Chapter 5 Homework Greece Needs Order Avert Default Negotiations Continued

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Chapter 5

CROSS-CULTURAL NEGOTIATION AND DECISION MAKING

LECTURE OUTLINE

General Outline

Opening Profile: Facebook’s Continued Negotiations in China

Negotiation The Negotiation Process

Stage One: Preparation

Negotiating Teams

Understanding Negotiation Styles

Successful Negotiators around the World

Comparing Profiles

Managing Negotiation

Using the Internet to Support Negotiations

Managing Conflict Resolution

Context in Negotiations

Comparative Management in Focus: Negotiating with the Chinese

Decision Making

Chapter Learning Objectives (see slide 5-2)

5-1. To become familiar with the role of negotiation in implementing a firm’s strategy, and the

various stakeholders who must be considered.

behavioral differences, values, and agendas of the negotiating parties and how to build

trust for successful negotiations. (see slide 5-3)

5-5. To learn the complexities of negotiating with the Chinese.

5-6. To appreciate the variables in the decision-making process and understand the influence

of culture on decision making.

Opening Profile: Facebook’s Continued Negotiations in China (see slide 5-4)

As Facebook filed for its IPO (initial public offering in 2012, investors questioned the

company’s ability to negotiate further expansion overseas. Facebook has more than 1.4 billion

users as of 2015. Most of the company’s growth must come from other countries. However,

I. Negotiation by Global Managers (see slides 5-6 & 5-7)

A. The planning process depends on management’s ability to negotiate productively. In the

international arena, cultural differences produce great difficulties in the negotiation

process. Important differences in the negotiation process from country to country

include: (1) the amount and type of preparation for a negotiation; (2) the relative

emphasis on tasks versus interpersonal relationships; (3) the reliance on general

Teaching Resource: A Mexican-U.S. cross-cultural simulation based on a JV negotiation

between a U.S. and Mexican firm is available from CIBER, College of Business and

Management, University of Maryland, College Park, MD 20742.

II. Chapter Learning Goals & The Negotiation Process (see slides 5-10 & 5-11)

A. The negotiation process consists of five stages: (1) preparation, (2) relationship building,

(3) exchange of task-related information, (4) persuasion, and (5) concessions and

agreements. (This sequence is presented in Exhibit 5.2).

Teaching Resource: Doing Business Internationally—The Cross-Cultural Challenges. This

video focuses on the effects of culture on cross-border negotiations. Available from Multimedia,

Inc.

5. Following the preparation and planning stage, which is usually done at the home

office, the core of the actual negotiation takes place on-site in the foreign location (or

C. Stage Two: Relationship Building (see slide 5-13)

1. The process of relationship building is regarded with much more significance in

2. It is usually recommended that those new to negotiating should use an

3. Posturing can be used as a bridge between the more formal stages of negotiating and

the stages of relationship building. This phase should result in a spirit of cooperation.

To help ensure this result, negotiators must use words like “respect” and “mutual

benefit” rather than language that would suggest arrogance, superiority, or urgency.

D. Stage Three: Exchanging Task-Related Information (see slide 5-14)

1. In the next stage, exchanging task-related information, each side typically makes a

presentation and states its position; a question-and-answer session usually ensues,

and alternatives are discussed. From an American perspective, this represents a

2. Adler suggests that negotiators should focus not only on presenting their situation

and needs but also on showing an understanding of their opponents’ viewpoints.

Focusing on the entire situation confronting each party encourages the negotiators to

assess a wider range of alternatives for resolution, rather than limiting themselves to

their preconceived, static positions. She suggests that to be most effective,

negotiators should prepare for meetings by practicing role reversal.

E. Stage Four: Persuasion (see slide 5-15)

1. In the next phase of negotiations, persuasion, the hard bargaining starts. Typically,

both parties try to persuade the other to accept more of their position and to give up

some of their own. Often, some persuasion has already taken place beforehand in

social settings and through mutual contacts.

of negotiation.

F. Stage Five: Concessions and Agreements (see slide 5-16)

1. In the last stage of negotiation, tactics vary greatly across cultures. Well-prepared

negotiators are aware of various concession strategies and have decided ahead of

time what their own concession strategy will be.

2. Research in the United States indicates starting with extreme positions attains better

end results.

Chapter Learning Goals – Comparative Management in Focus: Negotiating with the Chinese

(see slide 5-17, 5-18, 5-19, & 5-20)

With the increasing business being conducted in China (see Map 5.1) or with Chinese allies or

other companies, business practices there are now showing more similarity to those in the West.

