We hear of win-win, win-lose, and lose-win business relationships. Business relationship are either arms length or close; adversarial or mutual.
It is the desire of every business person to achieve win-win relationships, but the truth is that only some degree of such romantic business relationship is achievable because it is not possible to open up the same way personal relationship are handled.
Principles such as play your cards closer to your chest apply because information is a business asset that needs to be managed in business relationship.
Negotiators are trained to give out more of the less important information relating to a transaction in return of information of high importance from the other party.
Business transactions are more of a tug-of-war, as illustrated by the zone of potential agreement (ZOPA). When studying negotiation, one is taught to close the gap of wants and come to a common understanding compromising on negotiation variables such as cost, quality, delivery, etc.
This is not that easy because all negotiation parties develop their best alternative to a negotiated agreement (BATNA).
BATNA describes the area where the agreements may be met between two parties. Parties develop lower limits in any agreement, and demands and concessions are made with the BATNA in mind and resembling the tug-of-war.
ZOPA is about setting targets and minimum fall-back positions for a negotiation. The limits of ZOPA represent each partys fall-back position below which either party would walkaway.
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It therefore suggests that once both sides have moved into their respective zones, which are beyond the fall-back, then it is probable that a consensus can be reached.
One party has to make an offer which in turn will be evaluated by the receiving party, who will make a decision on whether to respond or not, and if so which zone.
This will continue until the ZOPA is reached and an acceptable agreement is formulated. ZOPA demonstrates various positions that can be taken when attempting to reach an agreement.
This provides a platform for offers and concessions in order to obtain a mutually acceptable resolution. The ZOPA ranges are as follows:
Reasonable zone: This is considered a precursor to the ZOPA. It is thought that an opening offer in this region is reasonable enough to enable to move towards an acceptable agreement.
Credible zone: An opening offer may be perceived as slightly unreasonable and therefore may or may not set parameters for negotiation.
Extreme zone: An offer opened in this zone will not usually set the parameters for negotiation; however, those offers that are deemed extreme, but credible may trigger movement.
Insult zone: Some offers are considered unreasonable and fail to set out the parameter for negotiation and may lead to the other party refusing to continue the discussion.
When establishing a fall-back position, it is important to remember todevelop a package of variables in order to create a bargaining mix with which to negotiate.
It is also necessary to identify those variables that are through-aways and those that are trade-offs, so that concessions can be elicited from the other party who may place more value on them.
Although ZOPA has limitations in that it does not take into account the relative strength, power or interest of the parties, all of which can affect the outcome of the process, it is still a useful negotiation strategy planning tool.
The model is also criticised of failing to allow for creativity in a negotiation process, also ignoring the impact of new information gleaned during the course of a negotiation process that affects individual positions; the tool is still useful in that it supports commercial negotiations and contractual disputes.
