Price negotiations are particularly difficult when a so-called monopolist is involved. However, it is necessary to differentiate between real and “home-grown” monopolists. What the difference between the two lies, what the purchase has to consider when negotiating with monopolists and how to achieve purchasing optimization, reveals the following article.
The biggest problem for buyers: monopolists can make their prices quite arbitrary. Price increases are therefore not uncommon and most companies accept them silently. Meanwhile, there are various industries in which companies are happy to receive goods at all. Therefore, buyers often shy away from price negotiations.
Monopolies: the different scenarios
But what are the reasons why a monopoly can arise in the first place? The following factors are typical of monopoly situations:
- the supplier is the only one offering the product in demand
- switching to another supplier would not be profitable
- only this supplier can offer the desired quality
- the supplier is specified by sales or technology in the company
In all cases, it is therefore a certain dependence. This applies, if possible, to dissolve. In the so-called procurement market research, it should be the top task to find, if possible, an equally good and cheap alternative supplier.
It is important to find out whether it is a real or only a home-made monopolist. Maybe you haven’t had the capacity to go in search of an alternative supplier so far? If so, it’s high time to take a thorough look around the market. If you have then actually discovered a more favorable supplier, you do not have to turn your back on your current supplier in haste. Instead, try to use your negotiating skills to lower their prices. It can also be useful to negotiate delivery times and quality. Try to bind the supplier to you in the long term so that there are never bottlenecks in production and procurement on your part. Therefore, conclude long-term contracts if possible.
There are two tactics available to you for negotiations: If you choose the “carrot” option, hold out the prospect of something that will benefit your supplier. This could be a new and large project, for example. The so-called carrot principle refers to all negotiation strategies that get the supplier to voluntarily make concessions. With a pleasant atmosphere you will be able to enforce these tactics best. So, in addition to good preparation, make sure that you create the right conditions.
But you can also threaten the supplier and choose the “whip” tactic. If you have already discovered a more cost-effective supplier, say so calmly and hold out the prospect of only working with this supplier in the future. Of course, as in all situations in life, the tone makes the music. So there is absolutely no point in upsetting your business partner. Instead, think about a good tactic from the outset to achieve your goal. If you don’t succeed at the first attempt, persevere and pursue your tactics with patience.
To help you achieve these goals, it’s important to prepare for the negotiation meeting as fully as possible. First, think about negotiation tactics. Do you want to try the friendly way or do you want to put a gun to your head? It can be helpful for your decision if you know your business partner as well as possible. Find out more about them on their website. If you even know some of your counterpart’s personal preferences, this can be very useful in the negotiation meeting. You can find information about companies in numerous sources, for example at:
Be sure to use multiple sources to gather as much information as possible. In fact, most monopolies are homegrown.
Suppliers usually have room to maneuver. Therefore, go into the conversation boldly and confidently. Every buyer in a business should know their negotiation skills and get the most out of every negotiation. If you yourself are confident and have a good inner attitude, you will also radiate this outwardly. Your negotiating partner will certainly notice this; you will be more convincing and get the best result for your company. Set yourself clear goals before the negotiations. What is the minimum you want to achieve and what is the maximum goal? This will help you significantly in the conversation. If it becomes clear during the discussion that you will not achieve your minimum goal, a plan B is also helpful. So this is also something to think about in advance.
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