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A Framework for International Business Negotiations
Lecture 1.
The Nature of Business Negotiation
Negotiation is a basic human activity. It is a process we undertake in everyday activities to manage our relationships, such as between a husband and wife, children and parents, employers and employees, buyers and sellers and business associates. In some of these negotiations, the stakes are not that high and we do not have to pre-plan the process and the outcome, but in some cases, such as business relationships, the stakes are high and we have to prepare, plan and negotiate more carefully. This course deals, in particular with the latter type of negotiation. In business relationships, parties negotiate because they think they can influence the process in such a way that they can get a better deal than simply accepting or rejecting what the other party is offering. Business negotiation is a voluntary process and parties can, at any time, quit the process. Negotiation is, thus, a voluntary process of give and take where both parties modify their offers and expectations in order to come closer to each other. Negotiations thus can be described as the cornerstone of business communications.
In literature, sometimes “bargaining” and “negotiation” are used inter- changeably. But they mean different things. Bargaining is more like haggling in a typical “bazaar” setting, or in so-called competitive bargaining or distributive bargaining. Here, the objective of the parties is to maximize their own benefit, quite often at the expense of the other party. It refers to a typical win-lose negotiation, where the resources are limited or fixed, and everybody wants to maximize his share of the resources. Parties are therefore more competitive and opportunistic. They normally do not like to 
share information with the other party unless they have to, and they want to get the maximum information on and from the other party. Although this view on negotiation is out-dated, it is still practiced and studied in some situations such as labor management negotiations.
On the other hand, negotiation, also called “integrative bargaining”, refers to win-win negotiation where both or all parties involved can end up with equally beneficial or attractive outcomes. In other words, everyone can win. It is more related to a problem-solving approach, where both parties involved perceive the process of negotiation as a process to find a solution to a common problem. In integrative bargaining however, if negotiations are not properly handled, both parties can end up with a jointly inferior deal. With negotiation, it is possible for both parties to achieve their objectives and one party’s gain is not dependent upon the other party’s concession. Business negotiation is considered by many authors as being this type of negotiation.
Some characteristics of this type of negotiation are:
•	Open information flow between the parties. In this case, both sides sincerely disclose their objectives and listen to the other party’s objectives in order to find a match between the two.
•	A search for a solution that meets the objectives of both parties.
•	Parties understand that they do have common as well as conflicting objectives and that they have to find a way to achieve, as much as possible, common and complementary objectives that are acceptable to both sides.
•	To achieve the above, both parties sincerely and truly try to understand each other’s point of view.
The above characteristics are, in fact, opposite to distributive bargaining. That means that the process of negotiation in a problem-solving situation is completely different from a process of distributive bargaining. In the problem- solving negotiation, parties have to look for a solution which is beneficial and acceptable to both sides: a win-win solution. In fact, they look for a jointly optimal outcome, which cannot be achieved unless the parties have this problem-solving approach.
In international business settings, the development of the negotiation process and how parties perceive the relationship are crucial. This process is influenced by some facts and factors beyond the negotiation process in question. The cultural differences that exist on several levels form one of the most important factors: on a national level, cultural differences at the level of different countries; on an organizational level, different type of organizations, depending upon their home country and industry, have different cultures; and on an 
individual level, individuals involved in the process of negotiation have different cultural backgrounds not only due to different countries and organizations but also due to their professional backgrounds, such as engineers vs. marketing people. Cultural differences create a challenge to the negotiators involved, and demand understanding as well as flexibility. An ability to assess these differences and properly handle the consequences is essential for success in international business negotiations. This process is also of a dynamic nature and can move in a positive as well as a negative direction at any time, for example, after or during each session. This dynamism is characterized as “atmosphere” in our world. The atmosphere not only explains the perceptions of the parties but also the progress of the process. The more the parties understand and adapt to each other, the more positive the atmosphere around the process, and the more parties are willing to compromise and see common benefits.


A Framework for International Business Negotiation
An overall framework for business negotiation has three groups of variables: background factors, the process and the atmosphere. Since the negotiation process is inherently dynamic, a certain perception of the parties or a particular development in the process may influence a change in the background factors.

Background Factors
This group of variables serves as a background to the process. It influences the process of negotiation and the atmosphere. The effect of different variables on the process and its different stages varies in intensity. One of these variables may influence one stage positively and another negatively. A positive influence means that the process saves time and continues smoothly, while a negative influence causes delay and hindrances. Background factors include objectives, environment, market position, third parties and negotiators.
Objectives are defined as the end stage each party desires to achieve. They are often classified as common, conflicting or complementary. For example, parties have a common interest in as much as both want a successful transaction to take place. At the same time, their interests may conflict, since profit to one is cost to the other. In terms of complementary interest, buyers in international deals are concerned with acquiring the appropriate technology to build an infrastructure. On the other hand, sellers want to enter a particular 
market and expect to do future business with it and with the surrounding countries’ markets. Common and complementary objectives affect the negotiation process directly and positively, whereas conflicting objectives have negative effects. These effects, in turn, influence the atmosphere and the outcome. Opportunity for an agreement decreases as conflicting objectives dominate a relationship; it increases as common and complementary objectives dominate.
The environment refers to the political, social and structural factors relevant to both parties. Variation of the parties with respect to environment, in international negotiation, often hinders the process. There are greater chances of interaction interferences when unfamiliar parties, having different back- grounds, interact with one another. Some of the characteristics directly influence the process while others directly influence the atmosphere. Political and social aspects influence the process, and market structure influences the atmosphere. The parties’ market position is an important factor influencing the negotiation process. The number of buyers and sellers in the market determines the number of alternatives available to each party, which, in turn, affects the amount of pressure imposed by its counterpart within the market. The process and bargaining position of the buyer or seller can be affected if either one has monopolistic power in the market place.
Most international business negotiations involve third parties, i.e. parties other than the buyer and seller, such as governments, agents, consultants and subcontractors. These parties may influence the negotiation process as they have different objectives. Often, governments are involved and influence the buyers towards complementary objectives, such as infrastructure, employment opportunities, foreign exchange considerations and any other prospective relationship between the countries involved.
Negotiators influence the negotiation process with their own experience and negotiating skills. Negotiators operate within two limits: firstly, they act to increase common interests and to expand cooperation among the parties; secondly, they act to maximize their own interests and to ensure an agreement valuable to themselves. The personality of the negotiators also plays a role, particularly when information about the other party is lacking and there is greater stress. A good personality is defined as an individual with the ability to make others understand his position, to approach strangers with ease and confidence and to appreciate the other person’s position. However, the skills of negotiators are related to different objectives and motivations, pertaining to different people and professions. Negotiators with a technical background may place more emphasis on technical issues, while those with a business background might consider other issues to be more important 
Atmosphere
The relationship developed during the negotiation process between the parties is characterized by an atmosphere which is of fundamental importance to the process as a whole. The atmosphere and the process affect each other through interaction at each stage. Atmosphere is defined as the perceived “milieu” around the interaction, how the parties regard each other’s behavior, and the properties of the process. It has to do with people’s perception of reality. In other words, in negotiation it is the perception of reality which is more important than the reality itself. Some characteristics of the atmosphere are dominant at one stage; others at another stage. The pre-negotiation stage is dominated by cooperation rather than conflict, as parties look for mutual solutions. Different characteristics of the atmosphere dominate from process to process. These characteristics are conflict/cooperation, power/dependence and expectations.
The existence of both conflict and cooperation is a fundamental character- istic of the negotiation process. On one hand, parties have some common interests in finding a solution to the problem which fits both the parties. On the other hand, a conflict of interest may arise, as cost to one of them can mean income to the other. The magnitude of conflict or cooperation in the atmosphere depends upon the objectives of the negotiating parties. Some relationships are more complementary — and consequently less conflicting — than others. The degree of conflict or cooperation during different stages of the negotiation process is often a function of the issues being dealt with, while the degree of conflict or cooperation in the atmosphere is a function of how the parties handle various problems. Conflict is sometimes perceived, without the existence of real conflict, due to a misunderstanding of each other’s behavior. The more unfamiliar the parties are with one another, the higher the risk of such perceived conflicts. Each process and even each stage of the process can be characterized somewhere on a scale with cooperation and conflict on opposite sides.
The power/dependence relation is another basic characteristic of all negotiation processes. It is closely related to the actual power relation, which is influenced by the value of the relationship to the parties and their available alternatives. Background factors for example the market position — can influence the power/dependence relation. The ability to control a relationship is related to the perceived power of two parties, their relative expertise and access to information. This power is a property of the relationship and not an attribute of the actor; in fact, it is closely related to dependence. Therefore, the power relationship is in balance if both parties perceive equal power. The power 
relationship is unbalanced if one of the parties perceives more power, or if one party is dependent on the other.
The last aspect of the atmosphere concerns two types of expectations. Firstly, there are long-term expectations regarding the possibilities and values of future business. The stronger these expectations are, the more inclined the negotiators are to agree on the present deal. Long-term expectations are related to primary objectives. Secondly, there are short-term expectations concerning prospects for the present deal. The parties’ decision to enter negotiations and to continue after each stage implies expectations of a better outcome from participating than from not participating. This compels the parties to proceed from one stage to the next. Expectations develop and change in different stages of the process.

Lecture 2.
The Negotiation Process
The process of international business negotiation presented here is divided into three different stages. A stage of the process refers to a specific part of the process and includes all actions and communications by any party pertaining to negotiations made during that part. Parties communicate with each other to exchange information within each stage. A particular stage ends where parties decide to proceed further on to the next stage or decide to abandon the communication if they see no point in further negotiations. In the pre- negotiation stage, parties attempt to understand each other’s needs and demands, which is done through information gathering and informal meetings. The negotiation stage refers to face-to-face negotiations and the post- negotiation stage refers to the stage when parties have agreed to most of the issues and are to agree on contract language and format and signing the contract.
In international business negotiations, the process has three dimensions. In addition to the three stages, it has a cultural dimension and a strategic dimension. These two dimensions are present in each of the three stages of the process. However’ these can play different roles in different stages. This is illustrated by Figure 1.1.

Stage I: Pre-Negotiation The pre-negotiation stage begins with the first contact between parties in which an interest in doing business with each other is shown. During this stage, some negotiations take place and tentative offers are made. The dynamism of the process can be observed at this early stage 

 

Figure 1.1: The process of international business negotiation.


where parties begin to understand one another’s needs and evaluate the benefits of entering into the process of negotiation.
The parties gather as much relevant information as possible on each other, the operating environment, the involvement of other third parties, influencers, competitors and the infrastructure. Parties need to be aware that their relative power relationship can be altered at any time by such events as the repositioning of competitors or movements in exchange rates. As we have defined this negotiation process as being of a problem-solving nature, the main issue here is to define the problem to be solved. It is important to define the problem jointly, as it will not only reflect each other’s expectations but is also 
necessary to acquire commitment from both parties. The parties should, therefore, truly and openly discuss each other’s objectives and expectations in order to achieve a positive problem-solving situation.
Informal meetings take place as the parties examine each other’s position. Whether the parties continue to the next stage of the negotiation process depends on the perceived level of cooperation or conflict, of power or dependence and the expected benefits of the relationship. The process often ends in failure if excessive conflict is sensed or if a successful future relationship seems doubtful. The parties should truly see how they are going to cooperate, examine whether it is realistic to expect to achieve the objectives of both sides and to identify the obstacles that have to be overcome to achieve these objectives.
The pre-negotiation stage is often more important than the formal negotiations in an international business relationship. Social, informal relationships developed between negotiators at this stage can be of great help. Trust and confidence gained from these relationships increase the chances of agreement. One method of establishing such contacts is to invite individuals from the other side to visit your office/country in an attempt to develop trust. The prime objective here is to get to each other’s priorities. The parties need to understand the interests and fears of the other party.
Parties also begin to formulate their strategy for face-to-face negotiation. By strategy we mean a complete plan regarding problems, the solutions available and preferred choices, relative to the other party’s choices and preferences. Parties try to build up their relative power. They compare the alternatives available, make check lists and assign arguments for and against these alternatives. They also decide on possible points of concession and their extent.
Parties try to foresee and take precautions against predictable events. Remittance of funds, taxes and import duties and work permits are just some examples of the rules and regulations of the particular country that must be researched at this stage. An understanding of the infrastructure of the country and the company is also critical at this point. In some countries, especially when the public sector is the buyer, purchasing organizations issue a “letter of award” (also called letter of intent/acceptance) after the first stage. The negotiators from Western countries often perceive this letter of award as a grant of contract. However, this is an incorrect assumption, the letter merely indicates the other party’s intention to negotiate further.
Parties to international business negotiations should have an initial strategy, which is dependent on the information attained so far and the expectations. The 
negotiators should list the problems and issues, especially the conflicting issues and form strategies and choices for all possible solutions they or the other party could suggest. These solutions should be ranked in terms such as preferred, desired, expected and not acceptable. If not acceptable, a solution that could be acceptable to the other party should be suggested. It is, thus, important to have several solutions for each problem or issue.

Stage II: Face-to-Face Negotiation The basic issue at this stage is that parties believe that they can work together to find a solution to a joint problem. The parties should also be aware that each side views the situation, the matter under discussion, in its own way. Not only that it has a different perception of the process but it has different expectations for the outcome. It is therefore, important to start face-to-face negotiation with an open mind and to have several alternatives. At this stage, as the process continues, the parties should evaluate the alternatives presented by the other party and select those that are compatible with their own expectations. The best way is to determine criteria for judging the alternatives and then rank order each alternative, one’s own as well as those presented by the other party, against these criteria. Here the parties can even help each other in evaluating these alternatives and can discuss the criteria for judgement. The main issue is to explore the differences in preferences and expectations and to come closer to each other.
Experience shows that the negotiation process is controlled by the partner who arranges the agenda, since he can emphasize his own strengths and the other party’s weaknesses, thus putting the other party on the defensive. However, the agenda may reveal the preparing party’s position in advance and hence permit the other side to prepare its own counter-arguments on conflicting issues. Some negotiators prefer to start negotiations by discussing and agreeing on broad principles for the relationship. Another way to ensure success at this stage is to negotiate the contract step by step — discussing both conflicting issues and those of common interest. In particular, an initial discussion on items of common interest can create an atmosphere of cooperation between parties. The choice of strategy depends upon the customer or supplier with whom one is negotiating. It is helpful to anticipate the other party’s strategy as early as possible and then to choose a strategy to match or complement it.
It is often suggested that the negotiator should not agree to a settlement at once, even if there is considerable overlap of his position with that of the other party. The negotiator may obtain further concessions by prolonging the negotiation process. A number of studies have revealed that negotiators who directly submit a “final offer” can be at a disadvantage. In view of the diverse 
cultural and business traditions prevailing in different countries, international negotiations inherently involve a discussion of differences. It is very difficult for parties to comprehend or adjust to each other’s culture or traditions, but it is important to be aware of these differences. Social contacts developed between parties are far more significant than the technical and economic specifications in many emerging markets. Negotiators from these countries take their time and are very careful not to offend or use strong words; and the other party is expected to follow suit.
A balance between firmness and credibility is important in all types of negotiation. It is important to give and take signals of readiness to move from the initial stage without making concessions. Negotiators having prior dealings with each other can easily send and receive signals, but it is very difficult for those meeting for the first time. Negotiators often send conditional signals such as “We cannot accept your offer as it stands” or “We appreciate that your equipment is quite suitable for us but not at the price you mentioned”.
It is also common that the party perceiving greater relative power makes fewer concessions and that the weaker party yields more, often to create a better atmosphere. Maintaining flexibility between parties and issues is of great importance in this stage. These usually occur after both parties have tested the level of commitment and have sent and received signals to move on. For example, the price can be reduced if the party offers better terms of payment. Other elements can be traded off but there may not be a way to evaluate them in accounting terms. For example, an entry into a huge protected market may be strategically more important than obtaining handsome profits on the present deal.

Stage III: Post-Negotiation    At this stage, all the terms have been agreed upon. The contract is being drawn up and is ready to be signed. Experience has shown that writing the contract and the language used can be a negotiation process in itself, as meaning and values may differ between the two parties. In several cases involving Western firms and emerging-country parties, the language used and the recording of issues previously agreed upon took considerable time. This stage can lead to renewed face-to-face negotiation if there is negative feedback from background factors and atmosphere. Discus- sion should be summarized after negotiations to avoid unnecessary delays in the process. The terms agreed upon should be read by both parties after concessions are exchanged and discussions held, by keeping minutes of meetings, for example. This will help test the understanding of the contract, as parties may have perceived issues or discussions differently. This not only applies to writing and signing the contract but also to its implementation. 
Trouble may arise later during the implementation of the contract if parties are too eager to reach an agreement and do not pay enough attention to details. The best way to solve this problem is to confirm that both sides thoroughly understand what they have agreed upon before leaving the negotiating table. A skilled negotiator will summarize and test understanding: “Do we understand correctly that if we agree to your terms of payment and repay the credit within three years from the date of the contract, you will reduce the price by 7%?”

Cultural Factors

As is apparent from the above discussion, cultural factors play an important role in international business negotiations. We have chosen to use the following factors that are most important in this respect:

Time Time has different meaning and importance in different cultures. While ‘time is money” in the Western culture, it has no such value attached to it in many cultures in Asia, Latin America and Africa. This influences the pace of negotiations and the punctuality in meetings. For negotiators, it is important to have advance information on the opposite party’s behavior regarding time. This will help them to plan their time as well as to have patience and not to get irritated during the process.
Individual vs. Collective Behavior    These are rather clear behavioral aspects in different cultures. As indicated by Hofstede’s study of 69 countries, we can place different countries on different scales. Even countries in Western Europe have clear differences in this respect (Hofstede G. 1980). In cases of negotiation, it is important to have knowledge of this cultural attribute, as it will help us to understand the behavior of the other party and to formulate an effective strategy. Knowing whether the opposite party is looking for a collective solution or an individual benefit will help in formulation of arguments and presentations.
Pattern of Communication Different cultures have different communication patterns as regards direct vs. indirect and explicit vs. implicit communication. These are related to culture as well as the contextual background of languages (Hall 1960). Some languages are traditionally vague and people from outside find it difficult to communicate with people with such language backgrounds. Indicators such as “maybe”, “perhaps”, “rather”, “I’ll consider it” and “inconvenient” are some examples of ambiguity in international communica- tion and conversation. “Maybe” and “inconvenient” can mean impossible in 
some cultures. In some cultures even “yes” means “may be” and “perhaps” means “no”. Some languages, for example some Arabic and some Asian languages, traditionally contain exaggerations, fantastic metaphors and repeti- tion, which can be misleading for foreigners. It is, therefore, important to be aware of these aspects and read between the lines. This is even more important in non-verbal communication, the personal space, handshakes, ways of greeting each other, communication between males and females, signs of irritation, etc., are important aspects of communication patterns, and knowl- edge of these can improve the negotiation process and effectiveness.

Emphasis on Personal Relations Different cultures give different impor- tance to personal relations in negotiations In many countries in the West, the negotiators are more concerned with the issue at hand and the future relationship between the organizations, irrespective of who is representing these firms, while in some cultures, the personality of the negotiator is more important than the organization he is representing or the importance of an issue. So the emphasis on personal relations can be different in different negotia- tions.
Lecture 3.
Strategic Factors
   While negotiating in an international setting, the parties have to prepare thoroughly with respect to how to present things, which type of strategy should be used and which type of decision-making process is followed by the other party. Whether or not they need an agent or an outside consultant is also a question of strategy.

Presentations Negotiators have to know whether the presentations to be made are carried out in a formal or informal setting. Whether these are to be made to teams, as in China and Eastern Europe, or to individuals, as in India and the Middle East. The formal vs. informal presentation style is very distinct in many countries. If not prepared, the negotiators can make serious blunders at an early stage of negotiations. It is also important to know whether issues can be presented in groups or whether each issue should be handled individually, and whether presentations should be argumentative or informative, factual and to the point.

