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Solution
Executive Summary
This integrative assessment for Corporate Award Program establishes a formal commercial negotiation for Occidental of Oman operating in oil and gas industry. Commercial negotiation plan has been developed by reference to data, factual information and CIPS tools. HSE and chemicals portfolio spend category has been identified and evaluated in-depth to come up with an appropriate negotiation plan. The importance of identifying the HSE and Chemicals are informed by the previous COVID-19 pandemic which has informed on the need for adopting healthy business environment which is free from any infections. Further, coming from the pandemic where the level of business operations had significantly reduced and the organisation need to restart their operations by cleansing their systems and machines. In this case, the need for HSE and the chemicals portfolio in Occidental of Oman has been in an upward trajectory. For negotiation successful implementation, Occidental of Oman involves professionals, terms and conditions initiated, holistic readiness and streamlined procurement and supply chain approaches. This is with good forecast and plans being core for guaranteeing customers services delivery on time.
By use of various analysis tools, the findings highlight that Occidental of Oman adopt various negotiation phases as guided by the CIPS. These steps include prepare, open, propose, bargain, agree and close. Also, the findings of the STEEPLE, Porter’s 5 Forces and SWOT analysis evidence the different strengths to capitalise on for achievement of holistic negotiation approach. From the findings sourced in stakeholders analysis, the supplier preferencing matrix highlight on the need to harness the negotiation approaches.
A set of benefits have also be sourced by using the 3P’s model of triple bottom line, importance of communication, engagement, teamwork process, accountability and management of entire conflicts being core. The identified initiatives promote successful negotiation approach and to mitigate potential bottleneck attained by embracing the BATNA Technique.
From the findings obtained in this assessment, a set of recommendations have been developed. These are;
- Holistically restructuring current Occidental of Oman negotiation strategy
- Pursuing outsourcing approach for purpose of attain value for money outcomes and effectiveness of their PS&M
- Establishing accurate and good specification matrix for all Occidental of Oman contract development
- Harness effectiveness of supplier selection approach by using tools such as STEEPLE and PESTLE Forces
Table of Contents
1.2 Organisation Background. 5
1.3 HSE and Chemicals Category of Spend. 6
2.0 Evaluation of Occidental of Oman Procurement and Supply Management (PS&M) Strategy. 7
2.1 RACI Stakeholders Model in Occidental of Oman. 8
3.0 Negotiation Plan for Occidental of Oman in H&S and Chemicals. 13
3.1.3 BATNA in Negotiation Preparation. 17
3.1.4 Negotiation Approaches. 18
3.4.1 4R’s Model use in Proposing. 21
4.0 Developing Contracts Evaluation. 25
5.0 Conclusions and Recommendations. 25
Figure 1:Reasons for Negotiation process. 5
Figure 2:Occidental of Oman Sectors of operations. 6
Figure 3:P&SM Structure in the Occidental of Oman. 7
Figure 5:Summary of RACI Matrix. 10
Figure 6:Stakeholders Analysis. 12
Figure 7:Occidental of Oman Stakeholders Analysis Summary. 13
Figure 8:Negotiation Stages 14
Figure 9:Steps of Negotiation. 15
Figure 10:Steps of Negotiation. 16
Figure 11:Occidental of Oman H&S and Chemicals spend category negotiation. 17
Figure 12:Occidental of Oman BATNA. 19
Figure 13:Negotiation Strategies for Occidental Oman. 20
Figure 14:4R’s Model use in Proposing. 23
Figure 15:3P’s Triple Bottomline. 24
Figure 16:Supplier Preferencing Matrix. 25
1.0 Introduction
Today, post-COVID-19 pandemic, organisations are operating in a challenging economic conditions and new competitiveness. As a result, Selviaridis (2020) argue that this constrain the success rates of all commercial contracts. These challenges have impacted management of stakeholders relationships, costing, ordering and delivery, quality levels and any variation of the contract. It is in this regard that CIPS (2017) has introduced the need for establishing a negotiation process which ensure holistic engagement, stakeholders relations, good negotiation and advice received. Additionally, CIPS (2022) argue that negotiation basically entail a holistic communication process among various involved parties with main objectives and expectations including attainment of mutual decision. In figure 1 summary, for negotiations to be successful, they are characterised by a set of factors. Also, negotiation process success is characterised with entire parties being satisfied and improving performance for being in line with the Key Performance Indicators (KPIs) and SLA’s.
