McGraw-Hill/Irwin International Management © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. International Management Phatak, Bhagat, and Kashlak

McGraw-Hill/Irwin International Management © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter 13 Negotiations and Decision-Making Across Borders and Cultures

13-3 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.

13-4 Chapter Topics What is Negotiation? The Negotiation Process Environmental Context of International Negotiations Managing Negotiation and Conflict Ethics in International Negotiations What is Decision-Making? The Decision-Making Process Internal and External Factors Implications for Managers

13-5 Negotiation The process of verbal and non-verbal exchanges between two or more parties with the goal of reaching a mutually satisfactory agreement

13-6 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

13-7 Situational Characteristics Influencing Cross- Border Negotiations Context of the negotiation Physical arrangements Time limits Status differences

13-8 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 solution 3.Background preparations leading to the process of negotiation 4.A goal, but not a certainty, of reaching mutual agreement (May succeed or fail)

13-9 Ex. 13-1: Stages of Negotiation in International Management

13-10 Ex. 13-2: Differences in Negotiator Strategies and Tactics in Three Countries Japanese N = 6American N = 6Brazilian N = 6 Promise Threat Recommendation Warning Reward Punishment Positive normative appeal Negative normative appeal Commitment Self-disclosure Question Command Individual Tactics as a Percentage of Total Tactics

13-11 Ex (contd.) Japanese N = 6American N = 6Brazilian 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 min min min. 4.7 Occurrences in a 30-Minute Bargaining session

13-12 Ex. 13-3: Comparison of Cultural Approaches to Negotiation American NegotiatorIndian NegotiatorArab 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

13-13 Ex (contd.) Swedish NegotiatorItalian 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

13-14 Ex. 13-4: Differences Between American and Chinese Culture and Approach to the Negotiation Process Contrast of Basic Cultural Values American Task and information oriented Egalitarian Analytical Sequential, monochronic Seeks the complete truth Individualist Confrontative, argumentative Chinese Relationship oriented Hierarchical Holistic Circular, polychronic Seeks the harmonious way Collectivist Haggling, bargaining

13-15 Ex (contd.) Approach to the Negotiation Process American Quick meetings Informal Make cold calls Full authority Direct Proposals first Aggressive Impatient A “good deal” Chinese Long courting process Formal Draw on intermediaries Limited authority Indirect Explanations first Questioning Patient A long-term relationship nontask sounding information exchange means of persuasion terms of agreement

13-16 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

13-17 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

13-18 Ex. 13-5: Nature of Conflict Between Members of Low and High Context Culture Key QuestionsLow-Context ConflictHigh-Context Conflict WhyAnalytic, linear logic; instrumental oriented; dichotomy between conflict and conflict parties Synthetic, spiral logic; expressive oriented; integration of conflict and conflict parties WhenIndividualistic 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 WhatRevealment; direct, confrontational attitude; action and solution oriented Concealment; indirect, nonconfrontational attitude; “face” and relationship oriented HowExplicit communication codes; line- logic style: rational-factual rhetoric; open, direct strategies Implicit communication codes; point-logic style: intuitive-effective rhetoric; ambiguous, indirect strategies

13-19 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.

13-20 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

13-21 Ex. 13-7: Deductive Versus Inductive Style of Decision-Making DEDUCTIVE DECISION-MAKING INDUCTIVE DECISION-MAKING DECISION General facts and objective observations Specific information and details General facts and objective observations

13-22 Key Terms and Concepts Negotiation International negotiation Bargaining Relationship building Difference in ideology Conflict Decision-making Programmed decisions Non-programmed decisions Deductive decision-making style Inductive decision-making style