2006 Prentice Hall5- *Chapter 5 Cross-Cultural Negotiation and Decision Making

PowerPoint byKristopher BlanchardNorth Central University& Dr Asma Abdullah (Malaysian Interculturalist)

2006 Prentice Hall5-*NegotiationManagements ability to negotiate productively effects their ability to implement strategiesNegotiation is the process of discussion by which two or more parties aim to reach a mutually acceptable agreementNegotiating across borders is more complex because of the number of stakeholders involved

2006 Prentice Hall5-*The Negotiation Process

2006 Prentice Hall5-*Stage One Preparation Negotiator must familiarize themselves withThe entire context and background of their counterpartsTo the specific subjects to be negotiatedDifferences in culture, language, and environmentManagers must have an understanding of their own negotiating style

2006 Prentice Hall5-*Stage One - PreparationManagers should find out as much as possible aboutThe kinds of demands that might be madeThe composition of the opposing teamThe relative authority that the members possessDevelop a profile of their counterpartsThey consider different variables during this process as well

2006 Prentice Hall5-*The Negotiation ProcessRelationship building taking time to build mutual trust before starting business discussionsExchanging task related information during this stage each side makes a presentation and states its position, normally followed by a question-and-answer session

2006 Prentice Hall5-*The Negotiation ProcessPersuasion during this stage both parties try to persuade the other to accept more of their position while giving up some of their own; there are recognizable tactics for this stageConcessions and Agreements at this point each side will make various concessions so that an agreement can be reached and signed

2006 Prentice Hall5-*Understanding Negotiation Styles

2006 Prentice Hall5-*Understanding Negotiation StylesFor North Americans, negotiations are businesslike; their factual appeals are based on what they believe is objective information, presented with the assumption that it is understood by the other side on a logical basis.Arabs use affective appeals based on emotions and subjective feelings.Russians employ axiomatic appeals that is, their appeals are based on the ideals generally accepted in their society.

2006 Prentice Hall5-*Profile of an American NegotiatorKnows when to compromiseTakes a firm stand at the beginning of the negotiationRefuses to make concessions beforehandKeeps his or her cards close to his or her chestAccepts compromises only when the negotiation is deadlockedSets up the general principles and delegates the detail work to associatesKeeps a maximum of options open before negotiationOperates in good faith

2006 Prentice Hall5-*Profile of an American NegotiatorRespects the opponentsStates his or her position as clearly as possibleKnows when he or she wishes a negotiation to move onIs fully briefed about the negotiated issuesHas a good sense of timing and is consistentMakes the other party reveal his or her position while keeping his or her own position hidden as long as possibleLets the other negotiator come forward first and looks for the best deal

2006 Prentice Hall5-*Profile of an Indian NegotiatorLooks for and says the truthIs not afraid of speaking up and has no fearsExercises self-controlSeeks solutions that will please all the parties involvedRespects the other partyNeither uses violence nor insultsIs ready to change his or her mind and differ with himself or herself at the risk of being seen as inconsistent and unpredictable

2006 Prentice Hall5-*Profile of an Indian NegotiatorPuts things into perspective and switches easily from the small picture to the big oneIs humble and trusts the opponentIs able to withdraw, use silence, and learn from withinRelies on himself or herself, his or her own resources and strengthsAppeals to the other partys spiritual identityIs tenacious, patient, and persistentLearns from the opponent and avoids the use of secretsGoes beyond logical reasoning and trusts his or her instinct as well as faith

2006 Prentice Hall5-*Profile of an Arab Negotiator Protects all the parties honor, self-respect, and dignityAvoids direct confrontation between opponentsIs respected and trusted by allDoes not put the parties involved in a situation where they have to show weakness or admit defeatHas the necessary prestige to be listened toIs creative enough to come up with honorable solutions for all partiesIs impartial and can understand the positions of the various parties without leaning toward one or the other

2006 Prentice Hall5-*Profile of an Arab NegotiatorIs able to resist any kind of pressure that the opponents could try to exercise on himUses references to people who are highly respected by the opponents to persuade them to change their minds on some issuesCan keep secrets and in so doing gains the confidence of the negotiating partiesControls his temper and emotionsCan use conference as mediating devicesKnows that the opponent will have problems in carrying out the decisions made during the negotiationIs able to cope with the Arab disregard for time

2006 Prentice Hall5-*Managing Negotiation

2006 Prentice Hall5-*Managing NegotiationSuccessful management of intercultural negotiations requires the managerTo gain specific knowledge of the parties in the upcoming meetingTo prepare accordingly to adjust to and control the situationTo be innovative

2006 Prentice Hall5-*Using the Web to Support NegotiationsNegotiation Support Systems (NSS) can provide support for the negotiation process by:Increasing the likelihood that an agreement is reached when a zone of agreement exists (solutions that both parties would accept)Decreasing the direct and indirect costs of negotiations, such as costs caused by time delays (strikes, violence), and attorneys fees, among othersMaximizing the chances for optimal outcomes

