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Best Practice Planning: Using Purchasing Training To Discover The Key To Ensure A Profitable Negotiation
Nearly all negotiators completely 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 negotiation environment is a great place to start preparing for negotiations.
Some of the key elements to think about are:
- What is the nature of the transaction in terms of risks involved, the cost and the difficulty of the transaction?
- Competitive analysis: What is the nature of the market and what choices do our counterparties have at their disposal? We will approach a sole supplier differently than those in a competitive market.
- Is it a single transaction or should we think about securing a long-term positive association that develops alternatives for future trade?
- Have we concluded any transactions with our counterparty in the past and what is their most likely style to concluding business?
- How skilled 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 & persons involved in the transaction and what is the decision process? A diversified approach 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 output and efficiency will find the financial elements almost totally immaterial.
Almost any negotiation training course will highlight the importance of setting formal deal objectives.
Failing 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 involved in negotiation on the sales or purchasing side, consider the following factors when planning for a negotiation:
- Price and payment terms, Key responsibilities, Delivery, Warranties, Intellectual property and Risks.
Price and Payments: The competition and the difficulty of most business transactions demand finding methods to develop additional value and to move negotiation from haggling to mutually beneficial and creative joint problem solving. Professional buyers are not requested 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:
- Purchase price, Maintenance costs, The cost of use, Training costs, Supplier performance criteria, Delivery, Product 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 provide value for money, we are in a better position to find common ground.
Key Obligations: Ensure your product and services are defined and show your priorities. Include all the important 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 think about the following factors:
- Who is footing the bill for the Research and Development?
- Could the research and 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 written contract. Cultural consideration is critical. In Asian countries the goal of negotiation is not a signed contract. In China, unforeseen events are settled through the relationship.
Analysing the above factors 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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