However, when Westerners initiate business negotiations with representatives from the People’s

Republic of China, cultural barriers confront both sides. There are considerable generational

differences, with those younger people who have been educated in the West, in contrast with the

older generation, which holds to more traditional culture and negotiation strategies. The Chinese

are among the toughest negotiators in the world. American managers must anticipate various

III. Understanding Negotiation Styles (see slide 5-21)

A. Global managers can benefit from studying differences in negotiating behaviors (and the

underlying reasons for them) that can help them recognize what is happening in the

negotiating process. The Japanese are typically skilled negotiators who have spent a

great deal more time and effort studying American culture and business practices than

Americans have spent studying Japanese business practices. Exhibit 5-4 shows some

examples of differences (see slide 5-22) among North American, Japanese, and Latin

American styles.

Many aspects of Japanese negotiating style can be disconcerting and confusing to

Teaching Tip: Ask if students have been in other countries and had to bargain for a price on

something. Use this as a starting point to discuss the different profiles of negotiators.

Successful Negotiators Around the World

C. Americans (see slide 5-23):

1. Know when to compromise.

2. Take a firm stand at the start of negotiations.

3. Refuse to make concessions beforehand.

9. Respect the opponents.

10. State position clearly.

11. Know to move on.

D. Successful Negotiators: Indians (see slide 5-24):

1. Look for and speak the truth, not afraid to speak up.

2. Exercise self-control.

3. Respect the other party and seek solutions that will please all parties.

E. Successful Negotiators: Arab (see slide 5-25):

1. Protect everyone’s honor, self-respect, and dignity, are respected and trusted.

2. Avoid direct confrontations.

6. Controls temper and emotions.

F. Successful Negotiators: Swedish (see slide 5-26):

1. Quiet, thoughtful, polite, straightforward.

2. Overcautious, but flexible.

3. Slow to react but eager to be productive and efficient.

4. Good at controlling emotions, afraid of confrontation.

G. Successful Negotiators: Italian (see slide 5-27):

1. Have a sense of drama, do not hide emotions.

Comparing Profiles: Comparing such profiles is useful. Indian negotiators, for example, are

humble, patient, respectful of the other parties, and very willing to compromise, compared with

Americans, who are firmer about taking stands. An important difference between Arab

negotiators and those from most other countries is that the negotiators are mediators, not the

parties themselves; hence, direct confrontation is made impossible. Successful Swedish

negotiators are conservative and careful, dealing with factual and detailed information. This

profile contrasts with Italian negotiators, who are expressive and exuberant but less

straightforward than their Swedish counterparts.

IV. Managing Negotiation (see slide 5-28)

A. Successful management of cross-cultural negotiation necessitates the manager to

Francis, and Walls, to “invite negative, more relation-oriented (versus information-

oriented) responses,” leading them to conclude that:

1. “The software of negotiation—that is, the nature and the appearance of the

relationship between the people pursuing common goals—needs to be carefully

addressed in the negotiation process.”

C. Cross-Cultural Negotiation Variables (see slide 5-29)

1. Successful management of cross-cultural negotiation necessitates a manager’s going

beyond generalized understanding of issues to 1) gain specific knowledge of the

parties in an upcoming meeting, 2) prepare accordingly to adjust and control the

situation, and 3) be innovative.

D. Using the Internet to Support Negotiations (see slide 5-31)

1. Modern technology can provide support for the negotiating process. As Web

applications develop, they may provide support for such things as multiple party

business transactions, international dispute resolutions, internal company

negotiations, and communications.

2. Negotiation support systems can support the negotiation process by: 1) increasing

the likelihood that an agreement is reached when a zone of agreement exists

E. Managing Conflict Resolution (see slide 5-33)

Much of the negotiation process is fraught with conflict—explicit or implicit—and such

conflict can often lead to a standoff, or a lose–lose situation. This is regrettable, not

only because of the situation at hand, but also because it probably will shut off future

V. Decision Making

A. Negotiation actually represents the outcome of a series of small and large decisions. The

decisions include those made by each party before actual negotiations start—for

example, in determining the position of the company and what fallback proposals it may

suggest or accept.

Teaching Tip: Have your students work in small teams to discuss how they reached a decision

on which college to attend. Ask them to consider all the influences they faced. Did they disagree

with their parents? If so, how was that conflict resolved? In what ways did the decision follow

the model described in the text?

C. The Influence of Culture on Decision Making (see slide 5-35)

1. Culture affects decision making through the broader context of the nation’s

international culture and through culturally based value systems, which affect each

2. One of the major cultural variables affecting decision making is whether a country

assumes an objective approach or a subjective approach. Another cultural variable

that greatly influences the decision-making process is the risk tolerance of those

D. Approaches to Decision Making & Chapter Learning Goals (see slides 5-36 & 5-37)

1. Value systems influence the overall approach that decision makers from various

cultures take to their task. The relative level of utilitarianism versus moral idealism

in any society affects its overall approach to solutions.