Strategy There are several types of strategies in business negotiations. The most important are tough, soft or intermediate strategies. In tough strategy, a 
party starts with a very high initial offer and remains firm on its offer and expects the other party to make the first concession. In soft strategy, a party does not start with a very high initial offer and makes the first concession in the hope that the other party will reciprocate. In intermediate strategy, a party does not start with a very high initial offer and as soon as an offer is made which is within its realistic expectations, it accepts it. It is important to have information on the opposite party’s strategy and to adapt one’s own strategy to it and to have a counter-offer ready.

Decision-Making Some information on the other party’s overall decision- making pattern is necessary before going into negotiations. Does the party use impulsive or rational decision-making? Who makes the decisions? Do the negotiators coming to the table have the power to make final decisions or not? These are issues which are important to know in advance. In many cultures in Asia, decision-making is highly influenced by the importance of face-saving and influences the timing of decisions made.
Need for an Agent
It is part of strategy-formulation to realize whether or not the firm or negotiators can handle the particular negotiation on their own. What type of cost and benefits can be achieved by employing an agent for a particular negotiation process? In our opinion, the more unfamiliar or complicated the other party or the market is, the greater need for an agent or a consultant. These days, specialized agents and consultants are available for different geographic as well as technological areas. There are enormous efficiencies to be achieved by using their expertise.

Planning and Managing Negotiations

Dozens of books have been written about negotiation, many of which I disagree with. I don’t believe in negotiating through intimidation, fear, bluffing or dishonest tactics. A good negotia- tion concludes as a good deal for every one; negotiation starts with what you want to accomplish. Then the realities and, sometimes, the complexities enter the picture. Sometimes many points of view and many elements have to be considered, but the deal itself must always be kept in view. Your first step should be 
to rid yourself of an adversarial position. The reality is that you have a mutual problem, which you are going to solve to your mutual advantage. The intention must be to structure a deal that resolves the problem and gives each of you what you want. It’s not always possible, of course. When it can’t be done, you are better off making no deal than making a bad deal. A bad deal usually brings a future filled with enormous problems. Negotiat- ing demands a recognition of reality on many levels. Only amateurs try to accomplish something that isn’t real or possible; it is an attempt that inevitably leads to failure. Amateurs tend to dream; professionals consider the realities of a deal.
In the past, the ability to negotiate was considered innate or instinctive but it is now regarded as a technique which can be learned. Experimental studies, empirical observations and experience have made it possible to grasp the art of negotiation. This section provides some guidelines for planning and managing the negotiation process in three stages.
The Pre-Negotiation Stage
The most important success factor in negotiation is preparation and planning. One may have excellent negotiating skills, persuasive and convincing communication style, a strong market position and relative power but all these cannot overcome the shortcomings caused by poor preparation. As mentioned in the previous section, the presence of cooperation as well as conflict and the relative power/dependence in international business negotiation demands careful preparation and planning. In the problem-solving approach, this becomes even more important as both parties do truly want to do business with each other. In spite of this cooperative behavior, negotiation involves trade-off between own and joint interests. A number of authors have stressed the importance of preparation and planning for negotiation.

Identify the Contents of the Deal    The initial points to consider are issues such as implications of the deal, the interests at stake, the “fit” with organizational objectives, and possible economic, political or other restrictions between parties. What will each gain or lose and how important is the deal for them? What alternatives does either side have? These issues must be considered in terms of tangible and intangible motives. 
Comparison of one’s own and the other party’s strengths and weaknesses is quite important. In business negotiations, the other party does not only include the buyer or the party you are negotiating with, but also the competitors who also have an interest in the same business. In most cases, a party’s arguments or preferences are influenced by the offers other competitors have made. Many negotiators use professional investigators for this task of getting information on the other parties and to find their weaknesses. According to one estimate, in the United States, $800 million is annually spent on industrial spying (Harrison & Saffer 1980). In our opinion, the information required to prepare and plan for negotiation need not include such rather unethical methods. It is quite easy to get a lot of information from the annual accounts of the firms and through talking to their executives, customers and suppliers.
In international business relations, buy-back arrangements are becoming more common, and in large international deals with emerging markets, buyers are demanding some sort of a buy-back. For more details on this issue. Emerging countries engage in countertrade deals to correct their trade deficits as well as to earn hard currency. It is important to calculate deals in monetary terms when conducting trade in this medium. The seller might end up with goods which cannot be easily marketed in the home country. The countertrade demand can be just a bluff, so that the seller who seeks to avoid the expenses of buy-back may offer a major price discount. The plant’s output supplied under the particular contract is part of the payment in some cases. China uses its cheap labor and re-exports products from local plants to the seller’s country. Another example is the iron-producing Carajas project in northern Brazil Most of the production of this complex is exported to Japan to pay for project financing.

Create Alternatives To negotiate effectively, the marketer must gather information on the strengths and weaknesses not only of the opposite party, but also of the other related parties such as competitors. By considering the resources and behavior of competitors, marketers can develop their own alternatives on different issues. There are several strategies by which the seller can pre-empt competitors, for example, offering credit to the buyer, price reductions or long guarantee periods. Sellers must also allow for alternative solutions to conflicting issues. Question one’s own position: ‘What if they do not accept this . . .?”
Quite often Western negotiators believe they have only three options: (i) persuasion; (ii) threat; or (iii) concession. In fact, there are many alternative solutions to a problem. Different issues can be combined to produce numerous alternatives. If the customer demands a 5% concession on the price, the other 
party can ask the customer to pay cash instead of the one-year credit proposed. In one case, the buyer demanded a 5% concession on the contract price after everything else had been agreed upon. The seller instead proposed that he was willing to give a 10% rebate on all the spare parts to be bought by the buyer during the next three years. This offer was accepted gladly by the buyer. One way of creating alternatives is to judge each conflicting issue in the following scale: our ideal position their ideal position. Here we should look for overlaps, is there any overlap of our and their position? If not, how can we create an overlap? What can be their minimum acceptable position? What is our minimum acceptable position? Can we move from there, perhaps give up on this issue and gain in another one which is not so sensitive to the other party, but equally important to us?

Put Yourself in their Shoes For negotiations to be successful, one party must understand the other party’s position. This will help each side interpret and anticipate the other side’s reactions to arguments. Anticipating and developing rational reactions to arguments allows each party to formulate new arguments and alternatives. This stimulates flexibility on different conflicting issues. Each party has to recognize the needs of the other, quite apart from gathering information and asking questions to check the other party’s position. Being a patient listener will help improve negotiations. One can understand the meaning behind the words by listening attentively. One can create a positive and cooperative atmosphere in the negotiation process by showing the other party that he or she is well understood. However, be careful while listening — it is not what is said, but how it is said that is more important and one should read between the lines.
The harder a party tries to show understanding of the opposing viewpoint, the more open it will be to alternative solutions. A universal feeling exists that those who understand are intelligent and sympathetic. Parties feel obliged to reciprocate in these situations. The ability to look at the situation from the other’s point of view is one of the most important skills in negotiations. It is important not only to see as the other party sees, but also to understand the other party’s point of view and the power of its arguments.

Gauge the Appropriateness of the Message The information exchanged must be adjusted for easier comprehension by the other party. Technical specifications and other material should be provided in the local language. Not only does this facilitate effective communication but it also demonstrates respect for the local language and environment. 
The problems of perception and language barriers often cause difficulties in the negotiation process. This is frustrating and places an added burden on all parties involved in the negotiating process. Different cultures interpret messages differently. An octopus is said to have several arms in the United States. It is said to have several legs in Japan. In Sweden, “next Sunday” does not mean the coming Sunday but the Sunday after. In India “next Sunday” means the coming Sunday. “Nice weather” means sunshine in Europe. “Nice weather” means cloudy or rainy weather in Africa and many Asian countries. The exchange of gifts and terms of reciprocity are quite normal in Asia, yet considered close to a bribe in many Western countries. It is important that negotiators adopt appropriate behavior for each negotiation. The chosen arguments should be tailored to the particular customer. One standard argument cannot be used throughout the world. Barriers to communication also arise from real or perceived differences in expectations, which create conflict instead of cooperation between parties.
In cross-cultural negotiations, non-verbal communication, in particular in the expression of emotions and the attitude of a negotiator toward the other party, is sometimes more important than the spoken language. Non-verbal commu- nication can be telling. Liking and disliking, tensions and appraisal of an argument are shown by numerous signs such as blushing, contraction of facial muscles, giggling, strained laughter or just silence. People, sitting down, lean forward when they like what you are saying or are interested in listening, or they sit back on their seat with crossed arms if they do not like the message. Nervousness can manifest itself through non-verbal behavior, and blinking can be related to feelings of guilt and fear. It is difficult to evaluate non-verbal communication, as it is connected to the subconscious and emotions. Effective communication and understanding of people will assist you in adjusting your arguments to the moods and expectations of the other party. Negotiators may continue to hold out, not because the proposal from the other side is unacceptable, but because they want to avoid feelings of surrender. Sometimes simple rephrasing of the proposal or a different approach to the presentation can alleviate the problem.

Build Up Relative Power Negotiators can determine who has the relative power advantage by gathering information about the other party, considering each party’s position and developing different alternatives. They can try to build their own relative power by developing arguments against the elements of power and improving their own position. In the negotiation process, this kind of power may be increased by repeatedly mentioning the weak points of the other party. The uncertainty regarding infrastructure and exchange rates must 
be handled here. Parties can agree on adjustments in the event of exchange rate variations. The party with greater information automatically acquires more power. The negotiator may have to work as a detective to ascertain the buyer’s needs, his strong and weak points, and the strong and weak points of competitors. By being active in the negotiation process an experienced negotiator can build up information in order to gain relative power. This can be done by asking the other party questions. It can also be done by giving conditional answers such as “If you agree to pay cash . . . then we can consider looking at our price”, or “What if we agree to pay cash perhaps then you can lower the price by 5%”.


The Face-to-Face Negotiation Stage

Who Within the Firm Should Negotiate? A difficult question arises regarding who should conduct negotiations whenever a deal is to be made in a new market. Who is the most appropriate person to hammer out a particular deal? In fact, persons involved in international business negotiation can do more harm than good if they lack an integrated knowledge of their own firm and the objective of the deal. Whoever is selected for negotiations must have a good grasp of the deal’s implications. This is especially true when long-term relationships are being discussed. One way to minimize this risk is to appoint a negotiation team, where the key members are selected from different departments.

Expendable Person It is important for management to realize that the selected person(s) should be expendable without creating organizational problems. When replacement is necessary, management must be able to escape deadlock. Sometimes negotiations and in an impasse and you may have to start with new players. It is also possible that the selected negotiators and the other party cannot reach a meeting of minds if there is a clash of personal chemistry. It may become necessary to change negotiators in such situations. This discussion gives rise to another question. From which level should the executives for the negotiations be chosen? In most countries, parties expect to negotiate with members of equal status. The managing director from one side expects to negotiate with his counterpart. It is advisable that firms match like with like.

Individuals vs. Teams Parties need to consider not only who should represent the company but also the number of negotiators, i.e. whether one goes 
for individual or team negotiations Team negotiation affords marketers the opportunity to benefit from the advice and guidance of many participants. It is difficult for a single individual to be adept in all kinds of commercial, technical and legal issues. The best way however, is to conform to the opposite party. If the opposite side is coming with a team, we should also send a team.

What Makes a Good Negotiator? A number of studies identify character- istics of a good negotiator. Ikle defined a good negotiator as one having a “quick mind but unlimited patience, know how to dissemble without being a liar, inspire trust without trusting others, be modest but assertive, charm others without succumbing to their charm, and possess plenty of money and a beautiful wife while remaining indifferent to all temptations of riches and women”. A marketer’s personality and social behavior are of equal importance to social contacts and formal negotiation in many emerging countries.
Depending upon their behavior, negotiators are often grouped into different categories, such as bullies, avoiders or acceptors. Bullies want to threaten, push, demand or attack. Avoiders like to avoid conflicting situations and hide in fear of making a wrong decision or being held responsible. They will normally refer to their superiors for a final decision, “I have to call my head office . . .”. Acceptors always give a very positive answer and say “Yes” to almost anything, which makes it difficult to realize which “Yes” is “Yes” and which “Yes” is “Maybe”, and whether they will be able to deliver what they are promising or not. The best way to handle these behavior types is to first identify them and then confront them by drawing a limit, helping them feel safe and by asking them how and when they would be able to do what they are promising.

Patience It is essential to know the negotiators’ precise authority. In Eastern Europe and China, one team may negotiate one day, followed by a fresh team the next day. When this process is repeated a number of times, it becomes very difficult for negotiators to establish who is the negotiating party and who has the final authority. One of the characteristics of a good negotiator is the ability to discover the timetable of the other party and allow plenty of time for the negotiation process. It is usually not feasible to expect to fly to a distant country, wrap things up and be home again in a week. Nor is it reasonable to coerce a party that is not ready to reach a decision. Negotiations with emerging market customers take a long time! Patience and time are the greatest assets a negotiator can have while negotiating with customers from these markets. Some negotiators take their time, discussing all issues and justifying their role through tough negotiations. 
Negotiators must be in a position to change their strategies and arguments, as the process of negotiation is highly dynamic. They must be flexible. The other party will often ask questions, probing the seller’s weaknesses, just to provoke and obtain more concessions. It is important to keep calm and find out first if the questions asked are relevant and justified. Negotiators can use this in their favor if questions are not justified and the buyer has wrong information. A good negotiator is not just a person who can conclude an apparently good contract for the company or one who can arrive at a contract in a short time. A good negotiator is one whose agreements lead to successful implementation.


The Post-Negotiation Stage

What is a Good Outcome? A good agreement is one which leads to successful implementation. There are many examples of firms getting into trouble because they could not implement the contract conditions of a particular deal. Therefore, in some cases, no agreement may be a better outcome for the firm. A good outcome benefits both parties and does not make either party feel that it has a less advantageous contract. Sometimes negotiators want to avoid specifying some issues and want to keep them ambiguous. It is important to understand that on the one hand, ambiguity can lead to reopening of the conflict later on, in the implementation stage, and on the other hand, if we want to specify such issues, it might prolong the negotiation process or prevent an agreement. Sometimes, this ambiguity is unintended, whereas, on other occasions, it is intentionally deployed to speed up the process or to give the impression that the particular issue needs to be re-negotiated.
It is normally considered that a good business deal is one which provides financial gains. But what were the objectives of the firm when it decided to enter into negotiations? Was it the present deal which was most important or was it future business? The outcome must be related to the firm’s objectives. If the objectives have been met then it is a good outcome. A successful negotiation is not a question of “win-lose” but a problem-solving approach to a “win-win” outcome.
The main purpose of the contract is to avoid misunderstandings and trouble in the future. The agreement should foster relationship development and be flexible enough to deal with expected or unexpected future changes. The language and terminology used in the contract must be simple and clear. It must not be necessary to seek legal help every time the contract is consulted. 
THEORY AND PRACTICE OF INTERNATIONAL BUSINESS COMMUNICATIONS 

                                                    PART 2.
              Strategies and Tactics  in International Business Negotiations


                                        Lecture 1.
Strategic Potential for International Business Negotiations 


When the parties involved in business communication, in particular, in business negotiations, are preparing for their future activities they have to consider a number of issues and to choose a proper strategy and proper tactics.
Their considerations are as follows: 
We have now staked out the framework for a successful negotiation. We know our needs. We know exactly what we want. We also have an idea what our negotiation partner wants of us, and what we can offer him. To put all this together in a single package will require considerable patience, creativity and cooperation. First of all, we need to make a careful decision about strategy and tactics. These are familiar terms, but what exactly is the difference between them? And above all, which of them is the more important?

Strategy and Tactics
Both are necessary, but a clear distinction needs to be made between them. Strategy is the overall guideline, indicating the direction we need to take from our wishes and needs to our objectives. If, given a set of specific interests and objectives, we choose the wrong strategy, we will be setting a wrong course from the very start. We would then be very lucky to get where we want to go.
Tactics, on the other hand, always follow after strategy, fleshing it out with a concrete line of action. If strategy is the thought, then tactics are its formulation. If we are going to get our message across, both will be necessary
— but the thought comes before the word. Tactics should not be directly oriented towards the objectives, but towards the strategy. For this reason they may sometimes take an unexpected turn, which may appear to be at odds with the general direction we are going. But as long strategy has been served,  

 

Figure 2.1: Strategic context of negotiations.


the choice of tactic will have been a good one. Nor is the shortest route necessarily the best — sometimes we first need to overcome an obstacle, or work our way around it. Any tactic is suitable, as long as it achieves its aim — ideally of course with the smallest possible expenditure of time and effort. Tactical action is considerably more flexible than strategy in this regard: it is also correspondingly more versatile and adaptable to changing conditions.

Positions in the Conflict
In the case of strategy, our room for maneuver is considerably narrower. Each position in a conflict can be charted along two axes: assertion and cooperation. The assertion element describes the fervor with which someone goes about having their wishes satisfied, while their readiness to cooperate will bring the interests of the other side into the equation. We can construct a grid based on these two axes, which allows us to define five different behaviors in conflict management (see Figure 3.2).
On account of the major significance they have on the course of negotiations, these positions and their advantages and drawbacks will be discussed in detail in the sections that follow. The choice of which of the five basic positions is the most appropriate for a given conflict depends on the type of task at hand, the situation, and the personality of the negotiator. Later we shall see how this choice is made, 

 

Figure 2.2: Modes of conflict management.

using different examples. So let us start with the five basic positions in a given conflict.

