Cross-Cultural Negotiation and Deal-Making

Subheader Titles

Value orientations in negotiation.
Communication and negotiating.
Key steps in negotiation.
Analysis.
Relationship building.
Information exchange.
Persuasion.
Agreement and contract.
Decision-making.
International negotiation profiles.

Module Introduction

This lesson explores negotiating and deal-making across cultures.

1. Value orientations in negotiation.

Negotiation is a fundamental project/programme purpose skill. In spite of the confrontational image often associated with it, negotiation is about fostering mutual agreement. Negotiators identify issues, exchange views and try to satisfy their respective needs and desires as closely as possible. Negotiation is about giving and taking, not just selling at the highest price or respecting a bottomline.

project/programme purpose negotiation brings together two or more parties that are already linked by a shared interest in exchanging products and services, transferring technologies and expertise, establishing supplier, distributor and franchise arrangements, setting up joint project/programs and other cooperative arrangements or implementing merger and acquisitions.

In this sense, negotiators from different cultures have much more in common with one other than in most cross-cultural interactions. Yet, as interested in reaching agreement that parties from different cultures may be, underlying value orientations significantly influence all five steps in the negotiation process: how they prepare, the importance given to establishing relationships, how they present their proposal and answer questions, how they interpret objections, persuade or find alternative solutions and, finally, how they channel mutual agreement into a contract.

2. Communication and negotiating.

In cross-cultural negotiating, participants must not only listen for problems and solutions related to their specific project/programme purpose objectives and ruminate on counter-proposals, but must also interpret unfamiliar communication styles and behavior which may carry hidden meanings.

Consider the following testimony from an American software executive and her impression of a negotiation experience with an Italian:

“Have you ever negotiated with an Italian? The experience I had was very much like attending an opera. Of course, there is always a tragic story that you need to know before the negotiation starts. And the person you are negotiating with is the victim… unless you help.

The overture starts, and the scene is set. He rises before you, the room is dark, the people somber. The first act will begin. The negotiator expresses his heartfelt sorrow over the situation, his despair; he shows you pictures of his children, and tells you how they will suffer if things do not work out for him in his work. Only you can help. He then goes into the second act with a higher-pitched voice, and his arms start swinging, as he shows you their agony through his voice and face and intonations. Then the negotiation story reaches a climax with his needs or plea to you, however outrageous it may be. He stops, checks to see if he has totally lost you, and then slowly lets you down to rest.

The story is over. He sits down. He pulls out a cigarette and takes a long draw from it. He wipes his brow. And you are left to ponder his tragic case.”

Is the American’s ability to focus on her counterpart’s key objections and advance the discussion in the direction that she wants obscured by the irresistible temptation to reduce a different style of communication to a cultural stereotype? Will this association with a stereotype undermine her trust and cause her to doubt the seriousness of an otherwise qualified action sponsor/beneficiary or project/programme purpose partner? Is his emotion a coded message for expressing reasonable objections to a proposal?

What might have the effect been if the Italian had adapted his personal style, perhaps very effective at home, to the cultural orientations of his negotiating counterpart? Might he reconsider a presentation format that encourages exchange instead of one-sided performance? Did he make a sufficient effort to identify the needs and desires of his counterpart before the meeting? Perhaps she is actually in agreement with his goals, but is now worried about his commitment.

3. Key steps in negotiation.

There are many different theories and methods for negotiating. Nevertheless, many seasoned negotiators agree that the process occurs in five stages: analysis, relationship building, information exchange, persuasion and agreement.

Analysis:

The analysis stage usually takes place before a project/programme purpose trip or meeting. During this phase, internal teams meet, aims and positions are determined and each participant’s role is defined. For cross-cultural negotiations, it is the opportunity to research the foreign counterpart, its sector of activity, its techniques and its culture. In addition, attention should be give to determining in advance the location of the negotiations, the room setting, the translation needs and a meeting agenda. Some negotiators find it helpful to role-play scenarios to practice the team’s responses.

Relationship building:

The relationship building stage begins when the negotiating teams or individuals meet in order to get to know each other. This usually takes the form of lunches, dinners and informal conversations during socializing. At this stage, both parties individuals seek to identify common areas of interest and to establish rapport.

