CIPS L4M5 - Commercial Negotiation

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.

The opening stage of the negotiation covers the very first few minutes when the parties meet and greet each other and are seated in the negotiation room in preparation for the main event.

Typical behaviours at the opening stage: 'dos' and 'don'ts'

Do’s

Be punctual and well presented (welcome their arrival)

Break the ice with small talks

Start the conditioning process

Check authority

Check agenda

Consider using visual aid to set out key objectives or make key points

Don’ts

Use strong, pushy, cold or tough style at the opening

Put down marker at this stage

Criticise other organisations/TOP's previous contacts/third parties.

In this scenario, Diana has made her proposal right at the opening stage. This is an example of 'don'ts'. Good negotiators are very careful about 'red lines'. If she puts such barrier up too early, the supplier may not try to look for more creative solutions later in the negotiation.

In contracts which have major commodity input, the price is determined by market forces with no individual supplier or buyer able to influence it significantly. Prices are much more variable even within long term contracts and seeking a fixed price would create financial risks for both the buyers and the suppliers. It is often intelligent to agree a contract price adjustment mechanism to allow for market price changes so both sides share risk.

Post-negotiation analysis should include performance evaluation, learning outcomes, and a comparison of achieved results versus original objectives. These elements contribute to continuous improvement and future strategy development.

A push approach typically involves exerting authority or power (1) with the party being influenced generally aware of the influence process (3). This method involves overtly directing or persuading the other party, often through explicit information or directives, as per CIPS’s understanding of push influence techniques.

Microeconomic factors refer to elements that affect individual businesses or sectors rather than the economy as a whole. In this case:

Availability of investors (B): Access to investors impacts capital availability for businesses.

Distribution channels (D): Distribution methods directly influence a business’s ability to get products to market.

Levels of competition (F): Competition affects pricing and strategic decisions within specific industries.

Taxation rates, unemployment levels, and inflation rates are considered macroeconomic factors, affecting the economy on a broader scale, as per CIPS's definitions of microeconomic vs. macroeconomic influences.

When facing a monopoly supplier, buyers must find creative ways to introduce leverage. Publicly exploring alternative solutions can create the perception of competition or a fallback plan, thus shifting bargaining power slightly toward the buyer.

Listening is a hugely important skill in the world of work. It’s a key part of effective communication [...].

Regarding active listening, there is a model called 'The SIER Hierarchy of Active Listening'. It details four key stages required for effective listening. As with all models associated with active listening, its purpose is to help the listener be a better, more effective listener who really hears what is being said, connects with the individual with whom they are communicating and builds effective relationships.

The model is a hierarchical model meaning that each stage builds on the stage before it. While the model is sometimes used for training in the sales arena, it is helpful in all walks of life. The stages of the model are: Sensing (including hearing and watching body language), Interpreting, Evaluating and Responding.