D4 - Negotiating and Contracting in Procurement & Supply

Question 1

Contract terms can be split into two categories, condition or warranty. What is meant by these categories?

Answer 1

Conditions are essential terms to the contract and to break them is considered a breach of contract.

Warranties are less serious and a failure to deliver may not constitue a breach of contract although the other party may stil claim.

Question 2

Describe cost, price and profit.

Answer 2

Price (the amount charged to the buyer) = Cost (the amount it costs the supplier for the materials) + Profit (The amount of money gained by the supplier for the sale)

Question 3

Describe Cox et Als power matrix

Answer 3

Buyer power relative to the supplier is on the y axis, and suppliers power relative to the buyer is on the x axis.
Buyer power is high, supplier power is high (Interdependence)
Buyer power is low, supplier power is high (Supplier dominance)
Buyer power is high, supplier power is low (buyer dominance)
Buyer power is low, supplier power is low (independence)

Question 4

Describe different types of relationships from the competitive end through to the collaborative end of the spectrum.

Answer 4

1. Adversarial
2. Arms Length
3. Transactional
4. Closer tactical
5. Single-sourced
6. Outsourcing
7. Strategic alliance
8. Partnership
9. Co-destiny

Question 5

EXAM Discuss 4 differences between distributive (win-lose) and integrative (win- win) approaches to commercial negotiation (16)

Answer 5

1. An integrative approach is working together to achieve an outcome however distributive approaches are aiming to get a win at the expense of the other party
2. Distributive negotiations will take a short term focus rather than thinking about the long term relationship
3. Openness and trust is a feature of an integrative negotiation
4. Positions tend to be inflexible in a distributive approach
5. Distributive approach is seen as competitive
6. If a distributive approach breaks down it is likely to end in dispute resolution

Question 6

EXAM: Describe 2 circumstances in which it may be appropriate to use a conformance specification in a commercial agreement (10)

Answer 6

1. Medical / pharmacutical / chemical compound areas where the product must be correct
2. Blueprints or drawings have been designed
3. Construction contracts where the building must fit in a specific location
4. A recipe is used

Question 7

EXAM: Describe 3 sources of power that can be used in a negotiation (15)

Answer 7

1. Legitimate power (authority)
2. Information power (presentation of data which changes view points
3. Expert power (knowledge is power!)
4. Referent power (Charisma, power because people want your approval)
5. Reward power (Carrot to give)
6. Coercive power (Stick to beat)
7. Personality
8. Contextual power (Understanding BATNA or walkaway)

Question 8

EXAM: Describe 5 proactive influencing tactics that might be used in negotiation (25)

Answer 8

1. Rational persuasion
2. Consultation (invite them to develop a solution)
3. Mother hubbard (no leeway)
4. Snow job (bombard information)
5. Threat, emotion or logic
6. Bargaining or compromising
7. Split the difference
8. Good cop/bad cop
9. Add ons (add things in at the end of the negotiation)
10. Salami tactics (split problems down)
11. Russian font (present two un paletable offers)
12. Take it or leave it
13. The nibble (ask for another thing as the deals about to conclude)

Question 9

EXAM: Discuss 2 key performance indicators that could be used in a contract with a supplier, illustrate your answer with relevant samples (10)

Answer 9

1. Cost management
2. Quality performance
3. Timeliness of delivery
4. Service, promptness of dealing with issues
5. Resources available

Question 10

EXAM: Discuss 3 merits of performance specifications in commercial agreements (15)

Answer 10

1 . Quicker to write

2. Cheaper to write
3. Risks of non-achievment with the seller
4. Allow innovation
5. Buyer doesn’t have to have knowledge of market
6. Potentially wider supply base

Question 11

EXAM: Discuss 5 phases of a negotiation and suggest the activity that might take place at each stage (25)

Answer 11

1. Pre-negotiation stage (fall back)
2. Introductory supplier meetings (testing assumptions and exploring facts)
3. Discussion meetings (negotiation/trade/move/bidding)
4. Agreement meetings (summarise discussions)
5. Post-negotiation phase (finalise/implementation)

Question 12

EXAM: Examine 5 resources required for an effective face-to-face negotiation meeting (15)

Answer 12

1. Personnel (with right skills and knowledge)
2. Information (ability to bargain)
3. Meeting room and suitable space
4. Finance to pay for refreshments and/or travel
5. Time to prepare and hold the negotiation
6. Equipment such as projectors, phone in the room, flip chart and pens…

