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Solution
Table of Contents
1.2 Procurement/ Commercial Function. 7
2.1 Negotiation Model: Bailey et al. 9
3.0 Post Negotiation Review.. 26
List of Figures
Figure 1:ROSHN Vision, Mission and Objectives. 6
Figure 2: Approval Supplier List Framework Agreements. 7
Figure 3:Procurement Cycle Diagram.. 8
Figure 4: Mendelow’s Matrix. 11
Figure 5: Porter’s 5 Forces Analysis. 14
List of Tables
Table 1: Team Members and their roles 20
Table 2: Negotiaiton Agenda. 21
Executive Summary
This negotiation plan for the ROSHN organization focuses on a contingency-based approach to procuring construction materials. It incorporates the Bailey et al. negotiation model alongside market analysis frameworks, such as Porter’s 5 Forces and PESTLED, to evaluate the market landscape and inform negotiation strategies. The negotiation approach chosen emphasizes a principled, collaborative model to establish sustainable, mutual value between ROSHN and its suppliers.
The negotiation strategy focuses on quality assurance, reliable delivery timelines, and risk-sharing, rather than prioritizing price alone. Preparation is a critical component of this plan, with initial steps involving a thorough review of internal information, risk assessment, and stakeholder engagement. This enables ROSHN to address both organizational needs and external market pressures effectively.
Key recommendations arising from this analysis include:
- Conducting internal and external assessments to determine the optimal sourcing strategy for ROSHN’s needs and market position.
- Developing a broad appraisal strategy to guide sourcing decisions and ensure alignment with corporate objectives.
- Emphasizing the management of sourcing strategy within the organization’s policy framework to drive consistency and effectiveness.
- Enhancing stakeholder involvement to bolster the negotiation process, allowing input from diverse perspectives within the organization.
- Investing in capacity-building initiatives to deepen the organization’s understanding of procurement and supply management, ensuring informed decision-making.
By focusing on these recommendations, ROSHN aims to achieve improved procurement efficiency, generate value for money, and foster long-term, strategic partnerships with suppliers. This approach not only secures immediate material needs but also strengthens ROSHN’s market position by embedding sustainable sourcing practices into its procurement processes.
1.0 Introduction
1.1 ROSHN Organisation
In this assignment, the ROSHN organization has been chosen for analysis. As part of the Public Investment Fund (PIF), it is tasked with developing high-quality residential properties within Saudi Arabia’s (KSA) real estate market (ROSHN, 2024). Currently, ROSHN holds over 60% of the residential construction market in KSA, positioning itself as a leading player in the real estate sector. The government of KSA has implemented a policy aimed at achieving 70% home ownership nationwide. This initiative caters to the diverse housing needs of the population according to their budgetary constraints. It focuses on supporting various sectors and fostering partnerships to enhance job opportunities and drive economic growth. The vision and mission of ROSHN can be summarized as follows;
Figure 1:ROSHN Vision, Mission and Objectives
Source: Summarised from PIF (2024)
According to the summarized figure 1, ROSHN’s operational success is founded on its forward-looking vision, mission, and core objectives. To support this, the organization allocates a significant budget of SAR 200 million to its Procurement and Supply Management (PS&M) activities (PIF, 2024). This budget is utilized to manage relationships with various consultants, oversee contract management, and coordinate with manufacturing teams and PS&M stakeholders. In each identified spending area, ROSHN employs distinct sourcing strategies.
1.2 Procurement/ Commercial Function
ROSHN operates a fully independent PS&M department mandated with the responsibility of generating an approved supplier list framework agreement. The components of the agreement are as illustrated in the following;
Figure 2: Approval Supplier List Framework Agreements
Source: CIPS Module Notes
Additionally, the Procurement and Supply Management (PS&M) team is responsible for creating the Pre-Qualification Questionnaire (PQQ), which helps identify the most suitable suppliers for various contract implementations. This is achieved through the procurement supply cycle (CIPS, 2024), which includes several phases such as specifications, tendering, and ultimately asset management, relevant to all PS&M professionals. Based on the results, the commercial team is tasked with analyzing and detailing the costs associated with managing tendering and supplier relationships to ensure that vendors are operating within the system. These stages are illustrated as follows:
Figure 3: Procurement Cycle Diagram
Source: (CIPS, 2024)
1.3 Category of Spend
For this negotiation plan, the category of spend selected is construction materials. This category plays a pivotal role in ROSHN’s operations, as it directly impacts project timelines, operational costs, and overall project quality. The negotiation would initially revolve on quality delivery, timely delivery and flexibility as so as to accommodate large quantities for different projects.
2.0 Negotiation
Bargaining is the business of two or more individuals wanting to come to a mutual agreement on the various conditions of the contract. In procurement, negotiation is not just getting to a certain price but also determining who will be responsible for quality, when the products should be delivered, how risks will be managed and what services go with the products. To ROSHN, successful negotiation means effective outsourcing contracts that guarantee long term strategic alliances benefitting operational performance, cost savings and increased value (Bailey et al., 2022).
Negotiations in procurement are important especially for construction materials since procurement directly affects what will be delivered in the project.
2.1 Negotiation Model: Bailey et al.
Bailey et al.’s model of negotiation is relatively mechanised and encompasses preparatory, initial, exploratory, counteroffer, competitive and convergent phase. Although this is so, the model can be useful as a structure through which to structure procurement negotiations and also offers a structure that guides the negotiator on the best way to proceed in a particular negotiation. This model will be implemented on the construction materials of spend at ROSHN to guarantee that the team is informed and in a good position to negotiate effectively (Bailey et al., 2022).
- The factors involved in preparation phase includes internal and external data collection, market condition analysis and supplier’s price strategy and behaviour.
- Introduction is the first part of typical social construct in which preemptive mood-setting is established. During this phase, the formality of a working relationship is acknowledged and trust is introduced; the key aspects of the problem are presented.
- In the analysing phase probing questions are asked so as to know the extent of willingness of the supplier, the supplier’s worrying factors and the flexibility limits of the offers being made. It is also when their bottom line is pushed for by using probing questions for instance Probing questions being used to determine their bottom line.
- The next step in the process is offer and counteroffer. It focuses on negotiation where both parties try to find a solution that will be suitable to both of them.
- The next phase of the model is the phase of negotiation in which the core of the negotiation is represented – both parties shift in order to obtain a mutual end.
- Last of all, the decision making involves the definition or final terms which is generally succeeded by an official contract/ memorandum of understanding.
Step 1: Internal Data (Spend, Demand, Specification)
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