NEGOTIATION BATNA FRAMEWORK

Satish Duryodhan
 Negotiation -Confer with others to reach agreement -Concise Oxford Dictionary

Third Party in control

Most evaluative/structured/ formal No common interest -nothing to negotiate for
H
Perceived Conflict

Litigation Let court of Law decide

Arbitration Let trusted party decide

Mediation Talk through third party

Consultant One/both to strengthen position

Negotiation

Partnering

L L Without Conflict -nothing to negotiate

-Parties in control Resolution approach H

-least evaluative/structured/formal
 Types of 3rd Party Interventions

LOW Court of Law Mediation

Level of negotiator control
over procedure
HIGH

Arbitration Negotiation

LOW HIGH
Level of Negotiator control over outcome
 Types of Mediation

Facilitative

Evaluative

Transformative

Court Mandate
Types of Arbitration
 To Litigate or not to Litigate?
Owner of Manhattan apt. spent $999 to
install child proof window guard and
presented bill to Society co-op board

Board refused to pay. Law

was unclear

Six years and USD 100K legal feels later the two
parties were still fighting in the court
 The fourfold pattern of preference
Gains Losses

95% chance of losing

95% chance of winning $1MN-Risk seeking
$1MN-Risk averse

High Probability
(Certainty effect) 01 02

5% chance of winning 5% chance of losing

$1MN-Risk seeking $1MN- averse

Low Probability
(possibility effect) 03 04
 Personal Experience: Real life Negotiation
Apollo
Domain
workstation
 Satish plan to sell business of CAD Products

Offer USD 0.9

Inter National
MN+ 3 YR
Giant Work bond

What should Satish do?

 Introducing BATNA
Best Alternative To Negotiated Agreement
Agree

Walk Away

Best
alternative
value

Why should we be ready to walk away-Video

 Satish Looks for walk Away position

$ 0.9 MN+
Agree 3YR Work
bond
Inter National
Giant
Regional
Walk Away
Co:$ 0.5
MN

What is Satish’s BATNA

 How BATNA influences walkaway point
Satish Original BATNA-Bankrupty

Satish Revised BATNA-Accept

Value to MNC (Buyer)

regional 0.5MN offer

Value to Satish (Seller)

Satish Walkaway 0.6M Satish dream 0.9M
plus 1 year Bond plus 1 year Bond
What shapes Satish perception Walkway value?

Price
Relationship

Ease of
deal
Walkaway
Time
Value pressure

Risk
Tolerance
 BATNA Quiz Poll

You are negotiating a purchase on unique

equipment with the supplier who won tech bid.
Which of following could be your BATNA

A. Accept only if they lower price to your budget

B. Meet another supplier and find their offer

C. Buy used equipment instead of leasing new

 BATNA Strategies
Decide your BATNA before negotiation

Improve your BATNA by seeking alternatives that

don’t require the other side’s cooperation

How will you apply this strategy?

 Case study: other party BATNA analysis

1912 US Presidential campaign brochure

Problem: Realization after printing 3MN copies......

Photographer permission not taken
 What should be
negotiation value?

Pay photographer USD

1/brochure as per
Roosevelt copyright laws
campaign
managers
options
Negotiate a royalty value
with the photographer

BATNA Destroy and reprint (USD

1MN+3 Wk delay)
Strategy: identify your
counterpart’s BATNA

Strategy: Do not disclose

your BATNA
Challenge:identify your counterpart’s BATNA
Work to identify your counterpart’s BATNA
 What should be
negotiation value now?

Analyse other party BATNA

No monetary gain

Estimating
Photographer
BATNA
Lose opportunity for
national publicity
Planning 3MN copies of campaign speech with
photograph. Excellent national level publicity
opportunity for photographers!

