CIPS Level 4 Diploma in Procurement and Supply

Tutor Notes
Module title: Commercial Negotiation [L4M5]
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Leading global excellence in procurement and supply

Learning Outcome 1 Understand key approaches in the negotiation of commercial

agreements with external organisations
These notes are designed to support teaching staff using the CIPS Teaching Resources PPT slides. Teaching staff are
advised to cross reference against the relevant module content and learner resources (e.g., study guide).
Supplementary resources are available on cips.org in the Student Zone, CIPS Knowledge and Supply Management
online journal (www.cips.org).
SLIDE TUTOR NOTES

1 Not applicable

2 There are two types of sources of conflict within a negotiation.

• What is being negotiated (talk through table on slide)
• How it is being negotiated (the process)

Sources of conflict regarding the process can arise due to the

following. • Lack of clarity before the negotiation
• Negotiating styles, where one party may adopt hard negotiating tactics that result
in win-lose outcomes, where the other favours building relationships to gain a
win-win outcome
• Cultural differences such as dress code and terms of address
• Method of communication – face-to-face, video or phone call
• Team size and makeup

To minimise conflict, agree ‘ground rules’ with the other party in advance of any
negotiation meetings, and manage divergent positions in order to achieve a win-
win outcome.

Activity
In pairs, learners draw up a table with four columns (alternatively, prepare a
worksheet for them to complete).
The first column contains the following questions relating to the sources of
conflict. • What is your preferred negotiating style?
• What is the standard dress code in your organisation? Is it different for meetings
with external suppliers?
• What terms of address do you use for colleagues?
• What terms of address do you use with suppliers?
• What is your preferred method of communication?
• What is the default team size when entering a negotiation, or does it depend on
the contract?
Learners discuss the questions and enter their responses in the second and third
columns respectively.
Learners indicate with a tick or a cross where their responses align, and where there
is conflict. They discuss how they would manage each conflict and reach a position
 of agreement, noting their responses in the final column.

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SLIDE TUTOR NOTES

3 The Thomas–Kilmann conflict mode instrument (TKI) outlines the positions

available when entering a negotiation.
It has the following two dimensions (refer to diagram on slide).
• The vertical axis, ‘assertiveness’, is concerned with conflict responses based on our
attempt to get what we want.
• The horizontal axis, ‘co-operativeness’, is concerned with conflict responses based
on helping others get what they want.

This produces five approaches to conflict resolution, each of which has its own
objective (refer to diagram on slide).
• Competing – objective is to win
• Accommodating – objective is to yield
• Avoiding – objective is to delay
• Compromising – objective is to find middle ground
• Collaborating – objective is to find a win-win solution

There are two parties in a conflict, so this results in 25 potential combinations of

styles that can be brought to any

conflict situation.
Some of these combinations are more congruent than others (refer to table on slide).

The collaborating approach is generally seen as the most effective one to adopt as
an initial posture in most circumstances, assuming the ongoing relationship is
important.

Discussion
Which combination of styles is most likely to lead to a satisfactory
outcome? What is your preferred/default negotiating style?
Are you comfortable using other styles too?
 4 Principled style of negotiation
• Principled negotiation focuses on the collaborative approach to conflict
management and dispute resolution.
• It proposes using an integrative approach to finding a mutually agreed shared
outcome.

The principled style has four principles.

• First principle: separate the people from the problem or issue.
• Second principle: focus on interests, not positions.
• Third principle: invent options for mutual gain (refer to table on slide which shows
ways of overcoming obstacles).
• Fourth principle: insist on using objective criteria.

Activity
Split the class into two groups.
Present a scenario to each group, and provide them with objectives just for their party (i.e.

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SLIDE TUTOR NOTES

they should not know the other party’s objectives).

Ask for one learner from each group to go to the front of the class.
Learners start negotiating.
After each side has made an opening point, learners offer suggestions to
their representatives, based on the principled style of negotiating.

