Most negotiators greatly underestimate the amount of time required to plan for any business negotiation even though this is a key part of business negotiation best practice.
Using your negotiation skills to understand the context is a great place to start preparing for negotiations.
Some of the key elements to think about 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 nature of the market and what alternatives do the other side have available? We will approach a sole supplier differently than those in a competitive market.
- Is it a one-off deal or should we consider maintaining a long-term positive association that creates opportunities for future business?
- Have we concluded any transactions with our counterparty in the past and what is their most likely approach to doing business?
- How experienced are the negotiators on the other side?
- What cultures will be present and what are the local practices?
- Who are all the organisations & individuals involved in the transaction and what is the decision making process? A diversified tactic is required as final decision makers will very often be interested in Return on Investment and augmented revenues & margins. The final user who looks for enhanced productivity and efficiency will find the financial elements almost totally 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 manipulated and/or ending with a less agreeable agreement. Whether you are engaged in negotiation on the sales or purchasing side, consider the following factors 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 transactions require finding ways to create additional value and to move negotiation from haggling to synergistic and creative joint problem solving. Professional buyers are not charged with buying the cheapest solution but rather with securing their organisations with the cheapest total cost of ownership, which is composed of things like:
- Acquisition costs, Maintenance costs, The cost of use, Training costs, Supplier performance metrics, Delivery, Quality and Customer Support. (These concepts are covered in most purchasing training programmes).
If we are able to lessen our counterpart's costs in the whole life cycle of the product, solution or service and at the same time offer value for money, we are in a better position to find common ground.
Key Obligations: Ensure 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 preserve trust and credibility make sure that you deliver any promises.
Intellectual property: Carefully negotiate IP ownership rights and consider the following factors:
- Who 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 stop competitors to use the same IP?
Risks: The best way to manage risks is to include the elements in a contract. Cultural consideration is critical. In Asian countries the goal of negotiation is not a signed contract. In China, unforeseen events are resolved through the relationship.
Analysing the above elements are crucial in planning Concession Strategies that will help you to leverage maximum value from trades and in planning meetings optimally.
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