Cross Cultural Negotiation

Module-4
Negotiation
Negotiation is the process of bargaining with one or
more parties for the purpose of arriving at a solution
that is acceptable to all. As a conflict solving method
negotiation plays a significant role in global business
especially in a cross-cultural environment.
Negotiation is a process involving two or more people of
either equal or unequal power meeting to discuss
shared and/or opposed interests in relation to a
particular area of mutual concern.
Negotiation is the process where interested parties
resolve disputes, agree upon courses of action, bargain
for individual or collective advantage, and/or attempt
to craft outcomes which serve their mutual interests
Dimensions of Negotiation
As a process, negotiation has three dimensions;
First, negotiation is an educational process: it enlightens
the other side about your team’s concerns, perceptions
and aspirations.
Second, negotiation is a problem-solving process:
inevitably the parties involved have different
perspectives that must be reconciled if there is to be
progress.
Third, negotiation is an interdependent process: workable
and sustainable progress depends on building a
cooperative relationship with the other side.
In general, negotiating a workable balance among
competing interests requires a combination of direct
and indirect diplomacy, discussion and consultation,
compromise and concession, and above all, flexibility.
For the efficient and effective international business
negotiations few steps are important. Which
includes:
(1) Selection of the appropriate negotiation team.
(2) Management of preliminaries, including
training, preparation, and manipulation of
negotiation related matters.
(3) Management of the process of negotiations,
that is, what happens at the negotiation and
table; and
(4) Appropriate follow-up procedures and
practices.
checklist is recommended to ensure proper
preparation and planning for negotiations:
➢Assessment of the situation and the people
➢Facts to confirm during the negotiation
➢Agenda
➢Best alternative to negotiated agreement
(BATNA)
➢Concession (compromise) strategies
➢Team assignments
Aspects of the negotiation
The various aspects of the negotiation are;
(1) Location
(2) Physical arrangements
(3) Number of parties
(4) Number of participants
(5) Audiences (new media, competitors, fellow
vendors, etc.)
(6) Communications channels
(7) Time limits
Stages of Negotiation
1. Preparation.
2. Relationship building.
3. Exchange of task related information.
4. Persuasion
5. Concessions and agreement.
1. Preparation
The importance of careful preparation for cross-
cultural negotiations cannot be over stated.
To the extent that time permits, a distinct
advantage can be gained if negotiation
familiarizes themselves with the entire context
and background of their counterparts in addition
to the specific subjects to be negotiated.
Because of most negotiation problems are caused
by differences in culture, language and
environment, hours or days of tactical
preparation for negotiation can be wasted these
factors are not carefully considered.
• To understand cultural differences in
negotiating styles, managers first must under
stand their own styles and then determine
how they differ from the norm in other
countries.
• They can do this by comparing profiles of
those perceived to be successful negotiators
in different countries. Such profiles reflect the
value system, attitudes, and expected
behaviors inherent in a given society.
Variables in the Negotiating process
The following are the few variables to consider
when preparing to negotiate.
➢Basic idea about negotiation process.
➢Negotiator selection
➢Knowledge about the issues
➢Negotiation protocol
➢Risk taking propensity (partiality)
➢Value of time
2. Relationship Building
Relationship building is the process of getting to
know one’s contacts in a host country and
building mutual trust before embarking (get
on)on business discussions and transactions.
This process is regarded with much more
significance in most parts of the world than it is in
the United States. U.S. negotiators are, generally
speaking, objective about the specific matter at
hand and usually want to waste no time in getting
down to business and making progress.
This approach, well understood in the United States
might be disastrous if the foreign negotiators
want to take enough time to build trust and
respect as a basis for negotiating contracts.
• In such cases, American efficiency interferes
with the patient development of a mutually
trusting relationship—the very cornerstone of
an Asian business agreement.
• It is usually recommended that managers new
to such scenarios use an intermediary,
someone who already has the trust and
respect of the foreign managers and who
therefore acts as a “relationship bridge.”