An alternative approach would be for the tutor to take one of the roles, and the
whole class to support the learner acting as the other party.
 5 Tradeables are items that you are willing to trade in a negotiation. They are also known
as variables.
Generate as many tradeables as you can before entering the negotiation. The more
tradeables can be identified, the more likely there will be an opportunity for a win-
win outcome, as they can prevent deadlock.
Examples of tradeables include the following (refer to list on slide).
• Price
• Payment terms
• Length of contract/supply agreement
• Minimum quantities
• Lead time
• Contract terms and conditions
• Publicity and reference site permissions
• Exclusivity of supply
• Intellectual property rights
• Added-value services

For each objective and variable/tradeable you need to establish the

following. • Must achieve: minimum target/maximum you can concede on
this point • Intend to achieve: realistic target you are aiming for on this point
• Like to achieve: stretch target to try to achieve on this point

Before entering a negotiation, you need to have an agreed position with stakeholders
or budget holders regarding your targets and what you can trade with.

Activity
• Prepare a scenario and outline the position of each party with respect to critical
points, e.g., delivery times, price, payment terms, etc., on separate sheets of paper.
• Learners work in pairs. Hand out the party position sheets so each person in each
pair sees just one side of the scenario.
• Learners consider their position, then role play a negotiation and write down what
each party achieves on each point.
• Bring the class together to compare what deals were made, how many tradeables
were discussed, etc.

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SLIDE TUTOR NOTES

6 There are three levels to consider when considering the relative power of buyers
and suppliers.

Level 1: Macro environment

Use PESTLE analysis.
• PESTLE looks at political, economic, social, technological, legal and environmental
factors.
• It can help negotiators understand the ‘bigger picture’ regarding trends,
developments, opportunities and threats in their microenvironment (the
industry) and the macroenvironment (the wider business environment).
• For each PESTLE factor, buyers should ask the following.
• What trends or changes could affect my power?
• Could any trends or changes significantly affect the other party’s power?

Level 2: Microenvironment (industry structure)

Use Porter’s Five Forces analysis to examine the following.
• The intensity of industry rivalry
• The bargaining power of buyers
• The bargaining power of suppliers
• The threat of substitutes
• The threat of new entrants
This analysis helps organisations understand their strengths and position within
their industry.
It helps decision makers to defend or grow their market share or profits in an existing
or new market.

Level 3: Supply positioning one-to-one organisation power

• Use supplier segmentation – this helps buyers classify their suppliers based on
relative importance by considering the goods they supply in terms of supply
risk and expenditure.
• Use the supplier positioning model.
• This helps buyers understand the suppliers’ perspectives in order to
determine which supplier(s) they are more important to (refer to
diagram on slide).
• The supplier positioning model considers suppliers’ perceptions of buyers
based on customer spend and customer attractiveness. This produces
four quadrants: develop, core, nuisance and exploit.
• Being perceived as an attractive buyer is always helpful, particularly in
markets where supplier power is dominant. Buyers are often able to
maintain their supply during periods of shortage through their
relative attractiveness and their good relationships with key
suppliers.

Activity

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SLIDE TUTOR NOTES

Present a scenario to the class or separate scenarios to each group. For example, a
steel supplier indicates that there will be a price increase when a contract is renewed.
Learners work in groups of three, with each person using the suggested model to
analyse one of the levels.
Learners then discuss their analyses within their groups.

7 A key objective of strategic procurement and category management is to maximise

spend leverage by channelling as much spend as possible across the organisation to as
few suppliers as possible in order to extract volume discounts and other benefits.

A key source of leverage in the market is an organisation’s absolute and relative spend
as a customer.

Other methods to increase leverage in the market with suppliers include the following.

Leverage can be increased through spend concentration/consolidating spend

with a smaller number of preferred suppliers. Methods include the following. •
Vendor base reduction
• Volume consolidation across categories
• Forming purchasing consortia

Leverage can be increased through analytics. This involves carrying out a spend analysis
to find out the following.
• Who in your organisation is spending the money
• Who they are spending it with
• How much they are spending on which categories
This helps the buyer to identify whether there are opportunities to increase leverage
with suppliers.

Leverage can be increased by projecting the organisation as an attractive customer,

even if it is not currently a big spender. This involves the following.
• Highlighting simple procurement and contracting processes
• Prompt payment
• Engaging the supplier in innovation opportunities

8 Signs of trust in business relationships include the following.

• Mutually agreed and managed objectives and success measures for the
contract, including KPIs
• Acceptance on both sides of the potential need to renegotiate terms when
business conditions change
• Real-time sharing of information on needs and priorities
• Acceptance that there may be conflict but that it will be managed through issue
resolution, joint problem solving teams and defined escalation routes
• Pride and strong effort, high employee and customer satisfaction
• On-time delivery of products and services, effective total cost reduction

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 SLIDE TUTOR NOTES

• High-performance teams that feel empowered to get the job done • The supplier
being encouraged to and welcoming the opportunity to innovate into the business
• Both parties bringing ideas and sharing insight from the business/market
• Resources being freed internally to do other work as trust increases •
Clear criteria for decision making

Activity
Think about a supplier contract you have managed.
What was the nature of the relationship? Was it collaborative or characterised by
conflict, for example?
How many of the trust indicators were present?
What can you draw from this about the impact of trust on relationships?

