BATNA

BATNA stands for Best Alternative To a Negotiated Agreement. It is a term used in negotiation to describe the alternative course of action that will be taken by a party if a negotiation is unsuccessful and no agreement can be reached.

In other words, BATNA is the fallback option that a party has if they are unable to negotiate a satisfactory agreement. It represents the next best option available to a party, and is often used as a benchmark for evaluating the potential value of a negotiated agreement.

For example, if a buyer is negotiating with a seller over the price of a product, the buyer’s BATNA might be to purchase a similar product from a different supplier at a lower price. If the seller is unable to offer a price that is competitive with the buyer’s BATNA, the buyer may choose to pursue their alternative option instead of agreeing to the seller’s terms.

Understanding your BATNA is important in negotiation because it can help you determine the lowest acceptable offer or the maximum amount you are willing to pay. It also helps you evaluate the potential value of a negotiated agreement, and can give you leverage in the negotiation process if your BATNA is better than the other party’s.

Overall, BATNA is a useful concept that can help parties in a negotiation make informed decisions and achieve better outcomes.

Internal and External BATNA

Internal BATNA and external BATNA are two types of BATNA that are commonly used in negotiation.

• Internal BATNA refers to the best alternative course of action that a party can take within their own organization or resources. For example, if a company is negotiating with a supplier, their internal BATNA might be to produce the required product in-house instead of purchasing it from the supplier.
• External BATNA, on the other hand, refers to the best alternative course of action that a party can take outside of their own organization or resources. For example, if a company is negotiating with a supplier, their external BATNA might be to purchase the required product from a competitor at a lower price.

Both internal and external BATNAs are important to consider in negotiation because they can affect a party’s bargaining power and leverage. Internal BATNAs may be more immediate and readily available, but external BATNAs may provide more varied and competitive options.

By considering both internal and external BATNAs, a party can determine their bargaining position and make informed decisions during negotiations. Understanding both types of BATNA can also help parties identify opportunities for value creation and potential areas for compromise.

Examples of BATNAs

Example 1, Business negotiation: A company is negotiating with a supplier for a bulk purchase of raw materials. The supplier has raised the prices, but the company has an alternative supplier who can provide the same materials at a lower cost. This alternative supplier is the company’s external BATNA. The company can use this information to negotiate a better deal with the current supplier or switch to the alternative supplier if the current supplier does not agree to the terms.

Example 2, Salary negotiation: An employee is negotiating their salary with their employer. The employee has another job offer from a different company that offers a higher salary. This other job offer is the employee’s external BATNA. The employee can use this information to negotiate a higher salary with their current employer or accept the job offer from the other company.

In each of these examples, understanding one’s own BATNA and the other party’s BATNA can help in determining the best strategy for negotiation and achieving a favorable outcome.