Cross Cultural Management by Shobhana Madhavan
Negotiations
Definition
Key Elements
Types of
Negotiation
- The process of communicating back and forth with another person or
group with the explicit purpose of making a joint decision or reaching
an agreement about a dispute
- Multiple Parties- two or more
- Mixed motives- areas of agreement or conflict, but also some interest
in common
- Movement of the parties- each party may move or shift positions over
time
- A goal of reaching an agreement
- Distributive Negotiation: Sometimes one party gets an advantage &
the other party compromises leading to a win- lose solution
- The size of the pie is fixed, so one party’s gain is another party’s lose
- Integrative Negotiation: A negotiation can also be win- win, when all
parties reach their objectives
- There is an attempt to increase the size of the pie
- Parties involved cooperate to achieve maximum benefits by integrating
their interests into an agreement also competing to divide the value
- To achieve integrative agreement, negotiators must think of innovative
methods for creating value
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Cross Cultural Management by Shobhana Madhavan
Negotiations
Examples
Important
Considerations
While
Negotiating
- Negotiations are an integral part of a manager’s life
- The traditional image of negotiation is often of the bargaining table
about prices
- International business negotiations are multi faceted
- Involves multi teams negotiating over a period of time
- Example: NAFTA (North American Free Trade Association), its impetus
came from Ronald Reagan in 1980’s & was signed by Bill Clinton in 1993
- In international marketing, negotiations happen on;
- price
- delivery
- dates
- service agreements
- agency agreements
- rights of distribution
- licensing agreement
- transfer of technology
- McDonald’s had faced protest by farmers in France who were disturbed
by the damage done to French cuisine by US fast food
- McDonald’s also faced problems in India. Hindu activists reacted to
rumors that it served beef flavoring
- McDonald’s dealt with the situation by being too open about its 2
ingredients & where they sourced these ingredients
Cross Cultural Management by Shobhana Madhavan
Negotiations
Negotiation
Issues in M&A
- Negotiations in M&A is very complex
- Corporate identity becomes a sensitive issue
- Often, M&A leads to reduction of workforce
- Acquired firm has very little power & has to negotiate skillfully if it
wants to retain some of its identity
- Across borders, cultural differences & national pride complicate
negotiations
- Negotiating between different countries;
- operating environment
- deal with political, legal, economic, financial, cultural systems, labor
codes, tax standards
- Negotiating in USA is very different than negotiating in bureaucratic
countries like India, China
- Negotiators may have to deal with corruption
- Businesses in politically unstable countries like Africa need to have
contingency plans, incase of military coup companies shut down
completely
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Cross Cultural Management by Shobhana Madhavan
Negotiations
Stages of
Negotiation
Pre- negotiation Stage
I. Parties need to understand each others needs & demands
II. Information is gathered about the counterpart, operating
environment, third parties, competitors, influencers & infrastructure
III. Informal meetings are organized. Each party examines the other’s
position
IV. If there appears to be a potential, parties move ahead for
negotiations
V. A strategy is prepared to tackle problems, find solutions, get to
know preferred choices
VI. Research on tax regulations, import duties & work permits is done
VII. During this stage each party;
1. Identifies the content of the deal & its implications- tangible &
intangible
2. Creates alternatives so that there are overlaps between the
positions of both parties
3. Understand the other party’s position
4. Builds power by strengthening its BATNA (best alternative to a
negotiated agreement)
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Cross Cultural Management by Shobhana Madhavan
Negotiations
Stages of
Negotiation
Negotiation Stage
I. The two parties explore the differences in preferences &
expectations to come closer
II. Negotiations could be face-to-face or electronically mediated
III. Negotiators have to be chosen & a decision needs to be taken on
how many negotiators need to participate
IV. Negotiation process is often controlled by the party that initiates the
agenda
Post- negotiation Stage
I. Parties involved have agreed to most of the issues
II. Have to agree on the format of the contract & signing of the
contract (writing the contract, language used, meanings of words,
values may differ for each party)
III. At this stage, both the parties thoroughly understand what they
have agreed upon
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Cross Cultural Management by Shobhana Madhavan
Negotiations
Inter Cultural
Communication
& the
Negotiation
Process
Communication style plays a major role in the negotiation process
