Negotiations in Business: Strategies for Achieving Mutual Benefits

This article discusses negotiations in businesses, specifically in drafting contracts that achieve benefits for both parties. It covers BATNA, reservation value, and ZOPA range. A sample letter for negotiation outcomes is also included.

Running head: NEGOTIATIONS 1

NEGOTIATIONS 2
Introduction
Negotiations in businesses is a daily activities especially where contracts are drafted in
order for two parties to enter into a contract that would achieve benefits in equal proportions.
Therefore, every partner should play a critical role in ensuring that all runs smoothly and no
party is offended by the terms of the contract. Additionally, people should also be in a portion to
understand each other’s reservation point and use ZOPA and BATNA to ensure every party is
satisfied by the terms of the contract. Failure to do it some parties will stand a chance of losing a
large stake of money or their objectives will not be achieved in long term or short term. In regard
to the case below, negotiations revolve around having an advertising campaign that will run for
months that guarantees a firm an additional level of sales (Beyond Intractability 2018, P10). This
should be achieved within the contract between the supplier of services and the recipient of such
services in order to improve the state of the business in the long run.
What is your client’s BATNA?
It is strategy used by organization when the value of a contract cannot be unanimously
agreed upon by the parties concerned. In this case the two parties fail to come an agreement then
BATNA is sought as the mechanism to solve the differences between the two parties and each
party with stake to the same contract stands to benefit. This is the essence of having BATNA in
negotiation contract between the seller of the services and the buyer of such commodities
(Gorlatov 2009, P10). Additionally, it is important to note that BATNA is a standard that is not
negotiable between the two parties concerned it is actually determined by the industry in which
the parties operate. In the case below, the aim of DeGrandis Sporting Goods is to achieve a total
sales of 1.5 million in sales as a result of advertising campaign contract they intend to enter with
ELITE Sport Stars Company. According to the terms of agreement, an advertisement of 1 month

NEGOTIATIONS 3
would make an organization lose an amount of $500, 000 on sales, 2 months will cause a loss of
$250, 000 while an advert that will last for 3 months will have no effect on the company sales at
all. 4 months advertising period will earn the company an additional sales of $250, 000 and 5
months will add the organization an additional sales of $500, 000 (Gorlatov 2009, P10).
However, the organization want to sign a negotiated contract that will generate the firm an
addition sales of $1.5 million. According to this contract the BATNA can only be a period of 7
months after which the company will deem itself to have generated an additional product sales of
$1.5 million. This will mean that the company will be granted a 15% discount on fees or will
receive no discount at all. Therefore, the firm should enter into such a contract in disregard to the
total cost it will incur in the long run. Therefore, this will form the BATNA of the client
(Gorlatov 2009, P10).
What is your client’s reservation value?
Reservation focus on the highest and the lowest value the client wishes to accommodate
the suppliers of services interest. As stated earlier, the DeGrandis organisation has set a given
amount of money in relation to a period that they believe the Elite Sport Stars will generate its
sales. However, they have a perception that the company projection might a bit high than they
projected sales based on the prices they have set (Gorlatov 2009, P10). Therefore, according to
the same, the reservation point for the transaction is $250, 000 in additional product sales. This
refers to as the highest and the lowest point the firm wishes to engage into a contract that will see
the organization meet its objectives.
What is the ZOPA range? What is your strategy for claiming the greater proportion of the
ZOPA?

NEGOTIATIONS 4
A zone of possible agreement is that range between the seller and the buyer that they can
walk away based on the kind of values they have placed on their commodities. For DeGrandis
organization, it cannot take anything that generate a lesser additional product sales by $1.5
million while the Elite Sporting Star cannot go lower 15% of the aforementioned value. At the
end of the day a range between the two values is established in order to determine the value in
which the two firms can walk away from each other (Gorlatov 2009, P10). The ZOPA for the
contract ranges from $250, 000 to $1500000. The strategy will revolve around negotiating a
discount of 15% if all works well for the DeGrandis.
Letter
Representative
Elite Sport Stars
To Fergus DeGrandis
CEO
DeGrandis Sporting Goods
www.degrandissports.weebly.com
Facebook: DeGrandis Sporting Goods
Dear Sir/Madam
RE: NEGOTIATION OUTCOMES FOR THE ADVERTISING CAMPAIGN

NEGOTIATIONS 5
I wish to bring to your attention the agreement sought after a long and interactive session
between I and the Elite Sporting Star about the advertising services we are seeking from them.
The purpose of the negotiation was to achieve an agreeable prices to which we shall ensure that
all key partners to the contract stands to benefit at all material costs. Therefore, I intend to float
all the negotiations agreement we settled on based on my negotiation skills. Besides that I
engaged your financial capability and the growth rate of the organization and the amount you
want to achieve from the advertising campaign you are driving towards.
After much consideration we came to an agreement that an advertising campaign for 1 month
will generate the company a loss of $200, 000 while 2 months will generate a loss of $100, 000
and 3 months periods the firm will have breakeven and any additionally period of advertising
will generate additional sales of $500, 000 and after 4 months an exponential growth of $1.5 M
in added product sales will be exhibited. The same will be attributed by the fact that customers
will have get used to the nature of the products offered by the organization and going forward
they will be in a better position to advised the organization on the kind of products it can venture
into in order to add value and improve sales. From the discussion above Elite Sporting Star stood
at 3 months with a negotiation fee of $400, 000. However, I managed to negotiated for a 20% fee
downward in order to ensure that the firm breakeven in the long term.
Additionally, the reservation value of the company were a bit high since they could not go below
a value of $400, 000 for any particular month they were willing to offer their advertising
services. Therefore, it was prudent for the DeGrandis organization to restructure its financing
structure since even after the discount it cannot pay the demand for Elite Sporting Star which
guarantees a large additional product sales than our projections.
Kind Regards,

NEGOTIATIONS 6
Representative

NEGOTIATIONS 7
References
Beyond Intractability. (2018). Zone of Possible Agreement (ZOPA). [online] Available at:
https://www.beyondintractability.org/essay/zopa [Accessed 17 Jun. 2018].
Gorlatov, I. (2018). Basic Negotiation Terminology: BATNA, Reservation Value, ZOPA. [online]
Successful Negotiators - Negotiation Skills - Negotiating Strategy. Available at:
http://www.successfulnegotiators.com/negotiators-blog/2017/1/16/basic-negotiation-
terminology-batna-reservation-value-zopa [Accessed 17 Jun. 2018].