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Unit 11: Wholesale Purchasing and Negotiation with Vendors

Self Assessment Notes

State whether the following statements are true or false:
7. The climax of a successful buying plan is the active negotiations.
8. A trade discount sometimes referred to as a functional discount.

9. Trade discounts are illegal.
11.4 Negotiation Strategies

Whether you’re negotiating over chores with a spouse or salary with an employer, the way in
which you approach the discussion dictates how successful you are. If you’re too timid, you may
give in too quickly and end up making an unfair deal for yourself. This may also lead the other
party — and even onlookers — to consider they can walk all over you. On the other hand, if
you’re too stubborn and unrelenting, you may provoke the other side to walk away from the
negotiation. This causes the deal to fall through, leaving everyone involved permanently bitter.

Nevertheless, depending on the emotions and the parties involved, sometimes it may be more
appropriate to lean one way or the other. A soft approach to negotiation refers to being generally
more willing to give in, make concessions, trust the other, and stay honest and forthright with
one’s situation. A hard approach is the conflicting. It means keeping a hard line, being unwilling
to make concessions, and keeping one’s own situation under wraps. The authors of a book called
“Getting to Yes” argue a third option, which is a balanced approach.
In the book, authors Roger Fisher and William Ury advocate principled negotiation, which has
four components:
1. Insist on using objective criteria: As a preventative method of keeping emotions at bay,
try whenever possible to use objective criteria. Beforehand, make sure the parties agree
on what is “objective,” be it legal precedent or scientific studies.
2. Separate the people from the problem: Try to account for others’ emotions and cool your
own. Communicate honestly and show that you actively and attentively listen to the
other side.

3. Invent options for mutual gain: This part involves using the integrative approach of
enlarging the pie we discussed on the previous page. Inventing new ideas could necessitate
brainstorming and thinking of as many options as possible — both ones you can offer the
other side or the other side can offer you. Afterward, decide which ideas sound best to
bring to the negotiating table.
4. Focus on interests, not positions: Although the outright demands (positions) of either
side might prove incompatible at first, getting to the root of the demands (the underlying
interests that motivated them) allows the parties to rethink and adjust demands to make
them compatible.

For people who just don’t feel comfortable with negotiation, the principled negotiation approach
serves as a great alternative to the difficult choice between being conciliatory or aggressive. By
minimizing emotions and focusing on objective sense of fairness, people gain more confidence
without feeling that they’re making enemies or being victimized.
But some negotiation theorists say it isn’t quite that simple. The question of strategy typically
revolves around predicting the other side’s moves. Because we predict you will go to the next
page, we’ll explain this concept there.

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