Negotiation Models and Strategies
We all have bargained with people at some point in our life.
In the business world, the bargain is the other word for negotiations. If you notice it not, we negotiate in every walk of our life.
Negotiation is a way of settling down differences between groups. It helps to arrive at an agreeable conclusion when both groups have their differences in agreeing on the proposal. It focusses to achieve a win-win outcome for both the negotiators.
Now We know what a negotiation is but how it is done!
Let us see what strategies and models negotiation has got,
- Integrative negotiation (Win-win model)
- Distributive negotiation (Win-lose model)
- Lose-lose model
- RADPAC model
- ZOPA
- BATNA
- Reservation value
Integrative negotiation (Win-win model):
Integrative negotiation is a Negotiation strategy that focuses on bringing a win-win outcome for both groups. It results in a mutually beneficial agreement between them.
This strategy is considered to be important because it delivers a satisfactory solution.
Some negotiators use this strategy as it brings profits for both groups and to maintain a healthy relationship for a long period.
Distributive negotiation (Win-loss model):
This type of negotiation is also called a fixed-pie negotiation or win-loss model. This means that any one of the groups has to compromise for the other group to win.
This is used when it is required to distribute fixed resources such as money or resources between the groups.
It is easily the negotiation type that we experience in our daily life. The bargain that happens between us and the shopkeeper is a kind of win-lose situation, only one gets satisfied.
Lose-lose model:
As the name says, this results in no agreement between the negotiators. No one is benefited from this strategy.
RADPAC negotiation:
This is the most extensively used model in corporate negotiations.
Each alphabet in RADPAC has its meaning.
R — Rapport: This denotes the relationship between the groups. It refers to the comfort and the rapport that both the negotiators share.
A — Analysis: This refers to the understanding between the two groups. Each of the negotiators must understand each other’s needs and should listen to each other.
D — Debate: This refers to the discussion that happens between the parties, evaluating the pros and cons of the solution. People debate with each other here and should not lose their cool and temper.
P — Propose: Each group proposes the best favourable solution that should be acceptable by both.
A — Agreement: This is the stage where both the groups agrees and bring a conclusion for the contract.
C — Close: The agreement is complete and the groups are satisfied.
BATNA: It stands for “Best Alternative to a Negotiated Agreement.” This means identifying the next best alternative as a backup (BATNA) when the ongoing agreement ends up as not expected.
ZOPA: It refers to “Zone of Potential Agreement.”
There is an acceptable range or a point in the agreement after which the buyer and the seller will look for alternatives.
Say in case of money value, Sellers have an acceptable range beyond which he doesn’t lower his selling price. Likewise, there is an acceptable range for the buyer beyond which he doesn’t buy.
There is a worst-case point in which the seller and the buyer are ready to agree. That point is called the Reservation point. It is the least possible solution that the groups are ready to offer. Say for example the seller’s reservation point is $20 and the buyer’s reservation point is $10.
The gap range between both the group’s reservation points is called the ZOPA (Zone of Potential Agreement).
So the solution has to be within the ZOPA or the parties will look for alternatives.
I have tried to put it in layman’s terms to make you understand what BATNA, ZOPA and Reservation point is. Hope you got an overview idea of what they are.
These are some of the widely used strategies and models in negotiations that you must know before you handle business negotiation deals.
It is important to practice good negotiation agreements in business as it accounts for an organization’s success. It greatly helps in building better relationships and delivering quality solutions.