Paper info: Global Account Attractiveness: The Shift in the "Give and Take" Negotiation Process with "Strategic" Suppliers
Title
Global Account Attractiveness: The Shift in the "Give and Take" Negotiation Process with "Strategic" Suppliers
Authors
Sylvie Lacoste
Kedge Business School
France
Place of Publication
The paper was published at the 27th IMP-conference in Glasgow, Scotland in 2011.
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Abstract
PURPOSE OF THE PAPER
Recent research shows that a new typology of suppliers is emerging, defined by some global
accounts, creating an additional level of segmentation: the "strategic" supplier or “partner",
which is unique (for each product line): it offers its global customer a unique competitive
advantage in terms of costs (Total Cost of Ownership), product, or services.
In this context, the global account must “attract” the "strategic" supplier to enter into a
specific relationship. This article therefore examines the determinants of global account
attraction and their impact on commercial negotiation and the characteristics of these
negotiations.
We present the state of literature on negotiation and bargaining power (Walton and McKersie,
1965; C. Dupont, 2004; Hunt and Nevin, 1974; Caniëls and Gelderman, 2007) in the context
of our study.
RESEARCH METHOD
We chose to work on two case studies, represented by two FMCG companies.
We chose the point of view of two global accounts, which recently created a new
supplier segmentation by introducing the concept of "strategic" supplier and carried out
in-depth interviews with one or two informants in purchasing (one decision-taker at
strategic level and a product line manager); users or influencers of purchased products and
part of the "buying centre"; key account managers or directors from suppliers.
RESEARCH FINDINGS
The first consequence of the "strategic” supplier status during negotiation is the change in the
object of negotiation: the price of the product is no longer at the heart of the negotiation.
Thus, global account attractiveness will be the ability of the global account to shift the “give
and take” negotiation process from price to final product margin sharing. It will be the
commitment for cost transparency, not only from the supplier, but also from the global
account. In short, the global account will be attractive to the supplier if it agrees with
providing a true integrative negotiation process that will allow both parties to get a fair share
of value, as the value appropriation process will take place at the far end of “cumulative”
value. The shift of the negotiation from the price to the sharing of the downstream value is
key to define global account attractiveness.
CONTRIBUTION OF OUR RESEARCH
Our study on the emerging status of "strategic" supplier, lays the foundation for a new form of
"interest-based" negotiation (Fisher and Ury, 1981), which moves the subject of negotiation in
the downstream of the value chain and which does occur in a situation of relative equilibrium
in which supplier and global account find themselves highly interdependent: the uniqueness
of the supplier’s value proposition entices the global account to think of itself in terms of
“attractiveness” in the relationship and negotiation process with the supplier.
Keywords: “strategic” supplier, global account “attractiveness”, negotiation
Recent research shows that a new typology of suppliers is emerging, defined by some global
accounts, creating an additional level of segmentation: the "strategic" supplier or “partner",
which is unique (for each product line): it offers its global customer a unique competitive
advantage in terms of costs (Total Cost of Ownership), product, or services.
In this context, the global account must “attract” the "strategic" supplier to enter into a
specific relationship. This article therefore examines the determinants of global account
attraction and their impact on commercial negotiation and the characteristics of these
negotiations.
We present the state of literature on negotiation and bargaining power (Walton and McKersie,
1965; C. Dupont, 2004; Hunt and Nevin, 1974; Caniëls and Gelderman, 2007) in the context
of our study.
RESEARCH METHOD
We chose to work on two case studies, represented by two FMCG companies.
We chose the point of view of two global accounts, which recently created a new
supplier segmentation by introducing the concept of "strategic" supplier and carried out
in-depth interviews with one or two informants in purchasing (one decision-taker at
strategic level and a product line manager); users or influencers of purchased products and
part of the "buying centre"; key account managers or directors from suppliers.
RESEARCH FINDINGS
The first consequence of the "strategic” supplier status during negotiation is the change in the
object of negotiation: the price of the product is no longer at the heart of the negotiation.
Thus, global account attractiveness will be the ability of the global account to shift the “give
and take” negotiation process from price to final product margin sharing. It will be the
commitment for cost transparency, not only from the supplier, but also from the global
account. In short, the global account will be attractive to the supplier if it agrees with
providing a true integrative negotiation process that will allow both parties to get a fair share
of value, as the value appropriation process will take place at the far end of “cumulative”
value. The shift of the negotiation from the price to the sharing of the downstream value is
key to define global account attractiveness.
CONTRIBUTION OF OUR RESEARCH
Our study on the emerging status of "strategic" supplier, lays the foundation for a new form of
"interest-based" negotiation (Fisher and Ury, 1981), which moves the subject of negotiation in
the downstream of the value chain and which does occur in a situation of relative equilibrium
in which supplier and global account find themselves highly interdependent: the uniqueness
of the supplier’s value proposition entices the global account to think of itself in terms of
“attractiveness” in the relationship and negotiation process with the supplier.
Keywords: “strategic” supplier, global account “attractiveness”, negotiation