CH. 5 CROSS-CULTURAL NEGOTIATION AND DECISION MAKING

1. CH. 5 CROSS-CULTURAL NEGOTIATION AND DECISION MAKING By Helen Deresky

2. I. OPENING PROFILE: ENRON IN INDIA • A. 3 YEARS OF NEGOTIATION • From 1996-1999, Enron’s patiently and skillfully negotiated • 10 years of on-again, off-again relationship with government • Ms. Mark needed 170 permits, along with countless paperwork • April, 2001, Enron’s plant is biggest FDI in India • Then, Enron said it didn’t think government could pay • Energy sold from plant cost 4 times going rate • Contract: pay partly in US dollars; rupee declined against dollar • Enron issued “political forcemajeure”-intent to withdraw • India’s political volatility causedmany foreign firms to leave • Enron decided to move out ofowning assets to trading energy

3. B. POLITICAL PROBLEMS • Various government agencies, sometimes too numerous • Shifting political agendas over time • Internal political conflicts between state and federal • Multiple layers of bureaucracy • Additional agendas besides firm • Political agenda of Chinese when plane landed there in 2001 • Chinese needed to “save face” • II. NEGOTIATION • A. NEED TO NEGOTIATETO IMPLEMENT STRATEGY • Need to know native bargainingrituals • Preparation, emphasis, priorities,people

4. B. GOAL: WIN-WIN • From beginning, view negotiator as partner • Goal: they should become partner • Most important skill: listening • Find out what “partner” wants • Can only do that by listening • Be creative: come up with proposal that fills needs of both sides • C. AVOID PROJECTIVE COGNITIVE SIMILARITY • Don’t assume others are the same as you • Learn their values, expectations, communication styles

5. III. THE NEGOTIATION PROCESS • A. STAGE ONE: PREPARATION • 1. Distinct advantage can be gained • Learn background of firm and counterparts • Learn culture and negotiation style • First, learn own style of negotiation • 2. Variables in negotiation process • Develop a profile of counterparts • Kinds of demands that might be made • Composition of the other team • Relative authority of members • 3. Develop strategy: assign roles,concessions, alternative plan • Compromise on site, length, type of surroundings, timing, other

6. B. STAGE TWO: RELATIONSHIP BUILDING • US: wants to get down to business • Rest of world: wants patient development of trusting rel. • Personal commitments support contracts rather than laws • Make time for social events, tours, ceremonies, small talk • Wait patiently for other party to start business talk • Can use experienced intermediary:“relationship bridge” • Middle East: must do businessthrough 3rd, familiar party • Use translator • Learn posturing: set tone fordiscussion • Create spirit of cooperation:“respect” and “mutual benefit”

7. C. STAGE THREE: EXCHANGING TASK-RELATED INFORMATION • Each sides makes presentation, states position • US: straight forward, direct • Mexicans: suspicious, indirect • French: enjoy debate and conflict • Chinese: ask many questions,delve repeatedly into details • Respond with vague material • After 6 weeks “thank you foryour introduction” • Russians: well-prepared • Bring along someone withtechnical expertise • Protocol important, they wantto deal with top people

8. D. STAGE FOUR: PERSUASION • Try to persuade other party to give up some of their position • Far East: details already worked out backdoor approach (houmani) • Bargaining and concessions varies from culture to culture • Learn tactics of your partner’s culture • Nonverbal behaviors: most difficult to learn • Silent periods • Conversational overlaps • Facial gazing • Touching

9. E. STAGE FIVE: CONCESSIONS AND AGREEMENT • Russians and Chinese open with extreme positions • Swedes and Japanese open with what expect • US • Disclose only information needed at a point in time • Obtain info one piece at a time • Far East: holistic • Decide on whole deal at end • No incremental concessions • Contracts • US: take very seriously • Russians: often renege oncontracts • Japanese: like to modify asgo along

10. IV. UNDERSTANDING NEGOTIATION STYLES • A. JAPANESE STYLE • Calm, quiet, patient negotiators • Long, detailed negotiating sessions • Want to get to know counterparts • Nontask sounding: politeconversation and informalcommunication (nemawashi) • Hide emotions; maintain smilingfaces no matter what • Value humility; hate boasting • Hate touching • Hate giving direct, negative answer, will be evasive • Maintain harmony

11. B. US NEGOTIATORS • Direct, states position as clearly as possible • Accepts compromise when deadlocked • Operates in good faith • C. INDIAN NEGOTIATORS • Tells the truth • Seeks solutions that will please all parties • Puts things into perspective • Withdraws, uses silence • Tenacious, patient, persistent • Learns from opponent • Trusts his/her own instincts

