Communication in Business: Negotiating Styles-America vs. Japan - Term Paper Example

 Communication in Business: Negotiating Styles-America vs. Japan Executive Summary Globalization has brought many changes in the political, social, economical and cultural lives of people. Business sector is one area which witnessed revolutionary changes as a result of globalization. Cross cultural business or international business has grown significantly as a result of the global business opportunities opened by globalization, liberalization and privatization policies implemented by most of the countries. Negotiation is an important business function both in domestic and international business arena. Most of the business functions are driven by negotiations. In international business, negotiation plays a vital role in developing mutual agreements between two entirely different parties of different cultures. International business negotiation process may face lot of problems or barriers with respect to cultural differences between the negotiating parties. The success and failures depends on how well the negotiating parties conduct the business negotiation process. According Hofstede, cultural differences with respect to Power Distance Index (PDI), Individualism (IDV), Masculinity (MAS), Uncertainty Avoidance Index (UAI), and Long-Term Orientation (LTO) etc can affect international business negotiation process between two or more parties. America and Japan are two entirely different countries as far as culture is concerned. Language, environment, politics, social setups, contexting or level of knowledge possessed by the people, verbal and nonverbal communication means etc are entirely different both in America and Japan. Terms of Reference It is difficult for an American firm to conduct cross cultural business negotiations with Japanese firm without studying the cultural differences of Japan with respect to America. High percentage of uncertainty is there about the outcomes of international business negotiations and proper planning may remove a substantial percentage of uncertainties or ambiguities in international business negotiations. I have around 5 years working experience in Japan and I have good knowledge about the business culture in Japan. At present, I am working as a management consultant giving advices to international companies in conducting business in overseas countries. Apple Inc, the second largest company in the world with respect to market capitalization and the most valuable technology company in the world, approached me recently for preparing a business report for them about conducting successful business negotiations with Japanese. My client, Apple was interested in acquiring a medium scale electronic company in Japan as their mode of entry to Japan. Even though, Apple was enriched with immense capabilities and resources, they had not much idea about the Japanese culture and they asked me to give focus to the cultural aspects which can affect the business negotiation process between Apple Inc and their Japanese counterpart. This report is prepared for my American client, Apple Inc, for conducting successful business negotiations with one of the medium scale Japanese electronics firm. Overview of the situation Japan and America are extremely different countries as far as culture, politics, custom, traits, economy, social organizations, language etc are concerned. Even though both the countries are democratic countries, the functioning of democracy in these two countries are slightly different. America is a secular democratic country with Judiciary, Parliament and Executive as the three pillars on which democracy is cemented. On the other hand, politics of Japan is established in a framework of a parliamentary representative democratic monarchy, where Prime Minister of Japan is the head of government even though the King holds the supreme power on paper. In other words, Japan is a constitutional monarchy. Like in America, in Japan also, multiparty system is prevailing. In America, legislative power is vested in congress whereas in Japan, it is vested in Diet. English is the language of America whereas Japanese is the language of Japan. America is a highly developed country in advancements in life and technology are more than anywhere else in the world. American economic development is huge compared to Japan. Majority of the Americans are Christians whereas majority of the Japanese are do not identify themselves as adherents of a single religion; they incorporate elements of various religions such as Shintos and Buddhism in their religious beliefs. Both Americans and Japanese possess different levels of knowledge and authority. Apple Inc should take all these differences in cultural elements before sending a