Managing in Cross Cultural Business Negotiation: Mapping Local Culture with Business Strategy for Effective Negotiation…

Managing in a cross cultural global business environment– learning and mapping the local culture with your business strategy– is critical for effective negotiation and global business success… Business negotiation in a global environment is major challenge for negotiators; knowing-understanding culture differences are imperative…

According to Pankaj Agrawal; learning the other side’s culture is critical… it’s very important to know and understand the common and basic components of your counterparty’s culture… it’s a sign of respect and a way to build trust and credibility as well as, an advantage that can help choose the right strategy and tactics during the negotiation: Don’t stereotype…

Regardless of the business sector, e.g., finance, technology, consumer electronics… global cultural awareness can help companies build international competencies and enable them to become more globally sensitive… According to D. Thomas; virtually all business conducted today is global business. It’s difficult to identify product-service that’s not somehow influenced by a cross border transaction of some kind... patience, flexibility and appreciation of other’s beliefs are essential qualities… 

But, how is culture defined? According to Czincota; culture is an ‘integrated system of learned behavior patterns that are characteristics of the members of any society’… Culture encompasses the beliefs, attitudes and behaviors of diverse ethnic groups, clans, tribes, regional subcultures or even neighborhoods. Culture differentiates people by religious or ideological persuasions, professions and educational backgrounds.

Families have cultures, as do the two largest cultural groups in the world, men and women. Companies, organizations and educational institutions also demonstrate unique cultures. Yet, specific cultures do contain clusters of people with fairly common attitudinal and behavioral patterns… For this reason, be wary of generalizations about how people from a specific culture may think or act…

Rigid notions about a group’s cultural patterns can result in inaccurate stereotypes, gross injustice to the group and inaccurate (and possibly disastrous) assumptions or actions. Common cultural patterns found in a group’s central cultural cluster should be looked upon as possible, or even probable, clues as to the ways a cultural group may think or respond. But the hypothesis should always be tested and modified after direct interaction with the group in question… 

According to Jeswald Salacuse; cultural differences are an important factor in business negotiations; in addition to language differences, different cultures have differing values, perceptions and philosophies… For example, Westerners and Asians tend to have a different view of the purpose of negotiations. Westerners see the goal of negotiations as a way to produce a binding contract which creates specific rights and obligations. Asians see the goal of negotiations as a way to create a relationship between the two parties; the written contract is simply an expression of that relationship. What the Asians see as a reasonable willingness to modify a contract to reflect changes in the parties’ relationship; Westerners might see it as a tendency to renege. Westerners insistence on adherence to the original terms of the contract may be perceived as distrust by the Asians…

Some cultures prefer to start from agreement on general principles, while others prefer to address each issue individually. Some cultures prefer to negotiate by ‘building-up’ from an initial minimum proposal; others prefer to ‘build-down’ from a more comprehensive opening proposal. Cross cultural business negotiations are challenging but unfortunately, people don’t realize the challenges until they are actively in negotiations– mainly because cultural differences are subtle and are often invisible.

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In the article International Negotiation: Facts and Culture by Mladen Kresic writes: Many deals succeed or fail just on the strength of a team’s level of preparation. How much you know about your market position. How well you understand your pressure points and business challenges. How well you understand your business culture– plus a mirroring set of information about the company represented on the other side of the table.

The first and most critical step in negotiation is information gathering. Negotiators who take shortcuts on this step are jeopardizing their deal and a long-term respectful relationship… Before you can make a credible value argument that will resonate with a potential customer or partner, you must get facts about: National or regional culture where each team lives or does business; Company’s organizational structure; Decision makers in the company; Lines of business– where will the impacts of your proposed solution be felt? Stakeholders (e.g., investors…) and anybody in the equation who has potential influence on the deal’s outcome (e.g., close advisors, independent consultants…); Customers and end users– who will ultimately use the product-service…?

Remember, you’re not making one deal– you’re setting up a relationship. The more you know about your customers’ people, culture, and business challenges, the better… Of course, not all information has the same value, but every bit of information you gather is important in its own way. Having information helps you reduce the other side’s alternatives– not processing information reduces your own. As you prepare to negotiate, you must discover:

  • Customer’s weaknesses in their business and industry;
  • How decisions are made in the company– about the people and structure and how their culture may impact their decision-making and negotiation style;
  • External factors– among other things, these could be regional economic pressures or regulations unique to their country;
  • Company’s financial status, stability, purchase timetables… all information is fair game– whether you think it’s immediately relevant or not.

In the article Competing Across Cultures by global prospective writes: Business executives are increasingly aware of the need for harmonious-productive cross cultural relationships that transcend differences. In order to access new global markets or recruit new talent, the corporate world must possess requisite intercultural communication skills. In ‘Economist’ survey of C-level executives and board members of organizations in Western countries  indicated that many leaders do not yet possess such practical skills.