Figure 1:Reasons for Negotiation process
1.1 Report Purpose
This report provides a background information which is relevant for guiding formal commercial negotiation plan in Occidental of Oman Organisation. This is by referencing on desk research which offer factual information, best practice and data. There are various aspects which have been noted as core for evaluating them and entail quality factors, terms and conditions summary, timelines, communication and stakeholders relations. For achieving the report purpose, a set of tools and models such as Mendelow’s matrix, Kraljic Matrix, 3P’s Bottom Line, BATNA have been analysed. Also, Supply and Demand Curve, SWOT analysis, Porter tool and STEEPLE have been analysed to evaluate business environment impact on negotiations. Eventually, a set of recommendations on improving negotiation by Occidental of Oman have been provided.
1.2 Organisation Background
In this assessment, Occidental of Oman has been identified as an organisation of focus. This organisation has been actively operating in the oil and gas sector in Oman and has over the years been involving in a set of business endeavours (OXY, 2022). This is in assets development, infrastructure growth, engagement of expertise and technologies which ensure that Oman citizens lives are improved substantially. By actively pursuing their operations in the Oman sector, Occidental of Oman has been in a position of leveraging on the multiple opportunities in the country specifically in sustainable business practice whose overall outcome has been a holistically improved quality of life in the world. Additionally, Occidental of Oman is involved in a set of operations as summarised in figure 2;
Figure 2:Occidental of Oman Sectors of operations
Considering the holistic nature of this organisation practices, OXY (2022a) argue that the organisation has managed to acquire a cumulative profit of £1.7 billion with a contribution to Oman and international governments taxation of approximately £1.2 bullion in the second half of year 2022. Additionally, the organisation has managed to explore approximately 1,200 thousands of oil barrels daily in the second quarter of 2022 which is more than midpoint of guidance of 48 mode.
Hence, considering this background information, in this report, it focuses on developing a negotiation plan. This plan would be relevant for Occidental of Oman cost savings and market dominance in this sector. This is through a holistic negotiation plan which integrate their best practice in the identified sector.
Considering the organisation hierarchical organisation structure is as illustrated in figure 3. In specific, their PS&M is mandated of ensuring that collaboratively and within set terms and conditions, stakeholders competence is attained and high value attained (see figure 3);
Figure 3:P&SM Structure in the Occidental of Oman
1.3 HSE and Chemicals Category of Spend
In Occidental of Oman Organisation, they have different sub-categories of HSE and chemicals portfolio. As evidenced in Airiagbonaye et al. (2020), the rationale of spending on HSE and Chemicals portfolio is informed by the need to formulate and address and contributing to reasonable applicable reduction of linked accidents. Also, it is used in managing any form of fatalities, losses (time and properties) and the occupational health. Further, for the chemicals, Occidental of Oman sources different chemicals are sourced include Tannins, different lignosulfonate salts and different phosphates and synthetic polymers including sodium poly (styrene sulfonate-co-maleic anhydride) which are appropriately applied. Particularly, for Occidental of Oman, they are involved in procurement of the partially hydrolysed polyacrymide which are similarly applied to drill fluids (Das et al., 2020).
Therefore, considering Occidental of Oman operations, the most appropriate sourcing approach for the various spend categories imply they have a significant control of their supply and procurement processes.
