Cross-cultural negotiations

Definition
“Intercultural negotiation involves discussions of common and conflicting interests between persons of different cultural backgrounds who work to reach an agreement of mutual benefit.” {Chapter 10, Intercultural negotiation}

Introduction
In a globalized world where many companies are multi-national enterprises an increased amount of negotiations need to take place on a cross-cultural basis.

This text describes on which things negotiators will need to put their attention in order to ensure that no misunderstandings reduce the outcome of a deal with an intercultural partner. This is valid for the sales perspective and the purchasing perspective.

Based on the Lewis model, examples of typical misunderstandings will be provided as well as solution possibilities. In addition, a guideline for a preparation of how to avoid intercultural misbehaviour will be provided.

Negotiation
KONTOL NEGO2 BACOT

Concept of culture
Culture in general is a set of attitudes, beliefs, languages, behaviours and rituals shared by its members that set it apart from other social groups. In a society, cultural values and norms are passed on by the previous generation to the next. These cultural values and norms influence how situations are perceived and how people react to the behaviour of others. This affects the way members of different cultures think about business and also leads to different negotiation strategies.

There are two types of cultural contexts ‘high context’ and ‘low context’. High context refers to societies who value close connection and long term relationships. Since they rely on strong personal relationships to support mutual understandings, they prefer indirect communication. They have strong boundaries to decide who is accepted and who is an outsider. For them, building close trusting relationships with the other party in a negotiation is more important than the task itself. They are more formal and judge aggression and confrontation as uncomfortable. High context includes for example countries like China, Japan, Korea, India, Pakistan, Greece, France, and those in the middle east.

Low context refers to societies which have more short-term relationships rather than long-term relationships. They are more focused on tasks than on building relationships. They find facts and reasoned arguments to be more persuasive and hence prefer a direct style of communication. In a negotiation, silence of the other party makes them uncomfortable. Low context countries are for example: United States, United Kingdom, Canada, Germany and Switzerland.

Nevertheless, the approach of high and low context is only a starting point to show that there is a difference between cultures. In order to be more specific in how different cultures are structured, the Richard D. Lewis model will be used in the following to explain major differences in intercultural communications.

Richard D. Lewis Model
Communication across cultures is challenging. The model developed by Richard D. Lewis illustrates how each culture perceives a situation and communicates. This approach is very useful for leaders who have to manage a company/industry across countries with different cultural backgrounds. The Richard D. Lewis model can serve as a guideline to help them understand the situation and use a suitable leadership style. It is also used to improve performance and efficiency in a multinational team. The cultures are divided into three main categories:

Linear Active – refers to societies where people focus on jobs. They separate their social and professional life. They work on one task at a time but have a detailed plan. They prefer polite and direct conversation with limited body language.

Multi Active - refers to societies where people focus on building relationships. Their decisions are based on emotions. They work multi-task and plan their work and life only partially. They prefer to communicate emotionally and talk most of the time with unlimited body language.

Reactive – refers to societies where people listen most of the time and react to others’ actions. They prefer being polite and communicating indirectly. They never interrupt a conversation and take decisions as they are. They focus mainly on building close trusting relationships.

All these categories will be explained in the chapter: Typical mistakes in intercultural negotiation / real life approach.

Factors influencing intercultural negotiation
In the last decades, trading with other countries became more and more important. Due to the fact that goods and people havé been able to be transported in a more efficient way, barriers for companies to trade internationally have come down. One of the side effects of globalisation is that companies are facing problems with intercultural negotiations.

One of the most obvious challenging factors in cross-cultural negotiation is the language barrier. Many people are not as confident in negotiating in another language as in their own native language. As a result, the atmosphere in the first minutes is usually stressful. To brighten up the atmosphere, it is useful to welcome the other party with some words in their own language. In negotiations with one native speaking party, it is also important to know that native speakers often use phrases that are not found in a dictionary. Therefore it can be really difficult to understand the other party.

The next important factor is the high or low level of context people are talking to each other. As described in the introduction, cultures differ in the level of context. Some cultures are not able to say “no” and therefore they say it in an indirect way which has to be decoded by the other party.

In order to adapt specific cultural behaviors, it is also important to ne aware of words with sexual connotations. Many words have different meanings and a slightly different pronunciation can lead to an unpleasant communication. The better the skills in the national language, the better the understanding of the culture.

In a cross-cultural negotiation, the language with the highest prestige is the one that is the most likely to be used. Nevertheless, non-verbal communication is also very important. Part of our nature is to observe people and to interpret gestures. In a cross-cultural negotiation, these observations will still take place but the gestures might be interpreted differently by different cultures. Eye-contact is not always a way to show the other party respect. This behavior can indicate disrespect in some cultures (e.g. Turkey).

Other factors which influence an intercultural negotiation are religion, work behaviour and rituals. Many cultures like to start a negotiation with small-talk before getting down to business. Additionally, some cultures do aim to reach a final result during the first negotiation.

