Competitive Negotiation Tactics and Kraljic Portfolio Category in SCM

Abstract

Negotiation outcomes are broadly classified as Distributive/Competitive and Integrative/Collaborative. Substantial academic and research negotiation literature of the past two decades commend adoption of a collaborative style for almost all real-life conflict situations. Business negotiation materials and relational self-construal psychology studies present a picture of contrast. Negotiations being at the heart of buyer-supplier interactions drive value sharing and value co-creation aspects of modern Supply Chains. Pricing, product selection, delivery terms, shipment schedules, carrier selection, volume discounts, product training, and quality standards are all more often than not subject to negotiation between supply chain members. Negotiation interactions ensuing preparation and determination of BATNA, entail use of Competitive or Collaborative Tactics. Buyers are the protagonists in procurement organizations. And procurement often accounts for the lions share of an organizations budget. Small wonder, they drive cost competitiveness together with the firms partners. Indeed this is true of the overall Supply Chain. An Indian pharmaceutical company was chosen for the qualitative research in the form of a case study. The most popular competitive negotiation tactics were chosen for this study and buyers were asked to spell out the negotiation techniques that they deployed, material-wise (with the corresponding suppliers). This data when plotted material-wise and grouped Kraljic category-wise circumstantiates the use of competitive tactics in all Kraljic categories, marked by a refreshing nuanced approach for different categories, with intensity varying for different categories. Interviews with buyers and the key informant to discern the rationale behind use of those negotiation tactics, however, brought out a pattern despite the refreshing tendency not to straight-jacket.