Competition
To push hard to get what we want may be effective, but it is not cooperative. Its thrust is to put through our own aims exclusively, without heed to the other, in the shape of a distributive result, a zero-sum game. Such power-oriented behavior uses all available means to attain the goal sought after — persuasive powers, pulling rank, or quite simply a stronger economic position, for example. We might fight for our rights, for a good cause, or simply for our own profit. Nothing is more appropriate if it is a matter of demonstrating our own strength or authority — even if we don’t really have them. Such conduct has all the romance of the Wild West: a real man wins against all the odds! This may indeed be impressive, but it is also extremely disturbing, such as when a street trader or door-to-door salesman just won’t give up and obdurately pressurizes the helpless victim into a sale. Nobody likes that. The person who advocates his cause energetically will have the advantage of initiative — like the white pieces on the chessboard, which are always one move ahead. But such hectic pressure and activity gets in the way of receptivity. It leads to impatience and loss of flexibility. The warrior obsessed by the pursuit of victory in his campaign is also at risk of missing important signals from his adversary. They want to exert their will and master the other. If both parties resort to such tactics, the inevitable result is confrontation, a battle of wills. One of them must give way or be bettered in the final showdown. In certain cases such stubborn maintenance of a position may be a good idea, but it leaves little room for cooperative approaches and a constructive solution to the conflict.
Collaboration
Constructive collaboration is also demanding in its way, but it is much more than that. It represents an attempt to find a solution in tandem with the other, that takes full account of the desires and interests of both parties. In the terminology expressed in this study, it corresponds to integrative bargaining. Collaboration simply requires that both parties familiarize themselves thoroughly with the conflict and its causes, and work towards finding a joint approach. This is almost always possible: there is a creative solution to be found for most problems if both sides pull together. With a little goodwill they can work through the differences that separate them and — without losing sight of their own principles — learn something from the other’s point of view and experience. They might consider specific points as a separate issue, or put them to one side straight away, so as to open up the way to an overall agreement. As we have already seen, a decisive factor in such an agreement is to satisfy at least some of our partner’s wishes. This implies the greatest possible understanding of the other’s needs. Why should the negotiating partners not address their personal differences and clear them up in a climate of cooperation? Such a strategy creates mutual trust and has the great merit of far-sightedness. It does not have any real weaknesses, but does require a readiness to collaborate from both parties
Compromise
A compromise is possible when each party meets the other half way. Something is demanded, but it is not absolute. Some cooperation occurs, but not the whole way. The purpose of compromise is to achieve a solution that is tolerably acceptable to both parties, that is at least partially satisfactory to each of them. Splitting the difference also lies halfway on the assertion and cooperation axes — illustrated by the diagonal from top left to bottom right in Figure 3.2. When we reach a compromise we don’t relinquish everything, but nor do we get everything we want, either. Such a solution will lie between the positions of avoidance and collaboration: it does not avoid the conflict, but nor does it go so far into the sort of detail a readiness for new alternatives would require. It is much more superficial. The compromise also lies at the center point of the other diagonal. This aptly illustrates the expression, to meet one another half way, where the parties make moves towards one another or look for a rapid agreement that is just about acceptable to them. At least then, some agreement will have been struck. The compromise is widely used as a device in politics and diplomacy, where it is highly esteemed as the art of the possible. If neither side is able or willing to make further concessions (because their mandate is limited), it is often the only option, which by definition is therefore the best. In another context a mixture of cowardice and avidity may lead to a bad compromise, where the partners apparently did not have the courage or the generosity of mind to look for better alternatives, even though their mandate would have allowed one. A compromise may well be the best solution in many cases, but it is more likely only to appear so.
Avoidance
Avoidance is always possible as a no-win solution. Instead of insisting on their demands or cooperating, the negotiator withdraws from the conflict and forgoes an agreement. In this he or she is serving neither their own interests nor those of the opponent. They simply avoid coming to grips with the problem; perhaps because the opponent seems too powerful and a confrontation does not appear to have any prospects of success. In such a case a tactic worth recommending might be to let the opponent thrash about in the air for a moment — similar to the technique used to such effect in the Japanese martial arts aikido and jujitsu, which indeed constitutes a favorite ploy of Japanese management. The avoidance strategy may have a very diplomatic quality, with awkward issues being put on ice and postponed until a more favorable moment. If an agreement does not yet seem possible, conscious avoidance may help to prevent damaging an otherwise good relationship with the other party. It is far better to duck away at the right moment than to experience disappointment later, or set it up. But avoidance may also come up in the shape of the ostrich policy, when one of the parties sticks the head in the sand and plays the waiting game. This is one way of deflecting a situation that threatens to be dangerous, but it will rarely be sufficient to defuse it completely. In cases such as this evasive action is a very circumspect and conservative way of responding. It does not involve much risk: nothing is ventured, but nothing much is lost. It also has the characteristic of covering up one’s own interests or positions quite effectively. It forestalls the sort of discussion in which the other side might be apprised of important information. Certainly, such an attitude does not exactly make a friendly impression on the partner at the receiving end of the rebuff, but to opt out at a later date could cause much greater damage. Avoidance is an extremely versatile and thus useful position to take in such a situation. But like the other positions, it should only be used in a very targeted manner. Certainly, it should not be seen as a stock solution. The over-frequent avoidance of conflict whittles down our own expectations and thus minimizes the chances of truly satisfactory results in the future. 
Accommodation
Accommodation is the opposite of competition. It is not assertiveness, but rather it is very cooperative. The negotiator renounces most of his objectives. In order to satisfy his opponent, he or she sacrifices their own interests — either from selfless generosity or forced obedience. Were the arguments of the other side so convincing, that our negotiator could only be convinced? Was he perhaps even converted? Straightforward capitulation is an effective strategy in its way, when it’s a matter of defusing an escalating conflict or simply to re- establish a friendly atmosphere. But it may be read as an invitation for more demands. Giving in may also frequently be interpreted as weakness and as a sign of naive gullibility (or a just punishment for it!). But as a strategy it should not be rejected out of hand — everything depends on the objective and the circumstantial details.

Which Position, When?
Since these various positions are diametrically opposed to one another, the question automatically arises, which position should we adopt in a given situation? Although as a matter of principle cooperation is the best choice, it is not always available as an option. In this section we present four important criteria on which to evaluate strategies when confronted with a specific problem.
 

Figure 2.3: Determinants of conflict behavior.


Let us begin with the vertical axis. How do we know how far we can go with our demands, and how forcefully we should present them? How much cooperation should we offer, and how much can we expect from the other side?


What is at Stake?
The first consideration underpinning this decision is: how vital is this negotiation for me? What is at stake here? If a failure would drive me to the wall, I am going to want to put more of my energy into it than if it were just a matter of buying a new telephone answering machine. I will want to fight every inch of the way to maintain my position or, better, work together with my opposite number to achieve an optimum outcome. At the very least I will want 
an acceptable compromise, if that is the best alternative the circumstances have to offer — always a better solution than to give up an important negotiation without any agreement at all. But one thing is certain, I am not going to give up if the outcome means everything to me, or when a precedent would be established. For if I give way now, then other people are going to expect a similar deal in comparable cases in the future. To give way now would mean to give way again, and again, . . . and again?
The power balance between the participants has a similar impact on the course of events. This is something of a self-evidence: the one who has the power to impose their demands is in general likely to do so. Unless of course they are pursuing a quite different objective. The mere availability of power thus does not necessarily mean that it is going to be brought to bear in a given case. But clearly the very possibility that it might — whether on our own part or that of the other — is going to have a considerable or even decisive impact on the choice of strategy. For the side that has the power in its hands can resort to it at any time. That is the principle of deterrence. There is no point in attacking an adversary who is stronger than you. As important as an accurate assessment of one’s own power, therefore, is the most accurate possible assessment of the adversary. For this, we need to understand the sources and basis of power.

Common Interests
Let us now turn our attention to the horizontal axis, which introduces two new variables that affect the level of cooperation: common interests and the quality of the personal relationship. Let us start with the first of these: it is natural to expect that the more the interests of the parties coincide, the more they will want to cooperate. If both are going for the same objective, they are more likely to pull together than if their aims are diametrically opposed. Conversely, the fewer interests the two sides have in common, the less cooperation will be an ingredient of their bargaining efforts. We don’t need to dwell on that. But it is a good idea to be clear about even such simple steps of logic when we are devising our strategy. A similar situation obtains when it comes to adapting our own position in the course of the negotiation, as we shall see later in the chapter.

Relationship Quality
The scope for cooperation also depends on the quality of the personal relationship between the negotiating partners. This too is such an obvious point that it sometimes risks being forgotten. Clearly, all of us behave differently towards a friend than we would towards a completely unfamiliar discussion partner, not to speak of a notorious double dealer in the trade. If we have had the positive experience of a negotiating partner, who has proved himself or herself to be serious and reliable in our eyes, the way is wide open to cooperation. And of course the converse is equally true: our partner is going to need to feel that we are sufficiently trustworthy before wanting to cooperate with us. Both parties have to earn their right to cooperation. But there is of course always the possibility that despite a good personal relationship too many differences of interest stand in the way of an agreement being obtained through cooperation. In such a case the result is likely to be a compromise, or one of the parties will give way in order not to sully the good relations. Both may even choose to side-step the conflict between interest and relationship, and not pursue the deal. As we have seen, each position on the grid described can be defined by four readily assessable criteria — relative power, outcome stakes, interest interdependence and relationship quality. On this basis, we can plot our own position on the grid as well as that of our partner in terms of demands and cooperation. True, this is not enough to resolve any conflicts that may arise, but an appreciation of the positions on both sides may be quite valuable when it comes to developing an appropriate strategy.

 
       
Lecture 2.
Strategic Potential for International Business Negotiations ( continued).
The theoretical issues set previously should now be illustrated by examples.
For Example: Business Lunch with IBM
The following example will show how effective it is to cultivate good personal relations. The movement along the horizontal axis in this case made it possible to pass from avoidance (on the part of the IBM representative) to collaboration.
Long before she became president of the advertising agency’s North American operations, Ogilvy & Mather’s Rochelle Lazarus had a sense of personal relations with clients. For several years she had lunched every day with former or current clients, cultivating relationships and the proverbial good connections, and not only at top executive level. In every company that she worked for — in the first third of her career, that included American Express — she knew armies of people in influential positions at all levels and in all sorts of departments. This enormous effort – to say nothing of the restaurant checks – paid off after several years for her company: in 1992 she won back American Express’s charge-card advertising account for Ogilvy. But the really big deal came two years later, when her good relations enabled her to reel in the $400 million-plus account of the computer giant IBM. She would of course never have landed such a prize without the qualifications and proven successes of her employer. But an internal note at IBM indicated that the contacts of many years standing between Ms Lazarus with IBM president Louis V. Gerstner and his vice-president of corporate marketing, Abby Kohnstamm, were instrumental in swinging the giant’s decision to put the account in the hands of Ogilvy & Mather. Ms Lazarus’s relations with client executives went a long way to making IBM feel that the risk of investing in a new campaign was considerably less than it might have been. Indeed she had begun to cultivate her good connections with her clients Gerstner and Kohnstamm when they were still on the payroll of American Express. At that time she could have no notion of the exceptional deal with IBM she was to snare years later.
In addition to illustrating the important role of good personal relations with major negotiating partners, this example once again demonstrates the strategic significance of the long view.
(based on Wall Street Journal 1994).
 

Choice of Strategy
We have now studied the basic positions and looked at their application through a number of examples. Which brings us to the important question of which position that we should adopt in a given situation. There is no all-embracing answer to this question. First, our own personal disposition will have a definite influence on the strategy we choose. A good negotiator will master the whole gamut of possibilities, and be able to put himself or herself behind any one of the five basic positions. But each of us has some individual preferences — one likes to push the way through, another will tend to draw back, while a third is more comfortable looking for new alternatives. This personal aspect should not be underrated, as the following example illustrates:

For Example: Switzerland
“The Swiss go into a negotiation with a compromise and finish it with avoidance or confrontation”. This less than generous judgment of the abilities of the alpine republic is doubtless formulated a little too harshly, but it is not without a grain of truth. Someone will perhaps brush off this statement as a self-effacing remark from an author who is himself Swiss, with considerable experience of negotiating in his home country. But we have in fact accumulated empirical evidence to support this statement. The instrument used was MODE, Management of Difficult Exercises, a questionnaire developed to determine the preferred positions taken up in conflict resolution, which we submitted to 184 diplomats, senior civil servants, managers, bankers and students. The results showed a distinct preference for compromise and avoidance. 
 
This result, which was obtained uniformly through all the occupational groups investigated, seems logical in a country that not only depends on various neighboring countries and their markets, but is divided up internally into several disparate ethnic, cultural, religious and linguistic communities. Without a predilection for compromise and avoidance of conflict on the part of the population, civil war is a far from remote possibility. This basic attitude is also recognizable in the government of this federal state by consensus of the seven members of the Federal Council (government ministers), who are nominated by the main political parties using a highly detailed key. A similar mentality is found in the industrial sector, which is dominated by cartels, or in the collective wage rounds, which for decades have guaranteed the country absolute social peace. Switzerland’s position in diplomatic negotiations, for example with the European Communities, also reveals a natural tendency towards compromise. In the face of its far larger and more powerful neighbors, Switzerland has no negotiating power to speak of, yet the agreements debated often have major significance for the Swiss economy. The country’s interests rarely coincide with those of the large European states, and relations with individual neighbors may not be too close in consideration of the various ethnic and linguistic groups of which Switzerland is composed. Otherwise there is a real danger that the federal state could break up. Active neutrality is the logical conclusion of this careful balancing act.
An interesting example of how Switzerland deals with conflict is given by the many negotiations it holds with the European Communities. These are succinctly illustrated in Figure 2.4. In the first phase from 1957 to 1972, the EEC was seen as a threat; membership would therefore never have been accepted by the people. In its search for a solution, Berne chose to participate in the establishment of the European Free Trade Association, EFTA. At the same time a free trade agreement was signed between EFTA and the EC countries, which made it possible for all EFTA countries, including Switzerland, to remain immune from the discrimination brought about by the EC customs union. With the switch from partnerships with major nations from EFTA such as the United Kingdom, to the EC, a new balance of power came into being between EFTA and the European Communities. Switzerland set its course on the avoidance of new discriminations and in the space of a single year concluded more than 130 bilateral agreements with EC countries (for example in the fields of research cooperation, improved market access for specific agricultural products, etc.).
Between 1989 and 1992 this course changed from avoidance to active cooperation, when membership of the European Economic Area appeared inescapable. But the hard-won agreement was then turned down by the people 

 

Figure 2.4: Relations between Switzerland and EEC, EC and EU.


of Switzerland in a popular referendum in 1992. Since that time, tension has reigned between Switzerland and the European Union. The situation was largely remedied by tough sectoral negotiations, which were concluded in 1999. A referendum was organized to oppose this bilateral agreement, and the Swiss people will now cast their vote for or against it in May 2000. If the vote goes in favor, Switzerland will once again have managed to negotiate an arrangement with the European Union that allows it to remain free from serious discrimination by the latter. But if the agreement is rejected, pressure on the part of the EU will increase. Even if the sectoral agreements are accepted, it is quite conceivable that Switzerland will not remain aloof for long and will finally one day take up membership of the EU.

Strategic Analysis
We have seen the role played by individual disposition in the choice of strategy in the example of Switzerland. While it is necessary to take the subjective inclination towards a particular position into account, we need to look at it critically: is the preferred strategy really suited to solving a specific conflict? It feels much more important to regard the objective side of the matter, provided that the negotiator is able to distance himself or herself from his personal preferences. Each conflict demands a completely new assessment of the situation, just as does each change in the position of the other side. The following section will deal with the adaptation of a chosen strategy to changing circumstances. At this point we would like to present a useful decision tool, with the help of which we can readily define our initial position.
When all the questions have been answered carefully for each of the four determinants addressed, the checklist reproduced in Table 2.3 provides a very informative figure. But just what information this number conveys becomes clear only when it is entered into the corresponding scale in Figure 2.5 as a vertical or horizontal line.
The checklist answers thus produce two horizontal and two vertical lines. We now turn our attention to the rectangle enclosed by these four lines. It may be useful to highlight it by coloring it in. Referring back now to the diagram (Figure 2.2), the position of our rectangle will show us where we stand in respect of the five fundamental positions in the context of the conflict we are currently dealing with. 
Adapting Strategy
We now have a clear basis on which to define where we stand — but that by no means implies that we have to remain in this starting position. Depending on the position adopted by the other side, we will want to vary our own as the talks progress. The strategy may even be defined by a movement from one position to another: “The true policy is to confront power with power at a selected point where a decision in a military sense is possible, and then to use the delicate and unstable equilibrium as an opportunity to be seized for constructive and magnanimous negotiation” (Walter Lippmann 1946).
The sequence and timing of the various positions may have a conclusive effect, as a famous example from Japanese management philosophy shows: “When the enemy attacks, remain undisturbed but feign weakness. As the enemy reaches you, suddenly move away indicating that you intend to jump aside, then dash in attacking strongly as soon as you see the enemy relax. This is one way” (Musashi, Miyamoto 1982).
The author of this directive, Miyamoto Musashi (1584–1645), is a very interesting man. He was a Samurai whose writings are still used as the theoretical basis for countless management seminars. 
Table 2.3: Strategic analysis checklist.

Instructions: First, circle the appropriate assessment of each individual factor on the 4-point scale. Then add up the score for each factor and plot each result as a horizontal or vertical line in Figure 5–5. The plane of intersection of the lines represents your initial strategic position.

1. Outcome stakes (SK)
Impact on corporate strategy	
negligible	
0	
1	
2	
3	
substantial
Financial condition	sound	0	1	2	3	unsound
Sunk costs	negligible	0	1	2	3	high
Precedents	existing	0	1	2	3	none
Accountability	low	0	1	2	3	high
Urgency	low	0	1	2	3	high
Options	none
Total	0	1	2	3	many
SK score
2. Power position (PP)
Size	
small	
0	
1	
2	
3	
large
Financial base	limited	0	1	2	3	substantive
Additional manpower	unavailable	0	1	2	3	ample
Expertise	insufficient	0	1	2	3	sufficient
Leadership	poor	0	1	2	3	excellent
Prestige	low	0	1	2	3	high
Communication/Persuasion	poor	0	1	2	3	excellent
Access to media	lacking	0	1	2	3	multiple
Cohesiveness of	low	0	1	2	3	high
organization
Experience handling conflict	
negligible	
0	
1	
2	
3	
substantial
Commitment	low	0	1	2	3	intense
Legitimacy	questionable	0	1	2	3	unquestionable
Risk-taking ability	inadequate	0	1	2	3	adequate
Potential coalition	unavailable	0	1	2	3	ample
Alternative options	none	0	1	2	3	many
Capability to reward	weak	0	1	2	3	strong
Capability to coerce	weak
Total	0	1	2	3	strong
PP score
3. Common interests (CI)
Goal compatibility	
not at all	
0	
1	
2	
3	
very much
 

Table 3.3: Continued.						
Approach compatibility	not at all	0	1	2	3	very much
Resource interdependency	not at all
Total	0	1	2	3	very much
CI score
4. Quality of relationship (QR)
Quality of past relationship	

poor	

0	

1	

2	

3	

excellent
Mutual understanding	poor	0	1	2	3	excellent
Mutual willingness to help	weak	0	1	2	3	strong
Quality of communication	defensive	0	1	2	3	open
Value orientation	divergent
Total	0	1	2	3	compatible
QR score
Source: Yiu 1987.						

The above principle could represent a skilful strategy for introducing a new product. The tentative introduction of a relatively unimportant or an inferior product (signaling weakness) is merely a feint to mislead the competition. While they lean back and relax, the real product is put onto the market, with full power behind it.
Starting from the five positions presented earlier, there are a total of 16 possible routes linking each pair (see Figure 3.6). I
One can interpret what each of these signifies in practice. All the options are open when it comes to deciding whether to pass from a confrontational stance to one of evasion or cooperation. Depending on the circumstances, any of the routes shown may constitute the optimum strategy.the largest possible area of the board with the stones of their own color. Once a stone (or several stones) has been surrounded, it is removed from the board. Otherwise all the stones remain where they were placed on the board, making up a complex network of local battlefields. A good player will evolve sophisticated strategies from the respective positions of the stones in relation to one another, so that at the end of the game he is in control of more than half of the free points (known as “liberties”) remaining on the board. The individual groups or chains of stones (“armies”) can form alliances to enable them to


 
Figure 2.5: Strategic positioning grid
 

Figure 2.6: Sixteen strategic paths.
move in on the enemy forces and finally capture them. They can also limit themselves to securing their own territory by establishing an effective and invincible barrier around it. It is also possible to make forays behind the opponent’s lines with the aim of linking up with other friendly stones and so to capture enemy territory from behind.
Figure 2.7 presents two simple examples of strategy and tactics in Go. The three diagrams along the top row show how the coordinated placing of his stones has permitted white to surround and capture three black stones. By placing a white stone on 1, white has surrounded black and is able to take out
 

Figure 2.7: GO: Japanese game of strategy.

three black stones. With this strategy white has won territory for himself and has established a superior and invulnerable position. The situation is quite different for black in the second example (bottom row): while he is able to capture two white stones, he then finds himself threatened by the remaining white stones. Black needs to secure the point marked with a 1, if he is to protect himself from the forthcoming white offensive.
At first glance the similarity between this extremely exciting board game and conducting negotiations will perhaps not be very obvious. But anyone who needs to bargain frequently with partners from the Far East will rapidly find a study of the game invaluable. For all its exotic airs — and in passing, it is regarded as the world’s oldest board game — it is able to reflect each and every one of the strategies we have already spoken.