9 Kirsten works for a fertiliser manufacturer. She is preparing for a negotiation with its
main supplier of nitrogen. Her organizationorganisation also uses three other suppliers
when it needs a quick turnaround on small deliveries.

Kirsten has picked up indications that this supplier might not be willing to renew the
contract for another year due to concerns over payment terms. This would cause a
problem for her organisation, because this supplier is the most reliable and has, to
date, offered the best bulk prices.

Kirsten is aware that payments to suppliers over the last year have sometimes been up
a month late. This is because the accountancy department was under pressure after
one member of staff was signed off with stress, meaning the other two accountants
had to take on his workload. However, the team is back to full headcount now, so this
should no longer be an issue.

When the supplier comes in, Kirsten can tell from their body language that they are
very disgruntled.

Discuss the following questions in small groups and record your answers. 1. What is
the source of the conflict: what is being negotiated or the way it is being
negotiated?
2. How could Kirsten handle the conflict?
3. List as many tradeables for this scenario as you can think of.
4. How could Kirsten increase the leverage of her organisation?

Learning Outcome 2 Know how to prepare for negotiations with external organisations
These notes are designed to support teaching staff using the CIPS Teaching Resources PPT slides. Teaching staff are
advised to cross reference against the relevant module content and learner resources (e.g., study
All rights reserved. Content may not be copied, reproduced, published, altered or transmitted in any
form or by any means, in whole or in part, without the prior written permission of CIPS. Copyright ©2018
CIPS
7
guide). Supplementary resources are available on cips.org in the Student Zone, CIPS Knowledge and Supply
Management online journal (www.cips.org).
SLIDE TUTOR NOTES

10 Not applicable

11 Costing methods

Absorption costing absorbs indirect costs into the direct costs related to specific
jobs, processes or outputs.
The costs that are absorbed into direct costs are the following.
• Direct labour
• Direct materials
• Overhead (indirect) costs relating to the manufacturing operation

Under total absorption costing, all the overhead costs such as rent, rates, premises and
head office administration are fully recovered by being incorporated into the costs of
the products created. This is a relatively arbitrary method of linking the overhead costs
to a product or service. However, it does mean that all of the relevant costs are fully
absorbed across individual products.

Activity
Half the class carries out research on activity-based costing and the other half
researches marginal costing.
• What is it?
• How does it work?
• When is it useful?
Lead a class discussion to share findings.

Activity-based costing is an alternative to absorption costing.

• This is an approach to overhead allocation that considers how the underlying
activities that enable products or services to be delivered are apportioned
across products or departments.
• It is based on usage, e.g., the costs relating to an organisation’s centralised
procurement department could be allocated across individual business units
based on the precise amount of time procurement staff spend working on
contracts and other activities for each business area.
• This is a more accurate approach than absorption costing.
• It requires time to be logged accurately.

Marginal costing
• This focuses on variable costs.
• Marginal costing involves calculating how much it will cost to manufacture an
additional unit once all of the fixed costs of manufacture have been taken
into account.

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SLIDE TUTOR NOTES

• This is a useful consideration for suppliers when pricing works. For example, should
they pass on to the buyer the fully absorbed costs per product or do they only
pass on the marginal costs? The difference can be significant.

12 Pricing strategies used by suppliers

Suppliers will typically have pricing strategies/policies for items and/or services within
category management groups. These strategies are more effective in consumer
markets but are also used in B2B markets. Procurement professionals can usually spot
these strategies and develop an appropriate response. A brief description of these
strategies is outlined below.

