1. Copyright ©2014 Pearson Education, Inc. 5-1

2. Chapter Learning Goals 1. Learn how to prepare for cross-cultural business negotiations. 2. Recognize the need to build trusting relationships as a prerequisite for successful negotiations and long-term commitments. 3. Be aware of culturally-based behavioral differences, values, and agendas of the negotiating parties. 4. Learn the complexities of negotiating with the Chinese 1. Learn how to prepare for cross-cultural business negotiations. 2. Recognize the need to build trusting relationships as a prerequisite for successful negotiations and long-term commitments. 3. Be aware of culturally-based behavioral differences, values, and agendas of the negotiating parties. 4. Learn the complexities of negotiating with the Chinese 5-2 Copyright ©2014 Pearson Education, Inc.

3. Chapter Learning Goals 5. Appreciate the variables in the decision- making process and understand the influence of culture on decision making. 6. Become familiar with the Japanese decision-making process and how it is influenced by their cultural norms. 5. Appreciate the variables in the decision- making process and understand the influence of culture on decision making. 6. Become familiar with the Japanese decision-making process and how it is influenced by their cultural norms. 5-3 Copyright ©2014 Pearson Education, Inc.

4. Opening Profile: Shiseido and Bare Escentuals – Cultural Conflicts in Negotiations 2010 Shiseido was dealing with declining demand in Japan, yen appreciated  announced purchase of Bare Escentuals Bare Escentuals = casual, blue jeans Shiseido: formal Language barrier and general miscommunication; required executive visits on both sides Launched Bare Minerals skincare in March 2012 2010 Shiseido was dealing with declining demand in Japan, yen appreciated  announced purchase of Bare Escentuals Bare Escentuals = casual, blue jeans Shiseido: formal Language barrier and general miscommunication; required executive visits on both sides Launched Bare Minerals skincare in March 2012 5-4 Copyright ©2014 Pearson Education, Inc.

5. 5-5 Chapter Learning Goals Learn how to prepare for cross- cultural business negotiations.

6. Negotiations by Global Managers Specific plans for strategies and for continuing operations May also be faced with negotiating with government-owned companies Managers must prepare; operational details must be negotiated: staffing, raw materials, profits, etc. Decision-making processes are key Specific plans for strategies and for continuing operations May also be faced with negotiating with government-owned companies Managers must prepare; operational details must be negotiated: staffing, raw materials, profits, etc. Decision-making processes are key 5-6 Copyright ©2014 Pearson Education, Inc.

7. Negotiation 5-7 Copyright ©2014 Pearson Education, Inc. The process of discussion by which two or more parties aim for mutually acceptable agreement

8. Copyright ©2014 Pearson Education, Inc. 5-8 Important Differences 1. Amount and type of preparation 2. Tasks vs. interpersonal relationships 3. General principles vs. specific issues 4. Number of people present and their influence 1. Amount and type of preparation 2. Tasks vs. interpersonal relationships 3. General principles vs. specific issues 4. Number of people present and their influence

9. Stakeholders in Cross-Cultural Negotiation 5-9 Copyright ©2014 Pearson Education, Inc.

10. 5-10 Chapter Learning Goals Recognize the need to build trusting relationships as a prerequisite for successful negotiations and long-term commitments.

11. The Negotiation Process 5-11 Copyright ©2014 Pearson Education, Inc.

12. Stage One: Preparation 5-12 Copyright ©2014 Pearson Education, Inc. Develop profile of counterparts. Find out likely demands, team composition, and counterpart authority. Choose a negotiation site. British/French Chunnel negotiations

13. Stage Two: Relationship Building 5-13 Copyright ©2014 Pearson Education, Inc. Getting to know one’s contacts and building mutual trust Non-task sounding Use an intermediary. “I have come as a mediator…”

14. Stage Three: Exchanging Task-Related Information 5-14 Copyright ©2014 Pearson Education, Inc. Cultural differences remain an issue. The French enjoy debate and conflict. Mexicans can be suspicious and indirect. The Chinese ask many questions, but provide ambiguous information in return. Show understanding of the other viewpoint.

