Question 3 (10 Marks)
Analyse which type of negotiation the South African organisation should engage in with its Chinese supplier.
You are required to identify the type of supplier relationship and justify your choice with the support of theory and application to the scenario and practical case study provided. Please note you are required to show your knowledge through application and full marks will not be awarded if only theory is pr
This solution was written by a subject matter expert. It’s designed to help students like you learn core concepts.
To determine the appropriate type of negotiation that a South African organization should engage in with its Chinese supplier, we need to consider various factors including the nature of the supplier relationship, the goals of both parties, and the specific circumstances of the scenario. Negotiation strategies can vary widely, but some common types of negotiations include distributive, integrative, and cooperative negotiations. Let’s analyze which type of negotiation is suitable for this case:
Scenario: A South African organization is dealing with a Chinese supplier for the procurement of raw materials for their manufacturing process. The Chinese supplier has been a long-term partner and has provided reliable and quality supplies in the past. However, recently, there have been quality control issues with the supplied materials, and the South African organization is concerned about the consistency and quality of the products.
Supplier Relationship: The supplier relationship in this case is a long-term one, which suggests that maintaining a good relationship is essential for both parties. The Chinese supplier has a history of reliability, but recent quality issues have strained the relationship.
The South African organization wants to ensure consistent, high-quality raw materials to maintain their manufacturing standards and meet customer demands.
The Chinese supplier wants to continue the business relationship and potentially expand it to increase their export revenue.
In distributive negotiations, parties typically have a fixed amount of resources to divide. It is often a zero-sum game, where one party’s gain is the other’s loss.
This type of negotiation could be appropriate if the South African organization is solely focused on price negotiation and wants to get the best deal without considering the long-term relationship with the Chinese supplier.
Justification: While this approach may be suitable for short-term cost savings, it might not be the best choice given the long-term nature of the relationship and the need for quality consistency. It could damage the relationship and hinder future cooperation.
Integrative negotiations focus on creating value for both parties, rather than just dividing existing value. It seeks mutually beneficial solutions.
This type of negotiation could be suitable if both the South African organization and the Chinese supplier are open to collaborating to address the quality control issues and find a win-win solution.
Justification: Given the long-term nature of the relationship and the mutual interest in maintaining it, integrative negotiation can be a more constructive approach. Both parties can work together to improve quality control processes, leading to better products and a stronger partnership.
Cooperative negotiations emphasize maintaining a positive relationship between parties and often involve open communication, trust-building, and problem-solving together.
This type of negotiation may be appropriate if the South African organization and the Chinese supplier are willing to work together closely to address quality control issues and ensure long-term success.
Justification: Cooperative negotiation can be particularly effective in this case because it encourages transparency and collaboration, which can help rebuild trust and ensure that quality control problems are resolved. It also aligns with the goal of maintaining a strong supplier relationship.
In conclusion, the South African organization should engage in integrative or cooperative negotiations with its Chinese supplier rather than distributive negotiation. These approaches align better with the long-term relationship, quality improvement goals, and mutual interests of both parties. However, the specific negotiation strategy should be tailored to the unique circumstances and dynamics of the relationship between the two organizations.