Negotiation Basics for Purchasing Professionals

ABSTRACT. Whether you are new to purchasing or an experienced negotiator, an overview of negotiation basics can help you sharpen your buying skills. The first section of this paper provides an overview of the negotiation process. The eight steps presented in the second section provide a framework for negotiation preplanning.
 
INTRODUCTION. While the ideal of most negotiation processes is to reach a win-win agreement, the ultimate objectives always include reaching an accord that meets the needs of the negotiator's organization. The first component of successful negotiations is an understanding of negotiation processes. This includes a working knowledge of the definition and purpose of negotiations, when to negotiate, barriers to effective negotiations, characteristics of effective negotiators, techniques that facilitate the negotiation process, and insights that can strengthen the negotiation process.

The second component of successful negotiations is thorough preparation. This includes understanding the other party's proposal and your own objectives, being able to formulate your own positions and analyze the other party's positions, defining and organizing the issues, developing negotiation strategies and tactics, and organizing for success.

Whether you are negotiating a complex agreement or working out a minor issue with a colleague, an understanding of negotiation processes and techniques can increase the likelihood of reaching a successful accord.
 
AN OVERVIEW OF NEGOTIATION PROCESSES. While no two negotiation processes are identical, an understanding of the following five points can increase your effectiveness in most situations.
 
The Definition and Purpose of Negotiations. Many feel that negotiations are "haggling" or "beating down" the other party in order to get your way. This type of win-lose orientation ignores the potential for finding areas of agreement where both parties can benefit. The definition of negotiation that I prefer is, "the process of working out a mutually satisfactory agreement." As a result, the purpose of negotiations is to reach a mutually beneficial deal. Generally, if both parties do not get something that they want from the negotiations an agreement will not be reached.
 
When to Negotiate. In a business buying situation, negotiations are likely to occur when the five criteria for competitive bidding are missing. They are：

(1) at least two or, preferably, more qualified vendors,

(2) vendors who want the business,

(3) clear specifications,

(4) an absence of collusion among bidders,
(5) a purchase dollar value large enough to justify the expense of competitive bidding. In most other situations, negotiations will be used before the buyer and seller reach agreement.