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The Impact of Culture Differences on international business negotiation

By Grace Baker,2014-07-10 11:02
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The Impact of Culture Differences on international business negotiation

1 Introduction

    With the accelerated process of economic globalizationeconomic and trade exchanges

    have become more and more frequent and closer between countries and regions. There are

    increasing needs for mutual exchange and cooperation.

    1.1 Background knowledge 1.1

    In the 21st century, although merchants widely use electronic commerce day by day, but it In

    still cannot replace the direct contact and face to face negotiations. International business

    negotiations are influenced by national political, economic, cultural and other factors of the

    respective state, it's the most difficult to grasp is that cultural factors. Culture refers to the

    value ideas, rules of conduct and customs that people or a community formed in the long term

    social production and life. This kind of culture shows an obvious difference from another

    nation or group of prominent characteristics. It is these cultural differences that led to

    cultural collisions and even cultural conflict in international business negotiations.

    International business negotiations are the direct interpersonal forms of communication,

    and its effectiveness has a direct relation with the quality of the negotiators and the

    information interpretation. Negotiators are likely to come from very different cultures or

    sub-cultural environments. Communication misunderstandings and misinterpretations are

    inevitable. The question is that if everyone estimates each other's interests and behaviors

    by their own cultural values, then it is difficult to quell disputes and achieve their

    objectives of cooperation.

    1.2 Purpose of the study

    Culture is diverse, and beyond national borders. Negotiations may be influenced by

    different cultures. The neglecting of cultural differences, lack of communication,

    preparation and inappropriate process in the negotiation will increase the difficulties.

    Therefore, it’s very necessary for the negotiators to study the culture of the other party

    carefully before the start of the process and in the talks .Only in this way can the

    corresponding negotiation strategies be developed.

    1.3 Significance of the study

    To get more familiar with the other party’s cultures will reduce misunderstandings caused

    by cultural differences and increase the abilities of predicting the behaviors of the opposite

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sides, and thus become more active in the negotiations.

2 Literature review

The researches are mainly conducted by the scholars of the western countries, especially in

    France, the Netherlands, Sweden, Argentina and Russia. In the 1990s, the study focused on

    several issues the impact of culture on the process and outcome of business negotiation,

    the relation between culture and negotiation situation, the practical recommendations for

    professionals, and research and methodological issues. Gore and Wusinier divided the

    issue of “The impact of cultural differences on international sales negotiations," into four

    categories (each has a second variable): the behavior trend of participants, negotiating

    strategy, negotiation process (agenda setting, schedule, information processing,

    communication, tactics), and results orientation. Austrian scientist Peter Munch thinks that

    there are three parts in international business negotiation: Background, atmosphere, and the

    process, And each part is influenced by cultural factors, such as time of different meaning

    and importance of the collective role of individuals, communication patterns and the

    importance of personal relationships. In recent studies on international negotiations, scholars have emphasized the role models and cultural variables or a combination of

    cultural elements, and it can be divided into the following four categories: structure -

    process approach, behavioral approach, understanding - a strategic approach and the steps

    method. Furthermore, local studies of international negotiations have been extended to

    China and Nepal. In recent years, experts and scholar of business negotiation and academic

    circles at home and abroad have reached a consensus on the understandings of this area

    that we have achieved, but as to how to overcome, each has its advantages. Such as:

    Hua-Lin Wang in 2006, " Northern Economy and Trade " section 08 of the "The Impact of

    Cultural Differences on Business negotiations and Countermeasures ", and Li Li in

    2006,"Market Modernization," No. 11's "The Cultural Difference in International business negotiations "and other articles. Because the importance of cultural differences on

    international business negotiation, the studies will be more concerned and get a greater

    development in the future, thus it can serve the practice of negotiations.

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3. Cultural differences and international negotiations

    3.1 Cultural differences

    To widely speaking, cultural differences mean that people in different areas and environments formed and there differences include language, knowledge, life, values, ethics, ways of thinking, customs and so on. And they make people produce disagreements on a same thing.

    3.2 International business negotiation

    It means that the parties of different countries or areas involved in negotiations through information exchanging and consultations to achieve consensus, and in the end meet their own needs. The main negotiations are from two or more countries or regions, negotiators represent the interests of different countries or regions .At the same time, it is intercultural. The negotiators from different countries or regions have different cultural backgrounds, and their values, ways of thinking, behaviors, communication patterns, their languages and customs were also different, these cultural factors will have a direct impact on the success of international business negotiations. International business negotiations are an important part of business activities, it is cross-border activities. The negotiators come to a conclusion by discussing the mutual interests. This means that it is very important to understand the cultures of different countries and get familiar with the business activities of cultural differences.

