NEGOTIATION MODELS

• Negotiation is defined as a discussion among individuals to

reach to a conclusion acceptable to one and all.
• It is a process where people rather than fighting among
themselves sit together, evaluate the pros and cons and then
come out with an alternative which would be a win win
situation for all.
• Example: Sam wanted to purchase a mobile handset, he tried
his level best to buy it at the lowest possible rate and the
shopkeeper also ensured that he could earn his profits as
well. Thus the negotiation benefited Sam who didn’t have to
shell out loads of money and the shopkeeper was also
satisfied because even he earned his profits.
• Negotiation helps in reducing conflicts and disputes among
each other. Negotiation is essential in every walk of life for a
peaceful and stress free living.
• Let us go through various models of negotiation:
 Win Win Model
• In this model, each and every individual involved in
negotiation wins.
• No body is at loss in this model and every one is benefited out
of the negotiation.
• This is the most accepted model of negotiation.
• Example:
• Daniel wanted to buy a laptop but it was an expensive model.
He went to the outlet and negotiated with the shopkeeper to
lower the price. Initially the shopkeeper was reluctant but after
several rounds of discussions and persuasion, he quoted a
price best suited to him as well as Daniel. Daniel was
extremely satisfied as he could now purchase the laptop
without burning a hole in his pocket. The negotiation also
benefited the store owner as he could earn his profits and
also gained a loyal customer who would come again in future.
• Example
 Win Lose Model
• In this model one party wins and the other party loses.
• In such a model, after several rounds of discussions and
negotiations, one party benefits while the party remains
dissatisfied.
• Example:
Please refer to the above example once again where Daniel
wanted to buy a laptop. In this example, both Daniel and the
store owner were benefited out of the deal. Let us suppose
Daniel could not even afford the price quoted by the
storeowner and requests him to further lower the price. If the
store owner further lowers the price, he would not be able to
earn his profits but Daniel would be very happy. Thus after the
negotiation, Daniel would be satisfied but the shopkeeper
wouldn’t. In a win lose model, both the two parties are not
satisfied, only one of the two walks away with the benefit.
 Lose Lose Model
• As the name suggests, in this model, the outcome of
negotiation is zero. No party is benefited out of this
model.
• Had Daniel not purchased the laptop after several
rounds of negotiation, neither he nor the store owner
would have got anything out of the deal. Daniel would
return empty handed and the store owner would
obviously not earn anything.
• In this model, generally the two parties are not willing
to accept each other’s views and are reluctant to
compromise. No discussions help.
• Let us understand the above three models with an
example from the corporate world.
 Mike got selected with a multinational firm of repute. He was
called to negotiate his salary with Sara- the HR Head of the
organization.
• Case 1 - Sara quoted a salary to Mike, but Mike was not too pleased
with the figure. He insisted Sara to raise his salary to the best extent
possible. After discussions Sara came out with a figure acceptable to
Mike and she immediately released his offer letter. Mike got his dream
job and Sara could manage to offer Mike a salary well within the
company’s budgets - A Win win Situation (Both the parties gained)

• Case 2 - Sara with her excellent negotiation skills managed to convince

Mike at a little lower salary than he quoted. Mike also wanted to grab
the opportunity as it was his dream job and he was eyeing it for quite
some time now. He had to accept the offer at a little lower salary than
expected. Thus in this negotiation, Mike was not completely satisfied but
Sara was - A win lose negotiation

