Pre-negotiation strategy development in uneven power situations.

Luthy, Michael R. ; Ryan, Mike H.

ABSTRACT

Negotiations between purchasing managers (acting as representatives of the organization's buying center) and sales representatives (the designated agent of the supplier) are characteristic of the purchase behavior process often encountered in business-to-business marketing settings. It is rare when the situational power of the parties is equal. Even with the growing emphasis on the establishment and nurturing of mutually beneficial relationships between buyers and sellers, the effect of situational power discrepancies on negotiation planning has not been adequately explored. This article investigates how uneven situational power conditions and the expected length of the relationship affect purchasing managers' pre-negotiation strategy development and how they structure their opening offers. Responses from approximately 150 purchasing professionals to pre-tested negotiation scenarios validated the moderating role relationship length plays in the exercise of situational power. Additional findings provide insight to selected negotiation factors purchasing managers consider significant.

INTRODUCTION

Researchers have conducted a considerable number of negotiation studies in the last several decades. Scholars from disciplines as varied as game theory, economics, psychology, sociology, international business, and marketing have explored the tasks, processes, and participant characteristics of negotiations. The implicit rationale for a large number of these studies is the central role that negotiation plays in the organizational buyer-seller exchange process. This process is made more critical because of the strategic role buyer bargaining power and buyer-seller collaboration can play. The relationships created through negotiations may represent either a strong or weak competitive force, depending on whether buyers have sufficient bargaining power to influence the conditions of sale in their favor, and the degree and relative importance that buyer-seller partnerships have within the industry as a strategic advantage.

Several models of organizational buyer behavior have achieved widespread acceptance. The principle motivation for their development was the realization that conventional models of consumer buyer behavior were inaccurate and insufficient to explain and predict the dynamics of organizational buying situations. The Sheth model of industrial buyer behavior (Sheth, 1973) focuses on the crucial elements of the decision process and the interactions among them. Chief among its contributions is the recognition that the expectations of the buyer, whether represented by an individual or by a group, have an effect on organizational buyer behavior. While the model addresses conflict resolution, it is dealt with only from the perspective of conflict within the organization, and not that which may occur between the buyer and seller.

The Webster-Wind model of organizational buying behavior (1973) incorporates task and non-task factors, as well as interactions that potentially affect the participants, both at a broad level (such as the environment and the organization), and at a narrow level (such as the individual and any group decision-making unit that may exist within the organization). A deficiency of this model is that it only examines the determinants of organizational buying behavior up to the point of a decision. Implementation of that decision, which would include the negotiation process itself, is not addressed either specifically or in general terms. In offering the model, Webster and Wind expressed the hope that their model would be used in future research to identify information required for planning strategies in organizational buying. Those planning strategies would logically include ones covering the likely event of negotiations with sellers.

Jean-Marie Choffray and Gary Lilien (1980) developed a model of industrial market analysis; one that specifically addressed how organizations adopt new capital equipment. Their model explored the connections between the characteristics of the organization's buying center, and the major stages in the industrial purchasing decision process. In discussing these connections, the authors recognized the impact of individual and organizational preferences to the process. While also making a contribution, Choffray and Lilien's model ended with the determination of a buying decision; no implementation issues, such as negotiations with suppliers, were considered.

From a strategic standpoint, the relative bargaining power of a buyer can create a significant negotiating advantage. Buyers have substantial bargaining leverage in a number of situations (Porter, 1980 and 1985). The most apparent demonstration of that circumstance is when large buyers purchase substantial percentages of an industry's products. Bulk purchases generally result in both price discounts and sales terms favorable to the purchaser. The economies inherent in large single point sales are generally seductive in themselves to produce uneven buyer-seller relationships. Still, a seller with a product in high demand can often redress the bargaining balance even when large quantity purchases are involved. Other factors also can create a strategic imperative that produces additional pressures, tilting the relationship in one direction or the other. For example, the possibility of critical market exposure or the perceived advantage of being associated with a prestige customer is common to relationships that are unequal in terms of bargaining power.

BUILDING A THEORETICAL FRAMEWORK

Power

The role of power as a logical determinant of outcomes in the negotiation process has been well established with the publication of several major works in the 1960s (Bier and Stern, 1969, Stern, 1969) as well as reinforced by others more recently (e.g., Greenhalph, Neslin, and Gilkey, 1985). In addition, Cadotte and Stern (1979) developed a model for analyzing power and conflict in the marketing channel and Bonoma (1979), created a typology of buyer-seller relationships based on the relative power of the parties.

