Best Practice Preparation: How Purchasing Training Helps To Discover The Key To Ensure A Successful Negotiation

Nearly all negotiators greatly underrate the time required to prepare for any business negotiation even though this is the most important 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 our counterparties have at their disposal? We will deal with 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 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 experienced are the negotiators on the other side of the table?

- What cultures will be present and what are the local customs?

- Who are all the organisations & persons concerned in the negotiation and what is the decision making process? A diversified method is needed as final decision makers will very often be interested in Return on Investment and increased revenues & margins. The final user who looks for better output 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 rank 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 terms, Key obligations, Delivery, Warranties, Intellectual property and Risks.

Price and Payments: The competition and the complexity of most business deals require finding ways to create extra value and to move negotiation from positional bargaining to synergistic and creative joint problem solving. Professional buyers are not requested with buying the cheapest solution but rather with providing their organisations with the cheapest total cost of ownership, which is made up of things like:

- Acquisition costs, Service costs, The cost of use, Training costs, Supplier performance criteria, Delivery, Product quality and Customer Support. (These concepts are covered in most purchasing training programmes).

If we are able to reduce the other side's costs in the whole 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 common ground.

Key Obligations: Ensure 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 as agreed?

Warranties: In order to maintain trust and credibility make sure that you deliver any promises.

Intellectual property: Carefully negotiate IP ownership rights and consider the following elements:

- Who is footing the bill for the Research and Development?

- Could the research and development be used by competitors to your disadvantage 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 contract. Cultural consideration is critical. In Asian countries the goal of negotiation is not a signed contract. In China, unforeseen events are settled through the relationship.

Analysing the above elements are important in preparing Concession Strategies that will assist you to leverage maximum value from trades and in planning meetings optimally.