In this regard, considering the Occidental of Oman organisation most appropriate sourcing strategy, various spend categories imply they are holistically controlling the entire supply and procurement approaches (CIPS, 2022). This is informed by essential need, demands and evidencing supply chain in an entity value chain. For evaluating the appropriateness of the spend category, various tools would be appropriately adopted.
2.0 Evaluation of Occidental of Oman Procurement and Supply Management (PS&M) Strategy
In PS&M, the various phases adopted are intended to ensure high quality level is attained and on-time supply of different products and services as stipulated in buyer specifications. While introducing the procurement cycle, Jenssen and De Boer (2019) identify this as a process which is inclusive of various phases which are pursued in phases hence having an impact on process effectiveness. A major determinant of this is to embrace competency in various procurement process areas and to ensure alignment of organisation goals. As illustrated in figure 4, the best practice in procurement is explained. At the start, the entire organisational requirements are identified with the entire specifications developed holistically. For this phase, an organisation is supposed to identify the entire needs and capitalise on appropriate opportunities. This is what CIPS (2017) identify as engagement of various cross-functional teams evaluated and development of a holistic specifications increase. This is also inclusive of engaging different stakeholders at an early stage to avert potential delays and bottlenecks.
To develop the entire specifications, the core areas of interest are inclusive of evaluating counterfeits skills and people practices, identifying quality demands, sustainable practice, holistic stakeholders inclusion, innovation embrace and technology.
In Occidental of Oman, for success in their PS&M operations, they adopt the procurement cycle holistically. The various identified phases are intended to harness their capacity to evaluate the entire business needs, pursuing a holistic market analysis, good planning and strategy implementation, documentation, issuing tenders, performance improvement and logistic. For Occidental of Oman, the main factors put into account in the procurement process evidence the overall input of their stakeholders. This is specifically relevant in the HSE and chemicals portfolio spend category. This is identified in Bull et al. (2021) as noting the most appropriate strategy for determining stakeholder types which is core for aiding an appropriate positioning of the negotiation process efficiently. Further, to achieve success in pursuing the stakeholders analysis, a holistic inclusion of an organisation with relevant people practices and sourcing plan is important. This can appropriately be evaluated by referencing on the RACI Stakeholders analysis model.
2.1 RACI Stakeholders Model in Occidental of Oman
For success of the PS&M, all the modules (1-4) in this CIPS course have identified on the need for involving people in an accountable manner and harnessing their competencies in the different phases of the procurement. By use of RACI (Responsible, Accountable, Consult, and Inform), the best individual is selected in the supply chain approach for guaranteeing all tasks implementation. According to Lee et al. (2021) this is an appropriate tool used to offer an opportunity for prioritising all interests of stakeholders and harnessing procurement and supply process (see figure 5);
Figure 5:Summary of RACI Matrix
Considering the HSE and chemicals spend category in Occidental of Oman sourcing, various stakeholders groups are involved and their practices are informed by the figure 5 steps of RACU Model. This is to harness the success of their relationships.
Responsible- This include the stakeholders or people with a mandate of implementing specified functions. Considering HSE and chemicals category of spend PS&M teams are engaged actively. Starting with the technicians, all stakeholders are viewed as important. For instance, the organisation in downstream in Oman has been accredited with ISO8738373 certification for their effectiveness of ensuring that they adopt a mutual agreement in their stakeholders relationships. In Wemyss (2018) report which uses an example of New Zealand best practice, it identified the application of RACI model as core for noting the functions and level of involvement of stakeholders in procurement.
Accountable- This entail an active decision making process and authority to approve or reject an undertaking. For Occidental of Oman identified spend area, stakeholders identify accountability level required. By engagement of a procurement and supply chain manager, effective decision making is attained. In line with Putra et al. (2020), inventory is applied in ensuring the entire procurement process are pursued. Other than successful procurement cycle, through accountability, ensure they own faced issues. An appropriate instance is where there do not have enough materials to maintain their health and safety equipment. For the phenomenon, PS&M and inventory planning can respond to issues arising and evidencing specific areas of people leading to issues prevalent.