    3. 3The impact of cultural differences on international business negotiations The impact of culture on negotiation is extensive and profound. Different cultures naturally divide people into different groups. The territorial and group differences tend to make people estranged with each other. Different cultures are also the obstacles for people with different cultures to communicate and exchange ideas. So, negotiators not only need to accept the cultures of each other , but also need to reveal and understand the other parties’ goals and behaviors correctly and be accepted by the opposite side, and reach to a unanimous agreements at last. In general, cultural differences impact on international business negotiations mainly in the following areas:

    3.3.1 The impact of differences in language and non-verbal behaviors on the

    international business negotiations

    The impact of cultural differences on negotiations firstly shows is the process of verbal

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communication. There is a close connection between a people and their cultures.

    Differences between different cultures have an obvious regulative relationship in

    cross-culture communication. Language is the bridge of communication for each country,

    region and people, the language differences is the most direct and clear. So far as Japan,

    Brazil and France is concerned the Japanese merchant's mutual exchange style is the most politeness. They like to use positive pledges, recommendation and guarantee, and

    seldom use threat, order and warning opinion. In their polite speech style, the most

    prominent is that they do not always use the "no" to "you" and face stare, but often keep

    silence for a moment. The Brazilian merchants use “not” and “you” frequently. Their

    negotiating styles are rather wanton and unwilling to keep loneliness, Furthermorethey

    like to gaze and even touch the other party from time to time. The French businessmen’

    negotiating styles are more aggressive and especially like to use threats and warnings. In

    addition, they also like to use insert language, facial gaze, and "no" and "you". From this,

    we learn that only understand these differences can we avoid the misunderstanding of

    Japanese’ taciturnity, Brazilian’ excessive zeal, and French’ threat. Thereby we can obtain a

    successful international business negotiation. In business negotiations, the most typical

    example is the using and understanding of "yes" and "no". A U.S. company negotiates with

    a Japanese company. In the negotiations, the Americans happy discovered that when he

    made a opinion, the other part would nod and say “yes”, he thought the negotiation is particularly smooth. Until he asked the Japanese to sign the contract, then he found that the

    Japanese say “yes” means “I hear you”, not “I agree with you”. In fact, the meaning of

    “yes” is very rich. Besides the above two, it also means “I understand the question” and

    “I’ll considerate”. The expression of “no” is also very complicated. Some cultures object to

    head-on collision, so people generally do not directly say “no”, but use some vague words

    to reject. For example, the Brazilians use “somewhat difficult” to replace “impossible”, if

    the negotiators with little negotiation experiences understand the meaning literally, it

    would be a waste of time and delay the negotiation process.

    Cultural differences affect the negotiation not only in speech communication process,

    also in the process of non-verbal communication. The cultural differences will cause a

    huge difference of the use of body languages and action languages for the negotiators of

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    different countries and regions. Negotiators issue or accept a lot of important information which is more important than language information by non-verbal and more subtle ways, but all such signals are always carried out unconsciously. Therefore, when the negotiators issued a different non-verbal signals, negotiators with different cultural backgrounds may easily misunderstood these signals, but also be unaware of the errors that occurred. This unconscious personal friction, if cannot be corrected, will affect the development of normal business relationship. For example, people of vast majority of countries express agreement by nod. But in India, Nepal, people shook their heads to show affirmationin another word,

    they shake their heads and smile to express agreement. Some people says "You are right! You are right!" frequently, but constantly shake his head, it is so odd which make people cannot understand his real mind and full of wonder. It is now clear that physical movement and language differences what negotiator use will also create barriers to communication of negotiation.

    3.3.2 The impact of value differences on international business negotiation behaviors

    Value differences in international business negotiations are more invisible and difficult to overcome than nonverbal behaviors. The impact of value differences on business negotiations mainly show as the misunderstanding caused by objectivity, equality and the different time concept.

    3.3.3 Objectivity

    The objectivity of the international business negotiations reflects the level of "the distinction between people and things” which behaviors people have. Westerners,

    especially Americans have strong objectivity. In the international business negotiations, they stress the distinction between people and things, and they are mainly interested in substantive issues. On the contrary, in the rest of the world, people think it is impossible to distinguish the people and things. For example, in oriental culture where nepotism is more important and economic developments are often achieved in the condition of

    family-controlled. Therefore, negotiators from these countries not only as individuals, and results of the negotiations often affect themselves, personal conduct and substance become into two not unrelated problems, and in fact the two become inseparable.