15. Stage Four: Persuasion 5-15 Copyright ©2014 Pearson Education, Inc. Dirty tricks are in the eye of the beholder False information Ambiguous authority Non-verbal messages Individualism vs. Collectivism

16. Stage Five: Concessions and Agreement 5-16 Copyright ©2014 Pearson Education, Inc. Russians and the Chinese start with extreme positions Swedes start with what they will accept Starting with extremes may be most effective Linear vs. holistic Importance of contracts

17. Management Focus: Cultural Misunderstanding—Joint Venture in China Sino-French joint venture was formed in March 1996 by Group Danone and Hangzhou Wahaha Group Co. and took the trade mark name of Wahaha. Between 1996 and 2009, a number of issues and disputes took place within the JV. Public rows erupted between the two companies when they kept on blaming each other for breach of contract. The Danone–WHH case became so much embroiled that Chinese and French governments asked the companies to negotiate an “amicable” resolution. Sino-French joint venture was formed in March 1996 by Group Danone and Hangzhou Wahaha Group Co. and took the trade mark name of Wahaha. Between 1996 and 2009, a number of issues and disputes took place within the JV. Public rows erupted between the two companies when they kept on blaming each other for breach of contract. The Danone–WHH case became so much embroiled that Chinese and French governments asked the companies to negotiate an “amicable” resolution. 5-17 Copyright ©2014 Pearson Education, Inc.

18. Management Focus: Joint Venture in China A Few Lessons We Learn Cross-cultural misunderstandings and unfamiliarity with the JV partners were at the heart of the dispute. Both companies used media and PR companies instead of having open negotiations. Relationship building and exchange of information is critical in any JV. There was lack of open communication in day- to-day management of the JV. In JVs, relationship building takes time and a good amount of interaction between the partners. Cross-cultural misunderstandings and unfamiliarity with the JV partners were at the heart of the dispute. Both companies used media and PR companies instead of having open negotiations. Relationship building and exchange of information is critical in any JV. There was lack of open communication in day- to-day management of the JV. In JVs, relationship building takes time and a good amount of interaction between the partners. 5-18 Copyright ©2014 Pearson Education, Inc.

19. Comparison of Negotiation Styles Japanese North American Latin American Hide emotionsDeal impersonally Emotionally passionate Subtle power plays Litigation, not conciliation Great power plays Step-by-step approach Methodological organization Impulsive, spontaneous Group good is the aim Profit is the aim Group/ individual good is aim 5-19 Copyright ©2014 Pearson Education, Inc.

20. Successful Negotiators: Americans  Knows when to compromise, but stands firm at the beginning. Accept compromises only when there is a deadlock.  Refuses to make concessions beforehand and keeps his/hers cards close to chest.  Keeps a maximum of options open before negotiation, operate in good faith.  States his/her position as clearly as possible, respects the “opponents”.  Is fully briefed about the negotiated issues, has a good sense of timing and is consistent.  Knows when to compromise, but stands firm at the beginning. Accept compromises only when there is a deadlock.  Refuses to make concessions beforehand and keeps his/hers cards close to chest.  Keeps a maximum of options open before negotiation, operate in good faith.  States his/her position as clearly as possible, respects the “opponents”.  Is fully briefed about the negotiated issues, has a good sense of timing and is consistent. 5-20 Copyright ©2014 Pearson Education, Inc.

21. Successful Negotiators: Indians  Look for and say the truth, not afraid to speak up.  Exercise self-control.  Respect other party, look for solutions acceptable to all parties.  Will change their minds, even at risk of seeming inconsistent and unpredictable.  Humble and trusts the opponent  Look for and say the truth, not afraid to speak up.  Exercise self-control.  Respect other party, look for solutions acceptable to all parties.  Will change their minds, even at risk of seeming inconsistent and unpredictable.  Humble and trusts the opponent 5-21 Copyright ©2014 Pearson Education, Inc.