Activity
Allocate the pricing strategies to groups of learners.
Each group begins with a discussion and notes down what they already know about
their strategy.
Learners carry out independent research on their strategy.
• What is it?
• When is it typically used?
• Is it more common in any particular sectors?
• Learners think of personal experiences/examples of the strategy.
• Learners suggest advantages and disadvantages for the buyer and for the
supplier. Learners reconvene in groups to discuss their research and create a document
listing the key points.
Lead a class discussion to share key points with all the groups.

Cost plus pricing

• The supplier calculates total variable and fixed costs and adds a
percentage. • This is usually based on historical data and may ignore market
forces.

Premium pricing
• The supplier is determined to charge a very high price, not connected with cost
structures.
• Brand marketing is a prime driver of this approach.
• This is typically found in the early part of the product life cycle, or when demand
exceeds supply.

Penetration pricing
• This is seen when a supplier is attempting to enter a new market or extend its
share in an established one.
• It is characterised by price reductions to increase volume, followed by steady price
increases. It may even be loss leading (no profit made) at the start.

Marginal cost pricing

• The supplier recovers only the variable cost elements in its price.

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SLIDE TUTOR NOTES

• Price will be well below the market price.

• If the supplier is near full capacity, goods and services can often be sold at a low
price without loss of profit.

Market pricing
• The supplier sells in line with what the market is prepared to pay.
• The market price may be forced artificially high by cartel price fixing.

13 Microeconomics studies the behaviour of small things such as individuals and

businesses, and how decisions are made based on the allocation of limited resources.
Microeconomics considers the following.
• The factors that affect individual economic choices
• The effect of changes in these factors on the individual decision
makers • How their choices affect and are affected by markets
• How prices and demand are determined in individual markets

Supply and demand is a key determinant of price.

The law of demand states that if the price of a normal good or service is reduced,
people will buy more, and as the price increases, people will buy less.
This is shown on the conventional demand curve (point out the downward-
sloping demand curve on the graph on the slide).

The law of supply states that the higher the price suppliers can obtain for goods and
services, the more they will be prepared to produce and bring to market. At higher
prices, less efficient suppliers can enter the market and still make a profit. This is shown
on the conventional supply curve (point out the upward-sloping supply curve on the
graph on the slide).

The equilibrium price is determined when the quantity demanded is equal to the
quantity supplied.
• At equilibrium price in a market there will be no shortages and no surpluses
(indicate the point at which the two lines cross on the graph on the slide). • If the
price is set above the equilibrium price, supply will exceed demand and there will be
a surplus. In order to reduce this surplus the price will need to fall. • If you set a
price below this point you will see that demand exceeds supply and there will be a
shortage. In order to reduce this shortage the price will need to rise.

Activity
Learners carry out research into the types of markets (e.g., monopoly, perfect
competition) and their impact on competition and therefore on supply and demand
factors. Lead a class discussion to share findings, and ask learners to suggest which
market type is most attractive from a procurement point of view, based on their
research.

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SLIDE TUTOR NOTES

14 Macroeconomics is the study of factors that relate to the broad economy at the
national, regional or global level.
All buyers, big and small, are affected by these factors.

Macroeconomic factors include the following.

• Economic growth
• Inflation rate
• Interest rates
• Currency exchange rates
• Unemployment rate
• Protectionism

Activity
Allocate the macroeconomic factors listed above to pairs of learners. Learners carry
out research and answer the following questions.
1. What is the factor? Provide a one-line definition.
2. How can it affect prices? For example, what happens if the inflation rate is
high, and what happens if it is low?
3. Provide an example.
Each pair reports their answers to the rest of the class.

15 Negotiation plans/strategies involve four key activities (talk through the diagram on
the slide and provide additional detail).
1. Developing and prioritising your objectives and limits – analyse a wide range
of objectives and variables within the context of the organisation’s business
requirements.
2. Seeking to understand TOP’s objectives – these will vary according to the
contract, the market, the power of the supplier, etc.
3. Developing concession plans – this will help you identify the variables that you
can negotiate to reach a successful outcome within your negotiation boundaries. •
Identify concessions that can be made during negotiations.
• Plan a supporting statement for each concession to make a case to TOP
that it is a sacrifice for you and of real value to them.
• Build a hierarchy of concessions from lowest cost/easiest to trade to
highest cost/most difficult to trade.
• Plan to make concessions in small increments – a spreadsheet cost
model/ready reckoner can be helpful.
4. Planning the resources and logistics required and agreeing team roles.

Discussion
Why is the organisation’s wider strategy an important consideration when planning
for a negotiation?