Common to most definitions of social power, one of the possible sources of power, is the idea of getting the other party to do something that he or she would not do in the absence of influence. In the case of negotiation however, power takes the form of inducing the other to settle for an outcome of less than their maximum utility, given their situation, but still within their zone of acceptance. Otherwise, an agreement will not be reached. If an agreement is reached, it can come about either because of tactical negotiating skill or situational power (Greenhalgh, Neslin, and Gilkey, 1985). In a paper on power and goal setting in channel negotiations, McAlister and her associates established that constraints established before the negotiations commenced had an impact on the resulting process and outcomes (McAlister, Bazerman, and Fader, 1986). Later work by Perdue and Summers (1991), which focused explicitly on industrial purchasing agents and their use of negotiation strategies in rebuy situations of component parts, demonstrated the ability of contextual variables (e.g., uniqueness of the buying firm's specifications, buyer's cooperative orientation, and buyer preparedness) to predict the emphasis purchasing agents will place on each of the general individual strategies (e.g. problem solving, manipulating perceptions about competition, and tough tactics) they identified for use in any particular set of negotiations.

Of principle concern to the research presented here is the issue of preparedness. The importance of preparedness to the negotiation process is widely acknowledged by purchasing experts (Barlow and Eisen, 1983; Peterson and Lucas, 2001). The possession of information relevant to negotiations and a formal plan for the interactions places the buyer in a strong position. In addition, having this information and a detailed plan for negotiation increases the buyer's ability to elicit concessions from the seller. This argues for greater use of aggressive bargaining by buyers who are better prepared. This contention has long been supported by experimental results that increasing task relevant data causes greater bargaining "toughness" (Siegel and Fouraker, 1960) as well as in the observation that having more information pertinent to the purchase situation tends to produce an aggressive posture in buying task group discussions (Krapfel, 1985).

Asymmetry

Negotiation is one strategy for a channel member to cope with another member's power (Dwyer and Walker, 1981). While many studies involve symmetric or balanced bargaining situations, Dwyer and Walker's research compares the bargaining process and outcomes in asymmetrical power structures against those of more balanced situations. Their results indicated that when the power structure was less balanced, the process was, in their term, more "efficient" (i.e. agreement terms were arrived at in fewer rounds) but the outcomes were less predictable.

Differential situational power has been manipulated in the laboratory in a number of ways, with the observed result that the more powerful party typically used that power (Rubin and Brown, 1975) and as a result had a higher outcome than the weaker party. More specifically, a negotiator motivated by immediate maximum self-gain who holds more power than his partners will submit a more extreme initial bid, yield less profit from his or her initial position, and send a larger portion of demanding-threatening messages than when power is balanced (Thibaut, 1950). Others have also found support for the effects of the power position. Dwyer (1984) found that negotiators in strong power positions earned more than those in weak power positions in an economic task. The results of these research works suggests the question of under what circumstances a negotiation party in an asymmetrically powerful position will not use (or at least moderate) the use of their power to extract maximum self-gain.

Initial Bargaining Position, Bargaining Style, and Relationship Orientation

Initial bargaining stance has been examined (Lawler and MacMurray, 1980) in the context of its effect on concession strategy in dyadic bargaining. Schurr and Ozanne (1985) extended this line of inquiry and concluded that prior beliefs significantly influence perceptions of the seller's actual behavior and that once a buyer's preconceptions are formed, whether or not the beliefs are consistent with the their objectives, buying behavior will be framed by these preconceptions. Neale and Bazerman (1985) found that a positive frame led to more successful performance than a negative frame, reinforcing Schurr and Ozanne's conclusions. Pullins et al. (2000) explored the early use of cooperative negotiation tactics and the impact on later satisfaction and profits. As a demonstrated construct, framing can occur before negotiations commence and therefore may exert an effect on the process and ultimate outcome of a negotiation.

