MGMT 7016 University of Cincinnati The Preparation Process for International Negotiations

The Preparation Process for International

Negotiations

MGMT 7016 - Negotiations

University Of Cincinnati

December 16, 2023

Introduction

International negotiation in general is an interactive

process, which serves as an instrument to end a

continuing conflict or to arrive at a solution for a

controversy. Good preparation forms the basis for

successful international negotiations. “It may also serve

as a means to achieve common objectives or agreements

among individuals or groups (parties) in relation to a

specific object, material or immaterial, within a

framework of pre-established rules, known and accepted

by the parties involved. These parties are directly or

indirectly interested in the object and in the objectives

of the negotiation,” (Meridiano, 2010). International

negotiations also include international business

negotiations, which falls under the scope of this

research.

While adequate preparation happens to be the most

important aspect that precedes every round of

international negotiations, negotiators often are found to

be inadequately prepared and there has been dearth of

research on the subject. Most of the existing guidelines

have been developed over the period without any

research backing. These guidelines focus on concepts

such as the underlying concerns of a negotiator and the

best alternatives to a negotiated agreement (BATNA),

and mostly these guidelines are adopted by the

negotiators in their encounters (Fisher and Ertel, 1995;

Thompson, 1998).

In the realm of international negotiations, the terms

planning and preparation are often used

interchangeably. However, “preparation” is much more

encompassing, as it includes all the efforts and activities

of the negotiator undertaken before the actual

negotiation takes place, when the negotiator is at the top

of his form. Without undertaking an effective

preparatory process, the negotiator in an international

negotiation is not likely to get satisfying and successful

outcomes. Therefore, preparation becomes an essential

process in international negotiation. In this context, this

presentation focuses on the preparation for international

negotiations from a systematic perspective.

International Negotiations

This section reviews the perspectives on international

negotiations to have a better understanding on the scope

of the research inquiry. The objective of any

international negotiation is to arrive at an acceptable

conclusion, which reduces disagreements and enhances

benefits for the parties to the negotiation. According to

Martin et al., (1999), a comprehensible negotiation

process forms the basis of any fruitful business

association at an international level.

International negotiations for the purpose of this paper

are restricted to international business negotiations. An

international business negotiation can be defined as the

interaction undertaken deliberately among two or more

social units. Out of the social units involved in the

negotiations, one of them represents a business entity.

The parties to the negotiation originate from varied

cultural backgrounds and each of them attempt to

describe their affiliation to a specific business issue.

International negotiations may take place between one

company and another or between a company and a

government.

The negotiations are interpersonal interactions over any

business issue as the negotiation may relate to the

conclusion of a sale contract, issue of licenses, entering

of joint ventures or acquisition of one entity by another

(Weiss, 1993: 270). The process of negotiation involves

the stages of pre-negotiation, actual negotiation and

post-negotiation. A negotiation becomes successful,

when there is a smooth flow of the negotiation process

in all the three stages.

“The pre-negotiation stage, which involves the

preparation and planning, is the most important step in

negotiation,” (Ghauri, 1996:14) and this stage is the

central focus of this study. The pre-negotiation stage

becomes important since it is the starting point in

international negotiations (Lewicki, et al., 1994).

Activities like building trust and relationship among the

parties and “task-related behaviors” which concentrate

on the choices of different alternatives available to

arrive at a solution constitute the major interactions

during the pre-negotiation stage (Graham & Sano 1989,

Simintiras & Thomas 1998). “In brief, the first stage of

negotiation emphasizes getting to know each other,

identifying the issues, and preparing for the negotiation

process” (Numprasertchai & Swierczek, 2006).

“The negotiation stage involves a face-to-face

interaction, methods of persuasion, and the use of

tactics. At this stage negotiators explore the differences

in preferences and expectations related to developing an

agreement,” (Numprasertchai & Swierczek, 2006). The

post-negotiation stage involves exploring concessions,

looking into compromises, evaluation of the agreement

and follow up through documentation or other

procedures.

In most international negotiations, these three phases are

undertaken at the same time. “The negotiation process

is a dynamic process, involving a variety of factors

related to potential negotiation outcomes,”

(Numprasertchai & Swierczek, 2006).

There is an element of complexity in international

negotiations, since such negotiations take place between

persons belonging to different cultures. “International

business negotiations are typically more complicated

and difficult to assess than the negotiations taking place

between negotiators from the same culture,”

(Numprasertchai & Swierczek, 2006). The reason for

the difficulty is due to the differences in the values that

the negotiators hold.

Negotiations are carried out based on various

approaches developed on the exclusive standpoints of

the negotiators concerned. “Other external influences

such as international law, exchange rates, and economic

growth also increase the complexity of negotiations,”

(Numprasertchai & Swierczek, 2006). It is essential that

the international negotiators understand the values of

each party so that they may be able to amend their

negotiating approaches and styles to meet the emerging

situations and arrive at an amicable solution to the

business issue.

Preparation for Negotiation – an Overview

The first rule underlying effective negotiation is to get

prepared for negotiating. In general, there are three

different activities involved in the process of preparing

for a negotiation. They are

1. information gathering,

2. analysis,

3. planning.

In the practical handbooks outlining negotiation

practices as well as other analytical papers, these three

activities have been regarded as the most important tasks

that a negotiator must undertake to ensure successful

outcomes from any negotiation. Some of the authors

argue that the preparation for negotiation will be better

able to give an upper hand to a negotiator than any other

activity in the process of negotiation.

This implies that those who prepare best will be able to

negotiate the best. Nevertheless, in the negotiation

literature there are few research findings about how

much one should prepare. This situation gives an

impression that one can never be too prepared for

negotiating except that more preparation will yield

better outcomes from the negotiation. Given the central

role in the negotiation process there is no inclusive

definition of the term “preparation” found in the

literature, nor is there an analysis of its boundaries and

limits and characterization of the preparation process as

a whole.

Traditional View of Preparation

A number of activities have been identified which a

negotiator has to undertake after the decision to

negotiate has been taken, but before arriving at the

negotiating table. These activities cover gathering

information on the issue to be negotiated and

information on the participants in the negotiation. The

activities also include analysis of one’s own interests

and preferences of the negotiator, as well as the parties

on the other side, and planning the course of action,

when the actual process of negotiation begins and face-

to-face interaction takes place (Breslin and Rubin 1991;

Fisher and Ury 1991; Johnson 1993; Keeney and Raiffa

1992, Lax and Sebenius 1986, Lewicki et al 1994, and

Raiffa 1992). These activities can be grouped into three

distinct categories such as

1. information gathering,

2. analysis,

3. planning.

Collecting Information about Parties and Issues

This can be taken as the first step in the process of

preparation for a negotiation, where the activities of data

collection and research into the history of the issues to

be resolved are undertaken. This step involves studying

the precedents for resolving similar issues, receiving

consultation from external experts and interviewing

those people who have negotiated with the other party

in the past instances (Lewicki et al 1994). Raiffa (1992)

includes all those activities in this group, where the

negotiator can learn whatever is possible about the

trustworthiness, ethics, style and personality of the other

party to the negotiation.

Analysis of Preferences, Interests and Alternatives

According to Fisher and Ury (1991), a negotiator has to

understand his own interests, and he should be able to

distinguish interests from positions. This line of analysis

is extended by Lax and Sebenius (1986), to separate

interests in outcomes of the negotiation, from the

interests of the parties in the relationship among them

currently and in the future. According to Fisher et al.,

(1994), it is essential that the negotiator understand the

interests, values and perceptions of the other parties to

the negotiation, and based on the understanding the

negotiator has to generate options that the other party is

most likely to accept. Keeney and Raiffa (1992) and

Raiffa and Sebenius (1993), based on multiattribute

utility theory have developed a methodology “for

quantifying interests, scoring and ranking preferences

and evaluating tradeoffs among issues and outcomes”

(Watkins & Rosen, 2001).

Negotiation Planning

In most of the cases, it is observed that the negotiators

attend negotiation without adequate preparation based

on the inherent belief that negotiation is an intuitive

process and any emerging situation can be met with the

experience and exposure to different situations.

Conversely, when the negotiators are able to adequately

plan ahead of actual negotiation, taking the negotiation

as a process and campaign they are sure to come out

with breakthrough results. Negotiation does not

constitute a single and conclusive event but is a process

consisting of a series of proposals and counter proposals

made by the parties seeking to arrive at an equitable

balance among them.

This section elaborates on negotiation planning which is

a part of the preparation for international negotiation.

Although authors like Lewicki et al (1994), use the term

“planning” to denote the entire process of preparation

for negotiation, this section deals with planning to

identify a narrower set of activities, which are

undertaken by the negotiator to decide on the course of

action to be pursued at the negotiating table.

Planning includes the creation of an action plan. “The

negotiation literature gives considerable attention to

such tasks as generating options and combining them

into packages or proposals (Raiffa and Sebenius 1993),

anticipating the actions of the other side, envisioning

possible responses, and planning for contingencies.”

Lewicki and Litterer (1985) have identified three

different types of planning activities –

1. strategic planning,

2. tactical planning,

3. administrative planning.

Setting long-term goals and identifying the ways of

meeting these long-term goals is the focus of strategic

planning. Tactical planning aims at developing specific

short-term steps designed to achieve the long-term goals

established through strategic planning. “Finally,

administrative planning is the process of making

logistical and allocative arrangements for the

negotiation: assigning roles to team members, choosing

locations for meetings, and clarifying lines of

communication and authority” (Watkins & Rosen,

2001).

Negotiation planning is the systematic mapping of the

different steps involved in the process of negotiation

with the other party. “Negotiation Planning is not a

stand-alone activity; it occurs within a process context

and a variety of cultural variables and involves ongoing

external and internal conditioning,” (Seacchitti &

Guertin, 2005). The cultural variables affect the manner

in which the plans and actions are proposed and

developed. Irrespective of the influence of the cultural

and other variables acting on the process, planning is an

essential step in the process of negotiation and is often

overlooked.

The Negotiating Process.

The above diagram illustrates the overall process of

negotiation in general, which also applies to

international negotiations. The first four steps encircled

within bracketed areas reflect the important steps in the

planning process. These elements are vital in nature and

actions in these areas need to be undertaken at the phase

preceding the actual negotiation. These steps also form

part of the preparatory phase of the negotiating process.

Preparation of negotiation strategies and tactics take

place before the negotiation takes place.