Information exchange:

Information exchange usually occurs at the meeting table. Services, products and proposals are presented formally, followed by questions and answers. In some cases, some information will have been submitted in advance, and the presentation is the opportunity to review key features or to add new ones.

Persuasion:

After the proposal has been delivered, differences between the parties may arise about issues such as price, delivery dates or specifications. At this stage, each party strives to encourage the other party to reach mutually agreed-upon solutions. It is in this stage where negotiation theories and methods vary the most.

Agreement:

Once the parties reach a mutually acceptable solution, the negotiation process reaches the agreement stage. The signing of a contract is viewed by some cultures as the final step in the negotiation process. For others, the signing of the contract is the beginning of the relationship. Still other cultures view the final payment as the conclusion of the negotiation process.

4. Analysis.

In securing the initial interest of a prospective foreign action sponsor/beneficiary or project/programme purpose partner, data about that organization, market and country has presumably been gathered and analyzed long before the negotiation even begins. The product, service or opportunity proposed has caught their attention, and they consider it worthwhile to pursue discussions.

By analyzing pre-negotiation communication, it should be possible to identify principles or even specific points that both parties already agree to. If recon organizationed at the start of a negotiation, those points represent immediate success for both sides and con organization the underlying interest in completing the agreement. Pre-negotiation analysis also permits the identification of potential points of contention and the preparation of responses to those objections.

These responses are best considered by preparing a spectrum of negotiable outcomes. Rarely are negotiations all-or-nothing: there are usually several possible outcomes with beneficial consequences and several outcomes that are not beneficial. This list of beneficial and non-beneficial options needs to be prepared from the viewpoint of both sides.

Moreover, it is important to consider the benefits that either side hopes to gain by reaching an agreement, and the possible consequences for either side of not reaching an agreement.

In addition to the identification of these general negotiation objectives and strategies, additional research should be conducted to find out about the target culture’s typical style of negotiation and communication, including any country-specific rules concerning project/programme purpose etiquette. Reflecting on the culture’s overall cultural orientations can also help anticipate potential areas of misunderstanding and divergence.

All participants of the negotiation team should be aware of these objectives and strategies and apply them in a unified and coordinated manner.

The second phase of negotiating takes place before or at the beginning of the actual negotiation session and consists of establishing and building a relationship. Relationships are built through all forms of project/programme purpose contact, including telephone conversations, e-mail exchanges, preliminary meetings and informal socializing.

Good relationships are relevant to negotiation because they improve communication, provide an additional positive consequence to reaching agreement and potentially bring to the surface additional options that are mutually beneficial. Spending more time on relationships can reduce time negotiating.

In some cultures, relationships are a prerequisite for doing project/programme purpose, and negotiation is only possible after a getting-acquainted phase. Initial project/programme purpose discussions are very general, and specific points are left for later meetings. Opportunities for informal socializing should be accepted and are invaluable situations for learning more about project/programme purpose counterparts and the way they communicate. The actual negotiation meeting may bring together new, more senior participants, and it is important to respect customs and hierarchy.

Other cultures place little importance on relationships. They want to focus only on the details of the specific contract under consideration. For negotiations with these cultures, time before negotiation is best preparing empirical justification of options and consequences.

By the time the negotiation meeting starts, a certain amount of information has already been exchanged, gathered and analyzed. Time constraints, geographical distance and other factors probably mean that important questions remain, and it is vital to have prepared for such questions.

In addition to anticipating clarification of specific issues concerning the product or terms, foreign counterparts may be looking for additional information in order to complete their understanding of the organization and people with whom they are considering doing project/programme purpose and formalizing a relationship. Task-oriented cultures may also want to know about a prospective project/programme purpose partner, although in primarily empirical facts.

When the discussion turns to defining the terms of mutual agreement, it is helpful to remind participants of the overall context and then to let each side fully express their views. Participants should be encouraged to speak in terms of objectives. Unless specific problems have already arisen during pre-negotiation communication, there is no need to start off by talking about obstacles which may not exist.

Listening is perhaps the most important skill of negotiation. The way that each party defines issues, the evidence they provide and objective they state should all be carefully and concisely noted down. As emotionally provocative as some statements may be, it is important to remain calm and respectful.