For Example: IBM
To conclude, the following example shows how a multinational corporation was obliged to harmonize its strategy with the position held by the government of a host country, and immediately adapt it to any new position taken up. It contains many of the elements presented here and so serves as an excellent application of the theories dealt with here. Once again we are looking at the computer and office machine producer, International Business Machines, known the world over as IBM.
Since the 1970s, multinational concerns such as IBM have found themselves faced with an increasingly tougher stance on the part of many emerging nations on the political and economic fronts. Whereas in 1951 IBM could still be invited to India and received with open arms by Prime Minister Nehru, twenty years later the wind had changed radically. In the interval, IBM had succeeded in achieving almost complete control of the Indian computer market. The Indian government felt this to be a dangerous dependence from the strategic standpoint and pressed the firm to reduce its 100% ownership to 40%, a holding that still constituted a blocking minority. IBM was also enjoined to extend its computer design and manufacturing operations in India for both the domestic and export markets. IBM was highly reluctant to deviate from its traditional global policy on account of a new attitude on the part of the Indian government. So the concern changed its position towards India from collaboration to heavy
 



Figure 2.8: Strategic position of IBM in India.

confrontation. The equity dilution demanded by India could not be counte-nanced at IBM. However, a similarly rigid position on the part of the Indian government forced IBM to propose a range of concessions in the hope of a compromise.
But India rejected IBM’s proposals. This led the computer giant to adopt a position which was as unfortunate as it was surprising for the Indian government: IBM considered the Indian demands to be a serious threat to its global strategy and renounced its activities in the subcontinent. When finally there was no longer any hope of compromise, the concern decided to turn to a policy of avoidance: on 15 November 1977 it announced its complete withdrawal from India.

 
                                         ТЕМА 3

Cultural Aspects of International Business   Communications 

Lecture 1. The Concept of Culture in International Business Communications 



Some researchers have questioned the very fact that cultural differences have an impact on international business communication, arguing that negotiation is negotiation irrespective of where and with whom it takes place:
Culture is to negotiation what birds flying into engines are to flying airplanes or, at most, what weather is to aerodynamics — practical impediments that need to be taken into account (and avoided) once the basic process is fully understood and implemented.
However, there is now much empirical support for the view that culture has an impact on business communications. Support is coming as well from authors actually involved in international negotiations. When negotiating internationally, one needs cultural knowledge and skills in intercultural communication. Many agreements have to be negotiated, drafted, signed and finally implemented: sales contracts, licensing agreements, joint ventures and various kinds of partnerships, agency and distribution agreements, turnkey contracts, etc. Negotiation is not only based on legal and business matters, hard facts which are often emphasized as being the sole important facts, but also on the quality of human and social relations, “soft

 
facts” which become of the utmost importance in an intercultural encounter. Goldman emphasizes, for instance, the importance to the Japanese of ningensei which, literally translated, means an all-encompassing and over- riding concern and prioritising of “humanity” or human beingness (see Box 5.1). According to Japanese specialists in international marketing negotiations:
The North American and U.K. negotiators failed to communicate ningensei at the first table meeting. Rushing into bottom lines and demanding quick decisions on the pending contract, they also overlooked the crucial need for ningensei in develop- ing good will . . . Hard business facts alone are not enough . . . Ningensei is critical in getting Japanese to comply or in persuading Japanese negotiating partners.
There are various kinds of “distances” between the potential partners: physical distance certainly, but also economic, educational and cultural distance, which tend to inflate the cost of negotiating internationally. Difficulties in interacting, negotiating, planning common ventures, working them out and achieving them together are deeply rooted in the cultural, human and social background of business people. They are not related to a superficial variance of business customs, and simple “empathy” is not enough for the avoidance of misunderstandings. In fact, people with different cultural backgrounds often do not share the same basic assumptions and this has an influence at several levels of international business negotiations: the behavioral predis-positions of the parties; their concept of what is negotiation and what should be an appropriate negotiation strategy; their attitudes during the negotiation process which may lead to cultural misunderstandings and undermine trust between the parties; differences in outcome orientation. 

Culture Defined
Culture as Learned and Forgotten Norms and Behavioural Patterns

Sometimes culture has a reputation for being rather vague, for being a somewhat “blurred” concept. The Swedish writer Selma Lagerlöf defines 
culture as “what remains when that which has been learned is entirely forgotten”. Depicted thus, culture may appear to be a “rubbish-bin” concept. Its main use would be to serve when more precise explanations have proved unsuccessful. It would also serve as an explanatory variable for residuals, when other more operative explanations seem inadequate. Nevertheless, Selma Lagerlöf’s definition does have the important merit of identifying two basic elements of cultural dynamics (at the individual level):
(1)	It is learned.
(2)	It is forgotten, in the sense that we cease to be conscious (if we ever have been) of its existence as learned behavior.

For example, if one has been told during childhood that modest and self- effacing behavior is suitable when addressing other people, especially at first contact — which is the case in most Asian cultures — one forgets about this and is easily shocked by assertive, apparently boastful, behavior which may appear in other cultures. Although largely forgotten, culture permeates our daily individual and collective actions. It is entirely oriented towards our adaptation to reality (both as constraints and opportunities). Since culture is “forgotten”, it is mostly unconsciously embedded in individual and collective behavior. Individuals find, in their cultural group, pre-set and agreed-upon solutions which indicate to them how to properly articulate their behavior and actions with members of the same cultural group.


Basic Definitions of Culture

Culture has been defined extensively, precisely because it is somewhat all- encompassing. After having assessed its nature as learned and forgotten, we need to provide some additional definitions of culture. Some authors argue, for instance,  that it is shared and transmitted: “A culture is the configuration of learned behavior and results of behavior whose component elements are shared and transmitted by the members of a particular society”. However, we should not go too far in considering the individual as simply programmed by culture. Linton had clearly indicated the limits of the cultural programming which a society can impose on an individual:
No matter how carefully the individual has been trained or how successful his conditioning has been, he remains a distinct 
organism with his own needs and with capacities for independ- ent thought, feeling and action. Moreover he retains a considerable degree of individuality.
If individuals have some leeway, then what use is culture to them?  Culture is a set of beliefs or standards, shared by a group of people, which help the individual decide what is, what can be, how one feels about it, what to do and how to go about doing it. On the basis of this operational definition of culture, there is no longer any reason why culture should be equated with the whole of one particular society. It may be more related to activities that are shared by a definite group of people. Consequently individuals may share different cultures with several different groups, a corporate culture with colleagues at work, an educational culture with other MBA graduates, an ethnic culture with people of the same ethnic origin. When in a particular situation, they will switch into the culture that is operational. The term “operational”, in this context, implies that a culture must be shared with those with whom there must be co-operation, and that it must be suitable for the task.
Goodenough’s concept of “operating culture” assumes that individuals are able to choose the culture within which to interact at a given moment and in a given situation. This is, of course, subject to the overriding condition that this culture has been correctly internalised during past experiences, that it is so well learned that it can be forgotten. Although the concept of operating culture is somewhat debatable, it does have the advantage of clearly highlighting the multicultural nature of many individuals in today’s societies, including binationals, multilingual people and people who have an international professional culture or are influenced as employees by the corporate culture of a multinational company. In this respect, international negotiation between culturally different organizations results in creating a new operating culture, a common set of beliefs and solutions, which is especially the case of joint ventures.

Significant Components of Culture



Language and communication    
The way in which people communicate (that is both emit and receive messages) and the extent to which their native 
language frames their world-views and attitudes directly affects international business negotiations. They require a dialogue, although partners may have different native languages, writing contracts in a foreign language (at least foreign to one side) using interpreters, trying to express ideas, concepts which may be unique in a particular language, etc.


Institutional and Legal Systems 
Differences in legal systems, contractual formalism and recourse to litigation express contrasts in how societies are organized in terms of rules and decision-making systems. The level of formality in addressing public and private issues has to be considered in any kind of negotiated partnership, including the discussion of joint-venture contracts, the registration of subsidiaries and the addressing of sensitive issues with the public authorities of the host country.


Value Systems 
The prevailing values in a particular society, and the extent to which they are respected in the everyday behavior of individuals, are important because they affect the willingness to take risks, the leadership style and the superior-subordinate relationships. This is true for the relationships between negotiators within a particular team, antagonistic negotiation teams and the negotiators on both sides and those from whom they have received the mandate for negotiating.


Time Orientations
 Attitudes towards time and how it shapes the way people structure their actions have a pervasive yet mostly invisible influence. Differences in punctuality, reflected in everyday negotiation behavior, may probably appear as the most visible consequence, but differences in time orientations, especially toward the future, are more important as they affect long-range issues such as the strategic framework of decisions made when negotiating.


Mindsets 
Whether called “Mindsets” (Fisher 1988), “intellectual styles” (Galtung 1981) or “mental models” (Bazerman et al. 2000), another major difference concerns the way people reflect on issues. Do they prefer to rely on data, ideas or speech, and which combination of these? How does this influence the way they relate words and actions? Mindsets influence ways of addressing issues, of collecting information, of choosing the relevant pieces of information 
and of assessing their “truthfulness”, so that finally they influence the negotiation process and the resulting decisions.

Relationship Patterns 
These concern how the individual relates to the group(s); what the dominant family and kinship patterns are; and how relationships are framed (individualism/collectivism; patronage relationships). These patterns affect international business negotiations through the style of interaction between people, their decision-making process, and the way in which they mix human relationships and business matters.




Culture and Negotiation: The Academic Literature

A large part of the academic literature on the influence of culture on international business negotiations uses a comparative and cross-cultural setting. A laboratory experiment helps in the comparison of negotiations between people of various nationalities. Nationality is used as a proxy and summary variable for culture. A basic description is made of the cultural traits of a specific nationality in negotiations, which is then contrasted with one or more different national groups. It is the basis for some hypotheses on either the process or the outcome of these negotiations, where the membership of a specific national group is one of the main explanatory variables.
It is advisable to be prudent before directly transposing data, on the behavior or negotiation strategies of people from a particular country which have been collected during negotiations with their compatriots. Some traits may not recur when people are negotiating with partners of other nationalities. For instance, when Italians negotiate together, or with the French, they may not adopt exactly the same behavior and strategies as they do when negotiating with Americans. Researchers address the issue of whether these simple international comparisons are fallacies, when and if researchers are trying to describe cross-cultural interactions accurately. They demonstrate that negotiators tend to adapt their behavior in intercultural negotiation. They do not behave as predicted by that which has been observed in intracultural 
negotiations. Therefore their behaviour as observed in intracultural negotiations can only serve as a partial basis for the prediction of their style and strategies when negotiating with people belonging to different cultures. Graham and Adler, for instance, show that French-speaking Canadians are more problem solving orientated when negotiating with English-speaking Canadians than they normally are among themselves.
Hence, the word “intercultural” in this text directly relates to the study of interaction between people with different cultural backgrounds. The word “cross-cultural” relates to a research design that is generally comparative but may also be centered on the encounter/interaction.
            

General Influence of Culture on Business Negotiations

Culture has mostly an indirect influence on the outcome of negotiations. It works through two basic groups of mediating variables: the situational aspects of the negotiation (time and time pressure, power and exercise of power, number of participants, location, etc.); and the characteristics of the negotiators (especially personality variables and cultural variables). These two groups of factors, in turn, influence the negotiation process, which ultimately determines the outcome. However, it is my contention that culture also has an influence on the outcome orientation: certain cultures are more deal/contract oriented whereas others favor relationship developments.


Behavioral Predispositions of the Parties


Who is Seen as a Credible Partner?

Scientists emphasize three dimensions of the self-concept which may have a strong influence on the cultural coding/decoding process of credibility: 
Table 5.1: The impact of cultural differences on international marketing negotiations.

1.	Behavioral predispositions of the parties
Concept of the self	Impact on credibility (in the awareness and
exploration phases)
Interpersonal orientation	Individualism vs. collectivism/ relationship
vs. deal orientation
In-group orientation	Similarity/“Limited good concept”
Power orientation	Power distance /Roles in negotiation
teams/Negotiators’ leeway
Willingness to take risks	Uncertainty avoidance /Degree of
self-reliance of negotiators

2.	Underlying concept of negotiation/Negotiation strategies
Distributive strategy	Related to in-group orientation/Power dis-
tance/Individualism/Strong past orientation 
Integrative strategy	Related to problem-solving approach and
future orientation 
Role of the negotiator	Buyer and seller’s respective position of
strength 
Strategic time frame	Continuous vs. discontinuous/Temporal ori-
entations 
 
3.	Negotiation process
Agenda setting/Scheduling the negotiation process
 

Linear-separable time/Economicity of time/ Monochronism/Negotiating globally vs. negotiating clauses  
Information processing	Ideologism vs. pragmatism/Intellectual styles

Communication	Communication styles /degree of
formality and informality
Negotiation tactics	Type and frequency of tactics/Mix of business
with affectivity 
Relationship development	The role of “Atmosphere” as bearing the
history of the relationship and facilitating transition 
 

Table 5.1: Continued.

4.	Outcome orientations
Partnership as outcome	Making a new in-group — “marriage” as
metaphoric outcome
Deal/Contract as outcome	Contract rules being the law of the parties
(litigation orientation)
Profit as outcome	Accounting profit orientation (economicity) 
Winning over the other party
 
Distributive orientation 
Time line of negotiation	Continuous vs. discontinuous view of negotiation 

(1)	self-esteem: the extent to which people think of themselves as very good or not too good;
(2)	perceived potency: the extent to which people view themselves as powerful, able to accomplish almost any task; and
(3)	perceived activity: the person sees him/herself as a doer, an active shaper of the world.

Since people generally live in homogeneous cultural settings (i.e. countries or regions within countries with one language, a dominant religion and shared values) they use the same cultural codes. But when people do not share the same codes, this may create problems for establishing credibility/trust. For example, a credible person may be considered by the emitter (coder) to be somebody showing a low self-concept profile (modest, patiently listening to partners, speaking little and cautiously etc.); if, conversely, the receiver (decoder) considers a credible person as somebody with a high self-concept profile (showing self-confidence, speaking arrogantly, not paying much attention to what the other is saying, etc.) there will be a credibility misunderstanding.
A classic example is the misinterpretation by the Soviet leader Khrushchev of the credibility of the American president, John F. Kennedy. It was one of the main reasons for the seriousness of the Cuban missile crisis at the beginning of the 1960s. Kennedy and Khrushchev had held talks in Vienna, after the 
unsuccessful invasion by U.S. soldiers resulting in defeat at the Bay of Pigs. During their meeting, the young President Kennedy recognised that this attack had been a military and political mistake, which he regretted. Khrushchev saw this confession of error as a testimony of Kennedy’s frank naivety and lack of character. He therefore inferred that it was possible to gain advantage by installing nuclear missiles in Cuba, which would have been targeted at the United States. This led the world to the brink of nuclear war between the superpowers. The events which followed showed that Khrushchev had been wrong in evaluating Kennedy’s credibility. Ultimately, Kennedy showed great firmness and negotiation skill.
Khrushchev’s mistake may be explained by differences in cultural coding of credibility. Whereas in the United States, reaching a high position while still young is positively perceived, Soviet people associate age with the ability to carry responsibilities. Moreover, the admission of a mistake or a misjudgement is also positively perceived in the United States. U.S. ethics value frankness and honesty. There is the belief that individuals may improve their behavior and decisions by taking into account the lessons of experience. On the other hand, in the Soviet Union, admission of errors was rare. It generally implied the very weak position of people subjected to the enforced confessions of the Stalinist trials.


                 Lecture 2. The Impact of Culture on International Business Communications

Signs of Credibility

Personal credibility is decoded through the filter of numerous physical traits, which are not often actively taken into consideration as they seem to be only appearances, or because we tend to use these reference points unconsciously. Being tall may, for instance, be perceived as a sign of strength and character. Stoutness may be considered a positive sign for a partner in societies where starvation is still a recent memory. Where malnutrition is a reality for a section of the population, it is better to be fat, that is, well nourished and therefore rich-and powerful-looking. Naturally these signs have a relative value. Weight, height, age and sex cannot be considered as adequate criteria for selecting negotiators. Furthermore, people may, in fact, be largely aware of the cultural code of the partner.
Each of these basic signs plays a role in the initial building of a credibility profile: age, sex, height, stoutness, face, tone and strength of the voice, self- esteem, perceived potency, perceived activity, etc. This profile is a priori because it only influences credibility in early contacts, that is, in the phase of awareness and at the beginning of the exploration phase. 
Interpersonal Orientation

The reproach made to Western business people by the Japanese, quoted in the introduction of this chapter, illustrates differences in interpersonal orientation. The concept of ningensei, presented at the beginning of this chapter has to do with the Confucian ethic which favors smooth interactions, underplaying conflict to the benefit of social harmony. For instance, the interpersonal sensitivity of Japanese people and their sincere interest in foreign cultures and people may make them friendly hosts at business lunches or dinners. As emphasized by researchers, “Before entering serious negotiations, Japanese business men will spend considerable time and money entertaining foreign negotiating teams, in order to get to know their negotiating partners and establish with them a rapport built on friendship and trust”. But it should never be forgotten that Japanese negotiators remain down-to-earth: they are strongly aware of what their basic interests are. Ningensei is, in fact, typical of collectivist values of interpersonal relationships (see Box 5.1). A basic divide in the interpersonal orientation is the individualism/collectivism divide (for a review of its impact on negotiation behavior. Its relevance for international business negotiations is examined in the following chapter.
 
In-group Orientation

Equal concern for the other party’s outcome is not necessarily to be found across all cultures. Cultures place a stronger or weaker emphasis on group membership (the other party is/is not a member of the in-group) as a prerequisite for being considered a trustworthy partner. In cultures where there is a clear-cut distinction between the in-group and the out-group (according to age, sex, race or kinship criteria) people tend to perceive the interests of both groups as diametrically opposed. This is related to what has been called the concept of “limited good”.
According to the concept of “limited good”, if something positive happens in favor of the out-group, the wealth and well-being of the in-group will be threatened. Such reactions are largely based on culture-based collective subjectivity: they stem from the conservative idea that goods and riches are by their very nature restricted. If one yields to the other party even the tiniest concession, this is perceived as directly reducing what is left for in-group members. The concept of “limited good” induces negotiators to adopt very territorial and distributive strategies. It is a view which clearly favors the idea of the zero sum game, where “I will lose whatever you may win” and vice versa. In Mediterranean and Middle Eastern societies where the in-group is highly valued (clan, tribe, extended family) the concept of “limited good” is often to be found; it slows the adoption of a problem-solving orientation, since co-operative opportunities are simply difficult to envisage.
It has been in fact argued that members of collectivist cultures make a sharp distinction between in-groups and out-groups, a reason for that being that harmony enhancement is only viewed as possible with in-group members. However, there is always some free room for negotiating insider/outsider status not only within but also across cultures. Scientists  present a number of case studies showing how people can gain status as partial insiders by leveraging common features that transcend the borders of cultures, such as gender or professional cultures. They demonstrate the role of a shared professional culture in blurring the ingroup/outgroup borders in an increasingly globalized world. His findings show that there is no significant impact of cultural differences on the international buyer-seller relationship in the context of the fisheries industries, whether trading partners of Norwegian exporters are Euro- pean or American (more in-group) or Japanese (more out-group). As he points out, “It is not unlikely that industries or trades which are very international will develop a specific industry culture, serving the role of unifying persons and companies from different nations and ethnic groups”. 
Power Orientation

One must distinguish between the formal power orientation on the one hand and the real power/decision-making orientation on the other. The first has to do with the display of status and how it may enhance credibility, especially in high perceived-potency societies. This involves the kind of meetings, societies, clubs, alumni organizations which assemble potentially powerful people. Belonging to such circles gives an opportunity for socializing and getting to know each other. The simple fact of being there and being a member of a certain club is the main credibility message. The signs of formal power orientation differ across cultures; they may range from education and titles (English public schools, French Grandes Ecoles, Herr Doktor, etc.) to belonging to a particular social class or caste.
Real power orientation is a somewhat different issue. As illustrated in Box
5.2 with an African example, there may be wide differences between formal and actual influence on the decision-making process. When making contacts, in a cross-cultural perspective, people should be aware of the following:
(1)	status is not shown in the same way according to culture;
(2)	influential persons are not the same and individual influence is not exerted in the same way; and
(3)	the decision-making process differs.
 
