10.04.2010
I am in Bangalore for conducting a Public Programme on “Excellence in Negotiation Skills” for Management Study Centre.
The participants were a mix of senior and entry level managers. I concentrated on giving inputs on Body Language and control of emotions during Negotiation. One of the points that the group accepted as valid was that Negotiation requires an amount of histrionics or acting. We also understood that total honesty in Negotiation may sometimes be seen as being naïve. But once a bond of trust is built into the framework of the negotiation process, then we can be more frank with a view to arriving at a Win/Win formula.
The participants were all from Procurement or Purchase and as such our deliberations were on negotiations with Vendors. One of the issues was as to how to break a Vendor Cartel.
A cartel can be understood in this context as a group of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the sale or price of goods or services.
The members of the cartel submit tenders for the same or similar prices and terms after an informal agreement amongst themselves. This price would, obviously, be way above the fair price. While cartelization is difficult in most goods due to ease of import substitution, in certain precision industrial goods, it is still possible to arm-twist a buyer.
A simple approach to break this method is to drive a small wedge into the solid block.I suggested that we should select a weaker member of the cartel and give him favorable treatment thus sowing seeds of doubt and suspicion into the minds of the group. After they are already greedy and avaricious people concerned more about personal gain than group loyalty.
Mr. Mallikarjun Reddy from BEML suggested a variation on this approach. His idea was to identify that supplier who has most to lose from not securing your business and place an order for the complete requirement on him at the tendered price; but insist that we will avail a ‘cash’ discount at the time of payment so that the price is now the fair price. Once the other members realize that they’ve been tricked, the whole cartel will crack and break down!
This lead the group to a contemplation of right and wrong, with the conclusion that all is fair in Love and Negotiation!
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