Negotiation Strategy Analysis: Vendor Negotiations
Most businesses incorporate strong negotiation skills, especially within the purchasing department. A company must be able to negotiate with vendors to ensure they receive the best price available on items both used and consumed by the business; this also includes hardware and software considerations. Regardless of the industry, building vendor relationships are necessary.
The writer will look at vendor negotiations from two different perspectives with one common goal; negotiate the best contract for all parties. The writer will then compare and contrast the different negotiation strategies as they apply to the oil and gas industry.
Vendor Negotiation Process The first article is about Mark Carbrey; Chief Information Officer (CIO) for a Massachusetts-based automotive service organization. His negotiation strategies allow up and coming team members to gain valuable experience with the negotiation process (Overby, 2010). He teaches his team to treat the vendors like a partner. He also teaches them to sort out what is important for the business, and to fact check with contacts that have similar contracts to ensure a fair market price from the vendor. Carbrey also stresses the importance of acquiring the support from the board of directors down (Overby, 2010).
The second article takes a slightly different approach to vendor negotiations than the first article. Joe Auer, Founder, and president of International Computer Negotiations (ICN), has over 35 years experience helping technology users do better and safer deals with vendors (ICN, 2011). Auer believes that attitude toward contract negotiation is one of the most important issues the negotiator faces. Auer’s article is a bulleted list of the “best practices” a negotiator should adhere to during the negotiation process. He uses the analogy of a pilot with 20 years experience still uses a checklist before take-off.
So too should a negotiator. He reminds the negotiator that a supplier often places untimely stress on himself by telling his boss, “the deal is done” before he has confirmation from the negotiator. Negotiators must use this to their advantage. He also shows that wording is subjective such as using the word preferred instead of needed. Auer states the negotiation process begins the first time information transfers to a potential vendor. He also states the negotiator gains or loses power with every succeeding transaction (Auer, 2011). Application to Work Environment
The oil and gas industry is very competitive. Entry into the market is easy but sustainability is difficult. The organization plagued by many of the same issues in information technology that most industries face. Using negotiating strategies is crucial to ensuring the best contract is both functional and valuable. The first article gave sound advice for setting the groundwork of negotiation strategy but did not explain the common pitfalls inexperienced negotiators face. The second article gave a clear checklist that a negotiator can refer to at any point during the negotiation process.
Conclusion Negotiation skills are a necessary part of today’s highly competitive marketplace. Building vendor relationships through the negotiation process is a delicate process. Although there is no one way to negotiate the best contract, one can incorporate the expertise of those with experience to develop the skills necessary to negotiate a fair market price with terms that meet the expectations of both parties. The two articles featured in this paper show very different perspectives with one common goal; to educate the reader with tools used in past negotiations.