Question 13

EXAM: Examine 5 types of supplier relationships, within the ‘relationship spectrum’, that can impact commercial negotiations (25)

Answer 13

Adversarial, Arm’s length, Transactional, Closer Tactical, Single-sourced, Outsourced, Strategic alliance, Partnership, Co-destiny

Focus on Intensity, mutuality, trust, commitment. Win/win or win/lose

Question 14

EXAM: Explain 3 reasons why a procurement organisation might attempt to analyse a supplier’s cost structure when preparing for a commercial negotiation (9)

Answer 14

1. Identify negotiable areas
2. Understand the suppliers walkaway position
3. Understand how much leverage to apply before supplier failure may occur
4. The buyer will know when the supplier can’t go any further
5. The level of profit can be identified and deemed to be reasonable
6. Help develop your BATNA if profits are too high

Question 15

EXAM: Explain 3 reasons why it may be more difficult to develop specifications in contracts for services rather than in contracts for goods (15)

Answer 15

1. Services are intangible (subjective)
2. Services are variable (each is unique)
3. Services are provided in real time
4. Must be performed in particular locations and may need specific locations detailed in the spec

Question 16

EXAM: Explain 3 requirements that an offer must fulfil in order to be legally valid (15)

Answer 16

1. Offer must be definite, unequivocal and unambiguous set of statements as a clear offer to sell (not a willingness to sell e.g. a catalogue)
2. The person making the offer must intend to be bound by it
3. The offer must be communicated successfully to the other party
4. The offer must be open (still valid) when the other party accepts it
5. The party offering must have the capacity to do so

Question 17

EXAM: Explain 5 cultural differences between the parties to a negotiation that may impact on the negotiation process or outcome (25)

Answer 17

1. Power distance (if all decisions need to be made by the leader it could be a slower negotiation process)
2. Individualism Collectiveness (May want to negotiate on their own or in a team)
3. Masculinity Femininity (Masculine cultures may negotiate with a distributive approach)
4. Long Term orientation (Will they persevere despite it getting difficult? over fulfilling obligations to protect ones face)
5. Language differences (may slow down negotiations and create ambiguity)
6. Uncertainty avoidance (Likely to seek stable rules and procedures for the negotiation if uncomfortable with uncertainty)

Question 18

EXAM: Explain 5 details that might be in an enquiry of RFQ (15)

Answer 18

1. Buyers contact details
2. Quantity of goods to be delivered
3. Place of delivery
4. Date of delivery or program
5. A unique reference number
6. Any terms and conditions which will apply to the purchase

Question 19

EXAM: Explain direct costs (4)

Answer 19

Direct costs can be identified directly with a specific saleable unit of output. Examples include
raw materials and direct labour

Question 20

EXAM: Explain fixed costs (4)

Answer 20

Fixed costs are costs that do not vary as output (production) might increase or decrease. Examples include factory rent and salaries

Question 21

EXAM: Explain indirect costs (4)

Answer 21

Indirect costs, otherwise known as ‘overheads’, are the costs that cannot be identified to a
specific saleable unit of output. Examples include administration and selling costs as well as machine consumables such as lubrication

Question 22

EXAM: Explain the closure phase of a commercial negotiation (10)

Answer 22

1. Ratification, ensure everyone is clear what has been agreed in the meeting.
2. It provides a tool for stakeholder buy in to the negotiated agreement
3. It provides actions and responsibilities to take away from the meeting
4. The minutes or summary can be written into a formal document to avoid any disputes
5. Formally and mutually agreed points can be incorporated into the contract without further discussion.
6. Closure can allow the follow up of any outstanding points from the negotiation
7. It can assist the evaluation of the negotiation and outcomes

Question 23

EXAM: Explain the nature and operation of a call-off contract (10)

Answer 23

Call-off contracts are sometimes called blanket orders, there is a contract put in place to buy a certain amount of a product over a period of time and then it is “called off” throughout the year. Similar to framework agreements except frameworks create many individual contracts whereas a call-off is only one contract.

Question 24

EXAM: Explain the reasons that lead to a monopoly supplier having high power relative to a purchaser in a commercial negotiation (10)

Answer 24

1. Monopoly suppliers tend to be large organisations and there may be many buyers
2. Product might be highly differentiated with no other supply options
3. No threat of substitutes
4. The buyers purchase volumes may be insignificant to the seller
5. The suppliers product is important to the buyer
6. No opprotunity to go elsewhere because of specialisms
7. Switching or developing a new supplier may be too expensive
8. The suppliers reputation might make other products difficult to find.