In the process of negotiation, conditioning calls for

placing a starting point in the minds of the opponents

and this starting point is close to the end result, the

negotiator is expected o achieve. Planning involves the

consideration of the concerns relating to the objectives

to be achieved, the opponents in the negotiation and the

ways in which an agreement can be reached. In cases of

international negotiations, the negotiators often tend to

be concerned with cultural factors.

However, in most instances, the negotiators either

underestimate or overestimate the influence of cultural

factors on the negotiation process. The reason for such

wrong estimation is that they consider the cultural

factors without regard to the non-cultural factors or

sometimes only in association with behavioral factors.

They do not consider the cognitive or value-oriented

effects of cultural factors on the negotiation process

(Watkins & Rosen, 2001).

Problem Statement

In any international negotiation, the objective of the

negotiators is to reach an optimal solution so that

maximum gains occur to their sides. One of the vital

factors for making a fruitful negotiation is to evolve a

comprehensive negotiation approach. This calls for a

undergoing an elaborate preparatory process so that the

negotiator will be able to collect information, analyze it

and make proper planning for successful negotiation.

Since the preparation process preceding the actual

negotiation can ensure outstanding results, the study of

the preparation approach becomes important. There are

no well-defined procedures outlining the preparation

process and this necessitates a relook into the

preparation process for negotiation. Negotiations done

with an “off the cuff” approach do not yield spectacular

results, making the application of a preparatory

approach not only significant but absolutely important

for ensuring great success in negotiations.

Preparation for negotiation makes a key difference in the

approaches of skilled and amateur negotiators and often

determines the course of negotiations changing the

outcomes. In addition, the negotiators, before entering

the negotiation table, must have a better understanding

of the situation and the range of acceptable and

unacceptable solutions to the issue. The negotiator can

improve such understanding and acquire self-

confidence, only when a thorough preparation to

negotiation is undertaken.

Aims and Objectives

The central focus of this research is to make an in-depth

study of the preparation process for international

negotiations. In achieving this aim, the research

attempts to accomplish the following objectives.

1. To study the international negotiation process in

general to understand the role and importance of

the process of preparation in negotiation.

2. To recognize the limitations associated with

traditional models of negotiation preparation

process.

3. To understand the relationship between the

process of learning and planning in international

negotiation process.

4. To consider different approaches to preparation

processes as practiced by negotiators from

different regions/settings.

Research Methodology

This study follows a descriptive and exploratory

qualitative case study for achieving the objectives of the

research. In recent years, the roles of descriptive and

qualitative research methodologies, which include case

studies, participant observation, informant and

respondent interviewing and document analysis have

been emphasized and pursued (Scapens, 1990). In these

approaches, the researcher is required to have closer

involvement with the organizations or issues under

study. Based on detailed examination of the institutions

or organizations concerned, research findings are

described instead of being prescribed.

One qualitative method, which seems to offer at least

partial solution to the currently unsatisfactory research,

is the case study approach. In contrast to simplistic and

superficial findings of the quantitative method in some

instances, case study provides the opportunity for the

research to develop better theories in management and

accounting control systems, which are based on real

world managerial practices. In addition, a case study

allows flexibility in the interpretation of the findings.

The researcher for example, is not restricted to his/her

original theory, but most often is encouraged to come up

with new theoretical discoveries.

Case study has been used as a research tool by a number

of researchers. “Case study is an ideal methodology

when a holistic, in-depth investigation is needed”

(Feagin et al. 1991). Different exploratory studies in the

discipline of social studies have made use of the case

study method for collecting relatable information about

the topics researched. Following a case study as the

research tool allows the researcher to follow well -

developed techniques to meet the requirements of data

collection for any kind of investigation. “Whether the

study is experimental or quasi-experimental, the data

collection and analysis methods are known to hide some

details,” (Stake, 1995).

However, the case study method has the unique

capability of retrieving additional information from

different perspectives using multiple sources of data.

There are varying kinds of case studies, which can be

engaged for conducting studies in different settings.

These are exploratory case studies, explanatory case

studies and descriptive case studies. This research will

use an exploratory case study method to analyze the

preparatory process of international negotiations carried

out by the negotiators belonging to China and will

present an analysis of the negotiating process including

preparation.

Structure of the Report

In order to make a comprehensive presentation this

research report is structured to have the following

chapters.

Introduction

The introductory chapter briefly described the

background and scope of the research on preparatory

approach to international negotiations. The chapter

presented an overview of the preparation process and

laid down the research objectives.

Literature Review

The second chapter reviews previous literature and

research findings in preparation for the international

negotiation process. The review addresses the

underlying assumptions, problems in understanding of

preparation and a rethinking of preparation.

Analysis

This chapter presents an analysis of the preparatory

process in international business negotiations in the

country of China.

Conclusion and Recommendations

The chapter summarises the research process and

findings and make a few recommendations for future

research studies.

Literature Review

International negotiation is the association between

planning for international transactions and

implementation of such planning. The ability to

negotiate successfully depends largely on the efforts the

parties put into the preparation for such international

negotiation. The central objective of this research is to

gain a better understanding of the preparatory approach

to international negotiation, by exploring and describing

the process of preparation.

The objective becomes significant in view of the fact

that international marketers are becoming business

negotiators engaged in continuous cross-border

transactions with a number of different people ranging

from consumers to competitors. Ghauri and Usunier

(1996) argue that people entering into international

negotiations will be able to enhance their ability to

interact effectively with their foreign counterparts, when

they are able to make the necessary adjustments to the

cultural backgrounds that they come across during

negotiations. The negotiation stage is the connecting

link between planning and implementation in the

management of international transactions (Deresky,

1996).

Negotiation can be defined as “a voluntary process of

give and take where both parties modify their offers and

expectations in order to come closer to each other”

(Ghauri and Usunier 1996). Each international

transaction has a negotiation aspect and every

negotiation gives rise to challenges and opportunities to

the people who are involved in the transactions.

Especially business negotiations are considered special

as the negotiation in this case is purely voluntary and the

parties have the option of quitting the process at any

time on their own accord. Many growing companies

find international negotiations a routine affair and when

these organizations operate across geographical borders

different cultures often tend to magnify the challenges

of negotiation (Herbig and Gulbro, 1996). In this

context, this review deals with the preparatory approach

for international negotiations.

International Business Negotiations

Any international business involves the participation of

parties belonging to two or more countries and it

involves the movement of merchandise and service

across geographical borders. In general, international

business encompasses the field of international trade

and commerce and international investments by parties

from one country in the assets of another. Tsai (2003)

defines international business to include the transfer of

goods, which is tangible business or services, which are

intangible merchandise between parties belonging to

two countries. The term “goods” cover a wide range of

commodities including raw materials, semi-finished

goods and finished inventory. Similarly, the term

“services” covers a number of activities including

accounting, transportation, banking and insurance.

Loth & Parks (2002) argues that the term also includes

the supply of intangible capital such as trademarks and

patents and technical knowhow from one country to

another. International investments in general denote the

foreign direct investments that parties make in other

countries. Apart from including buying of shares and

securities, the term international investments include the

provision of financial services to foreign owners

(Weigel, Gregory & Wagle, 1997; Bergsten & Noland,

1993). The process of international investment

incorporates the transfer of productive domestic

technology and management from transnational

companies to domestic companies (Kaminski, 1999;

Bergsten & Noland, 1993).

In pursuing both international business as well as

investments, managers increasingly engage themselves

in the process of international business negotiations.

Gilsdorf (1997) observes that international negotiation

is one of the toughest jobs in businesses. Managers

usually spend more than half of their time in negotiating

(Adler, 1997). International negotiations involve higher

stakes than the domestic business negotiations (Mintu-

Wimsatt and Calantone, 1991).

Tung (1988) argues that although the parties to

international business negotiations intend to reach

successful agreements, there is an alarmingly higher

level of failure in international negotiations. “The

consequences of failure in international negotiations are

also high, including limitations on the scope and profit

potential of companies, significant increases in non-

recoverable expenses, and, perhaps most importantly,

decreases in the motivation of the international

negotiators.”

There is the need for increased skill and competencies

in conducting international negotiations as compared to

domestic business negotiations. Several researchers

have observed the existence of an extensive literature

base covering domestic business negotiations (e.g.

Eppler et al., 1998; Perdue, 1992; Sujan et al., 1988;

Thomson, 1990). Simintiras and Thomas, (1998) are of

the opinion that the international business negotiations

literature is normative in nature and it is highly

disjointed. However, these views have to be taken as

expressed with an extensive review of the international

business negotiations literature.

In these kinds of transactions, whenever two parties start

negotiating, the complete process of negotiation takes

place within the context of the environment under which

the negotiation is undertaken and the immediate context

under which the parties negotiate with each other. “The

environmental context refers to forces in the

environment that are beyond the control of either party

involved in the negotiations. The immediate context

includes such aspects as the relative power of the

negotiators and the nature of their interdependence

factors over which the negotiators have influence and

some measure of control,” (Phatak and Habib, 1996).

Both the environmental context and immediate context

influence the process and outcome of the negotiations.

The Environmental Context of International

Negotiations

There are different dimensions to the environmental

context of international business negotiations. They

include

i. legal pluralism,

ii. political pluralism,

iii. currency fluctuations and foreign exchange

fluctuations,

iv. foreign government controls and bureaucracy,

v. influence of external stakeholders (Phatak and

Habib, 1996).

Legal Pluralism

“The principle of national sovereignty gives every

nation-state the right to make laws that are supposedly

in its national interests. An international business

transactions must comply with the laws of the countries

involved,” (Phatak and Habib, 1996). There are certain

restrictions imposed by the laws of countries on entering

into certain types of transactions. In many countries,

there may be sectors such as telecommunications and

automobile production, which may not be exposed to

one hundred percent foreign investments. For instance,

in countries like India and China, foreign enterprises can

enter into such sectors only through forming a joint-

venture arrangement with some of the domestic

companies.

The joint-venture arrangement has an influence on the

negotiations among the parties on several major factors

such as management and control of the enterprise and

international sales provisions. Apart from these, there

are the legal obligations on both the sides, which have

to be considered in concluding the joint venture

arrangements. In such cases, it becomes important that

the negotiators fully understand the implications of the

currency of the laws in the country with which they

would like to have business transactions. It is also

important that the persons involved in negotiations

refrain from taking any illegal actions prohibited by the

laws of the countries involved. “Negotiators should be

forewarned about the legal traps that could transform a

supposedly good agreement into a nightmare if the legal

implications of the transaction are not carefully

examined,” (Phatak and Habib, 1996).