Under the Lens: Negotiations and Decisions to Save the Eurozone System (see slide 5-39)

In 2012 a major issue at the intersection of politics, economics, and business was how

the Eurozone crisis would get resolved. The outcome of the negotiations and decisions

among representatives of the euro countries would have lasting repercussions for

businesses around the world, and European businesses in particular. At the heart of the

negotiations among the Eurozone countries and the IMF were the potential effects of a

massive financial rescue plan for Greece, which was threatened with default. In spite of

the passage of radical reforms and austerity cuts in Greece, the European Commission,

European Central Bank, and the IMF were demanding further cuts from Greece in order

to receive the $170 billion in bailout money that Greece needs in order to avert default.

Management in Action: Target: Frozen Out

Last year, Target said that rolling out 100-plus stores in Canada was too ambitious. Canada is

not a colder, friendlier version of its southern neighbor because labor and property are more

expensive. Managing the supply chain is trickier because pockets of population density are

dispersed, and brand recognition can be a curse. Canadians were well aware of Target’s

Chapter Learning Goals &Comparative Management in Focus: Decision Making in Japanese

Companies (see slides 5-40 & 5-41) See Exhibit 5-8 (see slide 5-42)

1. Japanese companies are involved in joint ventures throughout the world, especially with

American companies. An understanding of the Japanese decision-making process

requires an understanding of their national culture.

Although the ringi system is time consuming, the final decision can be rapidly implemented

because of the widespread awareness of and support for the proposal already gained throughout

the Japanese organization.

Conclusion (see slide 5-43)

Internet Resources

Chapter Discussion Questions

5-1. Discuss the stages in the negotiation process and how culturally-based value systems

influence these stages. Specifically, explain the role and relative importance of

relationship building in different countries. Discuss the various styles and tactics that

can be involved in exchanging task-related information. Describe differences in

culturally-based styles of persuasion, and discuss the kinds of concession strategies a

negotiator might anticipate in various countries.

Learning Objective: 2; AACSB: Analytic skills

The five interrelated phases in the negotiation process are: preparation, relationship

building, exchange of task information, persuasion, and concessions and agreement.

In exchanging task-related information, each side typically makes a presentation and states a

position. Then there is a question-and-answer session and then alternatives are discussed.

Americans are generally direct at this stage but many other countries tend to take an indirect

approach. Persuasion too has cultural differences in the methods used. Promises, threats,

commitments, and commands are some tactics possible. For instance, the Japanese and

Americans tend to be similar on the use of these tactics but quite different from the

Brazilians who use fewer promises and commitments. Americans and Japanese are also

more likely to use threats than the Brazilians. Exhibit 5-4 provides the complete list of

tactics and the variations among these three cultures.

5-2. Discuss the relative use of nonverbal behaviors, such as silent periods, interruptions,

facial gazing, and touching by people from various cultural backgrounds. How does

this affect the negotiation process in a cross-cultural context?

Learning Objective: 3; AACSB: Multicultural and diversity understanding

Nonverbal behaviors are the most subtle part of the negotiating process and the most

difficult for most managers to deal with because of widely varying cultural differences.

Negotiators must be aware of their own nonverbal agendas, as well as those of the other

party. Particular attention should be placed on determining which nonverbal behaviors

make the other party comfortable and uncomfortable.

5-3. Describe what you would expect in negotiations with the Chinese and how you would

handle that situation.

Learning Objective: 5; AACSB: Multicultural and diversity understanding

The Chinese place much greater emphasis than Americans on respect and friendship, on

5-4. What are some of the differences in risk tolerance around the world? What is the role

of risk propensity in the decision-making process?

Learning Objective: 6; AACSB: Multicultural and diversity understanding

According to research, people from Belgium, Germany, and Austria have a considerably

lower tolerance for risk than people from Japan or the Netherlands. American managers

5-5. Explain differences in culturally-based value systems relative to the amount of control

a person feels they have over future outcomes. How does this belief influence the

decision-making process?

Learning Objective: 4; AACSB: Multicultural and diversity understanding

Locus of control refers to the extent to which the manager feels that he/she can plan on

certain outcomes because he/she is in control of events that will direct the future in the

Experiential Exercise

Multicultural Negotiations

Administration Instructions

Goal: To allow students to experience the frustrations resulting from, and what must be termed,

a clash of cultures and to appreciate the problems associated with negotiating with people of

other cultures.

The Japanese team instructions are clear that they must remain almost completely stoic in the

face of anything that these American barbarians may do or say. This, they believe will, in the

long run, get them the best deal. The American team is here to close the deal in record time.