Consult- This aspect is used in identifying stakeholders and people to be provided with detailed feedback and input before pursuing their practices. In line with CIPS (2021) who note that stakeholders are seen as core practitioner. Different stakeholders are engaged in Occidental of Oman procurement and supply management (PS&M) to ensure successful procurement approach. This evidence the importance of pursuing stakeholders analysis to establish different stakeholders in procurement and supply chain. For instance, clients stakeholders need to be appropriately managed in a close as they are importantly influencing PS&M process. The different suppliers are essential for holistically engaged with quality and competencies essential to guarantee information sufficiency. A holistic stakeholder analysis by use of Mendelow Matrix is
Inform– Considering the findings from RACI model, this include different stakeholders and people notifying on decisions made in procurement cycle and way forward. More critically, informal consultations are done and not a must to lead to final decision (CIPS, 2022a). In figure 6 findings, monitoring category of stakeholders is evident. This is inclusive of regulators of HSE for ensuring Occidental of Oman abide to policy and quality aspects. As stipulated by RACI Model, negotiation approaches ought to make their priorities to be on quality which are influenced by need for approving and abiding to government laws. All the chemicals which are sourced by Occidental of Oman are supposed to have met specific stipulations which is appropriately achieved. This is with a guarantee of on-time provision and success in planning for all products.
2.2 Stakeholders Analysis
Advancing from the findings obtained in RACI model, analysis of stakeholders is essential. According to CIPS (2021) the importance of this to the organisation is assurance of quality service provided, products and project implementation. Considering the organisation activities (tactical, strategic and operational), successful practice would be informed by stakeholders support, commitment levels and their input. Generally, in Occidental of Oman, a set of categories are in place and grouped into internal, connected and external as illustrated in figure 6;
Figure 6:Stakeholders Analysis
In line with figure 6 findings, considering the types of stakeholders, they are involved to influence a successful supply chain and overall cycle which include clients, customers, logistics and provisions in line with Oman government laws. The stakeholders mandate is to guarantee successful practice. Also, through an active stakeholders analysis, it is possible to pursue a holistic procurement and supply management essential for promoting thoughts and international practices with innovation and expertise put into account for holistic engagement and interaction. This is impacted by what is illustrated in figure below. As illustrated in figure 7, a further analysis of the Occidental of Oman stakeholders is provided;
Figure 7:Occidental of Oman Stakeholders Analysis Summary
Low-Interest; High-Power- Considering the H&S providers, partners and safety department in Occidental of Oman, they are actively involved in determining the negotiation process. They are in a position of leveraging on resources and setting good negotiation environment. Hence, their participation in negotiation is limited but must be kept informed. This is by being provided with updated information on the quality of H&S and chemicals required.
High-Power; Low-Interest- This category of keep satisfied stakeholders and entail the administration and board of management. They have immense power owing to how they influence operations of their organisations. For instance, considering the current global economic recession, Occidental of Oman has substantially lowered their budget in various spend categories. This is with the board approving and sourcing plan appropriately adopted.
High-Power; High-Interest- For this category, it entail inclusion of procurement teams, the H&S and chemicals manufacturers, clients or their end users, the finance and legal departments. The level of their interest is to promote holistic management and inclusion in holistic sourcing strategy.
Low-Power; High-Interest– Considering the sourcing of H&S and chemicals by the organisation, this include suppliers engaged in this spend category. Their interest is to increase the overall sales and revenues by establishing appropriate relations with the buyer or Occidental of Oman. Further, the different communities and societies with interest on CSR strategies in Occidental of Oman ensure that their success is not limited. Hence, they ought to be informed in regard to the most strategic sourcing strategy applicable.