Political Pluralism

Each country in the world has its own political system

and foreign policy, which determines its trade relations

with other countries. International business negotiations

are sometimes impeded in the conflicting foreign

policies of the two countries. Foreign policies followed

by the host county affect the international business

negotiations. It therefore becomes important for the

negotiators to understand the implications and

constraints imposed by the foreign policies of the

countries in international business negotiations, as these

policies will have direct or indirect impacts on the

outcomes of the negotiations. The negotiators should

study the potential political fallout of an international

business deal before the deal is negotiated and the

agreement signed.

Currency Fluctuations and Foreign Exchange

Since international business transactions take place in an

environment where multiple currencies interact with

each other, the daily fluctuations in foreign exchange

value can have a large impact on international business

negotiations.

“A business deal that is not effectively structured to

compensate and protect against foreign exchange

fluctuations is likely to be a prelude to a disaster if the

underlying currencies in which payments are to be

received precipitously decline in value–or a windfall if

they appreciate in value–against the recipient

company’s home currency or other stable currencies,”

(Phatak and Habib, 1996).

Therefore, it becomes essential that the negotiators for

both companies obtain realistic and “most likely”

exchange rates for the relevant currencies from

international banks or currency future markets before

arriving at any resolution based on the currency

exchange rates. It is advisable that the negotiators

include contingency clauses in the agreements, which

would protect both sides from any unexpected

fluctuations in currency exchange rates in future.

Foreign exchange control policies of different

governments also have an influence on international

business negotiations. Exchange control policies affect

the import and payment of raw materials and

repatriation of profits from one country to another.

Therefore, negotiators from a foreign company should

ensure that the contracts negotiated and entered into by

them provide for the exigencies that might be created by

the exchange control policies of the host governments.

Government Controls and Bureaucracy

In the case of certain countries, there will be excessive

interference of the government in businesses.

“Government agencies may have the authority to control

the total output of an industry. Or they may have

absolute control over the granting of permits to expand

production capacity,” (Phatak and Habib, 1996). A

company, which has a potential to increase its market

share may be under an obligation to obtain the necessary

licenses for expanding capacity, which may be denied

many times by the bureaucrats attached to the

government. Similarly, a company might need a

government license to implement a new strategy in

connection with the operation of a new product line. In

all those cases where there is a major role played by the

government in furthering the business of the company,

the negotiations should include the government as one

of the parties with whom the foreign firm has to

negotiate directly or indirectly.

Influence of External Stakeholders

The external stakeholders are those people who have a

direct or indirect interest in the outcome of international

negotiations. Examples of external stakeholders include,

competitors, customers, labor unions, chambers of

commerce and industry and the shareholders of the

respective companies. It is important that the negotiators

take the interests of most of these external stakeholders

if not the interests of all of them into account while

drawing up international business agreements, as the

stakeholders’ interests are to be protected by any

international business negotiations.

Factors influencing Pre-Negotiation

According to Deresky (1996), there are twelve different

variables, which influence the process of pre-

negotiation and in turn, the preparatory process in any

international business negotiations.

They are:

i. basic conception of the negotiation process

implying whether the international business

negotiation follows a competitive process or it

depends on the culture of the country. This

approach determines the progress of the process

of negotiation;

ii. selection criteria for the members of the

negotiating team. There are different attributes to

be considered in the selection of the members

constituting the negotiation team like experience,

status, personal attributes and some other

characteristic features. The extent of value

involved in the negotiation also determines the

selection criteria;

iii. the significance of the kind of issues involved in

negotiation like the price, or the focus on formal

and informal relationships;

iv. the importance of the protocol concerning the

importance of procedures and social behaviors;

v. the complexity of language implying the extent of

reliance placed on verbal and non-verbal cues

used to interpret information gathered;

vi. the nature of persuasive arguments shown by the

intention of the parties attempting to influence

each other;

vii. the individuals’ aspirations in the entire process

of negotiation – the motivations based on

individual, company or community affect the

preparatory process to different degrees;

viii. the feeling of trust and its basis in past experience,

intuition or rules and continuance throughout the

process of negotiation;

ix. the propensity to take risk;

x. the attitude of each negotiating party towards the

time taken for completing the process of

negotiation;

xi. the system of decision-making whether by

individual determination or by group consensus;

xii. the form of satisfactory agreements and whether

such agreements are based on trust or the

creditability of the parties involved in the

negotiating process.

The important point to reckon here is that each of these

factors is influenced by the culture of the country. The

ease or difficulty in the negotiating process as

influenced by each of these factors largely depends on

the cultural differences between the countries involved

in the negotiation.

Underlying Assumptions of International

Negotiations

There have been a number of approaches made to the

issue of preparing for international negotiations by

various authors. However, there are two important

assumptions that have been found to be more evident in

most of the approaches. They are

i. a three-stage model of the negotiation process

ii. the importance of preparation for effective

negotiation.

Even though there are no explicit indications of these

assumptions, they form the foundation for much of what

has been written about the preparation for negotiation.

Three-Staged Negotiation Process

The first assumption relates to the existence of an

implicit three-stage chronological model of the process

of negotiation. This model underpins the overall

negotiation process, which has the pre-negotiation stage

as the first step in the process, followed by a preparation

stage and the final step of the negotiating stage. Much

of the previous literature has based its findings based on

the premise that each of these three stages encompasses

a definite set of activities characterizing the respective

stage. They have also based their findings on the

premise that it is possible to distinguish the stages from

one another based on the activities of the parties

involved in the negotiation process during each of the

stage.

The pre-negotiation stage generally appears to start at

the point where someone – this may be a party to the

negotiation or a third party intervening in the process of

negotiation – first identifies the possibility of a

negotiation and ends at the point when the parties to the

negotiation arrive at the negotiating table. The pre-

negotiation stage can be considered to have ended when

all the activities connected with the stage are completed.

The activities involved in this stage are

i. all the parties to the negotiation have made an

absolute commitment to continue with the

negotiation process,

ii. the agenda and the structure of the negotiation

have been set and agreed to by the parties,

iii. the participants to the negotiation are selected.

Next is the preparation stage, which covers the period

from the time parties have decided to negotiate until the

time when the first formal session of the negotiation

process begins. This stage involves three main sets of

activities;

i. gathering information in connection with the

negotiation,

ii. analysis of the information,

iii. planning the process of negotiation.

The activities in this stage are distinct in many respects.

These activities occur away from the formal actions

involved in the negotiating process and at-the-table

discussion. These activities are designed to improve the

prospects of the party, which undertakes the preparatory

process and the activities generally take place before the

parties come to the negotiating table for the first time.

The negotiating stage starts at the point of time when the

parties meet formally to discuss the issues and the

associated offers, proposals and concessions. The

negotiating stage concludes when an agreement is

reached because of the negotiations or at the point of

time when one or more of the parties leave the

negotiating table. The tactics for creating and claiming

value, which were developed during the preparation

stage, are implemented during the negotiating stage.

Traditionally the interaction between parties or their

agents at the negotiating table was the defining feature

of the negotiating stage. Any activities or incidents

happening prior to the first formal round were

considered as preliminary to the negotiating stage itself,

irrespective of the purpose or nature of the activities or

incidents. The literature is rife with a number of

variations of this three-stage approach. Even though

there may be some difference in the number of stages

and their nomenclature, the activities encompassed by

them do not vary too much. All of these theoretical

models tend to arrive at the same conclusion that the

negotiating process from the start to finish passes

through distinct and chronologically bound stages, each

of which possesses a characteristic set of goals and

activities.

Importance of Preparation to Negotiation

The second assumption made by most of the previous

literature on international negotiation is the central

importance of preparation to effective negotiation.

Many of the widely cited books and articles on

negotiation advocate the process of preparation as the

basis for an effective negotiation. Much of the literature

confirms that good preparation is the path to good

negotiation. In some of the literature, the faith in

preparation for the success of negotiation has been made

explicit. For example, Lewicki et al. (1994) view

negotiation success largely as a function of effective

planning undertaken prior to actual negotiation.

According to Lewicki et al. (1994), planning provides

the negotiator “a clear sense of direction on how to

proceed. This sense of direction and the confidence

derived from it will be the single most important factor

in affecting negotiation outcomes.” Raiffa (1992) after

considering a number of situations in which optimal

solutions to conflicts could not be reached concluded

that in all these cases lack of proper preparation for

negotiation has led to the situation of no resolution to

the conflicts. Therefore, there is the need for effective

preparation before attending any negotiating process.

Other authors like Lax and Sebenius (1986) appear to

have implicitly relied on the assumption of importance

of preparation for justifying their emphasis on the

analysis of interests, alternative courses of actions and

preferences before the real process of negotiation starts.

Because of their implicit faith in the preparation for the

success of negotiation, many authors have not touched

the question of the extent of preparation necessary for

any particular type of negotiation. Similarly, the authors

have paid little attention to the types of activities that

should be given priority during the process of

preparation. The authors have also not addressed the

issue of costs or drawbacks of preparation. In the

absence of answers to all these questions relating to

preparation, it can safely be assumed that the greater the

preparation, the greater is the chances of the negotiation

being successful.

Therefore, the more prepared negotiators arriving at the

negotiating table are likely to achieve better outcomes

in the negotiations. The study of the literature relating to

negotiation leaves a picture that if it were possible it is

better to have an infinite amount of preparation.

Problems with the Understanding of Preparation

The review of the literature raises pertinent questions

concerning the broad understanding of the preparatory

phase of the process of negotiation. The analysis of the

two assumptions gives rise to questions on the limits to

preparation and on the limits to the value of preparation.

The question pertains to the determination of whether

the preparation is a distinct and coherent set of activities,

which are undertaken and finished, within a specific

chronological stage in the process of negotiation, or is

the limit less than the undertaking of the activities.

Secondly, it is essential to understand the value of

preparation in the sense of the extent to which one

should go in preparing for the negotiation.

The first problem can be identified as the determination

of the point at which preparation starts and the point at

which it ends. There is ambiguity in the literature about

what exactly preparation entails. If preparation can be

defined to include recognizable boundaries and

characteristic activities, then it may be possible for a

negotiator to say that he/she has prepared to the extent

necessary. However, if the boundaries are not clear and

well defined it becomes difficult for one to understand

where preparation begins and where it ends.

