Unit 5: International and Cross-Cultural Negotiation
Negotiating across national and cultural boundaries raises additional challenges for participants and businesses. Culture creates biases in our perceptions, motivations, interests, and strategies, which may cloud the negotiating process. These aspects of culture may include language, dialect, societal norms, business etiquette, religion, values, cuisine, hygiene, comfort, and personal preferences.
International negotiations are also often impacted by economic and historical events, geographic distance, legal restrictions, multilateral alliances, nationalism, tariffs, topographic conditions, and political conflicts. Sometimes international negotiations may appear as congressional and parliamentary discussions and budget items. In these cases, negotiation not only crosses cultures but has become part of the country's funding apparatus.
In this unit, we examine several examples of cultural differences. Business leaders need to research these cultural norms to make sure they do not confuse or offend their foreign business partners. Our previous discussions about negotiation and conflict resolution apply to these situations.
Completing this unit should take you approximately 4 hours.
Upon successful completion of this unit, you will be able to:
- define culture;
- compare how cultural beliefs can influence negotiations;
- describe how nonverbal communications impact business negotiations;
- discuss the challenges multinational corporations face in managing their employees;
- list the seven dimensions of Trompenaars' model of national culture differences;
- list Geert Hofstede's six dimensions of culture;
- explain how understanding culture and national identity affect cross-cultural or international negotiations;
- describe political and legal issues that impact international negotiations; and
- describe the role the World Trade Organization plays in international business negotiations.
5.1: Cross-Cultural Communications
There is a saying that many things are lost in translation. Businesses must pay attention to these miscommunications, especially when costs are involved. History is full of instances where common misunderstandings upended long and productive negotiations.
The headquarters of multinational corporations often reside in foreign countries. Consequently, the government of one nation can impose restrictions on certain business practices when another country tolerates or "turns a blind eye" to the same behavior. Businesses must abide by the rules of the country where they work. For example, businesses have to be especially cautious when working in countries that limit the free speech of their citizens. They may prosecute or jail those who criticize their political leaders.
Read this chapter for an overview of how cultural understanding applies to business negotiations. For example, in high-context cultures, body language can be more important than spoken words. In low-context cultures, people tend to use explicit and direct verbal language.
The introduction describes the challenge of conducting business globally without understanding local business practices and culture. Dunkin' Brands received a first-hand lesson when it returned to Russia in 2010 to open 20 new stores after an 11-year absence. It proved difficult to balance the need to allow local operators to offer customized flavors and food products without diminishing the overall brand of their multinational company. Dunkin' created several items to appeal to Russian flavor preferences.
Note that successful business people should always practice cultural etiquette and standards of decency when they meet someone from a foreign country. They also realize they will fall flat if they succumb to gross stereotypes or fail to recognize the differences of the individuals they work with.
Read about the role ethics and national culture plays in negotiations. For example, in China, companies and workers do not like to say "no." To accommodate this norm, the author suggests asking open-ended questions, such as, "how will you do this for us" and "will it be done"?
This article highlights how businesses alter menus or messages to become profitable away from home. Pay close attention to the discussion about the changes Dunkin Donuts and Baskin Robbins went through in Russia, China, Japan, and most of Asia.
This video examines how to build meaningful cross-cultural interactions and relationships among team members in China.
5.2: Cultural Dimension Theories
At many business schools, cultural dimension theory is an entire course that studies domestic and international societal values. Gerte Hofstede (1928–2020), a Dutch social psychologist, is often cited in the discipline of cross-cultural communications. In this case, society represents the particular business community and the dominant culture of the area.
International business negotiations communicate across cultures and societies. Each party comes to the table with a heavy sense of local and personal culture as they try to negotiate the best deal. Businesses that fail to recognize these aspects of negotiation will lose time and money.
Fons Trompenaars (1953– ), 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. Businesses hoping to set up shop to provide goods or services to the public in a new cultural environment should research these different settings before they begin.
His 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.
Read this summary of the different models Trompenaar identified. For example, which of Trompenaars's five orientations describes a culture where people achieve status according to their ability to perform their functions well?
Watch this interview, where Trompenaars compares social media users by age, country, and other demographics. These comparisons align with how demographic data is gathered and shared. In this interview, Trompenaars compares the social media needs of older and younger users and the individual versus the community.
Read this article on four cultural models or frameworks Edgar Schein, Charles Handy, and Geert Hofstede identified. Schein examined three types of organizational culture, and Handy developed a framework of four types of culture in today's society.
Geert Hofstede identified six dimensions of culture when he studied IBM offices in 50 different countries. 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?
Read this text, which expands on Hofstede's six dimensions. Scores in each dimension range from zero to 100 and describe people in New Zealand relative to the characteristics of each dimension. Pay attention to Hofstede's definition of culture, in which the mind distinguishes one group from another. Business leaders must understand how to market a product or service so it appeals to all groups.
Watch this video, which cites the challenges of working with employees from multiple countries. Management must understand how employees wish to be managed and how to work with others. Notice the themes Brendstrup cites. He describes how the company acquired smaller companies to serve several international regions simultaneously (China, Europe, and Thailand/Philippines). He mentions the complexity of managing employees in other countries and realized the need to offer training on cultural differences to all their employees.
