Negotiating Internationally

In today’s global economy, ever more business deals are made across national borders. Negotiating international deals is a considerable challenge because you must be familiar with the complexities of the immediate negotiation context, such as the bargaining power of the parties and the relevant stakeholders, as well as the broader context, which may include currency fluctuations and government control.

Understanding the differences

You are likely to experience significant differences in several key areas when you engage in international negotiation:

• Agreements Western negotiators expect to conclude the process with a comprehensive bullet-proof legal contract. In other countries, and notably in Asia, memorandums of understanding (MOAs), which are broader but less substantial agreements, may be more common.

• Time sensitivity In countries in which a “doing” culture is prevalent, people believe in controlling events and managing time strictly. In some countries, time is not viewed as such a critical resource, and negotiations can be slow and lengthy.

• Degree of formality Negotiators from informal cultures tend to dress down, address one another by their first names, maintain less physical distance, and pay less attention to official titles. In contrast, negotiators from formal cultures tend to use formal titles and are mindful of seating arrangements.

Factors to consider in international negotiations

Political and legal systems

Different countries have different tax codes, labor laws, legal philosophies and enforcement policies, laws that govern joint ventures, and financial incentives for attracting business investments.

Bureaucracy

Business practices and government regulations vary from country to country. In some countries, the government bureaucracy is deeply embedded in business affairs, and businesses are constantly required to secure government approval before they act.

International finance

Currencies fluctuate and affect the balance of expenses and profits. The stability of the currency your investment is made in affects the risk to you. Many governments also control the flow of currency, limiting the amount of money that can cross their borders.

Culture

Different cultures have starkly different cultural beliefs about the role of individuals in society, the nature of relationships, and the ways in which people should communicate. These have a fundamental effect on how you need to approach a negotiation.

Ideology

In individualistic cultures like the US, the purpose of the business is to serve the interests of its shareholders, but in collective cultures, the business has a larger purpose: to contribute to the common good of society.

Political risk

While some countries have long traditions of an abundance of resources and political stability, others have scarce resources and are marked by volatile political changes.

Negotiating in Asia

Succeeding in any international negotiation means taking the time to understand the complex negotiating environment, being sufficiently flexible to be able to change your ways if necessary, and learning to work within governmental bureaucracies. The cultural and business landscape in Asia is especially unfamiliar to Western organizations, and, with the region’s rapid rise to economic prominence, every manager needs to be aware of how it differs.

Acknowledging differences

Asian culture is characterized by concern for people’s feelings. It emphasizes interdependence, harmony, and cooperation, while Western culture tends to be more competitive and achievement-oriented, and rewards assertiveness.

Asian societies give a higher priority to collective goals; self-sacrifice for the good of the whole is a guiding principle. There is a greater acceptance of unequal power distribution, and relationships are built based on differences of stature, age, and gender.

Another cultural differentiator is the level of comfort of individuals in ambiguous situations. Business people in China and Japan like to avoid uncertainty, preferring structured and clear situations, in which they are able to make decisions after careful evaluation of a large amount of information. Contrast this with some Western societies, where people are more comfortable with ambiguous situations and are prepared to make quick decisions based on a limited amount of information.

Be aware too that there are differences in communication styles: Asians may be “high context” (indirect, implicit, and suggestive), while those from the West are “low context”—more direct and specific.

The Asian style of negotiation

• Relationships (“Guanxi”)

  Chinese business leaders invest heavily in making interpersonal connections and creating a dependable social network, known as “guanxi.” They prefer to do business within their trusted network.

• Emotions

  The Confucian teaching xinping qihe, meaning “being perfectly calm,” makes it difficult for Western negotiators to “read” their counterparts and to know where they stand.

• Fairness

  The concept of fairness is based on needs: those who have more should give to those with less.

• Trust from the heart

  Asian businesses like to do business with trustworthy individuals rather than faceless organizations. The lengthy process of building trust is based on openness, mutual assistance, understanding, and the formation of emotional bonds.

• Face

  Dignity and prestige are gained when individuals behave morally and achieve accomplishments. Face is a formidable force in the Asian psyche that negotiators in Western organizations must be particularly aware of.

• Legalism

  You risk insulting your Asian counterpart if you emphasize penalties for dishonoring commitments in detail. Contracts are short and merely a tangible expression of the relationships being created. They are not treated as “fixed” legal instruments.

• Decisions

  Although Chinese and Japanese societies are hierarchical, they use the consensus style of decision-making. Lead negotiators refrain from dictating a decision in order to preserve relationships and give face to others.