In history, negotiation skills were considered as a native talent or instinctive, but nowadays they are regarded as a technique that can be learned (Ghauri 1986). Negotiation process especially requires written and/or verbal communication skills between parties (McCall – Warrington 1984, 13). Business negotiation process can be divided into three groups of variables that are presented in the Figure 1: the background factors, the process and the atmosphere (Ghauri 1996, 5). Figure 1: The process of business negotiations (Modified from the figure of Ghauri 1996, 81)
Background factors influence the process of negotiation and the atmosphere. They include objectives that are the final stages parties desire to achieve and environment which means political, social and structural factors relevant to both parties. Also the market positions (e. g. monopolistic power) parties posses influence the background factors. As well as the third parties, and the negotiators themselves. Third parties are the ones who are affected by the negotiation or can influence it at some level, for example governments, agents, consultants and subcontractors.Order now
Negotiators influence the background factors with their experiences, negotiating skills and personality. (Ghauri 1996, 5-6. ) Atmosphere is a fundamental part of negotiation process. It is characterised as the perceived “milieu” around the interaction process, how the parties see each other’s behaviour and the properties of the process. In different processes there are different characteristics of atmosphere that dominate. Atmosphere can be conflicting or co-operative depending whether the parties have common or conflicting interests.
The power versus dependence in the relationship means the property of the relationship, i. e. how power is divided between the parties. Also the expectations parties have influence the atmosphere. The expectations can be long-term (values and possibilities of future business) or short-term (prospects for the present deal). (Ghauri 1996, 6-7. ) The process phase of negotiation is divided into three stages which all are influenced by strategic and cultural dimensions. The first stage in order is the pre-negotiation stage.
In this step parties make the first contact, gather information on matters relevant to the process, define their own interests and prepare the negotiation scheme. The second stage is the face-to-face negotiation. Parties access to this phase if they feel that the negotiation is the best alternative to find a solution to a joint problem. They evaluate alternatives present, select the ones compatibles with their own expectation and agree on all terms. The last stage is the post-negotiation, which includes writing, signing and implementing the contract. (Ghauri 1996, 10-11. )
3 BUSINESS NEGOTIATIONS IN INTERNATIONAL SETTINGS 3. 1 International business negotiations With the globalization of business, the question of negotiating in international settings has received a lot of attention. When negotiating internationally, there are various distances between parties that influence the cost of the process. The clearest one of the distances is physical distance, but also there are economic, educational and cultural distances present. (Usunier 1996, 93. ) Parties in international negotiations come from different countries and have different cultural backgrounds.
They may have different patterns of thinking, feeling and acting. (Hofstede – Usunier 1996, 119. ) Due to the differences on parties’ cultures, the development of the negotiation process, and how parties understand the relationship are crucial (Ghauri 1996, 4).
There are three different levels of culture that influence the behaviour of negotiators: national level (cultural differences between countries) organizational level (cultural differences between different types of organisations depending on their home country and industry) personal level (cultural differences between individuals due to different countries, organizations and especially due to their professional and regional backgrounds, sex and age) (Ghauri 1996, 4; Hofstede – Usunier 1996, 119-120).
The control and decision-making structure vary from culture to another, as well as the reason for trusting or distrusting the other party for his/her behaviour. Also tolerance of ambiguity during a negotiation process varies culturally. (Hofstede – Usunier 1996, 125.
In order to have success in international business negotiation, it is essential that negotiators involved understand the other party’s culture and, if needed, are able to adapt their negotiation strategy to be consistent with the other party’s cultural system (Ghauri 1996, 4; Onkvisit – Shaw 1993, 667). Cultural differences demand negotiators with special skills for communicating the desired information and emotions to the other party by spoken word, written word and non-verbal behaviour (Hofstede – Usunier 1996, 126).
