Globalisation : Cross Border Negotiations

Stacey van Hooven has over 18 years experience as an attorney. She is presently Of Counsel to the law firm of Jacob & Associates located in Munich,Germany. Prior to moving to Germany, Stacey was an associate with the New York firm of Gwertzman, Pfeffer, Toker and Lefkowitz where she worked as a litigator on sophisticated civil commercial matters, preparing all legal documents related to the litigation, performing all aspects of pre-trial discovery, negotiating and settling lawsuits and handling trials and appeals. Later, she served in City government under the leadership of Mayor Ed Koch and his successor, Mayor David Dinkins, as an investigative attorney with the New York City Department of Investigation. Stacey also presently teaches Business Law and Economics as well as Entrepreneurship and New Venture Creation at the European Business University.

Stacey can be contacted at vanHooven@t-online.de


If I have to choose one word that I most often hear when discussing trends in business today, it would have to be the word "global". Global supporters view the expansion of business in inverse proportion to the disappearance of cultural differences and unseen borders as positive. ( Others have a doomsday view of such expansion as we have witnessed the backlash at the WTO's conferences ).

Sure, the world is getting smaller as a result of global communication advances and global corporate expansion. However, ingrained cultural differences exist today during the so-called technological revolution as they did during the industrial revolution. It is these underlying and unseen differences that often steer negotiations and affect the final outcome. What underlies how individuals negotiate with one another is affected by their ability to trust one another. When cultural differences come into play it is often difficult to assess the other person's true stance and hence the ability to trust that person.

Since the essence of the negotiation process is an exchange of promises and commitments, the negotiating parties will not accept each other's promises unless they trust each other. Therefore, a "negotiation is essentially defined by the degree of trust in the relationship among parties" (1.) Being realistic, everybody comes to the negotiating table with their own agenda in mind. However, if you feel that you can trust your negotiating partner and you have the sense that they are dealing with you ethically then you have a good starting point for negotiations. I am going to examine some cultural differences that may affect the level of trust between negotiating parties.

You've worked on a deal for months and its finally ready to go into the final face-to-face negotiation stage. You fly over to China with your team, only to have the deal fall apart as a result of the fact that there are lawyers on the team. You can't assume that something in the regular course of business in the U.S. or Germany is also in the regular course of business in China. "Loss of face", which basically means that the person has tarnished their personal image and or professional reputation is an issue when negotiating with someone from China. Giving and preserving face for the Chinese is another important part of the Chinese culture. Having "face" within the Chinese culture commands respect from and influence over other Chinese. To avoid losing face, the Chinese are unwilling to openly reject others' requests and avoid direct conflict with others. In resolving conflicts, the most preferred approach is through discussion or informal mediation by a common third party instead of going through formal mediation. The use of lawyers, which often results in "torn face" or broken relationship, is avoided as much as possible. The result is often a compromise after both sides have made some concessions. (2.)

This stands in juxtaposition to many western cultures where business people contact their attorneys before even beginning negotiation in order to understand what the legal ramifications are. Though a Chinese business person may rationally understand that Westerners commonly consult with lawyers in the negotiation stage and vice ver sa, such a difference in the methods of doing business results in a degree of mistrust.

In the Mexican culture, business people also fear loss of face, especially publicly. This stands in contrast to the States where Americans put up a tough business front and don't have that concern.(3.)

In going into international negotiations you should also keep in mind that your negotiating partner's planning strategy is influenced by their cultural background. For example, in the U.S. or Germany, planning is mostly done with the long-term picture kept in mind. This is a consequence of a stable business and economic environment. However, in certain cultures, planning is done mostly short term because of uncertain environment and the sense of "now".

According to Anne Koark, President and Co-founder of Trust In Business ( www.trustib.com ), a full service company for the start-phase of international subsidiaries in Germany, it is of key importance to identify what the customer really needs and not what they think they need when entering the German market. "Many companies coming over to Germany use home market knowledge . Not to inform your customer of local differences could make or break the negotiations that could result in market penetration in Germany."

Another issue that international negotiators need to be aware of is how different cultures deal with nepotism. Don't be surprised if you walk into negotiations in South America, to find that the individuals on the other side of the table are all related to one another in some form or other. Some cultures prefer the hiring of family and friends due to the factor of trustworthiness and promotions are based on loyalty to the superior in charge. The flipside are cultures that highly discourage nepotism and relatives are barred from being hired. In the U.S. or in Germany, where nepotism is discouraged, a degree of mistrust may arise in having to negotiate with various family members of an organization. The Americans or the Germans may question the negotiating capabilities of these individuals on the assumption that they have the position just because of their family ties.

There is also the misconception that if both negotiating partners are from Western cultures that they are on the same footing. There are many difference to be found within the various Western cultures that can create a lack of trust between negotiating partners. German business people generally want to be absolutely thorough and correct, whereas Americans with their positive entrepreneurial spirits may forge ahead resulting in a lesser degree of thoroughness. The differences in approach can pull a global deal apart.

Different manners of dealing with each other on a person-to-person level may also enhance the degree of mistrust. Straight-forward and explicit don't necessarily mesh with reserved and cautious.

The question is how to build the bridges between the different cultures so that the degree of mistrust is diminished until it is non-existent. In order to prepare for your negotiations try the following:

  1. Background checks into the company that you are doing business with. Get to know the company as much as possible. Have credit checks done on the company. Learn about their financial situation in any way possible ( within legal limits of course ! )
  2. Research the culture of the foreign company and sensitize yourself to the possible differences that you may be confronted with.
  3. Get the assistance of a company that is expert in dealing with such cultural differences that can give you some tips.
  4. Get to know the individuals that you will be personally dealing with. Making a one-to-one human connection is one of the best way to overcome mistrust!

References

  1. Wood, Jack D. and Thomas R. Colosi.1997 in Human, Resources Development: Readings in International Business Negotiations, Geneva: Int'l. Trade Center, UNCTAD/WTO, p.5
  2. Ai, Janet X. Key Cross-Cultural Differences Related to Canadian Companies Doing Business in China, Canadian Department of Foreign Affairs and International Trade ( www.dfait-maeci.gc.ca/china/business/76492-e.asp )
  3. Kras, Eva, in Management in Two Cultures - Bridging the gap between US and Mexico, Intercultural Press Inc.

© Copyright 2002 by Stacey van Hooven. All rights reserved.

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