A competitor's motivations also can have an effect on negotiations. Rose and Young (1991) used written instructions to manipulate negotiators' competitive orientations in a negotiation experiment. As a result of the instructions competitive buyers set more ambitious price goals, made lower final offers, and viewed the seller as more competitive and less trustworthy than cooperative buyers. In an article dealing with the likelihood of future negotiations (Corfman and Lehmann, 1993), the authors found that subjects recognized that to ensure future negotiations, equity in payoffs and satisfaction with the current bargaining experience was important. This view of the importance of possible future negotiations was examined by Pruitt and Kimmel (1977) in a review of the then last twenty years of experimental gaming literature. They concluded that a critical factor determining the behavior of a negotiator at a given point in a negotiation is the negotiator's short-term or long-term orientation. This perspective is taken up by Ganesan (1993). His findings suggest that channel members who have a vested interest in the other's welfare and in maintaining the relationship are likely to refrain from the use of active aggressive strategies. Combined with the finding of other research (Dwyer and Walker, 1981; Frazier, Gill, and Kale, 1989), which found greater use of aggressive strategies under conditions of high power, it suggests that relationship orientation may act as a moderating variable in high power situations.

Strategic Bargaining Leverage

Although the obvious situations of purchasing large quantities, critical market exposure, or the perceived prestige of a buyer's outlet or a seller's product can alter the buyer-seller advantage, there are other attributes that may also affect bargaining leverage. For example: if a buyers' costs of switching to competing brands or substitutes are relatively low; if the number of buyers is small or if a customer is particularly important to a seller or vice versa; if buyers are well-informed about sellers' products, prices, and costs or if sellers have similar information about buyers margins, value chain or end users; if buyers pose a credible threat of integrating backward into the business of sellers or alternatively if sellers have the capability of integrating forward into their buyers businesses; or if buyers have discretion in whether and/or when they purchase the product or if sellers have discretion in either selling or timing (Thompson and Strickland, 2001).

The important point is that not all buyers have an equal degree of bargaining power with sellers. Furthermore, individual sellers may retain variable bargaining power depending upon the buyer in question. The potential for an individual or a firm to take advantage of the different bargaining levels and forms of the buyer-seller relationship represents a strategic opportunity that should not be missed. Additional understanding of this process could improve the outcomes and therefore be of interest to parties on either side of the buyer-seller process.

Conceptual Framework

The current practical emphasis on relationship management as a key to successful marketing negotiations, both to buyers and sellers (e.g. Guenzi, 2003; Harwood, 2002) suggests that the ongoing relationship with a negotiating partner might also effect pre-negotiation strategies. More specifically, the existence of an ongoing relationship or one that will stretch well into the future may act to lessen the "extremeness" of opening offers and/or moderate the effect that one party may possess because of situational power. Power however, is not an absolute, dichotomous variable. Rather, it is a continuous one, evaluated relative vis-a-vis some "other" (in this case the bargaining opponent). In other words, if a buyer is negotiating two different $10 million dollar industrial purchases with two different sellers, the buyer will possess more situational power in the negotiation with seller A (where this contract represents 60% of the selling company's annual sales) than with seller B (where the contract would represent only 2% of the selling company's annual sales), all other things being equal. To conceptually represent relative power negotiating scenarios three factor levels will be considered: (1) the buyer is asymmetrically strong relative to the seller, (2) the buyer is on roughly equal or near symmetric footing with the seller, and (3) the buyer is asymmetrically weak relative to the seller.

The other major factor included in the conceptual framework is the buyer's relationship orientation. Two levels of this factor are considered: short-term and long-term. One-time relationships are rare in today's business markets. Even for true one-time purchases, after purchase services, upgrades, and the like typically necessitate some type of ongoing, if peripheral, relationship between buyer and seller. Furthermore, players in many industries are known to all. Reputations, both good and bad, can be created in single sale situations and exert influence over the future actions of the negotiation participants, even if they never negotiate directly with one another again. To investigate the effect of buyer situational power and relationship orientation, selected elements of the opening offer are examined; ones that are believed to reflect the perceptions (and actions) of the buyer regarding the negotiating opponent and their relative situational power, their reactions to such an offer, and the factors that may either exacerbate or moderate that position (in the current research the expected length of the relationship). In addition, this assessment will be reflected in the bargaining stance or style that the buyer determines to present when the negotiations begin. A current trend, pointed out by Murnighan and Bazerman (1990), supports the value of cooperation in negotiations and conflict management. This trend is also supported by literature advocating the relationship marketing perspective (e.g., McKenna, 1991; Sherlock, 1991; Burt, Dobler, and Starling, 2003; Hutt and Speh, 2004) and the strategic aspect to managing the buyer-seller relationship considering its role in affecting long-term outcomes (Schultz and Good, 2000). A graphical representation of these factors, the operationalized levels, and their interrelationships is presented in Figure 1 (see Figure 1).

