McGraw-Hill/IrwinInternational Management

© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

International ManagementPhatak, Bhagat, and Kashlak

McGraw-Hill/IrwinInternational Management

© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

Chapter 13

Negotiations and Decision-Making Across Borders and Cultures

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Learning Objectives

Understand the process of negotiation and decision-making and their significance for multinational and global corporations.Understand the environmental context of international business negotiations and the concept of multinational negotiating strength.Identify the various patterns of negotiation and conflict resolution in different national and cultural contexts.Understand the influence of national and cultural variations in decision-making.Discuss the importance of computer-mediated communication in negotiation and decision-making.

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Chapter Topics

What is Negotiation?The Negotiation ProcessEnvironmental Context of International NegotiationsManaging Negotiation and ConflictEthics in International NegotiationsWhat is Decision-Making?The Decision-Making ProcessInternal and External FactorsImplications for Managers

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Negotiation

The process of verbal and non-verbal exchanges between two or more parties with the goal of reaching a mutually satisfactory agreement

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Bargaining

The process of arguing and haggling over prices and other details involved in transactions of goods and services, common in flea markets, bazaars, and fairs all over the world

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Situational Characteristics Influencing Cross-Border Negotiations

Context of the negotiation

Physical arrangements

Time limits

Status differences

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Fundamental Elements of the Negotiation Process

1. Two or more parties involved in real or perceived conflict over important goals

2. Shared interest in reaching an agreeable solution3. Background preparations leading to the process of

negotiation4. A goal, but not a certainty, of reaching mutual

agreement

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Ex. 13-1: Stages of Negotiation in International Management

PARTY A PARTY B

PREPARATION

PREPARATION

INFORMATION EXCHANGE

PERSUASION

CONCESSION AND

AGREEMENT

RELATIONSHIP BUILDING

CULTURAL, NATIONAL, AND ORGANIZATION

INFLUENCES

Cultural Variables

Political and Legal Pluralism

International

Economic Situation

Nature of Regulations and

Control Processes

Political Risk and Instabilities

Differences in

Ideology

Organizational Stakeholders

Administrative

Heritage

Nature of Organizational

Control Processes

Patterns of Past Successes and

Failures

CULTURAL, NATIONAL, AND ORGANIZATION

INFLUENCES

Cultural Variables

Political and Legal Pluralism

International

Economic Situation

Nature of Regulations and

Control Processes

Political Risk and Instabilities

Differences in

Ideology

Organizational Stakeholders

Administrative

Heritage

Nature of Organizational

Control Processes

Patterns of Past Successes and

Failures

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Ex. 13-2: Differences in Negotiator Strategies and Tactics in Three Countries

Japanese N = 6 American N = 6 Brazilian N = 6

Promise

Threat

Recommendation

Warning

Reward

Punishment

Positive normative appeal

Negative normative appeal

Commitment

Self-disclosure

Question

Command

7

4

7

2

1

1

1

3

15

34

20

8

8

4

4

1

2

3

1

1

13

36

20

6

3

2

5

1

2

3

0

1

8

39

22

14

Individual Tactics as a Percentage of Total Tactics

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Ex. 13-2 (contd.)

Japanese N = 6 American N = 6 Brazilian N = 6

Number of times word “No” used

Silent periods of 10 seconds or more

Conversation overlaps (interruptions)

Gazing (minutes per random 10 minute period)

Touching

5.7

5.5

12.6

1.3 min.

0

9.0

3.5

10.3

3.3 min.

0

83.4

0

28.6

5.2 min.

4.7

Occurrences in a 30-Minute Bargaining session

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Ex. 13-3: Comparison of Cultural Approaches to Negotiation

American Negotiator Indian Negotiator Arab Negotiator

Accepts compromise when deadlock occurs

Has firm initial and final stands

Sets up principles but lets subordinates do detail work

Has a maximum of options

Respects other parties

Is fully briefed

Keeps position hidden as long as possible

Relies on truth

Trusts instincts

Seeks compromises

Is ready to alter position at any point

Trusts opponent

Respects other parties

Learns from opponent

Avoids use of secrets

Protects “face” of other parties

Avoids confrontation

Uses a referent person to try to change others, e.g. “Do it for your father”

Seeks creative alternatives to satisfy all parties

Mediates through conferences

Can keep secrets

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Ex. 13-3 (contd.)

