OKBIT22 Managing International Relations 6. International business negotiations: Cross-cultural considerations

A bit of repetition again The Process of Negotiation  Pre-negotiation  The actual negotiation  Post-negotiation Approaches to Negotiation  Adversarial (distributive, win-lose)  Partnership (integrative, win-win) The Content of Negotiation  Substance goals  Relationship goals

Business negotiations skills When negotiating, you need many skills You need to know about negotiating a sales contract, licensing agreement, partnership agreement etc. = the substance of negotiations General negotiating skills People skills

In cross-cultural negotiations you need… But in international negotiations you also need to know how to deal with different kinds of people from different cultures  You need more than empathy!

Language in business negotiations In international business negotiations it is important to have:  A knowledge of the language of the country in which the other party to the negotiation is located “You can buy in any language, but to sell you have to speak their language” An important part of culture is language, but in international negotiations mastering a language is not enough

Cultural knowledge in business negotiations Knowledge of the other side’s culture, habits, taboos, values, allows a negotiator to communicate, understand, plan and to anticipate more effectively So you also need a recognition of cultural influences on the negotiation process

Culture influences business Culture has a strong influence on business negotiations In negotiations cultural differences influence, e.g.,:  The behavioural dispositions of the parties  Their concept of what is a negotiation and what should be an appropriate strategy  Their attitudes during the process  Differences in outcome orientation

Major stumbling blocks So cultural differences cause problems in international negotiations:  1. Language  2. Nonverbal Behavior  3. Values  4. Thinking and decision-making processes

Language in business negotiations To speak the language of your business partners gives you an enormous advantage However, little knowledge is not enough Using interpreters is one option  Pros and cons?

Verbal and nonverbal communication In addition to verbal communication it is also important to talk about nonverbal communication Nonverbal aspects of communication may include a more important message than verbal When the messages received through verbal and nonverbal channel are in conflict, trust the nonverbal!  It is difficult to lie “with your body”

Nonverbal communication Body posture Hand gestures Facial expressions Gaze Proxemics Bodily contact

Cross-cultural scenarios

Basics of culture Culture is everything that people have, think, and do as members of their society Culture is thus made up of:  Material objects  Ideas, values and attitudes  Normative or expected patterns of behaviour

Basics of culture Culture is learned Culture influences biological processes All cultures face a number of common problems and share a number of common features  Economic systems  Marriage and family systems  Educational systems  Social control systems  Supernatural belief systems

Basics of culture All cultures experience continual change All cultures - to one degree or another – display ethnocentrism Any cultural item, an idea or an object, should be viewed as a component of the total cultural system

Culture influences… Relationships Economics Education Politics Ethics Aesthetics Values Ceremonies Communication/ Language Time orientation

Distinguishing cultures There are certain components/orientations of culture, which help us to distinguish a culture from another and to compare different cultures These components help us to understand e.g. different values and what is behind decision-making logic

National culture differences (Hofsteede 1994) Power distance Individualism Masculinity Uncertainty avoidance

National culture differences (Hofsteede 1994) Power distance  The extent to which the less powerful members of organizations expect and accept that power is distributed unequally  Emotional distance  Dependence vs. Interdependence relationship  Large in France and Portugal  In work place → Centralization

National culture differences (Hofsteede 1994) Individualism  Describes the degree to which the individuals are integrated into groups  Collectivism prevails individualism in Portugal and Greece → Group rewards & family enterprises

National culture differences (Hofsteede 1994) Masculinity  Distribution of roles between sexes  Austria and Italy very masculine → Competition, survival of the fittest  Sweden and the Netherlands very feminine → Solidarity, sympathy

National culture differences (Hofsteede 1994) Uncertainty avoidance  Indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations  Belgium and France uncertainty-avoiding → Strict rules & principles  Denmark & USA accept uncertainty → Opportunism

Components of culture According to Trompenaars (1994) every culture distinguishes itself from others by the specific solutions it chooses to certain problems  1. Those that arise from our relationships with other people  2. Those that come from the passage of time  3. Those that relate to environment

Relationships with people Universalism vs. Particularism  Rules vs. relationships Individualism vs. Collectivism  The group vs. the individual Neutral vs. Emotional  The range of feelings expressed Specific vs. Diffuse  The range of involvement Achievement vs. Ascription  How status is accorded

Attitudes towards time Past, present or future-oriented Japanese/French vs. Americans Sequential vs. synchronic  Straight line or a circle Sequential cultures cherish efficiency  Punctuality

Relationship with the environment Inner-directed or outer-directed cultures  Acting against or with the environment Controlling or going along with the environment Harmony seeking cultures vs. self-centred cultures

So what causes problems In international business negotiations?

Cultural clashes during negotiations What are we negotiating for? Price? Relationships? Delivery? Why haven’t they responded to the price proposal I gave them last week? Why is he asking me to sit beside him? We have only two people in our team. Why did they bring seven?