    3.3.4 The concept of equality

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    Western society has experienced bourgeois revolution that fight for freedom, and the awareness of equality is deeply rooted among the people. In international business activities, people from the UK and other countries pursue egalitarian values and adhere to the principle of fair and reasonable. In their view, both parties should be profitable. For example, although Americans are pragmatic, but they do not ask a sky-high price, quote and conditions they proposed are objective. In the trading relationship, the Americans treat the buyer as peers, and they are fairer than the Japanese when the time come to divide interests. Many American managers believe that the fair division of profits seems more important than how much profit they have got. But in the Oriental Cultural it is deeply influenced by hierarchy, and the sense of equality is not as strong as Americans and other Westerners. For example, the Japanese are good at how to make the cake bigger, but the way they divide cake is not very fair. In Japan, customers are seen as God, the seller will often obey the buyer's needs and desires, and therefore, the distribution of profits is more beneficial to the buyer. And on our part, the market economy has been built, the Chinese concept of enterprise managers are similar with the conscious of the earlier period of western market economy, that is, business negotiations tend to take a single winning strategy, when it related to economic interests ,they tend to consider more about their own and concerned less about others. On the other hand, the market economy of the developed countries is relatively mature, so western negotiators often adopt a win-win strategy and basically think over the real interests of both sides.

    3.3.5 The concept of time

    Different cultural backgrounds show different concepts of time. North Americans have a strong sense of time. For them, time is money. But the people of Middle East have a weaker sense of time, in their view, time should be enjoyed. As negotiators have different concept of time, it make different negotiators have different negotiation manner and style. The Americans have a typical linear concept of time. Americans have a strong sense of modern competition, they pursue speed and efficiency, which created the commercial style of vigorous American businessmen. They will try to make every negotiation as short as possible, and strive to complete the negotiation swiftly. For them, to measure how a negotiating process is going on, is to see how many problems have been solved. The Chinese concept of time is cyclic, the Chinese people will use a long-term vision and

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    systematic approach, in a broad context, analyse question comprehensively and make a conclusion at last. The followings are the example of the impact different concept of time on international business negotiations.

    A Brazilian company went to the United States to purchase a set of equipment. The

    Brazilian negotiating team were late because they went shopping; when they arrived at the venue for negotiations, it is more than 45 minutes behind schedule. U.S. delegates were extremely unhappy, spent a long time to criticize the unpunctuality of Brazilian, no credit, and warned the Brazilian that if they were not on time again, the subsequent work would be very hard to continue, and told them that waste time is a waste of resources. The representatives of Brazil felt guilty on this, and had to keep apologizing to the U.S. representatives. After the start of the negotiations, U.S. delegates seemed still bear a grudge against the representatives of Brazil. This kind of condition confused the representatives of Brazil, speaking everywhere passive. No intention to bargain with the U.S. representatives and seriously consider the requirements they proposed, the Brazilian hastily signed a contract with the American. After the contract had been signed, the representatives of Brazil calmed down then he found himself suffered a major loss, but it was too late.

    In this case, the United States delegates successfully use the critical-type start strategy,

    forcing the representatives of Brazil consciously feel wrong and no time to seriously consider the contract which is good for the United States. In this case the Brazilian did not fully understand the concept of time of the U.S. , result in the failure of the negotiations. Next, let's discuss the example, how the representatives of Japan dealt with being late.

    There is a famous Japanese car company which has just landed in the United States,

    they urgently needed to find a U.S. agent to sell their products to make up the shortcomings of their less understanding of the U.S. market. When the Japanese car company was preparing to negotiate with a company of the United States on this issue, the Japanese late for the negotiation because of traffic jam. Representatives of U.S. company insisted on Japanese mistake, so that they can obtain more favorable terms in negotiation. One of the representatives of Japanese company found no turning back, so stand up and say: "We are very sorry for wasting your time, but this is not definitely our intention, Our lack the understanding of traffic conditions in the United States resulted in such unpleasant

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    consequence, I hope we do not to discuss this problem anymore. If you doubt about the sincerity of our cooperation, we have to end the negotiations. And I think it is not difficult to find another partner in the United States”.

    3.3.6 The impact of Modes of Thinking on international business negotiation Ways of thinking as a long-term cultural accumulation have a subtle and invisible influence on people's social life. Different ways of thinking in international business negotiations are often the key to success. As Eastern and Western cultures are concerned, they show their own characteristics on the ways of thinking. Eastern cultures advocate the perception of “whole conception”. This holistic thinking put everything into the network of relationships,

    considers it as a whole, and then analyze it. This conception stresses the diversity, harmony and unity of things. But the Western cultures regard the living environment as external, acknowledge the opposition between human and the nature, thus explore and conquer it. Therefore, the West focuses on the things thorough analysis and rigorous deduction through the phenomenon of the essence of things, form developed abstract thinking, strict logical reasoning, and division of delicate subjects. Thus they think with dispersion. This kind of thought differences also display in the custom differences which negotiate in the East and West. For instance, in the negotiations, the Chinese merchants like to obtain agreement in the big direction, and then discuss the detailed questions. But the Western merchants think that the details are basic, the detail questions have been made clear, and the questions are also easily solved. Final agreement is to resolve a series of details of the agreement. They often solve the questions about prices, delivery, guarantee and contracts of service and so on at different times, each question has concessions and pledge. However, Eastern cultures pay attention to all issues and make an overall discussion. Generally speaking, the final concessions will be made at the last step, and thus a series of agreements reached, and even the signing of the contract. Such differences often cause difficulties in the negotiations for both Chinese and Western communication. 3.3.7 The impact of cultural ethics on international business negotiations

