International Management

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Chapter 5:

Cross-Cultural Negotiation

and Decision Making

Chapter Learning Goals

Learn how to prepare for cross-cultural business negotiations.

Recognize the need to build trusting relationships as a prerequisite for successful negotiations and long-term commitments.

Be aware of culturally-based behavioral differences, values, and agendas of the negotiating parties.

Learn the complexities of negotiating with the Chinese

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Chapter Learning Goals

Appreciate the variables in the decision-making process and understand the influence of culture on decision making.

Become familiar with the Japanese decision-making process and how it is influenced by their cultural norms.

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Negotiations by Global Managers

Specific plans for strategies and for continuing operations

May also be faced with negotiating with government-owned companies

Managers must prepare; operational details must be negotiated: staffing, raw materials, profits, etc.

Decision-making processes are key

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Negotiation

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The process of discussion by which two or more parties aim for mutually acceptable agreement

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Important Differences

Amount and type of preparation

Tasks vs. interpersonal relationships

General principles vs. specific issues

Number of people present and their influence

Stakeholders in Cross-Cultural Negotiation

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Negotiation becomes complex and challenging when it takes place between people of different cultural values, lifestyles, expectations, languages, and problem-solving techniques.

Cultural differences include the extent to which parties emphasize the task over relationships, spend time in preparation, rely on general principles rather than specific issues, engage many or few people in the process, etc.

Negotiation

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Chapter Learning Goals

Recognize the need to build trusting relationships as a prerequisite for successful negotiations and long-term commitments.

The Negotiation Process

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Let’s Look

Stage One: Preparation

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Develop profile of counterparts.

Find out likely demands, team composition, and counterpart authority.

Choose a negotiation site.

Stage Two: Relationship Building

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Getting to know one’s contacts

and building mutual trust

Non-task sounding: Polite/Informal communication before the meeting.

Use an intermediary.

“I have come as a mediator…”

Using an Intermediary

It usually is recommended that managers new to a given scenario use an intermediary—someone who already has the trust of the foreign managers and, thus, acts as a “relationship bridge.”

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Stage Three: Exchanging Task-Related Information

Each side typically makes a presentation and states its position. Then a Q&A and alternatives are discussed.

To Americans, this phase is straightforward, objective, efficient, and understandable. Negotiators from other countries, however, may continue to be indirect during this stage.

Adler suggests the most effective negotiators practice role reversal to show understanding of their counterpart’s viewpoint. Doing so may open up a wider range of alternative solutions.

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Stage Three: Exchanging Task-Related Information

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Cultural differences remain an issue.

The French enjoy debate and conflict.

Mexicans can be suspicious and indirect.

The Chinese ask many questions, but provide ambiguous information in return.

Show understanding of the

other viewpoint.

Stage Four: Persuasion

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Dirty tricks are in the eye of the beholder

False information

Ambiguous authority

Non-verbal messages

Individualism vs. Collectivism

Stage Five: Concessions and Agreement

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Russians and the Chinese start with extreme positions

Swedes start with what they will accept

Starting with extremes may be most effective

Linear vs. holistic

Importance of contracts

Well-prepared negotiators are aware of various concession strategies across cultures and have decided ahead of time what their own strategy will be.

Management Focus: Cultural Misunderstanding—Joint Venture in China

Good example of when negotiations were not complete prior to entering into a business relationship.

Sino-French joint venture was formed in March 1996 by Group Danone and Hangzhou Wahaha Group Co.

Between 1996 and 2009, a number of issues and disputes took place within the JV.

Both kept on blaming each other for breach of contract.

The Danone–WHH case became so much embroiled that Chinese and French governments asked the companies to negotiate an “amicable” resolution.

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Management Focus: Joint Venture in China A Few Lessons We Learn

Cross-cultural misunderstandings and unfamiliarity with the JV partners were at the heart of the dispute.

Both companies used media and PR companies instead of having open negotiations.

Relationship building and exchange of information is critical in any JV.

There was lack of open communication in day-to-day management of the JV.

In JVs, relationship building takes time and a good amount of interaction between the partners.