2006 Prentice Hall5-*Comparative Management in Focus: Negotiating with the ChineseThe Chinese think in terms of process that has no culmination. Americans think in terms of concrete solutions to specific problems. . . . The Chinese approach is impersonal, patient and aloof . . .To Americans, Chinese leaders seem polite but aloof and condescending. To the Chinese, Americans appear erratic and somewhat frivolous.Henry Kissinger,Newsweek, May, 2001

2006 Prentice Hall5-*Comparative Management in Focus: Negotiating with the ChineseBusiness people have two major areas of conflict when negotiating with the ChineseAmount of detail about product characteristicsApparent insincerity about reaching an agreementChinese negotiation process is affected by three cultural normsPoliteness and emotional restraintEmphasis on social obligationsBelief in the interconnection of work, family, and friendship

2006 Prentice Hall5-*Comparative Management in Focus: Negotiating with the ChineseTips to foreigners conducting business in ChinaPractice patienceAccept prolonged periods of stalemateRefrain from exaggerated expectationsDiscount Chinese rhetoric about future prospectsExpect the Chinese to try to manipulate by shamingResist the temptation to believe that difficulties are your faultTry to understand Chinese cultural traits

2006 Prentice Hall5-*Managing Conflict

2006 Prentice Hall5-*Decision MakingStages in the Rational Decision Making ModelDefining the problemGathering and analyzing relevant dataConsidering alternative solutionsDeciding on the best solutionImplementing the decision

2006 Prentice Hall5-*Cultural Variables Affecting Decision MakingObjective (basing decisions on rationality) versus subjective (basing decisions on emotions) approachRisk toleranceLocus of control internal (managers in control of events), or external (managers have little control over events)

2006 Prentice Hall5-*Cultural Variables Affecting Decision Making

2006 Prentice Hall5-*Comparative Management in Focus: Decision Making in Japan

2006 Prentice Hall5-*Negotiations across CulturesAmericans- linear, fact driven and numbers oriented- impatient and the contract is their central focusAsians- avoid conflict- express opinions indirectly and maintain a face of surface harmony when too direct can be seen as rudeFrench- enjoy emphasising distinctions and differences- blunt and logical approach to conflicting points of views that can seem antagonistic to people from other culturesMiddle Easterners and Latinos- passionate expression of differences- save face and preserve dignityRussiansa great deal of posturing and theatrics

2006 Prentice Hall5-*Guidelines on Negotiation across CulturesCheck whether they think like you Spend time on non-task sounding matters to establish personal relationships Know the differences between your opponents social, political and economic systems and yours Know how the above differences affect his thinking, authority and negotiating methods Know your opponents legal, technical and financial systems Know how the above will affect our choice of tactics Know the effects of ethical standards (right, wrong, reasonable) Know the importance of face saving

2006 Prentice Hall5-*Guidelines on Negotiation across Cultures Recognize the role of status Understand the role of government in the affairs of your opponent Identify the levels of approval Ask questions, but dont put pressure Ensure there is a suitable communication system with Head Office Identify the right leader for the situation Make sure when using an interpreter he is skilled in both languages and negotiation. Have a dummy run with him. Get him to translate gestures etc Avoid using jargon Confirm in writing and use words carefully to avoid ambiguity Use team approach by using experts Recognize differences in perceiving contractual differences and agreements Make concessions only after issues are discussed.

2006 Prentice Hall5-*Behaviours of Successful NegotiatorsHave greater flexibility - wider range of influence styles Recognize that an agreement can only be reached through exchange Label their behaviors - I want to propose..... - I want to give three reasons why.. Limit their reasons to two or three strongest points and repeat them if necessary Evaluate behavior they like positively attributing it to themselves Use incentives and find alternative currencies of value to the other party Summarize and test understanding Identify areas of agreement not on areas of conflict Avoid provoking the other party Use both verbal and nonverbal techniques to support ideas e.g. Use I language to convey that the speaker accepts responsibility for what he or she is saying Maintain eye contact with others as eye contact communicates sincerity, concern and involvement Show a relaxed attitude towards time and do not place unnecessary pressure on themselves by creating artificial deadlines Have persistence and see a difficult task through its completion Value organizational goals above and over their own

2006 Prentice Hall5-*Looking AheadChapter 6 - Formulating StrategyReasons for going internationalStrategic Formulation ProcessSteps in Developing International and Global Strategies

2006 Prentice Hall5-*Stakeholders Return

2006 Prentice Hall5-*Twelve Variables in the Negotiation Process

2006 Prentice Hall5-*Persuasion TacticsReturn

*In the global arena, cultural differences produce great difficulties in the negotiation process. Ignorance of native bargaining rituals, more than any other single factor, accounts for unimpressive sales efforts. Important differences in the negotiation process from country to country include (1) the amount and type of preparation for a negotiation, (2) the relative emphasis on tasks versus interpersonal relationships, (3) the reliance on general principles rather than specific issues, and (4) the number of people present and the extent of their influence. In every instance, managers must familiarize themselves with the cultural background and underlying motivations of the negotiatorsand the tactics and procedures they useto control the process, make progress, and therefore maximize company goals.

