Negotiation takes place almost every day in our daily life whether is it negotiating for a higher salary or for a better deal when shopping. These negotiations do not play a significant impact even if they are unsuccessful. However, it is not the same in the business context.
A good negotiation is absolutely vital to the success of a business especially in the increasingly competitive market. Whereas, a poor negotiation can potentially cause harm to the company as quickly as losing key customers or suppliers. Therefore, it is said that effective business negotiation is a core leadership and management skills.
Procurement or Purchasing Negotiation
Procurement and purchasing are often used interchangeably but they do have different meanings. This terminology can be explained using the PP Organogram in the diagram below for a better understanding. Although both purchasing and procurement focuses on systems and processes, but procurement also concentrates on the interaction with both external suppliers and internal customers. Thus, this article will mainly be concentrating on procurement negotiation.
Create Win-Win Situations
Negotiating is not about defeating the other party but instead it is the ability to create a win-win situation whereby everyone leaves the negotiation feeling happy, thinking that they have achieve a good deal. The conflict table below demonstrates several possible negotiation outcomes. However, to have a successful negotiation it is always highly encouraging to achieve a win-win strategy. While, it is often difficult to satisfy everyone in a negotiation situation, and thus this is exactly why it is so highly valued. Therefore, the following sections will be covering in depth on what can be done so to achieve a win-win situation.
Preparation for Negotiation
It is often said that half the battle is already lost whenever a party enters a negotiation without proper preparation. Preparation is responsible for 90% of negotiating success thus there is no good shortcut although it is usually a very time-consuming process.
During preparation, always start with yourself first by recognizing what you want as well as the kind of outcome you want to achieve at the end of the negotiation. Of course, it is not enough to only identify your own interest or wants but it is also equally important to gather information and understand the other party’s needs, strengths and weaknesses. By doing so, chances of attaining success when negotiating will be raised as assessing the negotiation context will be easier, thus resulting in the development of an effective negotiation strategy. Certainly, when more preparation is done prior negotiation, the more likely it is that the result of the negotiation will be acceptable for all parties involved. Hence, it is necessary to constantly keep in mind that power is always on the side of the person with the best information.