Business Negotiation March 12, 2013

Partnership Will Change How Sellers Sell Part One

With the growth of partnerships, sellers will be under pressure to sell in a new way. Only a short time ago, sellers competed differently that they do today. For most products and services there were local, regional and national firms in competition for the business available from any one firm in the area. For example, if a company like General Motors, Weyerhaeuser or Phillip Morris had divisions in different parts of the United States, each division had its own purchasing department and each, for the most part, focused independently on its own major procurement needs.

Local and regional sellers were in a good position to win the division’s business. If they lost the order this year, they would try to position themselves through price or service to win the order when bids opened again next year. Losing a million dollar order was serious for them but not catastrophic in relation to their total business. Today things are different for local and regional sellers; the stakes are far higher.

Hardly a day goes by without reading about a large corporate merger or the layoff of thousands of employees. Few companies are immune to these changes. One day it’s IBM, the next Kodak and a day later a small firm like Hospitek that moves to Mexico because it cannot compete with other medical firms until it reduces labor costs.

Three major trends have changed the economic picture for American manufacturing firms. The first is the ever growing tendency of companies to merge with others into larger corporations.

The second trend is the globalization of competition. Almost every product can be manufactured anywhere. The advent of computer, fax, sophisticated telephone communication and the internet has woven every point on the globe into a single marketplace. The third trend is the Deming phenomena. Edward J. Deming, a management expert whose theories were put into practice by the Japanese in their rise to economic power, believed that companies would be wise to reduce the number of suppliers providing their purchasing needs.

Deming reasoned that if an auto manufacturer presently placed its business with four suppliers of tires, it would be better off from a quality and price standpoint to place its entire requirement with only one. He believed that the product purchased would be continuously improved as seller and customer worked together in a win-win partnership arrangement.