university of economics in bratislava, slovak republic 6. contract negotiations
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UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC
6. Contract negotiations
UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC
When there is little latitude in determining their position or posture
When they are held accountable for their performance
When they have sole responsibility
When they are responsible to a constituency present in thenegotiations
When they are appointed rather than elected
Conditions that Prevent Spontaneous Response
Negotiators as representatives
Negotiation team
Purchasing items units
The Buyer’s Negotiation Position will be StrongIf:
Demand is not urgent
Suppliers are keen for the business
Buyer is in a monopolistic or semi position
Demand can be met by alternatives/substitutes
Make and buy options are available
Buyer has a reputation for fair dealing
Buyer has excellent supply market intelligence
Strong supplier position:
Demand is urgent
Suppliers are indifferent accepting business
Monopolistic or semi-monopolistic
Strong reputation of quality, reliability
Supplier owns necessary tools or specialised machinery
Supplier is well informed about buyer position
UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC
Introductions, agenda agreement and rules of procedure
Ascertaining the negotiation range
Agreement of common goals
Identification and removal of barriers
Agreement and closure
Stages of a NegotiationList of topics + timing
Openness saves time (collaborative approach)
Problem solvingConsiderations of solutions....Determination of concessions.....
Some ‘personnel’ factors in negotiation
UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC
7. Capital investment purchases
Definition
One of the subclasses of the fixed asset category and includes industrial and office machinery and tools, transportation equipment, furniture and fixtures and others. As such, these items are properly chargeable to a capital account rather than to expense.
BuildingsInstallation equipmentAccessory equipmentOperating equipment
Tools and instrumentsFurnishings and fittings
Categories of Capital Equipment
How Capital Equipment Procurement Differs fromthat on Materials and Components
Cost per item is usually greater
The equipment facilitates production
Financed with long-term capital
Tax considerations play a big part in the decision
Government financial assistance may be available
The purchase may be postponable
Decision to purchase, results in consequences for sale, output and labour
PurposeFlexibility
SparesStandardisation
Compatibility and existing equipmentLife
Reliability
Factors to Consider When Buying Capital Equipment
DurabilityProduct quality
Cost of operationCost of installation
Cost of maintenanceMiscellaneous, e.g., space requirements
Advantages
• Costs are known in advance
• Reduced need to tie up capitalin fixed assets
• Concerned only with rentals
• Hedge against risk of obsolescence
Disadvantages
• Fixed obligation to pay• Does not provide the prestige orflexibility of ownership• Large organisations may obtaincapital or equal terms with lessors• Flexibility to dispose of obsoleteequipment before end of leasemay be reduced
Leasing – Advantages and Disadvantages
Capital Investment Purchases – The Buyer’s Contribution
Provide a gateway for commercial considerations
Influence the specification to avoid single source quotations
Emphasise life-cycle costs
Prepare comprehensive invitations to tender
Provide commercial, contractual and negotiating expertise
Research alternatives to the purchase of new machines
Identify government grants that may be available
Research international market
Assist with disposal of displaced asset