All these examples are based on a business perspective but intercultural negotiations do not only take place in business. Intercultural negotiations can also take part in a normal conversation with a friend from a different culture. These situations underlie the same principles as intercultural negotiations. A major difference though might be the pre-existing relationship between “friends”. An already existing level of trust might reduce possible misunderstandings because the other party already considers your personal beliefs, behaviors and rituals.

Typical mistakes in intercultural negotiation / real life approach
The following text refers to the difficulties of intercultural management in terms of negotiation concerns. Due to differing cultural attitudes and behaviors, negotiation processes can be highly affected by the geographic surroundings in which a person finds themself. The following part of our encyclopedia tries to highlight these typical situations, showing real business life examples.

For further specifications, we deepen the before analyzed three cultural groups sticking to the Lewis’ model. Hereby, we use the categories “linear-active”, “multi-active” and “reactive”.

Linear – active countries
The linear-active countries in the Lewis model are mostly allocated in the German-speaking western European business world. Inhabitants and businessmen from these countries are considered direct and mainly straightforward in everything they do. So, the first point to be aware of doing business in these areas is the fact that they tend to try to avoid small talk. Especially Germans are known for their straight working attitude and their efficiency in organization or work.

In regard to negotiations in the German-speaking, linear-active business world, it is appreciable to come up with a clear mindset on goals and expectations. Avoid unproductiveness. Be direct. Out clearly what is your goal or overall idea. Then act.

At first, linear-active businessmen are always punctual. If there is a meeting set at 2 pm, they will usually appear around 1:45 pm in order to avoid unpunctuality. If there is one thing a businessman tries to avoid, it is for sure unpunctuality. And people really hate to wait for their counterparts. Please make sure to have a time schedule. Unpunctuality will be taken as a serious issue and can also lead to a personal non-understanding in the upcoming negotiations.

On the first contact, linear-active culture businessmen are rather rejecting. They are friendly and will welcome you with a smile. But it is also totally normal that they tend to behave a bit dismissive or even cold on the first contact in perspective of a non linear-active person. Nevertheless, they will be really quick in terms on targeting goal and outcomes of the given situation. It may take a time until a non-linear-active person reaches the same level of understanding of the whole situation the linear-active thinking person already has achieved.

Usually, on a meeting for negotiation business cards are distributed among the participants of the round. It is necessary to shake hands on the first view. This is mainly the first step towards an interpersonal business relationship. Especially in Germany, the hand shake is also used as an indicator of motivation or willingness to succeed, measuring the strength of the handshake applied by the hand of one of the persons. Be aware of touching the left shoulder of the other person with your other hand while shaking. This can be often observed as a measure to escape from the other’s tough handshake. Nevertheless it can be interpreted as you are willing to put pressure on the other person by doing that. This is often considered impolite or even arrogant.

Basically, on the first meeting with your possible business partners, you cannot do much wrong, if you consider to be direct and motivated. Be aware that open criticism is a totally normal thing in German speaking countries. Sometimes your counterpart’s contra arguments can appear more direct that they might let you feel uncomfortable. But, in this special situation, do not worry too much. Do it better and argue back with good and convincing arguments. Nothing else counts. If you are able to “deliver”. So you are able to give proof and profound information, your counterparts will soon get closer to you and once you have gained their attention and reward they will recognize you as a reliable and confidential partner. You can take them always by word. Usually, everything they say is what is really in their mind regarding a point.

Business meetings usually start with a round of self-presentation. Be short in that. Clearly state what is your name and position. Then, in case of, mention your educational background and what your focus is on work.

The end of any negotiation, if it was successful for both parties, is in a lot of cases concluded by a dinner or having drinks at night. This invitation of your German friends shows you that they liked your presentation and that they agree with the mutual outcome of the negotiation. This is your chance to get closer to them. By having drinks, you might get to know your new business partners from a relatively new perspective. Having drinks after –only after – the work is successfully done, Germans tend to be open-minded, funny and relaxed. This is a good point for small talk and further chat.

Multi-active countries
The multi-active countries in the Lewis model are mostly Spanish speaking countries of Europe and Latin America (e.g. Spain, Mexico, Colombia). When it comes to negotiation processes with counterparts in one of these countries, several cultural specifications are to be considered.

First, the meaning of a word that is spoken is by far not that important than for example in the German-speaking countries. In fact, oral agreements on things or issues can have (not always but often) a value close to zero. This implies, always make sure you are asking for a clear confirmation of all given issues. If you are trying to set up a meeting with several counterparts of multi-active countries, you should be aware of verbal confirmations regarding time location and possible efforts invested by that specific person with regard to the project or negotiation.

In fact, businessmen from Spanish-speaking countries are open and approach you with a smile in their face. This is cultural related and should let you know that you are a welcome guest and business partner. They also tend to confirm things verbally which they cannot achieve. They do this to establish a conversational harmony within a negotiation conversation. This is in fact a point to be aware of. Have always a clear mind. If you want to succeed in these countries you must be able to scan your partner in regard to his outings. Whether it is a clear confirmation, a “Yes”, or a confirmation, that later on is most likely to be not achievable.