It seems reasonable to define preparation to include “the

set of activities undertaken by a party to a negotiation

after it has decided to negotiate but before it gets to the

table” (Watkins & Rosen, 2001). Although there are no

uniform viewpoints of the authors on the activities

included in the preparation for negotiation, they all

agree that preparation encompasses three distinct types

of activities – information gathering, analysis of the

information and planning for the negotiation based on

the information gathered and analyzed. This definition

gives a picture of preparation in that it appears to be a

discrete chronological stage in the overall negotiating

process.

The preparation stage is preceded by the pre-negotiation

stage in which the parties agree to negotiate and it is

followed by the negotiation stage where the negotiation

ends. Nevertheless, this definition does not provide a

comprehensive idea of the host of activities, which

overlap the borders of pre-negotiation, preparation and

negotiation and therefore does not fit into the three-stage

model described earlier. Four different problems have

been identified when treating the preparation for

negotiation as a distinct stage.

Inconsistency in Definitions

When preparation is considered as a distinct stage

consisting of a specific chronological set of activities,

significant inconsistency occurs in outlining the

activities involved. This is because of the fact that the

stages of pre-negotiation, preparation and negotiation –

all suffer from multiple amount of interpretations and

uses. These inconsistencies make it difficult to define

the limits of preparation stage clearly and cohesively.

Among the three stages, the stage of pre-negotiation is

especially ambiguous. The literature makes two uses of

the term pre-negotiation – one in the broad sense and the

other in the narrow sense. Zartman (1989), Stein (1989)

and Saunders (1985) have provided a broader definition

of the term pre-negotiation. According to these authors,

pre-negotiation covers all the activities starting from the

earliest mediation efforts until the arrival of the parties

to the negotiating table.

The definitions provided by these authors reduce the

number of stages in the negotiation process to two rather

than three. The definition also includes the preparation

stage under the dichotomy of pre-

negotiation/negotiation classification of the total

negotiating process. In this case, many of the activities

that have been included in the preparation stage are

included in the pre-negotiation stage. Breslin and Rubin

(1991), using this broad definition, make a re-division

of pre-negotiation stage into two elements – creating an

internal agreement with the parties and meeting at the

negotiation table. Thus, Breslin and Rubin (1991) adopt

more or less a three-stage model. Other researchers like

Fisher (1994) and Raiffa (1992) provide a narrower

definition of pre-negotiation. They limit the use of pre-

negotiation to interactions between the negotiating

parties or their agents. Alternatively, they include the

activities in the time-period before the formal

negotiations start.

“Joint brainstorming sessions, dubbed “dialoguing” or

“non-negotiations” by Raiffa (1992), in which the

parties come together, often with a facilitator, to share

information and generate the widest possible range of

options for resolving the issues, are an example of this

narrower definition of prenegotiation” (Watkins &

Rosen, 2001).

Although this technique may find its use in international

political negotiations, it is not normally used in business

negotiations. There occurs a definitional problem even

with the term negotiation. Some of the authors argue that

the traditional definition of negotiation, which is formal

and mostly external, and at the table interaction does not

cover a number of activities that take place in the two

earlier process of negotiation. For example, according to

Zartman (1989), “the word ‘negotiation’ is being used,

as it often is, in two ways, referring both to the whole

process, including the preliminaries to itself, and to the

ultimate face-to-face diplomatic encounters.”

Overlapping of Preparation and Negotiation Cycles

When one tries to distinguish between chronologically

limited stages of preparation and negotiation, there is

likely to be a problem of overlapping preparation and

negotiation cycles. This is because most complex

negotiations involve several rounds of action and

interaction. Generally, interactions among and within

the parties, which are purely informal in nature precede

and intersperse formal negotiations at the table.

“When a negotiation is conducted in multiple rounds,

the activities that the parties engage in between rounds

may be nearly identical to those that they undertake

before the first round: gathering and analyzing

information, ranking possible resolutions, planning a

strategy for the upcoming round” (Watkins & Rosen,

2001). In other words, it becomes imperative that the

parties prepare for the next rounds of negotiation.

In many instances, the events of the first round might

serve as the preparation for the ensuing round. Instead

of a single, prolonged and chronologically limited phase

of preparation, which is followed by the negotiating

process, pursuing repeated and overlapping cycles of

preparation and negotiation, in which each round acts as

the preparation for the next round and running through

the entire process of negotiation until a resolution for the

issue is arrived is found to be more practical and

appealing.

Preparation treated as Negotiation

In many negotiations, it may be necessary for the parties

to conduct complicated and delicate internal

negotiations in order to arrive at an agreeable resolution

in the future negotiations. The parties to a complex

negotiation are rarely a single large entity. There will be

a number of sides representing diverse interests, who

might have spent a longer duration in arriving at a

unified strategy for bringing such strategies to the

negotiating table and they devise plans for the roles to

be played by each member of the negotiating team in the

negotiations (Putnam, 1988). In negotiations involving

two rounds, the first round of negotiations serve as the

preparation for the next round.

According to some scholars, there might be a difficulty

in deviating from a position, which is designed after

careful and elaborate deliberations and this makes the

internal negotiations the only means that really would

lead to some acceptable solution. In these cases

preparation itself is regarded as negotiation and it is

difficult to differentiate as to where the preparation stage

ends and where the negotiation begins (Zartman and

Berman, 1986).

The preliminary discussions between the parties, which

often occur before the formal negotiations take place,

are another illustration of preparation taking the role of

negotiation. If the parties to a negotiation arrive to the

place of negotiation in advance and enter dialogues to

set the agenda, make brainstorming session on the

available resolutions or fix the procedures for the

negotiating process, they can be said to be involved in

the negotiation even though there are no formal offers

or commitments made by any side.

Nevertheless, these preliminary dialogues also call for

preparation by the respective sides and therefore in

effect the parties must prepare to pre-negotiate. Thus,

preliminary discussions among the parties present

similar issues even though they are not held at the

negotiating table with each encompassing both

preparation and negotiation, which makes it difficult to

differentiate preparation from negotiation.

There is yet another type of negotiation, which develops

during the preparatory stage. In this, the parties make

strategic moves away from the table to engage in

altering the conditions that the parties eventually may

face at the time they arrive at the negotiating table.

These are the moves, which are undertaken by the

parties primarily to reduce the attractiveness of the

alternatives available to the opponents, to develop

supportive coalitions and to cause divisions in the

opposing coalitions (Lax and Sebenius, 1986, 1991).

“For example, if one side in a negotiation succeeds in

luring unaligned parties away from the other side,

convincing them that the other side’s proposals would

be disadvantageous, the dynamics of the negotiation

may change dramatically. Although activities like this

take place before the formal sessions begin, they are also

clearly moves in the game—both preparation and

negotiation,” (Watkins & Rosen, 2001). This position

may not be present in international business

negotiations.

Improper Separation of Thinking and Acting

In the three-stage model of negotiation, it usually

happens that the activities connected with the three

stages of information gathering, analysis and planning

are dissociated from the negotiating stage. At the same

time, the activities connected with negotiating like

acting and interacting are removed from the preparatory

stage. In the three-stage model, the process of

proceeding from one discrete stage to another covers the

fact that both activities like planning connected with

preparatory stage and activities such as acting connected

with negotiating stage are undertaken throughout the

process of negotiation.

At the start of the negotiating process, when the parties

begin the pre-negotiation process, usually the parties

undertake researching the associated issues and the

likely stands of their opponents. The parties will also be

involved in evaluating and ranking the interests of the

other side and the alternatives available to them. Based

on this evaluation they will plan the future course of

actions. It is important to note that these activities

continue to be critical throughout the process of

negotiation, since the parties gather information from

one another and based on this information evaluate the

findings and make amendments to their strategies based

on the analysis of the information gathered.

Because the parties to the negotiation cannot predict the

motives and moves of the other parties precisely, the

negotiators are left with no other option except to

continue preparing until the end of the process of

negotiation.

The need for continuous preparation in international

negotiations can be equated with formulating business

strategies. In the strategic planning process, separating

planning and implementation often leads to poor results

for the corporation engaging in the strategies because

even the most carefully designed strategic plans struggle

to take off if the designers do not indulge in learning and

revising their anticipation of the results in line with

changing market events which are unforeseeable

(Quinn, 1992).

Better business results can be achieved from strategic

plans when business leaders keep their options open and

make progress on an incremental basis based on the new

information acquired and adapt their plans as they move

along. Quinn (1992) states effective strategic plans “are

intended only as ‘frameworks’ to guide and provide

consistency for future decisions made incrementally. To

act otherwise would be to deny that further information

could have a value.” Negotiators need to act in the same

way as business strategists and must avoid the

separation of thinking from acting and learn new

information throughout the process of negotiation and

change their plans accordingly (Mintzberg, 1990).

Combined together, these issues of inconsistencies in

definition, overlapping of preparation and negotiation

cycles, preparation treated as negotiation and improper

separation of thinking and acting act as the limitations

to the preparation stage. These issues illustrate the

reasons for the inability to identify when the preparation

stage starts and when the stage ends, especially in a

complex negotiation, which comprises of multi-round

and multi-party involvement.

The issues discussed also illustrate that preparatory and

negotiating activities overlap each other and flow

simultaneously repeating themselves. The overlapping

of preparatory and negotiating activities suggest that a

three-stage pre-negotiation-preparation-negotiation

model does not precisely distinguish between the

activities and events in each stage in a situation of

complex negotiation process.

In the negotiation literature, the problem of boundaries

is not just the definitional issue. It has several practical

implications in the ways in which one thinks and

describes the negotiation process. The purpose of

establishing boundaries and definitions is to determine

what one assimilates and regards as important and what

one misses or disregards in the whole sequence of

activities in the entire process of any negotiation.

Therefore, clear boundaries and definitions become

critical elements in the process of good research and

analysis, and in offering good prescriptions to the

negotiators.

The three-stage model, which assumes that the

preparatory stage ends when the negotiation stage starts,

gives a misleading impression to the negotiators that

they can stop preparing when they arrive at the

negotiating table. The model also draws attention away

from the need to continue to acquire information,

analyze such information and continue planning over

the entire course of a negotiation process. The

separation of thinking from acting leads one to a

position where there is too much emphasis on

information gathering, analyzing and planning

preceding the stage of negotiation and too little on

learning any new information and adapting to such new

information while coming to the negotiating table.

Limits of Preparation

The review of negotiation literature indicates that more

preparation, which precedes the actual process of

negotiation, is likely to yield better results and therefore

it is advisable to invest as many resources as possible in

preparation. Nevertheless, there is no indication in the

literature as to the point where preparation is enough or

is too much. Just as the boundaries, problems deal with

the meaning of preparing to negotiate, the second issue

of limits to preparation deals with what it means to

prepare enough to negotiate.