3. Exchanging Task-Related Information
In the next stage-exchanging task-related information-
each side typically makes a presentation and states its
position; a question-and-answer session usually
ensues, and alternatives are discussed. In India, parties
will do brief discussion about their position and
expectations.
From an American perspective, this represents a
straightforward, objective, efficient, and
understandable stage. Mexican negotiators are usually
suspicious and indirect, presenting little substantive
material and lengthier, evasive conversation. French
negotiators enjoy debate and conflict and will often
interrupt presentations to argue about an issue even if
it has little relevance to the topic being presented.
4. Persuasion (argument)
Typically, both parties try to persuade the other to
accept more of their position and to give up some
of their own.
Often, some persuasion has already taken place
before hand in social settings and through mutual
contacts.
In the Far East, details are likely to be worked out
ahead of time through the backdoor approach.
For the most part, however, the majority of the
persuasion takes place over one or more
negotiating sessions.
• International managers usually find that this
process of bargaining and making concessions
is fraught (filled)with difficulties because of
the different uses and interpretations of
verbal and nonverbal behaviours.
• Although variations in such behaviours
influence every stage of the negotiation
process, they can play a particularly powerful
role in persuasion, especially if they are not
anticipated.
5. Concessions and Agreement
In the last stage of negotiation, concessions and
agreement tactics vary greatly across cultures.
Well-prepared negotiators are aware of various
concession strategies and have decided ahead of
time what their own concession strategy will be.
Familiar with the typical initial positions that
various parties are likely to take, they know that
the Russians and the Chinese generally open
their bargaining with extreme positions, asking
for more than the hope to gain, whereas the
Swedes usually start with what they are prepared
to accept.
Characteristics of Negotiation
Starting from domestic and to global level there are
an infinite variety of negotiation scenarios, most
negotiations are defined by three characteristics:
1. There is a conflict of interest between two or
more parties. What one wants is not necessarily
what the others want.
2. Either there is no established set of rules for
resolving the conflict, or the parties prefer to
work outside of an established set of rules to
develop their own solution.
3. The parties prefer to search for an agreement
rather than to fight openly, to have one side
capitulate, to break off contact permanently or to
take their dispute to a higher authority.
Cultural Differences that Affect
Negotiations
1. Negotiation Objectives
In the United States, negotiation objectives are
often obvious as the interactions follow a logical,
factual approach.
Obtaining lower-cost goods or services, gaining
access to technology or intellectual property,
extending one’s influence on markets through
alliances, and so on, all share a common
denominator: the underlying objective is near-to-
mid-term business success as defined by the
bottom line.
2. The Importance of Relationships
While some form of a working relationship is required for
negotiations in India, it doesn’t have to be extensive
and can usually be quickly established. In most cases,
evidence that you are a valid business partner and an
indication that you are willing to negotiate in good
faith will suffice.
In most of the cultures in Europe, and Latin America,
strong relationships are not only important to ensure
proper execution of an agreement but are a
prerequisite for entering into any formal or informal
negotiations. To varying degrees, people will want to
learn about your company background and
capabilities, prior experiences, strategies and
objectives, long-term plans, and so on. They also want
to get to know you personally before they decide to
trust you.
3. Decision Makers
A frequent source of frustration for Indians negotiating in
Latin American countries is that they find it hard to get
access to the decision maker, feeling they’re talking to
the wrong person or group. In India, identifying the key
decision maker is usually easy, and getting access to
them can always be arranged as long as you have
something of value to offer to them.
In Europe and Latin America, only managers at the top or
at least high up in the organization may have sufficient
authority to make decisions. Except for matters of
company-wide importance, they might not be available
for the negotiation itself, relying on inputs from their
middle management instead.
4. Negotiation Techniques
People around the world are very creative when
it comes to negotiating, bargaining, and
haggling.
Indians may be at a slight advantage in this field
as people receive extensive negotiation
training already as children, watching their
parents bargain at the market or in a shop.
Numerous negotiation techniques exist that
would be considered unusual or exotic in most
of the countries.
5. Reaching Closure
When approaching the final stages of an international
negotiation, you need to carefully look for clues that
the other side is ready to close. How the closure itself
looks will again vary.