• Case 3 - Mike declined the offer as the salary quoted by Sara did not
meet his expectations. Sara tried her level best to negotiate with Mike,
but of no use.-A lose lose model of negotiation. No body neither Mike
nor Sara gained anything out of this negotiation.
RADPAC Model of Negotiation
• RADPAC Model of Negotiation is a widely
used model of negotiation in corporates.
• Let us understand it in detail
• Every alphabet in this model signifies
something:
• R - Rapport
A - Analysis
D - Debate
P - Propose
A - Agreement
C - Close
• R - Rapport: As the name suggests, it signifies the relation
between parties involved in negotiation. The parties involved
in negotiation ideally should be comfortable with each other
and share a good rapport with each other.
• A - Analysis: One party must understand the second party
well. It is important that the individual understand each other’s
needs and interest. The shopkeeper must understand the
customer’s needs and pocket, in the same way the customer
mustn’t ignore the shopkeeper’s profits as well. People must
listen to each other attentively.
• D - Debate: Nothing can be achieved without discussions.
This round includes discussing issues among the parties
involved in negotiation. The pros and cons of an idea are
evaluated in this round. People debate with each other and
each one tries to convince the other. One must not lose his
temper in this round but remain calm and composed.
• P - Propose: Each individual proposes his
best idea in this round. Each one tries his
level best to come up with the best possible
idea and reach to a conclusion acceptable by
all.
• A - Agreement: Individuals come to a
conclusion at this stage and agree to the best
possible alternative.
• C - Close: The negotiation is complete and
individuals return back satisfied.
 Let us again consider Mike and Sara’s
example to understand RADPAC Model
• R - Rapport between Mike and Sara. They must be comfortable with
each other and should not start the negotiation right away. They must
first break the ice. The discussions must start with a warm smile and
greetings.
• A - Both Mike and Sara would try their level best to understand each
other’s needs. Mike’s need is to grab the opportunity while Sara wants to
hire an employee for the organization.
• D - The various rounds of discussions between Mike and Sara. Mike and
Sara would debate with each other trying to get what they want.
• P - Mike would propose the best possible salary he can work on while
Sara would also discuss the maximum salary her company can offer.
• A - Both Mike and Sara would agree to each other, where both of them
would compromise to their best possible extent.
• C - The negotiation is complete and probably the next course of action is
decided, like in this case the next step would be generation of the offer
letter and its acceptance.
 BATNA
• BATNA is an acronym for Best Alternative to Negotiated
Agreement

• Concept developed by negotiation researchers Roger Fisher and

William Ury
• Describes the best option available to negotiator’s side if
negotiations fail

• Negotiators with a strong, well-defined BATNA have an

advantage because they have a clear benchmark to which
they can compare any negotiated settlement

• BATNA is not interested in the objectives of a negotiation, but

rather to determine the course of action if an agreement is not
reached within a certain time frame
• Permits far greater flexibility and allows much more room
for innovation than a pre-determined bottom line
• When creating a BATNA, a negotiator should:
 Brainstorm a list of all available alternatives that might be
considered should the negotiation fail to render a
favourable agreement;
 Chose the most promising alternatives and expand them
into practical and attainable alternatives; and
 Identify the best of the alternatives and keep it in reserve
as a fall-back during the negotiation.
• In simple terms, is what you would do if you failed
to reach an agreement in a particular negotiation.
• Estimating BATNA is useful in negotiations
• It lets you know how hard to push
• If you have a strong BATNA and a negotiation counterparty has
a weak BATNA you can push hard for what you want
• Examples:
 Customer Needs
A salesperson knows that a customer needs their product to
solve a problem and that there are no feasible alternatives on
the market. As such, the customer's BATNA is to live with the
problem. In this situation the salesperson may offer a small
discount but not be pushed any further as they have
a strong position.
 Sales Targets
A customer can sense that a salesperson hasn't hit their sales
target and it is almost the end of the financial year. As such, the
salesperson's most likely BATNA is to miss their sales quota. As
such, the customer is confident to push for heavy discounts and
is willing to close the deal quickly so that the salesperson can
achieve their sales target.

 Customer Preferences
A salesperson gets the sense that a customer strongly prefers
their product to alternatives in the market. The customer's
BATNA is purchasing their second preference. The salesperson
is therefore confident that a minor discount will be
enough to close the deal.
 Talent
An employer is aware that a particular candidate is in
high demand and likely has other offers to consider. The
employer is also aware that the candidate's knowledge is
critical to their strategy. Therefore, the candidate has
many good alternatives to a deal and the employer will
risk strategy failure if a deal isn't reached. In this
situation it is in the candidate's interests to push hard
and the Employer's interests to be accommodating.