According to Nancy Adler; interconnectedness through modern technology has deluded many people. There is the false assumption that just because we can reach anyone in the world easily– through email, twitter, Skype… we are therefore, all the same… The two most common causes of under-performance across cultures are: (a) lack of fluency in language, and (b) mis-understandings rooted in cultural differences…

Repeated studies show that two countries that share a common language trade 42% more, than two otherwise similar countries that do not share a linguistic connection: Said another way; words add up to numbers. In the surveyEconomist’ asked business executives, this question: When communicating with business stakeholders across borders, how often would you say that you or your organization encounters difficulties? Respondents on average said: Very often = 8%; Sometimes = 61%; Rarely = 27%; Never = 2%. For Portuguese, Spanish, Russian speakers, the figures for– ‘Sometimes’  were much higher, in the 70-90% range.

According to Nandita Gurjar; most managers, when confronted with cultural conflict, often have little idea that the underlying issue could be cultural. They tend to think: Why are you so upset? This is the way I normally behave and people in my home office never get upset… A manager must get the best out of people and therefore needs to know that individual’s cultural background will strongly influence the way they respond… According to Flavio Liviero; Cultural barriers are always present and need to be constantly managed…

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In the article Culture’s Impact on Negotiations by Dr. Chester L. Karrass writes: Some cultures are very individualistic, while other cultures are collective or group oriented. Some cultures prefer a direct negotiating style while others prefer an indirect approach (i.e., via intermediaries or third parties) and in other cultures decisions are made by consensus…

Cultures vary from organization to organization, and it’s important to know who you are dealing with and how they prefer to negotiate… When dealing internationally, Western negotiators (i.e., Europe or North America) generally prefer an organized, point-by-point, issue-by-issue approach to their negotiations. Some Asian cultures (particularly China) take more holistic approach to negotiation; often jumping from one issue to another totally unrelated issue; then back to change a point that everyone had already agreed to; and then off to another issue… This type of cultural disorder can confuse an uninformed Western style negotiator. It hinders their ability to keep track of where they are in the negotiation and often is perceived as simply a tactic to gain advantage. In fact, this seemingly disorderly approach is generally purely culturally based…

Understand the influence ‘culture’ has on your negotiations… It does not matter if you are negotiating with a co-worker inside your own organization, supplier, or customer. Start by having a good understanding of your own cultural bias and how your negotiating approach may differ from that of the other party. Once you learn the cultural differences, don’t just adapt yourself to the other party’s culture, but learn ways to make the most of these cultural differences to craft more creative agreements. A good understanding of various cultural approaches to negotiating is to your advantage…

Cross cultural business negotiations are always tricky. In most cases parties involved in the negotiation process will not always have a good understanding of the other’s culture, and hence the negotiation process starts off with a false set of assumptions… and if those assumptions are not tested then the negotiation process will fail: Verify your assumptions and make things transparent and clear at the very onset of the negotiation process…

According to Falcao; regard every negotiation as a cross cultural exercise and that communication– the process in which people deal with each other– is a very important dimension in which rituals have a major impact… In terms of tactics, use a strategy of exploration, preparation and adjustment… start with zero assumptions: Then, figure out how much you need to adjust or adapt to the person across the negotiating table. In terms of negotiations, there are only two cultures: ‘competitive culture’ and ‘collaborative culture’, i.e., friend or foe, in a way…

The ‘Economist’ global survey of senior executives clearly showed that a significant number of companies are at the stage where they do recognize the benefits of overcoming cultural and communication barriers, but are not necessarily doing enough to address the challenge… also, there may well be a touch of complacency, in top management, about how much still needs to be done… There are three interconnected aspects that need to be considered before entering into cross cultural negotiation:

  • Basis of the Relationship: In much of Europe and North America, business is contractual in nature. Personal relationships are seen as unhealthy as they can cloud objectivity and lead to complications. In South America and much of Asia, business is personal. Partnerships will only be made with those they know, trust, feel comfortable. It’s therefore necessary to invest in relationship building before conducting business.
  • Information at Negotiations: Western business culture places emphasis on clearly presented and rationally argued business proposals using statistics and facts. Other business cultures rely on similar information but with differences, for example; visual and oral communicators may prefer information presented through speech or using maps, graphs, charts… such as the South Americans…
  • Negotiation Styles: How we approach negotiation differs across cultures, for example; in Middle East, rather than approaching topics sequentially negotiators may discuss issues simultaneously. South Americans can become quite vocal and animated. The Japanese negotiate in teams and decisions are based upon consensual agreement. In Asia, decisions are usually made by the most senior figure or head of a family. In China, negotiators are highly trained in the art of gaining concessions. In Germany, decisions can take a long time due to the need to analyze information and statistics in great depth. In the UK, pressure tactics and imposing deadlines are ways of closing deals, while in Greece, this tactic would backfire…