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Moore on Pricing: Making the pricing and culture connection

This past month I was in Central America working with a natural resources firm on the negotiation of terms and freight for global supply and distribution. I was reminded again of the diversity of cultures and approaches to negotiation, contracting, and price components.
By Peter Moore, Adjunct Professor of Supply Chain
February 01, 2012

This past month I was in Central America working with a natural resources firm on the negotiation of terms and freight for global supply and distribution. I was reminded again of the diversity of cultures and approaches to negotiation, contracting, and price components. 

It’s worth taking some time before any international bargaining session to remember some basic human rules on both business and personal relationships. In fact, I would contend that the two are very closely aligned in developing supply chain solutions.  Here are five cautionary rules of the road for buyers of logistics services from international providers.

Maintain eye contact.
It’s a basic human trait to want to trust your business partner. If you approach negotiations with the intent to dominate the relationship or cheat the other party, beware that even if you succeed, you fail. The network of providers and buyers logistics services is connected and getting tighter at an increasing rate. Assume your behavior will be on the equivalent of “Angie’s List” for all to know about. 

Understand the cultural norms on negotiation.
My colleagues in Central America say U.S. citizens take the fun out of give and take negotiations. If the process of negotiation helps build trust, flexibility, and balance for your partner, then by all means have a open, candid negotiation. Be prepared with some wiggle room so there can be some give and take. Be ready to shake hands and celebrate together upon the completion of the game.

Understand the Incoterms. In my first meetings, one of my clients kept referring to “SIF” and it took a few minutes to understand he was referring to CIF, or cost, insurance, and freight. Be prepared to define the key terms you will be negotiating to ensure there are no misunderstandings later. 

Understand cultural and company requirements regarding gifts and gratuities.
Beyond the legal restrictions, there are customary practices and local taboos. Get yourself fully briefed before you begin your travels. Remember, you don’t want to do something at your first meeting to make a poor impression. 

Do your homework. There are many factors that make up value. The freight price is determined by costs of factors such as fuel, equipment, labor, insurance, and capacity in a lane. Today in international trade, the elements of reliability, sustainability, and flexibility are being weighed equally with these traditional factors.

Researching equipment balance, road and sea lane conditions, customs issues, border delays, and even terrorist threat levels can provide the buyer with leverage in pricing particularly if your products are less subject to interference or delays.

These rules of the road are to stimulate your thinking. Make a list of elements that you can bring to a negotiation and enjoy the process of interacting with your global professional colleagues. You and your company will be richer for it.

About the Author

Peter Moore
Adjunct Professor of Supply Chain

Peter Moore is Adjunct Professor of Supply Chain at the University of Denver Daniels School of Business, Program Faculty at the Center for Executive Education at the University of Tennessee, and Adjunct Professor at the University of South Carolina Beaufort. Peter writes from his home in Hilton Head Island, S.C., and can be reached at .(JavaScript must be enabled to view this email address).

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