strategic business marketing reflection
Session 2: Organisational Buying Behaviour and Negotiation Skills
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• Purchasing Orienta1on and Nego1a1on • Chapter 3
3 • B2B Rela1onships and Networks • Handout
4 • Market Sensing / Price value • Chapter 2
5
• B2B Strategy and Planning • Chapter 4
6 • Managing B2B Products and Services • Chapter 5, 6
7
• Integrated B2B Marke1ng Communica1ons and Consulta1ve Selling • Handout
8 • Business Channel Management • Chapter 7
9 • Gaining and Managing Customers • Chapter 8, 10
10 • The Digital Evolu1on in B2B • Handout
11 • Exam Briefing and Poster presenta1on
Understanding Value
Crea0ng Value
Delivering Value
B2B Marke1ng Framework
1. Regard Value as Cornerstone. 2. Focus on Rela0onship Interac0on and
Networks. 3. Focus on Business Market Processes. 4. Stress doing Business Across Borders.
Guiding Principles
Overview
• Understanding firms as customers is the process of learning how companies rely on a network of suppliers to: – Add value to their offering – Integrate purchasing activities with those of
other functional areas and outside firms. – To make decisions
Overview
• Discuss how progressive firms have reconfigured the task of securing external resources.
• Look at three purchase orientations. • Cross functional buying teams.
Understanding Purchasing Orientation
• Purchasing – is the process of acquiring resources and capabilities for the firm from outside providers.
• Purchasing orientation – we mean the overall philosophy that guide managers who make purchase-related-decisions and delineates their span and influence.
Purchasing and Supplier Func1on Chrysler
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Straight rebuy Modified rebuy New task
Pure rou'ne
Complete nego'a'on
Some u1li1es (electricity, water, gas)
Bulk chemicals
Office supplies
New trucks
Consul1ng services
Electrical components
PC terminals
Custom-built offices
Bridges, dams
Installa1ons (machinery)
Weapon systems
Typical organizational buying classifications Source: Adapted with permission from Enis (1980)
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Avoids supplier dependence
Bargaining leverage (to maintain low prices)
Insurance against disrupted
supply
Not limited to capacity of single supplier
Access to more supplier data
S1mulus to compe11on
Greater prompt to innova1on
One rela1onship to manage
Greater commitment
Clearer responsibili1es
More leverage over supplier
Simplified monitoring
Easier supplier training
Cheaper tooling costs
Simplified scheduling
Mul6ple sourcing advantages Single sourcing advantages
Single vs. multiple sourcing Source: Adapted with permission from Wilson (1999, p50)
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Goals of Purchasing
Understanding Purchasing Orientation
• Purchasing Orientations: – Buying – Procurement – Supply Management
“The value network”
Value Network Defined
Ø Set of organiza'ons that perform por1ons of business processes designed to create:
Ø Economic and Technical Benefits
Ø Service and Social Benefits Ø The organiza1ons equitably share in resul1ng
benefits
Source: Adapted from a chart by Professor Sunil Chopra, J. L. Kellogg Graduate School of Management, Northwestern University, 1999.
Understanding Purchasing Orientation
• Buying Orientation involves the following: – Obtain the best deal in terms of price, quality,
and availability. – Maximise power over suppliers: and – Avoid risk where possible.
Understanding Purchasing Orientation
• Developments in Buying: – Global sourcing – Target pricing – Lopez approach – Customised materials – B2B Matrix – (E-Hubs)
B2B Matrix (e_hubs)
15
Alibaba Australia
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Narrow Buying Orienta1on - Walmart
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Understanding Purchasing Orientation
• The Procurement Orientation involves: – Improving quality i.e.: ISO 9000 /TQM – Reducing total costs i.e.: TCO – Cooperating with suppliers
Total Cost of Ownership (TCO)
Understanding Purchasing Orientation
The Supply Management Orientation: 1. Focus all of the firm’s efforts on
delivering value to end users. 2. Concentrate the firm’s own resources on
a set of core competencies and strategically outsource all other activities.