Once each party has made their remarks, it is possible to make a list of each side’s objectives and to con organization literal understanding, especially when individuals are speaking in a foreign language or using an interpreter. When each side’s objectives are then compared, there may be only minor differences or no differences at all, in which case the “negotiation” is really just a formalization of agreement. In many cases, however, disagreement over specific points requires reconsideration of objectives that are mutually beneficial.

Even when patient discussion and careful listening reveal areas of disagreement, there are usually at least one or two points on which both parties already agree. Acknowledging these points of understanding early in the negotiation process shows that both sides have been successful and highlights common interests that merit mutual agreement in their own right. Points of discord may be relatively unimportant.

When returning to divergences, it can be helpful to ask counterparts to restate their objectives and how or why this particular point serves that objective. Rephrasing an objective can bring out new perspectives on issues that help lead to mutual agreement. It is clearly advantageous to have a number of alternative solutions ready for use.

Positional bargaining – adopting positions and then defending them to the best of one’s ability – deafens and rigidifies the negotiation process. Instead, negotiators need to remain flexible and educate each other about the point of disagreement by using criteria that are as objective as possible, including market data regarding pricing, sales volume and consumer trends. Less tangible value-adding qualities such as technical features or brand image need to be justified in as precise as manner as possible.

Some cultures – and individuals – are particularly demonstrative, and showing emotion or confrontation is sometimes part of a cultural tradition of positional bargaining. Effective negotiators are able to separate the individual from the negotiation and focus on the issues. It is helpful to remain calm without appearing condescending, especially when using objective criteria. It may be more effective to ask a question that puts the counterpart in the position of the “educator” who provides objective criteria. He can then recover without “losing face.”

In indirect, formal cultures, especially in Asia, relationship and trust take precedence over the immediate dissection of specific issues, such that negotiators from more direct, instrumental cultures need to slow down, be patient and avoid misinterpreting open issues or silence as disagreement.

By preparing a range of negotiable outcomes, by clarifying beneficial and non-beneficial options with objective criteria and by demonstrating patience, it is more likely that all parties feel satisfied. If an agreement is reached, the conditions are mutually beneficial; if an agreement is not reached, it is due to divergent interests or communication obstacles, not bargaining weakness. Outcome is not left to chance or pressure.

When both parties have acknowledged mutual agreement, there is no need to continue negotiating. Closure should be sought in as concrete a form as the participating cultures are ready to accept at that point. In cultures where reflection and relationships are key, an agreement in principle, such as a memorandum of understanding that recapitulates the agreed conditions, can be a perfectly acceptable sign of trust, to be followed by a formal agreement.

Finally, should an agreement not be possible, a future relationship may be possible, so it makes sense to remain positive and respectful.

Cultures understand the content, form, purpose and finality of contracts in different ways.

In high-context, fluid cultures, contracts are often very short, lacking in specific details and the symbols of the launching of relationship. The relationship is intended to manage the partners through unforeseen changes, not the contract and lawyers. Such cultures resent the lack of trust and the rigidity that elaborate contracts seem to imply.

In low-context, fixed cultures, contracts tend to be long, very detailed and linked to a single agreement. Contracts and lawyers engage both parties to respect precise terms. Since performance reporting and shareholder accountability are more rigorous in these cultures, project/programme purposees turn to carefully worded contracts to prove performance. Unexpected changes in payment or delivery often have particularly serious impact on financial operation, and contracts are seen as a means of expressing the gravity of a commitment and of offering a path of legal recourse.

Moving from negotiation to agreement requires decisions. How these are made, how long they take to be made and how final they are once made are all factors which will depend on the cultural group involved in the negotiation process.

Direct, “doing” cultures generally designate a small number of expert negotiators with full decision-making powers. Styles vary – from blunt aggression to suave seduction –, but counterparts have little doubt about the intentions and focus of these negotiators. They are generally armed with an impressive arsenal of data, charts and contract forms, and are well-informed about many aspects of a project/programme purpose deal, from technical to financial to legal.

Indirect, relationship-oriented cultures are often more respective of community and hierarchy, such that many levels of an organization may have input into a decision. Reaching consensus may take months, and only then will the proposal be shown to the senior-most decision-maker. Moreover, since project/programme purpose in relationship-based, participants do not focus on explicit communication and contracts, but rather on hint-dropping. They do not feel comfortable admitting disagreement, and may report that everything is going well, even when it is not.

