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NEGOTIATION. BPT3133 – Procurement in Industrial Management. STRATEGIES. Chapter Outline. What is Negotiation? Negotiation Framework Negotiation Planning Power in Negotiation Win-Win Negotiation International Negotiation The Impact of the Internet on Negotiations. Learning Objective.

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  1. NEGOTIATION BPT3133 – Procurement in Industrial Management STRATEGIES

  2. Chapter Outline • What is Negotiation? • Negotiation Framework • Negotiation Planning • Power in Negotiation • Win-Win Negotiation • International Negotiation • The Impact of the Internet on Negotiations

  3. Learning Objective • Understand when and why a buyer enters into a sourcing negotiation • Recognize the importance of planning within the negotiation process • Appreciate the different sources of power that are present during negotiations

  4. Introduction • Negotiation is a skill that is essential to all purchasing and supply managers • Negotiation is a vital part of every sourcing process • Negotiation is an ideal way to convey the buyer’s specific sourcing requirements and specifications to its supply base

  5. What is Negotiation? “is an interactive communication process that may take place whenever we want something from someone else or another person wants something from us” OR “is the process of communicating back and forth for the purpose of reaching joint agreement about differing needs or ideas” OR “is a decision-making process by which two or more people agree how to allocate scarce resources”

  6. negotiation

  7. Negotiation Framework

  8. 5 PHASE Negotiation PROCESS

  9. Negotiation Planning • Develop specific objectives • Analyze each party’s strengths and weaknesses • Gather relevant information • Recognize your counterpart’s needs • Identify facts and issues • Establish a position on each issue • Develop the negotiation strategy and accompanying tactics • Brief other personnel • Practice the negotiation

  10. Negotiation Planning

  11. Power in Negotiation • Power is the ability to influence another person or organization • Sources of negotiation power: • Informational • Reward • Coercive • Legitimate • Expert • Referent

  12. Win-Win Negotiation Win-lose negotiation • Two or more parties are competing over a fixed value with the winner taking the larger share • Also known as a zero-sum or fixed-sum game (if one party gains, it is only at the expense of the other party) Win-win negotiation • Seeks to expand the value or resources available to all participants through collaborative negotiation • Also know as integrative bargaining

  13. Win-Win Negotiation Characteristics of Win-Lose and Win-Win Negotiation

  14. International Negotiation • Negotiations with suppliers located literally anywhere on the globe take on added complexity and challenge when the parties have different languages, customs, laws and cultures • Important considerations in negotiating a global sourcing agreement is culture shock • Requires additional planning and preparation to be successful

  15. The Impact of the Internet • Tend to equalize the interactions between the parties because normal visual cues and sources of power are not as evident • Engage in more risky behaviours and are more aggressive in their demands • Active listening and effective feedback are more difficult to conduct • Engage in behaviours that indicate that they are communicating in real time even when they are not • Often feel less accountable for the outcomes because of perceived disconnect with their counterparts in a different locale • Tend to take on a more adversarial, “us-versus-them” mentality • The negotiator at the other end of the electronic connection is relatively anonymous

  16. Negotiation skills • Successful negotiators criteria: • They should be rated as effective by both sides • They should have a track record of significant success • They should have a low incidence of implementation failures. Behavioral / Interactive Factors : Image Integrity Status Self-actualization Corporate issues & Human issues

  17. Negotiation skills The resolution of conflicting interests through negotiation is motivated by: • Individual personality needs of negotiators • Personality compatibility among negotiators representing opposing parties • Negotiators’ perceptions and expectations of the opponent • Persuasive mechanisms employed to modify the bargaining positions and values of the opponent to achieve a more favorable convergence of interests

  18. Negotiation skills Manipulative Techniques and Ploys

  19. Negotiation skills The Interpretation of Postures

  20. summary • Negotiation process involved 5 phases • Negotiation may not always be the appropriate way to reach an agreement – persuasion, complete acceptance, coercion or problem solving may prove sound alternatives • Negotiation style depends on the objective to be achieved • Individuals who are skilled at negotiation are destined to be among an organization’s most valued professionals

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