12_Negotiations_extended

12_Negotiations_extended - Negotiations -1- What Is...

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Unformatted text preview: Negotiations -1- What Is Negotiation? • A process of formal communication, either faceto-face or via electronic means, where two or to-face more people come together to seek mutual agreement about an issue or issues agreement • Involves the management of time, information, Involves and power between individuals and organizations who are interdependent organizations -2- Purchase Negotiation Overview • Process of formal communication, either face to face or via electronic means • Attempt to reach mutual agreement about issue(s) • Need to manage time, information, and power • May require significant time and resources • 90% of a successful negotiation is preparation, not execution -3- Purchase Negotiation Overview • Involves relationships between people, not just organizations • Primary objective is to reach an agreement that satisfies both parties • Negotiation is an opportunity to enhance value in the supply chain • Good negotiators are not born -- they develop their skills through practice and experience -4- Another Popular Way to Decrease Costs Cost Reduction Strategies -5- Negotiations • A brief history of negotiations in purchasing • Negotiation terms -6- The PRAM Negotiation Model Plans Maintenance Win-Win Negotiations Agreements -7- Relationships The Four Principles for “Getting to Yes” • • • • -8- Separate the people from the problem Focus on interests, not on positions Invest options for mutual gain Insist on using objective criteria Power in Negotiations • Sources of power – – – – – Informational power Reward power Coercive power Legitimate power Expert power • Caveats -9- http://1we4.files.wordpress.com/2009/10/negotiation-fight3.jpg Power of Influence • • • • • • - 10 - Reciprocation Consistency, already confirm, additional cost, Consistency, prior statement prior Social proof Liking: powerful supplier/buyer Authority Scarcity Concessions Concessions Received per Negotiation Round Supplier 1 Round 2 3 4 Continue or Stop?? 1 2 $40 $40 $40 _____________ $100 $55 $0 $5 _____________ 3 $25 $35 $45 $55 4 $160 $0 $0 $0 5 $0 $0 $0 $160 6 - 11 - $40 $70 $50 $30 $10 _____________ _____________ _____________ _____________ Negotiation Tactics • • • • • • - 12 - Low ball Honesty and Honesty openness openness Questions Caucus Trial balloon Trial Price increase • • • • • High ball: supplier Best and final offer Silence Planned concessions Venue International Negotiation • Issues to consider - 13 - ...
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This note was uploaded on 12/29/2011 for the course SCM 371 taught by Professor Tobias during the Fall '11 term at Michigan State University.

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