3.0 Negotiation Plan for Occidental of Oman in H&S and Chemicals
The core purpose of negotiation is to enhance the success of the PS&M and gain in optimum. This is evidenced in CIPS (2021) guidance which directs the best practice of achievement of an appropriate result and agreeing with different parties. For instance, in Occidental of Oman, their PS&M engages in negotiations with a primary intention of arriving at a win-win outcome. Nevertheless, often, conflicts emerge, cost challenges and market changes which impact success of negotiation. Considering the organisation H&S and chemicals sourcing, the steps adopted are as illustrated in figure 8;
Additionally, reflecting from the CIPS Modules Notes, it is important noting that the negotiation process is pursued through adopting figure 9 stages;
Figure 9: Steps of Negotiation
In negotiation, Kraljic Matrix Analysis Tool is important to identify involved risks and cost impact of the negotiation plan in procurement and management process. Considering the findings presented in CIPS (2022b), the use of this tool is relevant to guide stakeholders classification based on how the supply chain weaknesses affect them, support of strategy development while lowering extent of disruptions as illustrated in figure 10;
Figure 10:Steps of Negotiation
In summary, for the H&S and chemicals spend category, they are grouped as leverage items. This means they are highly competitive in terms of bid and low risks. This is different from critical which has less suppliers existing with immense profits incurred. The bottleneck items also are defined with less in value products faced by immense risks.
3.1 Preparation
For this starting stage in negotiation, it influence successful and attainment of projected outcomes by the involved parties. Further, concessions and BATNA (Best Alternative to a Negotiated Agreement) is also attained. The identified aspects are core for maximum results achievement. By working on a sufficient preparation detailed information on all the negotiation approaches are put into account. This is by leverage on quantitative and qualitative data which guide the process (Ellis et al., 2021). Another information category is classified into micro and macro aspects, Sourcing of information is achieved through a leverage on business environment scanning tools such as SWOT and STEEPLED. In Macioszek and Cieśla (2022), by evaluation of the business analysis, it is possible to obtain detailed insights on coming up with best and effective decision. The application of various tools inform sufficient information to promote negotiation.
3.1.1 SWOT Analysis
This is an abbreviation of Strengths, Weaknesses, Opportunities (SWOT). This is defined by CIPS (2022c) as offering a guide to appreciate the maximisation and improvements. This reflect the necessity of capitalising on strengths while addressing weaknesses with all risks averted. In a negotiation process, the threats represent shortcomings encountered. This can include miscommunication by the different engaged stakeholders in the process. Considering Occidental of Oman organisation, their SWOT analysis is shown in figure 11;
Figure 11:Occidental of Oman H&S and Chemicals spend category negotiation
Considering the provided SWOT analysis summary (see figure 11), Occidental of Oman is in an appropriate position of establishing sustainable relationships with their suppliers. These negotiations success are evidenced by Occidental of Oman professionals in their PS&M practice. However, there is a need of noting the competencies development to ensure organisation engagement. Besides, opportunities for leveraging on negotiation is core. The SWOT analysis opportunities are identified as inclusive of their brand image, organisation reputation and competitiveness. Threats entail immense competitiveness, legislations changing, change in market in terms of costs incurred and bankrupt of suppliers in current economic recession.
3.1.2 STEEPLED Analysis
This represent an evaluation of factors of Social, Technology, Economy, Politics, Laws, Ethics and Demographics. This is used to scan external factors of sourcing the H&S and chemicals. The identified factors are core in negotiation process.
Social- In Occidental of Oman operations, in the selected category of spend, lifestyle factors and labor impact the negotiations. In both onshore and offshore, there are players whose interests must be accommodated in negotiation.
Technology- There are technologies which could be used in negotiations to promote the effectiveness of negotiation. By reviewing the expectations online and other tools leverage would ensure success of the negotiation.
Economy- Post-COVID-19 pandemic, economic recession has been prevalent which affect the success of Occidental of Oman in their operations. Negotiations must hence include working on lowering the percentage of the costs incurred in the spend. This would impact on cost aspects priority in negotiating.