The good old handshake, still in use in America but
normally accompanied by signing a contract, works
well to confirm an agreement in countries such as
Brazil, most Arab countries, India, and many others.
That doesn’t mean that no written agreement should
be prepared, but it is advisable to consider the
handshake, rather than the signature, the critical step.
• The paperwork becomes a mere formality. The other
side might be alienated if you focus too much on the
written contract, feeling that you don’t trust their
word. In Japan, a signed written agreement is not
important.
Pre-requisites for Effective
Negotiation
1. Finding a Fair Compromise
Negotiation skills help you to resolve situations where
what you want conflicts with what someone else
wants. The aim of negotiation is to explore the
situation to find a solution that is acceptable to both
parties. Depending on the scale of the disagreement, a
level of preparation may be appropriate for conducting
a successful negotiation.
For small disagreements, excessive preparation can be
counter-productive because it takes time that is better
used elsewhere. It can also be seen as manipulative
because just as it strengthens your position, it can
weaken the other person’s.
Preparation regarding the following points before starting
negotiation
1. Goals: what do you want to get out of the
negotiation? What do you expect the other person to
want?
2. Trades: What do you and the other person have that
you can trade? What do you each have that the other
might want? What might you each be prepared to give
away?
3. Alternatives: if you don’t reach agreement with the
other person, what alternatives do you have? Are these
good or bad? How much does it matter if you do not
reach agreement? Does failure to reach an agreement
cut you out of future opportunities? What alternatives
might the other person have?
4. Relationships: what is the history of the
relationship? Could or should this history impact
the negotiation? Will there be any hidden issues
that may influence the negotiation? How will you
handle these?
5. ‘Expected outcomes’: what outcome will people
be expecting from this negotiation? What has the
outcome been in the past, and what precedents
have been set?
6. The consequences: what are the consequences
for you of winning or losing this negotiation?
What are the consequences for the other person?
7. Power: who has what power in the
relationship? Who controls resources? Who
stands to lose the most if agreement isn’t
reached? What power does the other person
have to deliver what you hope for?
8. Possible solutions: based on all of the
considerations, what possible compromises
might there be?
2. Needed Skills and Knowledge Base
• Negotiator is the key person for the profitable
survival of the organization in a competitive
world.
• Negotiation as an art requires certain inherent
qualities of an individual that makes the
negotiator more dynamic and natural. Skilful
managers must assess many factors when
managing negotiation.
• The successful management of intercultural
negotiations requires that manager go beyond a
generalized understanding of the issues and
variables involve. The negotiator must have the
knowledge about the following things;
1. Value
Business negotiators must make sure that they have an
intelligent understanding of the facts that are the basis
for any negotiation. Failure to gather & understand the
relevant facts that support optimal deal making will
result in a failed negotiation or negotiations where
value or resources are left on the table.
2. Process
Any negotiation that does possess a vigorously defined
negotiation process and lacks a management
infrastructure runs the risk of a sub-standard outcome.
A framework to operate in is necessary so that it can
provide an environment where risks can be proactively
managed. A robust negotiation process guarantees a
positive momentum and offers al framework of
reference that lessens unforeseen complications &
risks
3. Relationships
Agreement can only be completed between people
or organisations that are represented by people.
It goes without saying that the manner in how we
interact with other people is the essential basis
for a successful negotiation.
Within a negotiation context, the importance of
relationships is amplified when we find ourselves
in an environment where ongoing partnerships
and longstanding relationships results from our
business interactions
4. Vision
To achieve a collaborative or partnership
agreement, it is necessary that all parties have
a shared vision of the losses and benefits
associated with the agreement.
It is only when all parties have a shared vision
of the agreement that we can understand
their driving motivators or interests.
A crucial part of negotiation competency entails
the ability to create options that will serve the
needs & interests of all parties
Skills and Qualities of a good
Negotiator
To become a good negotiator the manager must
posses the following skills and qualities.
1. Knowledge: covering various fields including
the understanding of human nature and is
well read.