negotiation team to Japan. The negotiators of Apple Inc should possess qualities like ,intelligence, creativity, flexibility, diplomacy and skills like problem solving, negotiations etc. Analysis of international business negotiations based on Hofstede’s Cultural Dimensions (Posts Tagged ‘cross cultural, n. d) In the given picture, a Japanese lady is trying to convince an American with the help of some illustrations in a negotiations process. The American seems to be not convinced since he did not understand anything because of the language barrier. “Negotiation is the process by which two or more parties attempt to resolve a perceived divergence of interest” (Guidham, 2002, p.396). Culture plays an important role in resolving problems in a negotiation process. Geert Hofstede pointed out that different cultures may have different Power Distance Index (PDI), Individualism (IDV), Masculinity (MAS), Uncertainty Avoidance Index (UAI), and Long-Term Orientation (LTO) and the knowledge of these cultural dimensions may assist the international business negotiators immensely (Geert Hofstede Cultural Dimensions, 2009). Power Distance Index (PDI) Both America and Japan may have different Power distance indexes. Power distance index is the difference in the levels of power possesses by different societies. Japan has a power distance index of 54 while that of America is 40 (See Appendix). In other words, differences in power level possessed by Japanese societies is more than that in the American societies or Japan have more inequalities in their societies than in America. Power distance Index is an indirect measure of inequalities existing in a society. “According to some Japanese, Americans ask for the moon in negotiation process and many of them took the beating initially” (Adler & Gunderson 2007, p.232). In other words, Americans demand more in negotiation process because of their higher authority levels. While negotiating with Japanese counterparts, Apple’s negotiators can use the advantage of better PDI since Americans possess more authority levels than the Japanese. Individualism (IDV) Some societies like to do things collectively whereas some other societies like to do things individually. In an individualized society, the relationships between the individuals may be less than that in a collective society. Japan has an IDV of 46 whereas that of the Americans is 91(See Appendix). In other words, the IDV of American society is almost doubles that of the Japan. Americans like to do things individually whereas Japanese like to do things collectively. Japan’s passion towards collectivism forced them encourage team work more than the Americans. Masculinity (MAS) Masculinity represents the domination levels of males over the females while allotting jobs. In some cultures some jobs are reserved for males whereas in other cultures, such segregation of jobs with respect to gender is less or not existing. The Japan, MAS is 95 whereas that in America is 62 (See Appendix). In other words, segregation of jobs with respect to gender is more in Japan than in America. American males and females enjoy almost similar rights in the society and professional world whereas same thing cannot be said about the Japanese. Stereotyping is more visible in Japanese society than in American society. Most of the prestigious positions in Japanese professional world are conquered by the males whereas in America, instead of gender peculiarities, ability seems to be the major criteria while appointing people at the top level. Uncertainty Avoidance Index (UAI) Uncertainty Avoidance Index (UAI) of Japan is half of that of America (See Appendix). UAI is the ability of a society in avoiding uncertainties or ambiguities while dealing with unfamiliar situations. Americans are smarter than Japanese in dealing with unfamiliar situations. Japanese always like to start the business negotiation process in an informal manner. They will start the negotiation process by talking about non-business topics initially and then they will gradually come to the actual negotiation process. On the other hand, Americans do not like such way of negotiations. They will go directly into the topic at the very first moment of negotiation. In other words, Americans do not like to begin the negotiation process on uncertain or unfamiliar terms. They always like to avoid any form of uncertainty in their negotiation process. Japanese are uncomfortable in conducting business negotiations in that manner and Apple’s negotiators should consider these things seriously while doing negotiations with the Americans. Long-Term Orientation (LTO) versus short-term orientation LTO of Japan is 80 whereas that of America is 29 (See Appendix). In other words, Japanese are more particular in attaining long