BATNA

Larry Stevenson and Jim Shapiro are partners in a successful construction company. However, due to difference of opinion, Stevenson was willing to buy out his partner Shapiro who was willing to sell at the “right price.” Stevenson made an offer of $8.5 million for Shapiro’s shares in the company after months of bargaining. Shapiro was not willing to sell for less than $10 million because he owns 49% of the company which is has a total worth of $20 million. Shapiro choose to fight in court over accepting the $8.5 million. Best Alternative to a Negotiation Agreement (BATNA) is a backup plan to be used if the current negotiation results in an impasse such as the case with Shapiro and Stevenson (Bazerman et al, 2012). A BATNA will aid the negotiator by providing a threshold which can be used to determine whether the offer should be accepted or rejected. A BATNA should be determined before the negotiation talks, failing to do may lead to rejecting a deal that should have been accepted or accepting one that should have been rejected.
There are four steps to determine a BATNA in a given negotiation:
1) List the alternatives: this includes all the options available if the current negotiation ends in an impasse.
2) Evaluate the alternatives: by giving a value for each alternative.
3) Choose the BATNA: choosing the alternative with the highest value.
4) Calculate the Reservation Value (RV): which is the highest value a buyer is willing to pay or the lowest value a seller is willing to sell. This point will be used to determine whether a negotiator should accept or reject a deal.

 

 

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ACED ESSAYS