Question 25

EXAM: Explain the use of 4 different types of question (16)

Answer 25

1. Open questions for digging information 2. Closed questions for ratification of specific points 3. Probing questions for gaining clarity in a certain area 4. Multiple questions for putting pressure on 5. Leading questions for gaining acceptance 6. Reflective questions (you seem unhappy with the proposal) for bringing emotion into the negotiation 7. Hypothetical questions for opening up ideas

Question 26

EXAM: Explain variable costs (4)

Answer 26

Variable costs are costs that will vary as production volumes change. Examples include raw materials and hourly paid labour related to output

Question 27

EXAM: Explain with examples, 2 circumstances when a distributive (win-lose) approach to a commercial negotiation may be appropriate (10)

Answer 27

1. A particular point to the contract may be non-negotiable like health & safety 2. If one party has much higher bargaining power and the shareholders are willing them to use it 3. Where relationship building is less important than the results of the negotiation 4. Where the contract is low value to both parties 5. Limited time for a negotiation and both pushing for an acceptable position

Question 28

EXAM: For 1 variable which determines the scope of a negotiation, explain how a purchaser might set their objectives for the negotiation. (10)

Answer 28

1. Understand the bargaining mix 2. Linking variables 3. MIL analysis 4. Develop walkaway / BATNA

Question 29

EXAM: From a buyer’s perspective, outline the impact of 4 different market structures on commercial negotiations (20)

Answer 29

1. Perfect Competition (the buyer is in a powerful position because it is easy to change suppliers, there is no real distinction between suppliers and products, the buyer has a high level of information and understanding of products, buyers will be willing to encourage competition to drive prices down, buyer may be distributive in negotiation) 2. Imperfect or Monopolistic Competition (More complex structure with more variables other than price e.g. quality or delivery times, priorities need to be set against variables to choose a supplier, the power base is not so clear as perfect competition, negotiation is key) 3. Oligopoly (Buyers can focus on other aspects other than price as sellers avoid price competition, sellers may collude to keep prices high, buyers will need to be skilled and well prepared to achieve benefits, Buying consortia can restore some power balance) 4. Monopoly (The supplier can dictate the terms, the buyers only leverage is to develop another alternative, high prices in this type of market, the supplier has no incentive to tailor products to the buyers needs, an integrative approach to negotiation is required)

Question 30

EXAM: Give 2 circumstances in which it may be appropriate to use a performance specification (10)

Answer 30

1. Technology is moving fast in the area 2. Suppliers have great knowledge of the area 3. When there is a clear criteria for evaluating solutions 4. When the buyer has the time and expertise to assess the bids

Question 31

EXAM: Identify 3 types of non-verbal communication and explain why each is important in negotiation (9)

Answer 31

1. Eye contact (not making eye contact might show dishonesty) 2. Body positioning (slouching could show lack of attention) 3. Neuro-linguistic programming (mirroring could lead to an empathetic relationship) 4. Encouragement (Nodding shows interest) 5. Gestures (arms behind head being arrogant) 6. Cultural bias (dress code, hand shake etc) 7. Proxemics (how close one party wants to be to the other) 8. Facial gestures (raising eye-brows) 9. Silence 10. Tone of voice, speaking speed 11. Object language (the way the room looks)

Question 32

EXAM: Outline 3 elements of the opening stage of a negotiation (15)

Answer 32

1. Rapport building 2. Assertive communication (desired outcomes) 3. Using questions to gain information from the other party 4. Listening actively 5. Checking assumptions 6. Using signals to condition the other party 7. Creating an atmosphere conducive to agreement

Question 33

EXAM: Outline 5 pre-conditions that are necessary for an integrative (win-win) negotiation to be successful (15)

Answer 33

1. Both parties believe there is a greater likelyhood of success by collaboration 2. Broadly shared goals 3. Parties are prepared to let go of the need for a pre-plan or control the outcome and and consider the redefinition of problems 4. Trust between the buyer and supplier 5. There is a willingness to communicate accurately and willingness to ask questions and share information 6. Both parties understand the benefits of collaboration and aren't held back by adversarial negotiators scared of sharing information.

