UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC

6. Contract negotiations

UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC

When there is little latitude in determining their position or posture

When they are held accountable for their performance

When they have sole responsibility

When they are responsible to a constituency present in thenegotiations

When they are appointed rather than elected

Conditions that Prevent Spontaneous Response

Negotiators as representatives

Negotiation team

Purchasing items units

The Buyer’s Negotiation Position will be StrongIf:

Demand is not urgent

Suppliers are keen for the business

Buyer is in a monopolistic or semi position

Demand can be met by alternatives/substitutes

Make and buy options are available

Buyer has a reputation for fair dealing

Buyer has excellent supply market intelligence

Strong supplier position:

Demand is urgent

Suppliers are indifferent accepting business

Monopolistic or semi-monopolistic

Strong reputation of quality, reliability

Supplier owns necessary tools or specialised machinery

Supplier is well informed about buyer position

UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC

Introductions, agenda agreement and rules of procedure

Ascertaining the negotiation range

Agreement of common goals

Identification and removal of barriers

Agreement and closure

Stages of a NegotiationList of topics + timing

Openness saves time (collaborative approach)

Problem solvingConsiderations of solutions....Determination of concessions.....

Some ‘personnel’ factors in negotiation

UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC

7. Capital investment purchases

Definition

One of the subclasses of the fixed asset category and includes industrial and office machinery and tools, transportation equipment, furniture and fixtures and others. As such, these items are properly chargeable to a capital account rather than to expense.

BuildingsInstallation equipmentAccessory equipmentOperating equipment

Tools and instrumentsFurnishings and fittings

Categories of Capital Equipment

How Capital Equipment Procurement Differs fromthat on Materials and Components

Cost per item is usually greater

The equipment facilitates production

Financed with long-term capital

Tax considerations play a big part in the decision

Government financial assistance may be available

The purchase may be postponable

Decision to purchase, results in consequences for sale, output and labour

PurposeFlexibility

SparesStandardisation

Compatibility and existing equipmentLife

Reliability

Factors to Consider When Buying Capital Equipment

DurabilityProduct quality

Cost of operationCost of installation

Cost of maintenanceMiscellaneous, e.g., space requirements

Advantages

• Costs are known in advance

• Reduced need to tie up capitalin fixed assets

• Concerned only with rentals

• Hedge against risk of obsolescence

Disadvantages

• Fixed obligation to pay• Does not provide the prestige orflexibility of ownership• Large organisations may obtaincapital or equal terms with lessors• Flexibility to dispose of obsoleteequipment before end of leasemay be reduced

Leasing – Advantages and Disadvantages

Capital Investment Purchases – The Buyer’s Contribution

Provide a gateway for commercial considerations

Influence the specification to avoid single source quotations

Emphasise life-cycle costs

Prepare comprehensive invitations to tender

Provide commercial, contractual and negotiating expertise

Research alternatives to the purchase of new machines

Identify government grants that may be available

Research international market

Assist with disposal of displaced asset