Bargaining Power of Buyers

Date: November 17, 2014

Bargaining Power of Buyers

Tips for Negotiating with Suppliers

Have you ever tried negotiating with suppliers for lower prices or shorter lead time? If you don’t do your homework and you want to bargain with your suppliers, your style of negotiation can make or break your business. But if you master the art of negotiation well, you’ll find it very rewarding to your sourcing process in the long run.

We’re going to provide some tips on how to increase your negotiation power with Asian manufacturers and suppliers. This may not be an overnight success—it’s all about practicing it until you master it.

‘Know Thyself’

Are you the type of person who easily gets upset or angry when things don’t work out the way you planned them? In that case, let someone else — colleagues, partners, or consultants — do it for you. If you think you can handle those small nuisances properly and you have the grace and patience to discuss arrangements with manufacturers, it’s time to be the negotiator and act like one.

The Boy Scout Attitude

Be prepared to maintain that boy-scout attitude. Anticipate the questions and scenarios that your manufacturers would use to negotiate. Make a checklist and practice the possible answers. Outcomes will depend on your preparation and research, plus the relationship and face that you have. Remember, it’s not what you know that counts; it’s how you say it that matters. Always choose the right words when requesting something from the other party.

How much do You Know About Your Business?

The only person who can effectively persuade your manufacturer to give you the best quotes is actually YOU. Do you know your business very well? How about the nitty-gritty details of the trade and the red tape? Have you calculated the lead-time and key performance indicators to achieve your goals? If you’re not sure about the business, it will be difficult to persuade others. Keep on educating yourself about the global supply chain.

Know the Culture of Your Manufacturers and Suppliers

This is very critical especially if you’re negotiating with Chinese suppliers and manufacturers. Learn Chinese business etiquette and culture: the two basic concepts are face and guanxi (relationships). The former is derived from a Confucian principle where appearance takes precedence over substance. It includes the dignity, reputation or image of that person. Meanwhile guanxi is all about the concept of ‘it’s who you know’, and thus trust is vital in the business circle. Extending your network of guanxi is one of the most effective negotiation strategies for your business.

Build Rapport but Never Ever Touch Politics

If you want to build a good rapport and image, avoid all political comments and remarks during business meetings and negotiations. Give it your best shot as regards ice breakers, but never touch the political area. If you want to connect with the manufacturer and build a good rapport, talk about topics of general interest, like food, sports, leisure, or business. Also consider the way they would want to do business. For example, Cambodians and Kazakhs prefer to negotiate with friends. If you want to source products there, better make friends and practice that local version of guanxi in their business environment.

Know Their Language

To bridge the communication gap during negotiations, spend some time learning your manufacturers’ and suppliers’ languages, especially if you want to work with them on a long-term basis. Learn Chinese, Japanese, Korean, Bahasa and Malay, and let them know you’re there for serious business. While hiring a professional interpreter is handy, it’s important to be part of the culture, language and etiquette of that country where you’re sourcing the products.  Next time, if you want to find the best strategy for price negotiation or better quality of product, just remember this advice and you are more likely to reach your goal.


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