ISQA 454

Negotiation Planning

Abraham Lincoln “When I am getting ready to reason with

a man, I spend one-third of my time thinking about myself and what I am going to say, and two thirds thinking about him and what he is going to say.”

What is Fundamental Goal of This Transaction?

How Will This Transaction Create Competitive Advantage?

Assess Buying Position Assess Selling Position Assess Situational Issues Set Targets Plan Concessions

Negotiation Planning

Negotiation Success = Planning

Planning Must Be SystematicWhat Kind of Transaction?

One-Time Repetitive Requirements

Distributive Bargaining Integrative Bargaining

Distributive BargainingCompetitiveWin/LoseGoals in Direct ConflictConfrontational Information is GuardedUsually Focused on Price or Money

Issues

Distributive BargainingPositional Initial DemandContest of WillsLimited Resource SituationsTypically One-Time Transactions

Integrative BargainingFocus on Common Interests, Not

DifferencesAddress Needs, not PositionsAddress Needs of AllExchange Information and IdeasPursue Options for Mutual Gain ‘Abundance’ Mentality

Integrative BargainingAnswer “Why”Multiple Ways to Meet Needs of BothLook for Common InterestsStrives for Mutual GainTypically Longer Term RelationshipsHow Will This Agreement Look to the

Other Side’s Boss

Win-Win Goals Win-Win Does Not Mean Equal Gains The Other Side is NOT the Enemy Goal: Mutually Satisfactory Agreement Long Term Relationship Conflict Resolution Mechanism Mutual Dependence

Trust Collective Goals

LeverageLeverage is any Information Used to

Create a Perception in the Other Party’s Mind of Negotiation Strength on Your Part

Leverage is an Increased Means of Accomplishing a Purpose

Types of Transactions Industry StandardCustom

Straight RebuyModified RebuyNew Purchase

Negotiation PlanningFrom Whom Do We Want Responses

Research All Suppliers in Last Three Years Use Trade Directories, Yellow Pages,

Internal Users, etc. to Explore Supply BaseWhat Form of Supplier Response

Sealed Bids With Non-Price Negotiation Two Step Bidding Negotiation

Other Planning Issues Don’t Assume Everyone Knows What Are Real Goals of Meeting

Contract? Action Plan? Information Exchange and Next Meeting Date? The Importance of the Agenda and Ground Rules

Operationalizing the Agreement Commitment: What are Next Steps

Elements of Negotiation Planning

Facts Both Sides Agree

Needs/Interests Internal and External What Are Our Differences? Why? What if on Other Side

Alternatives Win-Win or Win-Lose Options BATNA

Elements of Negotiation Planning

Legitimacy Why is Your Position Proper Be Careful of Standards, Benchmarks

Communication Three Basic Rules Reframe What You Say

Relationships Unconditionally Constructive Smile - It’s All in How You Start Good Way Even if Other Side Doesn’t Reciprocate

Negotiation Planning Use Internal Resources

What – Exactly - Do We Need Complete, Detailed Specifications Past Volumes Projected Volumes

Research Total Commodity Purchases for Last Three Years

Define Performance Requirements/Specifications

Set Priorities Develop Price or Cost Estimates

Negotiation Planning Availability Issues

Lead Time Commitments Supplier’s Inventories

Quality Issues Warranties SPC

Pricing Target Pricing (Why) Acceptable Range

Setting Targets Needs

Price Range Quality Requirements Delivery Requirements

Wants Payment Terms Extended Warranties AM Deliveries

Setting Targets Like-to’s

Brown Color Right of First Refusal of New Technology Weekly Donuts

The Opening Position Have High Aspirations Temper With Realism

Assess Supplier’s MotivationQuick Sale

Unload Inventory Quota Time

“Tide Over” BusinessLong Term RelationshipFoot-in DoorMarket Penetration

What Happens If We Don’t Agree?

Walk Away Point What Will It Cost to Change Suppliers? What Will It Cost If We Don’t Agree?

Immediate Cost Future Cost Future Interaction

Relationship Credibility

BATNA Best Alternative Contingency Plans?

Negotiation Planning: FrankWhat Do We Know About Other Party

What Do They Want What About The Individuals

What Information to PresentTo Whom Shall We Present InformationHow to Present the InformationGet Point Across in 30 Seconds

ConcessionsAnother Element of Planning

Issues to be Avoided “MUST HAVE” Issues Priorities of Other Issues Alternative Approaches Concession Ammunition Concession Timing

Completeness of the Agreement

Amendments Acceptance Tests Assignment Service Bulletins, Modifications Confidentiality Contract Renewal Option Delivery Emergency Support Installation, Set Up

Completeness of the Agreement

Insurance Liquidated Damages Maintenance Packaging Payment Terms Price Change Spare Parts Availability Service Support

Completeness of the Agreement

Taxes Technical Publications Technology Training Termination Value Analysis Warranties

The Negotiating TeamComposition

Rank Numbers

Duties Conduct Observation Scribe Social Activities

Negotiation Planning Exercise