When a contract is negotiated with a vendor for procurement of costly and special products, rather than off-the-shelf products, there can be a lot of negotiations. There will be conflicts that need to be resolved regarding matters such as price and penalties for non-compliance. In such negotiations, the party that has more power has the upper hand. What factors, do you think, determine how much power one party will have over the other in contract negotiations?
Companies like Wal-Mart and other monstrous companies definitely have an advantage when it comes to having the power in contract negotiations. The party that has the most power is typically a party that has a few characteristics:
(1) The goods that they are procuring can be produced elsewhere, for a comparable cost. Suppliers don't want to risk the chance of losing companies as big as Wal-Mart, because they provide a substantial amount of revenue for the supplier or other party. The other party realizes that the company can go elsewhere, and ...
The solution provides a detailed discussion examining the factors that determine how much power one party will have over the other in contract negotiations.