Limits on Resources

One of the most fundamental limits confronted by a

party to a negotiation is the limitation imposed by the

finite resources available for negotiation. Even the best-

prepared negotiating team might have been subjected to

the “constraints on time, expertise, money, data, access

to documents” (Watkins, 2002) and other tangible

resources. Limitations on available resources act as a

restriction on the magnitude of the overall preparation

efforts of the parties to the negotiation. It is not always

possible for the negotiators to prepare as much as they

would like to because of these limitations and this fact

is often overlooked by the negotiation literature.

The limitations on various resources also force the

negotiators to undertake a series of difficult cost-benefit

calculations and decisions on allocating the available

resources. The decisions may relate to the time to be

devoted to information gathering and the time needed

for analyzing the gathered information.

They have to make hard decisions on the time to be

allotted for planning and on the gathering of the

additional information as to whether such additional

information to be gathered through more research is

really worth the cost or whether it is worth the while to

spend the additional time on analyzing the already

gathered information. The need to make these types of

decisions forces negotiators make a careful analysis of

the different priorities and to decide in advance which

types of preparatory activities are likely to give them

greater benefits during the process of actual negotiation.

Limitation on Information Availability

Even when the parties have infinite resources available

to them, they may not be in a position always to get what

they want while preparing for the negotiation.

Negotiations represent games of incomplete

information. There are some fundamental reasons,

which lead to this incompleteness in the information

available. They are:

i. negotiations are characterized by a high degree of

complexity, involving a number of variables,

which interact with each other in mostly

unforeseeable ways;

ii. negotiations suffer from high uncertainty because

of an inherent lack of knowledge about the future

state of the world;

iii. negotiations also possess the character of high

ambiguity, which restricts the chances of getting

complete information about one’s own interests

and alternatives or those of the opponents and in

addition there would always be shifts in the

interests and alternatives;

iv. negotiation also suffers from the limitation that

parties to a negotiation engage in various

deceptive activities of deliberately concealing

information from the opposite side or providing

misleading or inaccurate information on the

party’s interests and alternatives;

v. negotiations are basically indeterminate, in that it

is the interaction of the parties during the process

of negotiation which determines the specific

agreement within the range of all possible

agreements that are possible. It is to be noted that

no amount of information gathered would be able

to predict the course of that particular interaction

which decides the specific agreement;

vi. negotiations represent a strong non-linear

phenomenon, in which minor changes in the

initial conditions are likely to lead to major

consequences.

It may also happen that events occurring at an early

stage of negotiation may become irreversible at a later

point of time in the process of negotiation. In the process

of negotiation, it is possible that there are a large number

of initial conditions, in which even minor changes might

affect the outcome of the process of negotiation. For

instance, the simple event of whether the negotiators

shake hands when they enter the negotiating room first

may influence the course of the negotiation.

This will happen irrespective of the issues involved and

the interests of the parties at stake. There are other

factors like the chance of discovering common

acquaintances, factors of gender and age of the

negotiators or even the choice of the office building,

which is used for negotiation, which might affect the

outcome of the process. Just as it happens with many

other non-linear systems, the important aspects of

negotiation may become irreversible.

For example, a lost temper at an early stage of

negotiation is likely to impair the relations between the

negotiators throughout the process of negotiation until

the end and it may not be possible to repair any damage

once done. It is also not possible that negotiators could

prepare for the impacts of non-linearity in the process of

negotiation. At best, they can only recognize and adapt

to the effects as and when the incidents occur during the

course of negotiating process.

These reasons prevent the negotiators from knowing

every piece of information they would like to know and

any amount of preparation cannot equip them to know

the extent they want to know. For example, one of the

principal activities in the process of preparing is to

gather information on the interests and alternatives of

the other party.

Nevertheless, irrespective of whatever time, efforts, and

other resources the negotiators apply in this activity,

they may not be in a position to gain a complete

understanding of the other party’s interests and

alternatives because of the reasons listed above. It may

not be possible for the negotiators to perceive the

interests of the other party even if they apply infinite

resources. In addition, the resources invested in the

activity will provide only diminishing returns, as it is

often difficult to obtain more and more information even

on applying additional resources. “While the value of

devoting some effort—and perhaps significant effort—

to this activity is undeniable, it is equally clear that there

is a limit to its usefulness. The information sought may

simply not be available” (Watkins & Rosen, 2001).

Cognitive Limits

The characteristics and capacity of human perception

and reasoning limits the value of the preparation

process. These limits can be called “cognitive limits.”

Although the cognitive limits are less obvious than the

limitations emanating from finite resources and

incomplete information, the cognitive limits may be

important in deciding the possible extent of the

preparation. Unlike the limitations of resources and

information, the cognitive limits not only restrict the

magnitude and efficacy of the preparation process but

also actually weaken the process by reducing the ability

of the negotiator to achieve a desirable outcome of the

negotiation.

The nature of human perception and reasoning can

affect some basic elements of preparation. To illustrate,

analyzing one’s own interests being one of the activities

of preparation, although crucial, carries with its own set

of dangers. One of the fundamental assumptions

underlying the analysis of interests is the stability of the

interests and preferences of the negotiators. If the

interests and preferences are stable, then it becomes

easier to analyze, evaluate and solidify in advance,

which acts to reduce the risk of the negotiators being

sidetracked or losing sight of the original objectives.

The potential cost of this activity also needs to be

recognized. However, interests and preferences, which

are considered as stable and known cannot be expected

to evolve or change during the process of negotiation,

with the new opportunities arising or new information

becoming available. These changes in preferences often

become an important component in the dynamics of

negotiation, which allows the negotiators to take into

account new information, adapt to changes in their

relationship and expand the possibilities of arriving at

agreeable solutions.

However, considering the interests and preferences as

stable becomes additionally problematic in the cases

where complex internal negotiations are expected to

establish a position covering the external negotiations.

“Once an internal coalition has coalesced around an

apparently stable set of interests, participants in the

external rounds may have lost virtually all flexibility in

responding to new proposals and concessions,”

(Watkins & Rosen, 2001).

Similarly, negotiators who have invested a substantial

amount of time and effort in the analysis of their own

interests and preferences may tend to become

overcommitted to the outcomes of these processes,

which in turn is likely to create rigidity in their

convictions about what would constitute an acceptable

agreement. Keeney and Raiffa (1992) observe that a

significant amount of work has been done on the process

of quantifying interests and alternatives and in assigning

values to the issues and possible outcomes so that

negotiators could arrive at the negotiating table with a

precise understanding of their preferences and the

ability to score the other party’s offers and proposals.

This process actually facilitates the negotiators in

developing elaborate scoring systems and in investing

significant time in assigning values for the likely offers

and proposals. There is one danger associated with the

negotiators putting too much effort in analyzing the

interests and alternatives in that they become committed

to the systems they have developed. Such commitment

encourages them to expect to obtain a predetermined

score. This makes them judge the options and outcomes

purely in terms of scores or points. Consequently, there

may occur a loss of flexibility, creativity and receptivity

to compromise which are essential qualities for

achieving mutually beneficial outcomes.

The risks, which are inherent in analyzing one’s own

interests and preferences, are even more apparent in the

process of analyzing the interests of other parties. This

prescription applies only to those who undertake the

process of preparation preceding the negotiation process

and one cannot dispute the value of such analysis.

However, there is a high probability of stereotyping in

which one party assumes its interests would match with

those of whatever large group the party is associated

with and this probability cannot be ruled out. This

situation is most likely to arise in the case international

negotiations.

There is also the probability of making wrong guesses

about the things which matter, to the other party. Such

mistaken beliefs and assumptions about the interests and

alternatives of the other party have the effect of

narrowing the range of options generated and

considered in the course of the process of negotiation

and they reduce the chances of arriving at an efficient

agreement. If one of the parties becomes confident about

his/her understanding of the interests of the other party,

it may also lead to selective perception at the point of

time when the parties begin to talk. Such confidence

makes the negotiators less likely to listen carefully to the

views of the other party and ask intelligent questions as

they are sure that they already know the answers. This

type of selective perception combined with stereotypes

and mistaken assumptions might lead to self-fulfilling

prophecies and opportunities for sabotaging likely

agreements (Rubin, Pruitt and Kim, 1994).

The effect of these cognitive limits is that as and when

the deliberations in the negotiating table proceeds and

there is an exchange of views and proposals among the

parties, the negotiators may have to “unlearn” many of

the things that they presume they have learnt before

arriving at the negotiating table. The analysis and

planning that might take place before the parties meet at

the negotiating table might have been based on

information, which was incomplete. In order to avoid

becoming stuck to initial assessments which may not be

accurate, the negotiators must be willing to amend or

even discard the beliefs formed earlier in the face of

conflicting evidence. Thus, because of the effect of the

cognitive limits the negotiators who have spent

considerable time and efforts in gathering information,

analyzing it and devising detailed plans may not be

willing or able to amend their beliefs and adapt them to

the course of the actual process of negotiation, which

contain face-to-face discussions.

Resource, informational and cognitive limits inflict

major constraints on the process of preparing to

negotiate. These limitations suggest that there is a duty

for negotiators to think carefully about the goals of

preparing. They also advise that the negotiators must

consider setting priorities as a crucial first step and that

unlearning is as important as learning and it is even

possible that they might get “too prepared” for the

negotiations. Even though preparation is an important

step in the negotiation process, it has some potential

drawbacks. “Even the most basic prescriptions, such as

those about analyzing interests, entail tradeoffs that a

prospective negotiator must recognize and address,”

(Watkins & Rosen, 2001). It is a fact that the existing

literature has ignored the limits to preparing greatly and

one cannot expect much help from the literature on the

extent to which one should prepare to continue with the

negotiation process.

Summary

The boundaries and limits discussed above point to the

fact that there needs to be a complete rethinking of the

process of preparing to negotiate. Based on the

discussion it can be stated that preparation cannot be

treated easily as a cohesive bounded stage. It appears

that the activities undertaken during the stages of pre-

negotiation, preparation and negotiation are not entirely

different. Therefore, it is difficult and often not useful to

distinguish one chronological stage from the other. It is

problematic particularly with the preparation stage to

deem it as a distinct stage because it is ambiguous

because of the fact that all the three activities associated

with preparation namely information gathering,

analyzing and planning happen to take place through the

negotiating process. It is not possible to separate

thinking from acting.

