Negotiation Strategy, Process, & Skills Victor Engesser VCF Retail Advisor.
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Transcript of Negotiation Strategy, Process, & Skills Victor Engesser VCF Retail Advisor.
Negotiation Strategy, Process, & Skills
Victor EngesserVCF Retail Advisor
What is Negotiation?• Talking with the boss about a raise?• Reaching agreement with your 9 year old about how much TV
time he can watch?• Working out pricing and delivery terms with a new supplier?• Making an offer on a house?• Agreeing with your spouse where to go on vacation?• Bargaining with senior management for the budget allocations
you need to accomplish your departments goals for the year?• Developing the agreement for a multi-year collaborative
retailer/supplier relationship?
Why Become a Better Negotiator?
• Achievement of your goals• Greater control over outcomes• Better relationships• Prevention & resolution of conflicts• Credibility
© Circuit City, Highly Confidential Document
Types of Negotiation- (in Two Party Negotiations)
• Transactional – one time events (or repeatable but with no
commitment to repeat)• Ongoing
– a series of negotiations as part of a planned continuing relationship (with carryover)
• Distributive (Single Issue)• Integrative (Multiple Issues)
Possible Outcomes- for You and the other Party
• Lose/Lose• Lose/Win• Win/Lose• Win/Win• Remember, Win/Win
Does not mean equal!
Preparation Determines Outcome• Research first
– The other person– The history– The context– The environment
• Before you sit down with the other party– What do you want?– Why should they negotiate with you?– What are your alternatives? (understand your B.A.T.N.A.)
• Must haves versus nice to have– Determine the value of each part of the deal– Never give something up without getting something in return
• Determining what is a good agreement?– Does it meet your needs?– Does it exceed your next best option?
Planning a Solid Negotiating Strategy• Identify the Main
Arguments• Work out Their Strengths
and Weaknesses• Identify Potential Sticking
Points• Anticipate the Other
Party’s Position• Work Out Concessions
You Might Offer
Reservation Price• Determining your expected value or the highest price you are
willing to pay (your reservation price) also called your “walk away” price
• Making an effort to understand the seller’s expected value or the lowest price they are willing to accept (their reservation price)
Determine Where an Agreement Can Be Reached
How much buyer is willing to pay
Amount seller wants to make
1
2
Zone of Agreement
Who is happier with outcome #1? (seller surplus)
Who is happier with outcome #2? (buyer surplus)
$ $$$
Planning the Tactics You Will Use
• Think About– Timing– Method– Location– Sequence of Issues– Controlling the Release of Information– Getting Movement– Reaching Agreement
Negotiations in Business Relationships
• The foundation for building collaborative long term relationships depends on skilled negotiations
Successful Negotiations Depend On…
Knowledge
Strategy Tactics
Skill
Becoming a Better Business Negotiator
• Trial & Error?• Learn from others at work?• Go back to school?• Read-
– Harvard Business Essentials Negotiation• 2003 Harvard Business School publishing
– Winning Negotiations That Preserve Relationships• 2004 Harvard Business School publishing
– Game Theory at Work- by James Miller• 2003 McGraw-Hill
– Negotiation Analysis- by Howard Raiffa w/John Richardson & David Metcalfe• 2002 President & Fellows of Harvard College, Belkap Press
Vendor Negotiations Step 1 - Strategy
EXECUTEEXECUTE
EVALUATEEVALUATE
STRATEGYSTRATEGY
PLANPLAN
Think “Big Picture” Negotiate with an
implementation mind-set
Foster negotiation as a corp capability
Conduct Background Research
Study market & customer data
Understand your portfolio strategy
Understand the vendor
Determine Key Financial Levers
Know which ones apply to your negotiation
Understand impact
Determine your options and alternatives
Plan your negotiation
Review outcomes
Confirm or Renegotiate
Conduct the meeting
1
2
3
4
Negotiate for Implementation
• The deal & realized value should go hand and hand…
• Negotiators own the deal through implementation!
STRATEGYSTRATEGY1
A New Mindset•Enabling your negotiating team to transition from a deal-maker mentality to an implementation mind-set…•Start with the end in mind
– Imagine the deal 12 months out: What has gone wrong? How do you know if it’s a success? Who should have been involved earlier?
•Help them prepare– Surprising the other side doesn’t make sense, because if they promise things they
can’t deliver, you both lose.
•Treat alignment as a shared responsibility– If your counterpart’s interests aren’t aligned, it’s your problem too.
•Send one message– Brief implementation teams on both sides of the deal together so that everyone
has the same information.
•Manage negotiation like a business process– Combine a disciplined preparation process with post-negotiation reviews.– Treat negotiation as a “corporate capability”
STRATEGYSTRATEGY1
Conduct Background Research
– Study market & customer data–Understand your portfolio strategy–Understand the vendor– The clearer your “Perspective”
the stronger your Strategy
STRATEGYSTRATEGY1
Subjective Supplier Characteristics to Value
• Innovation & Core Competency• Responsiveness & Flexibility• Strength of Brand• Willingness to Partner• Distribution Strategy• Internal Connectedness• Trust• Quality of Relationship
STRATEGYSTRATEGY1
Role of Science
Ability to measure performance
Ability to compare performance across vendors
Ability to leverage information to secure better deals
Ability to make decisions with “edge”
•Art •Science
Good Relationships come out of good performance
Instinctively, you already use subjective criteria
Actual Supplier performance
STRATEGYSTRATEGY1
Consider All Financial Levers STRATEGYSTRATEGY1
Pricin
g
Payment Term
s
Turns
Compliance
Distribution
Price Protection
& Margin Protection
ExclusivityLead Times &Safety Stock
Back end
funding
Packaging
Order frequency
Marketing Funds
Returns & EOL
Support
Brand Value
FreightHandling
AVAILABILITY
Vendor Negotiations Step 2 - Plan
EXECUTEEXECUTE
EVALUATEEVALUATE
STRATEGYSTRATEGY
Think “Big Picture” Negotiate with an
implementation mind-set
Foster negotiation as a corp capability
Conduct Background Research
Study market & customer data
Understand your portfolio strategy
Understand the vendor
Determine Key Financial Levers
Know which ones apply to your negotiation
Understand impact
Determine your options and alternatives
What is your BATNA?