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Comparison of Negotiation Styles

Japanese	North American	Latin American
Hide emotions	Deal impersonally	Emotionally passionate
Subtle power plays	Litigation, not conciliation	Great power plays
Step-by-step approach	Methodological organization	Impulsive, spontaneous
Group good is the aim	Profit is the aim	Group/ individual good is aim

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Successful Negotiators

See next five slides to see some of the attributes of successful negotiators.

Successful Negotiators: Americans

Knows when to compromise, but stands firm at the beginning. Accept compromises only when there is a deadlock.

Refuses to make concessions beforehand and keeps his/hers cards close to chest.

Keeps a maximum of options open before negotiation, operate in good faith.

States his/her position as clearly as possible, respects the “opponents”.

Is fully briefed about the negotiated issues, has a good sense of timing and is consistent.

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Successful Negotiators: Indians

Look for and say the truth, not afraid to speak up.

Exercise self-control.

Respect other party, look for solutions acceptable to all parties.

Will change their minds, even at risk of seeming inconsistent and unpredictable.

Humble and trusts the opponent

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Successful Negotiators: Arabs

Protect honor, self-respect, dignity, and, thus, are trusted and respected.

Avoid direct confrontation.

Come up with creative, honorable solutions.

Are impartial and can resist pressure.

Can keep secrets

Controls temper and emotions

Arabs use mediators to settle disputes as is part of Islamic tradition.

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Successful Negotiators: Swedes

Quiet, thoughtful, polite, straightforward

Overcautious, but flexible

Slow to react to new proposals, but eager to be productive and efficient

Able to hide emotions, afraid of confrontation

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Successful Negotiators: Italians

Have a sense of drama, do not hide emotions

Good at reading facial expressions and gestures

Want to make a good impression and use flattery, but are distrusting

Handle confrontation with subtlety and tact

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Managing Negotiation

Examples

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Avoid person-related conflicts. That invite negative responses. Happens often when context is not understood.

Low-context Americans appear impatient, cold, and blunt to Mexicans.

Americans must approach negotiations with Mexicans with patience; refrain from attacking ideas.

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Chapter Learning Goals

Be aware of culturally-based behavioral differences, values, and agendas of the negotiating parties.

Cross-Cultural Negotiation Variables

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EXHIBIT 5-5 Cross-cultural Negotiation Variables

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Successful management of negotiation requires the negotiator to go beyond the general issues and variables involved.

Rather, he or she must gain specific knowledge of the parties, prepare accordingly to adjust to and control the situation, and be innovative.

Successful Negotiators

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Consider a wider range of options and pay greater attention to areas of common ground

Tend to make twice as many comments regarding long-term issues

More likely to set upper and lower limits regarding specific points

Make fewer irritating comments: “We’re making you a generous offer”

Make counter proposals less frequently and use fewer reasons to back up arguments

Actively listen

Successful Negotiators

Using the Internet to Support Negotiations

Negotiation Support System (NSS)

Web Application

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Increase likelihood of agreement

Decrease direct and indirect costs

Maximize optimal outcomes

E.g. INSPIRE

Provide support for phases and dimensions such as:

Multiple-issue, multiple-party business transactions of a buy-sell nature

International dispute resolution

Internal company negotiations and communications

E-Negotiations

Advantages

Disadvantages

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Speed

Less travel

Laying out much objective information over time

Not being able to build trust and interpersonal relationships

Nonverbal nuances are lost

Video conferencing may be a good compromise

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Chapter Learning Goals

Learn the complexities of negotiating with the Chinese

Comparative Management in Focus: Negotiating with Chinese

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The process of negotiation used by the Chinese is often mystifying to Westerners.

For example, the Chinese tend to put more emphasis on respect, friendship, saving face, and group goals.

Chinese appear impersonal and aloof to Americans.

Americans appear erratic and somewhat frivolous to the Chinese.

Comparative Management in Focus: Negotiating with Chinese

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Two problems:

Chinese desire for details

Apparent insincerity

Saving face:

Lien

Mien-tzu

Importance of harmony

Guanxi

Guanxihu networks

Two stages of Chinese negotiation

Technical

Commercial

Let’s Look

Comparative Management in Focus: Negotiating with Chinese

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Two major areas of conflict with the Chinese are their desire for a large amount of detail about product characteristics and their apparent insincerity about reaching an agreement.

