CIPS L4M5 - Commercial Negotiation

The zone of possible agreement (ZOPA) or bargaining range is considered an area where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work towards a common goal and seek an area that incorporates at least some of each party's ideas.

The zone of proximal development refers to the difference between what a learner can do without help and what he or she can achieve with guidance and encouragement from a skilled partner.

There is no Walk away area. Walk away point is a position from which you cannot concede any more ground and must walk away/decline a deal.

Best alternative to a negotiated agreement is a fallback or backstop position if the negotiation fails to result in an agreement/no deal is agreed.

LO 1, AC 1.2

Negotiating in the supplier's environment (their site) can unintentionally shift the power dynamic. The supplier may gain apsychological edgedue to the comfort and control of their surroundings. Best practice recommends holding negotiations in aneutral settingto ensure balance and reduce any influence based on physical context. While site visits are beneficial for supplier evaluation, they should beseparate from the negotiationto maintain objectivity.

Absorption costing is an approach to allocating overheads in which indirect costs are loaded or absorbed into direct costs related to specific jobs, processes or outputs, using an estimated basis of allocation.

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Summarising what has been said is a key component of active listening, as it demonstrates understanding and engagement in the conversation. Active listening involves confirming and clarifying information, which helps build rapport and ensures accurate communication, as outlined in CIPS’s guidelines for effective negotiation communication.

Published market indices are a source of macroeconomic data, as they reflect broader economic trends and provide insights into the overall market environment, which is essential for globalexpansion planning. Macroeconomic analysis focuses on high-level economic indicators, as recommended in CIPS’s guidelines on sourcing macroeconomic data.

There are two major persuasion methods: 'push' and 'pull'.

Persuasion can be defined as encouraging someone to do something that you want them to do for you. Persuasion is reasoning with someone so that they will believe or do something they might not otherwise do. Persuasion can be considered as 'pushing' on TOP so that they can accept the change in attitude or behaviour as a result of your actions.

Influence is the ability to affect the manner of thinking of another. Influence can be considered as pulling on TOP so that you achieve the same result, but TOP feels they have changed their attitude or behaviour as a result of their reflection and thinking, and not your direct actions.

There are multiple variables to consider when choosing between 'push' and 'pull'. Professor Fiona Dent of Ashridge Business School proposes situations when each style might be most appropriate, breaking down push into 'directive' and 'reasoning' and 'pull' into 'collaborative' and 'visionary':

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Using logical and objective reasons is one of the typical characteristics of persuasion reasoning method.

A collaborative relationship is characterized by mutual commitment, which enhances risk management and strategic planning between buyer and supplier. High levels of trust and commitment enable both parties to work closely to achieve shared objectives, creating a beneficial negotiation environment. This approach aligns with CIPS’s principles of collaborative procurement relationships.

Finding a middle ground, also known ascompromise or convergence, is a hallmark of collaborative or integrative negotiation. It allows both parties to secure partial wins, supports longer-term relationships, and promotes ongoing goodwill for future dealings.

“Negotiators must balance assertiveness with cooperation. Meeting halfway can lead to agreements that meet minimum needs of both parties while preserving the relationship.”

(L4M5 Commercial Negotiation, 2nd edition, Section 1.1 - Collaborative Approaches to Negotiation)