In a global economy, making deals, creating value and resolving conflict often requires International Business Negotiations. Chances are, several people within your organization have contact with international partners, suppliers or customers. They regularly conduct International Business Negotiations and should be aware of the impact of National Cultures.
After the signing the contract, negotiations do not end. Instead negotiations continue, as the parties re-interpreted the contract against continuous changes in the business environment. And negotiations are particularly important when a deal ends up in conflict.
Negotiating Styles:
There exist two negotiating styles. But most negotiations will use both styles: using one style for certain specific issues, alternating to the other style for the others:
- Win-Lose: a fixed value is distributed between the two parties, the negotiation is a zero-sum game.
- Win-Win: both parties work together to create value.
Negotiation experts generally accept that a win-win model produces better long term results for both parties.
The style of International Business Negotiations largely depends on the participating party’s negotiation styles. The negotiator has to understand that different cultures have more or less tendency to see negotiations as win-win or win-lose. Several Asian cultures tend to see negotiation as highly win-win, while many European cultures perceive negotiation more as win-lose.
Negotiating Phases:
The negotiation process itself is generally broken up on three phases:
- Pre-negotiation: the parties have not yet decided to negotiate. They are aware of each other and have some idea as to what will be negotiated. Each party learns about the other. This phase is concluded when both parties agree to formal negotiations.
- Deal-development: the parties explore the issues for negotiation and come up with possible ways to structure a deal. This phase concludes with an agreement (for instance a Memorandum Of Understanding) as to how the deal will be structured.
- Detailed Closing: this is often the most stressful part of the negotiation. During this phase the deal structure developed and agreed upon during the previous phase is completely build out, all details are discussed, and agreed upon.
There also exists cultural differences regarding the negotiation process itself. Asian cultures typically want to spend considerably more time during the Pre-negotiation phase. It is important for them to get to know their counterpart. A British or American business person might potentially proceed to the deal-development phase before the Asian partner is ready, creating misunderstandings and subsequent lack of trust. And, there exist differences as to what constitues a positive outcome of a business negotiation. US and European companies typically consider an ironclad contract as the proof of a successful negotiation. Asian companies in contrast may feel that the development of a long lasting business relationship is the true measurement of success.
Conclusion:
To be successful in International Business Negotiations, the negotiator must have a good understanding of the National culture of the other party. At the same time, the negotiator must understand that not everyone fits the same National cultural patterns. It would be just as wrong to stereotype someone from a certain country, as it would be to not understand the National culture at all.
The successful negotiator allows ample time for the pre-negotiation period, understands that a business deal results in a contract and a business relationship, and that if all goes well, the relationship outlasts the contract.