International commercial transactions require skilful negotiators to come to fruition. Despite commercial negotiators increasingly coming together from different parts of the world, it was not until relatively recently that cultural diversity became a factor to consider in negotiations. Any negotiation is characterised by certain elements which add a degree of difficulty: information asymmetry, entrenched positions, the potential for opportunism and sometimes, irreconcilable objectives.[1]
The fatality of the aforementioned factors will vary according to context, but it is now accepted that in the specific context of cross-cultural negotiations, these are heightened and more likely to lead to less joint profits for the parties involved.[2] Such findings are expectable because it is natural for people from different backgrounds to take different approaches to negotiation; it is logical and conceivable that culture will affect negotiation because culture affects important parameters such as preferred style of business relationship, attitudes toward business and of course, communication style. Examining the above factors in more detail, the following have been identified by researchers as the most influential parameters to be borne in mind in cross-cultural negotiations.
Focus on long-term relationship building vs focus on one-time deals
Broadly speaking, focus on long-term relationship building in international negotiations is present mostly amongst cultures which place value on trust and intuition (instead of predominantly facts and data), cooperation and respect.[3] The objective of the negotiation is almost always mutual benefit versus opportunism, with the outlook of repeat business. Because the focus is on establishing a long-term relationship, it is natural that a more collaborative approach will be taken during negotiations and for negotiators to problem-solve in order to reach a desirable outcome.[4] The focus is on adopting an attitude and approach that will convince the other party that a long-term relationship will be beneficial for all.
Studies have shown that focus on relationship-building is particularly common in Japan, China and India, where personal relationships and collectivism are important cultural features.[5] It must be noted that many times cultural features are complemented by external factors. For instance, due to the regulatory framework, supply chains and business risk, it makes commercial sense for parties to seek repeat business from existing partners to capitalize on economies of scale. Accordingly, it is natural that business culture will shape to prefer long-term relationships. This is particularly true for parties in jurisdictions outside the European common market, or other trade blocs, whose primary business targets are in the said trade blocs.
On the contrary, are parties that seek a single deal out of the other party in the negotiation. The focus is usually on achieving a transaction rather than a relationship.[6] In such negotiations, there is usually a pre-defined set of objectives to which parties might attach vastly different priorities.[7] For example, for the buyer as a negotiating party in a one-time deal situation, the primary focus would be to get the best value for money and the reverse would be true for the supplier. Because both parties know or at least suspect that there will be no repeat business following, it is natural that negotiators will insist on their positions far more. It is not uncommon for one party to have asymmetrical bargaining power, invariably leading to an inclination for a more aggressive negotiation style.[8] Such course of business is common in Western cultures, especially where competition and efficiency sit at the top of priorities and/or where there is significant imbalance in bargaining power.[9]
In any case, it is important to note that it is impossible to speak with accuracy about the negotiating approaches of entire jurisdictions.[10] Negotiating style very much depends on context – for example, the state of a specific business and its bargaining power, a specific business goal, corporate culture and the personal traits of decision makers and negotiators. Therefore, when preparing for a negotiation, it is advisable that each party researches the culture of its counterpart but approach the negotiation with an open mind and expecting that the other side might not present any or all characteristics of their background culture.
Win-win attitude vs win-lose attitude
A win-win attitude, or otherwise put, a collaborative approach, means that the negotiators will look at a situation holistically and make concessions to achieve mutual advantage without compromising on important points. Negotiators with a win-lose attitude or more accurately, 'I will lose whatever you may win' might be more competitive, inclined to insist on their own position and have less regard to the other party’s goals from the negotiation.[11] In this context, ‘winning’ can mean ticking most objectives out of the agenda while making the least possible concessions. The win-win or win-lose attitude is many times coupled with broader objectives of the negotiation. For example, when establishing a long-term business relationship is a priority, it is of utmost importance to adopt a win-win attitude in negotiations and try to create benefit for either side.
Communication styles
Negotiators will use various communication styles in an international negotiation. However, what style they adopt when, can be influenced by their cultural background. It is important to initially appreciate what communication styles exist. Direct communication or direct information sharing means that the negotiator is using clear and transparent language to express their position, without attempting to manipulate how their message is perceived by the listener.[12] For instance, clearly stating a hard line in a negotiation, without softening its impact for the other side, is direct communication. Accordingly, direct communication has several advantages; it can be less time consuming and can make the negotiation overall more efficient as the parties can avoid misinterpretations and focus on their most important differences. In certain cultures, directness is highly appreciated and is trust-building. In others, direct communication, and especially hardline statements (even in the name of efficiency) can be perceived as unwillingness to find common ground, impoliteness, or confrontational behaviour.[13]
On the contrary, an indirect communication style relies on implicit language to communicate a message, such as body language and 'information derived from the physical context.'[14] For example, taking a specific facial expression as a reaction to something spoken by the other negotiator can convey a negative or positive message, depending on the circumstances. The use of titles, the nature of the venue and other gestures (e.g. positioning in the negotiating table) are further examples of how the physical context can convey a subtle message in some cultures. Indirect communication also includes how tone and words that can be perceived to have more than one meaning or words that soften the gravity of a statement in a negotiation. In cross-cultural negotiations, the indirect communication style could present difficulties because of how broadly varied it is amongst cultures, leading to the communicated message being more ambiguous.[15] For example, conversational overlap leaves negotiations of some cultures unbothered, while others might perceive that as an aggressive communication tactic.[16] IIn a different context, offering a gift to the other side might be politeness in a culture that values personal relationships but be perceived as attempted bribe in a more individualistic culture.[17]
Final thoughts
Culture undeniably plays an important role in international negotiations, and it is imperative that negotiators research the culture of their co-negotiators; not necessarily to adjust their behaviour but to not misunderstand cues of the other side during the negotiation and seek clarification when necessary.
Endnotes
[1] Dina Ribbink and Curtis M Grimm, ‘The impact of cultural differences on buyer-supplier negotiations: An experimental study’ 32 Journal of Operations Management 2014 114, 115. [2] Ibid, 123. [3] Jean-Claude Usunier, Intercultural Business Negotiations: Deal-Making or Relationship Building (1st edn, Taylor & Francis Group, 2018), 14. [4] Ibid, 21.
[5] Ibid. [6] Ibid, 13. [7] Ibid. [8] Ibid, 203. [9] See generally Sara Benetti, Enrique Ogliastri and Andrea Caputo, ‘Distributive/integrative negotiation strategies in cross-cultural contexts: a comparative study of the USA and Italy’ 27 Journal of Management & Organisation 2021 786, 789 and 798. [10] Dina Ribbink and Curtis M Grimm, fn(1), 124. [11] Jean-Claude Usunier, fn(3), 48. [12] Ibid, 140. [13] See for example, the example of American and Chinese negotiators. Ibid, 315. [14] Sara Benetti, Enrique Ogliastri and Andrea Caputo, fn(8), 789 and 798.; Jean-Claude Usunier, fn(3), 139. [15] Jean-Claude Usunier, fn(3) 141. [16] See for example, Usunier’s report on Brazil. Jean-Claude Ibid, 311. [17] Ibid, 284.