    Cultural ethical differences in international business negotiations will also be an obstacle. Business negotiators have their own culture ethical bottom line in the pursuit of interests, The interests they concern about cannot conflict with the existence of their own cultural values. The forms of the culture ethical existence mainly are religious, moral, aesthetic,

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    scientific and utilitarian value. In strong religious countries and regions, establishing legal system based on religious doxy, for the recognition of people's behavior will depend on

    whether it is fit to the religious spirit of the country. Because of religious beliefs, a number of countries establish discriminatory or differentiated country-specific policy according to their own foreign policy in foreign economic relations. In social interaction and personal

    behavior, religious country and the countries with no faith have shown a clear difference.

    Such as different countries have their own religious festivals and events, which have a

    huge impact on the negotiators’ thinking, values, behavior choices. An international

    business negotiator must know the dominant religion of the nation or region; and the

    constraint to the thinking and behavior of the negotiators, understand whether

    government's policy, domestic political forms are influenced by the main religion of the

    country in the pre-negotiation information preparation. In the development plan and

    schedule negotiations should not be conflict with religious holidays of the country. In fact, many conflicts are because the negotiators do not understand the cultural differences.

    Consider the following example:

    Once, a motor plant of China welcomed a procurement team from Iran. Chinese negotiators have learned the Arab cultural taboos before the negotiation arrived, such as

    not to eat pork, not to drink, and talk about sex, and women had better not appear while

    negotiating and so on, and specifically communicated to each of the negotiators, the

    negotiation is very successful, although the price is slightly low than expected, but the

    order is very large. The director is happy, then the Chinese party invited them to a luxury

    local restaurant, but everyone can no understand why the foreign part said they cannot sign

    the contract after the meal and plan to return home the next day. The director was confused, and at last he learned that it’s because he had handed many drinks to the others with his left

    hand for the dinner, and he was too happy to notice the displeasure of the Arabs’ reaction.

    In Iran, people cannot use left hand when they are doing “clean” work. Left hand is used to

    wipe the buttock. The Chinese part has lost because they didn't pay much attention to the

    cultural ethical differences.

    3.3.8 The impact of negotiating styles on international business negotiations

    Negotiating styles are the main bearing and work-style what the negotiators showed in

    negotiation activities. The negotiating styles are reflected by the behaviors of the

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negotiators in the negotiation process, and controlling methods and means of the

    negotiation process. Negotiators’ negotiating styles have a deep cultural imprint. Culture

    not only determines the moral ethics of negotiators, but also affects the negotiators ways of

    thinking and personality and behaviors, so that negotiators from different cultures form

    different negotiating styles. Follow the cultural differences, negotiating styles can be

    divided into two types: oriental styles and Western styles. Oriental negotiating styles are

    based on oriental culture background, which are represented by Japan. Japanese merchants

    are conservative, status-oriented; attach importance to credit and the initial co-operation.

    They like paying attention to mutual dependency and they are experts in the negotiations.

    Japanese think it is very important to establish harmonious interpersonal relationships in

    the trade negotiations. If there had been contacts with Japanese companies, the negotiators

    should recall the past exchanges and friendship between the two sides before negotiation,

    which will be beneficial to the coming negotiations. They do not used to direct and pure

    business activities. If it is the first time to establish trade relations with Japan enterprises, it is important for the people in charge with high status to visit the Japanese people in charge

    with equal status, it will made the Japanese companies pay attention to the trading

    relationship with you. When negotiates with Japanese, it’s better to send a representative

    whose rank and status is relatively higher than the other party. This will facilitate the

    process of negotiations. Koreans are very tough in negotiations, often opinionated and not

    easily give up. In this case, it is necessary to adhere to principle and fight for the interests of one’s own, but it also needs patience. On the other hand, Korean companies in the

    negotiations do not usually express their views. In order to accurately understand the other

    part’s meaning, Korean companies be may repeatedly ask the same questions, in order to

    make decisions accurately. It does not means the South Korea will not change their minds

    when there was a contract which is signed successfully, they may ask to change the

    contract or re-start negotiations for other reasons.

    The Western negotiation styles are the styles of European and American countries based on western cultures. The main representatives are the United States and the UK.

    Americans often say "business is business" which means when they are talking about

    business there is no room for any kinds of relations, they insist on the principle of " focus

    on the issue rather than the person". "Time is money" is the American unswerving creed .

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