Understanding Purchasing Orientation
• The Supply Management Orientation: 3. Build a supply network that efficiently
completes required business process, and
4. Sustain highly collaborative relationships with selected supplier and sub supplier firms.
5. Pursue Segment specific supply and management strategies.
Understanding Purchasing Orientation
• Putting Knowledge of Purchasing Orientation to Use: – Knowing orientation is useful. – Helps in suppliers selection strategy – Helps you understand how your own
strategies and activities hinder the completion of processes.
Shift in Sourcing Practices
Traditional
• Purchasing • Multi-source • Material focus • Single point of contact
(sales –Purchasing) Arm wrestling relationship
Current
• (Out) Sourcing • Single source • Material and activity
sourcing • Overall supply-chain
partnership • Win-win relationship • Automation in Purchasing
Ques1on
Forrester forecasts that 1 million US B2B salespeople will lose their jobs to self-service eCommerce by the year 2020. While B2B buyers overwhelmingly prefer to research, and increasingly buy, products and services via a self-service website, What is your opinion?
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Summary
• Understanding firms as customers is the process of learning how companies rely on a network of suppliers to add value to their offerings, integrate purchasing activities with those of other functional areas and outside firms, and make purchase decisions.
• By understanding firms as customers it is better able to craft responsive market strategies.
Nego1a1on Skills Workshop
Chinese Indian Bargaining
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The N2 Model Of Negotiating Behaviour
NSP (Negotiating Style Profile)
Negotiating Style Profile (NSP)
1. Is designed to help you gain a deeper understanding of your negotiation style.
2. There are no right or wrong answers.
Negotiators are concerned with two kinds of factors
Every negotiator wants to reach and agreement that satisfies his substantive interests. That is why he negotiates. Beyond that, a negotiator also has an interest in his relationship with the other side.
Quote: In Getting to Yes, Roger Fisher and William Ury (1982, p. 20)
Two Universal Concerns of Negotiation
1. The substance or outcome of the agreement.
2. The relationship with the other party(ies).
How Patterns of Negotiating Evolve
1. The two universal concerns are shared by al negotiators, regardless of the object of their negotiations.
2. Each concern interacts with the other to produce a pattern or style of negotiating behaviour.
N2 Model Of Negotiating Behaviour
C on
ce rn
fo r
R el
at io
ns hi
p
Concern for Substance
High
Mod
Low
Low Mod High
N3 N2
N4 N1
Accommodate Collaborate
Withdraw Defeat
Build friendly relationships
Take whatever you can get
Creatively problem solve so both parties win
Be a winner at any cost
N5
Compromise
Split the difference
Which Style is Preferred?
Ø Variations of each style may be appropriate under certain conditions.
Ø A negotiator may choose one of the styles for a particular negotiation
Ø However, a consistent application of the N2 Style offers the greatest probability of producing negotiating results of the highest quality and enduring satisfaction for both parties.
How to use the N2 Model
Ø The N2 Model is intended as a clarifying model of negotiating behaviour.
Ø Once the model is understood you can gain a clearer insight into your present behavioural preferences
Ø If certain preferences are likely to produce undesirable results, then a negotiator may want to consider a program of behavioural change.
How to Score the NSP
1. Complete the 30 statements. 2. Complete response form and transfer to
the scoring form 3. Add each column and place at the
bottom of the column. 4. These scores reflect your preference for
each negotiating style in the model. 5. Create your profile on the chart
Profile Chart of Negotiation Style
42 42 42 42 42
30
23
20
17
11
6
41
37
31
35
27
6
38 30 36
33
28
25 30
22
6
19 25
13 19
6 6
Ve ry
H ig
h H
ig h
A ve
ra ge
Lo
w
Ve ry
L ow
N1 - Defeat
N2 - Collaborate
N3 - Accommodate
N4 - Withdraw
N5 Compromise
31 22 28
Six interpersonal skills to move to an N2 direction include:
1. Assertive Behaviour 2. Supportive Climate-Building 3. Active Listening/Empathetic Responding 4. Nonverbal Behaviour Sensitivity 5. Using Probes to raise Receptivity 6. Confronting and Working through
Differences.
An approach for a a Win-Win Outcome include
1. Comprehensive preparation. 2. An appropriate opening to set the tone of
the negotiation 3. Exploring of each party’s needs 4. Creative development of alternatives 5. Appropriate closing to define the
agreement. 6. Critique of the negotiated outcomes.
