1. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke1 Chapter 5 Negotiation and Conflict Resolution

2. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke2 Learning Objectives l Define negotiation and understand the basic negotiation process l Explain how culture influences the negotiation process l Consider the impact of situational factors and negotiating tactics on negotiation outcomes

3. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke3 Learning Objectives (cont.) l Analyze the differences between intracultural and cross-cultural negotiations l Discuss the role of culture in the conflict resolution process l Appreciate how approaches to conflict influence negotiation l Identify ways to become a better cross- cultural negotiator

4. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke4 Negotiation The process of bargaining between two or more parties to reach a solution that is mutually acceptable

5. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke5 The Negotiation Process l The Goal –Acceptable solution to all (win-win) –In some cultures, goal of negotiation is win- lose l Preparation (understanding one‘s own interests and anticipating the other party‘s interests: objectives, needs) l Relationship-Building (get to know each other) –Different cultures have different attitudes toward how much time and effort to spend on relationship building (e.g. America vs. Mexico)

6. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke6 l Information Exchange (stating an initial position followed by questions, answers, discussion) –Meaning of this stage depends on cultural background l American: beginning of „real“ negotiation l Mexican: are suspicious, present little substantive material l Persuasion (try to convince their counterparts to accept their proposals) The Negotiation Process

7. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke7 l Agreement (mutually acceptable solution by making concessions to the other side) –Cultural variation how to arrive at an agreement l Americans prefer to negotiate „linear“ (one issue at a time, concluding with binding legal contract) l Russians prefer to develop final agreement based on all items (attach less meaning to contract, see concessions as sign of weakness) The Negotiation Process

8. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke8 Negotiating Strategies l Two major types of negotiation/bargaining –Distributive negotiation (win-lose or zero-sum negotiations) –Integrative negotiation (win-win or positive sum negotiation) l „Technically“ every integrative negotiation is distributive as well (also the bigger pie has to be divided)

9. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke9 Distributive Bargaining Party A‘s aspiration range Party B‘s aspiration range Settlement range Party A‘s target point Party B‘s resistance point Party A‘s resistance point Party B‘s target point

10. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke10 l Strategies for distributive bargaining –Try to shift upward the other side‘s belief (e.g. by persuasion) about one‘s own minimum (reservation value) –Try to shift downwards the other side‘s belief of his own minimum –Make a binding, credible, communicated commitment –Negotiation are often settled at focal points Negotiating Strategies

11. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke11 l Strategies to facilitate integrative bargaining –Emphasizing superordinate goals (goals both parties can agree on) –Focusing on the problem, not people (not to personalize the conflict) –Focusing on Interests, not Demands (demands are what a person wants, interests why the person wants them) Negotiating Strategies

12. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke12 l Strategies to facilitate integrative bargaining –Creating new options for joint gains (expanding the resource pie) –Focusing on what is fair (helps to come to a mutual agreement) l The tension between integrative and distributive bargaining can‘t be dissolved in the end Negotiating Strategies

13. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke13 Negotiator‘s Dilemma l Moves to claim value drive out moves to create value (could prevent mutually beneficial agreement) Tom’s Choice Create Claim John’s Choice Create GOOD TERRIBLE GREAT Claim GREAT TERRIBLE MEDIOCRE

14. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke14 Ways out of the Dilemma l Chance of cooperation through repetitive negotiations –One time negotiation can be broken down into many steps (e.g. separating issues, having several meetings) –Managers as negotiators may have to deal on many company matters over a longer time (and therefore need each other‘s coop) –Negotiators reputation (for further negotiations) may be present even in one time negotiations l Best strategy in repetitive negotiations: TIT-FOR-TAT

15. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke15 Situational Factors and Negotiating Tactics l Circumstances of negotiations –Geographical Location (Home office of one party or Neutral equidistant location ) –Implications l Less expenses, better access to information for the „home“ party l (cost) pressure to the other party to come to an agreement l Room Arrangements (rectangular/ square vs. round table, competition vs. cooperation)

16. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke16 l Selection of Negotiators (no. of people, which ones) –Number of people reflects culture (small american team vs. large japanese group) –Can create advantage by overwhelming other side –U.S. companies select negotiators on a basis of position and competence, Mexican firms on personal factors (age, gender, race) and social connections Situational Factors and Negotiating Tactics

17. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke17 l Time Limits (are real of presumed deadlines in negotiations) –Cultural view of time affects negotiations l US, Swiss, Germany: time is a commodity, has to be used as efficiently as possible l Middle East, Asia: longer time perspective, extended negotiation time helps build relationship –Time limits may be used to strenghten one‘s position (to get concessions granted) Situational Factors and Negotiating Tactics

18. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke18 l Verbal tactics (to influence the outcome of a negotiation) –Asking more questions –Making fewer commitments before final agreement stage –Increasing the amount of initial request l Initial Offer (tactic influenced by culture) –Extreme initial offers from Chinese/ Russian negotiators –More „realistic“ offers from US or European negotiators (closer to their bottomline) –Japanese don‘t like extreme offers (called „banana sales approach“) Situational Factors and Negotiating Tactics

19. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke19 Situational Factors and Negotiating Tactics l Other Verbal Negotiating Behaviors –Normative Appeals –Commitments –Self-Disclosure –Questions –Commands –Promises –Threats –Recommendations –Warnings –Rewards –Punishments

20. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke20 l Nonverbal Tactics (challenge to cross- cultural negotiations) –Silence l normal part of conversation for Japanese, uncomfortable situation for Americans (e.g. silence interpreted as rejection) l Can be used strategically (to get concessions) l Conversational Overlaps (more than one person speaks) –usual to Brasilians, inappropriate to Americans/ Japanese Situational Factors and Negotiating Tactics

21. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke21 l Facial Gazing (Americans love to have eye contact, Japanese don‘t) l Touching –Only handshake for Americans and Japanese –Body touching for Brazilian or Mexican to deepen relationship/confidence Situational Factors and Negotiating Tactics

22. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke22 How Culture Influences Conflict Resolution l Negotiation is a means to resolve conflict (begin with different positions, move to an agreement) l Low- and high-context cultures perceive conflicts different –Low-context (LC) cultures see conflict as instrumental oriented (issues are separated from people) –High-context (HC) cultures see conflicts expressive (issues are not separated from people)

23. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke23 l Consequence –LC cultures: public disagreement is acceptable (people have conflict and still friendly relationship) –HC cultures: open disagreement/ public confrontation are highly insulting (parties „lose face“) l Why develop conflicts in the two cultures? –LC culture is individualistic with less specified ways of appropriate behavior (conflict arises if one violates the other‘s expectations) How Culture Influences Conflict Resolution

24. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke24 l Why develop conflicts in the two cultures? –HC culture is group-oriented with more specific rules of behavior (conflict arises if one violates cultural expectations) l Different attitudes toward conflict –In LC culture people are action-oriented (direct, confrontational response to conflict, quick resolution) –In HC culture people try to avoid confrontation (indirect, inactive approach avoiding/ ignoring conflict) How Culture Influences Conflict Resolution

25. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke25 l Styles to handle conflicts –LC cultures take an intellectual view to conflict (use logic to make an argument, factual- inductive or axiomatic- deductive style) –HC cultures take an emotional point of view (use flowery speech to make emotional appeal and diffuse conflict, affective-intuitive style) How Culture Influences Conflict Resolution

26. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke26 l View to conflict affects cultures approaches to negotiation –HC cultures l Negotiators try to behave harmonious on the surface l Differences in opinions are expressed less directly, real feelings through implicit language and nonverbal means l „Persona“ of the negotiator is integrated into how negotiations are handled (e.g. not to lose one‘s face) How Approach to Conflict Influences Negotiation

27. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke27 l View to conflict affects cultures approaches to negotiation –LC cultures l Negotiators are open and direct l They are action oriented and see negotiations as problem-solving process l Clear difference between the negotiator as „Persona“ and how well he/she performs in a negotiating situation (e.g. „to lose one‘s face“ plays far less a role) How Approach to Conflict Influences Negotiation

28. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke28 Becoming a Better Cross- Cultural Negotiator l Understand your negotiating partner (basic understanding of values, attitudes and typical behaviors) l Consider situational specifics (e.g. what experience does your counterpart have with your culture?) l Decide how to handle actual negotiation (Studies show: moderate adaptation of native behavior produces better results than no adaptation or trying to behave as a native)

29. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke29 Convergence or Divergence? l Greater knowledge and understanding of culture l If moderate adaptation proves effective l Ingrained cultural patterns of behavior l Perception that own culture negotiates effectively

30. Copyright 1998 Prentice-Hall Inc. adapted by Prof. Dr. vom Kolke30 Implications for Managers l Cross-cultural negotiations important part of international manager’s job l Improve negotiating outcomes by understanding dynamics of negotiation process and influence of culture l Moderate adaptation may be most effective