[FIGURE 1 OMITTED]

Another way of expressing this model would be in terms of each of the elements of the opening offer (e.g., buying firm power assessment, bargaining style); taking into account the relationships and expected interaction between and among the other elements of the model. In that form, each negotiation strategy element would be a function of power, relationship orientation, and any power by relationship orientation interaction. Imputed into this model would be the buyer's expected reaction of the seller to a particular level of an opening offer element.

The general principle of profit maximization guides the development of the research hypotheses. Given that both sides in the negotiation will be seeking to extract some profit or surplus from the encounter, those subjects that conclude their negotiating position is more powerful, will seek to use that factor in the negotiations and as a result design more favorable opening offer terms for himself or herself (refer to Thibaut, 1950; Rubin and Brown, 1975). Because of the distributive nature of the negotiations the subjects will also adopt a more competitive bargaining stance (as measured by Likert scales) in order to maximize their profits (refer to Perdue, Day, and Michels, 1986). The converse of this will be equally true. If the buyer perceives their negotiating position as asymmetrically weak, they will tend to avoid a competitive bargaining stance since it would have a lower likelihood of success. This disadvantageous position would also translate into the subject designing a less extreme opening offer for themselves, in essence operationalizing a cooperative bargaining style.

Hypotheses

Hypothesis 1: Buyers (subjects) perceiving their bargaining position as asymmetrically powerful will advocate a more competitive bargaining style and will propose more favorable opening offer terms for the buyer.

Unrelated to the buyer's perception of power, subjects who perceive their negotiations with the seller to be part of a longer term relationship are hypothesized to moderate the terms of their opening offer and lessen the competitive nature of their bargaining stance (refer to Corfman and Lehmann, 1993). By contrast, the perception of a short-term relationship beyond the current negotiations by subjects (which could include the case of no further contact) will embolden the terms of their opening offer and the competitive nature of their bargaining stance.

Hypothesis 2: Buyers (subjects) perceiving the current negotiation as part of a likely short-term relationship will advocate a more competitive bargaining style and more favorable opening offer terms for the buyer.

Hypotheses #3a and #3b predict that relationship orientation, when combined with perceived power will have a moderating effect at both extremes (i.e. short-term and long-term) for bargaining stance and terms of the opening offer (refer to Dwyer and Walker, 1981; Ganesan, 1993).

Hypothesis 3a: Buyers (subjects) perceiving their bargaining position as asymmetrically powerful and the current bargaining encounter to be part of a long-term relationship will moderate their competitive bargaining style and advocate a less favorable opening offer for the buyer.

Hypothesis 3b: Buyers (subjects) perceiving their bargaining position as asymmetrically weak and the current bargaining encounter to be part of a likely long-term relationship will advocate a more competitive bargaining style and more favorable opening offer terms for the buyer.

METHODOLOGY

Experimental Design

From the discussion of the proposed conceptual framework, and the identification of the various levels of the factors that will be employed, a two by three experimental design emerges (long-term vs. short-term orientation and asymmetrically powerful vs. asymmetrically neutral vs. asymmetrically weak). A between-subjects approach was selected for the data collection effort. Due to the time demands associated with the scenario evaluation task and the pencil and paper questionnaire format used for the main study, to keep likely response rates sufficiently high to allow for meaningful data analysis, each respondent was asked to evaluate only one negotiation scenario.

The Sample

The sample of 600 purchasing professionals was drawn randomly from the membership of the National Association of Purchasing Management, more specifically, those members who designated that their principle employment is in the Standard Industrial Classification Code associated with "Electrical Components Other than Computer Equipment." Selection of subjects within this somewhat narrow classification allowed for the design of experimental negotiation scenarios that were targeted for purchasing professionals in this area.

Data Collection Procedures

Data collection was separated into two stages. Experimental variables were tentatively selected as a result of an examination of the relevant purchasing, negotiation, and related literature. Questions surrounding these variables, as well as surrounding the general process of negotiation were designed into a questionnaire. Approximately 20 telephone interviews with purchasing professionals were conducted, drawn from the same population pool as the main sample. The purpose of these interviews was to verify whether the selected variables played a part in the past pre-negotiation activities of the interviewees and what cues were important to purchasing professionals in assessing their relative bargaining strength. In addition to specific questions about experimental variables, they were asked to recall and discuss the last negotiation situation they had participated in. Probing was used extensively to draw out detail. The responses from the telephone interviews were used to construct a framework for a series of one page negotiation scenarios (one for each of the six experimental conditions) that were administered as part of a pencil and paper questionnaire.

