Basic Negotiation

The success of your organisation will be influenced by your ability to buy the products and services you need at the right price and of the right quality.

This is why the terms of the agreements with your suppliers are so important. Before you sign the contract, you need to be sure that the terms are favourable for your organisation, providing the basis for you to be able to trade with your own customers. Once the contract is signed it is a legal document that will be difficult, and potentially costly, to change.

Getting the best terms will depend on your ability to negotiate with prospective suppliers; that is to say, to get them to agree to the terms that you want.

Negotiating is a critical skill in procurement. While some people have a natural talent for negotiation, it is a skill that should be nurtured and developed through regular training and support because of its vital importance to your organisation.

Always be well prepared before negotiations begin. Learn about the company you are dealing with and about the people who will sit across the table from you. Some issues to consider are:

When planning make sure you are fully prepared, like understanding the whole cost breakdown which means the total cost of acquisition.

Other sources of information you need to be aware of are:

• The supplier’s financial position
• Market share
• Corporate structure and goals
• Cultural norms
• Personal interests and preferences

There are many different approaches to negotiating. These include:­

Acceptance:  The negotiator accepts existing arrangements, possibly with a view to preserving a positive and productive relationship between the two sides.

Bargaining: Both parties accept that they have something to exchange which will be mutually beneficial.

Compromise: Both sides are prepared to make concessions to meet halfway. Be clear on what you are prepared to give up before the negotiations begin.

Logic: Each side uses evidence in support of their argument in the hope that the other side will be persuaded to move their position.

Emotion: Emotion can be a big part of the negotiating process. You can gain advantage by understanding what motivates the other side. It is also important to be able to separate the emotion from the facts.

Your approach to negotiations will be influenced by your organisation’s goals and who you are negotiating with. It is possible that it will need different approaches at different stages of the same negotiation, depending on what progress you are making.