Hofstede in his article about the cultural predictors of negotiation styles  hypotheses that larger power distance will lead to a more centralized control and decision-making structure because key negotiations have to be concluded by the top authority. And, in fact, a typically high-power distance country (score of 81 on Hoftsede’s scale) one finds a relatively centralized decision-making, based on individuals who have extended responsibility at the top of the organization. They become frustrated when confronted by the Americans who tend to have several negotiators in charge of compartmen-talised issues:
In another mismatch of the systems, the Americans find it hard to determine how much Mexican decision-making authority goes with which designated authority. There, as in many of the more traditional systems, authority tends to reside somewhat more in the person than in the position, and an organization chart does little to tell the outsider just what leverage (palanca) the incumbent has.
Willingness to Take Risks
Negotiation activities are associated with risk-taking. Disclosing information, making concessions or drafting clauses involves risk taking because there is always a certain degree of vulnerability to the other party’s opportunist actions. As shown in scientific literature, cultural differences exist in the perception of risk rather than in the attitudes towards perceived risk. Researchers studied how respondents from China, USA, Germany and Poland, differed in risk preference for risky financial options and found the Chinese to be the less risk averse, with the Poles in the middle, and Germans and Americans showing the highest level of risk aversion. However, they show that attitudes towards perceived risk are shared cross-culturally, that is, people across cultures tend to be consistently willing to pay more for less risky options. What differs is the perception of risk itself. As emphasized, “An understanding of the reasons why members of different groups (for example, different cultures) differ in preference or willingness-to-pay for risky options is crucial if one wants to leverage these differences into creative integrative bargaining solutions in inter-group negotiations”.
Risk taking is related to Hoftsede’s cultural dimension of uncertainty avoidance which measures the extent to which people in a society tend to feel threatened by uncertain, ambiguous, risky or undefined situations. Where 
uncertainty avoidance is high, organisations promote stable careers, produce rules and procedures, etc. “Nevertheless societies in which uncertainty avoidance is strong are also characterized by a higher level of anxiety and aggressiveness that creates, among other things, a strong inner urge to work hard”. Hofstede points out that “uncertainty avoidance should not be confused with risk avoidance . . . even more than reducing risk, uncertainty avoidance leads to a reduction of ambiguity” .
A high level of uncertainty-avoidance is noted by Hoftsede  as being associated with a more bureaucratic functioning and a lower tendency for individuals to take risks. This may be a problem for business negotiators when they have received a mandate from top management. For instance, the bureaucratic orientation in ex-communist countries has imposed strong government control on industry. As a consequence, Chinese negotiators, for instance, tend not to be capable of individual decision-making. Before any agreement is reached, official government approval must be sought by Chinese negotiators. The same has been noted by Beliaev, in the case of Russian negotiators: “Throughout the process, a series of ministries are involved . . . Such a process also limits the degree of risk taking that is possible . . . the American who does see it from (the Soviet) perspective may well interpret it as being slow, lacking in initiative and unproductive”. Another researcher confirms this tendency in the case of Chinese executives who tend to consult their superior significantly more than Canadian executives who belong to a low uncertainty-avoidance society.

Lecture 3. Underlying Concepts of Negotiations and Negotiation Strategies: Cultural Aspects 

Integrative Orientation vs. Distribution Orientation

In business negotiations, the purchaser (or team of purchasers) and the vendor (or group of vendors) are mutually interdependent, and their individual interests clash. The ability to choose effective negotiation largely explains the individual performance of each party on the one hand, and the joint outcome on the other. In pitting themselves against each other, the parties may develop opposing points of view towards the negotiation strategy which they intend to adopt: distributive or integrative. In the distributive strategy (or orientation) the negotiation process is seen as leading to the division of a specific “cake” which the parties feel they cannot enlarge even if they were willing to do so. This 
orientation is also termed “competitive negotiation” or “zero sum game”. It leads to a perception of negotiation as a war of positions — territorial in essence. These are negotiations of the “win-lose” type — “anything that isn’t yours is mine” and vice versa.
The negotiators hold attitudes and objectives that are quasi-conflictive. Interdependence is minimized whereas opposition is emphasized. At the opposite end of the spectrum is the integrative orientation. The central assumption is that the size of the “cake”, the joint outcome of the negotiations, can be increased if the parties adopt a co-operative attitude. This idea is directly linked to problem-solving orientation. Negotiators may not be concerned purely with their own objectives, but may also be interested in the other party’s aspirations and results, seeing them as almost equally important. Integrative orientation has been termed “co- operative” or “collaborative”. It results in negotiation being seen as an attempt to maximize the joint outcome. The division of this outcome is to a certain extent secondary or is at least perceived as an important but later issue. Here negotiation is a “positive sum game” where the joint outcome is greater than zero.
In practice, effective negotiation combines distributive and integrative orientations simultaneously, or at different stages in the negotiation process. The “dual concern model” explains negotiation strategies according to two basic variables: concern for one’s own outcome (horizontal axis) and concern for the other party’s outcome (vertical axis). This leads to four possible strategies (see Table 5.2). According to this model, the ability to envisage the other party’s outcome is a prerequisite for the adoption of an integrative strategy.
Problem-solving orientation can be defined as an overall negotiating behavior that is co-operative, integrative and orientated towards the exchange of information. Fair communication and the

Table 5.2: The dual concern model.

Concern for one’s own outcomes Concern for the other party’s outcomes
⇓
 
Low	High 
 
High	Yielding	Integrative strategy
Low	Inaction	Contending 
exchange of information between negotiators are important. “Problem solvers” exchange representative information, that is, honest and objective data. There is no desire to manipulate the partner, as in instrumental communication. Exchanging representative information is con- sidered a basic element in problem-solving orientation. Empirical studies (experimental negotiation stimulation) have shown that this orientation positively influences the common results of negotiation. Rubin & Carter, for instance, demonstrate the general superiority of co-operative negotiation by developing a model whereby a new, more co-operative contract provides both the buyer and the seller with cost reduction, compared to a previous adversarial contract.
There are, however, some conditions; the first is the availability of cost- related data, the second is the release of this data to the other party during negotiation. The sharing of data is obviously conditioned by culture, language and communication-related issues. The adoption of an integrative strategy is facilitated by the following:

(1)	a high level of aspirations on both sides;
(2)	the ability to envisage the future;
(3)	the existence of a sufficient “perceived common ground”, that is, enough overlap between the interests of the two parties.
           
         

Cultural Dispositions to Being Integrative

Even though one may accept the superior effectiveness of integrative strategies, in as far as they aim to maximise the joint outcome, the problem of how this joint outcome is divided between the two sides remains largely unaddressed. When integrating the cultural dimension, three questions merit consideration:

(1)	Do the parties tend to perceive negotiations as being easier, and do they tend to adopt an integrative orientation more readily, when they both share the same culture?
(2)	Do negotiators originating from particular cultures tend towards an integrative or distributive orientation? Furthermore, do negotiators origi- nating from cultures which favor a problem-solving orientation risk seeing their personal results heavily diminished by a distributive partner who cynically exploits their good will?
(3)	Do cultural differences and intercultural negotiation reduce the likelihood of integrative strategy? 
Difficulties in Being Integrative in an Intercultural Negotiation Situation

Generally, speaking, it seems more difficult to pursue an integrative strategy in an intercultural than intracultural setting. Nationalistic feelings are easily aroused by conflicts of interest and the partner may easily be subjectively perceived as an “adversary”, occupying a different and rival territory. These negative feelings are often reinforced by an alleged atmosphere of “economic war” which, for instance, results in “Japan bashing” in the United States where the Japanese are considered to be unfair competitors. According to this view, a potential partner belonging to another country-culture would also be perceived as a global adversary.
There is general agreement in the existing literature that the results of negotiation are less favorable when the negotiation is intercultural as opposed to intracultural, all other things being equal. Van Zandt  suggests that the negotiations between Americans and the Japanese are six times as long and three times as difficult as those exclusively between Americans. This increases the costs of the transaction for the American firms in Japan owing to the relative inefficiency of communication. Other researchers  show that intercultural U.S.-Japanese negotiations result in significantly lower joint gains than intracultural U.S. or Japanese negotiations (in which both national groups achieve similar joint gains). It seems that an explanation is that intercultural negotiators lack sufficient skills to adapt successfully and need a lot more clarifying statements than do intracultural negotiators. Another possible explanation is that American negotiators tend to use harder tactics, engaging in threats, demands and sanctions when there is more cultural distance with their partners’ culture . The subjective satisfaction of the negotiators (measured by a questionnaire) in their result tends to be inferior for intercultural negotiation compared to intracultural negotiation. However, recent empirical findings have disconfirmed this. In Brett & Okumura  intercultural negotiators were more happy and satisfied with the negotiation than were intracultural negotiators. This can be explained either by the subjective reward effect of achieving an obviously more difficult negotiation task (i.e. inter- as compared with intracultural negotiation) or by people being satisfied in both cultural groups by different — and not competing — outcomes (joint gains for Americans vs. outcome parity for the Chinese).
Problem-solving depends on a collaborative attitude which is easier with a partner from the same culture. Negotiation partners’ similarity,  
 lead to more trust and an enhanced level of interpersonal attraction. A greater similarity between two parties will induce greater interpersonal attraction. People need to evaluate others before entering into interaction: similarity facilitates accurate appraisal in the process of social comparison. As a result of similarity, each side tends to consider communication from the other as more representative, more honest and truthful. In other words, one party perceives that it transmits fairly objective information and does not try to unduly influence the other party, as is the case with instrumental communication. The hypothesis that the similarity of the parties leads to a more favorable outcome was proposed by Evans. Similarity facilitates awareness and exploration between parties. In fact, it is more a question of perceived similarity which leads to more cooperative behavior in negotiation. If this similarity is perceived but not based on strictly objective indications (such as shared nationality, language or educational backgrounds) a dissymmetric view of similarity may arise between the buyer and seller. For instance, many business people in the Middle East have a good command of either the English or French language and culture. Middle Eastern business people are often perceived by their American or European counterparts as being similar, whereas they may perceive their Western counterparts as different.
The role adopted in negotiation, buyer or seller, combines with perceived similarity. If sellers perceive a greater similarity, this can lead to a stronger problem-solving orientation on their part. Although appealing, similarity-based hypotheses have been poorly validated by the empirical study. No significant relationship was found among American and British buyer/seller pairs: similarity did not favor problem-solving orientation. In the case of the French and the Germans, the perceived similarity only led to a stronger problem-solving orientation on the part of the seller. However, the actual dissimilarity between negotiators was strongly reduced by the fact that all the simulated negotiations were intracultural.
In intercultural terms, there is the possibility of a misunderstanding arising from a perception of similarity which is not shared by both parties. For example, one can imagine a situation where a seller (American, for instance) perceives the buyer as similar (an Arab buyer who is very Westernized in appearance, who has a superficial but misleading cultural outlook because of his cultural borrowing). However, the reverse situation does not occur; the Arab buyer is aware that the American seller knows little about the Arabic culture. In this case the seller will have a tendency to take a problem-solving 
orientation, because of fallacious perceived similarity, whereas the buyer may exploit the seller without feeling obliged to reciprocate, and ultimately maximize his personal outcome by adopting a distributive strategy. However, the dynamics of similarity (showing to the other side that one understands, and thus laying the foundation for an integrative attitude on both sides) can be reversed, more positively. Harris & Moran  cite the case of a U.S. banker from the Midwest invited by an Arab sheik for a meeting in London. The banker demonstrates unusual patience and deep awareness of the other party’s power.
The banker arrives in London and waits to meet the sheik. After two days he is told to fly to Riyadh in Saudi Arabia, which he does. He waits. After three days in Riyadh, he meets the sheik and the beginning of what was to become a very beneficial business relationship between the two persons and their organizations began.

National Orientations Favoring the Integrative Strategy

The second question concerns the adoption of integrative strategies by some nationalities more than others. Studies tend to show that American business people show trust more willingly and more spontaneously than other cultural groups, and have a stronger tendency towards a problem-solving and integrative orientation. The level of their profits as sellers depends on the buyer responding positively by also adopting a problem- solving approach. American negotiators have a stronger tendency to exchange representative communication, making clear and explicit messages a priority. This is in line with the American appreciation of frankness and directness and their explicit communication style according to Hall. This is what is called the “John Wayne Style”. They often meet certain difficulties with cultures who take more time in the preliminaries, getting to know each other, that is, talking generally and only actually getting down to business later. As a result, Americans may not foster feelings of trust in negotiators from other cultural groups who feel it necessary to get to know the person they are dealing with. Graham & Meissner  have shown, in a study comparing five countries, that the most integrative strategies are adopted by the Brazilians, followed by the Japanese. On the other hand, the Americans, the Germans and the Koreans choose intermediate strategies that are more distributive. This is consistent in the case of the Germans who use the hard-sell approach, 
where the seller is fairly pushy and adopts an instrumental communication and a distributive strategy.
The concept of integrative strategy is strongly influenced by the American tradition of experimental research in social psychology applied to commercial negotiation. As explained by Leung, “In individualist societies, negotiation is seen more as a task than as a social process. The primary role of negotiators is to work out a solution that is acceptable to both sides”. It is also based on a “master of destiny” orientation which feeds attitudes of problem resolution. As noted, the problem-solving approach appears to make sense to the American negotiators, but this framework may not work in all cases when applied to foreign negotiators. Americans tend to see the world as consisting of problems to be solved, whereas Arabs, for instance, see it more as a creation of God. However, to our knowledge, there is no empirical study that has shown, for example, that the Arabs from the Middle East have a tendency to be more distributive and or less problem-solving oriented than the Americans.
A key issue in the integrative approach is wether parties should primarily
strive for achieving a maximum joint gain or for reaching outcome parity between negotiators. Scientists show that American negotiators consider problem solving as a more adequate strategy and are more satisfied with joint gain maximization than Hong Kong negotiators. When presented with cooperative instructions, Hong Kong negotiators tend to interpret them as meaning that they should strive for equality and display more satisfaction than Americans when the goal of outcome parity is reached. The tendency to search for equality in outcomes and to share the burden by allocating resources equally is confirmed in the case of Japanese as compared to American negotiators.
The dilemma about maximizing joint gains vs. outcome parity is precisely where the “double-bind” situation in negotiation is at its peak and where cultures offer simplified, pre-framed solutions to the paradox of having to cooperate at the risk of being taken advantage of. As emphasized, cross-cultural negotiation research has provided data “consistent with the generalization that members of individualist cultures are more likely to handle conflicts directly through competition and problem solving, whereas members of collectivist cultures are more likely to handle conflict in indirect ways that attempt to preserve the relationship”. Leung explains that “disintegration avoidance” (DA) is at the very heart of Chinese negotiation behavior; as long as there is reason for maintaining the relationship, DA will result in a preference for conflict avoidance. However, 
when the conflict is perceived as caused by the other party’s misbehaviour, DA ceases to be effective and Chinese negotiators are more likely to recommend discontinuing the negotiation.



Ignorance of the Other Party’s Culture as an Obstacle to the Implementation of an Integrative Strategy in Negotiation

One of the most important obstacles to effective international business negotiation is the ignorance of all or at least the basics of the other party’s culture. This is intellectually obvious, but is often forgotten by international negotiators. It refers not only to the cognitive ignorance of the main traits of the other party’s culture, but also to the unconscious prejudice that differences are minor (that is, ignorance as absence of awareness). This favors the natural tendency to refer implicitly to one’s own cultural norms, especially for the coding/decoding process of communication (the self reference criterion). In the case of business negotiations between American and Chinese people for U.S.-Japanese business negotiations, note the relative lack of prior knowledge 
of the American negotiators about their partner’s culture. Before coming to the negotiation table, Americans do not generally read books, nor do they train themselves for the foreign communication style, nor learn about the potential traps which could lead to misunderstandings. As Carlos Fuentes states (in a rather harsh aphorism), “What the U.S. does best is understand itself. What it does worst is understand others”. French negotiators also tend to be underprepared in terms of cultural knowledge whereas the Japanese seemingly try to learn a lot more than the French or the Americans about the other party’s culture before negotiation takes place.
The negotiation and implementation (which often means ongoing negotia- tions) of a joint venture may last for several years. In this case, national cultures tend to disappear as the two teams partly merge their values and behaviour in a common “venture culture”. In order to improve intercultural negotiation effectiveness, it is advisable to build this common culture between the partners/ adversaries right from the start of the negotiations. It means establishing common rules, communication codes, finding people on each side who will act as go-betweens and trying to agree on a common interpretation of issue, facts, solutions and decision-making. This must not be considered as a formal process; it is informal and built on implicit communications. Furthermore, it relies heavily on those individuals who have been involved in the joint venture over a long period of time and who get on well together.


Lecture 3. Cultural Misunderstandings in the Business Negotiations Process

If future partners do not share common “mental schemes”, it could be difficult for them to solve problems together. Buyer and seller should share some joint views of the world, especially on the following questions: What is the relevant information? How should this information be sought, evaluated and fed into the decision-making process?
An important distinction in the field of cross-cultural psychology opposes idealism to pragmatism. As indicated,  “Idealism vs. pragmatism, which corresponds to Glenn’s universalism vs. particularism, refers to the extent to which the information extracted from the environment is transmitted within a broad framework, such as a religion or a political ideology, or a relatively narrow framework”. This dimension refers to a way of thinking, an important element of the “mindset”. 
Ways of Processing Information: Is there a Common Rationality Between Partners?

People differ in their ways of relating thinking to action: while the ideologists tend to think broadly and relate to general principles, the pragamatist orientation concentrates on focusing on detailed issues that are to be solved one by one. Pragmatists will prefer to negotiate specific clauses, in sequential manner. Conversely, ideologists see arguments in favour of their “global way of thinking”, when negotiating a large contract, such as a nuclear plant or a television satellite for instance: it is a unitary production, it is a complex multi-partner business, it often involves government financing and also has far-reaching social, economic and political consequences. Pragmatists will also find many arguments in favor of their way of thinking: the technicalities of the plant and its desired performance require an achievement and deadline orientation (pragmatist values).
Triandis hypothesises that complex traditional societies will tend to be ideologist ones, whereas pluralistic societies or cultures experiencing rapid social change will tend to be pragmatist. This distinction may also be traced back to the difference between the legal systems of common law (mainly English and American) and the legal system of code law. Whereas the former one favours legal precedents set by the courts and past rulings (cases) the latter favors laws and general texts. These general provisions are intended to build an all-inclusive system of written rules of law (code). Codes aim to formulate general principles so as to embody the entire set of particular cases.
The ideologist orientation, which is to be found mostly in Southern and Eastern Europe, leads the negotiators to try and set principles before any detailed discussion of specific clauses of the contract. Ideologists have a tendency to prefer and promote globalised negotiations in which all the issues are gathered in a “package deal”. The pragmatist attitude corresponds more to attitudes found in Northern Europe and the United States. It entails defining limited scope problems, then solving them one after the other. Pragmatists concentrate their thinking on factual aspects (deeds, not words; evidence, not opinions; figures, not value judgements). They are willing to reach real world decisions, even if they have to be down to earth ones.
Ideologists will use a wide body of ideas which provide them with a formal and coherent description of the world, Marxism or Liberalism for instance. Every event is supposed to carry meaning when it is seen through this ideologist framework. On the other hand, the pragmatist attitude first considers the extreme diversity of real world situations, and then derives its principles inductively. Reality will be seen as a series of rather independent and concrete 
problems to be solved (“issues”). These issues will make complete sense when related to practical, precise and even down-to-earth decisions. Typically, ideologists will take decisions (prendre des décisions) that is, pick a solution from a range of possible decisions (which are located outside the decision maker). Conversely, pragmatists will make decisions, that is, both decide and implement: decisions will be enacted, not selected. Box 5.4 illustrates how the pragmatist Americans can resent the ideologist French in international negotiations.