The Art of Nego1a1on
Contents
Introduction About this workshop Phase 1 – Preparation Introduction Step 1 – Set Objectives Step 2 – Decide Fall back position Step 4 – Set best and worst limits Step 5 – Use ‘what if’ approaches
Contents
Phase 2 – Bargaining Introduction Step 1 – Get the issues on the table Step 2 – Ask questions Step 3 – Clarify Step 4 – Trade concessions Step 5 – Conclude Case Study Bibliography
Negotiation – What It’s Not
• Negotiation is one of the more abused words in the English language.
• Some believe negotiation is a code for: – Manipulation – Lying
What people say about Negotiation
• ‘The old idea of a good bargain was a transaction in which one man got the better of another. The new idea of a good contract is a transaction which is good for both parties to it’
Judge Louis D. Brandeis
What people say about Negotiation
• ‘I’ll make him an offer he cant refuse.’ Mario Puzo (Don Corleone, The Godfather)
• ‘Diplomacy is the art of letting someone else have your way’. Daniel Vare (Italian Diplomat)
Negotiation – A Definition
Negotiation is – ‘conference and bargaining for mutual agreement’.
For Negotiation to take place
1. Both Parties must have some level of commitment to do a Deal.
For Negotiation to take place
2. Both Parties must have the authority and the will to vary the terms of the agreement.
Negotiation
• Phase One - Preparation • Phase Two - Bargaining
Preparation
Step 1 – Set Objectives
Win - Win
‘Their Shoes’
Objective
Us • To secure major retail
account representing $5 million in new business p.a.
Them • To find a supplier who can
supply product to meet our immediate price objectives and customer requirements.
Preparation
Step 2 – Decide our Fallback Position
Imagine Total Failure
Decide Best Alternative
Fallback
Us • To secure $1 million of
business for high margin niche products only.
Them • To find another supplier.
Preparation
Step 3 – Prioritise your Tradeables
What are the Tradeables?
What are the Priorities?
Prioritise Tradeables
Us Them?
Product Range
High Low?
Rebates Low High?
Catalogue funding
Low High?
Product training
High Low?
Preparation
Step 4 – Set Best and Worst Trading Limits.
Best = Best allowing Win – Win
Worst = Walkaway to Review
Best and Worst Limits
B W B W
Product range
Range 10 product lines
Range only 3 product lines
? ?
Rebates 1.0% to sales 2.5% to sales
? ?
Catalogue funding
$60,000 p.a $150,000 p.a ? ?
Product Training
15 Training workshops
5 training workshops
? ?
Us Them
Preparation
Step 5 – Plan ‘What If…’ Strategies and Supporting Arguments.
Plan Options around Tradeables
Plan Creative Solutions
Bargaining
Step 1 – Get the Issues on the Table.
Start the Process
Don’t Show your priorities.
Bargaining
Step 2 – Ask Questions
For Information and Motives
To create movement
Bargaining
Step 3 – Clarify
Paraphrasing
Summarising
Bargaining
Step 4 – Trade Concessions
If … then …
Bargaining
Step 5 – Conclude
Summarise
Write it Down
It’s a Deal Negotiation
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Negotiation Mistakes
1. Neglecting the other sides problem 2. Letting price bulldoze other interests 3. Letting positions drive out interests 4. Searching to hard for common ground 5. Neglecting BATNAs (“best alternative to a negotiated
agreement”)
6. Failing to correct a skewed vision
Source: HBR Six Habits of Merely Effective Negotiators by James K. Sebenius April 2001
Bibliography
1. Do We Have a Deal? Gavin Kennedy, Gower 1991 2. Negotiation Skills, Baden Eunson, John Wiley & Sons 1994 3. Getting to Yes, Roger Fisher and William Ury, Penguin 1981. 4. Account Strategies for Major Sales, N. Rockham, Gower
1988. 5. It’s a Deal – A Practical Negotiation Handbook, P. Steele, J.
Murphy, R Russil, McGraw Hill 1989. 6. Negotiating: Everybody Wins, V. Helps, BBC Books 1992. 7. Planning for Behaviours for Win – Win Negotiations,
Research papers available from Huthwaite Research Group Ltd