Unit 6: International and Cross-Cultural Negotiation
Negotiating across national and cultural boundaries raises additional challenges for negotiating participants. All of us are a product of the culture and geographical areas where we were raised and live. Culture creates biases in our perceptions, motivations, interests, and strategies, which may give rise to a host of conflicts in the negotiating process. Aspects of culture that may affect negotiations include language, dialect, societal norms, business etiquette, religion, values, cuisine, hygiene, comfort, and personal preferences. International negotiations are also often impacted by historical events, nationalism, legal restrictions, tariffs, geographic distance, topographic conditions, multilateral alliances, and political conflicts.
Completing this unit should take you approximately 23 hours.
Upon successful completion of this unit, you will be able to:
- explain how culture impacts negotiations;
- identify characteristics of culture or national identity that negotiators should become familiar with prior to engaging in cross-cultural or international negotiations;
- explain how Trompenaars' and Hofstede's theories of cultural dimensions can be applied to cross-cultural and international negotiations; and
- describe the types of political and legal issues that might arise during the course of international negotiations.
6.1: Cross-Cultural Communications in International Business Negotiations
Read this chapter for an overview of how cultural understanding applies to business negotiations. For example, you will learn how a message is communicated in high- and low-context cultures. In high-context cultures, body language is as important and sometimes more important than actual words spoken. In low-context cultures, people tend to be explicit and direct in their communications. Verbal language and body language can impact our chances of understanding and being understood in a positive or negative way.
Read about the role of ethics when negotiating with others and how national culture plays a role in negotiations. This section gives an example of the need to understand differences in cultures. In China, companies and workers do not like to say no. A question that asks for a yes or no answer, therefore, may put a Chinese official in an uncomfortable position of saying no, which they likely would not do. To accommodate this way of thinking, the author suggests that we might rephrase the question to open-ended questions, like "how will you do this for us, and will it be done?"
6.2: The Application of Cultural Dimension Theories to International Business Negotiations
Fons Trompenaars, a Dutch organizational theorist, management consultant, and author, has developed a model of national culture differences to use as a framework for cross-cultural communication.
This model has seven dimensions:
- Universalism vs. particularism;
- Individualism vs. communitarianism;
- Neutral vs. emotional;
- Specific vs. diffuse;
- Achievement vs. ascription;
- Sequential vs. synchronic; and
- Internal vs. external control.
Which of Trompenaars' five orientations describe a culture in which people are accorded status based on how well they perform their functions?
Now that you have read about Trompenaars' model of national culture differences, you may find it interesting to hear his perspective on social media. Trompenaars compares social media users by their age, country, and other demographics.
Read this article to learn about four models that provide a useful framework for managers. Geert Hofstede addressed six dimensions of culture in a study at IBM offices in 50 different countries to recognize the need to understand global differences in culture. These include power distance, uncertainty avoidance, individualism vs. collectivism, masculinity vs. femininity, long-term orientation, and restraint. Which of Hofstede's Cultural Dimensions describes an organization's comfort level with risk-taking?
To expand on Hofstede's six dimensions, this article offers scores for New Zealand. In each of the dimensions, the lowest possible score is 0, and the highest possible score is 100. The scores in this article are interpreted to describe people in New Zealand relative to the characteristics of a particular dimension. Look at the discussion questions at the end of the article. What answers would you give? Why?
6.3: Regional and Country-Specific Case Studies on International Negotiations
This article describes a negotiation between a Chinese energy company (Sinopec) and a Brazilian energy company (Petrobras). The stage is set for a difficult experience by both parties because of several factors. The leaders on both sides had only limited experience with international negotiation, and both teams were hesitant to get the conversation started. Without an understanding of each other's backgrounds, it was hard to know where to begin. The facilitators had their work cut out for them.
Read to learn their progress on such issues as relationships, speaking a common language, research on each country's customs, history, and politics. In striving to make the negotiation a win-win, each side needed to learn what the other side hopes to accomplish. What are their goals? Through homework assignments and simulation exercises, the participants gained knowledge and skills to proceed with multiple negotiations.
In this video, Brendstrup cites the challenges of working with employees from multiple countries. He stresses that management must understand how different employees wish to be managed and what style they use to manage others. He points out that this becomes more complex when adding Asian management styles to the mix.
This chapter describes the difficulty of doing business globally without a sound knowledge of another country's local business practices and culture. Dunkin' Brands had first-hand experience with these challenges when returning to Russia in 2010 after pulling out of that country 11 years earlier. The company planned to open 20 new stores. A "challenging balance for Dunkin' Brands is to enable local operators in global markets to customize flavors and food product offerings without diminishing the overall brand of their companies".
For example, in Russia, people were largely unfamiliar with donuts, so Dunkin' has created several items that specifically appeal to Russian flavor preferences. You will also read about Dunkin's experiences dealing with cultural differences in China, Latin America, etc. Consider the questions in the opening case exercises at the bottom of the introduction. How would you respond?
This five-member panel debated the topic "Women, Civil Society and Leadership in a New Arab World". Follow along by reading the subtitles in English, and note the difference in opinion expressed by the men and women on the panel. One man, for example, explains that there are many women in business in various sectors. However, a woman panelist posits that if we look at the world of business as a world of profit and loss, there are exceptional and competent women who possess capital and leadership characteristics. Since they are capable of attracting capital, why are they being left out? She refers to families or traditions that may stand in the way of women's progress in business. Another obstacle for many women is that some Arab countries prohibit women from signing contracts or traveling to another country to conclude a deal. A vote is taken at the end of the debate to decide: Is the role of women in business less than it is supposed to be, or is it adequate? What do you think the vote will be?
