Assessment of How Cross-Cultural Negotiations Are Affected by Cultural Factors - Coursework Example

Running Header: Cultural Factors Affecting Negotiations Assessment of How Cross-cultural Negotiations Are Affected By Cultural Factors Name : Course Title : Date : University : Introduction In the modern day business environment, the level of cross-cultural business communications is very high due to the rapid phase of globalization. With the growth in Free Trade (FT), increased foreign direct investments (FDI) and escalated business process outsourcing (BPO) practices, the level of negotiations with people from different countries has increased dramatically (Hill, 2003). Many companies face challenges in establishing international operations and business dealings due to their inability to progress further than the initial rounds of negotiation process. However some organisations achieve success in international business, with a proper understanding of how the negotiation process is affected by cultural differences (Killing, 1982). National Culture and Its Influence on Communication While there is varying views of national culture and the degree of its impact on organisational behavior, there is much consensus that it embodies norms, values, artifacts and symbols, which results in diversity in communication and interaction process within a cross cultural setting (Trompennar & Hamden turner, 1998). It is also a key factor in gaining an insight in to how people behave in different countries, their preferences, attitudes, values and beliefs (Fathehi, 1996). Thus the importance of understanding national cultures become critical if businesses are to understand how and why people from different cultures will behave differently and communicate differently within the negotiation process (Francesco &Gold, 1998). Cross Cultural Communication To understand, how negotiations are affected by cultural factors, it is necessary to understand what actually entails cross cultural communication. “Cross cultural communication occurs when a person from one culture sends a message to a person from another culture” (Adler, 1991 cited in Weiss, 2003, page. 185). However, the communication process is distorted by the wrong signals, resulting from cultural differences. To make this communication process effective the communicating party should have a clear knowledge of the cultural values and assumptions which relates to each other’s national cultures. Some well established explanations of cross cultural differences such as Fons Trompennar & Charles Hampden-Turner’s model of Seven Dimensions of Culture; Geert Hofstede’s Indices of Work Related Values and The theory of Silent Languages of Culture proposed by Hall are useful in gaining insight to how cultures differ on different dimensions. Negotiation process is not only affected by verbal expressions but also by the silent communication factors which needs to be observed and responded during negotiation process (Hill, 2000). Different Cultural Factors Affecting Negotiation There are various cultural factors that influence the negotiation process and the meaning, interpretations and way of doing things differ from culture to culture. Following are few of the main cultural factors that can affect negotiation processes in international business. Display of Emotions in Negotiations Negotiation styles are affected by what is explained by Neutrality vs. Affectivism dimension (Trompenaars and Hampden-Turner, 1998), which refers to the degree to which people display their emotions. For example, Japan is a neutral culture with somber mannerisms especially in formal business dealings. In contrast, Americans, Australians or British can be considered as highly expressive by Japanese counterparts. In negotiations, Americans are direct in expressing their disagreement (Hall, 1963 cited in Weiss, 2003). For a comparative example of how American and Japanese negotiation styles vary on different aspects, please refer to Appendix I. In this view, if two companies from neutral and affectivist countries engage in business negotiations, those who are well versed in cross cultural negations will know that the lack of display of enthusiastic responses from counterparts from a neutral country not necessarily indicate lack of interest in what is being proposed. It is simply their way of considering and pondering deeply on the positions. Importance of Status, Gender and Seniority of Negotiator Status, gender, and seniority of the negotiator and delegates would also impact the negotiations. Cultural dimensions such as Achieved Status vs. Ascribed Status, bears impact on how capable the representative is seen in the eye of the other negotiating party. For example, America has a highly achieved status compared to ascribed cultures as Japan, India or China. In ascribed