Communications in Business: Negotiation Styles - Essay Example

? Communication in Business: Negotiating Styles Executive Summary The popularity of international or cross cultural business is growing rapidly at present because of globalization and as a result of that cross cultural business negotiations is also growing. The success and failures of international negotiation depends on how well the negotiators were able to interact effectively. Cross cultural negotiations is a complex process because of the differences in countries with respect to politics, culture, social setups, economy, legal frameworks etc. Language, environment, social organizations, level of knowledge and authority possessed by the people, verbal and nonverbal communication means, temporal conceptions etc of different cultures are different which can influence the negotiation process. Cultural dimensions like Power Distance Index (PDI), Individualism (IDV), Masculinity (MAS), Uncertainty Avoidance Index (UAI), and Long-Term Orientation (LTO) etc can affect international business negotiation process. Most of the societies are unequal because of the variations in power possessed by them and the different perceptions about the long term and short term goals. Some societies do things collectively whereas other societies do it individually. Moreover, some societies treat males and females differently whereas some others treat them equally. The ability of some cultures or societies in avoiding uncertainty is more than other societies. Moreover, political, economical, social, technological, environmental and legal factors can also affect the cross cultural business negotiation process. The international negotiators should possess adequate knowledge about all these factors in order to conduct the negotiation process in an effective manner. They should do their homework properly before going for the negotiation process. Terms of Reference Business negotiation is a complex task which requires lot of preparations and planning. Cross cultural business negotiations are even harder because of the high percentage of uncertainty and ambiguity in such negotiations. Most of the organizations will seek the guidance of business consultants before actively participating in international business negotiations. I am working as an international business consultant and recently one of the biggest American firms approached me in order to seek my advice for expanding their business to the Chinese territory. My client was interested in joint venture business strategy for entering into the Chinese territory. They already short listed few Chinese companies as their future partners and asked me to submit a report about how to negotiate with them. My client asked me to give more emphasize on the cultural aspects of international business negotiations since America and China have entirely different cultures. This report is prepared for my American client in order to make them aware of the role of culture in international business negotiations. Overview of the situation Both China and America have extremely diverse population. America is under a democratic regime whereas China is under an autocratic or communist regime. In other words, China and America are extremely different nations as far as politics; culture, social setups, economy, legal frameworks, etc are concerned. Language, environment, social organizations, level of knowledge and authority possessed by the people, verbal and nonverbal communication means, temporal conceptions etc are entirely different in these two countries. In my opinion, my client should have better ideas about all these things in order to conduct successful business negotiations with their Chinese counterparts. An international negotiator should possess intelligence, creativity etc and he should have flexibility and diplomacy in his approaches. He should also possess skills such as problem solving, negotiations etc. He should also possess knowledge about different legal structures, governmental policies, possibilities of natural and manmade disasters. He should be hardworking and should do the required home works before the negotiation process. Analysis based on Hofstede’s Cultural Dimensions of International negotiations Hofested argued that awareness about factors like Power Distance Index (PDI), Individualism (IDV), Masculinity (MAS), Uncertainty Avoidance Index (UAI), and Long-Term Orientation (LTO) can affect international business negotiations (Geert Hofstede Cultural Dimensions, 2009). Power Distance Index (PDI) Most of the societies are unequal and Power and inequality are the base units of these unequal societies. In a business deal between China and America, PDI can play a vital role. Both countries are developed countries and also members of the superpower group. However, Americans possess more authority than the Chinese in international business negotiations. Authority is defined as the shared beliefs about the power or influence of an organization or an individual representing that organization The Americans are more authoritative and their leadership and management styles are extremely different from that of the Chinese. In business negotiations with Chinese, my American client can utilize the above quality more effectively. Individualism (IDV) In a highly individualized society, the cooperation between the individuals is less. Most of the people will try to look their own matters rather than helping others in such societies. The family and social setups in China and America are entirely different. Because of the over influence of communism on individual, most of the Chinese people does not have belief in religion or God and hence their perceptions about life would be entirely different from that of the Americans. However, family values are more stable in China than in America. Since both the countries have different political and cultural outlooks, the beliefs about individualism and collectivism could be entirely different. Team work is encouraged in America whereas in China teamwork may not have such importance. In other words, individualism overrules collectivism in China. While conducting, negotiations with the Chinese, my client should consider the above fact seriously. Masculinity (MAS) Masculinity is varied in different societies. In some societies, both males and females enjoy equal status whereas in some other societies, males dominate the females. However, in none of