1. 1 McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. International Business Negotiation

2. 2 CHAPTER TEN International and Cross-Cultural Negotiation

3. 3 International Negotiation: Art and Science International negotiations are much more complex than domestic negotiations. They challenge the negotiators to understand the science of negotiation while developing their artistry. The science of negotiation provides research evidence to support broad trends that often, but not always, occur during negotiation. The art of negotiation is deciding which strategy to apply when, and choosing which models and perspectives to apply to increase cross-cultural understanding. 16-3

4. 4 What Makes International Negotiations Different? Two overall contexts have an influence on international negotiations: Environmental context –Includes environmental forces that neither negotiator controls that influence the negotiation Immediate context –Includes factors over which negotiators appear to have some control 16-4

5. 5 Environmental Context Factors that make international negotiations more challenging than domestic negotiations include: Political and legal pluralism International economics Foreign governments and bureaucracies Instability Ideology Culture External stakeholders 16-5

6. 6 Immediate Context “ Factors over which the negotiators have influence and some measure of control ” : Relative bargaining power Levels of conflict Relationship between negotiators Desired outcomes Immediate stakeholders 16-6

7. 7 The Contexts of International Negotiations 16-7

8. 8 How Do We Explain International Negotiation Outcomes? International negotiations can be much more complicated Simple arguments cannot explain conflicting international negotiation outcomes The challenge is to: –Understand the multiple influences of several factors on the negotiation process –Update this understanding regularly as circumstances change 16-8

9. 9 Conceptualizing Culture and Negotiation Culture as learned behavior –A catalogue of behaviors the foreign negotiator should expect Culture as shared values –Understanding central values and norms Individualism/collectivism Power distance Career success/quality of life Uncertainty avoidance 16-9

10. 10 Hofstede ’ s Model of Cultural Dimensions Individualism/collectivism Power distance Career success/quality of life Uncertainty avoidance 16-10

11. 11 Individualism/Collectivism Definition: the extent to which the society is organized around individuals or the group Individualism/collectivism orientation influences a broad range of negotiation processes, outcomes, and preferences –Individualistic societies may be more likely to swap negotiators, using whatever short-term criteria seem appropriate –Collectivistic societies focus on relationships and will stay with the same negotiator for years 16-11

12. 12 Power Distance Definition: “ The extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally ” Cultures with stronger power distance will be more likely to have decision-making concentrated at the top of the culture. 16-12

13. 13 Career Success/Quality of Life Definition: cultures differ in the extent to which they hold values that promote career success or quality of life. Cultures promoting career success are characterized by the acquisition of money and things, and not caring for others. Cultures promoting quality of life are characterized by concern for relationships and nurturing. 16-13

14. 14 Uncertainty Avoidance Definition: “ Indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations ” Negotiators from high uncertainty avoidance cultures are less comfortable with ambiguous situations--want more certainty on details, etc. 16-14

15. 15 Hofstede ’ s Cultures Ranking in the Top 10 16-15

16. 16 Conceptualizing Culture and Negotiation Culture as dialectic –All cultures contain dimensions or tensions that are called dialectics Example: Judeo-Christian parables “ too many cooks spoil the broth ” and “ two heads are better than one ” offer conflicting guidance This can explain variations within cultures Culture in context –No human behavior is determined by a single cause –All behavior may be understood at many different levels simultaneously 16-16

17. 17 Schwartz ’ s 10 Cultural Values 16-17

18. 18 The Influence of Culture on Negotiation: Managerial Perspectives Definitions of negotiation Negotiation opportunity Selection of negotiators Protocol Communication Time sensitivity Risk propensity Groups versus individuals emphasis Nature of agreements Emotionalism 16-18

19. 19 The Influence of Culture on Negotiation: Research Perspectives Negotiation outcomes –Research suggests that culture has an effect on negotiation outcomes, although it may not be direct and it likely has an influence through differences in the negotiation process in different cultures –Some evidence suggests that cross-cultural negotiations yield poorer outcomes than intracultural negotiations 16-19

20. 20 The Influence of Culture on Negotiation: Research Perspectives 16-20

21. 21 The Influence of Culture on Negotiation: Research Perspectives Negotiation process and information exchange –Culture has been found to have significant effects on the negotiation process, including: How negotiators plan The offers made during negotiation The communication process How information is shared during negotiation Effects of culture on negotiator cognition –Accountability to a constituent influenced negotiators from individualistic and collectivistic cultures differently 16-21

22. 22 The Influence of Culture on Negotiation: Research Perspectives Effect of culture on negotiator ethics and tactics –Differences exist in the tolerance of different negotiation tactics in different cultures –Negotiators who trusted the other party were less likely to use questionable negotiation tactics Effects of culture on conflict resolution –Within collectivistic countries, disagreements are resolved based on rules, whereas in individualistic countries, conflicts tend to be resolved through personal experience and training 16-22

23. 23 Culturally Responsive Negotiation Strategies When choosing a strategy, negotiators should: –Be aware of their own and the other party ’ s culture in general –Understand the specific factors in the current relationship –Predict or try to influence the other party ’ s approach Strategies are arranged based on the level of familiarity (low, moderate, high) that a negotiator has with the other party ’ s culture 16-23

24. 24 Low Familiarity Employ agents or advisers (unilateral strategy) –Useful for negotiators who have little awareness of the other party ’ s culture Bring in a mediator (joint strategy) –Encourages one side or the other to adopt one culture ’ s approaches or mediator culture approach Induce the other party to use your approach (joint strategy) –The other party may become irritated or be insulted 16-24

25. 25 Moderate Familiarity Adapt to the other negotiator ’ s approach (unilateral strategy) –Involves making conscious changes to your approach so it is more appealing to the other party Coordinate adjustment (joint strategy) –Involves both parties making mutual adjustments to find a common process for negotiation 16-25

26. 26 High Familiarity Embrace the other negotiator ’ s approach (unilateral strategy) –Adopting completely the approach of the other negotiator (negotiator needs to completely bilingual and bicultural) Improvise an approach (joint strategy) –Crafts an approach that is specifically tailored to the negotiation situation, other party, and circumstances Effect symphony (joint strategy) –The parties create a new approach that may include aspects of either home culture or adopt practices from a third culture 16-26