Important communication variables influencing negotiations are;
1. Language
2. Interpreters & translators
3. Shared experiences – common interests
4. Humor
5. Giving ‘face’- is an unwritten set of rules by means of which people
in society cooperate to avoid damaging each other’s prestige
6. Listening skills- Japanese & Scandinavian countries have good
listening skills. Indians are prone to interrupt often & do not listen
very carefully unless its their superior speaking
7. Pace- US, Germany proceed at a faster pace than Asia, Africa, Middle
East where more time is spent on relationship building
8. Time- polychronic negotiators display behaviors like, arriving late,
engaging in multiple conversations, leaving the room for taking a
phone call unlike monochronic negotiators
9. Socialization- learn dining etiquette, greeting etiquette, gift giving
etiquette
10. Business etiquette- how to greet business partner, how to exchange
visiting cards, learn the degree of formality in different countries,
addressing people with their first or last names
11. Negotiating environment
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Cross Cultural Management by Shobhana Madhavan
Negotiations
Negotiations in
Different
Cultures
Collectivist Culture
- Negotiators focus first on
building relationships then on
substantive issues
High Power Distance Cultures
- Negotiators are comfortable
with hierarchical structures
- The senior members of the
team will be the decision
makers
Individualistic Culture
- Negotiators focus first on
substantive issues and then
on building relationships
Low Power Distance Cultures
- Negotiators are comfortable
with open structures
- Involvement at all levels for
decision making
High Uncertainty Avoidance
- Negotiators may be unwilling
to take risks
- Finds it difficult to trust the
other party easily
Low Uncertainty Avoidance
- Negotiators are more likely to
take risks
- Easier to trust other parties
Feminist Culture
- Negotiators are more likely to
look for cooperative solutions
Masculine Culture
- Negotiators may be more
persistent in putting one
side’s identity
Short Term Orientation
- Negotiators may want short term
results & quick agreements
Long Term Orientation
- Negotiators are more likely to
Be persistent & patient
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Negotiations
Negotiation
Framework by
Weiss & Strip
(1985),
Later Simplified
by Moran &
Stripp (2004)
Cross Cultural Management by Shobhana Madhavan
Basic Concept of Negotiation
Distributive
- Leads to more competition &
confrontation
- Negotiators from feminine culture
tends to be less aggressive &
work towards cooperation
Integrative
- More cooperative & trusting
- Negotiators from Masculine
cultures tend to be aggressive
Selection of Negotiators
Technical Ability
- Negotiators can be selected on
the basis of technical skills,
seniority, experience in the field
& interpersonal skills
- High Power Distance Cultures
value senior people in the team
Social Skills
- In Low Power Distance Cultures,
US, negotiating teams are
selected basis skills & professional
experience
Role of Individual Aspirants
Individualistic
- Negotiators may choose to fulfill
private goals
Collectivist
- Like Japan, negotiators will try &
act on behalf of the organization
Value of Time
Monochronic
Polychronic
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Negotiations
Negotiation
Framework by
Weiss & Strip
(1985),
Later Simplified
by Moran &
Stripp (2004)
Cross Cultural Management by Shobhana Madhavan
Concern with Protocol
Formal
- Negotiators are formal & expect
good manners & conduct
- Importance is given to formal
introductions, presentations of
business cards, exchange of gifts,
seating arrangements, agendas &
politeness in communication
- Asia, Eastern Europe, Latin
Europe, Baltic states
Informal
- Negotiators from Australia, USA,
Canada exhibit informal behavior
Significance of Type of Issue (‘Issue’ can be defined as a point arising from, or
growing out of, the parties conflicting interest)
Substantive/ Task Related
- Deals with the resources such as
space, money, property, power &
prestige
- Europe & North America
Relationship Based
- Deals with the maintaining of an
ongoing relationship
- Asia, Latin America, Middle East
Basis of Trust ‘Trust’ can be defined as reliance upon the accuracy of the
counterpart’s information & the confidence that the joint decisions will lead to
the desired outcomes
- In international negotiations, negotiators cannot rely on sanctions alone
because of the complications of international law
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Negotiators base trust either on law or friendship
Negotiations
Negotiation
Framework by
Weiss & Strip
(1985),
Later Simplified
by Moran &
Stripp (2004)
Cross Cultural Management by Shobhana Madhavan
Complexity of Language: Factors in communication include;
1. Vocal Characteristics: tone, pace, rate of speech
2. Body Language: eye contact, facial expression, gestures, interpersonal
space, odour
Low Context
- Negotiators pay attention to
words more than to contextual