Regarding the latter, the Chinese often have little authority to close a deal.

They must report to the government trade corporations, which often have a representative on the negotiation team.

As such, Chinese negotiators are constrained within the framework of state planning and political ideals.

Comparative Management in Focus: Negotiating with Chinese

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When confronted with aggressive and emotional attempts at persuasion, the Chinese often respond with negative strategies, such as discontinuing or withdrawing from negotiation. The concept of “face” is at the heart of such responses.

There are two components of face. Lien refers to a person’s moral character, and it is considered the most important thing defining a person.

Mien-tzu refers to one’s reputation or prestige, earned through bureaucratic or political power. In negotiations, it is important not to act as though you have “won” because that implies the other party has “lost” and they will lose face.

Comparative Management in Focus: Negotiating with Chinese

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Strong social obligations and the need for harmony (i.e., in terms of personal relationships, trust, and ritual) underlie Chinese negotiations.

Guanxi refers to the intricate, pervasive network of personal relations that every Chinese personally cultivates.

Guanxi establishes obligations to exchange favors in future business activities.

Firms that have special guanxi connections and give preferential treatment to one another are known as members of guanxihu networks.

The Chinese also expect corporate goals and profit to be subordinate to friendship, national development, and mutual benefit.

Comparative Management in Focus: Negotiating with Chinese

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Americans often experience two stages of negotiation with the Chinese.

During the technical stage, every detail of the proposed product specifications and technology is hammered out.

The commercial stage deals with aspects of production, marketing, and pricing.

Comparative Management in Focus: Negotiating with Chinese

Some recommendations:

Practice patience.

Accept prolonged stalemate.

Refrain from exaggerated expectations.

Establish a contact in China

Remember to save ‘face’ for everyone

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Managing the Conflict Resolution Instrumental Oriented Conflict

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To negotiate on the basis of factual information and logical analysis.

Instrumental oriented conflict resolution often is used by Americans and in other low-context cultures.

Addresses conflict directly and explicitly, and conceptually separating the conflict from the person doing the negotiation.

This type of conflict resolution is often based on factual information and logical analysis.

Managing the Conflict Resolution Expressive Oriented Conflict

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To handle a situation indirectly and implicitly, without clear delineation of the situation by the person handling it.

High-context cultures tend to use expressive oriented conflict resolution. In this case, conflict is treated indirectly and implicitly. Negotiators want to avoid confrontation because it is viewed as insulting and can cause loss of face. As an alternative, they rely on evasion and avoidance.

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Negotiation Conflicts Between Low Context and High Context Cultures

Low Context Conflict Area

High Context Conflict Area

Explicit and direct, linear presentation of facts

Individualistic, short-term oriented

Task-oriented, up-front, impatient

Implicit, circular logic

Collective, decisions by consensus; long-term oriented

“Face” and relationship-oriented; non-confrontational, patient

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Chapter Learning Goals

Appreciate the variables in the decision-making process and understand the influence of culture on decision making.

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Chapter Learning Goals

Become familiar with the Japanese decision-making process and how it is influenced by their cultural norms.

Comparative Management in Focus: Decision Making in Japanese Companies

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Let’s Look

Amae

Shinyo

Ringi

Comparative Management in Focus: Decision Making in Japanese Companies

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Amae is the Japanese concept of “indulgent love,” and was is one aspect of amae.

Wa means “peace and harmony,” and it is the building block of Japanese management—as indicated by the emphasis on cooperation, participative management, consensus problem solving, and long-term decision making.

Amae results in shinyo, which refers to the mutual confidence, faith, and honor required for successful business relationships.

Comparative Management in Focus: Decision Making in Japanese Companies

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These elements generally result in a devotion to work, a collective responsibility for decisions and actions, and a high degree of employee productivity.

This culture and shared responsibility underlie the ringi system of decision making.

Comparative Management in Focus: Decision Making in Japanese Companies

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EXHIBIT 5-8 Decision Making Procedure in Japanese Companies

End Chapter 5

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Conclusion

Managers need working knowledge of decision-making processes and negotiating tactics used by managers in different countries

It is important to understand the cultural variables that influence negotiations and decision making, and how they influence these activities

Managers should prepare for, and conduct negotiations with cultural sensitivity