Best Practice Planning: How Purchasing Training Helps To Find The Key Factor To Unlock A Successful NegotiationMost negotiators completely underrate the amount of time required to plan for any business negotiation even though this is a critical part of business negotiation best practice.
Using your negotiation skills to understand the negotiation environment 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 cost and the difficulty of the deal?
- Competitive analysis: What is the nature of the market and what options do the other side have at their disposal? We will deal with a sole supplier in a different way than those in a competitive market.
- Is it a one-off transaction or should we think about maintaining a long-term positive association that develops opportunities for future trade?
- Have we had any dealings with the other side in the past and what is their most likely approach to concluding business?
- How skilled are the negotiators on the other side?
- What cultures will be present and what are the local traditions?
- Who are all the parties & persons concerned in the negotiation and what is the decision making process? A diversified method is needed as final decision makers will most likely be interested in Return on Investment and augmented revenues & margins. The end user who looks for improved output and efficiency regard the financial elements almost completely irrelevant.
Almost any negotiation training course will highlight the importance of setting formal deal objectives.
Failing to plan and prioritise our deal objectives we put ourselves at risk of being exploited and/or ending with a sub-optimal agreement. Whether you are involved in negotiation on the sales or purchasing side, think about the following elements when preparing for negotiation:
- Price and payment terms, Key responsibilities, Delivery, Warranties, Intellectual property and Risks.
Price and Payments: The competition and the complexity of most business transactions demand finding ways to develop extra value and to move negotiation from positional bargaining to synergistic and creative joint problem solving. Professional buyers are not requested with getting the cheapest solution but rather with securing their businesses with the cheapest total cost of ownership, which is composed of things like:
- Purchase price, Service costs, The cost of use, Support costs, Supplier performance metrics, Delivery, Product quality and Client Support. (These concepts are covered in most purchasing training programmes).
If we are able to minimize our counterpart's costs in the entire life cycle of the product, solution or service and at the same time provide 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 important quantities and specifications.
Delivery: How key are the delivery timelines and what happens if the delivery doesn't take place on time?
Warranties: In order to preserve trust and credibility ensure that you deliver any promises.
Intellectual property: Carefully negotiate IP ownership rights and think about the following elements:
- Which party is paying for the Research and Development?
- Could the research and development be utilised by competitors to your loss if you don' t own the IP? How can you avoid competitors to use the same IP?
Risks: The best way to manage exposure is to include the elements in a written 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 factors are important in planning Concession Strategies that will help you to leverage maximum value from trades and in planning meetings optimally.
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