16 The bargaining mix is the mix of variables that can be traded in a commercial
negotiation situation.

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SLIDE TUTOR NOTES

Identify as many variables as you can. This lowers the chance of the negotiation
reaching deadlock, because having more possibilities facilitates creative solutions. •
Having multiple variables allows you to package and repackage offers by mixing and
changing variables.
• You must set best and worst trading limits for each tradeable to ensure that you do
not give away more than you planned or are authorised to.
• Concession planning means considering what is important to you and what is
important to the other party, and therefore what you are willing to give up. • The
key in a negotiation is not to trade away anything that is of significant value to you.
These tradeables are often referred to as ‘must haves’.
• A good trade is when you trade something that has a relatively low value to you
but is valued by the other party (refer to diagram on slide).
• The bargaining mix and the variables will differ according to what is being
negotiated with whom.

Discussion
Present a scenario to the class, such as the following. ‘You are entering a negotiation to
renew a contract with a strategic supplier of steel. They have indicated that there will be
a rise in the contract price on renewal of the contract. Accept that the price rise is
justified for the purpose of this exercise. Bearing in mind that this is a strategic supplier,
what tradeables might you suggest?’
You could offer additional information to prompt discussion, for example: the
current payment terms are 30 days; the supplier has always delivered on time, but
you would prefer more frequent deliveries.

17 Individual negotiation styles

There are four main negotiation styles, as follows.
• Warm – a people person (refer to table on slide to discuss strengths and
weaknesses)
• Tough – a hard-nosed negotiator
• Logic – a numbers person
• Dealer – a trader who loves bargaining
For any individual, one of these negotiation styles will be dominant in most circumstances.

Activity
1. Allocate the three other negotiating styles (tough, logic and dealer) to groups of
learners.
2. Ask them to refer to the ‘warm’ strengths and weaknesses and consider the
strengths and weaknesses of the style they have been assigned.
3. Lead a class discussion to share ideas.
4. Ask learners to consider what their preferred style is.

Each style has its relative strengths and weaknesses. When considering their own style
and their team members’ styles, buyers should consider the following.
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SLIDE TUTOR NOTES

• In what circumstances is your style most effective?

• In what circumstances is your style least effective?
• What positive outcomes accrue from the use of this style?
• What negative outcomes may result from using this style?

18 Cy is a buyer for the fire service.

He is preparing to enter a negotiation with the organisation that has been providing
uniforms for the past two years.
Cy is happy with how the supplier has performed against the KPIs included in its contract
and it is a good fit for his organisation.
However, he is keen to understand its pricing strategy, as his research indicates that he
could obtain a similar quality product at a lower unit price.
The uniform supplier is based in another country. Cy has been keeping an eye on the
exchange rate and has noticed some changes lately. He realises he needs to take this
into account before renewing the contract.
Cy sits down to write some objectives for the upcoming negotiation.

Discuss the scenario in pairs, then write down your answers to the following questions. 1.
What are the costing methods that the supplier could be using? Make a list and
write a definition of each one.
2. Which of the pricing strategies would benefit Cy’s organisation?
3. What impact could a rising or falling exchange rate have on the price Cy pays the
supplier? How could this be mitigated?
4. Write at least three objectives for Cy’s upcoming negotiation.

Learning Outcome 3 Understand how commercial negotiations should be undertaken

These notes are designed to support teaching staff using the CIPS Teaching Resources PPT slides. Teaching staff are
advised to cross reference against the relevant module content and learner resources (e.g. study guide).
Supplementary resources are available on cips.org in the Student Zone, CIPS Knowledge and Supply Management
online journal (www.cips.org).
SLIDE TUTOR NOTES

19 Not applicable

20 Opening stage
• This stage is the first few minutes when the parties meet and greet each other and
are seated in the negotiation room in preparation for the main event. • It sets the
tone for the meeting.
• Be on time, get the names of the other party right and offer a firm handshake,
maintaining eye contact. Speak clearly and be courteous. Be prepared to engage
in small talk to break the ice.
• Check the people in the room have the authority to make a deal.
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SLIDE TUTOR NOTES

• By the end of this stage, you should check that you have got all the issues you
want to discuss on the table.