Each member of the American team has a personal (career driven) and corporate investment in

closing this deal as soon as possible.

The results of this clash, if the role does not break down, will be that the American team will

know exactly what most Americans have learned about international negotiations—a lack of

knowledge about the other’s culture will put you at a distinct disadvantage.

Instructions:

1. In order to minimize the time needed, the room should be set up for the

negotiation session in advance, using a rectangular table with four seats on

each side. The Japanese side should have three chairs at the table with one

chair set up behind the three. The American side of the table should have four

chairs side-by-side.

4. After the preparation time is over, the Japanese team should enter the room

first, because they must greet the Americans when they arrive. At this point,

the Americans should be brought in and the role play begins. Time for the

negotiations should be 20 to 30 minutes. The rest of the class should be told

that their role is to observe, and their observations will be part of the discussion

of the responses.

Some things that are critical to the exercise are:

➢ Competing teams must not have any knowledge of the instructions of the other team.

5. After the role play, the members of each team and the observers complete the

feedback sheets in the text.

At this point it is very beneficial to record the responses on the board. Because the questions are

similar on each of the feedback sheets, the differences in the responses will be driven by the

students’ different positions in the role play and should highlight the degree of cultural

diversity.

Instructions for the Japanese Team

(To be copied and distributed to the members of the Japanese team only)

Goals:

As members of the “buying” organization you have the power in these negotiations. By

Instructions:

The Japanese team should be comprised of only men. The negotiations are taking place at the

Composition of the Japanese Team is:

One senior executive, Mr. Ozaka. He is the real decision maker and during the

negotiation session says nothing. He is given no special treatment by the other members of the

team. He sits behind the other team members and is not looked at or spoken to by his team. He

shows no emotion throughout the entire exercise. He may be interested in this product but

believes by making the Americans come back a second time he will get a better deal.

When the Americans enter the negotiation room, they are pleasantly greeted by Mr. Kawazaka.

However Mr. Ozaka, Mr. Nishimuro, and Mr. Sheno stand, bow slightly, and then hand their

business cards to the Americans when they are introduced. Any woman or other minority

members of the American team will not receive business cards or be bowed to as deeply as the

other members of the American team.

Instructions for the American Team

(To be copied and distributed to members of the American Team only)

Goals:

Mr. Jones and his team are here to open up the Japanese market for their company. It is critical

to the financial well-being of the company and, more importantly, to the individual careers of

the team members that this contract be closed as soon as possible.

Instructions:

The American Team will be comprised of at least one woman and have a multiracial mix, if

possible. There will be a leader and three followers of equal rank, with each of the three having

Manufacturing Engineer—Mr./Mrs. Smith has a Masters degree in electrical engineering

from Cal. Tech. and has met engineers from the Japanese company at various conferences.

Through conversations with them, he knows that they are looking for an outside supplier for this

particular component. If he can play a strong role in closing this deal, Mr. Jones has promised

him a promotion to Director of International Manufacturing.

component for a unit cost of $12.50, it is costing the Japanese at least $14.25 each. Although his

starting point for negotiations with the Japanese is in the $13.50 to $13. 75 range, he would

(with the permission from Mr. Jones) go as low as $13.00 for a large quantity order. He really

believes that they would jump on a $13.00/unit price.

End-of-Chapter Case: Search Engines Aid Decision Making and Negotiation

Discussion Questions

5-6 Compare and contrast five search engines in global business. How do they aid in

decision-making and negotiation processes?  

Learning Objective: 1; AACSB: Use of information technology

In 2015, Google was the most popular and powerful search engine in the world, followed

by Baidu (China), Bing (United States), Yahoo, AOL Global, Ask.com, Google is highly

diversified in its products and maintains sites in various languages. In 2014, Google sales

surpassed $66 billion. Search engines in global business are mostly affected by local

5-7 Within today’s global business, what do you see happening in the next five years

regarding search engines’ growth and global strategies?  

Learning Objective: 6; AACSB: Use of information technology

Search engines such as Google, Yahoo, Baidu, Yandex, Naver, and others will play a

major role in their country-specific environments because of business efficiencies and

5-8 Search engines carry national identities and cultures. Compare five major search

engines from each continent, based on their local markets, strategies, and national

characteristics.  

Learning Objective: 6; AACSB: Use of information technology

The search engines and their commercial identity are highly country and region specific.

For example Yandex has sponsored contests from its users for the best search algorithms

with a prize for the best. Yandex wanted to stress the shared experiences of its users

with the feeling of community that working together brings. Yandex has also hosted a

webcast where participants could interview Russian President Vladimir Putin. Russian