Negotiation Process

Preparation

Information Sharing

Bargaining/Negotiation

Finalising the deal

PREPARATION
Tata steel has vastly diversified its geographical presence in the world. Currently the company
has its operations in 26 countries and commercial offices in more than 35 countries.
As company deals with various manufacturing sectors in many countries it is important for the
company to understand the market, needs of the customer and the best strategy to finalize the
deal, thus it is important for the company to adjust its strategy and to have a right approach to
seal the deal.

TATA STEEL have to negotiate not only on the client side but also on the procurement of the
raw material. Organizations have become very much concerned about the purchasing activities
as these have a direct bottom-line impact on the business profit of the company. To handle
these activities in a more systematic and structured way many companies all over the world are
following a process called strategic sourcing. Thus it is important to enter into the agreement
with extensive preparation to gain the strong hold of any business.

The know-how behind high premiums for branded products has been developed through:
 . Ability to
develop Services
Understanding
& Solutions
consumer needs.
addressing
consumer needs.

Designing the
Dedicated and
brand promise
high capability
around the
channel network.
consumer needs.

Developing the
Ecosystem to
deliver Branded
offerings.

So before initiating any agreement it is important to set the limit in the negotiation after
considering various crucial factors like choice of alternative, bargaining power of the customer
and expected profit from the deal. Thus creating a draft with terms and condition to gain the
profitable position in the agreement which will give you the buffer to negotiate on the various
terms and clauses of the agreement. This buffer gives the margin to bargain over the price,
delivery schedules, quality and other commercial terms.

The preparation process includes 3 factors to set the limit for negotiation
1. LAS- Least acceptable settlement
2. MSP Most supportable
3. BATNA Best alternative to Negotiated agreement

In this process BATNAs are critical to negotiation because you cannot make a wise decision
about whether to accept a negotiated agreement unless you know what your alternatives are. If
the proposed alternative is better than alternate opportunity than you should accept the agreement
otherwise, you should reopen the agreement for further negotiation.

INFORMATION SHARING
Tenders of the projects are rolled out for the companies to apply for the projects. Typical tender
includes:-
Instructions to Bidders
Form of Contract Agreement
General Conditions of Contract
Safety Code for Contractors

After the initial rollout of any tender for the project TATA Steel do an in-depth research about
the feasibility of the project, the cost which would incur, analyzing core competencies and
comparing with other project to prioritize the work at hand. The Process involves: -
 Rolling out of tender

Internal research about the

feasibility and profitability

Appling for project by

filling tender

Shortlisting of fitting
companies

Negotiation with
shortlisted companies

After which if the project is feasible for the company it files the tender for the project stating all
the deliverables and quoting competitive price for the project. The shortlisting of the companies
is based on the following factors:-
 Brand value

Safety
Pricing
standards

Trust/Prior Financial
relationship stability

NEGOTIATION
After the shortlisting of the companies, negotiation process takes place to arrive at a mutual
acceptable agreement in which all the stakeholder of the project is at a win-win situation.
Adopting a structured approach in negotiation is very important to achieve the best possible
outcome.
The process involves preparation by the negotiating team to deal with buyers potential approach
and also to sequence the issues which needs to be resolved one after the other. After which the
both the parties contemplate on the tradeoffs of the agreement and move forward amicably to
sign off the deal.

Negotiation can be classified into 2 types: -

Positional Bargain In this type of bargain companies try to stand strong on their
ground and keep the strong position in the negotiation, applying pressure and hard
negotiation skills comes into play in this type of bargaining and the war like mindset of
the companies are focused on winning the agreement.
Integrative Bargain - This process is more cooperative and the company tries to find a
solution amicable without stressing on their position. Negotiators are joint problem
solvers both parties co-negotiate to arrive at wise decision.
TATA STEEL focuses on integrative bargain in which both the parties sit together and co-
negotiate on the issues of concern to reach at a wise decision. It uses reason and yield to
principles and not pressure to reach a consensus. The to create a win-win-win situation for all.

While negotiating TATA Steel takes care of a gamut of factors including the prior relationship
with the company, political, social and economic factors. Thus increasing the bottom line of the
company and to increase the size and revenue of the company while sustaining and creating
healthy business relationship with trust and respect.

FINALISING THE DEAL

After the negotiation phase the deal goes into finalization phase. In this phase the task is hand is
to accept or reject the finalized agreement. If the final agreement is not suitable of any of the
parties, the deal is called off and the negotiation starts with the other shortlisted companies.

So it is critically important to reach in stage by considering if both the parties are on the same
page and the agreement is profitable and feasible for everyone. At this stage there is no more
concession of any type. After finalizing documentation of the agreement is done and share it
mutually.