the societies, females are capable of dominating the males. The role of genders in both American and Chinese societies is different. Stereotyping can be more visible in Chinese culture than in American culture. Females have less freedom in China than in America. In America, females have the right to undertake any jobs as their male counterparts do; however, in China, some of the jobs are limited only to the males. It should be remembered that no females succeeded in establishing their names in Chinese politics. Moreover, most of the administrators in China are from the dominant male community. Chinese females forced to limit their activities within the boundaries of their home, land or some small organizations. However, in America, there is no constraint to the females in acquiring any positions. In short, the discriminations with respect to gender is more evident in Chinese society than in America. Uncertainty Avoidance Index (UAI) Uncertainty and ambiguity are dominant in most of the societies. In represents the extent to which the members of that society are vulnerable to the unfamiliar situations. Uncertainty avoidance refers to the ability of a society in avoiding uncertainty and ambiguity. It points towards the comfortable and uncomfortable nature of the society towards unfamiliar situations. In business negotiations between the Americans and the Chinese, there can be lot of unfamiliar situations because of the cultural differences. The success will stay with those who tackle such situations diplomatically. Compared to Americans, Chinese have low uncertainty avoidance index (See appendix for more details). In other words, America has superior power in dealing with unfamiliar situations compared to the Chinese people and this knowledge will definitely help my American client while negotiating with their Chinese counterparts. Long-Term Orientation (LTO) versus short-term orientation: In some cultures people are more interested in attaining long term goals at the expense of short term goals whereas in some other societies, people are focussing more on attaining the short term goals at the expense of long term goals. American companies are demonstrating more social commitments than the Chinese companies. American companies are keener in giving something in return to the community in which they operate. Chinese companies are not much interested in exhibiting any social responsibility. They are interested only in profit making. In other words, Chinese companies concentrate more on the short term gains whereas American companies are more focussed on the long term gains. It is because of the above fact that American products are superior in quality compared to the Chinese products even though pricewise American products are expensive than the Chinese products. In other words, a customer, purchasing a Chinese product may face problems in future whereas a customer who is purchasing a similar American product may face fewer problems in future. Thus Chinese product manufactures may suffer in the long run. Because of the above differences in business philosophies, my client should take extreme care while negotiating with their Chinese counterparts. Two contrasting business philosophies may create problems in the future. PESTEL Analysis Political China is ruled by communists whereas democracy is prevailing in America. China has fewer respects towards human right protection and media has no freedom at all in China. China is doing everything possible to control the media in their country in order to block the leakage of unhealthy things happening in China. “China has signed the International Covenant on Civil and Political Rights (ICCPR), which means, it intends to be bound by the spirit of the Covenant pending ratification” (Censorship in China Business Standards in China, 2008). China has signed the above agreement just to convince the international community that China is valuing or respecting issues related to human rights. They do not want to isolate from the international community. They know very well that Globalization and liberalization policies have opened the business doors widely for them. The big markets like America will not be accessible to China, if they does not sign the above agreement mentioned. Amidst all such negative things, the political environment in China is so stable and nobody expects a crack in the near future. The tax rates in China are comparatively low and the political administration is keener in attracting foreign direct investments to China as much as possible. Economical China’s economic growth for the last 30 years is massive and hard to believe. The average economic growth in China for the last 30 years is around 8% and Chinese GDP growth already crossed 3.42 trillion US dollars (The Chinese Economy, n. d).China is considered to be one of the rapidly growing economies even amidst the current global economic crisis. Many people are of the view that China may put an end to America’s monopoly in global matters. China’s increasing economic activities in Africa and Latin America proves beyond doubt that China is getting stronger and stronger as far as economic growth is concerned. Chinese products are nowadays conquering all the global markets and also creating lot of headaches to others because of its cheap price though quality may be in question. China is one among the fewer nations which escaped from the global financial crisis without much damage. China’s financial system is much stronger than that of other countries and hence the current recession has affected it less compared to other countries. Sociological Negotiating in one’s own culture is easy compared to the cross cultural negotiations because of the similarities in cultural traits. Religions have not much role in China whereas in America religions play an important role in most of the life segments. Moreover Chinese culture and American culture are entirely different. Living standards, life philosophies, attitudes, perceptions etc of Americans and Chinese are entirely different. Before negotiating with Chinese people, my client should try to know more about the life styles of Chinese people. “Negotiations include both verbal and nonverbal tactics” (Adler & Gunderson, 2007, p.246). Indians say “Namaste” (holding the hands together in a particular manner) to greet others while the Chinese bow their heads in front of others in order to mark their respect. The mannerisms for