Communication may be difficult when partners do not share the same mindset. The most unlikely situation for success is an ideology-orientated contractor/supplier who tries to sell to a pragmatism-orientated owner/buyer. The ideologist will see the pragmatist as being too interested in trivial details, too practical, too down-to-earth, too much data-oriented and incapable of looking at issues from a higher standpoint. Pragmatists will resent ideologists for being too theoretical, lacking practical sense, concerned with issues that are too broad to lead to implementable decisions. In the first steps of the negotiation process, differences between ideologists and pragmatists may create communication misunderstandings which will be difficult to overcome during subsequent phases. Indeed, developing common norms will be fairly difficult, although it is necessary if partners want to be able to predict the other party’s behavior. A frequent comment in such situations will be: “One never knows what these people have in mind; their behavior is largely unpredictable”. An American (pragmatism-orientated) describes negotiations 
with the French (more ideology-orientated) in the following terms: “The French are extremely difficult to negotiate with. Often they will not accept facts, no matter how convincing they may be”.


Argument in Negotiation: Data, Theory, Speech and Virtue

Scientists contrast what is called the “intellectual styles” of four important cultural groups: the “Gallic” (prototype: the French), the “Teutonic” (prototype: the Germans), the “Saxonic” (prototype: the English and the Americans) and the “Nipponic” intellectual style (prototype: the Japanese). Saxons prefer to look for facts and evidence which results in factual accuracy and abundance. They are interested in “hard facts” and proofs, and do not like what they call “unsupported statements”. As Galtung states  when he describes the intellectual style of Anglo-Americans, “. . . data unite, theories divide. There are clear, relatively explicit canons for establishing what constitutes a valid fact and what does not; the corresponding canons in connection with theories are more vague . . .. One might now complete the picture of the Saxonic intellectual style by emphasizing its weak point: not very strong on theory formation, and not on paradigm awareness”.
Galtung contrasts the Saxonic style with the Teutonic and Gallic styles, which place theoretical arguments at the centre of their intellectual process. Data and facts are there to illustrate what is said rather than to demonstrate it. “Discrepancy between theory and data would be handled at the expense of data: they may either be seen as atypical or wholly erroneous, or more significantly as not really pertinent to the theory. And here the distinction between empirical and potential reality comes in: to the Teutonic and Gallic intellectual, potential reality may be not so much the reality to be even more avoided or even more pursued than the empirical one but rather a more real reality, free from the noise and impurities of empirical reality” . However, Teutonic and Gallic intellectual styles do differ in the role that is assigned to words and discourse. The Teutonic ideal is that of the ineluctability of true reasoning Gedankennotwendigkeit, that is, perfection of concepts and the indisputability of their mental articulation. The Gallic style is less preoccupied with deduction and intellectual construction. It is directed more towards the use of the persuasive strength of words and speeches in an aesthetically perfect way (élégance). Words have an inherent power to convince. They may create potential reality, thus probably the often-noted Latin love of words. 
Finally the Nipponic intellectual style, imbued with Hindu, Buddhist and Taoist philosophies, favors a more modest, global and provisional approach. Thinking and knowledge are conceived of as being in a temporary state, open to alteration. The Japanese “rarely pronounce absolute, categorical statements in daily discourse; they prefer vagueness even about trivial matters . . . because clear statements have a ring of immodesty, of being judgements of reality” .
           
Communication and Language

Needless to remark that the cross-cultural communication processes are a key component of the influence of culture on international marketing negotiations. If negotiators want to promote an integrative approach, it is important for them to focus on sharing and seeking information. Communication has been shown to generate greater cooperation even among negotiation partners that display strong tendencies to self-interest. The language used for negotiation has its importance: the myth that any language can be translated into another language often causes English to be chosen as a central negotiation language and to add interpreters when proficiency is too low on one side. As emphasized,  in the case of Sino-Foreign joint ventures, few Chinese can speak a foreign language and all oral communication between the Chinese and their foreign partners has to pass through interpreters, “When a third person is involved no genuine, direct communication between two persons can take place. In other words, “heart-to- heart” talks are unlikely to take place”. Furthermore, due to poor translation, it may be that only 30–40% of the actual content of what is said in Chinese is conveyed to the non-Chinese speaking negotiation partners, resulting in the discarding of good ideas and suggestions made by the Chinese . 
Researchers give a detailed account of how language used is negotiated in the case of a German-Japanese joint venture. “The negotiated outcome for language use [English as official venture language] was really the only one available. When a Japanese or German was confused or needed help, they would confer with members of their same cultural group in their mother tongue. This was done solely to expedite matters and clarify issues rather than as a means of excluding one or the other group from decision-making. One German manager spoke this way of the negotiation outcome: ‘The work language is English. But, during discussion, they would sometimes speak Japanese and I thought this was a good thing because you know your own language better and can understand better and can discuss things more precisely. One has to be tolerant . . .’”. 
There are semantic differences in the words used and many misunderstand- ings can arise from ignoring the precise meaning of key concepts for the negotiation; an economist gives the example of noticeable differences in the use of the word “customer” by Japanese and American negotiators. She shows that cultural connotations is a crucial aspect of conversation which needs careful attention in understanding the meaning beyond the mere one-to-one translations of words. Moreover, speakers of certain languages (i.e. high context languages such as Japanese, Chinese or Arabic) use more contextual cues to decode messages.
When messages are exchanged, the degree to which they should be interpreted has to be taken into account as well as the cross-cultural differences in linguistic styles, involving the use of silence or conversational overlaps . For instance, silence is a full form of communication for the Japanese, and Graham  reports twice as much silence in Japanese interaction than in American. Westerners often have the impression that they “do all the talking”. Low-context negotiators, such as Americans, tend to be explicit, precise, legalistic and direct in communication, sometimes forceful and even appearing as blunt to the other party (USIP 2002). In a recent empirical survey of Japanese and U.S. negotiators, researchers  show that direct and indirect communication patterns are consistent with Hall’s theory of low- vs. high- context communication:
The U.S. negotiators relied on direct information to learn about each other’s preferences and priorities and to integrate this information to generate joint gains. They were comfortable sharing information about priorities, comparing and contrasting their preferences with those of the other party, and giving specific feedback to offers and proposals. The Japanese negotiators relied on indirect information, inferring each other’s preferences and priorities from multiple offers and counteroffers over time.
In fact, the capacity to cope with very different communication styles is a key to successful international business negotiation. This is especially true for non- verbal communication. For instance, a lack of eye contact for the Americans is a signal that something is amiss and “American executives reported that the lack of eye contact was not only disconcerting but reduced their bargaining performance”.
Negotiators must be ready to hear true as well as false information, discourse based on facts as well as on wishful thinking or pure obedience to superiors. 
Frankness and sincerity are culturally relative values, they can be interpreted as mere naivety, a lack of realism or a lack of self-control in speaking one’s own mind. Furthermore, waiting for reciprocation when disclosing useful informa- tion for the other party, makes little sense in an intercultural context. Frankness and directness in communication are a substantial value to the Americans and to a lesser extent to the French, but not to Mexicans in formal encounters, nor to Japanese at any time.
The issue of formality vs. informality is a difficult one. Frequently, a contrast is made between cultures which value informality (e.g. American) and those which are more formal (most cultures which have long historical roots and high power distance). “Informality” may be simply another kind of formalism, and the “icebreaking” at the beginning of any typical U.S. meeting between unknown people is generally an expected ritual. It is more important to try and understand what kind of formality is required in which circumstances with which people. Outside of formal negotiation sessions, people belonging to apparently quite formal cultures can become much more informal. 
Due to increased global communication through the Internet and the extensive use of computer-mediated communication, in particular E-mail, as well as to the rise of Business-to-Business marketplaces, there is an increasing use of global electronic media in negotiating international deals.2 Contrary to traditional negotiation which is assumed to be carried out almost exclusively via face-to-face communication, E-mail does not offer much of the non-verbal feedback which exists in other media. However, electronic communication is very useful for dispersed negotiations, when matters have to be discussed without incurring the high costs associated with face-to-face cross-border negotiation. Potter & Balthazard  show that both Chinese and American managers prefer face-to-face over computer-mediated negotiation. However, both Chinese and Americans, negotiating intraculturally, do not perceive a significant difference between E-mail based written negotiation and the same negotiation dealt with a web-based threaded discussion even though the latter method seems to allow for more continuous interaction. Ulijn  based on a study involving 20 participants, use speech act theory and psycholinguistic analysis to show that culture affects non face-to-face communication as is the case of negotiation through E-mail.

Scientists also find a number of cultural differences between managers from Austria, Ecuador, Finland and Switzerland who negotiate electronically. Finally E-mail communication is often mixed with face-to-face encounters; E-mailing is widely affected by prior personal acquaintance of the people involved: if negotiators have started with some face-to-face activity, computer- mediated negotiation will be largely facilitated and communication misunderstandings arising from the « dry style » of E-mails may largely be avoided

Negotiation Tactics

Graham studied the negotiation tactics used in eight cultures, using videotaped negotiations in which statements were classified into twelve categories. His results show very similar negotiation tactics across cultures, most of them using a majority of tactics based on an exchange of information, either by self-disclosure or questions (more than 50% in all cases). The Chinese score the highest in posing questions, which is consistent with Pye’s comments about them: “Once negotiations begin the Chinese seem passive. They simply ask questions, probe for information, and conceal any eagerness they may feel”. On the other hand, the Spaniards score the highest in making promises. The proportion of “negative” tactics, including threats, warnings, punishment and negative normative appeal (a statement in which the source indicates that the target’s behavior is in violation of social norms) is fairly low in all cases, never exceeding 10% of the information exchange. Finally, cross-national differences are not great at the level of the type of tactics used, nor at the level of their frequency, but are more significant at the level of how they are implemented.
The use of theatricality, withdrawal threats and tactics based on time, such as waiting for the last moment to obtain further concessions by making new demands, are based on national styles of negotiations. Tactics are also related to the ambiguous atmosphere of business negotiations when implied warm human relations are supposed to be mixed with business. This relates to the divide between affective and neutral cultures . Negotiations are always interspersed with friendship and enmity, based on personal as well as cultural reasons. Atmosphere can be considered as a central issue in the

 
negotiation process. Researchers posit atmosphere as being of basic importance to the development of the negotiation process. Atmosphere has a double role, as a bearer of the history of the relationship and as main factor explaining the transition from one stage to the next. Atmosphere is characterized in a number of respects, namely the dynamics of conflict and cooperation, reducing or overcoming the distance between the partners, the power/dependence relation and, lastly, the expectations of the parties concerning future deals. 

    Lecture 4. Cultural Differences in International Business Communications 


Emotions and Conflict-Handling Styles in Cross-Cultural Negotiations

Communication misunderstandings in intercultural negotiation quite often result in increased level of emotions, that is, negotiators tend to depart from the rational and objective evaluation of issues at stake and to mix subjectivity and feelings with business matters. Morris  outlines two types of misunderstandings that frequently arise between Asian and American negotia- tors: “In one type of misunderstanding, U.S. managers make the error of reading silence of their Asian counterpart as an indication of consent . . . A different type of misunderstanding occurs when Asian managers make the error of reading an U.S. colleague’s direct adversarial arguments as indicating unreasonableness and lack of respect”. Emotions such as anger result in negotiators being less accurate in judging the interests at stake, more self- centered on their own interests; they also have a general effect of reducing joint gains.
Kumar  makes a sharp distinction between positive and negative emotions in negotiation. Emotions contain both an element of affect and an accompanying physiological arousal. For him, positive emotions result in being more flexible in negotiations, as well as helping negotiators to be more persistent, especially since a positive affective state increases the confidence level of negotiators. However, a positive affective state may also heighten expectations and result in negotiators’ disappointment with actual outcomes.
Negative emotions, on the other hand, may result in conflict escalation, that is, actors take matters personally when they should see them with a more distanced attitude. Likely consequences are the attribution to the other side of the responsibility for conflict, and possibly the discontinuation of the relation. While negative emotions may serve to inform the parties that an existing 
situation is untenable, they may also be snowballing and result in a negative conflict spiral. Negative spirals are partly based on selectively choosing those information cues which will confirm the negative feelings of a negotiators leading her/him to an escalation of negative feelings toward the other party which are no more based on hard facts. They also result from systemic reciprocation of contentious communication. Negative spirals are particularly likely to occur in cross-cultural negotiations due to differences at three levels: differences in internalised values and norms, differences in emotional expression and differences in linguistic styles. A conflict spiral appears as circular as it is based on repeated contentious communication whereby each side “responds” to the other side contentious communication by negative reciprocation.
The way to solve problems of negative spirals in negotiation has to do with both models of conflict resolution and with strategic communication styles in negotiation which may help to manage discrepancies in process and outcomes of negotiation. Tinsley shows that the Japanese, the Americans and the Germans use different models of conflict resolution. The Japanese tend to use what she calls the “status model”, that is, social interaction is viewed as governed by status and parties might solicit the advice of higher status Figures to solve the conflict. The German display a preference for the “regulations” model whereby conflict is seen as to be solved by applying standardized, universal and impersonal rules. Finally, Americans prefer the “interest” model whereby parties exchange information on their interests, try to prioritize them and trade off interests. Another dimension of conflict resolution is whether people tend to avoid or to directly confront conflict. Morris  show that Chinese managers tend to display conflict avoidance whereas Americans tend to develop a competing style. Moreover, negotiators who come from more traditional societies, where the dimension of social conservatism is high, tend to be more conflict averse.
Monitoring emotions in negotiation has to do with the avoidance of negative spirals but also with the avoidance of being too systematically conflict avoidant. A number of communication strategies have been recommended for breaking negative spirals in cross-cultural negotiations. George  recommends that negotiators engage in what they call “motivated information processing”, that is, a process whereby information is selectively processed in ways that are supportive of motivational goals; motivation for certain outcomes, rather than affect, guides interpretation. Brett  shows that a mix of reciprocation combined with non contentious communication is likely to help breaking negative spirals in negotiations. 
Differences in Outcome Orientation: Oral versus Written Agreements
It would be naïve to believe that profits, especially future accounting profits for each party, are the only possible outcome of the negotiation process. Other possible outcomes are listed in Table 5.1. The main reason for profits not being the sole possible outcome is that they are not really foreseeable. Basic differences in outcome orientation are generally hidden from the negotiation partners, generating increased misunderstandings. Another reason is that many cultures are relationship- rather than deal-oriented. As is described by the scientists, in the case of the Japanese and in the case of the Chinese, they prefer a gentleman’s agreement, a loosely-worded statement expressing mutual cooperation and trust between the parties, to a formal Western-style contract. The most crucial element of preparation for a negotiation with the Japanese is drafting an opening statement which seals the start of a relationship, in which the Western side may have the opportunity to seize the moment and set the tone for the rest of the negotiation.

Asymmetry in the Perceived Degree of Agreement

Agreements are generally considered as being mostly written. They are achieved by negotiation and by the signing of written contracts, which are often considered “the law of the parties”. This is unfortunately not always true. Keegan points out that for some cultures “my word is my bond” and trust is a personal matter, which he contrasts with the “get-it-in-writing” mentality where trust is more impersonal. The former is typical of the Middle East, whereas the latter is to be found in the United States where hundreds of thousands of lawyers help people negotiate written agreements and litigate within the framework of these written agreements. This has to be interpreted. It does not mean that people rely entirely on either an oral base (oaths, confidence between people, membership of a common group where perjury is considered a crime) or a written base. Exploring, maintaining and checking the bases for trust is a more complex process. It entails various possibilities:
(1)	An agreement may be non-symmetrical. A agrees with B, but B does not agree with A. Various reasons may explain this situation: either B wishes to conceal the disagreement or there is some sort of misunderstanding, usually language-based. 
(2)	People agree, but on different bases, and they do not perceive the divergence. They have, for instance, quite different interpretations of a clause or some kind of non-written agreement. Although much may be written down, some things will always remain unwritten. What is unwritten may, to one party, seem obviously in line with a written clause, but not to the other. Moreover, if there is no opportunity to confront their interpretations, they cannot be aware of their divergent nature.
(3)	The agreement is not understood by both parties as having the same degree of influence on:
•	stability;
•	precision and explicitness of the exchange relation.



Any business activity, particularly business communications presupposes signing a contract. This means that besides oral intercourse there is a written part in business negotiations, which is, of course, also discussed. Written documents are important as they are the material result of business negotiations. That is why it is necessary to pay special attention to them with regard to business issues and cultural aspects.

Written Documents as a Basis for Mutual Trust Between the Parties

There is a fundamental dialectic in written agreements between distrust and confidence. At the beginning there is distrust. It is implicitly assumed that such distrust is natural. This has to be reduced in order to establish confidence. Trust is not achieved on a global and personal basis but only by breaking down potential distrust in concrete situations where it may hamper common action. Trust is built step by step, with a view towards the future. Therefore real trust is achieved only gradually. Trust is deprived of its personal aspects. Thanks to the written agreement, the parties may trust each other in business, although they do not trust each other as people. Trust is taken to its highest point when the parties sign a written agreement.
On the other hand, cultures that favor oral agreements tend not to hypothesise that trust is constructed by the negotiation process. They see trust more as a prerequisite to the negotiation of written agreements. Naturally, they do not expect this prerequisite to be met in every case. Trust tends to be mostly personal. Establishing trust requires that people know each other. That is probably why many Far Eastern cultures  need to make informal contacts, discuss general topics and spend time together before they get to the point, even though all this may not appear task-related.
Subsequently, the negotiation process will be lengthy because another dialectic is at work. Since people are supposed to trust each other, the negotiation process should not damage or destroy the basic asset of their exchange relationship — trust. They will avoid direct confrontation on a specific clause, and therefore globalise the negotiation process. Global friends 
may be local foes, provided trust as the basic asset of the negotiation process is not lost.


The Ambiguity of the Cultural Status of Written Materials

That one should always “get-it-in-writing” is not self-evident. The contrary idea may even impose itself (“if they want it written down, it means that they don’t trust me”). Regina Traoré Sérié  explains, for instance, the respective roles of oral communication (spoken, transmitted through personal and concrete communication, passed through generations by storytellers) and written materials (read, industrially printed, impersonally transmitted, with no concrete communication) in the African culture.
Reading is an individual act, which does not easily incorporate itself into African culture. Written documents are presented as either irrelevant to everyday social practices, or as an anti-social practice. This is because someone who reads, is also isolating himself, which is resented by the other members of the community. But at the same time, people find books attractive, because they are the symbol of access to a certain kind of power. By reading, people appropriate foreign culture, they get to know “the paper of the whites”. As a consequence, reading is coded as a positive activity in the collective ideal of Ivory Coast society, since it is a synonym for social success. This contradiction between “alien” and “fetish” written documents encapsulates the ambiguity of the status of books in African society.


Do Written Contracts and the Intervention of Lawyers Produce Irreversible Commitments?