Response Rates

For the main study, 600 questionnaires were mailed to subjects in the purchasing professionals sample with a target of one hundred fifty responses (25%) spread evenly among the six experimental conditions. For each of the six experimental conditions, one hundred, one-page purchasing scenarios were mailed to subjects (one per person). A total of 146 surveys were returned for a response rate of 24.3%. The distribution of responses ranged from a low of 21% (asymmetrically strong / short-term condition) to a high of 30% (asymmetrically strong / long-term condition). More than 20 surveys were returned for each experimental condition. Combined with the fact that these surveys were relatively evenly spread across all 6 conditions, the use of standard statistical calculations and interpretations is appropriate (see Table 1).

An assessment of the background characteristics of the study's respondents, reported as averages for each experimental condition in Table 1, indicates that they are an "expert" group. On average, the respondents have been members of the principle professional organization in the purchasing field, the National Association of Purchasing Management (NAPM) for between 7 and 10 years. Additionally, they have significant tenure with their current organizations which are medium to large in size. New buy purchasing situations (see Anderson et al., 1987) are routine for their firms with significant outlays (in the millions of dollars) each year. Over half of the respondents in each experimental condition report supervising staff, with the average being 4 and 35. While the ranges on these variables vary, the overall impact does not limit the usefulness of the respondents' assessments on the survey. As a whole, the respondents represent an experienced and knowledgeable cohort concerning the experimental task they were asked to complete.

Experimental Task

Each subject was provided a one-page scenario describing a situation facing an organizational buyer (see Figure 2 for a sample). In each scenario, informational elements on the location of the supplier (domestic), nature and complexity of the product needed (moderate), reputation of the supplier (good reputation for quality), anticipated length of the relationship (short-term or long-term), and economic significance of the contract for the buyer (scaled for asymmetrically strong, balanced, or asymmetrically weak) were provided. Subjects assessed the degree of power both the buyer and seller possessed in the upcoming negotiation using 7-point Likert scales. After each power assessment, respondents evaluated the extent to which the various informational elements affected their judgments. Subjects structured selected elements of an opening offer: price per unit they would be willing to pay, number of days for delivery, and bargaining style employing a 7-point Likert scale ranging from cooperative to competitive. Again, subjects evaluated the impact informational elements influenced their judgments.

Figure 2 Scenario Description for Asymmetrically Strong, Short-Term
Experimental Condition

As a fellow purchasing professional I am contacting you to ask your
opinion and advice on an upcoming negotiation I will be having. In
particular, I would like to draw on your past experiences and
training in the purchasing area in structuring the opening offer
and other facets of the face-to-face negotiation.

The purchasing department at ACME has recently selected a
domestic-based supplier that we have not had any experience
with in the past in conjunction with a new product ACME will
be marketing. Furthermore, the product we are interested in
purchasing from the supplier is a "new buy" for us since we
have not needed or sought such an item before.

The item we will be purchasing is a production good of moderate
complexity that is the most important component of the finished
product we will market. Because of our particular needs this
product cannot be purchased from among the number of standardized
versions currently available. A number of unique product
characteristics and specifications require us to negotiate with
a supplier for the good.

ACME managers have selected a supplier who can provide the product
unless it becomes clear that no agreement is possible. Certain
guidelines concerning the upcoming negotiation are provided on the
following pages. However, although our company has not had any
experience with the supplier I have been able to learn some things
about their firm. They have been in business in our industry a
sufficient amount of time to build up a reputation for quality
products and service. Furthermore, from speaking with some of their
other customers they are considered trustworthy suppliers.

Managers at ACME believe that the potential sales of our new product,
which will incorporate the component we will purchase from this
supplier, will be strong although only over the near term. We therefore
expect our relationship with this supplier to be short-term in nature.

The total dollar amount of this contract will be less significant to
ACME than to the supplier. It will represent approximately one and
one-half percent (1.5%) of the contract purchases ACME makes this
calendar year. According to our information the contract will be
more significant to the supplier. The dollar amount of the contract
will represent eight and one-half percent (8.5%) of the contract
sales they make this calendar year.

