International Negotiation Meaning and Role

International Negotiation Meaning

International negotiation is a specialised domain within the wider field of cross-cultural communications. International managers need to possess effective communication skills while negotiating with overseas suppliers/buyers, making presentations and motivating and leading subordinates who represent workforce diversity. Cross-cultural negotiation is about more than just how foreigners finalise business agreements. The process entails a comprehensive examination of all factors that influence the proceedings. A cross-cultural negotiator, therefore, requires complete knowledge of the history of the country, their system, political structure, and form of government, in addition to their cultural dimensions. By taking cross-cultural negotiation training, negotiators and sales personnel gain a significant advantage over their competitors.

In cross-cultural negotiations, many of the rules taught and used domestically may not apply – especially if they clash with the cultural norms and values of the other party involved. For example, the common Western ideal of a persuasive communicator highly skilled in debate, able to overcome objections with verbal flair, an energetic extrovert may be regarded by members of other cultures as unnecessarily superficial, aggressive, insincere, even vulgar and repressive. Being referred to as straightforward and aggressive is often seen as a compliment by Americans. However, this may not hold for individuals from different cultural backgrounds. To describe a person as “aggressive” is a derogatory characterisation of a British citizen. In Japanese culture, these very same traits indicate a lack of confidence in one’s convictions and insincerity. Instead, terms such as thoughtful, cooperative, considerate, and respectful instil positives in the Japanese and other Asian cultures.

Role of Negotiations in International Business

Negotiation is an interaction of influences that includes resolving disputes, bargaining for individual or collective advantage, agreeing upon courses of action, or crafting outcomes to satisfy various interests. Negotiation is thus an alternative form of dispute resolution. In a successful negotiation, everyone wins.

The most basic to any conceptual framework for understanding negotiations is the concept of BATNA (Best Alternative to a Negotiated Agreement). BATNA stands for ‘Best Alternative to a Negotiated Agreement’. A party’s BATNA is that party’s reservation price in the negotiations. A rational party to a negotiation will not agree to a negotiated outcome that is less favourable to that party than the party believes one could obtain in the absence of a negotiated agreement. The settlement range is the area of overlap between the Best Alternative to a Negotiated Agreement (BATNA) of two parties.

One negotiates more effectively if one is clear about the goals of communications with the opposing party during the negotiation. Four goals are discernible in any negotiation, as follows:

1) Persuade Opponents to Revise their BATNAS

A negotiator can induce the opponent to revise their BATNA and, as a result, their position, since the opposing party’s negotiation stance hinges on their BATNA.

2) Determine the other Party’s Interests

Real negotiations are more complicated than the examples offered even in a simple negotiation about the sale of an automobile, the parties likely have interests other than simple zero-sum monetary ones. In almost any real negotiation, each party seeks to maximise the value of an array of interests.

In a real-world negotiation about the purchase of an automobile, each side cares about the price, the delivery date, driving qualities, warranties, insurability, the status of the title, and so on. As negotiations progress, additional specific interests often become part of the array due to ongoing communications.

3) Re-Assessing One’s BATNA

A good negotiator seeks not only to influence his opponent’s BATNA but also to improve the accuracy of his BATNA. BATNA calculation is always a guessing game, at least to some extent. To the extent a negotiator can get better data pertinent to his BATNA calculations, a marketer can negotiate more rationally.

4) Building Trust

All of the above discussion of how to approach a negotiation relies on each side being able to rely on the validity of information obtained from the other side, especially if such information is to affect the recipient’s negotiating position. If one believes that one’s opponent is an unreliable source of information, little that the opponent can say in a negotiation will affect the recipient’s position. Conversely, if a negotiator trusts his opponent and believes that the opponent never lies, then what the opponent says can have a significant effect on the recipient’s position.

This creates a conundrum. If the negotiator is too transparent, too readily revealing the most important weaknesses in position, the outcome obtainable by that negotiator will be worse than if a marketer is less forthcoming. A good negotiator never lies overtly but also does not disclose everything that knows. Any objective facts are subject to “spin”. A good negotiator spins the facts supporting the position in the most favouring way.

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Factors Affecting Negotiation in International Business

Factors Affecting Negotiation in International Business

The following are the factors which are affecting negotiations:

  1. Language Variation
  2. Cultural Differences
  3. Negotiating Goal and Basic Concept
  4. Communication
  5. View of Time
  6. Form of Agreement
  7. Trust
  8. Professional Conflict
  9. Protocol
  10. Risk-Taking Propensity-
  11. Uncertainty Avoidance
  12. Decision Making System
  13. Power Distance
  14. Personal Style

1) Trust

Cultures with high trust are less prose to try to cover every possible contingency in a contract than are negotiations from cultures with low trust. People from France may analyse every situation before taking a decision.

