To what extent are fact-based price negotiations with existing suppliers used in the Swedish private sector?

Abstract

This qualitative research investigates fact-based price negotiations within the Swedish private sector, conducted in partnership with the Swedish purchasing company Prognos MKA. The research sought to help the company gain knowledge on the applicability of their value offerings and how these can be developed, to better fulfill the needs of customers within the Swedish private construction and production industry. To answer the overarching research question, To what extent are fact-based price negotiations with existing suppliers used in the Swedish private sector?, twelve semi-structured interviews were conducted, analysed, and from them different themes were identified. The thematic analysis and the five-phase implementation model enabling fact-based negotiations reveal that companies today advocate long-term relationships, mutual dependence, transparency, and trust. Negotiations are characterised by the supplier and customer's importance for the company, based on the choice of sourcing strategy used and supplier categorisation. The use of data in the context of negotiations is identified as a source of power, improving negotiation outcomes. Enablers of the fact-based negotiation strategy identified are long-term relationships and proper negotiation preparations, influenced by the negotiation style and sourcing strategy used. Whereas barriers identified are largely connected to a lack of knowledge and understanding of data and indexes, and a lack of time and resources. To overcome the identified hindrances and thus enable the implementation of a fact-based negotiation strategy, one can employ the services of external cost data providers such as Prognos MKA, which offer specialized data reports, knowledge, training, and education on the use of data and indexes. The role Prognos MKA can play in this type of transition is to be an interactive educator and partner who partakes in negotiations, extending their value offerings further to provide, for instance, the service of external cost breakdown analysis for their clients. The research shows that the extent to which fact-based negotiations as a strategy is implemented in the Swedish private sector differs, meaning that companies to varying extents can benefit from this negotiation strategy. Some companies have the strategy integrated in their operations, while others deem it irrelevant for their business. A company such as Prognos MKA should therefore focus on companies that are in phases 1, 2, and 3 of the five-phase implementation model and adapt its offer to the preferences of these clients. That is, companies that have at most a partial implementation of fact-based negotiations.