Summary of Negotiation Process
The process of negotiation is a daily procedure in the faculties of businesses and is not exceptional in engineering. The process is a two-way initiative and a give-take setting. It makes the undertaking an important step in the present and the future of the company. Poor negotiation attributes can cripple and devastate a business. It can also swiftly result in loss of clients.
In the case scenario provided, the supply contract process was elaborate. It involved supplying a wide range of products. A number of sub-contractors and high prospective risks are involved. However, the managers considered it lightly. Consequently, the parties were caught up in emotions of the moment. They ended up ignoring their natural instincts about contemplating concrete facts and information.
Effective negotiation strategies involve high discipline, due diligence and confidence. Negotiation should be guided by solid facts and knowledge. Prudent negotiation abilities sustain a business from decline. It can attain a state of value, adding products and packages to the two negotiating parties.
Preparation is a Requisite
A good understanding your rival negotiating party is imperative to a successful contract negotiation procedure. The fundamental aspect is having adequate information relating your opponent. It allows you to utilize your strengths and capitalize on the rival party’s weaknesses. Your rival company may have been in the industry for a long period. With relevant experience on previous contracts’ principles, one can gain ability to assess the consistency of the binding agreements.
The commercial manager ought to have conducted due diligence on the previous negotiation terms as well the required background information. It is important to understand the sought priorities. Also important are the objectives around the negotiation platform. It is advisable to refer to the close business associates that have dealt with this customer previously. Then one can delegate the negotiation process to the project engineer. Many negotiators develop predictable negotiation strategies that you can utilize to your edge.
The aforementioned contract was both price-sensitive and risk-oriented. Consequently, it is vital to base the process on practical and realistic expectations. It should factor all the limitations that might undoubtedly arise. The constraints might include budget confines, management inclinations, and orientation. There may be urgency to make sales goals, and the risk bearing parameters. It is noteworthy that the negotiation objective might have shifted based on changes in scope. Other unpredictable factors may emerge during the settlement; however, the emergent aspects are stated as irrelevant principles. While the eventual objective must be realistic, this should not limit you from making the first bid or counterbid.
Before the process commences, ensure that your rival party is prepared. It is clear that the customer had visualized a closed a deal. It was blocked by the inconsistencies of the former and later binding agreements. In addition, the commercial managers ought to have concluded the negotiation terms with the customer rather than delegate the settlement to other parties, such as the project engineers. The enginers probably are not acquainted with critical facts and information.
Strategy
The negotiation strategy centers on your rival’s objectives. It is done through a careful establishment of real needs. The process will thus involve classification of your needs against the other party’s needs. By categorizing the prime objectives as risk bearing and cost pricing, one can enhance adequate research on the prevalent risk and pricing negotiation terms in advance. The final list of priorities and objectives is referred to as the negotiation plan.
It is important to follow the objectives presented by both the parties at the initial meeting. Adhering to the negotiation plan is important. During the negotiations, evaluate the deviations from the original plan. It is recommended that neither of the parties should bring in new information. Both parties must openly express concern over the adopted service-delivery approach. It must be consistent with the former negotiation plans. Consequently, any deviations can compromise the integrity of the ultimate resolution.
The core strategy is to assess your needs prudently as a company. Then seek to negotiate on what you want and can attain. Remember that you can never get what you have not bargained for. Therefore, make your initial bid bold and aggressive. The opening price must be realistic and create a provision and margin for a bargain. Your aim is to attain the stated offer or more. Therefore it is essential for the project manager to reconsider the products’ delivery criteria rather than rushing to conclusion, affirming the rash decisions.
Conclusion:
Negotiation is a critical business management tool that adds value to a company. If executed poorly, it can ruin a company. Therefore, the process must be done in prudence and due consideration. Preparation is the prime requisite that clarifies the fundamental aspects evolving around the relevant subject. Accordingly, highlight the key objectives and priorities. Highlighting your needs or objectives against your rival’s necessities should enhance the adoption of a sound negotiation strategy.
Mistakes and Corrective Approaches
Answer #1: Poor background information
As a supplier, ensure that you are well versed with the product and the service terms. The risks shall form the subject of the negotiation process. The commercial manager revealed his primary concerns over the aspect of risk-taking. Subsequently, he exposed his weakness in product details. Such revelation turned to be a prime mark for a bluff. It induced uncertainty and anxiety on the customer’s side. Psychology plays a critical role in the negotiation capabilities. It is advisable to exploit this fact and use it to your advantage. Exposing the other party’s inadequate preparations is a key. Therefore, a comprehensive negotiation plan must constitute a definite strategy.
Eventually, if an important decision is enacted, it is advisable to put the resolution in writing. It is useful for the purposes of endorsement and physical evidence for future counter-referencing. This information would have served as hard evidence on the previous terms, rather than overtly pronounce the new approach as irrelevant. It should have showed that the client has always borne all the risks.
Answer #2: Volunteering information
As a customer, restrain from disclosing unrequested information. It can include information such as the need to restructure the project design at the cost of the supplier. Consequently, the supplier is quick to realize that the redesigning would stop his cash flows. The supplier also realized the need to shift from his initial plan and adopt the responsibility of cushioning the project restructuring costs. However, this was insincere since there is no open declaration on who would take the aforementioned financial obligation. The approach renders such an agreement ineffectual and inconsistent.
Answer #3: Deviation from parties’ negotiation objectives
In the first meeting, involve the four relevant sub-contractors. It is essential that each of the firms would support its propositions relating to price, the scope of work and overall contribution. When the lead team was to express its operational contributions, the lead negotiator fails to defend the firm’s position. Instead, he delegates the task to the project manager. The manager evades the pertinent question and defines the technical aspects of the contract. The project manager had deviated from the sought functional attributes embodied by the contract objectives.
Answer #4: Lack of consistency
According to the previous negotiation plan, the supplier is required to stick to a fast product delivery process. However, neither of the parties provided any documentary evidence that bound the two parties to the plan. The lack of an elaborate control tool in defining the functional attributes of each party eventually compels the parties to deviate from the initial plan.
The customer does not commit to giving the bonus. Thus, the agreement falls short of due validity. It was advisable for both parties to arrive at a concession and ratify it before embarking on other contract aspects. The client ought to have stated a lower premium amount than the seller anticipated. In this case-scenario, neither of the parties was willing to settle for a contract. Instead, the settlement was halted.