2) Language Variation

The differences in language create a problem for the translator to exactly express the intended meaning of the original statement. The translator may also sometimes find it difficult to express the other party’s intention. This also increases the time duration of the negotiation. Differences in language may also create misunderstandings between the negotiators.

3) Professional Conflict

Business and government officials may mistrust each other and may not understand each other’s objective due to historic animosity or differences in professional status. The professional conflict has been particularly evident as shown by the many developing countries that have attempted to sell state-owned enterprises to foreign investment. It is also possible that neither will try to develop a relationship that is suitable for long-term objectives.

4) Cultural Differences

Cultural differences like punctuality monochronic or polychronic, and pragmatistic or idealistic cultures may handle the negotiations with different aspects. Monochrome cultured countries would prefer to give their undivided attention to one issue at a time and polychronic cultures may feel uncomfortable if they do not simultaneously discuss related business matters. Pragmatist cultures attempt to disaggregate the issues into small categories, whereas negotiators from, idealistic cultures view negotiations more holistically.

5) Protocol

There exists a wide array of business etiquette as there are nations in the world. These protocols encompass various factors that demand consideration, such as dress codes, number of negotiators, entertainment, degree of formality, gift giving, meeting and greeting, etc.

6) Negotiating Goals and Basic Concept

  • How is the negotiation being seen?
  • Is mutual satisfaction the true objective of the meeting?
  • Does MNE have to compete?
  • Do they want to win?

Different cultures stress different aspects of negotiation. The goal of business negotiation may be a substantive outcome, as preferred by Americans, or fostering a durable relationship, as valued by the Japanese.

7) Risk-Taking Propensity – Uncertainty Avoidance

There is always risk involved in negotiations. The outcome is unknown at the commencement of the negotiations. One of the most common dilemmas is related to personal relations between counterparts. The question that arises is whether people should place their trust in them. Certain cultures are more risk-averse than others, e.g., Japan. This means that unless there exists a robust trust-based relationship between the parties involved, there are limited options to explore in terms of creative and innovative alternatives during the negotiation process.

8) Communications

Verbal and non-verbal communication plays a pivotal role in the art of persuasion. The way MNEs express needs and feelings using body language and tone of voice can determine the way the other side perceives, and positively or negatively contributes to the credibility. Another aspect of communication relevant to negotiation is the decision between a direct or indirect approach while exchanging information. Is the meaning of what is said precisely in the words themselves? Does the term “impossible” really mean ‘something that cannot be achieved’ or does it merely imply a level of difficulty that makes it challenging to attain? Always use questions to identify the other side’s needs, otherwise, assumptions may result in never finding common interests.

9) Form of Agreement

In most cultures, formal agreements are typically solidified through written documentation. It seems to be the best way to secure interests in case of any unexpected circumstances. The deal can take the form of a contract or a relationship between the parties. For example in China, a contract is likely to be in the form of general principles. In this case, if any unexpected circumstances arise, parties prefer to prioritize nurturing their relationship over adhering strictly to the terms of the contract to resolve any issues.

10) View of Time

In some cultures, time holds immense value and is regarded as a precious resource to be used wisely. Punctuality and a clear agenda is an important aspect of successful negotiations. In countries such as Japan or China, being late would be taken as an insult. It is advisable to allocate more time to the negotiating process in Japan. When engaging in negotiations with an oriental counterpart is to establish a  strong and enduring relationship, which takes time. Another aspect to consider is the dimension of time, relevant to negotiation is the focus on the past, present, or future. Sometimes the past or the distant future can be perceived as integral components of the present, especially in Latin American countries.

11) Power Distance

This refers to the acceptance of authority differences between people and cultures. Cultures with low power distance postulate equality among people and prioritize earned status over ascribed status. Negotiators from countries like Germany, Britain, and Austria tend to be comfortable with shared authority and democratic structures. When multinational enterprises (MNEs) encounter a high power distance culture, they must be prepared for hierarchical structures and clear authority figures.

12) Personal Style

Individual attitudes towards the other side and biases which MNEs sometimes establish, all determine assumptions that may lead the negotiation process towards win-win or win-lose solutions. Do marketers are more comfortable using a formal or informal approach to communication? In some cultures, such as America, adopting an informal style may help to create friendly relationships and accelerate problem-solving solutions. In China,  on the other hand, an informal approach is considered appropriate only when the relationship is well-established and built on a foundation of trust.

13) Decision-Making System

The way members of the other negotiating team reach a decision may give MNEs a hint – which shall focus on providing a presentation. When engaging in negotiations with a team, it is important to identify who is the leader and who has the authority to make a decision.

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