factors
- North American & North
European Cultures
High Context
- Importance is given to contextual
factors in communication
- Asian Culture
Nature of Persuasive Argument: Different Persuasive arguments include;
1. Use of logic or facts
2. Use of emotions
3. Use of credibility
Facts Based Negotiation
- Like Germany, prefers facts,
credibility, statistical reports, cost
benefit analysis & financial
statements
Emotions Based Negotiation
- Like Russia, use emotions to
influence the negotiation process
Risk- Taking Propensity
Low Uncertainty Avoidance
- Prefer high returns & are willing
to take higher risks
High Uncertainty Avoidance
- Prefer low risks & secure returns
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Negotiations
Negotiation
Framework by
Weiss & Strip
(1985),
Later Simplified
by Moran &
Stripp (2004)
Cross Cultural Management by Shobhana Madhavan
Decision Making Systems: Decisions may be;
1. Authoritative
2. Consensus
- High Power Distance Cultures,
decisions are made by senior
members of the team
- Low Power Distance, Collective &
Feminine Cultures decisions are
likely to be made on consensus
- In collectivist cultures decision
making will be as a group
Form of Agreement: ‘Agreement’ can be defined as an exchange of conditional
promises in which each party declares that it will act in a certain way on
condition that the other party acts in accordance with its promises
Detailed Written Contract
- Nations with an internal locus of
control, like the USA, prefer
written contracts
Implicit Broad Agreement
- Countries in Asia, where
negotiations have an external
locus of control are comfortable
with implicit broad agreements as
they believe that the environment
may change & the agreement will
need to be adapted to these
changes
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Cross Cultural Management by Shobhana Madhavan
Negotiations: Adapted from Gestleland (2000)
Classification of
Cultures
According to
Negotiator
Profile
Group 1:
Relationship
focused
formal,
polychronic,
reserved
Group 2:
Relationship
focused,
formal,
monochronic,
Group 3:
Relationship
focused,
formal,
polychronic,
expressive
Group 4:
Relationship
focused,
formal,
polychronic,
variably
expressive
India
Bangladesh
Indonesia
Malaysia
Vietnam
Thailand
Philippines
Japan
China
South Korea
Singapore
Saudi Arabia
Egypt
Greece
Brazil
Mexico
Russia
Poland
Romania
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Cross Cultural Management by Shobhana Madhavan
Negotiations: Adapted from Gesteland (2000)
Classification of
Cultures
According to
Negotiator
Profile
Group 5:
Moderately
deal focused,
formal,
variably
monochronic
& expressive
Group 6:
Moderately
deal focused,
formal,
variably
monochronic,
reserved
Group 7: Deal
focused,
moderately
formal,
monochronic,
reserved
Group 8: Deal
focused,
informal,
monochronic,
variably
expressive
France
Belgium
Italy
Spain
Hungary
Baltic states
Britain
Denmark
Finland
Germany
Netherlands
Czech Republic
Australia
Canada
USA
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Negotiations: Adapted from Gesteland (2000)
Negotiation
Tactics Used in
Different
Countries
Cross Cultural Management by Shobhana Madhavan
Country
Negotiation Tactics
Japan
Style of interaction is among the least aggressive & most
polite. Positive promises, recommendations &
commitments. Infrequent use of ‘no’ & facial gazing,
frequent silent periods
Korea
Use of punishments & command. Frequent use of word
‘no’
Northern
China
Asking a lot of questions & the use of information
exchange tactics. Infrequent use of ‘no’ & ‘you’; some
silent periods
Taiwan
Use of face gazing. Asking fewer questions but providing
more information
Russia
Infrequent use of ‘no’; frequent silent periods; asking a
lot of questions
Germany
High percentage of self disclosures & low percentage of
questions asked
Untied
Kingdom
Falling in the middle of most negotiation scales. Don’t
interrupt each other frequently
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Negotiations: Adapted from Gesteland (2000)
Negotiation
Tactics Used in
Different
Countries
Cross Cultural Management by Shobhana Madhavan
Country
Negotiation Tactics
Spain
Highest percentage of commands & comparatively
fewer self disclosures. Highest percentage of
interruptions. High use of ‘no’ & ‘you’
France
One of the most aggressive negotiators. Highest
percentage of threats & warnings. Use of
interruptions, facial gazing, use of ‘no’ & ‘you’ very
frequently
Brazil
Aggressive negotiators. Highest percentage of
commands of all groups. Use of ‘no’, ‘you’, facial
gazing’ & touching
Mexico
Balanced negotiators. Verbal & non verbal behavior
much less aggressive than the Spanish & Brazilians
Francophone
Canada
Aggressive behavior similar to the French. High
percentage of threats & warnings; many interruptions.
High degree of eye contact
Anglophone
Canada
Lowest percentage of aggressive persuasive tactics,
such as threats, warnings & punishments
United States
Like the Germans & British, the Americans fall in the
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middle of most states