Long-term value suffers when bargaining is confused with negotiating



DBoateng.JPGA relative lack of negotiation on the African continent is hampering region-wide service delivery, organisational value chain performance and competitiveness and broader socio-economic development, among other things. In the increasingly competitive supply chain environment organisations, businesses and individuals are continually seeking ways to ensure sustainability, competitiveness and growth. While numerous strategies and tactics are being implemented to achieve this, focus tends to remain on bargaining for short-term goals and price-orientated benefits, instead of negotiating for long-term value creation, Professor Douglas Boateng, founder and CEO of PanAvest International and Partners, tells SmartProcurement.

Drawing on a sample of approximately 64 international organisations, including Fortune 1000, FSTE 250, and JSE 100 companies, as well as state-owned enterprises and government departments, a recent PanAvest International and Partners-funded study investigated current opinions related to the importance of negotiation skills among supply chain professionals.

While the findings of the research indicate a significant appreciation of the role of negotiations in long-term value creation and noted widespread agreement that negotiation skills need to be a core strength of supply chain management professionals, they also highlight significant misunderstandings related to the difference between negotiation and bargaining.

Contrary to popular belief, and although often used to explain the same thing, bargaining and negotiation are two inherently different activities.

“One of the most important, but often misunderstood, aspects of supply chain management is negotiation,” notes Boateng. In this regard, he insists that organisations and supply chain professionals need to develop a knowledge and understanding of the purpose of negotiation in order to ensure long-term value creation.

“Appreciating negotiation’s strategic importance can assist with achieving win-win value chain agreements and subsequent contracts,” he notes. As such, supply chain professional’s understanding of the importance and place of negotiations in the supply chain plays an integral role in organisational growth and negotiations success.

But what is the difference between bargaining and negotiating?

To begin with, bargaining tends to focus on short-term price-chiselling and looks at who is right in a specific situation. Since bargaining is about ‘winning,’ it leads to win-lose relationships between competing individuals or organisations and does not take the long-term business and societal consequences of such relationships into account. Bargainers tend to focus on attaining goods or services at the cheapest possible price.

Adopting bargaining practices in the place of negotiation usually happens for one of two reasons: bargainers may enter engagements with a psychological belief that their organisation cannot afford the proposed price of the required product or service and, therefore, need to cut the price down. Or they may enter engagements in a state of financial desperation and bargain out of fear of losing a deal.

In comparison, negotiation involves engaging on equal terms for mutual benefit and focuses on what is right in a specific situation. Negotiation is not about ‘winning’ or ‘losing,’ nor is it about attaining cheaper prices. Rather, seen as the catalyst for building long-term win-win relationships, negotiation is about compromise.

Instead of focusing on price-chiselling, negotiation encourages mutually beneficial engagement and opens up opportunities for developing long-term business relationships and value chain gains. Negotiators enter engagements from a position of knowing the intrinsic value of what they have and what value they want for it. In addition to this, they enter negotiations with the potential value to be created for each party in mind and are driven by the long-term possibilities of future business relationships.

Unlike the developed world and selected countries in Asia (e.g. China), which negotiate for long-term benefits, tendering in the developing world is still largely focused on maximising price gains. “Bargaining rather than negotiation dominates the supply chain industry in these areas. Bargaining is a particularly popular activity among African governments, policy makers, and executives,” says Boateng.

This is essentially a result of product or service value underestimation, pressure to satisfy business shareholders and a focus on short-term price gains and benefits. Consequently, issues related to long-term sustainability, competitiveness and socio-economic development continue to abound on the continent.

In order to facilitate mutually beneficial change and create recognisable differences in current African supply chain value creation, organisations, executives and governments need to acquaint themselves with the differences between bargaining and negotiation, and focus on win-win, positive business relationships and long-term developmental engagements.

Meanwhile, government must make "hard economic decisions" about SA's infastructure development or face possible further unrest over service delivery, Consulting Engineers SA (Cesa) told Business Day.

Cesa's warning comes as severe project delays plague Eskom's new power stations, which along with violent strikes, underline the poor state of the civil engineering industry in SA.

Among the industry's main challenges was that state procurement of infrastructure was based on the best price and broad-based black economic empowerment status, with "little or no regard to functionality or quality," Cesa said. 

Contact Professor Boateng on dboateng@panavest.com

Leave a comment



Career opportunites


  • <500 000 Gauteng Operations, Planning & Inventory Supply Chain
Are you looking for new career opportunities as

Procurement Specialist

  • >500 000 Gauteng Procurement Officer / Specialist Strategic Sourcing Supplier / Business Development
As a specialist Supply Chain recruiter, I am

Logistics Controller

  • <500 000 Gauteng Logistics & Warehousing Procurement Officer / Specialist
Seeking dynamic up and coming candidates looking for

Supply Chain Manager

  • >500 000 Permanent Procurement Management Supply Chain Western Cape
As a specialist Supply Chain recruiter, I am

Business Process Specialist

  • <500 000 Gauteng Procurement Consultant Procurement Officer / Specialist Supply Chain
A company within the financial services sector is

LOC Procurement Manager

  • Gauteng Permanent Procurement Management Procurement Officer / Specialist
Your Responsibilities: Job Purpose To be the interface ...More

Account Manager

  • >500 000 Procurement Officer / Specialist Supplier / Business Development Western Cape
Key Performance Areas:• To ensure that all aspects


  • >500 000 Gauteng Procurement Consultant Strategic Sourcing Supply Chain
Key Performance Areas:• You'll be concerned primarily with

Commercial Buyer

  • <500 000 Buyer Contracts Procurement Officer / Specialist Western Cape
A well-known Mining company is seeking the services

Technical Buyer

  • <500 000 Buyer Contracts Procurement Officer / Specialist Western Cape
A well-known Mining company is seeking the services

Business Development Executive

  • >500 000 Gauteng Supplier / Business Development
A retail solutions company is seeking a New

Financial Manager

  • >500 000 Contract Operations, Planning & Inventory Procurement Management Western Cape
Looking for an unemployed CA (SA) in Cape

Chief Financial Officer

  • >500 000 Gauteng Operations, Planning & Inventory Procurement Management
An exciting opportunity exists for a CFO with

Procurement Consultant

  • >500 000 Gauteng Procurement Officer / Specialist Strategic Sourcing
Key Performance Areas: A profound knowledge of sourcing

Commodity Specialist: IT

  • >500 000 Commodities Gauteng Procurement Officer / Specialist
Key Performance Areas:• Effectively applies acquired technical/functional skills

Senior Consultant

  • >500 000 Gauteng Projects / Category Management Supplier / Business Development
Key Performance Areas:• Adheres to best practice processes

Logistics Manager

  • >500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Procurement Management
Key Performance Areas:• Manage warehousing and distribution 3PL's

Head of Franchise Network

  • >500 000 Contracts Operations, Planning & Inventory Western Cape
The opportunity to work for a multinational retail

National Driver Manager

  • >500 000 Analyst Contracts Logistics & Warehousing Operations, Planning & Inventory Western Cape
The opportunity for an extraordinary individual to join

Commodity Specialist: Industries

  • >500 000 Commodities Gauteng Procurement Officer / Specialist
Key Performance Areas:• Under the guidance of the