2. Personality: It refers to the general physical
appearance, which is pleasing, encouraging,
associative, open, powerful, impressive an
above all very friendly.
3. Confident: A negotiator is always calm, composed and
confident under any circumstances. He is a man of
strong convictions; He has clarity of thoughts and
expressions. He can disagree but is not a disagreeable
character.
4. Communicative: Negotiation is nothing but
communication and understanding. The ability to be
able to express views and make them understood n the
same way that are intended to, is the foremost
important requisite of a good negotiator.
5. Leadership Qualities: Across the negotiating table or
over the electronic media including the written and the
verbal form, in all these cases the man who leads the
negotiation is the one who faces the opponent first
hand. It requires specific skills to hold not only his
ground but to offset the opponent from his ground.
6. Authoriative: A negotiator need be a man of
power especially of bureaucratic nature. His
authority stems from his knowledge and skills. He
exerts authority without power,
7. Abilty to Keep Secrets: This is perhaps one of the
key character traits of negotiator. He has the
ability not only to keep secret what he knows but
also is ever ready to open up the minds of the
opponent.
8. Problem Solving Approach: experiences shown
that a problem-solving approach is essential to
cross-cultural negotiation, whether in national or
at the global level.
Role of cultural factors in negotiations
• The “top ten” elements of negotiating behaviour
constitute a basic framework for identifying cultural
differences that may arise during the negotiation
process.
• Different cultures enter into negotiation with different
expectations. Therefore, when dealing with
negotiations across cultures, the various factors
regarding the sense of time, appropriateness of places,
significance of gender and body language, and patterns
of communication must consider.
• Being aware of these differences and adjusting your
negotiation expectations will provide the best
environment for a successful negotiation.
1. Negotiating goal: Contract or relationship?
Negotiators from different cultures may tend to
view the purpose of a negotiation differently. For
deal makers from some cultures, the goal of a
business negotiation, first and foremost, is a
signed contract between the parties.
Other cultures tend to consider that the goal of a
negotiation is not a signed contract but rather the
creation of a relationship between the two sides.
Although the written contact expresses the
relationship, the essence of the deal is the
relationship itself.
2. Negotiating attitude: Win-Lose or Win-Win?
Because of differences in culture, personality, or
both, business persons appear to approach deal
making with one of two basic attitudes: that a
negotiation is either a process in which both can
gain (win-win) or a struggle in which, of necessity,
one side wins and the other side loses (win-lose).
Win-win negotiators see deal making as a
collaborative, problem-solving process; win-lose
negotiators view it as confrontational.
As you enter negotiations, it is important to know
which type of negotiator is sitting across the table
from you.
3. Personal style: Informal or formal?
Personal style concerns the way a negotiator talks to
others, uses titles, dresses, speaks, and interacts with
other persons. Culture strongly influences the personal
style of negotiators. It has been observed, for example,
that Germans have a more formal style than
Americans.
A negotiator with a formal style insists on addressing
counterparts by their titles, avoids personal anecdotes,
and refrains from questions touching on the private or
family life of members of the other negotiating team.
A negotiator with an informal style tries to start the
discussion on a first-name basis, quickly seeks to
develop a personal, friendly relationship with the other
team, and may take off his jacket and roll up his sleeves
when deal making begins in earnest. Each culture has
its own formalities with their own special meanings.
4. Communication: Direct or indirect?
Methods of communication vary among cultures.
Some emphasize direct and simple methods of
communication; others rely heavily on indirect
and complex methods. The latter may use
figurative forms of speech, facial expressions,
gestures and other kinds of body language.
In a culture that values directness, such as the
American or the Israeli, you can expect to receive
a clear and definite response to your proposals
and questions. In cultures that rely on indirect
communication, such as the Japanese, reaction to
your proposals may be gained by interpreting
seemingly vague comments, gestures, and other
signs.
5. Sensitivity to time: High or low?
Discussions of national negotiating styles invariably
treat a particular culture’s attitudes toward time.
It is said that Germans are always punctual,
Latins are habitually late, Japanese negotiate
slowly, and Americans are quick to make a deal.
