IFTM University

Assignment
of
BATNA

( Negotiation &
Subject……

Counseling)

Submitted To- Submitted By-

Shruti Aulakh
 M.B.A. (4th
Sem.)
 BATNA (Best Alternative to a Negotiated Agreement)

Background:
BATNA is a term coined by Roger Fisher and William Ury in their 1981 bestseller,
Getting to Yes: Negotiating Without Giving In. It stands for "best alternative to a
negotiated agreement." BATNAs are critical to negotiation because you cannot make a wise
decision about whether to accept a negotiated agreement unless you know what your
alternatives are. Your BATNA "is the only standard which can protect you both from
accepting terms that are too unfavorable and from rejecting terms it would be in your interest
to accept." In the simplest terms, if the proposed agreement is better than your BATNA, then
you should accept it. If the agreement is not better than your BATNA, then you should
reopen negotiations. If you cannot improve the agreement, then you should at least consider
withdrawing from the negotiations and pursuing your alternative (though the costs of doing
that must be considered as well).

Definitions of BATNA:

“In negotiation theory, the best alternative to a negotiated agreement or BATNA is the course
of action that will be taken by a party if the current negotiations fail and an agreement cannot
be reached. BATNA is the key focus and the driving force behind a successful negotiator.”
Summary:
BATNA should not be confused with the reservation point or walkaway point. A party should
generally not accept a worse resolution than its BATNA. Care should be taken, however, to
ensure that deals are accurately valued, taking into account all considerations, such as
relationship value, time value of money and the likelihood that the other party will live up to
their side of the bargain. These other considerations are often difficult to value, since they are
frequently based on uncertain or qualitative considerations, rather than easily measurable and
quantifiable factors.

“The reason you negotiate is to produce something better than the results you can
obtain without negotiating. What are those results? What is that alternative? What is
your BATNA -- your Best Alternative To a Negotiated Agreement? That is the standard
against which any proposed agreement should be measured." -- Roger Fisher and
William Ury

The BATNA is often seen by negotiators not as a safety net, but rather as a point of leverage
in negotiations. Although a negotiator's alternative options should, in theory, be
straightforward to evaluate, the effort to understand which alternative represents a party's
BATNA is often not invested. Options need to be real and actionable to be of value however
without the investment of time, options will frequently be included that fail on one of these
[Link] managers overestimate their BATNA whilst simultaneously investing too little
time into researching their real [Link] can result in poor or faulty decision making and
negotiating outcomes.

Having a good BATNA increases your negotiating power. Therefore, it is important to

improve your BATNA whenever possible. Good negotiators know when their opponent is
desperate for an agreement. When that occurs, they will demand much more, knowing their
opponent will have to give in. If the opponent apparently has many options outside of
negotiation, however, they are likely to get many more concessions, in an effort to keep them
at the negotiating table. Thus making your BATNA as strong as possible before negotiating,
and then making that BATNA known to your opponent will strengthen your negotiating
position. It´s therefore useful to have a best alternative to a negotiated agreement or BATNA.
A BATNA is the best outcome you could bring about if current negotiations fail and an
agreement cannot be [Link] should establish your BATNA prior to entering into
negotiations. If the negotiations are not delivering better value than your BATNA, then it´s
time to stop negotiating.

For example, suppose you want to have an air conditioner installed in your office. You have
a coupon from the newspaper that offers instalment within one week for $1,500. This could
be your BATNA as you enter into negotiations with another provider. You know that, should
the negotiations fail, you can always have the air conditioner installed for $1,500 within one
week. You´re negotiating with the other provider to come to a better agreement than this.

BATNA was developed by negotiation researchers Roger Fisher and William Ury of the
Harvard Program on Negotiation (PON), in their series of books on Principled negotiation
that started with Getting to YES, unwittingly duplicating a game theoretic concept pioneered
by Nobel Laureate John Forbes Nash decades earlier in his early undergraduate research.

Examples

The following examples illustrate the basic principles of identifying the BATNA and how to
use it in further negotiations to help value other offers.

Selling a car

If the seller of a car has a written offer from a dealership to buy the seller's car for $1000,
then the seller's BATNA when dealing with other potential purchasers would be $1000, since
the seller can get $1000 for the car even without reaching an agreement with such alternative
purchaser.

In this example, other offers that illustrate the difficulty of valuing qualitative factors might
include:

 An offer of $900 by a close relative (is the goodwill generated worth $100 or more?)
 An offer of $1100 in 45 days (what are the chances of this future commitment falling
through, and would the seller's prior BATNA (the $1000 offer from the dealership)
still be available if it did?)
 An offer from another dealer to offset $1500 against the price of a new car (does the
seller want to buy a new car right now, and the offered car in particular?
Purchasing

Consider the following business example: Company one can choose to buy from companies
two, three and four - but companies two, three and four can only sell to company one.
Company one can use their powerful BATNA position to leverage a better deal by playing
companies two, three and four against each other. This is a common practice among
purchasing and procurement managers in the business world.

Determining Your BATNA:

BATNAs are not always readily apparent. Fisher and Ury outline a simple process for
determining your BATNA:
1. Develop a list of actions you might conceivably take if no agreement is reached.
2. Improve some of the more promising ideas and convert them into practical options; and
[Link], tentatively, the one option that seems best.

