Negotiation Preparedness

Introduction to BATNA

• BATNA: Best Alternative to a Negotiated Agreement
  • Represents your backup plan if negotiations fail.
  • It's your "walk away" point.

Benefits of using BATNA

• Provides an alternative if negotiations fall through.
• Enhances negotiating power.
• Helps determine your reservation price (walk away point).
• Boosts confidence in negotiations.

Importance of BATNA

• Always consider BATNA before entering negotiations.
• Entering without knowing your BATNA is unwise.

Understanding ZOPA

• ZOPA: Zone of Possible Agreement
  • This is the overlap between buyer and seller settlement ranges.
• Seller's Settlement Range: Acceptable bid range for the seller.
• Buyer's Settlement Range: Acceptable bid range for the buyer.
• Each party's worst case is their reservation point:
  • If the buyer's offer is below the seller's worst case, the seller may seek another buyer.
  • If the seller's offer is above the buyer's worst case, the buyer must consider alternatives.

Real-Life Example: Jane and Tony

• Scenario:
  • Jane wants to buy a car:
    • Desired Price: £500
    • Maximum Price: £750
  • Tony wants to sell his car:
    • Asking Price: £1,000
    • Minimum Acceptable Price: £650 (if paid in cash)
• ZOPA Calculation:
  • Range: £650 to £750
  • This is where Jane and Tony could potentially agree if negotiations are successful.

Conclusion

• Being prepared and researching to determine your BATNA ensures you do not accept a bad deal.
• Importance of having a clear BATNA in negotiations.