Data Analysis

Analysis of variance (with significance evaluated at the 0.05 level) and multiple linear regression techniques were used to analyze the collected data. The research hypotheses test whether informational elements contained in the scenarios, manipulated to conform to the experimental design, affect respondent judgments concerning opening offer terms. Beyond verifying the manipulation of power, central to the study and the conceptual framework, ANOVA was employed to compare experimental cell means on opening offer terms. For both opening offer terms and power assessments, regression was used to assess which informational elements were important to respondents acting as buyers.

RESULTS AND DISCUSSION

The power manipulation used in the experimental scenarios was successful. Cell mean scores on the buyer power question conformed to expected patterns and were statistically significant at the 0.05 level. Examination of cell mean scores on the question of seller power confirmed the manipulation. In conditions where the buyer was asymmetrically strong, neutral, or weak, the seller was judged to hold the remainder of situational power.

To examine whether buyers, once aware they possess power in the upcoming negotiation, uses this to their advantage in opening offer elements (hypothesis #1) response cell mean scores were examined. Regarding the opening offer price (in dollars per unit), subjects in the asymmetrically powerful experimental conditions provided mixed results. It does not appear buyers perceiving themselves as powerful use that power to structure a shorter delivery time frame at their opening offer. Mixed results were also obtained in terms of the bargaining stance that subjects in the asymmetrically powerful experimental conditions recommended. While they were more competitive in the short-term encounter and evidenced a consistent trend, in the long-term encounter, the asymmetrically neutral condition produced the most competitive stance. Because observed patterns were generally as predicted by the hypothesis, but in some instances not statistically significant at the 0.05 level, hypothesis #1 is only partially supported (see Table 2).

Hypothesis #2 compares short-term to long-term relationship orientations across power conditions. The objective is to determine whether respondents in the short-term relationship orientation conditions are more competitive and seek to gain maximum advantage from the upcoming negotiations than those in the long-term conditions. For this hypothesis a relatively clear pattern was observed supporting the hypothesis for lower dollar per unit offer recommendations in short-term versus long-term situations, across all but the asymmetrically weak power level. For delivery time a clear pattern also emerges across all power conditions supporting the hypothesis, but the difference for some power levels is minimal at best. Finally, for the bargaining style issue, the trend was minimal at best to hypothesized results. On balance, hypothesis #2 was supported.

In evaluating hypothesis #3a, a comparison of the mean scores indicates that there is a marked difference in the dollar per unit opening offer consistent with the idea that subjects perceiving themselves as asymmetrically powerful will moderate their power. Delivery time, however, does not appear to be affected and although bargaining stance does show a difference in line with the hypothesized effect it is minimal.

In regard to hypothesis #3b, there is a marked difference in the dollar per unit opening offer consistent with the asymmetrically weak experimental condition subjects trying to obtain a higher price in the long-term condition. Delivery time, however, does not appear to be affected. Bargaining stance by contrast reflects a pronounced difference in line with the hypothesized effect. Taken together, there is sufficient evidence to assert that the anticipated length of the relationship between buyer and seller does affect the buyer's pre-negotiation strategy development.

Results from multiple linear regression assess which informational factors were significant in explaining the respondents' assessments of power and opening offer terms (at least in one experimental condition) are presented in table 3 (see Table 3). The fact that a moderately complex product is involved in the upcoming negotiation was most consistently reported as significant. Relationship length and supplier reputation followed in importance. Economic significance and geographic base were least important across experimental conditions.

Main and Interaction Effects

Table 4 presents the results of statistical tests for main and interaction effects (see Table 4). No main effects were found for the buyer power assessment question. There is strong evidence of a power by economic significance of contract interaction effect. Additionally, there is evidence of a power by product complexity interaction effect, but only at the asymmetrically strong power level. For the supplier power assessment question there is a main effect with regard to relationship orientation as well as three different interaction effects. Results from the unit price question indicate a main affect for relationship orientation as well as a relationship orientation by supplier reputation interaction effect. Delivery time-frame results reflect the almost total lack of statistically significant main or interaction effects and lend credence to the methods behind the other effects that were deemed statistically significant. Finally, the results for bargaining style do not reflect any main effect, however, a power by supplier reputation interaction effect is indicated.

Taken as a whole, these results support the conclusion that the process of pre-negotiation strategy development, as it is represented in this research, is both complex and generally interactive. Furthermore, the effectiveness of written scenarios to affect a power manipulation underscores the appropriateness of the research methodology. While not conclusive, there is sufficient evidence to warrant tentative support to the underlying theory that situational power does affect buyers' pre-negotiation strategy development and structure of their opening offers. Additionally, there is support for the moderating role that the anticipated length of the relationship between buyer and seller plays. The lack of stronger evidence is believed to be at least partially a result of the artificiality of the task and the exclusion of other important variables that were beyond the scope of the current study.