Question 34

EXAM: Suggest 3 reasons why it is important for a purchaser to understand a supplier's fixed and variable costs when preparing for a negotiation (9)

Answer 34

1. Understanding costs can help set the parameters for price negotiations 2. Other negotiation initiatives e.g. supplier development targets can be set 3. help understand minimum order quantities or economies of scale achievable 4. Understanding costs can help justify price increases 5. Understanding variable costs allows you to know the suppliers walkaway point 6. You can understand profitability or mark-up 7. Buyer could understand the suppliers breakeven

Question 35

EXAM: Suggest 3 situations when a distributive approach may be appropriate for commercial negotiations (9)

Answer 35

1. When an issue is regarded as non-negotiable 2. If one party holds a stronger bargaining power 3. If the negotiation outcome is more important than the long term goals 4. For one-off transactional purposes 5. Where there is time pressure

Question 36

EXAM: Suggest 5 points that should be considered when preparing for a telephone negotiation compared with a face-to-face negotiation (10)

Answer 36

1. There may be background noise which could affect peoples ability to hear 2. An agenda should be shared prior to the meeting 3. Preparing questions to help overcome the lack of non-verbal communication 4. Prepare strong cases or arguments as they may prevail more over the phone 5. Take steps to initiate the call as there tends to be a power advantage over the joiner 6. Preparing psychologically as there is pressure to reach a conclusion on a call

Question 37

EXAM: Suggest how the ‘battle of the forms’ may be avoided (15)

Answer 37

1. Agreeing and negotiating terms 2. RFQ or Enquiry used to get an offer from the supplier initiated on your terms 3. Counter signed PO's 4. Stamping delivery notes Answer should be around creating offer and acceptance.

Question 38

EXAM: Variables are essentially the content issues for negotiation which determine its scope and focus. Explain 3 variables that can be discussed in a commercial negotiation (15)

Answer 38

Price, Delivery, Contract terms, Quality, Specification, Transportation, Payment Terms

Question 39

How can cultural differences affect a negotiation?

Answer 39

1. Power distance, the extent to which the unequal distribution of power is accepted 2. Uncertainty Avoidance, how we respond to uncertainty and ambiguous or unexpected situations 3. Individualism-Collectiveness, the extent to which people focus on themselves and their family 4. Masculinity-Femininity, how gender values predominate society 5. Long term orientation, shorter or long term values?

Question 40

How can you calculate a suppliers break-even point?

Answer 40

Take the variable costs from the sales revenue to get the contribution. Then divide this by the volume of sales to get the contribution per unit. Then you divide the fixed costs by the contribution per unit to work out the amount of units which must be sold.

Question 41

How can you plan for a negotiation?

Answer 41

MIL - must haves, intend to have, like to have. categorise all points which aren't agreed and decide on the importance.

Question 42

Name 3 costing methods

Answer 42

1. Marginal Costing 2. Absorption Costing 3. Activity Based Costing

Question 43

What 3 elements make up communication and in what proportions?

Answer 43

1. 55% body language 2. 38% pitch we speak in 3. 7% what we say

Question 44

What 5 parts must exist to make a contract?

Answer 44

1. Consideration - both parties must get something out the agreement. 2. Offer - one party must offer the other something. 3. Acceptance - the other party must accept the offer. 4. Intention - to create a legally binding contract 5. Capacity - to make the contract legal.

Question 45

What activities should you do in the pre-negotiation stage?

Answer 45

1. Data gathering and analysis 2. Stakeholder mapping 3. Power and dependency profiling 4. Identifying issues and priorities 5. Deciding on approach (integrative/distributive) 6. Evaluating power 7. Cost analysis 8. Setting objectives 9. Considering the negotiation variables (MIL) 10. Planning the logistivs 11. Understand walkaway / BATNA

Question 46

What are porters 5 forces of competition?

Answer 46

1. Buyers bargaining power 2. Suppliers bargaining power 3. Threat of new entrants 4. Threat of replacement products 5. Market rivalry

Question 47

What are sources of information when planning for a negotiation?

Answer 47

1. Networking (supplier / buyer events) 2. Published Information (media, trade journals etc) 3. Internet sources (search engines) 4. Internal sources (People who have worked with the organisation previously)

Question 48

What are sources of power?

Answer 48

1. Legitamite (exert power based on the beliefs of others) 2. Expert (being an expert in an area) 3. Reward (through offer of inscentive) 4. Referent (through charisma or personality) 5. Coercive (threaten sanctions) 6. Informational (through access to information) 7. Personality (through being personable) 8. Position based (pulling rank) 9. Relationship based (ability to control resource) 10. Contextual (understanding a batna)

Question 49

What are the 2 types of sepcification and what is the difference between them?

Answer 49

1. Performance specification: details the desired results | 2. Conformance specification: details exacting perameters around delivery and execution.