In cultures where relationships are very personalized, confidence cannot be separated from the person in whom the confidence is placed. The basis for mutual trust is no longer the detailed written contractual documents, but a man’s word, which is his bond. It is not “just any word”, but a special kind of word, which is heavily imbued with cultural codes. These words as bonds cannot easily be transferred from one culture to another. Adler describes the case of an Egyptian executive who, after entertaining his Canadian guest, offered him joint partnership in a business venture. The Canadian was very keen to enter this venture with the Egyptian businessman. He therefore suggested that they meet again the next morning with their 
respective lawyers to fill in the details. The Egyptians never arrived. The Canadian businessman wondered whether this was caused by the lack of punctuality of the Egyptians, or by the Egyptian expecting a counteroffer, or even the absence of available lawyers in Cairo. Adler  explains:
None of these explanations was true, although the Canadian executive suggested all of them. At issue was the perceived meaning of inviting lawyers. The Canadian saw the lawyer’s presence as facilitating the successful completion of the negotiation; the Egyptian interpreted it as signaling the Canadian’s mistrust of his verbal commitment. Canadians often use the impersonal formality of a lawyer’s services to finalize an agreement. Egyptians more frequently depend on a personal relationship developed between bargaining partners for the same purposes.
If agreements are mostly person-based, then their written base may be less important. Thus the demand for renegotiation of clauses by a Middle Eastern buyer in a contract already negotiated and signed, should not be seen as astonishing. It should not necessarily lead to litigation. Behind the demand for renegotiation is the assumption that, if people really trust each other, they should go much further than simple and literal implementation of their written agreements. This leads to the following question; to what extent should the contract signature date be considered as a time line which signals the end of the negotiation? 

Different Attitudes Towards Litigation
It is easy to understand that the function of litigation will be different for both sides. Recourse to litigation will be fairly easily made by those favoring written-based agreements as the ultimate means of resolving breaches of contract. The oral and personal tradition is less susceptible to recourse to litigation, because litigation has major drawbacks:
(1)	It breaks the implicit assumption of trust;
(2)	It breaches the required state of social harmony, especially in the Far Eastern countries, and may therefore be quite threatening for the community as a whole.
As David states:
. . . in Far Eastern countries, as well as in Black Africa and Madagascar . . . subject to the Westernization process which has 
been attempted, one does not find, as in Hinduism or Islam, a body of legal rules whose influence may be weakened by the recognized influence of other factors; it is the very notion of legal rules which is challenged. Despite authorities having sometimes established legal codes, it is well known and seems obvious that the prescriptions of these codes are not designed to be implemented literally. They should only be considered as simple patterns. The judge will be able to moderate their strictness and, moreover, it is hoped that this will not be necessary. The “good judge”, whether Chinese, Japanese or Vietnamese, is not concerned with making a good decision. The “good judge” is the one who succeeds in not making any award, because he has been skillful enough to lead the opponents to reconciliation. Any dispute, as it is a threat to social harmony, has to be solved by a settlement through conciliation. The individual only has “duties” towards the society. Recognition of “subjective rights” in his favor is out of the question. Law as it is conceived in the West is seen as good for barbarians, and the occupation of lawyer, in the limited extent that it exists, is regarded with contempt by the society.

These remarks by a specialist in comparative law give a good idea of the differences of litigious tradition between the Far East and the West. In the field of contracts, the Western saying “the contract is the law of the parties” dominates the practices of international trade. But this is, in part, window- dressing. When negotiating intemationally, a set of written contracts is always signed. This is not to say that people choose either oral or written agreements as a basis for trust. The real question is rather: how should the mix of written and oral bases for trust, as they are perceived by the parties, be interpreted? People do not deal with conflicts in the same way. Negotiating together requires a capacity to envisage different ways of managing disputes. Not only differences in rationality and mental programs, but also differences in time representations, may lead to a partner “who thinks differently” being considered a partner “who thinks wrongly”.
The utmost caution is recommended when interpreting the bases of trust, whether written documents or oral and personal bonds. Even in the Anglo- Saxon world, where it is preferred to “get-it-in-writing”, a number of business deals, sometimes large ones — in the area of finance, for instance — are based on a simple telex or fax, or the simple agreement between two key decision-makers. It would be a mistake to believe that personal relationships do not exist 
in places where written contracts are generally required. Moreover, in cultures where “my word is my bond”, it should never be forgotten that it is difficult to trust somebody who is not a member of the in-group, whether on a written or spoken basis. Therefore, trust has to be established (and monitored) on both bases, while at the same time keeping in mind a clear awareness of the limits of each.


Conclusion
The process of intercultural encounter in negotiation has been described as akin to a dance in which one dancer dances a waltz when the other dances a tango. There is, however, much adaptation in intercultural negotiation; negotiators tend to adjust to the other party’s behavior in ways that derive significantly from what would be the stereotypic attitude in their native culture. It is naturally difficult to step out from one’s own culture. However, negotiators exchange masses of information during a full negotiation and they process it in complex ways, that do not aim at an intellectual understanding of the beliefs and attitudes of the other party, but rather target mutual adjustment in view of maximizing outcomes. Negotiators therefore tend to adapt their behavior to the other party, at least to the extent they perceive as useful for smoothing the process and improving the outcomes. On average cultural adaptation, provided that it is done properly — without naïve imitation
— is positively experienced by the other side. Pornpitakpan  shows that neither the Japanese nor the Thais feel that their social identity is threatened by high adaptation coming from American sellers in sales negotiations. The Japanese buyers positively experience cultural adaptation by American sellers despite the marked tendency in Japan to make a clear-cut distinction between in-group members (nihon-jin) and out-group members (gai-jin).
Culture clash in negotiation may be strong at the very start, when negotiators expect behaviour from the other side which normatively corresponds to what they are used to as well as to what they consider as the most appropriate for effective negotiation. Cultural adaptation is not necessarily symmetrical. For instance, Japanese negotiators tend to adjust to Americans by using more direct information sharing and less indirect communication than in negotiations with their countrymen, whereas Americans adapt less to their Japanese counterparts. A common professional culture may also help overcome the barriers related to cross-cultural understanding. That is why, culture often appears as a relatively poor predictor of the negotiation. 

                                                                
Business Communication in Different Parts of the World.

Business Negotiations Between Japanese and Americans.


More than 35 years ago, anthropologist E. T. Hall  warned, “When the American executive travels abroad to do business, he is frequently shocked to discover to what extent the many variables of foreign behavior and custom complicate his efforts”. Despite Hall’s comments, little attention has been paid to the “typically ethnocentric American” sitting across the table from “inscrutable Japanese customers”, trying to negotiate an acceptable business contract. This chapter attempts to shed light on this circumstance. The topic is most worthy of consideration since business negotiations with Japanese often fail for seemingly inexplicable reasons and because most others have ignored such questions.


Conceptual Framework: A Framework for Understanding Negotiation Processes

The most difficult aspect of international business negotiations is the actual conduct of the face-to-face meeting. Assuming that the best representatives have been chosen, and assuming those representatives are well-prepared, and that situational factors have been manipulated in one’s favor, things can still go sour at the negotiation table.
Obviously, if these other preliminaries haven’t been managed properly, things will go wrong during the meetings. Even with great care and attention 
to preliminary details, managing the dynamics of the negotiation process is almost always the greatest challenge facing Americans seeking to do business with Japanese.
Going into a business negotiation, most people have expectations about the “proper” or normal process of such a meeting. Based on these expectations, progress is measured and appropriate bargaining strategies are selected. That is, things may be done differently in the latter stages of a negotiation than they were in the earlier. Higher risk strategies may be employed to conclude the talks — as in the final two minutes of a close football game. But all such decisions about strategy are made relative to perceptions of progress through an expected course of events.
Differences in the expectations held by parties from different cultures are one of the major difficulties in any cross-cultural business negotiation. Before we discuss differences between the processes of business negotiations in Japan and the United States, however, it is important to point out similarities. In both countries, business negotiations proceed through four stages: (i) non-task sounding; (ii) task-related exchange of information; (iii) persuasion; and (iv) concessions and agreement.
The first stage, non-task sounding, includes all those activities which might be described as establishing a rapport or getting to know one another, but it does not include information related to the “business” of the meeting.
The information exchanged in the second stage of business negotiations regards the parties’ needs and preferences, or, stated more precisely, the parties’ subjective expected utilities of the various alternatives open to the interactants.
The third stage, persuasion, involves the parties’ attempts to modify one another’s subjective expected utilities through the use of various persuasive tactics. The final stage of business negotiations involves the consummation of an agreement which often is the summation of a series of concessions or smaller agreements.
Despite the consistency of this process across cultures, the content and duration of the four stages differ substantially between the two cultural groups (see Table 16.1). Compared to the Japanese, Americans spend little time establishing a relationship.1
 It is imperative to avoid stereotyping the behavior of Japanese and American managers. Moreover, personalities may be even more important than cultural norms, particularly in business negotiations. Even so, an understanding of norms, particularly when there are major differences, should help negotiators on both sides of the table be more patient 
The typical Japanese negotiation may involve a series of non-task interactions and even ceremonial gift giving. Witness the media attention given to the very large kosai-hi (literally, entertainment expenses) that once were typical of business dealings in Japan: “While the Japanese defense budget is 0.9% of the country’s GNP, corporate wining and dining accounts for 1.5% of the total national output” (Time 1981). In the 1990s, since the steep decline in the Japanese economy, Japanese executives have cut back on the “excesses” of the 1980s. Even so, a greater emphasis on business entertainment by the Japanese will be noticeable. To the American critic, this may seem a waste. However, the Japanese make a great effort in the beginning to establish a harmonious relationship.
In America, the second stage (exchanging task-related information) is relatively direct, with clear statements of needs and preferences. For the Japanese, this exchange of information is the main part of the negotiation. A “complete” understanding is imperative. The Japanese are reported to ask


Table 16.1: Four stages of business negotiations.

Japan	United States 
1.	Non-task sounding


2.	Task-related exchange of information
 
Considerable time and expense devoted to such efforts is the practice in Japan.
This is the most important step — high first offers with long explanations and in- depth clarification.
 
Relatively shorter periods are typical.


Information is given briefly and directly. “Fair” first offers are more typical. 
3.	Persuasion	Persuasion is accomplished
primarily behind the scenes. Vertical status relations dictate bargaining outcomes.
 
The most important step, minds are changed at the negotiation table and aggressive persuasive tactics used. 
4.	Concessions and agreement
 
Concessions are made only toward the end of negotiations — a holistic approach to decision making. Progress is difficult to measure for Americans.
 
Concessions and commitments are made throughout — a sequential approach to decision making. 

  
“endless” questions while offering little information and ambiguous responses. Japanese negotiators spend much more time trying to understand the situation and associated details of one another’s bargaining position.
Americans tend to spend the most time in the third stage of negotiation — persuasion. Americans openly disagree and use aggressive persuasive tactics such as threats and warnings. Alternatively, Japanese take the time to understand one another during the first two stages of the negotiation, so little persuasion is necessary, and they avoid confrontations and respond to threats by a change of subject, a silent period, or withdrawal. For Japanese, it is more important to maintain the relationship than to be frank and open.
Regarding the fourth and final stage of business negotiations, Americans tend to make concessions throughout, settling one issue, then proceeding to the next. Thus, the final agreement is a sequence of several smaller concessions, and progress is easy to measure. The Japanese tend to make concessions at the end of the negotiation, and agreements are concluded rather abruptly from the American point of view. Such differences are a major point of procedural conflict for trans-Pacific negotiations.
The following presentation of recommendations regarding face-to-face meetings with Japanese clients is ordered according to the four stages typical in most business negotiations. First comes non-task sounding.

Non-Task Sounding
Americans always discuss topics other than business at the negotiations table (e.g. the weather, family, sports, politics, business conditions in general), but not for long. Usually, the discussion is moved to the specific business at hand after 5 to 10 minutes. Such preliminary talk is much more than just being friendly or polite. Before getting to the “business” at hand, it is important to learn how the other side feels this particular day. One can determine during non-task sounding if a client’s attention is focused on business or distracted by other matters, personal or professional.
Learning about a client’s background and interests also provides important cues about appropriate communication styles. To the extent that people’s backgrounds are similar, communication can be more efficient. Engineers can use technical jargon when talking to other engineers. Golfers can use golfing analogies “the deal is ‘in the rough’” — with other golfers. Those with children can compare the cash drain of “putting a kid through college”, and so on.
During these initial stages of conversation, judgments, too, are made about the “kind” of person(s) with whom one is dealing: Can this person be truste 
Will he be reliable? How much power does she have in her organization? All such judgments are made before business discussions even begin.
So there is a definite purpose to these preliminary non-task discussions. Although most people are often unaware of it, such time almost always is used to size up (or “sound”, in the nautical sense) one’s clients. Depending on the results of this sounding process, proposals and arguments are formed using different jargon and analogies. Or it may be decided not to discuss business at all if clients are distracted by other personal matters or if the other person seems untrustworthy. All this sounds like a lot to accomplish in 5 or 10 minutes, but that’s how long it usually takes in the United States. This is not the case in Japan; the goals of the non-task sounding are identical, but the time spent is much longer.
In the United States, firms resort to lawyers when they’ve made a bad deal because of a mistake in sizing up a client or vendor. In Japan, lawyers are not used for such purposes. Instead, Japanese executives spend substantial time and effort in non-task sounding so that problems do not develop later. Japanese clients and suppliers will want to spend much more time in non-task sounding than Americans will want, and Americans must reconsider, from the Japanese perspective, the importance of this stage of bargaining if negotiations with Japanese are to be successful.
Negotiations with Japanese firms often include three levels of executives — top executives, middle managers, and operational staff. Depending on the level of the negotiations, the process of non-task sounding is somewhat different, so we will first discuss recommendations for non-task sounding among top executives, and then we will discuss the processes among middle managers and operational staff.


Non-Task Sounding for Top Executives

The role of the top executive in Japanese negotiations is usually ceremonial in nature. Ordinarily, top executives are brought into negotiations only to sign the agreement, and this only after all issues have been settled and agreed upon by lower-level executives. On occasion, top executives are included earlier to communicate commitment and importance. In either case, the main activity of top executives is non-task sounding.
The ceremony, formality and apparent triviality will seem very out of place for American executives, because to most Americans it will seem “unnatural” to avoid discussing specific business and to leave the persuasion to others. They need, however, a very clear understanding of their role in the negotiation, 
though getting them to make adjustments in their behavior may be difficult. It could be helpful to supply a long list of “non-task sounding” questions for them to ask during such sessions. It is important, too, that American executives understand that what is said is not so important, from a Japanese perspective, as how things are said.
The Japanese top executive is making gut-level judgments about the integrity, reliability, commitment and humility of his American counterpart particularly if the Japanese is considerably older or if his company is more powerful. The non-task sounding provides a context or vehicle for making such judgments. To the Americans, the “content” of early conversations — words and verbal information may seem inane, but the Japanese regard as critical the non-verbal messages and feelings the wa (interpersonal harmony) and shinyo (trust) such talk conveys.


Non-Task Sounding for Middle-Level Executives

Establishing business relationships in the United States typically involves certain procedures, such as a letter of introduction, followed by a phone call for an appointment, then a meeting at the client’s office (including 5 to 10 minutes of non-task sounding followed by the business proposal), and perhaps lunch, with more business talk. Almost always, after 5 or 10 minutes of non-task sounding, an American client will ask, “Well, what can I do for you?”
In Tokyo, the typical routine goes something like this: The initial appointment will be set up and attended by a shokai-sha (third-party introducer), and the Japanese client will invite the American party, including the shokai-sha, for a late afternoon (approximately 4 p.m.) meeting at the Japanese firm’s offices. There, the Americans will meet the concerned operational-level personnel for a “ chat”, not to include business talk or proposals. At around 6 p.m., the Japanese suggest dinner. Ordinarily, they will pick the restaurant and pick up the tab. Americans will not have a chance to “fight” for the bill because they will never see one. At this point, business talk still is inappropriate. After dinner, the Japanese will suggest a few drinks, and conversation with the bar hostesses will be the bill of fare. The sessions ordinarily go on at past 11 p.m. and end with the scheduling of future meetings. While the 1990s have witnessed cutbacks in the lavish expenditures of the 1980s, the need for more informal non-task time in Japan persists.
Throughout the introductions, the business of the meeting, the purposes of the visit, are not discussed. Again, vague and indirect references to a future relationship may be made, but only in response to similar comments by the 
Japanese. The Japanese will be looking for integrity, sincerity, a cooperative attitude shinyo and wa. Economics will come later.


Task-related Exchange of Information
Only when the non-task sounding is complete, when wa has been established, should business be introduced. American executives are advised to let the Japanese side decide when such substantive discussions should begin. Typically, the Japanese will signal their readiness for an exchange of task- related information, after tea or coffee has been served, by remarks such as, “Can you tell me more about your company?” or “Tell me, what has brought you to Japan?”
A task-related exchange of information implies a two-way communication process. However, observations suggest that when Americans meet Japanese across a negotiating table, the information flow is unidirectional from Americans to Japanese. The Japanese appear: (i) to ask “thousands” of questions; and (ii) to give little feedback. The first severely tests American negotiators’ patience, and the latter causes them great anxiety. Both can add up to much longer stays in Japan (compared to negotiating in other countries), which means higher travel expenses.


Giving Information

The most obvious problem associated with providing information to Japanese clients will be doing so in another language. It is true that there are many more Japanese executives who understand and speak English than there are Americans who understand and speak Japanese, thus meetings on both sides of the Pacific usually can be handled in English. Americans should be careful, however, of misunderstandings that can arise from the Japanese side’s limited knowledge of English. Often, confusion can result because Japanese executives are too polite to indicate they do not understand. When doubt exists, Americans should use visual media (slides, brochures, videos, etc.), and should provide copies of written support materials.
American negotiators should provide an interpreter, if the Japanese side has not, and even then there may be critical stages when an interpreter should be included on the American negotiation team as well. Even with the best of interpreters, language problems still can be sources of misunderstandings. Economists suggest that 
Americans and Japanese have different conceptualizations of the word profit and that these differences lead to what general semanticists call bypassing. Bypassing occurs when two people use the same word. Japanese and American negotiators, usually communicating in English, initially may think they are in agreement regarding profit and profitability discussions when in fact they are not. This false agreement can lead to bewilderment, confusion, frustration, and perhaps failure in future negotia- tions.

Once comfortable with the language, attention can be turned to more subtle aspects of giving information to the Japanese. The first of these has to do with the order of presentation. In the United Stages, negotiators tend to say what they want and explain the reasons behind the request only if necessary. That’s why the task-related exchange of information goes quickly in America.
Things don’t work this way in Japan. Very long explanations come first, then the request/proposal. Accordingly, it is not surprising to hear the American executives’ complaints about the “1000 questions”. The Japanese expect long explanations.
American negotiators should be prepared with detailed information to back up their proposals and should include appropriate technical experts on negotiation teams, as their contribution will be required. Finally, we recommend the Japanese style of presentation, with background and explana- tions presented first and the actual request/proposal made only toward the end. While such an approach will take longer, with Japanese clients it will obtain better results.
Another reason for the “1000 questions” has to do with the consensus decision-making style of Japanese organizations. Several people on their side may ask for the same information or explanation. Most Americans find this repetitive questioning irritating and even insulting. “ Didn’t they believe me the first time?” Such tactics should be viewed in light of the Japanese consensus decision-making style when everyone must be convinced, not just the key decision maker. To some degree this questioning may be a tactic to make sure explanations hold up under close scrutiny. A degree of patience with this process is recommended, along with the kind of detailed preparations necessary to prevent inconsistent answers.
Americans tend to make initial offers they consider “fair” or near what they expect the eventual agreement to be, while Japanese executives expect to spend time in bargaining and tend to ask for more initially. Thus, Americans dealing with Japanese clients should present second lowest offers first. 
The same can be anticipated from them. They initially may ask for more than appears reasonable, but they will move from that position, albeit with reluctance. After each party has supported its “ second best offer” with detailed explanations, the Japanese consider it “fair” behavior to move however reluctantly from their initial position. American bargainers should guard against their own tendency to make concessions during the exchange of information. Often they are impatient with the process and make concessions before they have determined what the Japanese negotiators’ interests and positions are. Americans need to constrain their natural urge to get on to stage three, persuasion, via making concessions in the hope that the Japanese will reciprocate.