cultures seniority, age and gender is important in determining the status. Such cultural factors carry implications when choosing the correct representatives for negotiation process (Hill 2000). Level of Friendship vs., Professionalism in Business Dealings Different cultures appreciate different levels of friendship vs., formality when it comes to establishing business relationships (Brown, 1988). Dimension of Specific vs. Diffused orientation (Trompenaars and Hampden-Turner, 1998) of the culture affects such factors. Those cultures, which are Specific, will have little private space and greater public space. In contrast the Diffused cultures will allow for greater private space. Countries in Arab world for example are highly diffused and will only get down to real negotiations once reasonable levels of informal relationships are established with the negotiating parties. They prefer to think that they are doing business with a particular person than a business organisation and as such a long-term key representative has to be appointed to negotiate with a prospective Arab business partner (Tayeb 2005). Americans on the other hand tend to be more specific and gets down to business directly which they consider is the professional approach to work (Ford & Honeycutt, 1992). Risk Taking and Decision Making Some cultures are high on uncertainty avoidance and risk aversion and hence follow a long process in decision making. For instance, Japanese culture places importance on the process over outcome. They take a long period in negotiating contracts and visiting sites etc. prior to agreeing on a business deal. Japanese score the highest in Uncertainty Avoidance dimension in Hofstede’s study. (Please refer to Appendix II for score table). This factor affect how decisions are made and contracts are closed in the negotiation process. Western countries or Australians for instance reach decisions quickly and often by singular persons. Contracts are even brought in to the first round of negotiations. They may pressure for a final decision and the negotiator may make decisions on their own during the negotiation process. However, other cultures as Arabic, Japanese or Chinese which are highly collective in their orientations wish to consult others and reach decisions slowly and with consensus. Treatment of Time Cultures differ in the way they treat time. This is often the course for misunderstandings in negotiation process. Countries such as USA or Britain see time as sequential and places greater importance on punctuality, sequence of operations and speedy actions (Hofstede 2001). However those cultures as Italy, Spain, or Latin American countries as well as countries in the East see time as the backdrop for the “great circle of life” where there is a certain lack of urgency in how things are done. Where time is considered as highly important, being late and wasting time on chit chatting over tea may be seen as useless. On the other hand curtness, impatience to get down to work and prompt manners may be interpreted as disrespectful and aggressive by other cultures. Negotiators must learn to respect each other’s cultural differences and try to adopt to each other or at least avoid misinterpreting them as signs of disrespect of lack of interest in negotiations (Hill 2000). Confrontations and Losing Face In negotiating, confrontations, disagreements and agreements can naturally be expected. But each culture expresses agreement or disagreement in their own unique manner. (Hall, 1963). Some business cultures insist on explicit and written contracts while other cultures as Japanese or Arabs value the trust and commitment. In negotiation process too, disagreements and agreements can be explicitly expressed or more subtly expressed. For example, when dealing with Japanese firms, most foreigners can not understanding whether the Japanese are agreeing or disagreeing. They believe it is better not to be confrontational and make the other party lose face. Similarly they too wish to save face and not be cornered in to difficult situations. Americans, Australians, British, or Germans on the other hand are direct in expressing their disagreement (Weiss 2001). Commitment Levels Negotiations in international alliances are further affected by cultural orientation towards commitment to the partnership. Some cultures take a short term orientation of projects while others pursue long term goals. For example, business people from the West will be more short term oriented with a greater focus on profitability of venture in short run in comparison to Japanese counterparts. When dealing with American firms, the expectation should be to demonstrate short term profitability. Indian management style too is dominated by such short term orientation where the main attraction of a venture will be the short term