Outsourcing and Negotiation in Project Management

The prevailing t kiboshency of goernings is to concentrate on nerve center activities and opt to source those activities which atomic number 18 considered to be noncore. 1) controvert the concept of outsourcing, fountain behind outsourcing and its challenges. Outsourcing is the act of one alliance contracting with an opposite company to propose work that might otherwise be performed by in house employees. Often, the tasks that argon outsourced could be performed by the company itself, but in many cases there are financial advantages that come from outsourcing.Many large companies forthwith outsource jobs such as call centre services, email services and payroll. These jobs are handled by separate companies that specialize in each service. Outsourcing is therefore, the plow of contracting an existing business function or attend of an organization to another independent organization and ceasing to perform that function or process internally, instead, purchasing it as a serv ice. Reasons for Outsourcing i. Cost reduction/Cost Savings- outsourcing cuts cost such as labour costs, regulatory costs and training costs.Most companies that provide outsourcing services are fitted to do the work for considerably little money as they dont have to provide benefits to their workers and have fewer overhead expenses to worry about. ii. Focus on Core Business- companies are able to direction their money and resources to a greater extent towards improving the core aspects of their business when outsourced. this allows the outsourcing company to shit onto its core functions that keep the business running smoothly. iii. Access to more(prenominal) Knowledge, genius and Experience- outsourcing means contracting to an organization that is more specialized in a particular(a) area, e. . , payroll services. this means that the process that is outsourced provide be performed in a more efficient and effective manner hence modify services. iv. Increased profits- due to t he fact that some services or processes are outsourced at a cheaper cost, it means that the services/products a company offers allow also be provided at an affordable cost hence higher(prenominal) revenues. Cost savings and reduction also increases the profits. Challenges of Outsourcing i. Eliminates direct communication mingled with a company and its clients especially in instances where customer service has been outsourced.This may prevent a company from building solid relationships with their customers which brush off withdraw to dissatisfaction. ii. The danger of not being able to control some aspects of a company which have been outsourced which can lead to delayed communication and disgorge implementation. In turn, this can cause a company to become exceedingly dependent on its outsource providers which can cause worrys or complications should the outsource provider back out on the contract for one ground or another. iii. Any sensitive knowledge is more vulnerable as there is reduced confidentiality and also the risk of leakage.Outsourcing means that some information needs to be shared with the outsource provider hence confidentiality is compromised. 2) Discuss the significance of negotiation and its approaches to achieve procurance objectives, factors influencing vendee negotiations, strengths and weaknesses of negotiation styles. duologue is dialogue between 2 or more people or parties intended to reach an understanding, resolve point of difference or gull advantage in outcome so as to satisfy dissimilar interests of the negotiating parties. It is therefore mutual discussion and arrangement of the terms of a dealings or agreement.It is a process where each party involved in negotiating tries to gain an advantage for themselves by the end of the process. Negotiation is intended to learn at compromise. preludees to Negotiation i. Structural cuddle Structural approaches consider negotiated outcomes to be a function of the characteristic s or morphological features that define each particular negotiation. These characteristics may include features such as the number of parties and issues involved and the root or relative power of the competing parties.In this approach, theres an emphasis on the means parties begin to a negotiation. Power is thus the central determining factor in negotiation. In this view, the relative power of each negotiating party affects his/her ability to ready their individual goals. However, other factors such as negotiating skills can play a key role in shaping negotiated outcomes. Therefore, victory in negotiations does not always go to the party that is more powerful. Another limitation of structural approaches is their emphasis on taking positions.Negotiators should be aware that a cheat attachment to winning from a negotiation regardless of the resulting satisfaction of other parties, can be a poor long term dodging if it means that the other side impart lose its will or ability to maintain its side of the negotiated agreement. ii. Strategic Approach Here, the emphasis is on the role of ends (goals) in determining outcomes. Negotiators are viewed as rational determination makers with known alternatives who make choices guided by their calculation of which option will maximize their ends or gains.Actors choose from a choice set of practicable actions in order to try and achieve desired outcomes. Its grounded in the precept that there is one best solution to every negotiation hassle hence look for best solutions from all perspectives of a negotiation. iii. Behavioural Approach Behavioural approaches emphasize the role that negotiators personalities or individual characteristics play in determining the course and outcome of negotiated agreements. It explains negotiations as interactions between personality types. It therefore, highlights humankind tendencies, emotions and skills.It may emphasize the role played by arts of persuasion, attitudes, trust, know ledge or misperception, individual motivation and personality in negotiated outcomes. iv. Integrative Approach Negotiations are viewed as interactions with win-win potential. It looks for ways of creating value so that there is more to share between parties as a result of negotiation. Uses objective criteria, looks to constrain conditions of mutual gain and emphasizes the importance of exchanging information between parties and group problem solving. It thus calls for participants to work jointly to create win-win solutions.It involves uncovering interests, generating options and searching for commonalities between parties. Objectives of Negotiation for Procurement 1. Obtain the quality specified- through negotiation, buyers and suppliers are able to reach a consensus on quality required for the products/services. 2. Obtain a bring together and reasonable price. 3. Create a long term confederacy with a highly qualified supplier- through negotiation, an organization is able to co nstitute which supplier it best relates with hence creating a long term relationship. 4.To cook the supplier to perform the contract on date- economy date instrument for quantity and quality specified should be realistic. Its important that buyers negotiate delivery schedules which suppliers can realistically regard without endangering other requirements of the purchase. 5. To exert control over the manner in which the contract is performed- buyers need to negotiate for controls which will hold in compliance with the quality, quantity, delivery and service terms of the contract. Factors Influencing emptor Negotiations 1. Type of Buyer All buyers are not equal.Buyers have different acquisition objectives, return and competitive pressures, availability of capital and the attendant costs, risk tolerance and mental quickness at negotiating deals that will impact the amount they are willing to dribble on procurement. 2. General Attractiveness of the Company Naturally, an asking price that is to a lower place market valuation will make a supplier more kind. Also, an asking price that is in close proximity to a companys fair market valuation is also attractive. Therefore, factors that make a supplier attractive include Strong management A strong balance bed sheet High growth rate Leadership or dominance in the market Such factors will attract buyers since the supplier will be viewed as dependable or reliable. 3. Financial Parameters A buyers financial parameters that set up what to be paid include internal cash available for procurement and the amount they are willing to invest in a angiotensin converting enzyme procurement deal. 4. Relative Negotiation Skill and Bargaining Leverage of the Parties As a buyer, the amount of money you will pay will be influenced by your negotiation skills, bargaining leverage and time constraints.For example, if the products/services are required urgently, then you might not have enough time to bargain for a good deal . Ultimately, the greatest power possessed by both the buyer and seller is to walk away or end the negotiation process. 5. Buyers Experience with Prior Suppliers The amount of money that a buyer is willing to pay is influenced by prior experience. If the buyer paid a high price in the past and the supplier failed to deliver, they will conjecture long and hard before offering an overly generous price and vice versa. 6. Inherent Risk Factors and the Buyers ToleranceRisk can be defined as the possibility of a bad outcome or the uncertainty of a desired outcome. Tolerance of risk is a buyers willingness to accept and manage risks that can come about say due to a delayed or even failed delivery. When it comes to negotiation, the biggest risk is overpayment then the product/service procured does not meet the specifications or is not even delivered. 7. General Market and frugal Conditions Economic and market conditions strongly influence buyers. Favourable economic conditions means that buyers are willing to spend more unfavourable economic conditions means that buyers will reduce on their spending.