Negotiation in Procurement: A Case Study of Charles & Keith, Singapore

This case study examines the role of negotiation in the procurement of materials for Charles & Keith in Singapore, highlighting its significance in developing trade relationships and managing supplier interactions. The study identifies the impact of negotiation on material purchases, the importance of supplier relationships for production efficiency, and recommends measures for improving the negotiation process. Through qualitative analysis, including observation and interviews with employees, the research explores different negotiation processes, challenges faced by the organization, and strategies for effective talent management and risk management during procurement. The findings emphasize the importance of both distributive and integrative negotiation styles based on the situation and supplier type, concluding that effective negotiation positively impacts material purchase effectiveness and reduces operational costs. Recommendations include employee engagement in negotiation, skill development programs, and fostering long-term beneficial relationships with suppliers to enhance service, innovation, and quality.

ROLE OF NEGOTIATION IN PROCUREMENT OF
MATERIALS
A CASE STUDY OF CHARLES & KEITH, SINGAPORE

INTRODUCTION AND BACKGROUND OF THE
STUDY
• Charles and Keith was found in the year of
1996 by Charles Wong and his brother
Keith Wong (Charleskeith.com 2018)
• The organization was the first organization
to start their own ecommerce business by
redirecting their efforts on E-commerce
than on mortar and brick stores.
• This study has identified the role of
negotiation in procurement of materials
for Charles & Keith in Singapore.
• Negotiation is crucial for developing trade
relationship between two parties and the
importance of negotiations have
increased with the advent of the internet-
based technologies as it requires complex
negotiations of materials for developing
goods and services
• Negotiation is a commercial process
which takes place due to conflict between
the suppliers and the retailer in the
organization (Goldberg et al. 2014).

RESEARCH AIM AND OBJECTIVE
• To identify the impact of negotiation process in managing purchases of
materials made by Charles and Keith, Singapore
• To evaluate the significance of managing good negotiations with
suppliers for improving the production process efficiency
• To recommend necessary measures for improving the negotiation
process and facilitate the purchasing of materials for Charles and Keith,
Singapore.

RESEARCH QUESTIONS
• What is the significance of effective negotiation in procurement?
• What are the benefits and drawbacks of different negotiation methods?

LITERATURE REVIEW
• Ribbink and Grimm (2014) stated that negotiations are important in order
to work out a deal that is critical in procurement.
• Wong (2013) also depicted that if the definition is considered the term
negotiation refers to the process of communication for accomplishing the
aim of reaching an agreement by means, where some appropriate
procedures can be compromised.
• Yu and Wong (2015) defines negotiations as the conversation between two
or more parties that are trying to find a solution to their issues. The recent
definition of negotiation considers it as the interaction process.

ELEMENTS OF NEGOTIATION
• Interests
• Legitimacy
• Relationships
• Options
• Alternatives
• Communication
• Commitment

OBJECTIVES OF NEGOTIATION
• To obtain reasonable and fair price along with minimal ownership cost
• To establish partial control over the process of fulfilling the contract
• To make sure that the suppliers are making the delivery on time. However, the
negotiation process cannot fully control the delivery time so developing effective clauses
during the negotiation process results in accountability of the other party to meet the
obligation. This could also include penalties for not meeting the delivery deadline.
• To establish a continual and sound relationship with the suppliers so that a long term
relationship can be established
• To persuade the suppliers to provide maximum support to the company

NEGOTIATION VARIABLES AND STYLES
• As stated by Yan, Chien and Yang
(2016), three basic variables
that defines the nature of
negotiation are power, time
and information.
• The different negotiation styles
are principled style, hard
style, soft style and
pragmatic style (Carbonneau
and Vahidov 2014).

RESEARCH METHODOLOGY
• Single research designs - qualitative analysis.
• Observation method
• Interpretivism - qualitative analysis
• Inductive approach
• Descriptive research design
• Primary data analysis - open coding and axial coding
• Sampling - convenience sampling of 5 employees of the organisation.

FINDINGS AND ANALYSIS
Questions Codes
1. What are the different types of negotiation processes? Distributive, integrative, dominating
2. What are the challenges faced by the organization in
effective negotiation?
Time, last minute changes,
3. What is the most appropriate method of negotiation for the
organization?
Distributive, integrative, dominating
4. What are the logic and principle of good procurement for your
organization?
Transparency, strict protocols, supplier selection criteria, no
personal gain
5. How do you manage activities and development strategies of
your managers?
Effective talent management strategies, skill development
based on aptitude, growth opportunities
6. How to manage risk during the procurement process? Risk assessment matrix, probability of occurrence and impact,
contingency plan, strategy based on external change in
environment
7. How do you manage your relationship with suppliers? Regular communication, timely payment, Avoiding rush orders

CONTD..
• The coding of the collected shows that effective negotiation depends
on the situation and goal of the organization.
• In this study, the organizations use both distributive and integrative
type of negotiation based on the need of the situation and the type of
supplier they are dealing with.

CONCLUSION
• According to the objective of the study, the different elements of
negotiation have been identified such as interest, legitimacy, relationships,
options, commitment, communication and alternatives.
• These factors have a significant impact in reaching an effective conclusion
for the buyer and Charles & Keith can effectively use these elements to
reduce their operational cost
• The study has shown positive impact of negotiation on procurement where
with increase in effectiveness of negotiation there is increase in the
effectiveness of the material purchase.

RECOMMENDATIONS
• Engaging the employees into negotiation
• Consulting with the employees and expert negotiators of other
organizations and industry
• The organization should develop programs to develop negotiation skills
among all the employees in the purchasing department.
• The organization should also focus on develop a long-term beneficial
relationship with their suppliers as it will help in cost reduction and
improvement in service, innovation and quality.

REFERENCES
• Charleskeith.com 2018. Shop Shoes, Bags & Accessories Online | CHARLES & KEITH.
[online] Charleskeith.com. Available at: https://www.charleskeith.com/sg [Accessed 9
Aug. 2018].
• Goldberg, S.B., Sander, F.E., Rogers, N.H. and Cole, S.R., 2014. Dispute resolution:
Negotiation, mediation and other processes. Wolters Kluwer Law & Business.
• Ribbink, D. and Grimm, C.M., 2014. The impact of cultural differences on buyer–
supplier negotiations: An experimental study. Journal of Operations
Management, 32(3), pp.114-126.
• Wong, L.F., 2013. A generalized learning curve adapted for purchasing and cost
reduction negotiations. Advances in Operations Research, 2013.