 Economy
An employer is aware that the economy is in recession
and jobs are difficult to find. As such, they have a strong
hand in negotiation as candidates may have no other
offers.
 B est A lternative T o N egotiated
A greement

BATNAtells you when to accept and

when to reject an agreement

When a proposal is better than

your BATNA…….accept it

When a proposal is worse than

your BATNA…….reject it
Let’s illustrate BATNA by using a simple example.

In the first scenario, let’s say that you are a buyer who goes
to a supplier to purchase some urgently needed parts to
complete a project. The supplier senses your urgency; his
eyes begin to gleam with anticipation. You want the lowest
price possible while he wants a higher price. Uh-oh! You
have no fall-back negotiation position. While you’re both in
this negotiation boat together, it’s the supplier who’s holding
the oars, so no prizes for guessing who decides which
direction your boat moves.
 For a moment let’s instead imagine you you’ve taken a
negotiation training course, and so know the value of going
into your negotiation meeting better prepared. Before
arranging the meeting, you set up talks with two alternative
suppliers who are ready and able to handle all your needs.
When you meet with the first supplier in this second
scenario, you can calmly sit back in your chair, and allow the
supplier to finish his spiel. Now, watch the gleam fade from
his eyes when you make mention of some aspect of his or
her competitor’s offering. You have a BATNA! The talks
suddenly become more amenable. Yes, you now have a firm
grip on the negotiation oars to steer the terms in your
direction.
• BATNA answers the question: 'What would you do if you were
not able to agree to a deal with your negotiation partner?'
• But it is not all
• It is also crucial to assess the BATNA of the other side
• The weakness of your own BATNA might not matter that
much if the other side has no good alternative to doing
business with you.
• Reservation Value" is the least favourable point at which one
will accept a negotiated agreement.
• For example, for a seller, this means the minimum amount
they would be prepared to accept, while for a buyer it would
mean the maximum that they would be prepared to pay.
 ZOPA
• Zone of Possible Agreement (ZOPA)" is the range in
which an agreement is satisfactory to both parties
involved in the negotiation process

• It is the range between each parties Reservation Values

and is the overlap area that each party is willing to pay in
a negotiation
Example:

• A buyer has set a reservation price of $275,000 for the

purchase of a commercial warehouse and would like to
pay as little as possible. The seller has set a reservation
price of $250,000 and would like to obtain as much as
possible. The ZOPA, therefore, is the range between
$250,000 and $275,000.
• If the numbers were reversed, and the buyer had set a
reservation price of $250,000 while the seller had set a
reservation price of $275,000, there would be no ZOPA—
no overlap in the ranges in which they would agree. No
agreement would be possible, no matter how skilled the
negotiators, unless there were other elements of value to
be considered—or one or both sides' reservation prices
changed.
 Negotiator’s
Framework
Creating a framework to walk throughnegotiations
 • What is aframework?
 System of checks and balances
 Gives you a direction to guide or
lead through the negotiation

 Helps you evaluate offers and

propose counter offer

• When will a frameworkbe successful?

 Your research needs to be

exhaustive and accurate
 You need to be disciplined to
adhere to the plan
Let us learn the framework
through a case study
 Case Study: Harmony Hills
 You are the Director of Summit Estate

 A 5 acre prime property

 Posted an ad for selling Harmony
Hills
 You have received interest from
two prospective buyers
-Realty Developers-Prime Estate

Harmony Hills in Gurgaon

 Case Study: Harmony Hills
Builds High Rise Apartments
Fair Negotiators
Realty Developers
Offer
 Rs.30 Crores ( 5 Mn USD)
 Offer Expires in oneweek
Fair offer by market standards

Premier real estate company

Builds only premium end villas

Prime Estate
Offer
 Not made any offer Offer
 CEO has called you tomorrow fordiscussions
Case Study: Harmony Hills
Harmony Hills was You are confident that
bought by you 5years Realty Developers and
back for 19crores Prime Estate know this
(3 MN USD) fact