Swedish Negotiator Italian Negotiator

Gets straight to the point of the discussion

Avoids confrontation

Time conscious

Overly cautious

Informal

Flexible

Reacts slowly to new propositions

Quiet and thoughtful

Dramatic

Emotional

Able to read context well

Suspicious

Intrigues

Uses flattery

Concerned about creating a good impression

Indefinite

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Ex. 13-4: Differences Between American and Chinese Culture and Approach to the Negotiation Process

Contrast of Basic Cultural Values

American

Task and information orientedEgalitarianAnalyticalSequential, monochronicSeeks the complete truthIndividualistConfrontative, argumentative

Chinese

Relationship orientedHierarchical

HolisticCircular, polychronic

Seeks the harmonious wayCollectivist

Haggling, bargaining

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Ex. 13-4 (contd.)

Approach to the Negotiation Process

American

Quick meetingsInformalMake cold calls

Full authorityDirectProposals first

AggressiveImpatient

A “good deal”

Chinese

Long courting processFormal

Draw on intermediaries

Limited authorityIndirect

Explanations first

QuestioningPatient

A long-term relationship

nontask sounding

information exchange

means of persuasion

terms of agreement

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Support for the Negotiation Process by Decision Support Systems

Reducing the amount of time that is necessary for feedback from headquarters in order to carry out effective negotiations

Providing a large amount of data and information on alternative scenarios that may result from the negotiation process

Increasing the likelihood that important data and information are available when needed

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Conflict

Conflict can be understood as a state of disagreement or opposition between two parties, where if party accomplishes their objectives, the other party is unable to achieve its desired outcomes

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Ex. 13-5: Nature of Conflict Between Members of Low and High Context Culture

Key Questions Low-Context Conflict High-Context Conflict

Why Analytic, linear logic; instrumental oriented; dichotomy between conflict and conflict parties

Synthetic, spiral logic; expressive oriented; integration of conflict and conflict parties

When Individualistic oriented; low collective normative expectations; violations of individual expectations create conflict potentials

Group oriented; high collective normative expectations; violations of collective expectations create conflict potentials

What Revealment; direct, confrontational attitude; action and solution oriented

Concealment; indirect, nonconfrontational attitude; “face” and relationship oriented

How Explicit communication codes; line-logic style: rational-factual rhetoric; open, direct strategies

Implicit communication codes; point-logic style: intuitive-effective rhetoric; ambiguous, indirect strategies

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Decision-Making

The conscious process of moving toward objectives after considering various alternatives. It is concerned with making an appropriate choice among a multitude of possible scenarios.

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Ex. 13-6: Steps in the Decision-Making Process

1. DEFINE THE PROBLEM

2. ANALYZE THE PROBLEM

3. IDENTIFY DECISION CRITERIA AND THEIR IMPORTANCE

4. DEVELOP AND EVALUATE ALTERNATIVE SOLUTIONS

5. CHOOSE THE BEST SOLUTION

6. IMPLEMENT THE SOLUTION

7. EVALUATE THE OUTCOMES

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Ex. 13-7: Deductive Versus Inductive Style of Decision-Making

DEDUCTIVEDECISION-MAKING

INDUCTIVE DECISION-MAKING

DECISION

General facts and objective

observations

Specific information and

details

Specific information and

details

General facts and objective

observations

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Key Terms and Concepts

NegotiationInternational negotiationBargainingRelationship buildingDifference in ideologyConflictDecision-makingProgrammed decisionsNon-programmed decisionsDeductive decision-making styleInductive decision-making style