Testing stage
• Each side ‘tests’ the other’s position without giving away too much about its own.
• The information gained at this stage may help you decide which negotiating option
to go for, or to change your approach – either tougher or less demanding. • Listen
attentively, use open questions to obtain missing information, identify common
ground, clarify both parties’ perceptions to avoid misinterpretations, and show
concern for the other party’s needs and interests.
• Develop new options (in your head or on paper) based on any new or unexpected
information to share with your team during a breakout session.
• At the end of the testing phase you should have confirmed or clarified your key
assumptions and should understand the ‘why and what’ of the negotiation so
that there is less risk of surprises later.

Proposing stage
• Both sides will be seeking to establish if a zone of potential agreement
(ZOPA) exists.
• Either side may start making tentative proposals regarding their offering. • In the
case of a negotiation where the other party has already submitted a tender or
proposal, this stage may provide an opportunity for them to make proposals to
improve on their initial offers. These could be general suggestions or could target
areas highlighted in advance by the buying side.

Bargaining stage
• Both parties trade concessions.
• Proposals move from being tentative and general to being more definite and
specific.
• This stage may be short, particularly if the testing and proposing stages have
elicited useful insights by both parties into each other’s underlying interests,
red lines and walk-away points, and the ZOPA is effectively confirmed.

Agreement and closing phase

• Not all negotiations will get to this stage.
• Judging when to close can be difficult. Listen for explicit language and look for non
verbal cues.
• Make sure that all issues have been resolved and there is no ambiguity about any
of the terms. Summarise to confirm what has been agreed to lead to final
agreement.
• You can seek agreement in principle if the other party does not have the final
authority.
• Shake hands on the agreement and leave the meeting as soon as possible
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SLIDE TUTOR NOTES

thereafter.
• Immediately or as soon as possible after the negotiation, put the terms or details
of the agreement in writing if you have not already got them, to confirm
mutual understanding.

Activity
Individually or in pairs, reflect on a negotiation you have been involved
in. • Did it go through each of these stages?
• What aspects were discussed at each stage?
• How did each party behave/react during each stage?

21 Persuasion means ‘pushing’ on the other party so that they accept their own change
in attitude or behaviour as a result of your actions.
Influence means ‘pulling’ on the other party, which gets them to change their attitude
or behaviour as a result of reflection.

Professor Fiona Dent broke down push and pull into two types.
• Push can be ‘directive’ or ‘reasoning’
• Pull can be ‘collaborative’ or ‘visionary’

Various factors determine when each one is most appropriate to use (refer to the grid
on the slide).
• Directive is an ‘I’-driven push style where the influencer asserts their own views
and ideas and expects others to follow. Use this if you are an expert, are
working with new or inexperienced staff, and you require speedy action.
• Persuasive is an issue-driven push style where the influencer wants others to buy
into their ideas by presenting them in an even-handed, logical, rational and
objective way. Use this if your credibility and knowledge are high, you need to
get buy-in to an unpopular decision and you have done research that shows
this is the best answer.
• Collaborative is a team-oriented pull style where the influencer aims to involve
others who will offer views and ideas about the issue. Use this when you need
commitment from others, and you want innovative ideas from others because
the issue has no clear answer.
• Visionary is a pull style where you have to tap into others’ emotions, engage their
imagination and help them visualise what is possible. Use this when you are at
the beginning of a complex change process, you need to get people’s attention
and innovative thinking is required.

Activity
Think of an occasion where you have needed to persuade someone of something. This
can be in a work context (e.g., persuading your company to invest in a new business
case you have presented) or personal (e.g. convincing friends or a partner to go to an
event that they were not keen to go to).
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SLIDE TUTOR NOTES

• What method did you use?

• Is this your default approach?
• Did it have the intended result?
• Referring to the grid on the slide, could another method have been more effective?

22 Tactics are actions or strategies carefully planned to achieve a specific

end. • They work best if used sparingly and as part of your plan.
• They are particularly effective when dealing with untrained negotiators. • Their
effectiveness will decrease over time, as the other party will recognise and be able
to counter them if you use them repeatedly.

Discussion
1. Ask learners whether they are familiar with any of the tactics listed on the
slide, and ask for explanations of how they work. Fill in any gaps in their
knowledge. 2. Have any learners used these tactics in a negotiation?
• Was it planned?
• How did it go?
• Any lessons learned for next time?

