Like any business area, Purchasing has its share of jargon. Knowing what the different terms mean make you an insider.
These three terms are used in Purchasing as well as other types of negotiations. Even if you don't use these exact terms, the concepts are vitally important to successful negotiations.
I'm talking about MDO, LAA, and BATNA.
MDO stands for Most Desired Outcome. You need to think about what you would most like to get out of a contract. Yes, superior service for free would be nice, but you have to be realistic too. What terms and conditions would truly make you and your bottom line happy?
LAA stands for Least Acceptable Agreement. What is the minimum that will satisfy your needs and budget? This must be established ahead of time or you may "give away" too much during the negotiation session.
BATNA stands for Best Alternative To Negotiated Agreement. Can you walk away from this vendor if you can't reach an agreement? If the vendor's items are common commodities, maybe you can. If you are buying proprietary software that is a necessity for your business, this is a different story.
Be sure to spend time thinking about all three of these concepts before entering a negotiations session.
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