Negotiation Phase – 4 Phases For Effective Negotiations

In a procurement process, the negotiation phase is just as important. This is where you discuss options and agreements with the other party. Therefore, the negotiation phase should not be underestimated.

To excel during the negotiation phase, you need to prepare. That is why we will talk about the 4 phases or stages of the negotiation phase for this article. We will define the terms and come up with the right stages so you can negotiate without issues.

After reading this article, you should already understand the negotiation phase and become a master of it!

Why Study the Negotiation Phase?

For a procurement process to work, you should always include negotiations. It is an integral part of procuring materials or skills for your company. Without it, you are doomed to procure goods and/or services at a rate that is disadvantageous for your organization. 

Also, the negotiation phase is the trickiest part of the procurement process. It is where the results for both the RFQ and RFI will be used in order to take advantage during the negotiation stage. It takes skills and determination to become a skilled negotiator, but those can be learned. Our Negotiation Gamechanger course is designed to help negotiators hone their talents during this critical procurement phase.

During the negotiation stage, this is where you try to convince the supplier to give you high-quality materials or supplies for the best price that you can offer. If you fail during the negotiations phase, your organization will have to go back to square one in your procurement process. It is for this reason alone that many procurement managers believe that one should really study and prepare for the negotiation phase carefully in order to proceed in the procurement process without too many issues.

Editor's note:

The Negotiation Game Changer Certificate Program teaches you:

  • the skills needed to drive better, fact-based decisions that ultimately benefit both organizations and its employees.
  • a comprehensive analytics skill set that will enable you to achieve deals with results you have been dreaming of.

The 4 Phases of Negotiation

Since we’re done discussing the importance of negotiations in the procurement process, it’s time to take a look at the 4 phases of negotiation.

Each phase or stage, as some would like to call it, coincides with each other. It’s basically just a cycle of how negotiations would run through. Your team at Procurement Tactics understands that it might be overwhelming and too much of a bore to write a long wall of text for each phase, so we’ve decided to create this simple table so that it’ll be easier to understand each phase.

So without further ado, here are the 4 stages or phases of negotiation:

Phases of Negotiation

Stage 1 - Preparation
Stage 2 - Information Exchange, Validation, and Bargain
Step 3 - Conclude
Stage 4 - Execute

What it Involves

Identify potential value, begin to understand interests, develop fact-base
Discovering and creating value, build rapport and trust, assess interests, create and distribute value, make and manage concessions
Capture value, confirm interests have been met, thank the other party
Expand value, addressing any changing interests, strengthen relationships

Stage 1 – Preparation

Heading into a negotiation without preparation is like heading to war without a weapon. You really need time to prepare for negotiations. 

Thus, there are several key points that you need to assess while preparing for the negotiation. These key points will help you big time in determining the outcome of the negotiation:

Points to Consider

  • Should I be the one to negotiate?
  • What do I need to know?
  • Who are the players and stakeholders?
  • Are there any standards and benchmarks?
  • Re-organize any data that you may have on the other party
  • Anticipate what may happen during negotiations
  • Assess the strength and risk of the other party and your party
  • Have a look at your desired outcome and your least acceptable agreements.
  • Be ready to make concessions

Stage 2 – Information Exchange and Bargaining

Once the information has been exchanged and there is validation over the information presented, bargaining will start immediately. 

Always remember that during the exchange stage, it is important to build rapport and trust. Forget about playing the hardball negotiator; for a procurement process to work, there should be trust between your organization and the supplier. Take note of these key critical assessments during the information exchange period:

  • Competency – Are they credible and able?
  • Trustworthiness – Are they dependable and honest?
  • Likeability – Can you work well together?
  • Alignment of Interests – Are your interests aligned with theirs?

During the bargaining stage, always remember your BATNA. Again, BATNA means Best Alternative to a Negotiated Agreement. Use your BATNA should negotiations start to fail, as this will give you and the other party options to come up with an acceptable concession, rather than just walk away from the negotiation table.

Stage 3 – Conclude

The Conclude stage is the point where both parties finally reach an agreement. It is important to follow up on whether the other party can follow through with what was agreed on. Therefore, it is always during the Conclude stage where documents and agreements are handed down and signed on by both parties.

Stage 4 – Execute

The last part of the negotiation phase is where the deals agreed on are executed and carried out. At this stage, take note of any changes or failures on both sides so that if there is another negotiation, those listed will be discussed in greater detail in the future.

FAQs

What is the first phase in a negotiation?

The first phase in a negotiation is the Preparation Phase.

 

What is the final phase in a negotiation?

The final phase in a negotiation is the Execute phase

 

What is a negotiation phase?

The negotiation phase is the step-by-step process of how negotiations are carried out.

 

Become the master of the negotiation phase?

To become a master negotiator, you need to learn the negotiation phase by heart. Enroll now in our Negotiation Gamechanger course and hone your skills to become an expert negotiator in no time at all. But hurry because our course is in a limited time slot only!

Go to www.procurementtactics.com for more information about this offer!

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