BATNAs may be determined for any negotiation situation, whether it be a relatively simple
task such as finding a job or a complex problem such as a heated environmental conflict or a
protracted ethnic conflict.

Fisher and Ury offer a job search as a basic example of how to determine a BATNA. If you
do not receive an attractive job offer by the end of the month from Company X, what will
you do? Inventing options is the first step to determining your BATNA. Should you take a
different job? Look in another city? Go back to school? If the offer you are waiting for is in
New York, but you had also considered Denver, then try to turn that other interest into a job
offer there, too. With a job offer on the table in Denver, you will be better equipped to assess
the New York offer when it is made. Lastly, you must choose your best alternative option in
case you do not reach an agreement with the New York company. Which of your realistic
options would you really want to pursue if you do not get the job offer in New York?

More complex situations require the consideration of a broader range of factors and
possibilities. For example, a community discovers that its water is being polluted by the
discharges of a nearby factory. Community leaders first attempt to negotiate a cleanup plan
with the company, but the business refuses to voluntarily agree on a plan of action that the
community is satisfied with. In such a case, what are the community's options for trying to
resolve this situation?

They could possibly sue the business based on stipulations of the Clean Water [Link]
could contact the Environmental Protection Agency and see what sort of authority that
agency has over search a [Link] could lobby the state legislature to develop and
implement more stringent regulations on polluting factories.

The community could wage a public education campaign and inform citizens of the problem.
Such education could lead voters to support more environmentally minded candidates in the
future who would support new laws to correct problems like this one.
In weighing these various alternatives to see which is "best," the community members must
consider a variety of factors.

Which is most affordable and feasible?

Which will have the most impact in the shortest amount of time?

If they succeed in closing down the plant, how many people will lose their jobs?

These types of questions must be answered for each alternative before a BATNA can be
determined in a complex environmental dispute such as this one.

BATNAs and the Other Side

At the same time you are determining your BATNA, you should also consider the
alternatives available to the other side. Sometimes they may be overly optimistic about what
their options are. The more you can learn about their options, the better prepared you will be
for negotiation. You will be able to develop a more realistic view of what the outcomes may
be and what offers are [Link] are also a few things to keep in mind about revealing
your BATNA to your adversary. Although Fisher and Ury do not advise secrecy in their
discussions of BATNAs, according to McCarthy, "one should not reveal one's BATNA
unless it is better than the other side thinks it is."[5] But since you may not know what the
other side thinks, you could reveal more than you should. If your BATNA turns out to be
worse than the opponent thinks it is, then revealing it will weaken your stance.
BATNAs and the Role of Third Parties
Third parties can help disputants accurately assess their BATNAs through reality testing and
costing. In reality testing, the third party helps clarify and ground each disputing party's
alternatives to agreement. S/he may do this by asking hard questions about the asserted
BATNA: "How could you do that? What would the outcome be? What would the other side
do? How do you know?" Or the third party may simply insert new information into the
discussion illustrating that one side's assessment of its BATNA is likely incorrect. Costing is
a more general approach to the same process...it is a systematic effort to determine the costs
and benefits of all options. In so doing, parties will come to understand all their alternatives.
If this is done together and the parties agree on the assessment, this provides a strong basis
upon which to come up with a negotiated solution that is better than both sides' alternatives.
But if the sides cannot come to such an agreement, then negotiations will break down, and
both parties will pursue their BATNA instead of negotiation.

Importance of BATNA:

BATNA is the acronym for Best Alternative To a Negotiated Agreement. If you look at it
from the simplest standpoint, your BATNA is the choice you can make if you conclude that
negotiating with a particular party is not likely to yield a favorable result. You can walk away
from a negotiation if your BATNA is better than the likely outcome of that negotiation.
BATNA, however, covers far more than that. One view says that BATNA is the measure of
the balance of power in a negotiation. If other parties need you in order to reach their
objectives, your BATNA is strong; your negotiating circumstances are strong. If you want to
buy a new car and the same model is for sale at several car dealers, you have a strong
BATNA because you can benefit from their competition for your business.

It is crucial to think of BATNA as having two stages in a negotiation. You start off with your
'walking-in' BATNA; the things you can influence or control before the negotiation begins.
However, once negotiation starts, the BATNA is a dynamic element, changing as you derive
information about the interests of other parties and their constituencies and as you compare
the resources each party (including you) has available to bring about and fulfill an agreement.
You can think of BATNA in negotiation like playing a game of cards. Your walking-in
BATNA may be the first cards you are dealt. In many card games, your hand may change
during the play as new cards are dealt to you (and others). So your BATNA changes as new
cards come into your hand. If those new cards are only known to you, you develop a greater
understanding of your own apparent strength. If the new cards are dealt to all the players in a
way that allows each player to see at least some of the cards in each player's hand, you learn
more about the comparative strength of your BATNA. In negotiation, rather than looking at
cards, we are assessing information about our own resources, those of other negotiating
parties, and the influences on each negotiator from their constituencies.

By looking at BATNA as an ongoing, changing measure of negotiating strength, as a

mechanism for deciding whether and/or when to quit, we develop a disciplined, informed
approach to our negotiations.