Understanding BATNA & ZOPA
BATNA is an acronym that stands for Best Alternative to a Negotiated Agreement. It is defined as the most advantageous alternative that a negotiating party can take if negotiations fail and an agreement.
ZOPA
A “Zone of Possible Agreement” (ZOPA) exists if there is a potential agreement that would benefit both sides more than their alternative options do. For example, if Mr. X wants to buy a used car for $5,000 or less, and Mr. Y wants to sell one for $4,500, those two have a ZOPA. But if Mr. Y will not go below $7,000 and Mr. X will not go above $5,000, they do not have a zone of possible agreement.
The ZOPA is critical to the successful outcome of negotiation. But it may take some time to determine whether a ZOPA exists; it may only become known once the parties explore their various interests and options. If the disputants can identify the ZOPA, there is a good chance that they will be able to come to an agreement.
Resources for negotiation
- Personnel – enough staff, with the right experience and skills
- Finance – adequate budget.
- Time – enough and appropriate time must be set aside.
- Information – about supplier, the market, environmental, bargaining positions etc (key resource for negotiation)
- Space and facilities – applicable to face-to-face meeting
- ICT resources applicable if negotiation to be conducted via ‘virtual’ meetings (conference calls, teleconferencing or web conferencing)
Environment for a Commercial Negotiation
- Both parties feel comfortable
- No concern regarding security & confidentiality
- The facility is quiet & secure
- Agenda and time are agreed in advance
- Access to tele/video conferencing facilities if required
- No surprise for visiting party to distract them
Stages of Commercial Negotiation
Preparation
- Opportunities for conditioning
- The importance of confidentiality
- Effective team building
Opening
- Rapport building
- Assertive communication (opening position, needs and wants)
- Using questions to get information and clarification
- Listen attentively and effectively (look for body language and other non-verbal signs)
- Facilitating practice of confirming understanding, clarifying, seek information, summarizing of discussion
- Using verbal and non-verbal signals to condition the other party
- Create atmosphere conducive to agreement
- Agenda and recording of minutes
Testing
- Test and validate assumptions made during preparation phase
- Test opposing party’s position, their willingness to collaborate, opposition and flexibility
- Clarify stated issues (importance and value to the other party)
- Attempt to ascertain any surprises (new information)
Proposing
- Offers possible solutions to issues
- Takes different forms according to the negotiation approach
- Distributive negotiation – proposing absorbed into bargaining (offer and counteroffer)
- Integrative negotiation – the main part of the meeting will be generating and evaluating alternative solution
Bargaining
- The exchange of variables
- Definition (Bailey et al) – the point when we convey the specific terms on which we would settle. Example – if you reduce price by 3%, we will increase order by 10%
- Distributive negotiation – objectives mainly achieved by bargaining
- Integrative negotiation – rarely used
Closing
- Watch for closing signals
- Check to ensure all issue shave been resolved
- Consider using visual aids to summarize
- Summaries all that has been agreed.
- Decide to conclude
- Seek agreement in principle if the TOP does not have final authority
- Make your own private notes on the final agreement
Communication skills that influence outcome in Commercial Negotiation
Active listening
- Be motivated to listen
- Be alert to non-verbal cues
- Do not interrupt the other party when they are speaking
- Fight off distractions
- Write everything down
- Listen with a goal in mind
- Give the other party your undivided attention
- React to the message, not the person
Non-verbal communication
- Voice tone, volume, inflection, pace
- Eye contact, facial expression
- Gestures, posture, muscle tension
- Proximity
Emotional intelligence (EQ)
- Definition – the capacity for recognizing our own feelings and those of others, for motivating ourselves, and for managing emotions well in ourselves as well as others.
EQ seeks to measure emotional intelligence and is centered on abilities such as the following
- Identify emotions
- Evaluating how others feel
- Controlling one’s emotions
- Perceiving how others feel
- Using emotions to facilitate social communication
- Relating to others
In today’s leather sector marketplace, there are a numerous obstacle that add costs and complexity to producing continuous buyer satisfaction. Companies of leather sector is faced with increased regulatory oversight but remaining cost efficient and compliant and ensuring that your buyer receive the best possible value. Achieving all these things is not an easy task at all. Commercial Negotiation is the key to deal with these issues. Procurement & Supply Chain Professionals of leather sector having good skill of Commercial Negotiation can successfully negotiate best possible price, terms & conditions with buyer and lowest possible price from supplier maintaining all required criteria. Successful Commercial Negotiation also result positive relationship with both buyers and suppliers.
Sheikh Nafiz Ahmed
MBA II Certified Supply Chain Analyst II
Experienced Leather Sector Supply Chain Professional