Commentators sometimes claim that some cultures
value time more than others, but this observation
may not be an accurate characterization of the
situation.
Rather, negotiators may value differently the
amount of time devoted to and measured against
the goal pursued.
6. Emotionalism: High or low?
Accounts of negotiating behavior in other cultures
almost always point to a particular group’s
tendency to act emotionally.
According to the stereotype, Latin Americans show
their emotions at the negotiating table, while the
Japanese and many other Asians hide their
feelings. Obviously, individual personality plays a
role here.
There are passive Latins and hot-headed Japanese.
Nonetheless, various cultures have different rules
as to the appropriateness and form of displaying
emotions, and these rules are brought to the
negotiating table as well. Deal makers should
seek to learn them.
7. Form of agreement: General or specific?
• Whether a negotiator’s goal is a contract or a
relationship, the negotiated transaction in
almost all cases will be encapsulated in some
sort of written agreement.
• Cultural factors influence the form of the
written agreement that the parties make.
• Generally, Americans prefer very detailed
contracts that attempt to anticipate all
possible circumstances and eventualities, no
matter how unlikely.
8. Building an agreement: Bottom up or top down?
Related to the form of the agreement is the
question of whether negotiating a business deal
is an inductive or a deductive process.
Does it start from an agreement on general
principles and proceed to specific items, or does
it begin with an agreement on specifics, such as
price, delivery date, and product quality, the sum
total of which becomes the contract?
Different cultures tend to emphasize one approach
over the other. Some observers believe that the
French prefer to begin with agreement on general
principles, while Americans tend to seek
agreement first on specifics.
9. Team organization: One leader or group
consensus?
In any negotiation, it is important to know how the
other side is organized, who has the authority to
make commitments, and how decisions are
made.
Culture is one important factor that affects how
executives organize themselves to negotiate a
deal.
Some cultures emphasize the individual while
others stress the group. These values may
influence the organization of each side in a
negotiation.
• 10. Risk taking: High or low?
Certain cultures are more risk averse than others.
• In deal making, the negotiators’ cultures can
affect the willingness of one side to take risks– to
divulge information, try new approaches, and
tolerate uncertainties in a proposed course of
action.
• The Japanese, with their emphasis on requiring
large amount of information and their intricate
group decision-making process, tend to be risk
averse. Americans, by comparison, are risk takers.
 Bargaining power in negotiations
Power is the most important factor in determining
negotiation outcome. Experienced negotiators are
aware of this and experiments confirm it. Power is
the ability of one person to control the resources and
benefits of another.
To the extent the one person can control something
another needs, that person has power over the
other. The key is to learn how to build your base of
power and limit the leverage of the other side.
• Power is rarely what it appears to be. People
have more power than they think because
they are more aware of their own limitations
than those of the other side.
• They recognize the losses they would suffer if
agreement cannot be reached.
• What they cannot do is look into the mind of
the other party and accurately assess how
worried they are about losing the deal if
deadlock occurs.
• Additionally, both parties always have some
constraints upon their action, even when they are
in a strong position.
• These limits may be legal or moral, economic or
physical, geographic or organizational, imagined
or real.
• These constraints limit the negotiator’s capacity
to use all the power they have.
• Examining and understanding your own base of
bargaining power, along with accurately assessing
the power limitations of the other party puts you
in a stronger position to negotiate with
bargaining power.
Power in Negotiations – Three Main Sources
1. A strong BATNA.
Your Best Alternative To a Negotiated
Agreement, or BATNA, is often your best
source of bargaining power.
By cultivating a strong outside alternative, you
gain the power you need to walk away from
an unappealing deal.
For example, a home buyer could improve her
power in a negotiation with a seller by
finding another house she likes just as much.
2. Role power
Power can come from a strong role, title, or
position, such as a high rank in an
organization.
When negotiating with your boss, for instance,
you sometimes may need to cede to his
preferences because of his high status.
3. Psychological power.
Negotiators can bring a sense of psychological
power to the table—the feeling that they’re
powerful, whether or not that’s objectively
the case.
• power can bolster your confidence and
improve your outcomes