BATNA

Negotiation

When two or more parties are doing businessand would like to arrive at a solution withrespect to price , service or quality

When business risks involved cannot beaccurately pre-determined

When a long period of time is required toproduce the items purchased

When to Negotiate ?

BATNA (Best Alternative To a Negotiated Agreement)

Reservation Price ZOPA (Zone Of Possible Agreement) Value Creation Through Trade

Key Concepts of Negotiations

The concept has been developed by Roger Fisher and William Ury

It is ones preferred course of action the absence of a deal

Knowing your BATNA means knowing whatyou will do if you fail to reach an agreement inthe negotiation

Know your BATNA before the Negotiation.

Know your BATNA

Improve your BATNA to improve your negotiating position

Identify the other sides BATNA Weaken the other party's BATNA

Improving your position in the negotiation table

Also Known as the walk away price Reservation price should be derived from your

BATNA Don't enter a negotiation without a clear

reservation price

Reservation Prices

ZOPA is the area or range in which a deal that satisfies both parties can take place

It is the set of agreement that potentially satisfy both parties

Each Party's reservation price determines one end of the ZOPA

Zone of Possible Agreement (ZOPA)

ZOPA in Distributive Negotiations

The negotiating parties can improve their position by trading the values at their disposal. Getting what one wants in return for something it values much less

Both parties often emerge as winners

Value Creation Through Trades

Identify people having decision making authority

Identify the real parties in sophisticated business

transactions.

Identify all the influential parties to the

negotiation as they can redefine the whole

endeavor.

Identify the current and potential parties in

negotiation.

Who are the real parties in the negotiation?

Negotiators must ask following questions to themselves: - what due diligence needs to be done before, during

and at the end of the deal ?

what gives more value: short term benefits or long

term results ?

what is the best time to strike the deal ?

Is there a need to refine the interests due to

changed circumstances

What are the interests and priorities of the key parties?

Value Creation: Not on common ground but by capitalization on differences

More dimensions of differentiation add more value

Differences may be in Valuation, Expectation, or Attitude towards risk

Agreements can fetch gains for all parties involved

Mutual gains not necessarily equal gains

Motive should be to reach “Pareto Optimal”

How can value be created—and who will get it?

Three main kind of barriers are :

Strategic Behavior Parties shouldn’t exaggerate

One must weigh the benefits and risks of specific bargaining

value

Psychological or interpersonal Emotions should be kept aside on the negotiation table

Negotiations should be free of power and status play

Should be resolved using skillful management of negotiation

Institutional Legal/Policy related barriers.

What obstacles might prevent agreement (or the maximization of value) and how can they be overcome?

Recognize that the other party may not share your view of what constitutes power

Hard to negotiate with someone who has lost it all ! e.g. A company filing for Bankruptcy

Change the basic architecture of negotiation. e.g. Talk to Manager instead of a Salesman

Using time to increase bargaining power e.g..: Using deadlines to reach the agreement

“Exert Power”: attack BATNA of other party e.g. don’t sweeten your offer rather worsen result of refusing

your offer

How can the various parties influence the negotiation process and its outcomes?

Questions that negotiators must ask themselves

What do one party owe to the other party?

How are the equity of the agreements reached? One should be concerned whether the other party gets due share

Is it morally correct to force in negotiation?

How will it affect the parties not at the bargaining

table?

What are the moral issues in negotiating on behalf of

others?

What is the right thing to do?