Buyer Seller Negotiations

The legitimate buying and selling does not leave any room for the dishonesty in buyer seller relations such as bribery, offer of gift articles, misrepresentations etc. However, it is very difficult to put a line of demarcation between fair or foul tactics in buying and selling, and it merely becomes a matter of degree and intent. The development of the personal relationship with the salesman of the supplier is good, but the loyalty must rest with the supplier because when salesman joins the competitor’s form, the business should not go with him. In fact, some salesmen hold a god command over certain key buyers and accordingly, they bargain their position. Similarly, the purchase officer should be made free from pressure of superiors in exercising the buying decision. If this is not maintained then purchase officer should not be held responsible for any form of failure of purchase function. The superior may not always act in the interest of the organization and thus may not be inclined to adhere to the standards. The purchase function should be handled autonomously through the independent purchase organization.

Negotiation is an important, interesting costly and complex mechanism in the buying and selling process. Generally it is confined to the high value and / or large volume buying. It is superior to competitive bidding, another popular technique employed in high value and / or large volume purchases because unlike biding, negotiation is a two way process. In fact, negotiation provides a legitimate and ethical means for setting the transaction between the buyer and seller through the give and take tactics. It is not a process of stripping or trapping any of the party by other party but a healthy activity which eliminates the injustice to any of the parties of the deal. In reality, the successful negotiations result in satisfaction to both the parties. At the end of the deal, the dealing parties feel that they have reached to an agreement which is mutually beneficial.

Negotiation means deliberations between the parties leading to an agreement. It is a business session between the buyer and seller for the purpose of settling some business transaction. Webster defines negotiation as, “conferring, discussing, or bargaining to reach agreement in business transactions”. It is also defined as the process of working out a procurement and sales program together, to the point of reaching a mutually satisfactory agreement. As competitive parties deal through the negotiation, the purchase deal of one party results into the sales deal of the other.

Many times negotiations is considered as a price haggling, and thus is considered unethical. In reality, price is not only, but one of the considerations in the negotiation. Moreover, it does not amount to exploitation of one party by the other, but it results in an agreement which is mutually beneficial.

Objectives of Negotiation: The negotiation is an objective oriented process. All types of negotiations strive to attain one or more of the following objectives:

1) To settle a fair price
2) To perform the contract in agreed time
3) To exert control on the fulfillment of the agreed terms
4) To seek maximum co-operation from the supplier
5) To develop sound and sustained relationship

To settle a fair price: To get price settlement is the core part of the negotiation. Both buyers and sellers consider their respective cost analysis of the product. Cost data is the factual data and it is subject to some adjustment during the deliberations. However, the utility factor of the buyer (i.e. the intensity of the need) and the profit margin of the seller provide sufficient leeway in the price settlement. Both parties have their respective ranges of the price. Negotiation strives to develop a fixed point on these ranges which is considered satisfactory by both the parties. It should be noted that price fixing is sometimes qualified by the quantity of purchase, sustained buying from the negotiating supplier, transportation and other allied costs, insurance etc. clarification should be sought on all these issues while developing a fair price.

Timely delivery: The objective of buyer and seller gets integrated on the issue of timely delivery because for the buyer it eliminates the situation of stock outs and the resultant losses, while for seller, it enables him to liquidate his stock and the paraphernalia of costs attached to storing and to utilize his production capacity more effectively. Timely delivery is endangered when buyer fails to plan his requirements, or the planned requirements are not communicated to the seller. Seller fails to deliver in time when there is no commitment or there exists any ambiguity in commitment. Negotiation attempts to bridge such gaps on the side of both the dealing parties.