Based on your experience or readings, discuss the two different types of negotia

Question

Based on your experience or readings, discuss the two different types of negotiation, along with their preparation, strategies, and tactics.

In preparation for development and implementation of a strategic supplier alliance which of these types would be most useful?

Framing is generally considered the determination of what issues are at stake in a negotiation. Why is framing critical to understanding the negotiating issues, defining the expectations and preferences of the parties to the negotiation, selecting the information/data to support each party’s position or case, and evaluating the outcomes actually achieved during the negotiation?

What is the role of Purchasing and Supply Management professionals in preparation for and negotiation of a one-time purchase of a major capital equipment item?

Explanation / Answer

Negotiation

A term which is the most important aspect in a business transaction and it can also be stated that the profit and loss of a business depends quite an extent on negotiation. Negotiation is nothing but a discussion and the objective of the discussion is to reach at a common point and finalize a deal. It is clear from the definition that the importance of negotiation is huge while using it in business because the basic objective of a business organization is to generate the maximum amount of revenue and earn profit and in order to achieve that, negotiation is very much essential because without proper negotiation a business may incur loss from a particular deal. It can be stated that basically there are two distinctive types of negotiations namely Distributive Negotiation and Integrative Negotiation.

Distributive Negotiation is the type where the parties discuss over a fixed sum and the negotiation is about who gets the better share. In this type of negotiation one party makes profit at the cost of the other party and this is also denoted as a negotiation where one party wins and the other lose.

Integrative Negotiation is the type where the parties discuss in order to receive maximum benefits by cooperation and the objectives are aggregated and agreed upon. this type of negotiation is also denoted as a negotiation where both the party wins.

While establishing a new supplier alliance Integrative Negotiation should be used because the supplier is going to be a stakeholder in the business process and in order to be successful, each and every stakeholder should be satisfied. The business organization and the supplier should cooperate to serve its objectives and achieve maximum share of profit. If the supplier feels that the organization is getting more profit from the deal then it may degrade the quality of the product or service in order to make up for the loss.

Framing from the word itself means to frame something and is very important negotiation technique. Consider yourself entering a shop with the objective to buy a basic mobile phone which is cost effective the sales man at the counter displays a smart phone and explains its ability to make your daily activities simple and suddenly you become interested and finally you are convinced enough to buy the smart phone. This is framing where the seller just diverted your issue of buying a cost effective phone to a smart and convenient buy. In negotiation the parties should be well aware of their personal needs and also what the other party needs because that will help in negotiating the deal from both the side, for example a start up wants to tie up with a global brand here the global brand should be aware that the primary objective of the start up is not to make monetary profit, instead it aims at getting a platform to do business and get business easily, hence the global brand should use that as the unique selling point and make the deal done because the global brand does not seek a platform but it can demand quality at a very high level from the start up.

The type of negotiation varies with the type of deals that is being negotiated. If a business plans to purchase a major capital equipment item, let us assume a piece of land in order to expand the business. The management team who is in charge of negotiating should keep the strengths and weakness of the item they are about to purchase. If there is some issue regarding the position of the land for which the business may not get affected but that should be showcased in order to have an upper hand over the other party. The Management team should possess knowledge of the item to be purchased and should using framing technology accordingly. During a one time purchase Distributive Negotiation can be used because relationship with the other party is not that important in such transactions.

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