What is Fundamental Goal of This Transaction

1
Negotiation Planning

• What is Fundamental Goal of This Transaction?
• How Will This Transaction Create Competitive
  Advantage?
• Assess Buying Position
• Assess Selling Position
• Assess Situational Issues
• Set Targets
• Plan Concessions

2
Negotiation Planning

• Use Internal Resources
• What Exactly - Do We Need
• Complete, Detailed Specifications
• Past Volumes
• Projected Volumes
• Define Performance Requirements/Specifications
• Set Priorities
• Develop Price or Cost Estimates

3
Negotiation Planning

• What Do We Want
• Availability Issues
• Lead Time
• Suppliers Inventories
• Quality Issues
• Response Time
• Warranties
• SPC
• Pricing
• Target Pricing (Why)
• Acceptable Range

4
Negotiation Planning

• From Whom Do We Want Bids
• Research All Suppliers in Last Three Years
• Use Trade Directories, Yellow Pages, Internal
  Users, etc. to Explore Supply Base
• What Form of Supplier Response?
• Sealed Bids With Non-Price Negotiation
• Two Step Bidding
• Negotiation

5
Setting Targets

• Needs
• Price Range
• Delivery Requirements
• Quality Requirements
• Wants
• Payment Terms
• Extended Warranties
• AM Deliveries

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Setting Targets

• Like-tos
• Purple Color
• Right of First Refusal of New Technology
• Weekly Donuts
• The Opening Position
• Have High Aspirations
• Temper With Realism

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Concessions

• Another Element of Planning
• Issues to be Avoided
• MUST HAVE Issues
• Priorities of Other Issues
• Alternative Approaches
• Concession Ammunition
• Concession Timing

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Planning Tools

• Price Analysis
• Cost Analysis
• Learning Curves
• Power
• Criticality Grid

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Price Analysis

• What and How
• Industry Standards
• Factors Influencing Price
• Perceived Substitute
• Unique Value
• Switching Cost
• Difficult Comparison
• Quality

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Price Analysis

• Expenditure
• End Benefit
• Shared Cost
• Fairness
• Inventory
• Administrative Cost
• Risk-Continuity

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Cost Analysis

• Custom Products
• High Volume Requirements
• Cost Elements
• Design
• Quality
• Process
• Productivity
• Economies of Scale
• Sourcing
• Volume/Learning Curve

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Assess Suppliers Motivation

• Quick Sale
• Unload Inventory
• Quota Time
• Tide Over Business
• Long Term Relationship
• Foot-in Door
• Market Penetration

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Negotiation Planning

• What Do We Know About Other Party
• What Do They Want
• What About The Individuals
• What Information to Present
• To Whom Shall We Present Information
• How to Present the Information
• Concession Planning
• Our Opening Position
• The Negotiating Team

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The Negotiating Team

• Composition
• Rank
• Numbers
• Duties
• Conduct
• Observation
• Scribe
• Social Activities

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International Negotiation

• Age, Gender
• Status, Authority
• Formality
• Numbers and Team Composition
• Professionalism
• Yes and No

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International Negotiation

• Silence
• Subtleties
• Deadlines
• Cultural Respect
• On Being Alone

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Criticality Grid in Negotiation Planning
High M A R K E T
Low
Low High INTERNAL
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Completeness of the Agreement

• Amendments
• Acceptance Tests
• Assignment
• Service Bulletins, Modifications
• Confidentiality
• Delivery
• Emergency Support
• Installation, Set Up

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Completeness of the Agreement

• Insurance
• Liquidated Damages
• Maintenance
• Contract Renewal Option
• Packaging
• Payment Terms
• Spare Parts Availability
• Service Support

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Completeness of the Agreement

• Taxes
• Technical Publications
• Training
• Termination
• Value Analysis
• Warranties

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What Happens If We Dont Agree?

• What Will It Cost to Change Suppliers?
• What Will It Cost If We Dont Agree?
• Immediate Cost
• Future Cost
• Future Interaction
• Relationship
• Credibility
• BATNA
• Best Alternative
• Walk Away Point
• Contingency Plans?

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Global Sourcing Communication

• Understanding the True Barriers
• Speaking
• Reading and Writing
• Slang and Colloquialisms
• Two Word Verbs
• Vocabulary
• Conversational
• Business
• Technical

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Global Sourcing Communication

• Translators
• Local
• At Destination
• Types
• Translating Written Materials
• Business Cards and Titles

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Dwight D. Eisenhower

• All people talk about the middle of the road as
  though it were unacceptable. Actually, all human
  problems, excepting morals, come into the gray
  area. Things are not all black and white. There
  have to be compromises. The middle of the road
  is all of the usable surface. The extremes,
  right and left, are in the gutters.

25
Some Tips on Negotiating

• The strongest dont always win. Intelligence,
  creativity, and having the best information often
  win the war.
• You must first know and be aware of your own
  needs, assumptions, and beliefs. Were all
  different and we all approach negotiations in a
  different way.
• Develop a detached attitude toward the outcome.
  Negotiating is a game learn to enjoy the process.

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Some Tips on Negotiating

• The biggest bets are made at the end of the poker
  game. Before the end, the players are learning
  everything they can about each other because most
  people are predictable.
• If you cant think of the right thing to do, do
  nothing and see what happens tomorrow. What you
  end up with is more important than how quickly
  you get it.
• Dont be bashful. Its okay to ask for more than
  you think you deserve or think youll get.

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Some Tips on Negotiating

• Be persistent, even if your first strategy fails.
  Stay on top of current events and know when the
  situation has changed in your favor.
• Attitude, attitude, attitude. You project how
  confident you feel and how prepared you are.
  Control all of those things you can, especially
  your attitude.

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Some Tips on Negotiating
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Global Sourcing

• Problems With Global Sourcing
• Cultural Issues
• Language Difficulties
• Long Lead Times
• Paperwork
• Payment Issues
• Political Risk
• Currency Risk

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Global Sourcing

• Methods
• Intermediaries
• Foreign Subsidiaries
• International Purchasing Offices
• Direct Purchases
• Inspection Services
• Customs Brokers and Freight Forwarders

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Global Sourcing

• Domestic Sourcing
• Same Language
• Same Cultural/Ethical Expectations
• Same Legal System
• Same Banking System
• Same Transportation
• No Customs, Tariffs

32
Global Sourcing

• Why Look for Global Sources?
• Lower Total Cost (Landed)
• Access to Markets (Countertrade)
• Access to Raw Materials
• Access to Technologies
• Other Reasons
• Quality
• Competition

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Global Sourcing

• Finding Global Suppliers
• Directories
• Trading Companies
• Embassies/Consulates
• Trade Shows
• Countertrade
• Logistics Issues
• Incoterms
• Other Logistics Costs