Negotiation: A strategic discussion that resolves an issue in a way that both parties find acceptable.

Position: What a person says they want (e.g., “I want a 20% discount”).

Interest: The underlying reason why they want it (e.g., “I need to lower my costs to be competitive”).

BATNA (Best Alternative to a Negotiated Agreement): This is the most advantageous course of action you can take if the current negotiation fails and an agreement cannot be reached. For example, if you are negotiating with Supplier A, your BATNA could be to buy from Supplier B, even if their price is slightly higher.

Example: Yohannes Negotiates with a Component Supplier

Yohannes needs to buy a specific type of reflective panel for his solar cookers. The supplier’s listed price is 500 ETB per panel. This is too high for Yohannes to make a profit.

Preparation: Before the meeting, Yohannes researches other suppliers. He finds Supplier B, who sells a similar panel for 520 ETB. Buying from Supplier B is his BATNA. He also defines his goals: his ideal price is 450 ETB, but he can accept up to 480 ETB.

Focus on Interests: In the meeting, the supplier holds his position: “The price is 500 ETB.” Yohannes asks questions to understand his interest: “Can you help me understand the components of this price? My business is new, and managing costs is my biggest challenge to making clean energy affordable.” He learns the supplier’s main concern is cash flow and that he gives discounts for large, pre-paid orders.

Inventing Options: Yohannes proposes a solution that meets both their interests: “What if I can’t buy 1,000 units today, but I pay you in cash for 200 units right now? That helps your cash flow, and a lower price helps my new business survive.” They eventually agree on a price of 475 ETB per panel for the initial order. This is a win-win outcome.