FACTS

The offer from Realty Land deals for villa

Developers is at par projects are typically
with market but you priced 20% more than
think you can get10% the case for apartment
more projects
 The Negotiation Framework

Calculate your RV Calculate Opponent’s RV Close the Deal

1 2 3 4 5 6

Assess your BATNA Assess opponent’s BATNA Frame your ZOPA

 The Negotiation Framework
Calculate your RV Calculate Opponent’s RV Close the Deal

1 2 3 4 5 6

Assess your BATNA Assess opponent’s BATNA Frame your ZOPA

Step 1: Assess your BATNA

 BATNA: Best Alternative Toa NegotiatedAgreement
 What will you do if this negotiation does not work out? What’s Plan B?
 For your negotiation with Prime Estate, what’s yourBATNA?
 Make a deal with Realty Developers
 The Negotiation Framework
Calculate your RV Calculate Opponent’s RV Close the Deal

1 2 3 4 5 6

Assess your BATNA Assess opponent’s BATNA Frame your ZOPA

Step 2: Calculate your ReservationValue

 Reservation Value: Your walkaway point in the currentnegotiation
 What is the minimum that you need from this negotiation? Anything below is
unacceptable
 For your negotiation with Prime Estate, what’s your ReservationValue?
 The offer from Realty Developers + 10% more which amounts to 33cr (5.5 MN USD)
 A correct assessment of your BATNAis essential to know your ReservationValue
 The Negotiation Framework
Calculate your RV Calculate Opponent’s RV Close the Deal

1 2 3 4 5 6

Assess your BATNA Assess opponent’s BATNA Frame your ZOPA

Step 3: Assess the other party’sBATNA

 What are the other options for your negotiating opponent
 Involves a lotof research on your opponent and careful assessment of market
conditions

 For your negotiationwith Prime Estate, what’s their BATNA?

 Todevelop their villa project on another piece of land inGurgaon
 What are the similar land holdings in Gurgaon and what would be theyselling at?
 The Negotiation Framework
Calculate your RV Calculate Opponent’s RV Close the Deal

1 2 3 4 5 6

Assess your BATNA Assess opponent’s BATNA Frame your ZOPA

Step 4: Calculate the other party’s ReservationValue

 Your negotiating opponent’s walkaway point in the current negotiation
 What is the maximum that they can give you from thisnegotiation? Anything
beyond is unacceptable for them
 For your negotiation with Prime Estate, what’s their Reservation Value?
 The market price is 30 Cr (5MN USD) and they would think of maximum 10%
appreciation i.e 33 Cr (5.5 MN USD)
 Villa projects can get a premium of 20% more, i.e. 33 Cr + 20%
 Reservation Value = 39.6 Cr (6.6 MN USD)
 The Negotiation Framework
Calculate your RV Calculate Opponent’s RV Close the Deal

1 2 3 4 5 6

Assess your BATNA Assess opponent’s BATNA Frame your ZOPA

Step 5: Frame ZOPA
 ZOPA: Zone of PotentialAgreement

Minimum
Max Amt. you
Amount You
want
ZOPA think you canget
(Your RV) (Opponent’s RV)
33Cr to 39.6 Cr
Your RV Prime Estate RV
33 Cr 39.6 Cr
(5.5 MN USD) (6.6 MN USD)
 The Negotiation Framework
Calculate your RV Calculate Opponent’s RV Close the Deal

1 2 3 4 5 6

Assess your BATNA Assess opponent’s BATNA Frame your ZOPA

Step 6: Closing the deal:

 Negotiate to get a deal within your ZOPA
 Choose an openingstrategy:
 Most common is to start by aiming at the higher end ofthe ZOPAand then
negotiate your way down
 RECAP : The Framework

Calculate your RV Calculate Opponent’s RV Close the Deal

1 2 3 4 5 6

Assess your BATNA Assess opponent’s BATNA Frame your ZOPA