Appreciate opportunity,
but can afford Only $250.
 Decide Discover
Offer / counter /
04 alternatives to
reject/ accpt 01 agreement

Applying BATNA
strategies
Improve BATNA Select
• More alternatives 03 02 the best
• Est. Other Party alternative-BATNA
BATNA

Seller BATNA Buyer BATNA

 Case Scenario 1: Find Phadake’s BATNA

Case study: Work Out BATNA1 –Breakout rooms

 Case study: Work Out BATNA

Case Scenario 2: Find Phadake’s BATNA

Case Scenario 3: Possible outcomes

 Decision Model

Decision model for distribution company on whiteboard

 Decision Trees- Decision making with multiple scenario

Decision trees have two types of branching points or nodes

Outcome 1

Decision Node
Outcome 2
At decision nodes-
alternatives decision-
maker can choose. Outcome 3

Outcome 4
Chance Node

At chance nodes-branches because the uncertainty of the business

world. permits multiple possible outcomes.
 Exercise

Step1: Predict outcome

as green or Red
Step 2: Spin a wheel of
fortune that has a
"green" outcome and a
"red" outcome.
Offer: $100 if you correctly predict the
outcome. If you choose the wrong color, you
receive nothing.
Draw a decision tree and find expected value
 Exercise

The wheel of fortune has a 75% chance of a "green"

outcome and a 25% chance of a "red" outcome.

Draw decision model and find expected value

 Exercise

Which trees
is right?
Create a decision tree for Distribution company?
Which tree is right for a Distribution company?
Exercise
 Probability in Decision trees

Producers Seth & Chaplin

(S&C) boasts that when Cloven
is released in theatres, it will
become an instant classic.

If asked how confident he is that Cloven will

achieve at least modest success, he might
reply with a percentage: "80%.
 Options poll

Options I: Flat fee Options 2: Profit Sharing

"Blockbuster":$6 MN Chance:30%
“Lackluster":$0 MN Chance: 50%
“Flop“: - $2 MN Chance: 20%
•Sony Owns Cloven
•S&C gets $10 MN flat •Paramount & S&C split
•S&C pays $9 MN ownership and revenue
production cost •S&C pays production costs
•S&C profits: $ 1 MN •S&C profits =F(film success)
 Which option to choose?

The EMV of $1.40 is the long-

term average value of
outcomes of a large number
spins.
 Exercise

S&C are uncertain about the estimated

value for the movie becoming blockbuster

What is the profit value of the movie

becoming blockbuster at which the
company will be indifferent between
Paramount and Sony deal?
Salt Harbor -negotiation Part B
 Brims Loses
Brim Wins
CCb=0
LRB appeals Court case
LRB costs Court Cost
CCe=0
Easterly Loses
easterly Wins

Lets develop a decision model for Brims and Easterly

Lets understand the Brims and easterly analysis templates

 EVW-Easterly=pw*(X1*(LRBe+Ie)+(1=X1)*(LRBe+Pr))) Easterly
Easterly Frozen out
LRBe+Implication for
Probability = X1 Easterly Ie
Win: Commercial use Not OK

W pw
Easterly outbids other
Residential buyers
Easterly LRBe+ Pr
Probability = (1-X1)
Brim sells to other
LRBe+CCe+Implication
L Probability = X2 for Easterly Ie
Lose: Commercial use OK

(1-pw)
Easterly outbids other
Commercial buyers
LRBe+CCe+ Pc
Probability = (1-X2)
EVL-Easterly= (1-pw)*X2(LRBe+Cce+Le)+ (1-X2)*(LRBe+Cce+Pc))))
 Brims
Easterly Frozen out
Pro-LRBb-CCb
Probability = Y1
lose: Commercial use Not OK

L pb
Easterly outbids other
Residential buyers
Brims Pre-LRBb-CCb
Probability = (1-Y1)
Brim sells to other
Prc-LRBb
W Probability = Y2
win: Commercial use OK

(1-pb)
Easterly outbids other
Commercial buyers
LRBb+ negotiated cost of
Probability = (1-Y2) land Cc
Analysis of data of 30 Yrs. of Parties/Lawyers predictions of success

Why such a wide difference between positive vs

negative prediction vs actual?
 Break out room

Salt Harbor B–Evaluate court options

Analyze your model template and arrive at

conclusion if court or out of court is better

At what price you will be indifferent between

court case and out of court settlement
Salt Harbor A, B–Integrated report

01
Easterly-Pre
Brims-Pre

Integrated Single 02
E B
report for team

Post Negotiation
Analysis

E
B
04 Easterly-BATNA
BRIMs-BATNA

E B 03