Environment- H&S and chemicals sourcing are supposed to adhere to green policy which is prioritised in the negotiation process.
Politics- Through the positive environment in Oman, there prevail a good business environment for sustainable practices.
Legal- In Oman, the government has set legislations which govern negotiations in procurement. For instance, the In-Country Value (ICV) policy ought to be pursued in the process of negotiation.
Ethical– Negotiation must adhere to suppliers expectations of guaranteeing justice, morality and integrity in their operations.
Demographics– By involving the Generation Y and Millennials, negotiations are successfully pursued with the locality and age factors of suppliers prioritised. This is important to guarantee holistic satisfaction in negotiation.
3.1.3 BATNA in Negotiation Preparation
As part of negotiation, the Best Alternative to a Negotiated Agreement (BATNA) need to be achieved by highlight of entire objectives (Ott & Ghauri, 2019). Particularly, for Occidental of Oman organisation, this is critical determinant prior pursuing a negotiation. Through this, the organisation is able to avoid going into MIL which offer guidance of all parties intention in a negotiation process. A good BATNA in Occidental of Oman can be in line with CIPS (2021a) guidance on need to follow a set of 4 phases;
- Stage 1- Identify and list all alternatives which are relevant for a negotiation
- Stage 2- Value every alternative which has been identifies in stage 1
- Stage 3- Use information in valuing the entire alternatives to come up with the most appropriate
- Stage 4- Calculate the low value deal and come up with a solution
Considering Occidental of Oman H&S sourcing process, the PS&M make sure that they are aware of all the expectations and recognise the Best Alternative to Negotiated Agreement and obtain power and equal influence. By using this approach, negotiation alternatives as summarised in figure 12 are pursued in order to develop Zone of Potential Agreement (ZOPA). This tend to overlap sellers and buyers range of settlement. The buyer settlement range is appropriate for buyers.
Figure 12:Occidental of Oman BATNA
3.1.4 Negotiation Approaches
In preparing for the negotiation process, it is important to identify the best practice. This is in terms of effectiveness in persuading and eventually negotiating with seller and other stakeholders. The potential approaches are illustrated in figure 13;
Figure 13:Negotiation Strategies for Occidental Oman
Compromise- This is not commonly used in Occidental of Oman since it entail a win-lose approach (Vojvodic et al., 2019). To avoid this, the PS&M ensure they carry out an in-depth arrangements prior the process.
Logic- According to Francisco et al. 92019) this process use data and research to come up with an appropriate negotiation process. In Occidental of Oman organisation, by use of factual information, numerical and text, it is possible to influence their decision making process. Before COVID-19 emerged, Occidental of Oman was budgeting upto 70% more in sourcing for H&S and chemicals. This has since changed guided by research.
Emotional- For this method, it tend to be threatening due to scope of interaction. This entail stakeholders highlighting on care and being smart in embraced value. Further, body language/non-verbal behaviours are applied. Considering my recent placement in Occidental of Oman as a procurement professional, I ensure that I guide approval of contracts on time. In one case, the vehicles which had been hired offshore had their leases expired. There was however a mistake made by failing to alert the leasing company on time. This lead to compromise or logic not being an option. We managed to adopt emotional approach for communicating with suppliers for contract termination. Emotional approach was adopted in communicating with suppliers for the contract termination. I managed to safe $20 million for Occidental of Oman organisation.
Bargaining– By offering an example of Brexit negotiations, Martill and Staiger (2021) identify this as a negotiation approach which is defined with back and forth engagement on entire aspects, hence establishing a common agreeable result. In figure 12, this was noted to have high intuitiveness and low influence. For Occidental of Oman, after COVID-19 pandemic, the masks and sanitizers supplier had been engaged through bargaining strategy. This lead to presentation of an appropriate chance for Occidental of Oman PS&M to relate with different suppliers. After a review of all benefits, a win-win phenomenon was attained.
3.2 Opening
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