Cross Cultural Management
and Negotiation Practices
Chapter 8 – Negotiation Fundamentals
Dr. Bahaudin G. Mujtaba
© Bahaudin G. Mujtaba
Chapter Topics
• Chapter 8 – Negotiation Fundamentals
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Overview of Global Business Negotiations
Environmental Dimension
Score of Negotiation
Structured Settlements
Mediation and Mediators
Psych Them Out: Rules for Effective
Negotiation
© Bahaudin G. Mujtaba
Why Cross Cultural Management &
Negotiations
• Globalization requires professionals to deal with their
counterparts in countries with different economic, cultural,
legal, and political environments.
• When negotiators are from diverse cultures they often rely
on quite different assumptions about social interactions,
economic interests, and political realities.
• You must know how to navigate across national,
organizational, and professional cultures at the negotiating
table.
• Cross-cultural knowledge, management and negotiation
skills are keys to success in a multicultural global
environment.
•Cellich, C. and Jain, S. C. (2004). Global Business Negotiations: A Practical Guide. Thompson-Southwestern.
© Bahaudin G. Mujtaba
Difficulty of Negotiations
• Cultural Differences Between Parties Exist!
• Different Business Environments in Which
Parties Operate!
• Two facts about negotiation are that:
– Negotiation is a lifelong activity!
– Negotiation is interdependent!
•Cellich, C. and Jain, S. C. (2004). Global Business Negotiations: A Practical Guide. Thompson-Southwestern.
© Bahaudin G. Mujtaba
Negotiations
• Negotiation is the process of two or
more parties seeking a mutually
beneficial goal through a common
agreement.
– Negotiation is a method by which two or
more parties reach a “common ground”
for win-win endeavors.
– Negotiation is a process the requires
cultural competency and sensitivity,
conflict management, change
management, stress management, and
effective listening skills.
© Bahaudin G. Mujtaba
Negotiation Process and Stages
Stages of the Negotiation Process:
• Pre-negotiation Planning
• Initiating Negotiation: Making first move
• Negotiating Price or Issue
• Closing Business Negotiation
• Undertaking Renegotiation
•Cellich, C. and Jain, S. C. (2004). Global Business Negotiations: A Practical Guide. Thompson-Southwestern.
© Bahaudin G. Mujtaba
GOING INTO NEGOTIATIONS
• Be aware of situations to avoid during the
negotiations: conflict, controversy and
criticism vis-à-vis the other party.
• Be aware of the right attitudes to develop
during the talks: communication, collaboration
and corporation.
• Know what goals to seek during the
discussions: change, coherence, creativity,
consensus, commitment, and compensation.
•Cellich, C. and Jain, S. C. (2004). Global Business Negotiations: A Practical Guide. Thompson-Southwestern.
© Bahaudin G. Mujtaba
Knowing One’s Negotiation Limits
• Target Point: a negotiator’s most preferred point
or ideal settlement.
• Reservation Point: point at which a negotiator is
indifferent between reaching a settlement and
walking away.
• Power: Reward, Coercive, Legitimate, Referent,
Expert.
• BATNA: Best Alternative To a Negotiated
Agreement.
(i). Brainstorm alternatives
(II). Evaluate each alternative.
© Bahaudin G. Mujtaba
Best Alternative To a Negotiated Agreement
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BATNA: Best Alternative To a Negotiated Agreement. BATNA is the standard
against which a proposed agreement should be evaluated. The following are the
general steps for BATNA assessment:
– Brainstorm alternatives
– Evaluate each alternative.
– Determine the best alternative that maximizes value over time.
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The Best Alternative To a Negotiated Agreement should be clarified at the
beginning based on the available information. BATNA is impacted by such
variables as the number of possible alternatives, deadlines, interests, knowledge,
experience, resources available to the negotiator, and resources available to the
negotiators of the other party.
A negotiator can be in a much better position by evaluating several alternatives and
knowing the BATNA.
Basic principle: As a negotiator, do not accept an agreement that is not, at a
minimum, as good as the best alternative to a negotiated agreement (BATNA).
© Bahaudin G. Mujtaba
INITIATING GLOBAL BUSINESS
NEGOTIATIONS
OPENING OFFERS should:
– Stress mutual benefits
– Be clear and positive
– Imply flexibility
– Create interest
– Demonstrate confidence
– Promote goodwill
© Bahaudin G. Mujtaba
Negotiation Strategies
• Focus on interests, not demands: demands are
what you want, interests are why you want them.
– Demands are confrontational and slow negotiations.
• Create new options for joint gain: focusing on
interests allows for new ideas to come forth.
– Perhaps there is a new solution that can solve the issue.
• Focus on what is fair: emphasizing fairness allows
both parties to give a bit and agree.
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© Bahaudin G. Mujtaba
Role of Culture in Cross-Border Negotiations
In a globalizing world, companies operate in a multi-cultural environment.
– Culture involves all learned behavior and values that are transmitted
through shared experience to an individual living in a society.
– Culture is a deep-rooted aspect of a person’s life that is always present.
– Culture is hard to avoid, bringing cultural assumptions, images,
prejudices, and other behavioral traits into negotiating situations.
– Culture is a social interaction process.
– Culture is learned: transmission takes place from generation to
generation.
– Culture is interrelated: cultural agents and components are closely
connected.
– Culture is shared: the tenets of a culture are accepted by most members
of the group.
– Because culture is non-negotiable, cultural differences can influence
business negotiations in significant and unexpected ways!
© Bahaudin G. Mujtaba
Effects of Culture on Negotiation
• Negotiation: the basic concepts of negotiation is interpreted differently
from one culture to another.