• Good cop/bad cop – put on an act to make the other party warm to the good cop
and make more concessions than they would in absence of the bad cop. • Thank
and bank – say thank you when the other party offers you a concession and ‘bank’
it, making it harder for the other party to take it back later.
• Lack of authority, ‘board approval’ – extract another concession that allows you to
sign off there and then; say that if, for example, the price is less than $1m, you
do not have to get board approval.
• Declaration of a public stance – say publicly what you expect from a deal, e.g.,
promise union members a 10% pay rise. Use this as emotional pressure with
the employer in the meeting to gain concessions without which you would
lose face, which in many cultures is highly undesirable.
• Getting peanuts – pretend something that you need is not important. For example,
you might not initially communicate your need for urgency in case the other
party wants to supply ASAP. This means that you may not need to pay extra,
whereas if you indicate the value of fast delivery you will be charged for it.
Always trade concessions.
• Salami (one slice at time) – ask for an exceptional one-off concession that is
normally hard to get, e.g., an extra-long payment period. Once granted,
the precedent is set and it will be easier to get again.
• Outrageous initial demand – your first demand is so high that the other party is
shocked and you condition them to move closer to your position. This is linked
to anchoring.
• Add on – unexpected extras are added on after the negotiation that were not
clarified or explicitly discussed, e.g., out-of-hours support costs, hidden fees,
or discounts dependent on extra-prompt payment.
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SLIDE TUTOR NOTES

• Broken record – keep repeating something, e.g., repeatedly emphasise the

budgetary pressures you are under to condition the other party into thinking
you have no money.
• One more thing – wait until the end to ask for a concession you know is
contentious. You still may not get it but as the deal is so close the other party
may be more likely to concede at this stage when reopening the negotiation is
not attractive.

23 Questioning in a negotiation is used to do the following.

• Elicit information
• Condition the other party by constantly asking about a specific issue, to suggest
you are unaware of a particular subject or more knowledgeable about it than
you actually are
• Test the honesty of the other party, e.g., by asking about something you already
know the answer to
• Create and sustain movement in a negotiation if it stalls

There are many styles of question (refer to the diagram on the slide). Each style should
be used at a different stage of the negotiation meeting to elicit different types of
information.
• Open questions typically start with ‘what’, ‘how’ and ‘why’. They are used at the
opening and testing stages build rapport and uncover needs and underlying
motives and allow the buyer to get a feel for what is in store in the negotiation.
• Closed questions generate a specific answer. They are useful for confirming facts.
For example, ‘Can you deliver to regions X and Y with a 48-hour lead time?’ Or
‘Who will be the account manager?’
• Probing questions are typically used as follow-ups to open questions to elicit more
detailed information, for example, ‘Can you expand on that last point?’ •
Hypothetical questions are used to ask about a possible situation or abstract
concept. They are useful at the testing and proposal phases. For example, ‘If we
could pay in advance, what could you do about the price?’

Activity
In pairs, learners quickly devise a scenario based on the products or services provided by
one or both of their organisations. For example, if learner 1 works for an organisation
that manufactures computers, and learner 2 works for a local authority, the scenario
could be either the local authority procuring computers to replace its existing suite, or
the computer manufacturer trying to obtain planning permission from the local
authority to extend its warehouse.
Learners obtain as much information from each other as possible using the different
types of questions in turn, inventing their own responses as they go along.
At the end of the role play, ask each pair of learners to join with another pair, and
reflect on the following.
 • What they found out

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SLIDE TUTOR NOTES

• Which types of questions yielded the most useful information at each

stage • How they found the process

24 Skilled negotiators have good listening skills.

• They use active listening to provide them with more information.
• They are attuned to verbal communication signals from the other party – they note
how other negotiators use word choice and sentence structure for effect. • They are
attuned to nonverbal communication signals from the other party – they note vocal
features such as pitch, tonal quality and rate of speech.

Three common pitfalls that hinder active listening are as follows.

• Thinking of negotiation as a job of persuasion, and speaking rather than
listening • Using the time in which the other person is talking to prepare what to
say next • Not hearing what you do not want to hear

The following rules of active listening will help you to become a successful
negotiator (refer to the points on the slide).
• Be motivated to listen.
• Do not interrupt the other party when they are speaking.
• Fight distractions.
• Write everything down.
• Listen with a goal in mind.
• Give the other party your undivided attention.
• React to the message, not the person.

