Chapter 5 CrossCultural Negotiation and Decision Making 5

Chapter 5: Cross-Cultural Negotiation and Decision Making 5 -1 Copyright © 2014 Pearson Education, Inc.

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 5 -2 Copyright © 2014 Pearson Education, Inc.

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 -3 Copyright © 2014 Pearson Education, Inc.

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 = 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.

Chapter Learning Goals Learn how to prepare for cross-cultural business negotiations. 5 -5 Copyright © 2014 Pearson Education, Inc.

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 5 -6 Copyright © 2014 Pearson Education, Inc.

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

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 5 -8 Copyright © 2014 Pearson Education, Inc.

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

Chapter Learning Goals Recognize the need to build trusting relationships as a prerequisite for successful negotiations and long-term commitments. 5 -10 Copyright © 2014 Pearson Education, Inc.

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

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

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

Stage Three: Exchanging Task-Related Information • 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. 5 -14 Copyright © 2014 Pearson Education, Inc.

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

Stage Five: Concessions and Agreement • 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 5 -16 Copyright © 2014 Pearson Education, Inc.

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. 5 -17 Copyright © 2014 Pearson Education, Inc.

Management Focus: Joint Venture in China A Few Lessons We Learn Cross-cultural misunderstandings and 5 -18 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 dayto-day management of the JV. In JVs, relationship building takes time and a good amount of interaction between the partners. Copyright © 2014 Pearson Education, Inc.

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

Successful Negotiators: Americans q Knows when to compromise, but stands firm at q q 5 -20 the beginning. Accept compromises only when there is a deadlock. Refuses to make concessions beforehand 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. Copyright © 2014 Pearson Education, Inc.

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

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

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

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

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

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

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

Successful Negotiators Consider a wider range of options and pay 5 -28 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 Copyright © 2014 Pearson Education, Inc.

Using the Internet to Support Negotiations Negotiation Support System (NSS) Increase likelihood of agreement Decrease direct and indirect costs Maximize optimal outcomes 5 -29 Copyright © 2014 Pearson Education, Inc. Web Application 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

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

Chapter Learning Goals Learn the complexities of negotiating with the Chinese 5 -31 Copyright © 2014 Pearson Education, Inc.

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

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

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 5 -34 Copyright © 2014 Pearson Education, Inc.

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

Negotiation Conflicts Between Low Context and High Context Cultures Low Context Conflict Area • Explicit and direct, linear presentation of facts • Individualistic, shortterm oriented • Task-oriented, upfront, impatient 5 -36 Copyright © 2014 Pearson Education, Inc. High Context Conflict Area • Implicit, circular logic • Collective, decisions by consensus; longterm oriented • “Face” and relationship-oriented; non-confrontational, patient

The Influence of Culture on Decision Making Individualism VS Objective Subjective Risk Tolerance Avoidance Uncertainty 5 -37 Copyright © 2014 Pearson Education, Inc. Collectivism VS VS VS Risk Familiarity

Approaches to Decision Making 5 -38 Utilitarianism Idealism VS Autocratic Participative VS Slow Pace VS Copyright © 2014 Pearson Education, Inc. Moral Fast

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

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

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

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

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

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 5 -44 Copyright © 2014 Pearson Education, Inc.

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