What is BATNA? (With Ways To Identify It And Examples)

Updated 28 September 2022

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Short for the best alternative to a negotiated agreement, BATNA is a concept in negotiation that increases one's bargaining power. An individual or a business may utilise it to explore their options when they are not able to reach a favourable agreement. Learning about the concept can help you to identify your limits in negotiations and strengthen your position to negotiate by achieving the best terms possible. In this article, we define BATNA, outline some steps to determine your best alternative to a negotiated agreement and share some examples of the concept.

What Is BATNA?

BATNA is a backup plan that gives you options that are available to you, in case a negotiation does not succeed. Before entering a negotiation, preparing your best alternative to a negotiated agreement proves to be beneficial. It may help you prevent the negotiation from going against your terms and present greater demands to the other side since you have a plausible alternative available. Realising your potential limits in negotiation also helps you to be less vulnerable during negotiations.

When you have identified your best alternative to a negotiated agreement, it is also easier for you to conduct negotiations on your terms. For instance, you and a company are negotiating. This organisation is not willing to explore an agreement that works for both parties involved. You may decide to end the discussion, as you already possess the best alternative to a negotiated agreement and you know that with it, you are in a better position to fulfil your requirements.

How To Determine Your Best Alternative To A Negotiated Agreement

Below are some steps you may follow to determine your best alternative to a negotiated agreement:

1. Enumerate the alternatives

Prepare several feasible alternatives that may be available to you. To this list, add all options you feel are suitable replacements for the points you intend to negotiate. The alternatives that you feel are the most appealing, put them on the top of the list. Consider keeping in mind that this order may change as you advance.

For instance, you have plans to purchase equipment for your company. Now, you may require negotiating with a vendor. The first few items on your list may be the alternative companies from whom you may buy the equipment if negotiations with the first vendor do not succeed.

2. Recognise the value of the alternatives

Determining the value of your alternatives is the second step, which you may perform by conducting a well-grounded comparison. This comparison is between potential solutions and their costs. Performing this step may prove challenging, as one company's offer price for its goods and services may differ from the offer price of another company. To overcome this challenge, you may calculate the overall value of all your alternatives, instead of just focusing on measuring the financial value.

For instance, there is a specific model of a motorcycle you wish to buy. You may compare several motorcycle options as alternatives to this model of motorcycle. The cost may not be the only factor that you evaluate, as features like mileage or ride comfort may also be some factors that you evaluate when negotiating. Apart from features, you may also conduct a related cost comparison, like fuel consumption, maintenance cost and insurance coverage. When you compare all these factors, you are in a better position to assess each option fairly.

3. Select the preferred alternative

After the evaluation of all the options, you may possess a better idea of what alternative is appropriate for you. This may be based on your expectations of a negotiation. Given that you comprehend your situation better, you may also know what is the most important part of a negotiation, along with an equally suitable alternative.

For instance, you are negotiating a raise with your manager. You have recognised extra paid time off (PTO) as the alternative that you prefer in this situation. You have selected this alternative because you have calculated the value of the PTO. This calculation involves both time and money and the value is also comparable to the salary hike you seek. If the negotiation with your manager does not succeed, you may ask the manager to add extra PTO and see if this alternative benefits you.

4. Identify the lowest bargain that you are willing to accept

This is the last step where you decide to accept the lowest bargain. At this stage, your negotiations with another party end, if this party does not match your negotiation criteria. This outcome may not align with your expectations but acts as a limit for what you consider acceptable when accepting an offer.

For instance, you have a job offer from an organisation that impresses you moderately. Even after the offer, you prefer working with your current organisation, but since you seek a promotion, the job offer becomes your best alternative to a negotiated agreement. Now, you determine what offer the current company may give you and if this offer convinces you to stay with the company. This offer may be a good raise or a promotion. If you prepare for such a scenario in advance, you may know when to agree to an offer or explore another alternative.

Examples Of The Best Alternative To A Negotiated Agreement

Here are two examples to help you understand the best alternative to a negotiated agreement better:

Business example

Here is an example of negotiation in a business setting:

There is a firm that has decided to renegotiate a contract with a vendor where you are negotiating the deal. This vendor gives the company printer services. The services include routine equipment maintenance and ink and toner supplies for ₹12 lakh a year. The organisation barely utilises maintenance services but finds value in the supplies. Recognising this, you either plan to lower the vendor's annual charges or select a new, cost-effective vendor if negotiations do not succeed. You have prepared a list of feasible alternatives. These alternatives are other local vendors.

Some of these vendors are also offering supply management and troubleshooting. Now, you create a spreadsheet, which has value comparisons. You have also mentioned the number of repair calls the organisation makes, how frequently it makes these calls and how often the vendor offers maintenance, along with the costs of ink and toner. For the best alternative to a negotiated agreement of the company, you decide that company officials take responsibility for the printers and their maintenance. You have also decided that the organisation may purchase the ink and toner directly from suppliers.

All of this may cost between ₹5 lakh to ₹8 lakh a year. According to your calculations, the amount the organisation would pay to the current vendor is ₹11 lakh, whereas you prefer it to be around ₹6 lakh per year. The services of the vendor still appeal to you because these services may help the organisation to save significant money if printers require repairs. The vendor insists that their lowest acceptable amount is ₹12 lakh, but both parties conclude the agreement at ₹10 lakh and have a deal that benefits both of them.

Personal example

Here is an example of negotiation in a personal setting:

You have had a broadband connection at home from the same internet service provider (ISP) for two years. The price of your internet plan has been increasing every year. Presently, you pay ₹3,000 every month. Recently, you have learnt that your ISP is offering the same plan as yours to new customers for a cheaper price. You also plan to call your ISP and negotiate a better rate. You have also decided to either secure a good deal from the ISP or find a new one.

You find out about other ISPs in your area and explore their plans and internet speeds. With this research, you create a list of alternative ISPs. You notice that the primary competitor of your current ISP is offering the same plan for ₹2,000. This plan also mentions that there may be no price hike for two years. With this information, you have identified your best alternative to a negotiated agreement. Now, you decide to get a plan for ₹1,500 from your current ISP, since you are still preferring to avoid the hassle of getting a new connection.

You have also decided that the most you are willing to pay is ₹2,200 per month. After the initial negotiation over a call, the ISP offers you a plan costing ₹1,200 but has lower speeds. You counter this deal with ₹1,500 for your current plan. The ISP refuses to accommodate this, but they offer a plan for ₹2,700 per month for your current speed. This saves you ₹300 per month, but this offer is still costing you more than your maximum acceptable amount, so you cancel your present ISP's subscription and sign up with its competitor for ₹2,000 per month.