Colin needs a car and negotiates with Tom to buy his car. Tom offers Colin to sell his car to Colin for $10,000. Colin searches Craigslist and finds a similar car to which he attributes a value of $7500. Colins BATNA will cost $7500 – if Tom doesn`t offer a price below $US 7500, Colin will consider his best alternative to a negotiated deal. Colin is willing to pay up to US$7500 for the car, but he would ideally only want to pay $US 5,000. Relevant information is presented below: Having good options available before starting negotiations is the best practice. You will feel able and confident, either to reach an agreement satisfactory for both parties or to go to your best alternative. A good BATNA increases your bargaining power. If you know you have a good alternative, you don`t need to admit much, because you don`t care if you get a deal. You can also press harder on the other side.
If your options are slim or non-existent, the other person may place increasing demands, and you`ll likely decide to accept them – because you don`t have a better option, no matter how unattractive they will be on the table. It is therefore important to improve your BATNA whenever possible. If you have a strong one, it`s worth revealing it to your opponent. However, if you have a weak one, it`s better to keep this detail hidden. The chart below illustrates each party`s best alternative to a negotiated deal (seller and buyer): If Tom asks for a price of more than 7500 $US, Colin will take his business elsewhere. In the example, Tom`s BATNA is not made available to us. If you think Tom can sell his car to someone else for $8,000, it`s Tom`s BATNA. In such a scenario, no deal is made since Tom is only willing to sell for at least 8000 $US, while Colin is only ready to buy for a maximum of 7500 $US. The parties can adapt the BATN to any situation requiring negotiations, from discussions on wage increases to the resolution of more complex situations such as mergers. BATNs are essential to negotiations because a party cannot make an informed decision about whether or not to accept an agreement unless it understands its alternatives. While a BATNA is not always easy to identify, Harvard researchers have outlined several steps to clarify the process: attractive alternatives are needed to develop a strong BATNA.
In the Bestseller Getting to YES: Negotiating Agreement Without Giving In, the authors make three suggestions on how to achieve this: How to determine your best alternative to a negotiated agreement? First analyze both your position and your negotiating interests.. . . .