12. D. ARAB NEGOTIATORS • Protects all parties’ honor • Avoids direct confrontation • Does not create situation where partyshows weakness • Disregards time • Islam has impact: right path • E. SWEDISH NEGOTIATORS • Quiet and thoughtful • Polite and punctual • Straightforward • Informal, cautious, flexible • Slow at reacting to new proposals • Avoid confrontations

13. F. ITALIAN NEGOTIATORS • Sense of drama • Does not hide emotions • Does not trust anybody • Wants to make good impression • Individualistic • Never embraces definite options • Always looking for ways tooutsmart opponents • Flair for intrigue, flattery

14. IV. MANAGING NEGOTIATION • A. SOFTWARE OF NEGOTIATION • Individualistic vs. group cultures • Direct vs. indirect communicators • High-context communicators vs. low-context • Research shows tactics ofsuccessful negotiators • Wider range of options • Twice as many LT issuesand common ground • Limits instead of points • Fewer irritating comments,counterproposals • Active listening, ask morequestions, summarize

15. B. USING THE WEB TO SUPPORT NEGOTIATION • Web applications support various phases • Multiple issue, multiple business transactions • International dispute resolution • Negotiations and communications • Negotiation Support Systems (NSS) • INSPIRE – prepare and conduct negotiations • C. NEGOTIATING WITH CHINESE • Socialization and fostering personal guanxi (obligations) • Respect, friendship, saving face, emotional restraint, polite • Long-term goals • Want tremendous detail • *Have little authority; critical to know who has authority* • Deal must fall within state budget

16. What won’t work • Aggressive or emotional attempts at persuasion • Negotiating with wrong people • Showing that you won in the negotiation • Appeals to individual members • Saving face • Lien: moral character, defines person, earned by fulfilling obligations • Mien-tzu: reputation, earned thru accomplishments • Giving others time, gifts, or praise enhances face • If win negotiation, give token gifts, concessions to help lose safe face

17. Guanxi • Network of personal relations based on favors given and owed • How things get done in China • Carefully cultivated • Prevails over laws • Guanxihu network: firms doing favors for each other • Price varies tremendously: dependingon whether one has strong guanxi withlocal administrators • Extended preliminary visiting • Chinese will learn more about you • Chinese convey their deeply heldprinciples • Expect Western firms to sacrificeprofit for Chinese goals • Americans can’t connect the dots:Chinese development and profit

18. Technical stage • Long detailed conversations • Want every detail hammered out • 1/3 time spent on technical Commercial stage • After technical stage • Production, marketing, pricing • 1/3 time spent on price negotiation • Chinese Team • Twice as large as visiting team • Avoid direct, specific answers,stall • Don’t like to compromise • Adopt rigid posture whenWesternersdon’t adopt Chinese goals • Will play one foreign team againstanother

19. What works • Patience, accept prolonged periods of stalemate • Discount Chinese rhetoric about future • Expect Chinese to shame you • Difficulties are not caused by you • Understand Chinese, but cannot practice their techniques • D. MANAGING CONFLICT RESOLUTION • Can lead to a lose-lose situation • Low-context cultures: instrumentaloriented • Conflict handled directly • Issues are separate from people • High-context cultures: expressiveoriented • Handled indirectly and implicitly • No clear separation of situation from person • Avoid confrontation: loss of face • Use evasion and avoidance

20. VI. E-BIZ BOX • A. ONLINE BUYERS - Pit sellers against each other • B. ONLINE SELLERS - Reach more buyers • C. EXCHANGES – bidding or reverse bidding • VII. DECISION MAKING • A. THE INFLUENCE OF CULTURE • Objective or subjective approach to process? • Define problem • Gather data • Alternative solutions • Choose best solution • Implement solution • Risk tolerance • US: highest tolerance • Japan and Netherlands • Belgium, Germany, Austria: low tolerance

21. Locus of control • Internal: US, deterministic, we determine outcome • External: fatalistic, god or nature determines outcome • Accepetance of change • B. APPROACHES TO DECISION MAKING • Utilitarianism: western world, cost-benefit approach • Moral idealism: China • Autocratic vs. participative decisions • Individualistic vs. collective decisions • Speed • US and Europe: fast • Middle East: importance of decisions correlated with length of time

22. C. JAPANESE COMPANIES • Harmony: wa • Indulgent love: amae, results in shinyo or trust in business • Identify strongly with workgroup-preserve the wa • Avoid shame or loss of face Ringi system • Dispersed decision making • Get approval by circulating document • Ringi-sho: proposer, works on getting informal consensus (nemawashi) • Meetings are held, experts consulted • Then, formal process begins: ringi:time-consuming • Implementation is speedy becauseall are familiar • Doesn’t help in rapidly changingenvironment where fast responsesare called for