Chapter 5- IB summary Cross-Culural Negotiation and Decision Making

Chapter 5: Cross-cultural Negotiation and Decision Making [IB]

Opening Profile: Bechtel and GE Benefit from Enron's Failed Negotiations over Dabhol Plant

Betchel and GE bought out partner Enron's 65% share in Dabhol from a bankruptcy court for $22M. Goal is to restart the 740-megawatt plant, idle for almost 3 years. Dabhol went bankrupt in May 2001 when state electricity board stopped paying the bills, citing the cost was too high. Now that Dabhol has been consolidated into one place, Betchel and GE, partner's in this venture are in negotiations to sell to some of India's biggest non-government energy companies.

Negotiation : The Negotiation Process comprised of 5 stages (order may vary and relationship building can be continuous) where two or more parties aim to reach a mutually acceptable agreement.

Stage 1: Preparation- find out as much as possible about (1) the kinds of demands that may be made; (2) the composition o f the "opposing" team, and (3) the relative authority that the members possess Then you can gear your strategy, allocate roles, decide on concessions, and prepare action plan if negotiated situation cannot be found.

Stage 2: Relationship building- the process of getting to know one's contacts in a host country and building mutual trust before embarking on business discussions and transactions. (more focus & value world-wide than in U.S.). Entertaining, non-task sounding (nemawashi) – general conversation.

Stage 3: Exchanging Task-Related Information (presentation and state position; Q&A; alternatives discussed). Mexican negotiators give little substantive material and more lengthy, evasive information. French like to debate. Chinese ask any questions and give vague ambiguous information, but delve into details.

Information: Stage Four: Persuasion- hard bargaining starts. Majority of persuasion takes place over several negotiation sessions. Far East, details are usually worked out iahead of time through the backdoor approach (homnani). Japanese are more like Americans and less like Brazilian behaviors. Brazilians= fewer promises, threats, and so forth and Americans tend to be more alike in the use of these behaviors, but use commands less. "Dirty Tricks", tactic often used to mislead the opponents deliberately. Another tactic, place opposing negotiator in stressful situation (uncomfortable temp, rudeness, too bright light, interruptions, etc.). American's see as dirty or misleading may be cultural norm to mislead at first. Persuasion primary purpose. Brazilians interrupt, touch and facial gaze often. Japanese tend to use more silent periods and interruptions but less facial gazing than Americans. Japanese and Americans did not touch other than handshake.

Stage Five: Concessions and Agreement- last stage of negotiation, tactics vary greatly across cultures. Chinese & Russians are prepared to ask for more than they expect to get; Swedes start with what they are prepared to accept. Better Results are attained when bargaining with extreme positions. Asking for more than you hope to gain. Careful timing of the disclosure of information. Only tell what and when needed.

Understanding Negotiation Styles - Comparison of negotiation styles (Japanese; North American; Latin American) see page 155. Brazilians: spontaneous, passionate, and dynamic style; use the word 'No' extensively; lots of physical contact. Japanese: skillful, calm, quiet, patient negotiators; accustomed to long, detailed negotiating sessions. Americans: plunge straight to the matter at hand. Westerners and Arabs believe time is money; where other cultures build relationships and delay with haggling.

Successful Negotiations Around the World: Profiles of American, Indian, Arab, Swedish, and Italian negotiators, according to Pierre Casse, and give some insight into what to expect from different negotiators and what they expect. Pg. 156-158.

Managing Negotiation - The successful management of intercultural negotiations require a manager to go beyond a generalized understanding of the issues and variables involve. 1. Gain specific knowledge 2. Prepare accordingly to adjust to and control the situation 3. Be innovative. Huthwaite Research Group- reveals how successful negotiators, compared to average negotiators, manage the planning process and face-to- face behavior.

Using the Web to Support Negotiations- can provide support for negotiations, but cannot replace the face-to-face. (NSS- Negotiation support system) decreases direct and indirect costs of neg.

E-Negotiations- negotiations carried through e-commerce

Management Focus: Samsung's e-Chaelbol - internet becomes middleman for trading auctions. FishRound: online marketplace for frozen fish, CareCamp- e-marketplace for medical equipment, etc.

Comparative Management in Focus: Negotiating with the Chinese - cultural barriers on both sides when US vs. China. Two major areas of conflict: 1. The amount of detail the Chinese want about product characteristics and 2. Their apparent insincerity about reaching an agreement

Chinese negotiation process 3 cultural norms: ingrained politeness and emotional restraint; emphasis on social obligations; belief in the interconnection of work, family, and friendship. Avoid open conflict to save face: Lien (moral character); Mien-tzu (one's reputation or prestige).

Managing Conflict Resolution - differing communication styles Low-Context vs. High-context usually lead to confict. Low-context such as U.S.= instrumental oriented (conflict separate from task); High-context such as Middle East (avoid conflict) = expressive oriented (handle conflict indirectly) otherwise insulting and lose face.

Decision Making

The Influence of Culture on Decision Making- crucial to understand as culture affects decision making through the broader context of the nation's institutional culture, collective patterns of decision making & value system that affects decision maker's perception of situation.

Approaches to Decision Making : value system- utilitarian system vs. moral idealism in a society affects its overall approach to the world. Who has authority- Autocratic vs. participative; Country's orientation- individualistic vs. collectivist; Culture affects speed- how fast or slow a decision is made.

Comparative Management in Focus: Decision Making in Japanese Companies - three levels of negotiation in Japanese culture of collectivism and share responsibility = ringi system of decision making. (cumbersome and very time-consuming prior to the implementation stage)

1. nemawashi process: used to gain consensus

2. ringi: more formal authorization procedure begins

3. ringi-sho: passed up through successive layers of management for approval – the approval made by official seals. (Showing collective agreement)

Conclusion: Competitive positioning and long-term successful operations in a global market require a working knowledge of the decision-making and negotiating processes of managers form different countries. One cannot negotiate without making decisions.