Differences in cross-cultural negotiations Basic concepts Criteria for selecting negotiators Issues stressed Protocol Communications Nature of persuasive arguments Role of the individual Basis for trust Risk-taking propensity View of time Decision-making systems Form of agreement

OKBIT22 Managing International Relations 7. International business negotiations: Country-specific examples

Greetings and introductions Kiss, bow, or shake hands?  In Germany, always shake hands, firmly but briefly  In Japan you may greet with a hand shake, but the bow is the traditional Japanese greeting Forms of address  Never use first names and don’t suggest to be called by yours

Business cards In Japan business cards are extremely important Present your card with both hands When you receive a business card spend several seconds studying it and do not write on it or put in your pocket in the presence of the giver

Business cards In many parts of the Middle East, you should never use your left hand when giving your business card Print your business card in English on one side, and in the language of your host on the other Learn the protocol of giving business cards!

Doing business in Germany German business culture is extremely hierarchical, so be sure that you learn and use the professional titles of those you expect to encounter Professionals of any kind will expect to be referred to as "Herr" or "Frau", followed by the correct occupational title  An individual with a Ph.D. should be addressed as "Herr (or Frau) Doctor Professor.“ First names are reserved for family members and close friends  It's not uncommon for colleagues who have worked together for years not to know of each other's first name

Doing business in France When speaking French, use the “Vous" form until you are asked to use "tu" French business culture is intensely hierarchical, so be sure to learn and use the titles of everyone you plan to encounter  In many offices, first names are not used "Madame" is a basic title of courtesy for all women, as is "Monsieur" for men

French business etiquette Making first impressions  A handshake is the common first greeting  Not appropriate to call them by their first names initially  The way a person communicates is often determined by their social status and education level Typical business attire  Business dress is formal and stylish, but understated (nothing flashy)  It is always safer to dress up than dress down

French Business Methods Conducting Business  In French business, details are important  Business may be conducted slowly because every detail of a deal or proposal will be carefully analyzed  Use logic and intelligence to debate your position  The French are resistant to high pressure tactics and over-the-top claims  Business writing is almost always formal

Doing business in Japan First names are reserved for family and close friends Don't invite others to call you by your first name Even if you are on a first name basis with a Japanese colleague, it may be appropriate to use his or her last name in the presence of colleagues, to avoid causing any embarrassment

In Japan Use courtesy titles such as "Mr.", "Ms.", or the suffix "san", in addition to last names The Japanese often use professional titles in the place of actual names, as an acknowledgment of a person's status.

Japanese Business Etiquette Making First Impressions  Always introduce with full name followed by title  Bowing is used often to show respect & compassion  Business cards Present yours and accept others’ with two hands  Be aware of hierarchy Definite status differences based on age, employment, family background, etc..  Focus on respect It is conveyed through body language, etiquette, and other subtle forms of non-verbal communication

Japanese Business Methods Conducting Business  It is assumed that the listener is always well- informed on the subject  Business Meetings Always deal with a team & not an individual Japanese are very detail-oriented and will ask a variety a questions during negotiations Do not disagree openly or put anyone on the spot Silence is a virtue in Japan, people may even close their eyes during meetings.

United Kingdom Business Etiquette Making first impressions  Shake hands on first meetings  Titles and last names are used in formal situations or to show respect  Punctuality and courtesy are very important Typical business attire  Business attire similar to the US, although it is stricter for men

United Kingdom Business Methods Conducting Business  Renowned for their politeness and courtesy  Negotiations and decisions are usually open and flexible  What has been discussed at a meeting should be considered as confidential  When socializing after work hours do not bring up the subject of work

Conclusions Remember that in addition to being a member of certain culture, people should always be treated as individuals also Regional generalizations are often times incorrect Stereotyping based upon what people say a “culture” is can be dangerous in the negotiation process Consider culture, but focus on the individual  Their personalities and backgrounds  Treat others as business partners

Some general guidelines for negotiating International Business Preparing for the negotiations  Be prepared to prepare  Gather factual information  Assess intercultural obstacles as early as possible  Prepare for the type of deal that will be negotiated  Empathy is not enough

Some general guidelines for negotiating International Business Strategy formulation  Define your basic interest  Prepare walk-away options  Prepare for tough strategies on the other side

Some general guidelines for negotiating International Business Face to face negotiations:  Control location and tactics  Change negotiation style when needed  Control your concessions  Allow yourself plenty of time  Be flexible with the negotiation agenda  Manage the communication process  Check non-verbal communication

Some general guidelines for negotiating International Business Negotiate beyond negotiation  Be prepared to negotiate beyond negotiation  The agreement should be clear  Avoid the threat of litigation

What makes a Successful Negotiator Sufficient time to prepare Clear objectives Knowledge of the subject matter Information about the other parties involved and their organization

What makes a Successful Negotiator A clear negotiating strategy or plan Appropriate use of negotiating tactics e.g. when to release information All parties treating each other with respect throughout Effective communicating skill, such as listening

What makes a Successful Negotiator A willingness to be open by all parties involved Conflicts raised and handled in a constructive manner Movement of both sides from their initial starting position to a win/win outcome Agreements being implemented

In your presentations you could talk about… Making Appointments Guidelines for Business Dress Conversation First Name or Title? Selecting and Presenting an Appropriate Business Gift What You Should Know Before Negotiating Entertaining for Business Success Acceptable Public Conduct