The people in the Spanish-speaking world tend to belong to one of the most warm cultures on Earth. They are welcoming guests and they try to avoid uncomfortable and very direct criticism of each other. Meanwhile in Western Europe (Germany, Netherlands) this is common business, a direct criticism, even if it is hundred percent objective, will be felt as impolite and very offending by your business partner.

In order to criticize, it is important to have a feeling for the other person. It is important to know when it is appropriate and when it is not. By criticizing in the wrong moment, you can destroy the entire business relationship by provoking an uncomfortable feeling for the other person (e.g. during a presentation). On the other hand, when it comes to bargaining, this can be also used as your weapon. Be aware of this.

Reactive countries
The reactive countries are mostly countries in the Asian world (e.g. China, Japan, Vietnam).

When doing business in these countries and especially when it comes to negotiations, there are a few things that should be considered.

Especially in terms of hierarchy and power distance, the reactive countries differ a lot from the western business world.

The first thing that appears totally different from the most other cultures is the fact of presenting business cards. Meanwhile in the western business culture world business cards are handed out before, during or after the meeting as a simple mean of communication in order to stay in contact. In Asia these business cards exchanges require a highly sophisticated form of etiquette. First, give your card with both hands to the other person and look her in the eyes. You will soon notice that the other person will also take it with both hands and will at first have a look on it in order to accept your card. If you receive a business card in this way make sure to accept it in the same way.

In western countries, business cards are just regarded as a paper for a simple reason, to enable interpersonal contact from one to another person. In Asia, the business card etiquette seems to underline that a having received a business card from your counterpart, this person is letting you into his world. And the card is the first entrance. So, show respect.

Meanwhile this point applies for most of the Asian culture countries, it can also differ among the several countries in that business area. So, this special etiquette is mainly present in Japan and China.

The second point widely differing from western countries is the power distance or – shortly – the interpretation and feeling of hierarchy in Asia.

Asian businessmen often tend to be really sticking to the role that they have been given by the person in charge on a higher hierarchy level. This comes together with a different understanding and feeling of discipline. Be aware that people in general tend to be more ahead when it comes to discipline and persistence. Asians tend to be clearly structured and efficiently organized. They need clear structures in order to achieve the most efficient work capacity. This applies especially for Japan.

In countries in South East Asia, especially countries like Singapore, another business fact becomes relevant. Be aware, that among these countries, there is a culture of “Non-denying”. People and especially your possible employees will always try to stay in harmony within a conversation with you. They will do everything to keep the structure of hierarchy once applied as stable as possible. This is possible through a non-denial behavior. They will never criticize or offend somebody directly. But, while never saying no, you must be aware of how to manage these situations. You may come to a point after having gained several experiences within these countries, when you get a feeling for these communicational differences; therefore you need an intercultural antenna.

Be careful on the first meeting of partners in Asia. Try to never offend somebody by being direct. Especially as a German or from a state of linear-reactive culture, you should be very aware of not being as direct as when you are negotiating with a fellow citizen of Western Europe. Be careful and a bit reserved and very respectful when meeting your fellows in Asia. A too straight approach, direct statements or any kind of personal offending can lead to a lot of misunderstanding and will destroy the business interaction, formally and personally.

Intercultural Negotiations Preparation
Preparation is required for all kind of negotiations. Intercultural negotiations though require a special and usually more intensive preparation. Even knowing the Richard D. Lewis model might not be enough to engage in a successful intercultural negotiation. At this point, be aware that an intercultural negotiation can already take place in your “home country”!

As we have learned from previous chapters, cultures can differ a lot from each other. Big differences paired with misunderstandings between two parties can lead to small or even huge consequences:

While a friend from aboard might be insulted by a gesture or special local humor it is easily possible to clarify the situation by explaining the background the gestures or humor. Still it might take some time to make your friend overcoming the insult. But approaching a friend is due to a given level of trust relatively easy.

If it comes to intercultural business negotiation which a potential strategic supplier who believes you show arrogant behavior by nature, this can have a negative impact on for example your company’s terms of payment – or even worse. Those terms of payment might only be renegotiated earliest after one year and harm in this way the company’s’ overall financial performance.

In both, the private and business related situations, the Richard D. Lewis model can be a starting point to analyze and visualize general differences to values, believes and assumption of the counter party – assuming you know the counterpart’s culture. Still only applying the model might not be enough. It’s a big advantage to use empathy too.

A conclusion to the different possible consequences of a negotiation is the following:

Even if a small misunderstanding happens the effects from it can last long and therefore have a high impact on a relationship – a friend or even a business partner. Here we can conclude that in case the negotiated result has an important impact, the intensity of preparation in advance increases to a high degree. Whereas the negotiated result has only a low impact, the preparation effort usually decreases with a decreasing importance.

In order to avoid unnecessary intercultural mistakes a preparation could include the following (excluding negotiations tactics training) sources:

It is highly recommended not just to rely on one of the preparation possibilities. Also be aware that the facts you learned should be studied well. A good way of studying those facts is practicing with a friend or business colleague. If you have colleagues from that particular culture it might be best to practice with him/her.