Eskom Procurement Book 2015

NEGOTIATION

Distributor (henceforth ‘D’): So, this trade fair. How much are you going to contribute? Company C (henceforth ‘C’): Nothing. D: We want 10 000 Euro. C: No way. I’ll give you 2 000. D: 6 000 and I’ll take you out to dinner. C: 4 000 and I choose the restaurant. D: 5 000 and you choose the restaurant. C: OK, 5 000 and I choose the restaurant. But I also like your tie. I want that as well. D: No chance, it was a present from my wife. C: Then I’ll take your cufflinks. D: 7 500. C: 3 000. 7.8 NEGOTIATING POWER Power is in the mind. There is ample evidence that people, even when given identical facts and an identical power position, react differently to their circumstances. It pays to understand the source of one’s power, and the limits of the other person’s power, because power plays a key role in determining the outcome. In procurement, we may be tempted to feel that we have all the power on our side. After all, by awarding business we are enabling the very existence of our suppliers. This, however, is a limited view. In truth, the power is shared between both parties in a negotiation. The buyer has the power to award or dismiss, but the seller has the power to offer everything he/she has, or may offer the barest minimum. At times the seller may not even need the buyer’s business. There are many sources of power. Some are based on resources, others on laws, regulations or precedent, while others are based on psychological factors. The following identifies some important sources of negotiating power. • Legitimacy: No source of power so hypnotises people as the power of legitimacy. We have learned to accept the authority of things like procedures, laws, standard forms and price tags to such an extent that we fail to question their applicability in changing situations. Buyers have legitimate authority to negotiate and enter into agreements. It is the position that a person holds, rather than the individual person, that forms the basis of legitimate power. • Commitment: Commitment, loyalty and friendship are sources of power. People who are committed to their goals or to the satisfaction of others have Negotiation dissolves into laughter.

7.8.1 SOURCES OF POWER

161 CHAPTER 7