When balancing these different alternatives to see what is “best,” community members need to consider a number of factors. Company A, for example, makes a US$20 million takeover bid to Company B. Nevertheless, Company B thinks they are worth $30 million in valuation. Company B quickly declined the offer. However, what Company B has not taken into account is increasing competition in the sector and stricter rules, all of which will limit growth in the coming year and reduce its valuation. If Company B had taken the time to include these factors in the current assessment and had clearly followed the four batna steps, including #2, assessing the alternative to staying the course in a challenging business environment, management could have been persuaded to accept it. Under these conditions, you can choose to allude to your own powerful batna. We advise our clients, in our sales negotiation training, not to rub a buyer`s nose in its unfortunate negotiating position so that the buyer is not insulted. An offended buyer could start working on a medium- and long-term alternative to decide to undertake activities with your business. With enthusiasm, Sam was very close to moving to the new insurer.
But after some excavation (and some selfish advice from Acme), Sam identified important definitions of relationships and concepts that were deeply buried in the legality of both directives. After going through a translation process to make prices comparable, Sam realized that Acme, his current insurer, was making him a better offer (see also trading capabilities – Three Sources of Energy at the negotiating table to learn more about power and how BATNA helps negotiators develop sound strategies for the negotiating table). Your BATNA “is the only standard that can protect you both from accepting unfavorable terms and from rejecting conditions that would be in your best interest.”  In the simplest sense, if the proposed agreement is better than your BATNA, then you should accept it. If the agreement is no better than your BATNA, then you should resume negotiations. If you are unable to improve the agreement, you should at least consider withdrawing from the negotiations and following your alternative (although the costs are also taken into account). Improve your BATNA. Look for alternatives to the current BATNA to see if it can be improved. If there is no BATNA, create one.
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. For example, as Sam`s owner`s insurance extension approached, he decided to do a “market check” to compare prices. Sam`s existing insurers — let`s call it Acme — had increased interest rates by 7% and 10% a year over the past three years, and Sam wasn`t sure he had the best deal. He then found a support offering a policy for 30% less than the rate of extension of Acmes. Third parties can help thinkers accurately evaluate their BATNas through reality tests and calculations. During the reality tests, the third party helps to clarify and welcome each party`s alternatives to the agreement.