The basic steps in developing a strategy for negotiation are as follows: 1. Develop the specific objectives (outcomes) desired from the negotiation. This is done by gathering relevant information and then generating, analyzing, evaluating, and selecting alternatives. 2. Gather pertinent data. Here is where cost analysis comes into play.

3. Determine the facts of the situation. A fact is defined as an item of information about which agreement is expected. For example, if the supplier's cost breakdown states that the direct labor rate is $20.10 per hour, and you agree, that is a fact. 4. Determine the issues. An issue is something over which disagreement is expected. The purpose of negotiation is to resolve issues so that a mutually satisfactory contract can be signed. For example, if the supplier claims the manufacturing burden rate is 300 percent of direct labor costs, but your analysis indicates a 240 percent burden rate is realistic, this becomes an issue to be settled through negotiation. 5. Analyze the positions of strength of both (or all) parties. For example, what are the supplier's capacity, backlog, and profitability? How confident is the supplier of getting the contract? Is there any time urgency? The process of analyzing strengths helps the negotiator establish negotiation points, helps avoid setting unrealistic expectations, and may reveal ideas for strategies. The negotiator (or team) should be able to generate a list of 12 to 24 points for either side through a brainstorming process. 6. Set the buyer's position on each issue and estimate the seller's position on each issue based on your research. What data will be used to support the buyer's position? What data might support the seller's position? Two questions should be asked after analyzing positions of strength: (a) "Whose position is stronger?" and (b) "Which points give each side the most strength?" The answer to the first question should help determine how realistic the objectives are and if they need to be changed or clarified. The answer to the second question tells the negotiator what his or her key points will be in the negotiation and what to expect from the other side. If done well, this information allows the negotiator to prepare counterarguments