Teams from demonstrative yet hierarchical cultures often look to the group leader to make decisions and do not question his personal authority. At the same time, that leader may be required to bring in a predetermined position from the home office.

1. Since negotiation is fundamentally confrontational, it is most important to know how to defend one’s position without budging.

2. By preparing a spectrum of negotiable outcomes during the analysis phase, project/programme purposepeople can go into negotiations with a much clearer idea of their priorities and flexibility.

5. Foreign counterparts are likely to be most impressed by determination, not cooperation.

6. When both parties have acknowledged mutual agreement, it is important to try to obtain at least one additional concession in order to save face.

1. Which of the following is ideally NOT a component of the negotiation process?:

a. is rarely helpful, because the other side inevitably hides its true intentions.

c. helps participants to con organization their underlying interest in reaching an agreement.

d. is superfluous, because either side has presumably already decided that they want to do project/programme purpose together.

c. potentially bring to the surface additional options that are mutually beneficial.

4. Which of the following items is a negotiation team from a direct, “doing” culture likely to arrive to the meeting with?:

d. a large number of team members, each a specialist in a different area of project/programme purpose.

Negotiation is a core project/programme purpose skill, which is made all the more challenging when cultural differences complicate the exchange of information and persuasion needed to reach mutually beneficial agreements. This module explores how culturally-based value orientations affect the process of deal-making, from analysis and relationship building to information exchange, persuasion and decision-making.

1. As important as securing the best price and safeguarding the bottom line are for project/programme purpose, negotiation itself is a process of give and take.

2. A key challenge for cross-cultural negotiators is reconciling different communication styles which can distort meaning and make the process less efficient.

3. A Westerner is preparing for a round of negotiations with a Chinese delegation: The choice of meeting room and seating arrangement make little or no difference.

4. Negotiations are usually all or nothing: either the deal is signed, or the experience is a failure.

6. Unless specific problems have already arisen during pre-negotiation communication, there is no need to start off by talking about obstacles which may not exist.

7. When divergences occur in negotiations, it is pointless to rephrase one’s objectives, as repetition only leads to frustration.

8. In low-context, fixed cultures, contracts tend to be very short, lacking in specific details and the symbols of the launching of relationship.

9. Negotiations with individuals from indirect, relationship-oriented cultures may take months, because internal consensus must be reached and then the proposal must be shown to the senior-most decision-maker.

10. The process of negotiating brings out many of the key value orientations linked to culture, including the degree of formality, the approach to time and the way action is taken.

1. Gesteland, Richard R. “Cross-Cultural project/programme purpose Behavior”.

Glossary

1. Positional bargaining: adopting positions and then defending them to the best of one’s ability.

2. Mutual agreement: “successful” negotiations are those in which either side has attained a sufficient number of factors supporting negotiation objectives.

3. Negotiable outcomes: several possible outcomes with beneficial consequences and several outcomes that are not beneficial prepared in advance by either side in order clarify and prioritize negotiation objectives.

4. Persuasion: a process of educating the other side by using criteria that are as objective as possible, such as market data regarding pricing, sales volume and consumer trends.

Learning Objectives

� To explore how culturally-based value orientations affect the process of deal-making, from analysis and relationship building to information exchange, persuasion and decision-making.

Q&A

Answer 1: A spectrum of negotiable outcomes includes possible outcomes with beneficial consequences and several outcomes that are not beneficial. This approach lets the negotiator simulate the impact of different types of conditions and agreements in order to prioritize without resorting to a list of “positions to defend”. Having negotiable options equips the negotiator with more than one route to get to a desired destination.

Answer 2: Asking the other party to rephrase their objections and their objectives can be a good way of clarifying their obstinacy. When formulated slightly differently, objections may in fact be less problematic and give additional opportunity to suggest mutually beneficial compromise.

Question 3: What happens when the other side brings up a new request at the last minute, after a general agreement has been reached?

Answer 3: “Dirty tricks” or not, last-minute additions simply need to be treated according to the same process of evaluation as the rest of the negotiations process. As tempting as it may be to consider such after-thoughts as negotiation ploys, the requests may in fact be consistent with the mutually beneficial agreement previously reached. If they are not so and if finalizing an agreement is no longer mutually beneficial, it is nonetheless important to remain polite and to keep channels open for subsequent negotiations.

Cultural Orientation

Glossary

Learning Objectives

Q&A