Cross-Cultural+Negotiation

8/10/2019 Cross-Cultural+Negotiation

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2010 Pearson Prentice Hall

Copyright 2014 Pearson Education, Inc.5-1

Chapter Learning Goals

1. Learn how to prepare for cross-cultural

business negotiations.

2. Recognize the need to build trusting

relationships as a prerequisite for successful

negotiations and long-term commitments.

3. Be aware of culturally-based behavioral

differences, values, and agendas of the

negotiating parties.

4. Learn the complexities of negotiating with

the Chinese5-2 Copyright 2014 Pearson Education, Inc.


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5. Appreciate the variables in the decision-

making process and understand the influence

of culture on decision making.

6. Become familiar with theJapanese decision-

making process and how it is influenced by

their cultural norms.

http://money.cnn.com/2014/10/05/pf/working-abroad/http://www.tportal.hr/vijesti/hrvatska/356243/Kupuj-i-placi-formula-uspjeha-zagrebackog-Iracanina.html

http://www.youtube.com/watch?v=GOHvMz7dl2A

http://www.youtube.com/watch?v=dHq4zqBTfqc

http://www.youtube.com/watch?v=UTE0G9amZNk

5-3 Copyright 2014 Pearson Education, Inc.

Example of US Cultural Baggage

I can go in alone.

Many U.S. executives seem to believe they can handle any negotiating situation by themselves, and they are outnumbered in mostnegotiating situations.

Just call me John.

Americans value informality and equality in human relations. They try to make people feel comfortable by playing down statusdistinctions.

Pardon my French.

Americans arent very talented at speaking foreign languages.

Check with the home office.

American negotiators get upset when, halfway through a negotiation, the other side says, Ill have to check with the home office. Theimplication is that the decision-makers are not present.

Get to the point.

American negotiators prefer to come directly to the point, getting to the heart of the matter quickly.

Lay your cards on the table.

Americans expect honest information at the bargaining table.

One thing at a time.

Americans usually attack a complex negotiation task sequentially; that is, they separate the issues and settle them one at a time.

A deal is a deal.

When Americans make an agreement and give their word, they expect to honor the agreement no matter what the circumstances.5-5
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Example of European Cultural Baggage

A German Swiss buyer of goods is visiting a Chinese entrepreneur,trying to close a contract.

The Chinese sits inscrutably while the Swiss expostulates his detailedproposal.

The Swiss finishes his speech, a bit nervous at receiving so littlefeedback.

Finally, the Chinese speaks: This is not good for us. And then, Let me

take you for dinner.

According to the German Swiss, the relationship may be in trouble, butthe Chinese, in fact, may be keenly interested and wants to strengthenthe relationship with a social event.5-6



Learn how to prepare for cross-

cultural business negotiations.


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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.


Negotiation


The process of discussionby whichtwo or more parties aim for

mutually acceptable agreement


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Important Differences

1. Amount and type of preparation.

2. Tasks vs. interpersonal relationships.

3. General principles vs. specific issues.

4. Number of people present and their influence.

CAUTION: avoid Projective Cognitive Similarity!

Assumption that others perceive, judge, think and reason in the same waywhen, in fact, they do not because of cultural and practical influences.

Stakeholders inCross-Cultural Negotiation



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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.




Recognize the need to build

trusting relationships as a

prerequisite for successful

negotiations and long-term

commitments.


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The Negotiation Process


Stage One: Preparation


Develop profile of counterparts.

Understand your own

negotiating style.

Find out likely demands, team

composition, and counterpart

authority.

Choose a negotiation site.

British/French Chunnel

negotiations

Cooperative vs. Competitive

signaling.


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Approach to negotiation process: Competitive or problem-solving. Composition of negotiating team: Number and experience of team members. Relative hierarchy in

position. Relationships with counterparts. Decision-making power of team members. Motivated byindividual, company, or community goals.

Method of reaching decisions: By individual determination, by majority opinion, or by groupconsensus.

Purpose of negotiations: One-time contract. Joint venture or other alliance. Long-term relationship-building.

Negotiation process: Behavioral expectations, typical procedures.

Communication context used by teams: Low context, explicit; high-context, implicit; nature ofsurroundings.

Nature of persuasive arguments: Factual presentations and arguments, accepted tradition, or emotion.

Bases of trust:Relationships, past experience, intuition, or rules.

Risk-taking propensity: Level and methods of uncertainty avoidance in trading information or makinga contract.

Value and uses of time: Attitude toward time. Use of time in scheduling and proceeding withnegotiations; use of time to pressure for agreement.

Form of satisfactory agreement: Based on trust (perhaps just a handshake), the credibility of the parties,commitment, or a legally binding contract.

Stage Two: Relationship Building


Getting to know ones contactsand building mutual trust

Non-task sounding

Usually a serious problem for US

business people.

Use an intermediary.

I have come as a mediator


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Stage Three: Exchanging

Task-Related Information


Each side typically makes a

presentation and states its

position

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.

Ex. Boing case

Russians are wellprepared and versed,

put a lot of emphasis onprotocol and

expect to deal with top executives.

Show understanding of the

others viewpoint.

* Practice by

reversing roles.

Stage Four: Persuasion


Hard bargaining.

Dirty tricks are in the

eye of the beholder!!

False information.

Roughtactics.

Ambiguous authority.

Non-verbal messages.

Individualism vs.

Collectivism.Relative motivation of

personal self-interest.


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Stage Five: Concessions

and Agreement


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.