term goals whereas Americans are not much interested in long term goals. The recent global recession is the best example to prove the consequences of avoiding LTO. Americans had a habit of spending everything they earned without saving anything for the future and they faced lot of problems during the recent financial crisis era. On the other hand, Japanese are particular in their long term goals and they succeeded in countering the recession problems more effectively than the Americans. Japanese save more for the future whereas Americans save less for future. The above cultural trait is visible in business also. American companies give more importance to their short term goals whereas Japanese companies always give more attention towards the long term goals. These contrasting business philosophies may affect the negotiation process between Apple and their Japanese counterpart. PEST Analysis Political Political ideologies or theories may not have much importance in Japan. Country’s progress is given priority more than anything else in Japan. Unnecessary strikes or agitations at workplaces are less in Japan than in America. Even though, America was responsible for destroying Japan in the Second World War, it is surprising to watch that America is at present one of the closest allies of Japan. Japan has cleverly adopted a strategy during the post war in which they relied US for their security while concentrating on the economic growth alone. This strategy helped them to reduce their expenditure on defense and helped them to concentrate fully on the rebuilding process of the country. Japan has tried a dual strategy in their foreign policy towards United States which brought dividends to them in the long run. At one side they have given US the responsibility of protecting Japan from external threats. On the other side Japan tried to exploit the opportunities in US. Japan believes that US is the biggest market in the world and investments in US will be safe because of the strength of American economy. Economical The economic growth of Japan is a highly debated topic among the external world because of the immense growth it achieved after the total destruction of its resources by the Second World War. The rise of Japan, like the phoenix bird from the ashes of total destruction to highly prosperous economy at present is a big surprise to external world. No country was ever able to achieve such rapid progress after such a big destruction. In fact, Japan has presented the external world another school of economics, the Japan model similar to the Marxist model and Keynesian model. Industrial developments in Japan are more than anywhere else in the world. Japanese products are best in the market as far as quality is concerned. For example, Japanese automobiles and Japanese electronics products are believed to be the bests in tits categories. Japanese economy is the third largest in the world; just behind United States and China. “Manufacturing, construction, distribution, real estate, services, and communication are Japan's major industries today. Agriculture makes up only about two percent of the GNP” (Japan: economy, 2010). In pre-war Japan the slogan was “enrich the country, strengthen the military” (Hiroko, 2004, p.2). But the above slogan has changed to “enrich the country, strengthen the economy” during post-war. In short, economic climate of Japan is one among the bests in the world and Apple Inc can invest in Japan without second thoughts. Sociological Studies by anthropologists suggest that the Japanese sense of self is more “relational” than individualistic. The psychologist Takeo Doi has argued that Japanese interpersonal relationships revolve around the concept of amae (“dependency,” “depend on or presume another’s benevolence” or “mutual indulgences to each other’s weaknesses”) built around trust and mutual dependency (Hays, 2010) Japanese believe more in friendship and team work. They always like to build relationships with others since they feel that man is a social animal and relationship building is keen in building a stable society. Their friendly nature can be witnessed not only in personal matters, but it can be seen in professional matters also. They never like to do things under pressure. “In some societies, relationships are thought of as spontaneously created by individuals and language is used to negotiate those relationships” (Guidham, 2002, p.274). Americans are not much interested in building relationships or friendships in negotiations. They are always focussed on their tasks. On the other hand, Japanese people always like to build relationships first, before going to the actual tasks. “Negotiations include both verbal and nonverbal tactics” (Adler & Gunderson, 2007, p.246). Americans shake hands to