22. Successful Negotiators: Arabs  Protect honor, self-respect, dignity, and, thus, are trusted and respected.  Avoid direct confrontation.  Come up with creative, honorable solutions.  Are impartial and can resist pressure.  Can keep secrets  Controls temper and emotions  Protect honor, self-respect, dignity, and, thus, are trusted and respected.  Avoid direct confrontation.  Come up with creative, honorable solutions.  Are impartial and can resist pressure.  Can keep secrets  Controls temper and emotions 5-22 Copyright ©2014 Pearson Education, Inc.

23. Successful Negotiators: Swedes  Quiet, thoughtful, polite, straightforward  Overcautious, but flexible  Slow to react to new proposals, but eager to be productive and efficient  Able to hide emotions, afraid of confrontation  Quiet, thoughtful, polite, straightforward  Overcautious, but flexible  Slow to react to new proposals, but eager to be productive and efficient  Able to hide emotions, afraid of confrontation 5-23 Copyright ©2014 Pearson Education, Inc.

24. Successful Negotiators: Italians  Have a sense of drama, do not hide emotions  Good at reading facial expressions and gestures  Want to make a good impression and use flattery, but are distrusting  Handle confrontation with subtlety and tact  Have a sense of drama, do not hide emotions  Good at reading facial expressions and gestures  Want to make a good impression and use flattery, but are distrusting  Handle confrontation with subtlety and tact 5-24 Copyright ©2014 Pearson Education, Inc.

25. Managing Negotiation Examples 5-25 Copyright ©2014 Pearson Education, Inc. Avoid person-related conflicts. Low-context Americans appear impatient, cold, and blunt to Mexicans. Americans must approach negotiations with Mexicans with patience; refrain from attacking ideas.

26. Copyright ©2014 Pearson Education, Inc. 5-26 Chapter Learning Goals Be aware of culturally-based behavioral differences, values, and agendas of the negotiating parties.

27. Cross-Cultural Negotiation Variables 5-27 Copyright ©2014 Pearson Education, Inc. EXHIBIT 5-5 Cross-cultural Negotiation Variables

28. Copyright ©2014 Pearson Education, Inc. 5-28 Consider a wider range of options and pay greater attention to areas of common ground Tend to make twice as many comments regarding long-term issues More likely to set upper and lower limits regarding specific points Make fewer irritating comments: “We’re making you a generous offer” Make counter proposals less frequently and use fewer reasons to back up arguments Actively listen Consider a wider range of options and pay greater attention to areas of common ground Tend to make twice as many comments regarding long-term issues More likely to set upper and lower limits regarding specific points Make fewer irritating comments: “We’re making you a generous offer” Make counter proposals less frequently and use fewer reasons to back up arguments Actively listen Successful Negotiators

29. Using the Internet to Support Negotiations Negotiation Support System (NSS) Web Application 5-29 Increase likelihood of agreement Decrease direct and indirect costs Maximize optimal outcomes Increase likelihood of agreement Decrease direct and indirect costs Maximize optimal outcomes Provide support for phases and dimensions such as: Multiple-issue, multiple- party business transactions of a buy-sell nature International dispute resolution Internal company negotiations and communications Provide support for phases and dimensions such as: Multiple-issue, multiple- party business transactions of a buy-sell nature International dispute resolution Internal company negotiations and communications Copyright ©2014 Pearson Education, Inc.

30. E-Negotiations Advantages Disadvantages 5-30 Speed Less travel Laying out much objective information over time Speed Less travel Laying out much objective information over time Not being able to build trust and interpersonal relationships Nonverbal nuances are lost Video conferencing may be a good compromise Not being able to build trust and interpersonal relationships Nonverbal nuances are lost Video conferencing may be a good compromise Copyright ©2014 Pearson Education, Inc.

