Four key concepts (to negotiate wisely)

We had to read an article called "Four Key Concepts" that talks about BATNA, Reservation price, ZOPA and Value creation through trades.
There's already a brief sum-up of these notions at the end of the last page but we are asked to summarize it again. Therefore, here, you can find my personal sum-up about the article.

First, to properly understand the content of the pages, I had to look for 2 definitions :

• Integrative negotiation :  Integrative negotiation is often referred to as a "win-win" and typically entails two or more issues to be negotiated. It often It often involves an agreement process that better integrates the aims and goals of all the involved negotiating parties through creative and collaborative problem solving. Relationship is usually more important, with more complex issues being negotiated than with distributive negotiation. 

• Distributive negotiations : A distributive type  or process that normally entails a single issue to be negotiated. The single issue often involves price and frequently relates to the bargaining process. Also referred to as "Win-Lose" negotiation because one party generally gains at the expense of another party.

Those 2 types of negotiation often came back during my reading and I understood better thanks to those definitions that I found on www.negotiations.com 

Now let's move on to the summary : 

A negotiated solution is advantageous only when a better option is not available and any successful negotiation be based on 4 concepts which are : BATNA (best alternative to a negotiated agreement), Reservation price, ZOPNA and Value creation through trade. 

I. BATNA

Knowing your BATNA means knowing what you will do or what will happen if you fail to reach agreement in the negotiation. It is really important to know our BATNA before entering into any negotiation otherwise we won't know whether a deal makes sense or when to walk away. If your BATNA is strong, the negotiation will be easy for you and you can negotiate for more favorable terms whereas a weak BATNA puts you in a weak bargaining position (it will be weak to walk away from a proposal even it doesn't suit your projects). 

If your BATNA is weak, you can work on its improvement and therefore strengthen your position. For that, you can 

• Identify the other side's BATNA (by asking questions during the negotiation and/or learn in advance). The more you know about your counterparts situation, the more you'll be able to fin creative ways of meeting their interests (preferably at low cost to you)
• Weaken it : it will improve your relative position. 

However, BATNA isn't always simple. In a transaction that does not involve the price ONLY, the BATNA tends to be fuzzy because of the difference between the features taken into account. In such negotiation situations it's possible to assign a monetary value to the various features taken into account and adjusting the BATNA value by that amount. But not all situations are amendable to price adjustments. 

II. Reservation price

The reservation price (= "walk away price") is the least favorable point at which one will accept a deal. It should be derived from the BATNA but it must be differenciated from it. 

III. ZOPA

The ZOPA for "zone of possible agreement". It is a range in which a deal satisfies both parties. Each party's reservation price determines one end of the ZOPA which is the overlap between these limits. 

 

Sometimes there can be no overlap in the ranges that means no ZOPA and therefore no agreement. In such cases the creation of value is important and that is what we are talking about next.  

IV. Value creation through Trades

This concept tells us that negotiating parties can improve their positions by trading the values at their disposal. Value creation through trades occurs in the context of integrated negotiations. It takes the form of each party getting something it wants in return for something it values less. 

However, it's important to think about asking for something in trade if you give something of value.