To improve your active listening skills, practise some of the following techniques. • Ask
probing questions to obtain deeper and more meaningful information. • Use brief,
positive prompts, such as ‘oh?’ and ‘and?’ to show you are listening and to keep
the other party speaking.
• Summarise by bringing together the facts and pieces of the problem to check your
understanding.
• Give feedback to let the person know what your initial thoughts are on the
situation, but do not give away too much in a negotiation.
• Use pauses and silence to indicate that you are thinking about what the other
party has just said.
Activity
In groups of three, learners take on three roles: person A, person B and observer.
Person A begins by asking person B a question. This could be about their daily routine,
a hobby or an interest. Person A and person B have a three-minute conversation. The
group then completes the following tasks.
• Person A summarises what they have heard and the body language they have
 observed.
• Person B corrects the summary and adds any key points person A has missed.
Person B says what they have noted about the body language of person A.

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SLIDE TUTOR NOTES

• The observer then provides their own reflections. For example, maybe person A
asked leading questions, or interrupted person B; perhaps the observer
noticed body language the others missed.
Learners then change roles and repeat the exercise.
As a follow-up, ask learners to practise active listening in their conversations both in
and out of work. They should note how much they truly pay attention, and how often
they are waiting for the other person to finish speaking so they can talk. As they
become more mindful of their default state, they should try to modify it to become
more active.

25 When professionals deal with organisations based in other countries, cultural

differences that affect values in the workplace can come into play. Some large multi-
national organisations mitigate issues that arise as a result of cultural differences in
the following ways.
• Employing or deploying staff with the same cultural background as part of the
negotiation team
• Using a local agent or an overseas purchasing office that employs local staff

Professor Geert Hofstede initially classified national cultures against four

dimensions, which were later expanded to six dimensions, as follows.
• Power distance
• Individualism versus collectivism
• Masculinity versus femininity
• Uncertainty avoidance
• Long-term orientation versus short-term orientation
• Indulgence versus restraint

Activity
Allocate one of the dimensions to each learner.
• Ask them to use the Internet or a library to find out about the dimension. •
Learners then group together with others who have researched the same
dimension. They discuss their findings and record them in the form of a mind map
or notes on flipchart paper.
• Ask each group to select key facts about their dimension, e.g., what it is, and what
the characteristics of high and low scores in each dimension are.
• Bring the class together. Each group shares its key facts and answers any questions
from other groups.
• The tutor uses the diagram on the slide to summarise the key points and fill in any
gaps missed by learners.
 As an individual follow-up activity or a class discussion, ask learners to consider what
the dominant aspect of each dimension is in their culture and/or organisation.

26 Reflection means reviewing what went well and what could have gone better in order
to improve future performance.
• It can take place in a formal team setting, and also privately, in your own mind.
• The amount of time and effort put into the reflection should be in line with the

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SLIDE TUTOR NOTES

importance of the negotiation to the buying organisation.

• When reflecting on performance, always refer to your strategy and plan. • Use a
checklist that includes questions that cover process, people and objectives to help
maintain focus when reflecting (refer to table on slide).

Reflection has many benefits.

• It makes participants more focused during the meeting.
• Lessons can be learned regarding what tactics did and did not work. • Participants
have an opportunity to air their thoughts openly with their colleagues. • The
strengths and weaknesses of the negotiation strategy can be confirmed. • The
strengths and weaknesses of negotiators’ individual and team skills can be
identified for development.
• It helps to improve performance in future negotiation settings.
• It helps leaders to identify future leaders through their capability to give and
receive feedback.

Activity
Working individually or in pairs, learners think of a recent negotiation they have
been involved in or have observed in their organisation.
Learners consider the questions in the table on the slide, reflect on the negotiation,
and note down their thoughts.
Can any lessons be learned for next time?

27 Nico works for a solar panel manufacturer based in Holland.

He is preparing to enter a negotiation with a supplier based in China, which provides
the solar cells.
It will be the first negotiation that he has led.
In pairs, discuss the scenario and answer the following questions, writing down
your answers.
1. What stages should Nico expect the negotiation to go through?
2. Suggest three ways that Nico could demonstrate active listening.
3. Should Nico expect there to be cultural differences between his organisation
and that of the supplier or are they likely to be culturally similar?
4. If there were to be differences, what steps could Nico take to reduce the
likelihood of conflict arising as a result of the differences?
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