MANAGERIAL IMPLICATIONS

This research explored the effect of uneven situational power on managers' plans for upcoming negotiations. The implications of the results are extensive and certainly no less complex than that of the negotiation process itself. A more generalized application to management practice reflects on the tendency of managers possessing significant power advantages to moderate their behavior under some (select) circumstances. For example, even in situations where the power clearly resides with one party, individual managers and firms frequently refrain from capitalizing on the full extent of their bargaining position. In some ways, this restraint would appear to be counter-intuitive given the expected desire to maximize outcomes that favor the party having the greater power. In cases involving individuals there is a greater likelihood of a "time now" versus a "time in the future" point of view. Individuals are able to sublimate their perceived immediate needs in order to achieve some longer term objective. In part, this is due to their perception that the other party, however weak they may now appear, has or may have additional strategic value or strategic weapons that may appear in the future. Such uncertainty can undermine a manager's perception of power--but more important is that it alters his/her perception of the relative value of a short-term gain in favor of a potential long-term, more strategic, opportunity, particularly if the current negotiation is prelude to a longer-term relationship. Strategic considerations can influence the application of power in ways that are not always obvious.

Corporations and other organizations with many participants involved in a negotiation-like process might be expected to take the short-term advantage when it is offered, except in circumstances where the strategic opportunity is especially clear and not too far removed into the future. The average tenure of a CEO, the individual generally driving the decision process within an organization, is effectively quite short for most firms. Therefore, it becomes increasingly less likely that an organization will invoke other considerations to the extent that they fall beyond the perceived time frames deemed relevant to the reigning CEO. Still, a firm might choose to alter its bargaining position on the basis of a long-term relationship that while unequal in terms of power represents a strategic synergy. The synergistic aspect of the relationship increases the value of the less powerful participant over a longer period of time and thereby reduces the perceived gain available to the more powerful member in the short term. It does not pay to take advantage of the unequal power relationship because the strategic value resides in areas less subject to negotiation. The complexity of most managerial decisions is sufficient that isolating individual components is undoubtedly problematic. Regardless, it is clear that factors other than just having the preponderance of power affect the bargaining process. Neither managers nor firms make their decisions in isolation. To improve the quality of negotiations it is important to know what is being added to the decision mix and the relative value of each component.

CONCLUSIONS AND DIRECTIONS FOR FUTURE RESEARCH

The present research is a beginning step to more fully understanding the influences that affect purchasing professionals' pre-negotiation strategy development. Due to the lack of attention by researchers to this area of negotiations, this research was, by necessity, exploratory. The future directions of the present research stream are three-fold: (1) expanding the nature of the conceptual framework to include the sellers' perspectives, (2) incorporating additional factors and special circumstances that are particularly important in business-to-business situations thus making it more realistic (e.g., the presence of other sellers and/or buyers not presently involved in the negotiation), and (3) linking pre- and post- negotiation concepts with our current understanding of negotiations, preferably with field investigations.

The conceptual framework is selective in the factors included. Subjects were not provided with information concerning the vendor selection process or at what point negotiations could be broken off and another supplier selected, if at all. In very few real-life negotiation situations would alternate suppliers or products not be available. In future studies, information concerning this aspect of the organizational buying process, as well as others such as imposed organizational buying criteria and time pressure elements, both for preparation to negotiate and the actual amount of time allowed for the negotiations themselves, should be included. The result will improve both the realism of the study and the robustness of the conceptual framework.

The framework may be further developed by incorporating team selling as well as buying center aspects. The validity and robustness of the framework must be subjected to a variety of purchase situations to prove its usefulness. One example would be the impact of the purchase time horizon on the negotiation process. Organizations often have a need for products which may be one-time specialty purchases for which the time horizon is quite long. Different dynamics would almost certainly apply and affect the negotiation process and pre-negotiation activities. Put another way, how would the process function differently for an organization's purchase of small electric motors versus a supercomputer? Because of the globalization of many organizations' purchasing activities the impact of different cultures' bargaining styles should also be addressed in the framework.