5.3: Regional and Country-Specific Case Studies
Business schools often use case studies to teach particular real-world business concepts. They examine how products and services perform in certain areas and markets or with a local or international demographic. Regional case studies help businesses plan for the typical country-specific business environment and prepare for abrupt and sudden changes, such as supply issues many businesses experienced during the Covid-19 pandemic in 2020.
Here we examine case studies through the lens of regional categories. A domestic, regional category can include several cities or states. In contrast, international, regional categories can include a formal or informal alliance of countries, such as the European Union (EU) or the Economic Community of West African States (ECOWAS).
When making these observations, negotiators must take the cultural biases and stereotypes discussed in Unit 4 into account and be wary of differences that may exist within a region. For example, a farmer in rural Greece probably has different needs and expectations than a banker in Berlin, although both live in EU countries.Read this text, which describes a negotiation between a Chinese energy company (Sinopec) and a Brazilian energy company (Petrobras). The stage is set for a difficult experience for both parties due to several factors. The leaders on both sides had limited experience with international negotiation, and teams hesitated to start the conversation because they did not understand each other's backgrounds.
The participants researched each country's customs, history, politics, and the issues of relationships and speaking a common language. As discussed in Unit 1, each side had to learn what the other side hoped to accomplish to negotiate a win-win solution. Through homework assignments and simulation exercises, the negotiators gained the knowledge and skills to proceed. They also encouraged follow-up correspondence to ask for clarity during their discussions.
Watch this video, which explores the concept of respect or not losing "face" or "mianzi" in front of your team in China. This idea is not unique to China – most other cultures have a similar concept, but it may play out differently. Failure to understand this behavior in a business relationship can cause tension or a complete breakdown in the worst cases.
Watch this video, which discusses how Chinese workers are not used to receiving praise from their supervisors.
How can the United States improve its relationship with the Arab World? Anthony Cordesman says Americans should recognize the region includes separate countries with different cultural and political values. A country-by-country approach is critical.
Watch this video, which discusses creating country teams with values that mirror the population they serve to establish respect, acceptance, and business longevity.
Watch this panel discussion, "Women, Civil Society, and Leadership in a New Arab World." The first speaker says the Arab Spring protests from 2010 to 2011 were a catalyst that helped change minds and ideas about women business leaders and managers. For example, the director of a Tunisian business syndicate is now a woman.
However, a panelist complained that many exceptional and competent women who possess capital and leadership characteristics were being left out. For example, some Arab countries prohibit businesswomen from signing contracts or traveling alone to another country for work. Many families and traditions stand in the way of women's progress.
Mexico offers another example of an enormous country with a complex history, economic and social contrasts, and thousands of cultural and regional differences. As in the Arab world, Lee Iwan writes that businesses should treat each region separately, recognizing good conversation topics, language, mealtimes, politics, relationships, and taxation systems. Businesses must be aware that, as border partners, Mexico and the United States have many relevant treaties and regional trade agreements that could affect their operations.
Watch this brief video, which documents the author's experience on the West and East coast of the United States. It 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. However, it notes that many businesses "homogenize" important differences within the Latino and Hispanic communities and ignore their diversity at their peril.
5.4: Political and Legal Issues in International Negotiations
In Unit 2, we discussed legal issues that arise during negotiations. Political changes can cause multinational corporations that opened satellite offices and hired local people to shutter their doors due to new protectionist regulations. Political instability can also hinder business processes, especially during violent conflicts when safety issues become a key concern.
Read this summary of the General Agreement on Tariffs and Trade (GATT), which evolved into the World Trade Organization (WTO) in 1995 and currently has 164 members. The WTO is a forum for governments to negotiate trade agreements and settle trade disputes. It operates an international system of trade rules. They are contracts that bind governments to keep their trade policies within agreed limits. Its goal is to "help producers of goods and services, exporters, and importers conduct their business while allowing governments to meet social and environmental objectives". (WTO)
Read this chapter, which provides an overview of policy issues, controversies, and the history of international trade. Businesses that wish to conduct trade internationally or establish offices in foreign countries need to understand these complex issues. The reading discusses international economics, tariffs, anti-subsidy laws, free trade agreements (FTAs), the 1947 General Agreement on Tariffs and Trade (GATT), and the World Trade Organization (WTO).
Read this summary of the effort Raytheon, a U.S. defense contractor, made to negotiate a NATO (the North Atlantic Treaty Organization) weapons system with a consortium of European companies. Raytheon learned that the individual European governments would make the purchasing decision, not the companies they planned to partner with. Cultural differences can cause four problems in international negotiations: language, nonverbal behaviors, values thinking (cultural and personal), and decision-making processes.
Watch this video on the importance of proactively building a relationship with your local government representatives when growing a business in a foreign country so help is available in case any problems or legal issues arise. This will also raise your awareness of any ethics, rules, standards, or regulations you need to follow.
Watch this follow-up to the previous video. The speaker explains that minor problems and confrontations with government authorities can be an opportunity for businesses to improve and build relationships of trust that will help overcome future negative encounters or roadblocks.
Unit 5 Assessment
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