*The negotiation process comprises five stages, the ordering of which may vary according to the cultural norms; for most people, relationship building is part of a continuous process in any event: (1) preparation, (2) relationship building, (3) the exchange of task related information, (4) persuasion, and (5) concessions and agreement.

*This slide highlights steps two and three in the negotiation process. During relationship building many non-task events (social events, tours, and ceremonies) take place so that the parties can get to know one another.

Once stage three begins the parties begin to present their positions and discussion follow so that a mutually beneficial solution can be found. Negotiators should focus not only on presenting their situation and needs but also on showing an understanding of their opponents viewpoint. Focusing on the entire situation confronting each party encourages the negotiators to assess a wider range of alternatives for resolution, rather than limiting themselves to their preconceived, static positions. Researchers suggest that to be most effective, negotiators should prepare for meetings by practicing role reversal.

*This slide highlights the final two stages in the negotiation process. Follow the hyperlink to the persuasion tactics.

Well-prepared negotiators are aware of various concession strategies and have decided ahead of time what their own concession strategy will be. Familiar with the typical initial positions that various parties are likely to take, they know that the Russians and the Chinese generally open their bargaining with extreme positions, asking for more than they hope to gain, whereas the Swedes usually start with what they are prepared to accept. Research in the United States indicates that better end results are attained by starting with extreme positions. With this approach, the process of reaching an agreement involves careful timing of the disclosure information and of concessions. Most people who have studied negotiations believe that negotiators should disclose only the information that is necessary at a given point and that they should try to obtain information piece by piece to get the whole picture gradually without giving away their goals or concession strategy.

*Global managers can benefit from studying differences in negotiating behaviors (and theunderlying reasons for them), which can help them recognize what is happening in thenegotiating process.

**This slide illustrates the relationships among the factors of cross-cultural negotiation.*Skillful global managers must assess many factors when managing negotiations. They must understand the position of the other parties in regard to their goalswhether national or corporateand whether these goals are represented by principles or specific details. They should have the ability to recognize the relative importance attached to completing the task versus developing interpersonal relationships. Managers also must know the composition of the teams involved, the power allotted to the members, and the extent of the teams preparation. In addition, they must grasp the significance of personal trust in the relationship.

*The Chinese are among the toughest negotiators in the world. American managers must anticipate various tactics, such as their delaying techniques and their avoidance of direct, specific answers: Both ploys are used to exploit the known impatience of Americans. The Chinese frequently try to put pressure on Americans by shaming them, thereby implying that the Americans are trying to renege on the friendshipthe basis of the implicit contract. Whereas Westerners come to negotiations with specific and segmented goals and find it easy to compromise, the Chinese are reluctant to negotiate details. They find it difficult to compromise and trade because they have entered negotiations with a broader vision of achieving development goals for China, and they are offended when Westerners dont internalize those goals.

*Much of the negotiation process is fraught with conflictexplicit or implicitand such conflict can often lead to a standoff, or a loselose situation. This is regrettable, not only because of the situation at hand, but also because it probably will shut off future opportunities for deals between the parties. Much of the cause of such conflict can be found in cultural differences between the partiesin their expectations, in their behaviors, and particularly in their communication styles.

*Negotiation actually represents the outcome of a series of small and large decisions. The decisions include those made by each party before actual negotiations start. The decisions include incremental decisions, made during the negotiation process, on how to react and proceed, when to concede, and on what to agree or disagree. Negotiation can thus be seen as a series of explicit and implicit decisions, and the subjects of negotiation and decision making become interdependent. Generally these decisions are made by using the rational decision making model.

*Having an understanding of the Japanese decision making process is vital for any manager that will be working within this country. This understanding will come from having an understanding that the Japans national culture is one that is based on relationships, and team work. It is this culture of collectivism and shared responsibility that underlies the Japanese ringi system of decision making. In the ringi system, the process works from the bottom up. Americans are used to a centralized system, where major decisions are made by upper-level managers in a top-down approach typical of individualistic societies. The Japanese process, however, is dispersed throughout the organization, relying on group consensus. The ringi system is cumbersome and very time-consuming prior to the implementation stage, although implementation is facilitated because of the widespread awareness of and support for the proposal already gained throughout the organization. However, its slow progress is problematic when decisions are time-sensitive. This process is the opposite of the Americans top-down decisions, which are made quite rapidly and without consultation, but which then take some time to implement because unforeseen practical or support problems often arise.

*This slide illustrates the different stakeholders involved in global negotiations.