Partnerships between buyers and sellers are an increasingly important component in business-to-business activities contrasted with business-to-consumer. Sellers and buyers have found that in a number of areas it is to their mutual competitive advantage to coordinate and collaborate. Specific examples include just-in-time delivery, real-time order processing, multiple level inventory control and the ability to provide mass customization. To the extent that cooperation is possible and could be secured, a third research stream involves longitudinal research with a number of business-to-business buyers and sellers to observe actual pre-negotiation, negotiation, and post-negotiation efforts. These studies, grounded in previous theoretical and fieldwork would provide additional detail to our understanding of the entire negotiation process and permit a meta-theory of business-to-business negotiation to be developed.

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Table 1 Sample Response Rates and Characteristics

 Short-Term Orientation
 Written Scenarios

 Buyer is Asymmetrically ...

 Strong Neutral Weak

Number of scenarios distributed 100 100 100
Number of surveys returned 21 24 24
Sample Response Rate 21% 24% 24%
Years NAPM member 9.7 8.5 7.0
Years with present company 9.6 10.4 10.8
Number of company employees 2,129 7,068 2,569
Percent with supervisory role 57% 58% 67%
Number of people supervising 7 6 5
New Buy contracts per year 806 431 58
Value of annual "new buy" $10.2 $10.1 $12.6
 contracts (in millions)
 Long-Term Orientation
 Written Scenarios

 Buyer is Asymmetrically ...

 Strong Neutral Weak

Number of scenarios distributed 100 100 100
Number of surveys returned 30 25 22
Sample Response Rate 30% 25% 22%
Years NAPM member 9 8.6 8.5
Years with present company 10.1 11.2 10.4
Number of company employees 8,143 17,463 6,189
Percent with supervisory role 66% 60% 57%
Number of people supervising 12 6 35
New Buy contracts per year 318 38 117
Value of annual "new buy" $15.7 $3.9 $10.1
 contracts (in millions)

Table 2 Response Means by Experimental Condition

 Buyer's Buyer's Supplier's
 Position Power * Power *

Short-term Asymmetrically Strong (n=21) 5.24 3.19
 Asymmetrically Neutral (n=24) 4.63 4.46
 Asymmetrically Weak (n=24) 3.42 5.04
 Asymmetrically Strong (n=30) 5.13 4.37

Long-term Asymmetrically Neutral (n=25) 4.72 4.44
 Asymmetrically Weak (n=22) 3.68 5.32

 Opening
 Delivery
 Buyer's Per Unit Time Frame
 Position Price ($) (days)

Short-term Asymmetrically Strong (n=21) 118.81 33.00
 Asymmetrically Neutral (n=24) 115.42 31.81
 Asymmetrically Weak (n=24) 131.46 33.00
 Asymmetrically Strong (n=30) 132.77 33.05

Long-term Asymmetrically Neutral (n=25) 141.50 33.00
 Asymmetrically Weak (n=22) 127.30 33.20

 Offer Terms
 Buyer's Bargaining
 Position Style **

Short-term Asymmetrically Strong (n=21) 3.62
 Asymmetrically Neutral (n=24) 3.50
 Asymmetrically Weak (n=24) 2.88
 Asymmetrically Strong (n=30) 3.60

Long-term Asymmetrically Neutral (n=25) 3.92
 Asymmetrically Weak (n=22) 3.32

* Measured with a 7-pt Likert Scale, 1=very little or no bargaining
power and 7=a great deal of bargaining power.

** Measured with a 7-pt Likert Scale, 1= cooperative and 7=competitive.

Table 3 Statistically Significant Factors in Explaining Respondent
Assessments

 Product Relationship Supplier
 Complexity Length Reputation

Buyer Power X X
Supplier Power X X
Unit Price X X X
Delivery X
Bargaining Style X X X

 Economic Geographic
 Significance Base

Buyer Power X
Supplier Power
Unit Price X
Delivery X
Bargaining Style X

Table 4 Main and Interaction Effects

 Main Effect Interaction Effect

Buyer Power None Power with Economic
 Significance of Contract

 Power with Product Complexity
 (Asymmetrically Strong)

Supplier Power Relationship Relationship Orientation with
 Supplier Reputation

 Orientation Power with
 Relationship Orientation
 (Asymmetrically Strong)

 Power with Product Complexity
 (Asymmetrically Weak)

Unit Price Relationship Relationship Orientation with
 Supplier Reputation Orientation

Delivery None None

Bargaining Style None Power with Supplier Reputation

 Relationship Orientation with
 Supplier Reputation