• Selection of Negotiators: the criteria for the selection of negotiators vary
from culture to culture.
• Protocol: the degree of formality used by the parties in negotiation is
affected by their cultures.
• Communication: language in its spoken and symbolic differences across
cultures affect meanings, interpretations and relations.
• Time: The meaning and importance of time vary from culture to culture.
• Risk Propensity: cultures differ in their willingness to take risks (risk
aversion).
• Group versus Individuals: In some cultures individuality is highly valued,
while others value group (Individualism vs. Collectivism).
• Nature of Agreement: the nature of agreement varies from culture to
culture.
© Bahaudin G. Mujtaba
Players and Processes in Negotiation
• Key Individuals: those people inside and
outside the company whose approval must
be sought before a negotiated deal is
finalized.
• Decision Process: understanding of the role
each individual plays in the approval
process.
• Informal Influences: webs of influences can
make or break negotiations.
© Bahaudin G. Mujtaba
TRAITS FOR COPING WITH
CULTURE
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Negotiating Goal: contract or relationship
Negotiating attitude
Personal Style: formal or informal
Communication: direct or indirect
Sensitivity to Time: high or low
Building an Agreement: Bottom-Up or Top-Down
Team Organization: one leader versus consensus
Risk Taking: high or low.
© Bahaudin G. Mujtaba
Factors Determining the Success
of Negotiations
Successful negotiators are those who are aware of the environments in which they
operate and the multiplicity of variables – both actors and factors influencing
negotiating relationships, progress and results. Authors Griffin and Daggatt
(1990) have identified twelve such important actors and factors which
negotiators should be cognizant of in the process of negotiating:
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The nature of the process
The value of time
The importance of etiquette, protocol, and ceremony
The decision-making process
The importance of principle and honor
The use of intermediaries
The make-up of the negotiating team
The appropriate level of trust
The importance of individual versus group aspirations
The appropriate level of risk
The appropriate manner of communicating information or proposals
The appropriate form of final agreement.
© Bahaudin G. Mujtaba
Negotiation Guidelines
Latz (2005) offers the following principles or
guidelines for successful negotiations:
– Negotiate strategically – not instinctively
– Confidence and success come from knowledge
and practice
– The power of preparation always makes a
difference
– Protect your reputation
– Learn by doing.
© Bahaudin G. Mujtaba
Golden Rules of Negotiation
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Information is Power – So Get It
Maximize Your Leverage
Employ “Fair” Objective Criteria
Design an Offer-Concession Strategy
Control the Agenda.
© Bahaudin G. Mujtaba
Structured Settlements
• What are structured settlements? Essentially,
structured settlements are periodic payments over
virtually any length of time, which can be tailored
to the wants and needs of the damaged party. This
type of payment scenario differs from the
traditional, and taxable, lump-sum payment
popular prior to a tax code change in the midseventies (Ringler Associates, 2006). When the
United States’ Internal Revenue Service began to
allow tax free interest growth on annuities, the
structured settlement industry was born (Ringler
Associates, 2006).
© Bahaudin G. Mujtaba
Mediation and Mediators
• When two or more parties cannot reach an agreeable
decision regarding a disagreement, a third party is often
brought in to facilitate a constructive settlement. These
third parties are called mediators and the process by which
grievances are aired is called mediation. Often viewed as
the referee in a pivotal match up, mediators are not judges;
they are in place to help parties reach a mutual agreement
by focusing on tangible outcomes.
• Agreements by compromise do not solve underlying
emotional or organizational conflict, and are not the most
favorable solutions sought by either party (Eilerman,
2006). However, mediation can guide people to a mutually
acceptable resolution, in a cost-effective, expedient
manner, and provide closure to uncomfortable situations.
© Bahaudin G. Mujtaba
Psych Them Out: Rules for Effective
Negotiatio
• Negotiation is a process where interested parties attempt to
construct outcomes which serve their mutual interests. This
is a practical definition of negotiation as it implies fairness;
it is a definition one’s mother would like. Unfortunately,
commitments to childlike fairness are not highly valued or
advantageous in the adult world of negotiation. By and
large, people want the lion’s share in every negotiation,
and want their opponents to helplessly pick over the scraps
left behind (Sorry mom!). It is rude, wrong, and right on
the money, but also quite true. People want it all!
Resources are scarce, survival is paramount; as a
consequence, evolution has hard-wired human beings to
amass as much as possible.
© Bahaudin G. Mujtaba
• So, when negotiating, how do cagy wheeler-dealers
reconcile primordial urges to satisfy the wicked and
hedonistic id, while placating the ego’s desire to be seen as
virtuous and benevolent?
• One simply needs to become adept at using these three
powerful weapons of influence: the Reciprocation Rule,
the Liking Rule, and the Detachment Rule.
– These superior bargaining tools will assuage the aforementioned
conflict by allowing people to exploit targets while exerting little
personal force, and, best of all, manipulate without the appearance
of manipulation.
– Remember, negotiations are a battle; therefore, the last thing to
engage in is a fair fight. Fights should be fixed and the deck
stacked.
© Bahaudin G. Mujtaba
It’s what is inside that
makes a difference!
Learn well, take chances, and
remember that together
we can move the world!
© Bahaudin G. Mujtaba
Reference
• Mujtaba, B. G. (2007). Cross Cultural Management and Negotiation
Practices. ISBN: 978-0-9774211-2-1. ILEAD Academy, LLC; Davie,
Florida.
© Bahaudin G. Mujtaba
© Bahaudin G. Mujtaba