What can the United States do currently to improve our relationship with the Arab World? Rather than thinking of the Arab world as a "region", we should recognize it comprises different countries, often with divergent cultural and political values. We need to have strong country teams to interact successfully with specific countries. Using television and radio to deal with an entire region is ineffective. A country-by-country approach based on the values of the people there is absolutely critical.
Mexico is an immense country, with enormous economic and social contrasts, thousands of cultural and regional differences, and a complex history that probably can never be understood completely by the foreign business person. This article holds a view similar to the last video. You must treat each region separately to respond to that area's economics and cultures effectively. This article addresses such topics as relationships, language, mealtimes, acceptable and unacceptable topics of conversation, politics and political parties, and the taxation system.
This brief video traces the commercial, cultural, and political interests that created a national Hispanic identity in the 1970s and boosted the political clout of Mexicans, Puerto Ricans, Cubans, Salvadorans, Guatemalans, and other Latin Americans in the United States. Interestingly, it explains how these disparate cultures in America gained strength by developing a common identity. Global business leaders are realizing a need to identify and relate to specific cultures, even within the same country.
Watch this video to learn some of the challenges people face in China due to cross-cultural differences.
Today, the physical territories that constitute the countries of India and Indonesia are far different from a hundred years ago. The previous British rulers in India tended to hire locals for administrative positions, which established a strong and well-educated Indian bureaucracy. Although many business people complain about India's slow bureaucracy focused on rules and regulations, the government infrastructure and English-language education system helped position India as a strong high-tech economy.
This representation of India is through the eyes of several expatriates who describe their journeys and experiences and explain why they chose India as their home. More than just a tourist destination, many foreigners are learning that India has a booming economy that allows them to earn and live in India by taking up permanent residence.
6.4: Political and Legal Issues in International Negotiations
This article describes Raytheon's effort to negotiate a NATO weapons system with a consortium of European companies. We return to a recurring theme that businesses need to understand the various economic, political, and social cultures of a particular country or region they wish to negotiate with. In this case, Raytheon learned that the governments of the countries they wished to negotiate with in Europe would make the purchasing decision, not them.
This lecture analyzes the Transatlantic Trade and Investment Partnership (TTIP), which sought to strengthen economic and trade ties between the U.S. and Europe. It gives a background on TTIP, its advantages and issues, and prospects for the future. The now-failed Trans-Pacific Partnership (TPP) was the idea of a regional free-trade agreement in the Asia-Pacific region, including Australia, Canada, Japan, Mexico, the US, Singapore, and Vietnam. One significant issue of TPP was its exclusion of China.
Read this chapter. While we are all a part of the economy, we can't see all parts of an economy at any one time. This chapter describes policy issues, controversies, and the history of international trade. You will learn about international economics, FTAs, GATT, WTO, anti-subsidy laws, and bound vs. applied tariffs. You will read about real-world issues such as policies restricting trade and forging agreements to reduce trade barriers. Test your knowledge by answering the exercises in each section.
Read this study on how international trade regulation addresses exchange rate measures. The authors look for provisions of the World Trade Organization (WTO) agreements that could address the exchange rate issue and rebalance the impacts of misaligned currencies on trade. These misalignments significantly affect international trade instruments and create incentives to export while disincentivizing imports.
Read this chapter to learn about currencies, foreign exchange rates, and global capital markets. It gives us a real-world example of a company that has to deal with different currencies. Small changes in the daily foreign currency market can significantly affect a company's costs and profitability. At the end of the chapter, read the ethical dilemmas. What would your responses be? Would you recommend that Walmart set up an offshore company? Why or why not?
This chapter argues for economic free trade through the lens of trade theory. While free trade may not be optimal, many consider it to be the most pragmatic policy option for a country. During the 19th and 20th centuries, policymakers asked whether free trade was in everyone's best interest. The modern case for free trade argues that government intervention in trade is impractical. Free trade is not always the best policy choice when the objective is to maximize national welfare. Free trade is pragmatically, rather than technically, optimal because it is attainable and most likely to produce the highest level of economic efficiency.
Commercial diplomacy is designed to influence foreign government and regulatory decisions that affect global trade and investment. This article differentiates commercial and economic diplomacy, which are often used interchangeably. It describes public and private sector practitioners and lists traditional commercial diplomacy activities under the umbrella of networks, intelligence, image campaigns, and support.
Read this article on the World Trade Organization (WTO) to learn why it was formed, its members and observers, the Doha Development Round, major obstacles, and agreements.
Listen to this podcast for an argument that the WTO needs to adapt its approach to trade negotiations and strike a balance between its strong dispute settlement mechanisms and a comparatively weak negotiating framework.
6.5: Bargaining Ethics
It may be legal, but is it ethical? Read this section to learn about the role of ethics in negotiations and how one culture may consider something to be right and fair, while another perceives it to be threatening and antagonistic. For example, an American nods their head to convey agreement, while someone from China nods their head to convey they are listening and following what you are saying. Attempt the exercises at the end of the section.
This lecture discusses when a voluntary choice is not really voluntary. Capitalism constantly tries to find new ways to make better stuff more cheaply and allocate a fixed amount of resources. What counts as voluntary? Is it possible to be coerced by circumstance? An overriding question raised in this lecture is: what is justice in market pricing?
Unit 6 Assessment
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