Similarly, the existence of resource, informational and

cognitive limits force the negotiators to make a cost-

benefit analysis through the entire process of

negotiation. Because of the fact that the activities

connected with information gathering, analyzing and

planning entail cost and are subject to diminishing

returns, the negotiators must compare the costs of

undertaking the activities with the benefits likely to

occur from such activities. Based on such cost-benefit

analysis the negotiators should make the allocation of

the available resources. More particularly the

negotiators have to make their decisions from three

different perspectives –

i. the amount of time and resources to be invested

in information gathering, analyses and planning

away from the negotiating table as against at the

negotiating table,

ii. the time and resources to be invested in acting to

adapt to the circumstances away from the

negotiating table as against at the table

iii. the ways of learning both away from and at the

table.

The characteristics and context of the situation facing

the negotiators will have to be taken into account by the

negotiators in making these decisions.

An alternative to the three-stage preparation model,

which advises more preparation, a model of repeated

cycles of learning and planning will be of more use. In

this model, learning implies gathering and analyzing of

information available from whatever sources both away

from the table and during the course of negotiations at

the negotiating table.

Planning encompasses using the gathered information to

devise plans for possible future action and to identify the

other information needed both prior to the start of the

negotiation and during the negotiation process. There is

another stage of acting involved in this model, which

implies taking steps to change the conditions, which

may include moves away from the table. It also includes

sharing of the available information emanating from any

brainstorming session and exchanges of offers and

proposals in a traditional way at the negotiating table.

This model envisages the progression of the negotiators

in an adaptive way through alternative cycles of the

three core activities involved in the model.

The most important difference between this model and

the theoretical three-stage model is the central role taken

by learning throughout the process of negotiation. In this

model, negotiation is not represented by a plan and then

implemented as a process with one time learning and

planning before arriving at the negotiation table.

Instead, this model suggests that negotiation is a process

of acquiring new information on a continuous basis from

all the available sources including knowing the interests

and alternatives of the other party. Based on such

knowledge the negotiators adjust their expectations and

devise new strategies based on the new information

gathered.

This model also provides for managing the resource,

informational and cognitive limits which find an

inherent place in a negotiation process concentrating on

the major decision areas discussed earlier. The

limitations on resources do not allow the negotiators to

do an unlimited amount of information gathering,

analysis and planning based on the analyses. The new

model enables resource allocation on an explicit basis

and provides better solutions such as making tradeoffs

between learning before and during the process of

negotiation.

Unambiguous recognition of information limitations

underlines the need to take the peculiar characteristics

of specific negotiations into account when making

tradeoffs between learning away from and during the

course of negotiation. This leads to the formation of a

contingency theory of learning, planning and acting in

negotiation. In the case of negotiations, which are not

complex uncertain and unambiguous, most of the

information, which a negotiator wants to know can be

learnt in advance and there will be very little to be learnt

during the negotiation.

The negotiation in this case can proceed as portrayed

with most of the planning done and with most of the

acting carried out in one or few steps during the

negotiations at the table. On the other hand, in the case

of complex, uncertain and ambiguous negotiations,

there are several limitations acting on the extent to

which the negotiators can learn before they arrive at the

negotiating table and on the resources, which could be

invested in gathering information upfront and analyzing

the information gathered.

Under such circumstances, negotiators can benefit more

by using the time planning to learn once they arrive at

the negotiating table. When faced with a high level of

uncertainty, complexity and ambiguity, it is advisable

that the negotiators adopt an incremental step approach

through the entire process of negotiation, learning

through the interactions taking place during the course

of negotiation.

Because of the existence of cognitive limitations, the

rigorous information gathering and analysis

recommended by the literature may make the

negotiators resort to misleading assumptions about the

interests of other parties or make them rigid in their

approaches to the whole negotiation process. In contrast

to this position, concentrating on a continuous learning

process both away from and at the table would enable

the negotiators to adopt a scientific approach of

hypothesis testing and deciding on the issues. A

negotiator who goes to the negotiating table with a

hypothesis about the interests and alternatives of the

other party will attend to the negotiation with the goal of

testing the hypothesis and will be in a position to unlearn

where necessary.

The negotiator who is willing to unlearn is likely to ask

a different set of questions during negotiations than the

one who relies on the accuracy of his upfront analysis

and leading assumptions to interpret the actions of the

other party. The learning negotiator will also realize and

look for shifts in the preferences and values of the other

party during the course of negotiation. Therefore, this

model help the negotiators to balance the investment of

valuable resources in information gathering, analyzing

the information gathered and planning in advance with

learning and unlearning during the process of

negotiation.

Analysis

Neslin and Greenhalgh (1983) observed that negotiation

is one of the important matters for both sellers and

buyers in international trade (as cited in Simintiras &

Thomas, 1998). Gilsdorf (1997) as cited in Woo &

Prud’homme (1999) indicate that negotiation is the most

challenging task in communicating in business dealings.

Negotiation is considered as the process of

communicating backward and forward in order to

discuss the issues and arrive at a resolution which both

parties could not satisfy initially (Foroughi, 1998).

“Negotiation is a process for managing disagreements

with a view to achieving contractual satisfaction of

needs” (Gilles, 2002).

Negotiation in international trade is a kind of social

interaction entered into with the intention of reaching an

agreement for two or more parties having different

objectives or interests whom they think are important for

themselves (Manning & Robertson, 2003; Fraser &

Zarkada-Fraser, 2002). Differences in cultures,

environments, communication styles, political systems,

ideologies and customs or protocols make situations

more complicated in cross-cultural negotiations

(Hoffmann, 2001; Mintu-Wimsatt & Gassenheimer,

2000).

Role of Culture in International Negotiations

“Cultures are defined by values and norms. These may

vary according to national, organizational, regional,

ethnic, religious, or linguistic affiliation, and by gender,

generation, social class, and family levels” (Chen and

Starosta cited in Aydin & McIsaac, 2004). According to

Simintiras and Thomas (1998), cultures are accepted

values and norms, which lead people to have different

ways in their thoughts, feelings and behaviors. “Culture

has been defined as accepted beliefs, behavior patterns,

values, and norms of a collection of individuals

identifiable by their rules, concepts, and assumptions”,

Salacuse as cited in Hendon, Roy, & Ahmen, 2003).

Janosik (1987) has worked on his seminal theory of

cross-cultural negotiation research, which was based on

his qualitative, phenomenological studies about the role

of culture on negotiation. The theory advocated by

Janosik (1987) has identified four different constructs,

which are (i) cultures as a learned behavior, (ii) cultures

as a system of shared values, (iii) cultures as dialectic

and (iv) culture in context defined as cross-cultural

negotiation research. Irrespective of the approach to be

used, one of the main issues is to understand the

individual variations in international business

negotiation. In this context, this chapter presents an

analysis of international business negotiation as carried

out by Chinese nationals.

Style of Chinese Negotiation

The adoption of the Open Door Policy by the People’s

Republic of China has resulted in significant economic

growth. This rapid growth in the economy has opened

up the chances for foreign investors to invest in Chinese

companies. At the time when China opened up its

economy for foreign investments, Sino-foreign joint

ventures were the privileged forms of business

organization that attracted most western investments.

Many western companies are considering the formation

of joint ventures in China, in view of the great potential

they offer for a vast market for their products and the

availability of cheaper labor.

Nonetheless, the existence of differing management

styles between Chinese partners and foreign investors

creates problems in the negotiation of business deals and

the formation of joint venture arrangements. In forming

such joint venture arrangements, the challenges the

Chinese business negotiations pose is so great that there

have been instances that a number of business deals

between China and other western countries including

the USA have failed because of poor negotiations. As

John Graham and Mark Lam (2003) see this it is because

often “Americans see Chinese negotiators as inefficient,

indirect and even dishonest, while the Chinese see

American negotiators as aggressive, impersonal and

excitable”. Variations in the management style and

problems in negotiations are created by strong cultural

factors.

Despite these hindrances, it is possible to win

negotiations with Chinese businessmen, provided a

clear understanding of the social, cultural and economic

aspects of the negotiation with Chinese entrepreneurs is

evolved. This chapter presents an in-depth analysis of

the intricacies of Chinese negotiations including the

cultural background of such negotiations. The chapter

also deals with the influence of Confucian traits like

hierarchy, harmony and face on communication,

characteristics of communication and the Chinese

perception of negotiation. Further, the chapter discusses

the challenges the Chinese negotiation process poses for

managing international business in China.

A number of studies have been conducted in the area of

business negotiations of the Sino – Western and Sino –

American joint venture arrangements. These studies,

which started around the 1980s, have made an in-depth

study into the peculiarities of the negotiations of

business deals with Chinese government and

businessmen. The most important studies have been

conducted by Blackman 1997; Chen 1993; Davidson

1987; Deverge 1986; Fang 1999; Frankenstein 1986;

Lee and Lo 1988; Pye 1982; Stewart & Keown 1989;

and Tung 1982. The primary objective of these studies

is to bring out an exhaustive narration of the socio-

cultural implications of negotiations with the Chinese

and the intricacies thereof. It cannot be said that these

studies have completely made recommendations for the

successful negotiation of business deals with the

Chinese business empires. An abstract of these studies

is detailed in the following sections.

Role of Culture in Chinese Negotiation

The Chinese culture, which is 5000 years old, has a large

influence on their business negotiations. The rural origin

of a majority of the people has led them to retain their

agrarian values. Social and economic theories attach

more importance to the agricultural base than commerce

and business. Because of the rural base, the human

values assume more prominence in the negotiations than

business profits and gains. Graham and Lam (2003)

state, “Chinese negotiators are more concerned with the

means than the end; with the process more than the

goal.”

‘Morality’ is the next aspect of culture that greatly

affects the Chinese negotiations. Confucianism, which

is a 2500 years old Chinese philosophical tradition,

makes morality the all-pervasive factor throughout the

negotiation process. For coherence sake, the detailed

discussion on ‘Confucianism’ is included in the section

on Chinese Business Culture.

The Chinese believe in the holistic presentation of

information relating to their business negotiations. This

is because from a young age the Chinese get used to

studying the Pictographic Language. Because of the

pictorial character of the Chinese language, all Chinese

learn to memorize many pictures rather than sequences

of letters. This is reflected in the Chinese tendency to

depend more on holistic presentation of information.

The Chinese cannot do away with their suspicion of

foreigners. China was prone to violent attacks from

foreigners over several historical periods. Such attacks

resulted in internal conflicts and civil wars within the

country. The effect of this history had been the reason

for such wariness. Because of these bad memories, the

Chinese have a tendency to believe only in their families

and bank accounts. All these aspects of their cultural

background are reflected in their business negotiations

as well.