convey their regards to others whereas Japanese bow their heads in front of others in order to convey their respect. Both the verbal and nonverbal traits are different for America and Japan. The body language, gestures, facial expressions etc could be different both for Americans and Japanese. Suppose, Apple’s negotiator (Mr. X) meets the Japanese counterpart (Mr. Y) for the negotiation process; the negotiation process may develop as follows. Mr. Y bows his head whereas Mr. X tries to shake hands instead of bowing his head. (Rosenbaum, 2003) Mr. Y feels discomfort even at the beginning of the negotiation process. However, he has not shown his displeasure and started the conversation in the following manner. Mr. Y: Hi X, how are you? Mr. X: I am fine. Mr. Y: How was your journey to Japan? Mr. X: Let’s talk the deal first Mr: Y: I am sorry. I thought it was my responsibility to ask you about it (Mr. Y may feel humiliation at this juncture and he has lost his faith in conducting a negotiation in this manner. Here, the Apple’s representative felt that informal conversations are unnecessary whereas the Japanese counterpart felt that an informal communication and the development of friendships is necessary for conducting business negotiations in a successful manner. The Japanese may feel that the Americans are not much friendly in their approach and doing business with them may create problems in future). Mr. X: You know Apple Inc is the most valued technological company in the world at present and a tie up with Apple will definitely boost your reputation. (Here the American tries to stamp his authority over the Japanese counterpart) Mr. Y: I know that. However I have strong concerns about the future of Apple Inc, especially at a time when Steve Jobs decided to quit (Here the Japanese tries to express his concerns about Apple’s business strategy which rotates around the abilities of Steve alone) Mr. X: You know, we have lot of potential middle managers who can succeed Steve. Mr. Y: I am not much convinced. If my knowledge is true, Apple called back the resigned Steve once when they faced immense troubles in the 1990’s. Mr. X: That’s true. However we have improved the strength of our management team after that incident. Moreover, it is not necessary to think in terms of the future of Apple now. (Here the American forced to accept the reality and struggled to convince his Japanese counterpart) Mr. Y: Sorry Mr. X. It is my duty to think about the future and the long term goals (here the Japanese clearly indicate that long term orientation and goals are important for him) Mr. X: Nobody can anticipate what is going to happen in 10 years time. You should remember that the recent recession was an unexpected one even for economic gurus. You should think about the present situation alone (here the American reveals that he is more particular about the short term goals) Mr. Y: I am really sorry Mr. X. It is difficult for us to make collaboration with you in this manner. We are more particular about the long term goals than the short term goals. I am sorry. Thus the negotiation process may end up in failure mainly because of the American’s hesitation in accepting the cultural traits of his Japanese counterparts. The Japanese fellow might have avoided such disturbing questions if the American was ready to start the negotiation process in a friendlier manner. However, the American was so particular about the task and he thought in business negotiations, personal matters should not overrule professional matters. Japanese people always like to do things in an indirect manner whereas Americans always like to do things in the direct manner. These conflicts in beliefs and approaches may lead the above negotiation process towards failure. Technology Technological developments in Japan after the Second World War are unbelievable. “Japan was able to challenge even the US supremacy in industrial and technological growth and became the second largest market economy by 1980” (Kumon et al, 1992, p.xv & xvi). Japanese technology in many areas found far more superior than that of the American technology. As mentioned earlier, Japanese cars and electronics products are selling more in America than the American products. The technological dominance of Japan may reflect in any of their business deal with other countries. However, American technology is not far below than the Japanese technology as far as consumer electronics products are concerned. Moreover, America has slight edge over Japan in the computer industry. Apple Inc can make use of their superior abilities in technology to improve their bargaining power while conducting negotiations with their Japanese counterparts. Solutions and recommendations Americans should try to build relationships