The more distant the parties’ cultures are from each other, the more difficult it is to adjust to it and communicate within it. Also to have culturally appropriate and acceptable purpose for negotiation is difficult in intercultural settings. (McCall – Warrington 1984, 34. ) Parties should share some joint views of the world because when they are partners in the future, it is difficult for them to solve problems together without common “mental schemes” (Usunier 1996, 109). In order to master the foreign, and frequently very different, cultural environment, businesspersons must prepare themselves ahead of time (Ferraro 1990, 2).
Cultural differences demand also specific skills for preparing, planning and arranging negotiations (Hofstede – Usunier 1996, 126). When preparing for international negotiations there are many things that should be considered or done depending on the situation. The parties should identify contents of the deal, create alternatives, put themselves in the shoes of the other party, think the appropriateness of the message, build up relative power and choose the persons who will handle the negotiation. Careful planning before the negotiation takes place can lead to a great benefit to both parties and to their future relationship.
(Ghauri 1986, 80-81. ) The idea that culture is learned has many important meanings for the conduct of international business negotiations. First of all, such an understanding can lead to a greater tolerance for cultural differences. Secondly, it reminds people that if they have learnt their own culture through the process of learning, it is possible to learn to operate in other cultures as well, even though it is more difficult. (Ferraro 1990, 21-23. ) People from different cultures have different values, different attitudes and different experience. They also have different strengths and different weaknesses.
A good negotiator should become aware of his/her own strengths and the strengths of his/her particular culture and find a negotiation strategy that copes with those strengths. According to Gesteland (1999) there are two basic rules concerning the international negotiation process: the seller should adapt the buyer and the visitor should observe the local customs. (Gesteland 1999, 16, 61). It has been stated that the results of intercultural negotiation are less favourable than the ones in intra-cultural (within a country) settings (Usunier 1996, 106).
But also that when negotiators are skilled and well trained in working within different cultures, they can turn their knowledge into an asset and that way achieve better results (Hofstede – Usunier 1996, 126). Whether the company has success or it fails abroad, depends on how effectively its’ employees can exercise their skills in a new location. Less favourable results usually derive from an inability to understand and adapt to foreign ways of thinking and acting rather than from the lack of technical or professional skills. (Ferraro 1990, 7.)
Negotiators should be conscious that people from different cultures operate different ways. Some writers point out that negotiators should not imitate other cultures, adapt or change themselves but to be just what they really are (Gesteland 1999, 61; Ghauri 1986, 81). Being themselves also means to be aware of local cultural characteristics and generally accept and honour local customs, habits and traditions (Gesteland 1999, 16; Ghauri 1986, 81). On the other hand, it has been stated that negotiators in the real-life situations adapt their behaviours in cross-cultural interactions (Adler – Graham 1989, 530).
The model presented in the Figure 1 applies also in international business settings. Environmental differences, especially in view of the culture and business traditions prevailing in different countries, are important things to take into account. It might be difficult to understand and adjust to each other’s culture or traditions, but it is very important to be aware of these differences. Post-negotiation stage also presents a crucial problem in the international negotiation process: which law should be chosen to regulate the contract and arbitration?
This requires an entity like the International Chamber of Commerce to act as an arbitrator in all international deals. (Ghauri 1986, 73-82. ) As stated in this chapter, the cultural knowledge has a huge importance in international business negotiations and relationships. In the following subchapter we are going to talk more about those cultural characteristics that influence business negotiations between parties from different countries. 3. 2 Cultural characteristics that influence business negotiations As already stated, various cultures make up the character of an individual.
All the cultures (national, regional, industrial, organisational and personal) have subcultures and even subsubcultures (Kapoor et al. 1991, 21, 25, 83). The fundamental differences between cultures have an impact on firm’s business success throughout the global marketplace (Gesteland 1999, 19). However, one should start preparing for international negotiations by learning one’s own cultural values and how much they differ from those of the other party (Hofstede – Usunier 1996, 126). What are the components of a culture that should be taken into account in international business situations?