Companies that invest extensively in preparation for negotiations with their suppliers and develop a detailed procurement negotiating strategy can achieve significantly better results. First and foremost, this requires a professional procurement team.
No Heinz Baked Beans or Tomato Ketchup, and no Whiskas cat food either. At the end of June 2022, supermarket customers saw what happens when two companies fail to come to an agreement. Some of the shelves at Tesco, the UK’s largest supermarket chain, were empty. US companies Mars and Kraft Heinz wanted to raise prices.
Tesco did not want to accept this, so both companies stopped their deliveries to the supermarket. These conflicts seem to have since been settled, and the products are now back on the shelves. But these price disputes show how serious the consequences can be when negotiations stall or fail.
In many cases, things don’t need to go that far. Companies with professional negotiating teams can benefit from taking an active approach to supplier management. The way to do so is to follow the eight rules of negotiation excellence.
What can you take away from this article?
This article explores the 8 rules of negotiation excellence
1. Don’t fear negotiations
2. Prepare well within your company and learn about the market
3. Set clear business objectives
4. Apply game theory to develop your negotiation strategy
5. Set the rules for your negotiation to make the most of competition
6. Be creative especially in monopolistic situations
7. Ensure alignment within your negotiation team
8. Build your company’s reputation wisely
1. Don’t fear negotiations
Many procurement professionals struggle when entering intensive negotiations with their suppliers. Potential fears include the risk that they negotiate too hard, and their supplier walks away. In most cases, these fears are unfounded. Ultimately, it’s in the interest of both parties to do business together.
Good preparation is the key to gaining confidence and the right mindset, because then you know what you can and deserve to achieve in negotiations.
The former US President John F. Kennedy said it a long time ago: “Let us never negotiate out of fear. But let us never fear to negotiate.”
2. Prepare within your company and learn about the market
Successful negotiation preparation starts with the engagement of all relevant stakeholders within your own company. It’s important to have a workplace culture where various departments work together, because most of the time it’s not only prices quoted by suppliers but also their technical capabilities, product quality, sustainability measures, geographical locations, and much more that matters to the business. It falls to the procurement team to engage, for example, with the research and development department to understand their technical requirements, the production department to get a better sense of the timeline, and the sales department to estimate customer needs in terms of business volume. The procurement team needs to make sure that all these aspects are addressed during the negotiation and captured in the final contract with suppliers.
Good preparation also means that the procurement team conducts a thorough market analysis of both the company’s competitors and potential suppliers. When it comes to suppliers, it’s good to not only consider the incumbents, but also to assess other suppliers available on the market
as it can help bring in competition and thus increase your bargaining power. It’s also important to be clear on each supplier’s strategic significance to the company and vice versa. If you are a small supplier’s main customer, this gives you a greater leverage than if you are a small customer to a large supplier.
The article is part of our magazine issue Achieving Cost Excellence.
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When negotiations succeed, it is rarely by chance. Their outcome is largely determined by thorough preparation from early alignment with internal stakeholders and clear business objectives to a solid understanding of the market and supplier landscape. Competitive dynamics, behavioral insights from psychology and game theory, and a company’s reputation all shape the room for maneuver at the negotiation table.
In an interview with Barry Nalebuff, Professor at Yale School of Management, negotiations are framed as a question of value creation rather than power, with cooperation and data-driven analysis enabling fairer, more sustainable outcomes.
Negotiations with strong brands require a partnership mindset and rigorous preparation. By focusing on shared interests, objective criteria, and long-term value creation rather than positional power, procurement teams can expand the zone of possible agreement and reach sustainable compromises where both sides benefit.
Successful cross-cultural negotiations require flexibility rather than fixed assumptions. Understanding local communication styles, decision-making norms, and the importance of relationships allows negotiators to build trust, avoid friction, and reach sustainable agreements across borders.
In an interview with negotiation expert Matthias Schranner, former crisis negotiator with the police and FBI, emotions are highlighted as a major barrier. Effective negotiators reduce pressure, focus on shared interests, and use clear, constructive questions to steer discussions away from conflict and toward sustainable, mutually beneficial agreements.
In an interview with Simone Hilbrig, Managing Director at Inverto, the focus is on how culture, courage, and inclusion drive sustainable success. Empowering people, challenging traditional structures, and embracing diversity strengthen leadership, improve performance, and enable more resilient business models.
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Authors
Dr. Daria Khromenkova
Senior Project Manager
is a Senior Project Manager at Inverto in Munich and an expert in game theory and negotiation excellence. She has extensive international experience and has led many projects on strategy and negotiating.
Jürgen Wetzstein
Managing Director
is a Managing Director in Inverto’s Munich office. With over 20 years’ experience in consulting and industry, he primarily advises companies in the automotive, mechanical engineering, chemical, consumer products and service industries on transforming and optimizing procurement and supply chains.