Alternatives To An Agreement

Negotiations are more than the definition of a number of alternatives. Understanding the nuances of negotiating tactics can help improve industrial relations by terminating difficult conflicts. Understanding the negotiations can also help you assess personal strengths and weaknesses in the event of a conflict and learn how to manage your negotiating tendencies. Finally, studying the common and potentially manipulative negotiating tactics used by some people can help negotiators neutralize their effects. Contracting parties can adapt BATNAs to any situation that requires negotiations, from discussions on wage increases to resolving more complex situations such as mergers. BATNas are essential to negotiation because a party cannot make an informed decision on whether to accept an agreement unless it understands its alternatives. Although a BATNA is not always easy to identify, Harvard researchers have outlined several steps to clarify the process: having good options available before starting negotiations is best practice. You will feel able and confident either to reach a satisfactory agreement for both parties or to go to your best alternative. BATNAs are essential to negotiation because you cannot make wise decisions about whether or not to accept a negotiated agreement, unless you know what your alternatives are.

If you are offered a used car for 7500 $US, but there is a better one at another dealership for $6,500 – the car is your BATNA. Another term for the same thing is your “walking point.” If the seller does not drop their price below $6500, you will walk AWAY and buy the other car. The performance of your BATNA gives you the leverage to ask for more. If you don`t get what you`re looking for, then you can turn to your best alternative. A strong BATNA is like a hot and fuzzy insurance. A strong alternative offers you two possibilities. Either they make an agreement on more advantageous terms, or you just say “no business” because you have a good alternative plan. It is simply not a proven method if you do not manage to have feasible alternatives when you enter into a negotiation. With attractive and achievable alternatives, you can confidently reach a mutually beneficial agreement. It also allows you to go with a satisfactory alternative.

In the diagram above, if Tom asks for a price in excess of $7,500, Colin will take his business elsewhere. In the example, we are not supplied with Tom`s BATNA. If Tom is expected to sell his car to someone else for $8,000, it is Tom`s BATNA. In such a scenario, no deal is reached, since Tom is only willing to sell for at least $8,000, while Colin is only willing to buy for a maximum of $7,500.

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