Chinese Business Culture

According to Tony Fang (2006) “Chinese business

culture consists of three fundamental components: the

PRC condition, Confucianism, and Chinese

stratagems”. In business negotiations, the Chinese

negotiator conducts the process of negotiation with his

or her cultural background and changes the strategies

during the process of negotiation depending on the

trustworthiness of the other negotiating party. The

adoption of such strategies is guided by the basic

business culture embedded within the three essential

components.

The PRC Condition

“Chinese politics, China’s socialist planned economic

system, legal framework, technology development,

great size, backwardness and uneven development, and

rapid change all these make the PRC condition”

(Campbell and Adlington, 1988; Child, 1990, 1994;

Lockett, 1988; Porter, 1996)

These attributes represent the distinctive characteristic

features of the Chinese business environment.

The PRC condition is represented by the Chinese

Bureaucracy with its special character of centralized

decision making and internal bargaining that result in

red-tapism. The rapid progress in economic reforms

made the Chinese overcome this shortcoming as they

had to use the quality of their ability to quickly grasp the

need for keeping themselves in pace with economic

reforms. Such quick learning has made radical changes

in the PRC condition. The emergence of efficient

business managers and the rapid change of the country

to a market economy are examples of the changed PRC

condition.

Under the PRC condition, the personnel and

administration departments assume greater importance

and power than the other departments. This is because

these departments acted as the nerve centre of the state-

owned Chinese enterprises controlling business

negotiations with foreign investors. However, this

situation has completely changed with the passage of

time.

Features of the PRC Condition:

The following features of the PRC condition make it an

important factor that forms the foundation on which

Chinese business ventures with overseas investments

and contracts are built:

 Politics: Politics centers round every aspect and

spectrum of life and business in China. Hence, it

becomes difficult to separate Chinese business

and politics under the existing Chinese social

system. Politics forms part of a normal business

life.

 Economic Planning: The retaining of control by

the Chinese government over major industrial

sectors with a view to carefully plan the economy

is another important element of the PRC

condition. This makes every foreign business

negotiator go through the economic policies of

the government thoroughly before they attempt to

begin their negotiation. In fact, this can be

considered as a very important aspect in the

Chinese negotiation.

 Legal Framework: Mention should be made about

the legal framework that exists in China, which is

another important PRC condition. However it

must be understood that the laws and legal

systems prevalent in China are relatively young

and were influenced more by human values than

sheer legal stances.

 Technology: The PRC condition implies the

adoption of modern technology. It may be

appreciated that only the need to overcome the

shortage of modern technology that hampered

economic progress persuaded China to open up its

economy for foreign direct investments. This is

another important feature of the PRC condition,

which helped China get an edge over the other

developing countries, in the matter of

technological advancement.

 Magnitude of the Market: Another appreciable

feature of the PRC condition is the extension of

the world’s biggest market in exchange for the

ultra modern technology, which has been made

the state policy of the government. In fact, this

policy helped China attract a record amount of

foreign direct investments.

 Backwardness: Economic backwardness still

exists in a majority of the population. This is a

distinguishing feature of the PRC condition.

Though the communist face of the country

changed long before, the government still bases

its decisions to eradicate the poverty in the

country through the various economic reforms on

some of the basic tenets of socialist thought.

 Rapid Change: China has the distinction of

adapting itself to economic changes at a very fast

speed, which no other country could match so far.

Both the government and the people understood

the necessity of the economic changes the country

needed and did everything to take advantage of

changes in the global economic scenario.

Irrespective of the resistance by the people and

even by some government authorities, rapid

changes took place in the Chinese economy.

 Chinese Bureaucracy: Bureaucracy coupled with

the resultant red tapism characterizes the PRC

condition. At the same time, the government will

not hesitate to take quick decisions on buying

when the product meets the requirements of the

nation. This is a peculiar condition, which baffles

many foreign negotiators.

Confucianism

The effect of Confucianism on Chinese business

negotiations can be looked at from the following angles:

 Moral Cultivation: “Confucianism emphasizes

people’s self-moral cultivation and lifelong

journey” (Ghauri and Fang, 2001) According to

this ancient principle the rulers were advised to

use moral persuasion and rules of propriety rather

than legal processes in administering the people.

This aspect of Confucianism is still being

followed in Chinese negotiations. The moral

aspects take prime importance in business

negotiations and this is the reason the Chinese

look into the moral values of their opponents

before arriving at any business decisions.

 Interpersonal Relationships: The affiliation and

affinity of king and citizens, parents and their

sons and daughters, man and wife, brothers and

friends form the very basis of the lives of the

Chinese people. These relationships collectively

known as Gunaxi are closely related to etiquette,

propriety and rules of conduct that have formed

the way of life for the Chinese. Hence, it is

difficult for the Chinese to attribute only

monetary gains in their business dealings without

giving importance to these human relationships.

 Family and Group Orientation: From time

immemorial, even when there were no well-

defined legal systems, ‘family orientation’ and

reliance on groups as social units influenced the

conduct of Chinese lives. In this way, most of the

social responsibilities are taken care of by the

family structure without too much dependence on

laws and regulations. This trait continues to grip

the Chinese business negotiations even today.

 Respect for Age and Hierarchy: Chinese are

taught from generation to generation to give

importance to social harmony and stability.

Hence, the respect for age and the regard for

hierarchical levels are embedded in the blood of

the Chinese. This culture is being represented in

their business negotiations also which needs to be

understood and appreciated by the foreign

negotiators.

 Avoidance of Conflict and need for Harmony:

The Chinese by nature do not want to create

conflicts and want to have a peaceful resolution

of all issues. This is due to the basic nature of the

Chinese. According to Confucius, the men when

made to compete will act like gentlemen

exhibiting high moral values. (However, The

Chinese can be quite aggressive when the need

arises. Preferring harmony and peace they can act

decisively if they think they are threatened or

offended.) Thus, for the Chinese harmony in

society is considered an essential part of social

life and these needs find a place in their business

negotiations also.

 Concept of Chinese Face: The Chinese value

social respect more than their lives. Any act to

humiliate them in public will be viewed seriously

by the Chinese people. Since, both criticizing too

openly and or praising too openly in public can

make someone lose face; Chinese do not want to

have any situation that affects their ‘face’. The

concept of Chinese face implies avoidance of

humiliation for them in public. The Chinese

believe that it makes a person stand out from the

group and consider that as a great insult.

Chinese Stratagems

A Chinese proverb “The marketplace is a battlefield”

reflects a deep-seated Chinese belief that the wisdom

that guides the general commander in the battlefield is

the same one that applies to business (Chu, 1991). This

implies the application of strategy in wars, which in

Chinese opinion equally applies to business situations.

“The Chinese stratagem is a strategic component in

Chinese culture,” (Chu, 1991; Faure, 1998; Mun, 1990;

Tung, 1994).

The Art of War written by Chinese Military Strategist

Sun Tzu forms the basis for the Chinese Stratagems. The

basic principle underlying the Chinese stratagems is the

admonition that, “To win one hundred victories in one

hundred battles is not the acme of skill. To subdue the

enemy without fighting is the acme of skill.” (Sun Tzu

1982). The normal strategy that the Chinese negotiator

adopts is not to force the opponent into accepting his

terms but providing signals that one of the competitors

is waiting to offer a better deal. The Chinese use 36

stratagems in dealing with the enemies and gain

advantage over them by overcoming dangerous

situations. The basis of all these 36 stratagems can be

traced to their philosophical origins of ‘Yin Yang’ and

‘Wu Wei’ principles.

Yin Yang Principle

Chinese culture has developed based on three

philosophical traditions namely; Confucianism, Taoism

and Buddhism. Each of these has a different objective

and approach in that Confucianism describes the human

relationship while Buddhism deals with the immortal

world, and Taoism advocates life in harmony with

nature.

Yin Yang is a Taoist principle that is again based on

‘Dualism’ that represents unity and harmony. Cooper

(1990) says “the Yin Yang image, probably the best-

known symbol in East Asia and is illustrated in a circle

being equally divided by a curved line forming the black

and white areas.” Yin is the form of female elements like

moon, darkness, mystery, softness etc, whereas Yang

represents male element s like sun, day, fire, strength

etc.

The white dot in the black area and the black dot in the

white area signify that there is no absolute white or black

that can exist. Chen (2001) suggests that the black and

white spaces contain the power for the other to act and

both of them combined from dynamic unity. The Yin

Yang principle laid the foundation for the cultural

inhibitions of the Chinese people. It led them to follow

different philosophical teachings and such teachings

controlled their behaviors in the varied circumstances

the Chinese faced. This is originally the reason for the

Chinese people to mix their cultural affiliations with

their business negotiations.

Categories of Chinese Stratagems:

While the stratagems provide guidance to the Chinese to

win over the enemy without fighting, Chiao, (1981)

shows that the Chinese stratagems are the driving force

for the Chinese in all Chinese societies to condition their

minds in dealing with all situations. The stratagems

backed by the Chinese culture acts as weapon that the

Chinese use intentionally or unintentionally in complex

business deals. On a theoretical basis, these 36

stratagems are grouped in to the following six categories

(Chiao, 1981):

 Stratagem 1 to 6 to be used when being superior.

 Stratagem 7 to 12 to be used for confrontation.

 Stratagem 13 to 18 to be used for attacking.

 Stratagem 19 to 24 to be used for confused

situations.

 Stratagem 25 to 30 for gaining ground.

 Stratagem 31 to 36 when being used in an inferior

situation.

In fact, the Chinese negotiators often combine the

elements of culture, PRC condition representing the

bureaucracy and the influence of the 36 stratagems in

their business negotiations. Unless the foreign

negotiator has a clear understanding of the mixture of

these factors in Chinese business negotiations, it would

be difficult for him or her to win over the Chinese

people.

Negotiation Process

In generic terms, the negotiation process is a process by

which the parties try to reach mutual agreements with

respect to the terms, conditions and guidelines for future

relations. The Sino-western business negotiations can be

divided into three stages:

 Pre – negotiation: This is the initial stages of the

business deal where actions like lobbying,

presentation of a business proposal, informal

discussions on the terms and conditions and trust-

building exercises take place.

 Formal – negotiation: Under this process the

parties tend to exchange task – related

information and undertake persuasion processes,

concessions and agreements for furthering the

deal.

