The Procurement Glossary » BATNA

BATNA

Sourcing & RFx

Also known as: Best Alternative To a Negotiated Agreement

Definition

The Best Alternative To a Negotiated Agreement — a party's strongest fallback if the current negotiation fails.

Explanation

Knowing your BATNA sets your walk-away point and your real bargaining power: you should never accept a deal worse than your best alternative. In sourcing, a credible BATNA (a second qualified supplier, or making in-house) strengthens the buyer's hand.

Example

Because a second supplier will match the spec at RM8.50, the buyer's BATNA lets it refuse the incumbent's RM9.20 offer.

Related terms

• Negotiation — The discussion between buyer and supplier to agree price, terms and conditions before a contract or order is placed.
• Supplier Selection — The decision process of choosing which supplier (or suppliers) to award business to after evaluating bids or proposals.
• Leverage — The relative bargaining power a buyer or supplier holds in a negotiation, driven by factors like volume, alternatives and switching cost.

Frequently Asked Questions

What is BATNA?

The Best Alternative To a Negotiated Agreement — a party's strongest fallback if the current negotiation fails. Knowing your BATNA sets your walk-away point and your real bargaining power: you should never accept a deal worse than your best alternative. In sourcing, a credible BATNA (a second qualified supplier, or making in-house) strengthens the buyer's hand.

Can you give an example of BATNA?

Because a second supplier will match the spec at RM8.50, the buyer's BATNA lets it refuse the incumbent's RM9.20 offer.

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