What went wrong? Many cross-border joint ventures (JVs) encounter problems because the partners differences in management styles and corporate control, aswell as cross-cultural issues, do not get recognized and resolved during the negotiation phase, and so continue to fester during the operations phase. One suchJV is the Sino-French collaboration that was formed by Groupe Danone (hereafter Danone), and Hangzhou Wahaha Group Co. (hereafter WHH).

Danone is one of the largest food conglomerates from France. Wahaha, which was star ted in 1987 and was controlled by the government of HangzhousShangcheng District, is Chinas largest beverage company. From its inception, Zong Qinghou ran the operations of WHH. When the company converted i tselfinto a private entity, Qinghou took the role of a minority shareholder.

The Danone-WHH joint venture was established in March 1996 and took the trademark name of Wahaha because of its strong brand visi bility in the Chinesemarket. In emerging markets, Danone grew by creating a multitude of profitable JVs in India, Pakistan, Vietnam, Columbia, and other countries. On the otherhand, WHH achieved its market expansion and corporate growth in China by turning itself into a national brand and a highly successful food and beveragecompany.

The Danone-Wahaha JV dealt with the areas of food and beverages and g rew at a respectable rate. For Danone, this was a good stra tegy to enter into China. ForWHH, the JV helped the company to make a linkage with a well-known global brand. Negotiations resulted in the following salient features of the JV:

1. Ownership of the JV included foreign partners (51 percent), WHH (39 percent), and employees (10 percent).

2. The JV encompassed five entities: Hangzhou Wahaha Baili Foods, Hangzhou Wahaha Health Foods, Hangzhou Wahaha Foods Co., Hangzhou Wahaha BeveragesCo., and Hangzhou Wahaha Quick Frozen Foods. Danone and Peregrine Investment Holdings collectively invested $70 million in th e five entities of the JV.

3. As agreed to by Danone, the day-to-day operations of the JV resided with Qinghou.

The JVs business operations expanded in China, eventually growing into a $2 billion beverage behemoth and one of Chinas best-known brands. However, theactivities of Danone and WHH also became intertwined and complex, leading to differences in opinion, corporate control, and management styles.

Between 1996 and 2009, the following changes took place in the structure and operations of the Danone-WHH JV:

1. Because of consumer demand and market growth, the JVs operations in China witnessed the emergence of 37 business entities. Danone attempted to buyout Qinghou but the negotiations were unsuccessful.

2. Public rows erupted between the two companies when they kept on blaming each other for breach of contract. Danone blamed Qinghou for going outside ofthe contract and profiting from 80 unauthorized businesses. This included misusing the Danone brand and its distribution system in China.

3. The dispute between Danone and Qinghou became even more personal when Danone filed a lawsuit against Qinghou s wife and daughter in a Los Angelescourt regarding their business interests and unauthorized JV-related dealings outside of China.

4. Danone filed for arbitration proceedings in Stockholm in May 2007.

5. During the dispute, Danone also filed legal claims against ten business entities that were believed to be controlled by WHH in Samoa and the British VirginIslands.

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

7. In September 2009, the two companies agreed to drop the protracted legal proceedings and announced that they had agreed to an amicable split: Wahahawould pay cash to acquire Danones 51 percent, giving the Chinese company control of the venture.


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Management Focus: Joint Venture in China

A Few Lessons We Learn

Cross-cultural misunderstandings and unfamiliaritywith the JV partners were at the heart of thedispute.

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

Relationship building and exchange of informationis 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 goodamount of interaction between the partners.


Comparison of Negotiation Styles

JapaneseNorth

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 aim5-24 Copyright 2014 Pearson Education, Inc.


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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.


Successful Negotiators: Indians

Look for and say the truth, not afraid to speakup.

Exercise self-control.

Respect other party, look for solutionsacceptable 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


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


Managing Negotiation

Examples


Avoid person-relatedconflicts.

Low-context Americansappear impatient, cold,and blunt to Mexicans.

Americans must approachnegotiations with Mexicanswith patience; refrain from

attacking ideas.


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Be aware of culturally-based

behavioral differences, values,

and agendas of the negotiating

parties.

Cross-Cultural Negotiation Variables



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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: Were 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 toSupport Negotiations

Negotiation Support

System NSS)

Web Application

5-34

Increase likelihood of

agreement

Decrease direct and

indirect costs

Maximize optimal

outcomes

Provide support for

phases and dimensions

such as: Multiple-issue, multiple-

party business transactionsof a buy-sell nature

International dispute

resolution

Internal company

negotiations and

communications

Copyright 2014 Pearson Education, Inc.


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E-Negotiations

Advantages Disadvantages

5-35

Speed

Less travel

Laying out much

objective information

over time

Not being able to build

trust and interpersonalrelationships

Nonverbal nuances are

lost

Video conferencing may be

a good compromise

Copyright 2014 Pearson Education, Inc.



Learn the complexities of

negotiating with the Chinese


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Comparative Management in Focus:

Negotiating with Chinese


EXHIBIT 5-6 Influence on Western-Chinese Business Negotiations

Comparative Management in Focus:Negotiating with Chinese


Two problems:

Chinese desire for details

Apparent insincerity

Saving face:

Lien Mien-tzu

Importance of

harmony

Guanxi

Guanxihu networks

Two stages of Chinesenegotiation

Technical

Commercial


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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


Managing the Conflict Resolution

To negotiate on the basis offactual information and logicalanalysis

Instrumental-OrientedConflict

To handle a situation indirectlyand implicitly, without cleardelineation of the situation bythe person handling it

Expressive-OrientedConflict



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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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Cross-Cultural+Negotiation