Criticality Grid in Negotiation Planning

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Criticality Grid in Negotiation Planning
High M A R K E T
Low
Low High INTERNAL
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Negotiation Planning

• What is Fundamental Goal of This Transaction?
• How Will This Transaction Create Competitive
  Advantage?
• Assess Buying Position
• Assess Selling Position
• Assess Situational Issues
• Set Targets
• Plan Concessions

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Negotiation Planning

• Use Internal Resources
• What Exactly - Do We Need
• Complete, Detailed Specifications
• Past Volumes
• Projected Volumes
• Define Performance Requirements/Specificiations
• Set Priorities
• Develop Price or Cost Estimates

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Negotiation Planning

• What Do We Want
• Availability Issues
• Lead Time
• Suppliers Inventories
• Quality Issues
• Response Time
• Warranties
• SPC
• Pricing
• Target Pricing (Why)
• Acceptable Range

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Negotiation Planning

• From Whom Do We Want Bids
• Research All Suppliers in Last Three Years
• Use Trade Directories, Yellow Pages, Internal
  Users, etc. to Explore Supply Base
• What Form of Supplier Response?
• Sealed Bids With Non-Price Negotiation
• Two Step Bidding
• Negotiation

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Setting Targets

• Needs
• Price Range
• Delivery Requirements
• Quality Requirements
• Wants
• Payment Terms
• Extended Warranties
• AM Deliveries

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Setting Targets

• Like-tos
• Purple Color
• Right of First Refusal of New Technology
• Weekly Donuts
• The Opening Position
• Have High Aspirations
• Temper With Realism

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Concessions

• Another Element of Planning
• Issues to be Avoided
• MUST HAVE Issues
• Priorities of Other Issues
• Alternative Approaches
• Concession Ammunition
• Concession Timing

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Planning Tools

• Price Analysis
• Cost Analysis
• Learning Curves
• Power
• Criticality Grid

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Price Analysis

• What and How
• Industry Standards
• Factors Influencing Price
• Perceived Substitute
• Unique Value
• Switching Cost
• Difficult Comparison
• Quality

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Price Analysis

• Expenditure
• End Benefit
• Shared Cost
• Fairness
• Inventory
• Administrative Cost
• Risk-Continuity

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Cost Analysis

• Custom Products
• High Volume Requirements
• Cost Elements
• Design
• Quality
• Process
• Productivity
• Economies of Scale
• Sourcing
• Volume/Learning Curve

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Assess Suppliers Motivation

• Quick Sale
• Unload Inventory
• Quota Time
• Tide Over Business
• Long Term Relationship
• Foot-in Door
• Market Penetration

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Completeness of the Agreement

• Amendments
• Acceptance Tests
• Assignment
• Service Bulletins, Modifications
• Confidentiality
• Delivery
• Emergency Support
• Installation, Set Up

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Completeness of the Agreement

• Insurance
• Liquidated Damages
• Maintenance
• Contract Renewal Option
• Packaging
• Payment Terms
• Spare Parts Availability
• Service Support

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Completeness of the Agreement

• Taxes
• Technical Publications
• Training
• Termination
• Value Analysis
• Warranties

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Negotiation Planning

• What Do We Know About Other Party
• What Do They Want
• What About The Individuals
• What Information to Present
• To Whom Shall We Present Information
• How to Present the Information
• Concession Planning
• Our Opening Position
• The Negotiating Team

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The Negotiating Team

• Composition
• Rank
• Numbers
• Duties
• Conduct
• Observation
• Scribe
• Social Activities

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What Happens If We Dont Agree?

• What Will It Cost to Change Suppliers?
• What Will It Cost If We Dont Agree?
• Immediate Cost
• Future Cost
• Future Interaction
• Relationship
• Credibility
• BATNA
• Best Alternative
• Walk Away Point
• Contingency Plans?

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