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Best Practice Planning: How Purchasing Training Helps To Uncover The Key To Unlock A Successful Negotiation
Most negotiators greatly underrate the time required to plan for any business negotiation even though this is the most important part of business negotiation best practice.
Using your negotiation skills to analyse the context is a great place to start preparing for negotiations.
Some of the key elements to consider are:
- What is the nature of the sale/purchase in terms of risks involved, the level of expenditure and the difficulty of the transaction?
- Competitive analysis: What is the nature of the market and what choices do our counterparties have available? We will approach a sole supplier in a different way than those in a competitive market.
- Is it a one-off deal or should we think about securing a long-term positive association that develops alternatives for future business?
- Have we concluded any transactions with the other side in the past and what is their most likely approach to doing business?
- How accomplished are the negotiators on the other side of the table?
- What cultures will be present and what are the local customs?
- Who are all the groups & individuals involved in the negotiation and what is the decision making process? A diversified tactic is needed as final decision makers will certainly be interested in Return on Investment and augmented revenues & margins. The end user who looks for better productivity and efficiency will find the financial elements almost completely irrelevant.
Almost any negotiation training course will highlight the importance of setting formal deal objectives.
If we fail to plan and rank our deal objectives we put ourselves at risk of being manipulated and/or ending with a sub-optimal conclusion. Whether you are engaged in negotiation on the sales or purchasing side, consider the following elements when preparing for negotiation:
- Price and payment, Key responsibilities, Delivery, Warranties, Intellectual property and Risks.
Price and Payments: The competition and the difficulty of most business transactions demand finding methods to create additional value and to move negotiation from positional bargaining to synergistic and creative joint problem solving. Professional buyers are not charged with getting the most affordable solution but rather with securing their businesses with the cheapest total cost of ownership, which is made up of things like:
- Acquisition costs, Maintenance costs, The cost of use, Support costs, Supplier performance metrics, Delivery, Quality and Client Support. (These concepts are covered in most purchasing training programmes).
If we are able to reduce our counterpart's costs in the entire life cycle of the product, solution or service and simultaneously offer value for money, we are in a better position to find common ground.
Key Obligations: Make sure your product and services are defined and reflect your priorities. Include all the relevant quantities and specifications.
Delivery: How key are the delivery timelines and what happens if the delivery doesn't take place as agreed?
Warranties: In order to preserve trust and credibility ensure that you can live with any promises.
Intellectual property: Carefully negotiate IP ownership rights and consider the following factors:
- Which party is paying for the Research and Development?
- Could the product development be utilised by competitors to your disadvantage if you don' t own the IP? How can you stop competitors to use the same IP?
Risks: The best way to manage exposure is to include the factors in a contract. Cultural consideration is critical. In Asian countries the goal of negotiation is not a signed contract. In China, unexpected circumstances are resolved through the relationship.
Analysing the above elements are important in preparing Concession Strategies that will help you to leverage maximum value from trades and in planning meetings optimally.
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