Question 50

What are the risks of intention to create a contract for procurement professionals?

Answer 50

Intention is a requirement for contracts which is generally deemed accepted when entering into contractual relationships.

Question 51

What are the stages in the communication (main discussion) part of a negotiation?

Answer 51

1. Opening - set tone 2. Testing - check assumptions 3. Proposing - each party proposes solutions to problems 4. Bargaining - trading occurs between parties 5. Agreement - Both parties accept the offers being made 6. Closure - ratification

Question 52

What are the two main approaches to tendering?

Answer 52

1. Open tendering: publicly advertise the work | 2. Restricted tendering: prequalify a list of suppliers and invite them to privately tender.

Question 53

What considerations must be taken when trading internationally?

Answer 53

1. Jurisdiction: where will disputes be settled? 2. Applicable Law? 3. Language of contract? 4. Customs and practice considerations. 5. Currency fluctuations 6. Documentation requirements may differ. 7. Taxation may be different from country to country.

Question 54

What elements make up emotional intelligence?

Answer 54

1. Self awareness - Manage ones own feelings 2. Emotional resilience - Perform under pressure 3. Motivation - Driving for goals 4. Interpersonal sensitivity - Understand others feelings 5. Influence - Changing others views 6. Intuition - Read situations 7. Integrity - Building of trust and rapport

Question 55

What elements make up the macro environment?

Answer 55

``` S - Social T - Technological E - Environmental E - Economic P - Political L - Legal E - Ethical ```

Question 56

What is absorption costing?

Answer 56

The variable costs and a reasonable portion of the fixed costs are covered by the price.

Question 57

What is activity based costing?

Answer 57

All costs are allocated to a specific product or brand including the fixed overheads.

Question 58

What is distributive negotiation or integrative negotiation?

Answer 58

Distributive negotiation is win/lose Integrative negotiation is win/win Negotiations can be lose/lose if it rushed and neither party get what they want out the agreement.

Question 59

What is marginal costing?

Answer 59

The variable costs are covered by the price but no fixed costs are. Fixed costs must be recovered elsewhere.

Question 60

What is meant by a BATNA?

Answer 60

Best alternative to a negotiated agreement is your back up plan. This will be important as it will provide leverage.

Question 61

What is meant by capacity to create a contract?

Answer 61

Having the capacity can mean, is the person old enough e.g. nobody under 18 has the capacity to create a contractual relationship. Another example is whether an employee has the right to act on behalf of a company.

Question 62

What is meant by consideration and what must be considered before making a legally binding contract?

Answer 62

1. The contract must offer something of value from both parties to the other. 2. The law is concerned with whether the value is sufficient.

Question 63

What is meant by implied terms and explicit terms?

Answer 63

Contracting can have either implied or explicit terms. Implied terms are assumed based on law or another term within the contract. Explicit terms are stated clearly within the document.

Question 64

What is meant by SMART objectives?

Answer 64

``` S - Specific M - Measurable A - Achievable R - Relevant T - Timely ```

Question 65

What is meant by walkaway?

Answer 65

A walkaway is the point at which the deal is no longer worth making. This will depend on things like - are there other suppliers who can deliver? - how urgently do you need the goods / services? - how easy is it to switch to other suppliers?

Question 66

What is negotiation?

Answer 66

It is a process which involves more than one party trying to reach an agreement.

Question 67

What is power and what are the different styles which it can be used?

Answer 67

Power is the ability to influence people. It can take many forms: - Overt power, the obvious and transparent use of power - Cover power, more subtle use of power through implication - Structural power, represents power through relationships.

Question 68

What is the difference between direct and indirect costs?

Answer 68

Direct costs relate directly to the product being sold. An impact on quality of anything under direct costs will have an impact on the overall quality of the end product. Indirect costs are overheads and non end product related costs e.g. lighting or machinery.

Question 69

What is the difference between fixed costs and variable costs.

Answer 69

Fixed costs will not change dependent on the amount of produce created. The costs are usually regular payments. Variable costs are directly related to the products and an increase in sales will see an increase in variable cost.

Question 70

What is the difference between influence and persuasion?

Answer 70

Influence can happen at any time, advertising influences us. It is something which shapes our views, understandings or beliefs. Persuasion is the ability to change someone elses views understandings of beliefs and is used in negotiation.

Question 71

What is the difference between mark-up and margin?

Answer 71

Mark-up is the profit as a % of the cost. | Margin is the % of price which is profit.

Question 72

What is the difference between positions and interests?