Anticipate the vendor’s position
Plan your negotiation
Work with your internal partners!
Plan the meeting
Review outcomes
Confirm or Renegotiate
Conduct the meeting
1
PLANPLAN2
3
4
Determine Your DealKnow what you want
but also what you are willing to concede
Know what your decisions will cost and the dollar rationale
Know what the vendor must keep and is able to trade
Must Have/Keep
Willing to Trade
Potential Cost/Risk
PLANPLAN2
•Know your B.A.T.N.A. and be willing to go there if the supplier will not provide
the “deal” you require-•Work to strengthen your BATNA
Preparation Assures Productivity
• Mutually built agenda (identify a ‘lead” person on both sides) • Use the phone and email to “ask”, “answer”, and “declare
ready to meet”– Research & understanding before the meeting is what
assures great meeting outcomes• Confirm the “right” attendees
– Knowledge & Authority• Work to assure “no surprises”
PLANPLAN2
Vendor Negotiations Step 3 - Execute
EXECUTEEXECUTE
EVALUATEEVALUATE
STRATEGYSTRATEGY
Think “Big Picture” Negotiate with an
implementation mind-set
Foster negotiation as a corp capability
Conduct Background Research
Study market & customer data
Understand your portfolio strategy
Understand the vendor
Determine Key Financial Levers
Know which ones apply to your negotiation
Understand impact
Determine your options and alternatives
What is your BATNA?
Anticipate the vendor’s position
Plan your negotiation Work with your
internal partners! Plan the meeting
Review outcomes
Confirm or Renegotiate
Conduct the meeting
1
PLANPLAN2
3
4
Conduct the Meeting EXECUTEEXECUTE3
The Art Side of Negotiating
Things to consider… When it is time to deal, fewer at the table is better Personalities & feelings really matter
Negotiating Behavior Types•Assertive
– Say what I want clearly & concisely
– Treat others with respect– Carefully listen to others– Calm, relaxed, confident– Expect win/win outcomes
•Aggressive– Say what I want in a
demanding manner– Bully, cajole & coerce– Don’t listen well to others– Interrupt others– Look for win/lose outcomes
•
•Passive– Don’t say what I want– Go along with others– Fail to accept responsibility– Hesitant or nervous– Hard to express needs clearly– Expect lose/win
•Manipulative– Indirect & expect people to know
what I want– Sarcastic– Behave passively with aggressive
intention– Often find win/lose outcomes in
disagreements
EXECUTEEXECUTE
3
A Few Tactics Every Good Negotiator Should Recognize…
• Hiding information & misrepresenting capabilities• Needing to refer to a higher authority• Anchoring (making the first offer)• Concessionary moves & splitting the difference• Tying deal elements together• Threats (i.e. timing & escalation)• The role of time• Red herrings to distract or create concessions• Displaying emotion to get an advantage
EXECUTEEXECUTE3
Non Verbal Behavior (examples)
• Don’t read too much into any physical clue, but always be on the lookout so you can react and respond as needed,
• Rubbing Neck• Hand to nose, mouth, eyes• Chewing on glasses• Taking off glasses, rubbing bridge of nose• Hand supporting head• Hand on side of face with finger up• Folded arms• Hands behind head, or hands together (steeping)
EXECUTEEXECUTE
Conduct the Meeting EXECUTEEXECUTE3
When to Talk & When to Listen
Things to consider… When should you lead the conversation? When might silence be the best response?
The “Art” of Listening• Physical Listening
• Facing the speaker• Eye contact• Open posture• Avoid fidgeting• Don’t interrupt
• Psychological Listening• Listen for the central theme• Think ahead• Analyze & evaluate• Listen for how it is being said• Listen for what is not being said
•
EXECUTEEXECUTE
Wrap Up the Meeting
Proper Conclusion is Key Summarize agreements Identify the next steps/timeline Establish who will write meeting notes Determine necessary follow-up Understand how the deal will be
implemented Know deal breakers vs. minor adjustments
EXECUTEEXECUTE3
Vendor Negotiations Step 4 - Evaluate
EXECUTEEXECUTE
EVALUATEEVALUATE
STRATEGYSTRATEGY
Think “Big Picture” Negotiate with an
implementation mind-set
Foster negotiation as a corp. capability
Conduct Background Research
Study market & customer data
Understand your portfolio strategy
Understand the vendor
Determine Key Financial Levers
Know which ones apply to your negotiation
Understand impact
Determine your options and alternatives
What is your BATNA?
Anticipate the vendor’s position
Plan your negotiation Work with your
internal partners! Plan the meeting
Review outcomes
Confirm or Renegotiate
Conduct the meeting
1
PLANPLAN2
3
4
Review the NegotiationEvaluate the Outcomes Did you get what you needed? Did the vendor get what they needed? Was the deal collaborative and partnership-
oriented? Do you need to renegotiate anything? Do you need to escalate the situation? Have you debriefed with your team? Who else needs to be informed of outcomes?
EVALUATEEVALUATE4
Thank You!Remember,
Preparation, Perspective, BATNA, & Realization of the Deal