or friendships with their Japanese counterparts before actively engage in business negotiations. Instead of bringing the negotiation topic or the task in the first place, it is better to bring the task later while conducting a negotiation with Japanese. Americans should adopt more flexibility in their approach and they should show readiness in accepting the cultural characteristics of Japanese. Americans should try to respect the Japanese counterparts more and they should never try to use their superior power or authority level while doing negotiations with the Japanese. Instead of shaking hands, it is better for Americans to practice bowing head in order to conduct business negotiations more effectively with the Japanese. My client apple should recognise all the above cultural peculiarities of Japanese and they should be flexible enough in their approach to deal with such diverse cultural parameters of Japan. Forecasts and Outcomes Most of the big companies in America are facing saturation problems in America and they have no space available in America for expansion. Globalization brought immense opportunities for the big American companies and Japan is one country which can be considered seriously by the Americans. American economy is facing strong challenges at present as a result of global recession and a tie up with Japan will definitely better for the American companies. Japan is a democratic country and one of the closest allies of America at present and hence American companies can invest in Japan just like they invest in America. Political problems and terrorism are less in Japan which is an encouraging sign for the foreign investors. References 1. Adler N.G. & Gunderson A. (2007), International Dimensions of organisational Behaviour Publisher: South-Western College Pub; 5 edition (June 29, 2007) 2. Geert Hofstede Cultural Dimensions (2009) [Online], Available at: http://www.geert-hofstede.com/[accessed on 22 January 2011] 3. Guidham M. (2002), Interactive Behaviour at Work (third Edition) Essex pearson Education Ltd. 4. Hays J (2010). JAPANESE SOCIAL LIFE[Online], Available at: http://factsanddetails.com/japan.php?itemid=613&catid=18 [accessed on 22 January 2011] 5. Hiroko, T.( 2004). The Political Economy of Reproduction in Japan. Publisher: Routledge; 1 edition (November 22, 2004) 6. Japan: economy, (2010) [Online], Available at: http://www.japan-guide.com/e/e644.html/ [accessed on 22 January 2011] 7. Kumon S., Rosovsky H. & Yamamura K. (1992). The Political Economy of Japan: Cultural and Social Dynamics. Stanford University Press, 1992 8. Making Sense of Cross Cultural Communication, (2009), [Online], Available at: http://www.clearlycultural.com/geert-hofstede-cultural-dimensions/uncertainty-avoidance-index/ [accessed on 22 January 2011] 9. Posts Tagged ‘cross cultural, (n. d), [Online], Available at: http://www.sh-cbc.com/?tag=cross-cultural[accessed on 22 January 2011] 10. Rosenbaum, A (2003). How to Steer Clear of Pitfalls in Cross-Cultural Negotiation - Tips for Avoiding Misunderstandings When Negotiating Cross-Border Deals[Online], Available at: http://hbswk.hbs.edu/archive/3401.html[accessed on 22 January 2011] Appendix Uncertainty Avoidance Index 1-20 21-40 41-60 61-80 81-100 101-120 Country PDI IDV MAS UAI LTO Greece 60 35 57 112 Portugal 63 27 31 104 Guatemala 95 6 37 101 Uruguay 61 36 38 100 Belgium 65 75 54 94 El Salvador 66 19 40 94 Poland 68 60 64 93 Japan 54 46 95 92 80 Peru 64 16 42 87 Argentina 49 46 56 86 Chile 63 23 28 86 Costa Rica 35 15 21 86 France 68 71 43 86 Panama 95 11 44 86 Spain 57 51 42 86 South Korea 60 18 39 85 75 Turkey 66 37 45 85 Hungary 46 55 88 82 Mexico 81 30 69 82 Israel 13 54 47 81 Colombia 67 13 64 80 Brazil 69 38 49 76 65 Venezuela 81 12 73 76 Italy 50 76 70 75 Czech Republic 57 58 57 74 Austria 11 55 79 70 Pakistan 55 14 50 70 Taiwan 58 17 45 69 87 Egypt 80 38 52 68 Iraq 80 38 52 68 Kuwait 80 38 52 68 Lebanon 80 38 52 68 Libya 80 38 52 68 Saudi Arabia 80 38 52 68 United Arab Emirates 80 38 52 68 Ecuador 78 8 63 67 Germany 35 67 66 65 31 Thailand 64 20 34 64 56 Finland 33 63 26 59 Iran 58 41 43 59 Switzerland 34 68 70 58 Ghana 77 20 46 54 16 Nigeria 77 20 46 54 16 Sierra Leone 77 20 46 54 16 Netherlands 38 80 14 53 44 Ethiopia 64 27 41 52 25 Kenya 64 27 41 52 25 Tanzania 64 27 41 52 25 Zambia 64 27 41 52 25 Australia 36 90 61 51 31 Norway 31 69 8 50 20 New Zealand 22 79 58 49 30 South Africa 49 65 63 49 Indonesia 78 14 46 48 United States 40 91 62 46 29 Philippines 94 32 64 44 19 China 80 20 66 40 118 India 77 48 56 40 61 Malaysia 104 26 50 36 Ireland 28 70 68 35 United Kingdom 35 89 66 35 25 Hong Kong 68 25 57 29 96 Sweden 31 71 5 29 33 Denmark 18 74 16 23 Jamaica 45 39 68 13 Singapore 74 20 48 8 48 (Making Sense of Cross Cultural Communication, 2009) Read More