Getting Information

Hopefully Japanese clients will be the ones seeking American business, because in such situations the Japanese will be the ones making the proposals and supplying more information than appears necessary. In situations where American firms initiate contact or try to make sales, they experience great difficulty in getting feedback on their proposals. For example, if they ask a group of Japanese executives what they think of an American firm’s price quote, the Japanese will often say, “ Oh, it looks fine”, even if they think the quote is totally unacceptable. Americans need to consider, for a moment, the Japanese reasons for such “strange” behavior.
In the first place, no Japanese, especially not the boss, will venture to speak for the entire group until a consensus has been reached. Second, the Japanese executives wish to maintain the wa, and, from their point of view, a negative (albeit honest) answer during the negotiation may disrupt the harmony already established. Finally, even the most experienced American negotiator may not be able to read the subtle, non-verbal, negative cues that another Japanese executive would read (via tone of voice, body movements, pauses in speech, looks of surprise, etc.) along with the politely offered phrase, “Oh, it looks fine”.
Besides their language differences, the non-verbal behaviors of Japanese and American executives differ. The Japanese conversational style in both simulated and real business negotiations includes much less eye contact than the American style. This difference seems to cause problems for both sides. The Japanese report discomfort at the “aggressive staring” of the Americans. Americans suggest that “something must be wrong” because the Japanese won’t look them in the eye. Eye contact and movements, ordinarily a source of 
information about the other person’s feelings, don’t communicate across cultural barriers.
Most people process such information as the facial expression of a client reacting to a proposal, etc., but in the United States such processing often is subconscious. Attention should always be paid to this channel of information, however. Many American executives report great frustration in trying to read Japanese negotiators’ “poker faces”. In our studies of videotapes of simulated business negotiations involving Japanese we found little difference in the quantity of facial expression. Rather, the inscrutability has more to do with the timing and cultural rules for facial expressions. This, then, is the reason we hear наvery experienced Americans say, “I make deals all over the world. Everywhere I go I can pretty much tell where I stand with my clients — everywhere, that is, except Japan”. How, then, are Americans ever to get at the honne, or true mind, of Japanese negotiators?
At the negotiation table, the tatemae (truthful, official stance) often isn’t very helpful. An informal channel of communication, which can be established only between and through the lower levels of the negotiation teams, is the only way Americans can become privy to the honne. This, then, is the primary reason for including lower-level executives on negotiation teams. Besides, it would be too difficult, without some division of efforts, to handle both formal communica- tions at the negotiating table and informal communications after hours.
Management of the informal channel of communications is critical for efficient and successful negotiations, as it can be a delicate undertaking. During the non-task sounding activities, lower-level members of the American team should be assigned the task of establishing rapport with the operational level managers on the Japanese side. Then, throughout the task-related exchange of information and the rest of the negotiations, they should invest in after-hours nurturing such relationships. They can begin by simply asking the selected and/ or indicated Japanese executive(s) out for a drink “to solve our companies’ problems”. The Japanese will be looking to open such a channel of communication, and the Americans should be alert for such overtures.
Once this informal channel has been opened, it will be used for aggressive persuasive tactics (discussed later) and to learn how the Japanese really feel about proposals and the associated arguments. After hours, such information is communicated in restaurants, over drinks, and at bath houses. It emanates from and is transmitted to all members of the Japanese negotiation team. While everyone knows about this informal channel of communication, it is critical that it remains “under the table”, and any reference to such a channel (e.g. “Suzuki-san told Mr Smith last night that . . .”) will lead to elimination of the “leak” by immediate dismissal of Mr Suzuki from the negotiations. 
The following illustrates the importance of this informal channel. A large American firm sought to acquire a smaller Japanese firm. Talks between executives of the two companies had not been fruitful. Although the Japanese executives showed initial interest in the deal and the American firm had a final proposal ready, the Japanese seemed to be hesitant. The American side decided on a wait-and-see strategy, and nothing happened for almost six months. Then, a lower-level manager of the American firm received a call from an acquaintance (they had played golf and had a drinks together a few times) asking if they could have drinks. When they met, the Japanese explained the delays: “ I have something to tell you that just couldn’t be talked about by my boss to your boss ’ He went on to explain the primary problems, from the Japanese point of view, which were with the acquisition price and the renaming of the company. Once these were out in “the open” (the informal “gut spilling” by these lower-level players was never discussed), the companies were able to deal with both issues. The Japanese side simply felt it inappropriate to voice such objections to a higher-status buyer and potential owner at the negotiation table, using a formal communication channel.

Persuasion
In Japan, a clear separation does not exist between task-related exchange of information and persuasion. The two stages tend to blend together as each side defines and refines its needs and preferences. Much time is spent in the task- related exchange of information, leaving little to “argue” about during the persuasion stage. Indeed, Robert March  reports that Japanese negotiators tend to prepare for negotiations in a way that differs greatly from how Americans prepare:
They [Japanese negotiators] developed defensive arguments with no consideration of persuading or selling or converting the other side. Nor did they consider what the other side might be thinking or offering, nor of anticipated strategies, nor of any concession strategies.
A strong consensus was reached based on the arguments supporting their position after the leader had reviewed these and everyone had noted them down. There was strong group cohesion.
However, from the American perspective, persuasion is the heart of a negotiation. Once it is determined what each side wants, then “the fun” begins 
— trying to change the other side’s mind and bring them closer to one’s own side’s proposal. Many persuasive tactics can be applied, and often are, to change clients’ minds. Researchers at the Kellogg School of Business Administration at Northwestern University have come up with a list of such persuasive tactics (Table 16.2). We have observed Americans using all such persuasive tactics.
Table 16.3 is a list of persuasive tactics considered appropriate in Japan. One of the primary differences between American and Japanese bargaining styles has to do with the importance of the role or power position of the bargainer.
Relationships in Japan, whether personal or business, are vertical in nature. A simple analogy demonstrates this: bargaining in Japan is like an interaction between father and son, while in America it is like that of two brothers. The point is, the repertoire of persuasive tactics available to bargainers in Japan is prescribed by status/power relations. Buyers, playing the role of “father”, can say things to sellers that sellers would not even consider saying to buyers. Alternatively, buyers and sellers in the United States are on much more of an equal footing (although still not completely equal).
Another important factor in Japan is where specific tactics are used. That is, at the negotiation table, bargainers are limited to the use of questions, self- disclosures, and other positive tactics that influence behaviors. Aggressive influence tactics, which can be used only by negotiators in high power/status positions, should be communicated through the low-level, informal commu- nication channel. Even there, threats, commands, etc., are subtle and indirect. This makes establishing an informal channel of communication doubly important to the American side, because it not only can provide a “reading” of Japanese clients but will allow them to employ persuasive tactics that would be completely inappropriate (from the Japanese perspective) at the formal talks.
To sum up, if an impasse is reached with Japanese clients, rather than trying to persuade them in the usual American manner, it is appropriate to use the following nine persuasive tactics, in order and in the specified circumstances:

(1)	Ask more questions. The single most important consideration is the use of questions as a persuasive tactic. This is true not only in Japan but anywhere in the world, including the United States. Chester Karrass  in his book, The Negotiation Game, suggests that sometimes it is “smart to be a little bit dumb” in business negotiations. Ask the same questions more than once; for example, “I didn’t completely understand what you meant — can you please explain that again?” If clients or potential business partners have good answers, then perhaps it is best to compromise on the issue. Often, however, under close and repeated scrutiny their answers are not 

Table 16.2: Bargaining tactics, definitions, and examples (Anglemar & Stern 1978).

POSITIVE INFLUENCE TACTICS
Promise. A statement in which the source indicates his intention to provide the target with a reinforcing consequence which source anticipates target will evaluate as pleasant, positive, or rewarding. “If you can deliver the equipment by 1 June, we will make another order right away.”
Recommendation. A statement in which the source predicts that a pleasant environmental consequence will occur to the target. Its occurrence is not under the source’s control. “If you keep the company name after the acquisition, then your present customers will stay with the company.” Reward. A statement by the source that is thought to create pleasant consequences for the target. “This negotiation is progressing smoothly because you have prepared well.”
Positive normative appeal. A statement in which the source indicates that the target’s past, present, or future behavior was or will be in conformity with social norms. “Lowering your price in light of the new information will demonstrate your interest in good principles of business.”
AGGRESSIVE INFLUENCE TACTICS
Threat. Same as promise, except that the reinforcing consequences are thought to be noxious, unpleasant, or punishing. “If you insist on those terms we will have to find another suitor for our company.”
Warning. Same as recommendation, except that the consequences are thought to be noxious. unpleasant, or punishing. “If we can’t get together at this stage, few other companies will be interested in your proposal.”
Punishment. Same as reward, except that the consequences are thought to be unpleasant. “You can’t possibly mean that. Only a fool would ask for such a high price.”
Negative normative appeal. Same as positive normative appeal, except that the target’s behavior is in violation of social norms. “No one else we deal with requires that kind of guarantee.”
Command. A statement in which the source suggests that the target performs a certain behavior. “It’s your turn to make a counter offer.”
INFORMATION EXCHANGE TACTICS
Commitment. A statement by the source to the effect that its future bids will not go below or above a certain level. “We will deliver the equipment within three months, and at the price we originally quoted.” 

Table 16.2: Continued.

Self-Disclosure. A statement in which the source reveals information about itself. “My company now requires an ROI of at least 15% during the first year.”
Question. A statement in which the source asks the target to reveal information about itself. “Why are you asking for such a high royalty pay- ment?”


very good. When their weak position has been exposed, they will be obligated to concede. Questions can elicit key information, being powerful yet passive persuasive devices. Indeed, the use of questions is a favored Japanese tactic which they will use against you.
(2)	Re-explain your company’s situation, needs, and preferences.
(3)	Use other positive influence tactics.
(4)	If still dissatisfied with the Japanese response, try silence. Let them think about your proposal and give them an opportunity to change their position. Be aware, however, that the Japanese are the world’s experts at the use of silence and that your Japanese clients are likely to use it frequently.
(5)	If tactics 1 through 4 produce no concessions, change the subject or call a recess and put the informal communication channel to work. At this level, it would be appropriate, rather than going directly to more aggressive tactics, to try tactics 1 through 4 again. Continuing to ask questions and offer explanations may cause new information to surface that could not be broached at the negotiation table.


Table 16.3: Persuasive tactics appropriate for negotiations with Japanese.

At the Negotiation Table	Informal Channels and Buyers Only
 
1.	Questions	1. Aggressive influence tactics
2.	Self-disclosures
3.	Positive influence tactics
4.	Silence
5.	Change subject
6.	Recess and delays
7.	Concessions and commitments 
(6)	Only in special circumstances and with an awareness of the great risk involved should aggressive tactics be used with Japanese. They should be used only when the American company is clearly in the stronger position (e.g. monopoly power, larger size, the Japanese company has come courting), and they must be carried out only via the informal channel in the most indirect manner possible. Rather than an American saying, “If your company can’t lower its price, then we’ll go to another supplier”, it would be better if he said, “Lower prices on the part of your company would go a long way toward our not having to consider other options available to us”.
Even then, the use of aggressive persuasion tactics probably will damage wa, which in the long run may be to the American company’s disadvantage. If power relations ever shift, the Japanese will be quick to exploit the change of events. If the American side exercises restraint and maintains the wa, then the Japanese, if and when power relations shift, will consider the American company’s interests.
This latter point is difficult for most Americans to believe. “Why should they consider our interests?” We have, however, witnessed Japanese executives behave in this way several times. For example, some years ago, International Multi-Food Company (IMFC) sold franchise rights for the Mr Donut chain to Duskin Ltd. in Japan. Initially, IMFC provided the know- how (operations and marketing) for a successful venture in Japan. Indeed, ten years later the franchise revenues from Duskin exceeded the total profits IMFC made from its U.S. operations. When, IMFC executives met with Duskin to re-negotiate the franchise agreement, they anticipated changes in the agreement (reduced royalties, etc.) to reflect the change in power relations. Certainly, an American franchisee would have demanded such an adjustment. However, because IMFC initially had been careful to maintain wa with the Japanese clients, the president of Duskin simply offered to renew the agreement. Needless to say, the IMFC executives were pleasantly surprised.
(7)	If tactics 1 through 6 have not produced concessions by the Japanese, we suggest that they employ the use of time. This tactic requires the cooperation and understanding of the American home office.
Give the Japanese time to consider new information and time to reach a consensus. They almost never make concessions immediately following persuasive appeals, because the entire group must consult and agree. This takes time. Unfortunately, American bargainers seem to find the use of the time tactic most difficult. “Letting things hang” goes against their nature, but it may be necessary, in the hope that the Japanese will run into their 
time limits before you run into yours. Consensus decision making and their long-term approach to business deals seem to enhance the effectiveness of tactical delays for Japanese bargaining with Americans.
(8)	The next persuasive tactic that can be used with Japanese clients is asking the shokai-sha to arbitrate differences by calling the Japanese clients and serving as a go-between. Though shokai-sha often successfully settles otherwise irreconcilable differences, serious consideration should be given to making concessions before calling in shokai-sha, because third-party arbitration ordinarily will work only once.
(9)	As a last resort, bring together top executives of the two companies to see if that will stimulate more cooperation using a top-down approach. Such a tactic is, however, fraught with danger, particularly if negative influence tactics have been used in the past. A refusal at this stage means the business is finished.
To conclude our discussion of persuasive tactics, we want to emphasize the importance of our recommendations. A mistake at this stage, even a minor one, can have serious consequences for Japanese/American cooperation. American managers will have to be doubly conscientious to avoid blunders here because the Japanese style of persuasion is so different and, apparently, cumbersome.
Remember that the Japanese are looking to establish a long-term business relationship of mutual benefit. Threats and the like do not fit into their understanding of how such a relationship should work. They are not in a hurry, because they are concerned about wa and cooperation in the long run. We recommend, moreover, that you adopt a Japanese approach to persuasion when bargaining with Japanese clients and business partners. Such an approach may take longer, but, in the end both companies will benefit by using it. Finally, smart American negotiators will anticipate the Japanese use of the nine persuasive tactics described in this section of the chapter.

Concessions and Agreement
The final stage of business negotiations involves concession making, building toward agreement. Negotiation requires compromise. Usually, both sides give up something to get even more.
However, the approaches used for compromise differ on the two sides of the Pacific. Americans and other Western business executives tend to take a sequential approach to solving complex problems. That is, “ Let’s discuss and settle quantity, then price, then delivery, then after-sale service”, and so on. Alternatively, the Asian approach is more holistic — looking at all issues 
simultaneously and not agreeing on any single issue until the end. Americans often are very upset by such differences in style of concession making.
American managers report great difficulty in measuring progress. “After all, in America you’re half done when half the issues are settled”. In Japan, nothing seems to get settled. Then — surprise — the negotiation is done. Frequently, impatient Americans make unnecessary concessions right before agreements are announced by the Japanese.
These difficulties reflect more differences than just in decision-making styles (sequential vs. holistic). The differences go deeper than that. In the American view, a business negotiation is a problem-solving activity, the solution being a deal that suits both parties. From the Japanese standpoint, a business negotiation is a time to develop a business relationship with the goal of long- term mutual benefit. For the Japanese the economic issues are the context, not the content, of the talks. Settling any one issue is not really so important. Such details will take care of themselves once a viable, harmonious business relationship is established. Once the relationship has been established, signaled by the first “agreement”, then the other “details” are settled quickly.
American bargainers in Japan should expect this holistic approach and should be prepared to discuss all issues simultaneously and in what may appear to be a haphazard order. Progress in the talks should not be measured by how many issues have been settled. Rather, Americans must try to gauge the quality of the business relationship by watching for the following important signals of progress:
•	higher-level Japanese executives being included in the discussions;
•	their questions beginning to focus on specific areas of the deal;
•	a softening of their attitudes and positions on some of the issues, such as, “Let us take some time to study this issue”;
•	at the negotiation table increased talk among themselves in Japanese, which may often mean they’re trying to decide something; and
•	increased bargaining and use of the lower-level, informal channels of communication.
A crucial part of preparing for negotiations is deciding upon and writing down planned concession strategies. Americans need to follow such strategies with care, because “trading” concessions will not work with Japanese bargainers who will settle nothing until everything can be settled. After all issues and interests have been exposed and discussed fully, to help establish the relationship, make concessions on minor issues first.
Besides following a plan in making concessions, American negotiators in Japan should take care that concessions are made following recesses in the 
talks, not at the negotiation table the first time the topic is broached. It is better to reconsider each concession away from the social pressures of the formal negotiations. Again, this is a Japanese practice. Because of the nature of their consensus decision-making process, you will find that the Japanese frequently “have to check with the home office”. This is a negotiation practice which Americans would do well to emulate, particularly in Japan. Having limited authority can be an important check on “run-away” concession making.
In conclusion, American managers will spend more time putting deals together with Japanese clients or partners than with other Americans. If the negotiation processes are handled adroitly, the U.S. negotiators can look forward to long, mutually beneficial business relationships with Japanese partner



2.	Compromise as a strategy of international business communication means a solution:
[	] a) satisfactory to the other party needs;
[	] b) satisfactory to each party needs;
[	] c) unsatisfactory to the other party needs;
3.	Avoidance as a strategy of international business communication is more typical for:
[	] a) Japanese culture;
[	] b) German culture;
[	] c) American culture;
4.	Accomodation as a strategy of international business communication really mens:
[	] a) postponing the decision;
[	] b) meeting halfway;
[	] c) giving in;
5.	The factor that mostly intensifies cooperation in international business negotiations is:
[	] a) short power distance;
[	] b) minor cultural differences;
[	] c) common interests;
6.	The party which is believed to employ the Wild West type of behavior in international business negotiations  is:
[	] a) American;
[	] b) Swiss;
[	] c) Japanese;
7.	Government pressure in international business negotiations can be typically observed in:
[	] a) American culture;
[	] b) Swiss culture;
[	] c) Chinese culture;
8.	Emerging nations on the international business arena are those with:
[	] a) highly developed economy;
[	] b) encouragingly developing economy;
[	] c) poorly developed economy;
9.	Cultural behavioral patterns can influence international business communications:
[	] a) in all cases;
[	] b) in some cases;
[	] c) in no cases;
10.	 The culture that belongs to collectivist ones is:
[	] a) German;
[	] b) Swiss;
[	] c) Chinese;
11.	 Informal style of behavior in international business communication is proper to:
[	] a) American culture;
[	] b) Chinese culture;
[	] c) Japanese culture;
12.	 The presence of lawyers at international business negotiations  can be regarded as:
[	] a) a positive feature;
[	] b) a negative feature;
[	] c) either as a positive or as a negative feature;
13. Orientation towards objectives is proper to:
[	] a) strategy;
[	] b) tactics;
[	] c) either strategy or tactics;
14. As for the risk taking in international business negotiations, Chinese businessmen show the:
[	] a) highest level;
[	] b) middle level;
[	] c) lowest level;
15. The terms international business communications and international business negotiations are:
[	] a) interchangeable in all contexts;
[	] b) interchangeable in some contexts;
[	] c) not interchangeable in any contexts;
16. The difference in such background factor of international business communication as power distance:
[	] a) always hinders the process of negotiations;
[	] b) often hinders the process of negotiations;
[	] c) never hinders the process of negotiations;
17. For successful international business communication it is essential that technical specifications are provided in:
[	] a)  the local language;
[	] b) a foreign language;
[	] c)  the English language;
18. Distributive strategy in international business communications is induced by:
[	] a) high stakes;
[	] b) the concept of limited good;
[	] c) great cultural differences;
19. The highest entertainment expenses in international business negotiations are known typical for the:
[	] a) Americans;
[	] b) Chinese;
[	] c) Japanese;
20. Integrative strategy in international business negotiations is aimed at:
[	] a) fully satisfying both parties;
[	] b) partly satisfying both parties;
[	] c) fully satisfying one party.