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Best Practice Preparation: How Purchasing Training Helps To Uncover Important Factors To Unlock A Successful Negotiation
Most negotiators greatly underestimate the amount of time required to prepare for any business negotiation even though this is a critical part of business negotiation best practice.
Using your negotiation skills to analyse the context is a great place to start preparing for negotiations.
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 complexity of the deal?
- Competitive analysis: What is the current position of the market and what options do our counterparties have available? We will deal with a sole supplier in a different way than those in a competitive market.
- Is it a one-off deal or should we consider maintaining a long-term positive relationship that develops alternatives for future business?
- Have we had any dealings with the other side in the past and what is their most likely approach to doing business?
- How capable are the negotiators on the other side?
- What cultures will be represented and what are the local traditions?
- Who are all the groups & individuals concerned in the negotiation and what is the decision making process? A diversified style is required as final decision makers will most likely be interested in Return on Investment and increased revenues & margins. The end user who looks for better productivity and efficiency regard the financial elements almost completely irrelevant.
Almost any negotiation training course will highlight the importance of setting formal deal objectives.
If we fail to prepare and prioritise our deal objectives we put ourselves at risk of being taken advantage of and/or ending with a sub-optimal conclusion. Whether you are engaged in negotiation on the sales or purchasing side, think about the following elements when preparing for negotiation:
- Price and payment, Key obligations, Delivery, Warranties, Intellectual property and Risks.
Price and Payments: The competition and the complexity of most business deals demand finding methods to create extra value and to move negotiation from positional bargaining to synergistic and creative joint problem solving. Professional buyers are not charged with buying the cheapest solution but rather with providing their businesses with the cheapest total cost of ownership, which is made up of things like:
- Acquisition costs, Service costs, The cost of use, Support costs, Supplier performance metrics, Delivery, Quality and Customer Support. (These concepts are covered in most purchasing training programmes).
If we are able to minimize the other side'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 agreement.
Key Obligations: Make sure your product and services are defined and reflect your priorities. Include all the relevant quantities and specifications.
Delivery: How important are the delivery timelines and what happens if the delivery doesn't take place on time?
Warranties: In order to maintain trust and credibility ensure that you can live with any promises.
Intellectual property: Carefully negotiate IP ownership rights and consider the following elements:
- Which party is paying for the Research and Development?
- Could the product development be used by competitors to your loss if you don' t own the IP? How can you prevent competitors to use the same IP?
Risks: The best way to manage exposure is to include the factors in a contract. Cultural consideration is very important. 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 crucial in planning Concession Strategies that will assist you to leverage maximum value from trades and in planning meetings optimally.
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