31. 5-31 Chapter Learning Goals Learn the complexities of negotiating with the Chinese

32. Comparative Management in Focus: Negotiating with Chinese 5-32 Copyright ©2014 Pearson Education, Inc. EXHIBIT 5-6 Influence on Western-Chinese Business Negotiations

33. Comparative Management in Focus: Negotiating with Chinese Copyright ©2014 Pearson Education, Inc. 5-33 Two problems: Chinese desire for details Apparent insincerity Saving face: Lien Mien-tzu Two problems: Chinese desire for details Apparent insincerity Saving face: Lien Mien-tzu Importance of harmony Guanxi Guanxihu networks Two stages of Chinese negotiation Technical Commercial Importance of harmony Guanxi Guanxihu networks Two stages of Chinese negotiation Technical Commercial

34. Comparative Management in Focus: Negotiating with Chinese Some recommendations: Practice patience. Accept prolonged stalemate. Refrain from exaggerated expectations. Establish a contact in China Remember to save ‘face’ for everyone Some recommendations: Practice patience. Accept prolonged stalemate. Refrain from exaggerated expectations. Establish a contact in China Remember to save ‘face’ for everyone 5-34 Copyright ©2014 Pearson Education, Inc.

35. Managing the Conflict Resolution To negotiate on the basis of factual information and logical analysis Instrumental- Oriented Conflict To handle a situation indirectly and implicitly, without clear delineation of the situation by the person handling it Expressive- Oriented Conflict 5-35 Copyright ©2014 Pearson Education, Inc.

36. 5-36 Negotiation Conflicts Between Low Context and High Context Cultures Low Context Conflict Area High Context Conflict Area Explicit and direct, linear presentation of facts Individualistic, short- term oriented Task-oriented, up-front, impatient Implicit, circular logic Collective, decisions by consensus; long-term oriented “Face” and relationship- oriented; non- confrontational, patient

37. The Influence of Culture on Decision Making 5-37 Copyright ©2014 Pearson Education, Inc. Individualism VSCollectivism ObjectiveVS Subjective Risk ToleranceVS Risk Avoidance UncertaintyVS Familiarity

38. Approaches to Decision Making 5-38 Copyright ©2014 Pearson Education, Inc. UtilitarianismVS Moral Idealism AutocraticVS Participative Slow PaceVS Fast Pace

39. Copyright ©2014 Pearson Education, Inc. 5-39 Chapter Learning Goals Appreciate the variables in the decision-making process and understand the influence of culture on decision making.

40. Cultural Variables in Decision-Making Process 5-40 Copyright ©2014 Pearson Education, Inc. EXHIBIT 5-7 Cultural Variables in the Decision-Making Process

41. Copyright ©2014 Pearson Education, Inc. 5-41 Chapter Learning Goals Become familiar with the Japanese decision-making process and how it is influenced by their cultural norms.

42. Comparative Management in Focus: Decision Making in Japanese Companies Wa Amae Shinyo Ringi 5-42 Copyright ©2014 Pearson Education, Inc.

43. Comparative Management in Focus: Decision Making in Japanese Companies 5-43 Copyright ©2014 Pearson Education, Inc. EXHIBIT 5-8 Decision Making Procedure in Japanese Companies

44. Copyright ©2014 Pearson Education, Inc. 5-44 Conclusion Managers need working knowledge of decision- making processes and negotiating tactics used by managers in different countries It is important to understand the cultural variables that influence negotiations and decision making, and how they influence these activities Managers should prepare for, and conduct negotiations with cultural sensitivity Managers need working knowledge of decision- making processes and negotiating tactics used by managers in different countries It is important to understand the cultural variables that influence negotiations and decision making, and how they influence these activities Managers should prepare for, and conduct negotiations with cultural sensitivity

45. 45 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2014 Pearson Education, Inc. Copyright © 2014 Pearson Education, Inc.