 Post – negotiation: This stage covers the actual

implementation of the deal once a formal

agreement is reached between parties on the

various terms and conditions of the deal. In case

the parties are unable to reach some consensus,

they would go in for further rounds of negotiation

to resolve the unfinished issues.

Under normal circumstances, the Chinese consider the

negotiation process as a prolonged one that includes

more rounds of dialogues than arriving at the final

resolution immediately after a few rounds of talks. As

discussed earlier, the Chinese would always prefer the

negotiations to be done taking into account the

hierarchical importance of the people involved in the

negotiation. They also would like to ensure that social

harmony is given due importance throughout the

process of negotiation. At any point of negotiation, the

Chinese would not like to have a situation of conflicts.

Even when they have to say ‘no’ to some of the issues,

they will try to use some circuitous ways to make the

opponent know their negative reply. Hence, the period

of length that the process of negotiation takes not at all

matter for the Chinese.

Under both pre – negotiation and formal – negotiation

processes the Chinese are very particular that the

trustworthiness of the people with whom they are

dealing is sufficiently tested before they form their

opinion. ‘Trust building’ thus is an essential part of the

whole negotiation process. These processes also involve

the services of intermediaries, which are very vital in

any trust building exercise. The Chinese are also

particular that they maintain their ‘face’ throughout the

process of negotiation. The processes are further

influenced by other factors like group benefits and

holistic thinking.

Usually the Chinese would like to take a longer time to

review the negotiating process during pre – and post –

negotiation processes. This is because the Chinese think

that the pre – and post – negotiation periods are

important in the whole process for building mutual

relationships and in securing the commitment of both

sides. When Westerners and the Americans consider

that the negotiation process is over, while for the

Chinese the negotiation process continues even after the

deal is concluded.

Negotiation Structure

The structure of business negotiation from the side of

the Chinese will take the following format:

 While the negotiations take place in a formal

environment, the discussions will start from

general things down to specific details relating to

the deal.

 The Chinese team would normally consist of

more people and appear larger than the opponents

appear. However even when the contingent of

fringe personnel changes, the core negotiators

will remain the same.

 The seating arrangements for the Chinese team

will be done according to the hierarchical level

and will be facing the opposite team.

 Usually there will be a note taker on the Chinese

team.

 The Chinese team will speak unanimously on

issues indicating that they have reached on a

consensus on the issues internally before the

negotiation process started.

 It is not advisable to assume the function and

authority of the Chinese team as sometimes the

whole purpose of the meeting may be only to

gather information rather than arriving at some

business decisions.

Role of Intermediaries in the Business Negotiations

The peculiar characters of Chinese negotiations require

the services of an intermediary or ‘Zhongjian Ren’ as he

is otherwise called (Chiao, 1981). All meetings with

strangers are looked at with suspicion and distrust by the

Chinese. It requires a trusted business associate of the

foreigner to pass him along to the former’s trusted

business associate in China. It is very important for

Chinese that a foreign businessman is introduced by a

known source rather than dealing with unknown people

directly.

This involves finding a person to act as an intermediary

who must be known to both the parties of the business

deal. It so happens in any business deal that the

intermediary has a major role to play at times when

some issues need to be settled between the parties. This

is because it becomes a lot easier for a native business

intermediary to read and understand the expressions and

feelings of the Chinese side in any business negotiation.

He would also be able to contribute much for an easy

resolution by understanding the facial expressions and

the actual body language of the Chinese side that have a

lot to say more than the words spoken.

Managerial Implications in Chinese negotiations

There are quite a lot of managerial implications for

effectively negotiating with Chinese businessmen. The

qualities that the westerners may need are Priority,

Patience, Price and People.

Priority: In order to be successful in business deals with

China especially in large industrial projects, the foreign

firm should understand the priorities, policies and plans

of the Chinese government as the government was the

‘biggest boss’ in the Chinese industrial environment,

although this situation changed in the due course Quite

often, the government announces changes in its policies

that determine the priority of industries in the

government’s view. The foreign firm should carefully

follow the latest guidelines to get to a win – win

situation in business deals.

Patience: Since business negotiations in China often

take longer and involve dealing with different

hierarchies of the government departments, patience is

the most important qualification that a foreign

negotiator possesses in dealing with the Chinese

successfully. It must be noted that the Confucian

principles of relationship, face, etiquette and harmony

that form the basis of the Chinese negotiations make the

negotiation process time consuming. The foreign firm

should have the required patience to go through these

processes, which are not only lengthier but also non-

cohesive with the western culture.

Price: If there are drastic price reductions by a foreign

firm during negotiations, then that will arouse the

suspicions of the Chinese negotiator. This would result

in the loss of credibility for the foreign negotiator in the

eyes of the Chinese. Similarly if the Chinese request a

discount and price reduction and if the foreign firm

rejects such a request then the Chinese will consider it

as an insult, and will try to retaliate for it in their own

ways. Hence, it is important for the foreign firms to

consider the pricing of their products very carefully to

get a business deal through with the Chinese.

People: Since the approach of the Chinese people

towards contracts are rather secondary in importance

than the interpersonal relationship of the people

involved, it is necessary for the foreign firms to take a

people-oriented approach and establish a trusted

relationship with the Chinese partners. The appropriate

time for the foreigners to build rapport with the Chinese

people is the time during which the Chinese decision

makers undertake business tours abroad, when the

foreign team can develop the guanxi with the Chinese

counterparts.

Apart from the above implications, there are certain

other additional factors that the foreign firm should

consider while dealing with the Chinese companies for

the conclusion of major deals:

 Sending the right team with the proper

temperament to China.

 Getting and showing support from the respective

governments.

 Identifying the real Chinese negotiators as there

will be different fact finding and information

gathering teams without real decision ,making

authority.

 Engaging the services of an able native Chinese

intermediary.

 As far as possible maintaining a consistent team

will help in developing rapport.

 Helping the Chinese counterparts to come out of

the bureaucratic web.

 Inviting the Chinese to come for negotiations

abroad would also prove helpful in successfully

concluding the deal.

 Use appropriate techniques for face saving of the

Chinese negotiators.

Preparation in Chinese Negotiations

Since negotiation with China involves cross-cultural

aspects, it requires some preparation on the cultural

front before negotiating with Chinese. “Preparation for

negotiations in China includes conventional aspects of

identifying goals (immediate, medium, and long-term);

identifying goals and expectations of counterparts

(requiring research and networking); and planning

processes of “trade-off’s,” “what-if’s,” and fall back

positions etc” (Potter, 2010).

However, there are other specific preparation that are

needed before commencing negotiations with Chinese.

These are institutional and personal mapping of the

Chinese negotiators, which will help in identifying the

goals and expectations. Preparation also involves

identification of relational networks, which are likely to

have strong influence on the Chinese negotiators.

On their side, Chinese negotiators also undertake

adequate preparation before they start negotiating.

Chinese adopt an efficient process through preparation,

which help in creating and establishing procedures that

are important for achieving their goals in negotiation.

They specialize gaining the interplay between the

strategy and the negotiation. Chinese are able to perform

better in their negotiation because of their better

preparation by collecting comprehensive information

about the opponents. Such collection of information acts

as the foundation for the preparation for negotiations,

especially through mapping the interests of the

counterparts. The process of collection of information

enables the Chinese to develop an efficient negotiation

strategy.

Conclusion

This research shows that the preparation and planning

for international negotiation involves a number of

issues, which influence the progress and success of the

negotiations. Irrespective of the nature or size of

industry or the extent of the negotiation, there are certain

basic ingredients in the pre-negotiation stage. The

findings indicate the aspect of gathering information is

considered important and the negotiators should be

careful in allocating the resources for gathering the

required amount of information.

In general, companies having high stakes in negotiation

are more concerned in gathering adequate information

about the interests and alternatives of the opposite side

to plan their course of action. The findings of this study

indicate that companies involved in international

negotiations need to perform all types of planning

including strategic, tactical and administrative as

advocated by theory. Usually companies involved in

negotiations with high stakes do the tactical planning

more thoroughly than other companies do.

Nevertheless, the three types of planning are useful in

describing the planning and preparation before any

international negotiation starts.

As regards the factors that affect preparatory process of

negotiation, the first important factor is the

identification of the decision-maker in the opposite side

and thus making the decision-making system of the

opponent as an important influencing factor in the pre-

negotiation stage.

Companies always perceive negotiations as resulting in

some synergistic advantage to them. The findings

indicate that in some cases the nature of persuasive

arguments is most likely to have an impact on the

preparatory stage. One of the major reasons for such

influence is that the large amount of stakes involved in

the solution arrived from the negotiations makes the

parties involved rely more on rational arguments.

On the other hand, in the case of negotiations involving

lesser value, negotiators are more likely to be involved

in emotional persuasion rather than following rational

arguments. The research indicated that different

countries have different preferences as to the method of

negotiation and as to the person who should handle the

negotiation. With the nature of persuasive arguments,

companies involved in negotiations having lesser value

have the opportunity of adjusting the negotiator suited

to different cultural-specific preferences. On the other

hand, negotiations having larger values demand the

selection of a fixed set of negotiators. Companies having

larger number of members in the negotiating team adopt

different selection criteria for choosing the negotiators.

In the preparatory stage, companies involved in

negotiations with longer time-periods are likely to be

influenced by factors other than those which are

culturally specific. These factors, however, depend on

the individual product, company, industry or segment

and have a greater impact on the preparation for

negotiation than cultural factors.

Implications for Managers

While attending international negotiations, preparation

and planning is considered to be of utmost importance.

The important aspect of preparation and planning is not

realizing but actually doing the preparation and

planning. There are a number of considerations about

the preparatory phase, which have been presented in this

research report and a majority of them might prove

beneficial to negotiators.

It is especially important that the managers should adopt

the policy of unlearning throughout the negotiating

process and adapt their strategies to the changing

circumstances emanating during the process of

negotiation. The managers should understand conflict is

unavoidable and they should expect and be prepared to

face the conflicts. They should also understand that

cooperation is fundamental and the mangers should take

the necessary efforts to maintain and improve

cooperation as early as possible. Another important

factor which has an implication for the managers is that

informal relationships are necessary for future

relationships.

Nevertheless, the informal relationships assume a lesser

degree of importance in the Western nations. Trust is

another important factor, which should be maintained

and improved throughout the process of negotiation.

Gathering information about the interests and

alternatives of the opponents and analyzing them to

make proper planning are essential steps in the

preparatory process and the managers should make

careful allocation of the available resources among these

activities to ensure success in the international

negotiations.

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