profit generation. Japanese firms are more willing to lose money on the short run to establish themselves in a market (Ford & Honeycutt, 1992). Conclusion Discussion of various culture related factors that influence negotiation showed that negotiators need to be deeply aware of these different dimensions in which various cultures differ. The manifestations of these cultural differences in the negotiation process should be fully anticipated and suitable responses to create a harmonious negotiation setting needs to be pre planned. It is necessary to compromise on own cultural traits and act with tolerance and empathy to the other party’ negotiation styles. However, one need not totally sacrifice own style and practices to satisfy the other. The success of any negotiation process, largely depend upon achieving a “win-win” situation where both parties are mutually satisfied with the outcome. The delegates should also be prepared in advance by being aware of the other party’s expectations. Open mindedness is a prerequisite and managing both verbal as well as non verbal communications with cultural awareness and cultural sensitivity can lay the foundation for sound negotiation process. Appendix I Table 1 – Negotiation Styles from a Cross Cultural Perspective Dimension North American Japanese 1 Emotional sensitivity not highly valued. Straightforward or impersonal dealings. Emotional sensitivity highly valued Hiding of emotions. 2 Litigation; not as much as conciliation. Subtle power plays; Conciliation. 3 Lack of commitment to employer; breaking of ties by either if necessary. Loyalty to employer; employer takes care of employees. 4 Teamwork provides input to a decision maker. Group decision-making by consensus. 5 Decisions made on a cost-benefit basis; face saving does not matter. Face-saving crucial; decisions often made on basis of saving someone from embarrassment. 6 Decision makers influenced by special interests but often not considered ethical. Decision makers openly influenced by special interests. 7 Argumentative when right or wrong, but impersonal. Not argumentative; quiet when right. 8 Great importance given to documentation as evidentiary proof. What is down in writing must be accurate, valid. 9 Methodically organized decision-making. Step-by-Step approach to decision making. 10 Profit motive or good of individual ultimate aim. Good of group is ultimate aim. 11 Decision making impersonal; avoid involvement, conflicts of interests. Cultivate a good emotional social setting for decision making; get to know decision makers Source: Weiss, J.W. (2001) Organisational Behavior & Change, 2nd ed. Ohio: South-Western Collage Publishing. p16. Appendix I Table 1 – Work Related Values for 20 Selected Countries Country Power Distance Uncertainty Avoidance Individualism Masculinity Argentina 49 86 46 56 Australia 36 51 90 61 Brazil 69 76 38 49 Canada 39 48 80 52 Denmark 18 23 74 16 France 68 86 71 43 Germany 35 65 67 66 Great Britain 35 35 89 66 Indonesia 78 48 14 46 India 77 40 48 56 Israel 13 81 54 47 Japan 54 92 46 95 Mexico 81 82 30 69 Netherlands 38 53 80 14 Panama 95 86 41 44 Spain 57 86 51 42 Sweden 31 29 71 5 Thailand 64 64 20 34 Turkey 66 85 37 45 United States 40 46 91 62 Hofstede, G. (2001). Cultures Consequence: Comparing Values, Behaviors, Institutions, and Organisations across nations. London: Sage Publications Ltd. References Adler, N. (1991). International Dimensions of Organisational Behavior. 2nd ed. Boston: PWS-Kent. Fatehi, K. (1996). International Management: A Cross Cultural Approach. New Jersey: Prentice Hall Inc. Ford, J.B. & Honeycutt, E. D. Jr. (1992). Japanese national culture as a basis for understanding Japanese business practices [online]. Available from: http://www.findarticles.com/p/articles/mi_m1038/is_n6_v35/ai_13246882 [31.12.2005] Francesco, A.M. & Gold, B.A. (1998). International Organisational Behavior. 2nd ed. Upper Saddle River, New Jersey: Person Education Inc. Hall, E. T. (1963) Silent Languages. Green witch: Fawcett Publications. Hofstede, G. (2001). Cultures Consequence: Comparing Values, Behaviors, Institutions and Organisations across nations. London: Sage Publications Ltd. Hill, C.W.L. International Business. (2003). 4th ed. New York: McGraw-Hill. Killing, J. P. (1982) "How to Make a Global Joint Venture Work.” Harvard Business Review, Vol. 60 (May/June), 120-­27. Tayeb, M. H. (1988) Organizations and National Culture a Comparative Analysis. London: Sage Publications. Tayeb, M. H. (2005) International Human Resource Management. New York: Oxford University Press. Trompenaars, F. & Hampden-Turner, C. (1998) Riding the Wave of Culture: Understanding Diversity in Global Business. 2nd ed. New York: McGraw Hill Companies. Weiss, J.W. (2001) Organisational Behavior & Change, 2nd ed. Ohio: South-Western Collage Publishing. Read More