demonstrating respect are different for different cultures and the knowledge about these things will help the international negotiators to behave properly while conducting the cross cultural negotiations. Relationship building is the core of every business negotiations and it is true in international business negotiations also. “In some societies, relationships are thought of as spontaneously created by individuals and language is used to negotiate those relationships” (Guidham, 2002, p.274). Negotiations taking place directly between two parties without the assistance of an interpreter is may bring more success than the negotiations taking place between two parties with the help of an interpreter. In other words, the negotiation process should take place in a common language in order to convey the views, suggestions and opinions more effectively. In short, my American client should ensure that their Chinese counterparts know English well. Otherwise my American client should send a person who knows Chinese language well, for the negotiation process in order to settle the deal quickly and effectively. Technology The American technology in many areas found far more superior than the Chinese technology, and hence the Chinese will definitely have interest in importing the American technologies to their country. The technological dominance of America may reflect in any business deal between America and other countries. Moreover the Americans are looking suspiciously at the growth of China and hence they will be extremely careful about the deals in which technology may come as a matter of interest. Environmental “Whenever two parties negotiate, the entire process occurs under two umbrella contexts, environmental and immediate” (Phatak & Habib, 1996). Environmental characteristics of China and America are different. The natural resources, the weather, political system, all will be different in China compared to America. The working culture and environment will be different in America and China. The culture is influenced by climate, topography, population size, density, and natural resources. Americans are not much concerned with the climate differences as they strongly believe that any climate changes can overcome using modern technologies. China has the largest population in the world and hence their attitude towards exporting or importing can be different from that of the Americans. Moreover the population density can influence the behaviour and perception of the negotiators. For example, the shopping habits, land use, or transportation means in China and America can be extremely different. Legal Legal frameworks, both in America and China are entirely different because of the different types of political ideologies. In China, censoring can be seen everywhere. China will never allow something unfavourable to their political ideologies to enter or exit. All the organizations working in China should keep some tight control over their activities under the legal frameworks of China. My client should take a note of the different legal systems in China before entering China. Solutions and recommendations Americans are more authoritative than the Chinese. While negotiating with Chinese, Americans should try to avoid the exercise of authority in order to avoid clashes or conflicts. Mutual respect is unavoidable in international negotiations. The economy, political system, living standards, beliefs attitudes etc of China are entirely different from that of America. My client should be mentally prepared and flexible enough to deal with such diverse parameters of China. American technology seems to be better than that of the Chinese. China is always accused of trying to steal American technology. My client should take a note on that. Business environment in China and America are entirely different. My client should learn more about that before going for a negotiation with the Chinese counterparts. My client should take a note of the different legal systems in China before entering China. Censoring on media and human right violations can disturb my client while conducting business in China. They should be well prepared to tackle issues related to these types of problems. My client should realize that while comparing the immense business opportunities provided by China against the challenges raised by China, the opportunities and advantages overweigh the challenges and disadvantages. In other words, the problems with respect to censoring and human right violation are negligible considering the huge business potentials in China. Forecasts and Outcomes Most of the big American companies will look towards China for expansion because of the huge economic growths of China. American economy is facing stiff challenges at present and most of the big companies are facing saturation in America. These companies are now looking towards the emerging markets and China would be the number priority for them. China is the number one country as far as population size is concerned and hence the size of the Chinese market is bigger than any other market in the world. Moreover, Chinese government is liberalizing most of the rules in order to welcome foreign direct investment in ordered to strengthen the Chinese economy further. The adamant and brutal face of communism is giving way for humanitarian face and the prospects in China are bright for any of the entrepreneurs who is ready to invest in China. References 1. Adler N.G. & Gunderson A. (2007), International Dimensions of organisational Behaviour Publisher: South-Western College Pub; 5 edition (June 29, 2007) 2. Censorship in China Business Standards in China, (2008) [Online], Available at: http://www.amnestyusa.org/business-and-human-rights/internet-censorship/business-standards-in-china/page.do?id=1101629 [accessed on 12 January 2011] 3. The Chinese Economy (n. d.),, Economy watch [Online], Available at: http://www.economywatch.com/world_economy/china/ [accessed on 12 January 2011] 4. Geert Hofstede Cultural Dimensions (2009) [Online], Available at: http://www.geert-hofstede.com/[accessed on 12 January 2011] 5. Guidham M. (2002), Interactive Behaviour at Work (third Edition) Essex pearson Education Ltd . 6. Making Sense of Cross Cultural Communication, (2009), [Online], Available at: http://www.clearlycultural.com/geert-hofstede-cultural-dimensions/uncertainty-avoidance-index/ [accessed on 12 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