Answer 72

Positions are what you want out of the negotiation and focus around positions is a distributive approach to negotiation. Interests are why you want something and focus is around achieving interests. Focus on interests is an integrative approach to negotiation.

Question 73

What is the text book approach to negotiation stages?

Answer 73

Start by conditioning with threat, emotion or logic. Then bargain with low value trade offs. Then compromise to reach agreement.

Question 74

What makes up the micro environment?

Answer 74

1. Suppliers 2. Distributors 3. Customers 4. Competitors

Question 75

What methods could be used to accept a contract?

Answer 75

1. Oral or written communication confirming acceptance. 2. Unconditionally - acceptance must be in complete agreement of the entire contract. 3. By performace - starting to deliver work under a contract can count as acceptance of a contract

Question 76

What other preperation might you do before a negotiation?

Answer 76

1. Set the agenda 2. Agree a date and time 3. Agree a location 4. Agree duration 5. Agree attendees and roles 6. Plan meeting room layout

Question 77

What pricing strategies are there?

Answer 77

1. Market Penetration (start low) 2. Market Skimming (start high) 3. Cost Plus (Costs of production calculated and mark up added) 4. Going rate (price similarly to the competition) 5. Buyer based (what the buyer will pay) 6. Captive pricing (high pricing because of monopoly) 7. Relationship pricing (price set to try and maintain long term relationship) 8. Premium pricing (High as your brand is reputable)

Question 78

What resources are required for a negotiation?

Answer 78

1. Time - for preperation as well as the meeting and any follow up. 2. Personnel - the relevant people to attend the negotiation. 3. Finance - budget must be available for the goods/services 4. Information - gathering and obtaining information is critical to a successful negotiation 5. Information Technology - ensure correct set up e.g for webinar 6. Space and facilities - flip chart, large enough meeting room, etc

Question 79

What should be done post-negotiation communication stage?

Answer 79

Follow up on formalities are complete and management arrangements are put in place. Also ensuring the contract is marked up after the meeting is essential.

Question 80

What tactics can be used in a negotiation?

Answer 80

1. Good cop, bad cop 2. Nibble, add something small in just as the deal is about to be concluded 3. Snow job, give lots of irrelevant information to bog the other party down 4. Mother Hubbard, act like your on their side but have other constraints e.g. management or budget

Question 81

What techniques can be used for Price assessment?

Answer 81

1. Price reduction 2. Profit assessment 3. Cost analysis 4. Break even check

Question 82

What types of questions can be used in negotiations?

Answer 82

1. Open - variety of answers can be given 2. Closed - yes or no 3. Hypothetical - something may not happen 4. Probing - request information on specific area 5. Leading - put an answer in their mouth 6. Multiple - used to put pressure on

Question 83

When measuring performance of a service contract it is sometimes useful to use what kind of agreement?

Answer 83

Service level agreement which will set the desired service levels e.g. toilets will be cleaned every 10 hours.

Question 84

When negotiation fails to settle disputes or revive relationships what are the next steps?

Answer 84

Conciliation or Meditation then Arbitration or Litigation

Question 85

Why are specifications required when contracting?

Answer 85

1. Define the requirement: must be a clear list of requirements for the seller to understand. 2. Gain buy in: from the outer business. 3. Communicate: Must make clear the work to be delivered so the supplier can price accurately. 4. Minimise risk: avoids misinterpretations 5. Facilitate Evaluation: Allows you to benchmark suppliers performance. 6. Standardisation: allows you to standardise products bought across different companies.

Question 86

Why is it better to host a negotiation rather than travel to it.

Answer 86

The "home advantage" is useful as you will be more relaxed in the environment. You will be less tired as you won't have travelled and have access to resources more easily. You can set the meeting room to suit your requirements etc.

Question 87

Why is it high risk to enter into oral contracts?

Answer 87

1. Perceptions of the contractual arrangements may be different. 2. Where a mistake is deemed to have taken place the contract may be void. 3. Transparency can be vital for disputes and lead to mistrust if there isn't any documentation. 4. Conflict may arrise through lack of clarity on the agreed terms. 5. Compliance will be difficult to measure with no written contract.

Question 88

Why might a relationship breakdown?

Answer 88

Bad communication, unrealistic expectations, change in external environments, disputes

Question 89

Why should conflict be avoided in negotiations?

Answer 89

1. It may distract away from the main task. 2. Polarise views and create tension. 3. Act as a barrier to effective communication. 4. Encourage adversarial behaviours. 5. Lead to emotional reactions.