The Importance of BATNAs – (The demise of NOKIA)

Author: Mark McCormack

Co-Founder of www.TheBuyers.Network

Negotiation is a fundamental aspect of human interaction, affecting business deals, diplomatic agreements, and even personal decisions. One crucial concept in the area of negotiation is a BATNA, which stands for Best Alternative to a Negotiated Agreement. Understanding and leveraging your BATNA can significantly influence the outcome of negotiations, ensuring you secure the best possible deal.

What is BATNA?

BATNA is a term coined by negotiation experts Roger Fisher and William Ury in their book “Getting to Yes: Negotiating Agreement Without Giving In.” It represents the most advantageous course of action a party can take if no agreement is reached. Essentially, BATNA is your fallback plan or the best alternative you have if the negotiation fails. Knowing your BATNA provides a benchmark against which you can measure any potential agreement.

The Importance of BATNA

1. Empowerment in Negotiations: Knowing your BATNA gives you confidence. It provides you with a clear understanding of your options and allows you to negotiate from a position of strength. You are less likely to make unnecessary concessions if you are aware that you have a solid alternative.
2. Better Decision Making: With a well-defined BATNA, you can make more informed decisions during negotiations. It helps you to evaluate offers objectively and to reject unfavourable deals that do not meet your minimum requirements.
3. Increased Leverage: Your BATNA can serve as leverage in negotiations. If the other party knows you have a viable alternative, they may be more inclined to make concessions to ensure a deal is reached.
4. Avoiding Unfavourable Agreements: Without a clear BATNA, you may end up accepting an agreement that is worse than your alternative. Understanding your BATNA ensures that you only agree to terms that are better than what you could achieve without an agreement.

Strategies for Leveraging Your BATNA

1. Thorough Preparation: Before entering negotiations, conduct a thorough analysis of your options. Identify and develop your BATNA to ensure it is as strong as possible. This preparation involves understanding your needs, exploring alternatives, and assessing their feasibility.
2. Keep Your BATNA Confidential: While it’s essential to know your BATNA, it’s not always necessary to reveal it to the other party. Disclosing your BATNA can sometimes weaken your position if the other party attempts to undercut it.
3. Improve Your BATNA: Continuously work on improving your BATNA during the negotiation process. This might involve seeking additional alternatives or enhancing the ones you have. A stronger BATNA provides greater leverage and increases your chances of a favourable outcome.
4. Assess the Other Party’s BATNA: Understanding the BATNA of the other party can provide valuable insights. If you know their alternatives are weak, you may have more room to negotiate favourable terms. Conversely, if their BATNA is strong, you might need to adjust your strategy accordingly.
5. Use Objective Criteria: Use your BATNA as an objective criterion to evaluate offers. Compare the terms of the negotiation with your BATNA to ensure that any agreement you consider is better than your best alternative.

Real-Life Examples of BATNA in Action

1. The Microsoft and Nokia Deal

A prime example of the importance of BATNA in real-world negotiations can be seen in the acquisition of Nokia’s mobile phone business by Microsoft in 2013. Understanding the BATNA of both companies provides a clearer picture of the negotiation dynamics and outcomes.

Background: In the early 2010s, Nokia was struggling to keep up with competitors in the smartphone market. Despite being a market leader in the early days of mobile phones, Nokia failed to transition effectively to the smartphone era dominated by Apple and Android devices. Microsoft, on the other hand, was looking to strengthen its position in the mobile operating system market with its Windows Phone but lacked significant hardware partners.

Nokia’s BATNA: Nokia’s BATNA was bleak. Without a strategic partner or a significant turnaround, it faced continued market decline and financial instability. The company could potentially focus on its network infrastructure business, but this was not a favourable alternative given the substantial losses in the mobile phone division.

Microsoft’s BATNA: Microsoft had a somewhat better BATNA compared to Nokia. If the deal didn’t go through, Microsoft could continue to focus on other hardware partners for its Windows Phone OS or even consider developing its own hardware, albeit at a higher cost and with more risk. However, acquiring Nokia’s mobile phone business was seen as a faster and potentially more effective way to gain a foothold in the smartphone market.

Negotiation Dynamics: Knowing Nokia’s weak BATNA, Microsoft was in a stronger negotiating position. They leveraged this to acquire Nokia’s mobile phone business for $7.2 billion. For Nokia, the deal was more favourable than continuing to suffer losses and market irrelevance. For Microsoft, while they paid a significant amount, the acquisition provided them with valuable patents, brand equity, and a ready-to-go hardware division.

Outcome: The acquisition, however, did not turn out as successful as Microsoft had hoped. They struggled to integrate Nokia’s assets and failed to make a significant impact in the smartphone market, eventually writing off the investment. This example illustrates not just the importance of BATNA in securing a deal but also the need for due diligence and strategic planning post-negotiation.

2. Union and Management Negotiations

Consider a scenario where a labour union is negotiating with management for better wages and working conditions. The union’s BATNA could be to go on strike if their demands are not met, while the management’s BATNA might be to hire temporary workers or outsource the jobs.

Union’s BATNA: For the union, the BATNA of going on strike involves risks and potential loss of income for the workers. However, it can also put pressure on the management by disrupting operations and potentially causing financial losses.

Management’s BATNA: Management’s BATNA, on the other hand, involves the costs and logistical challenges of hiring temporary workers or outsourcing. This can be less efficient and more expensive in the short term but serves as a fallback if negotiations fail.

Negotiation Dynamics: If the union has a strong and unified front, their threat to strike becomes a potent leverage point. Conversely, if management can convincingly argue that they can replace the labour without significant disruption, the union’s position weakens.

Outcome: In many cases, both parties will seek to avoid these BATNAs and instead work towards a mutually beneficial agreement. The union might secure better wages and working conditions without resorting to a strike, and management avoids the costs and inefficiencies associated with temporary replacements or outsourcing.

Conclusion and how to get a better deal every time

A BATNA provides confidence, clarity, and leverage, allowing you to navigate negotiations more effectively and achieve better outcomes. The Buyers Network uses BATNAs and magnifies them by leveraging its technology and combining the purchase intent of many SMEs to negotiate a better price for the Team. We do hope you take a look at The Buyers Network. There is almost zero risk to join, we do all the negotiation so you get a better deal on many of your business expenses.