1 international business negotiation: an overview · 2020-04-01 · ownership and control 172 ijv...

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CONTENTS

List of Figures and Tables xiiiPreface xiv

Part 1 – Principles 1 1 International Business Negotiation: An Overview 3

Introduction 3Different types of negotiation 4

Scope 4Domestic versus international negotiations 4Bilateral and multilateral 5Single issue and multiple issue 5Micro-level and macro-level 6

Cultural challenges 7Cross-cultural aspects 7

Negotiation process 9Give-and-take process 9Draft agreements 10Creating value and capturing value 10Stages of negotiation 11

Communication technologies 12Efficiency gains 12Access to international markets 13Negotiation support systems 13Automated negotiation 14Negotiating by phone 14Conference calls 14Email negotiation 14Virtual negotiation 14Face-to-face negotiation 15

Negotiation theory 16Lack of a comprehensive theory 16Irrational negotiators? 16Exchange platform 17Shortage of theory-based applications 17

Choosing an interpreter 17Amateur interpreters 17Professional interpreters 18

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Meeting Chinese people 18Communication problems 18Influence of ideology 19

Key points 19Questions for discussion and written assignments 20Bibliography 20

2 Culture and Negotiation 22Introduction 22Cultural influence 23

Wide differences 23How reliable are cultural surveys? 23Micro- and macro-level perspectives 27Influence of organisational culture 27

Cultural distance 28Extra risk 28‘Noise’ in negotiations 29

Negotiation styles 30Influence of national cultures 30Country similarity theory 33Nonverbal differences 33


3 Ethics in Negotiation 40Introduction 40Unethical negotiating tactics 41

Unethical tactics and opportunism 41Widespread tendency 41Unethical tactics and nationality 42When outcomes are very important 42Unethical tactics and relationships 43Cooperative and competitive negotiators 43Idealism versus relativism 44

Gender differences 45Women negotiators 45Religious values 46

Ethical codes and standards 48Lack of international standards 48Codes of conduct 48Ethical behaviour abroad 49

Justice issues in negotiations 50Procedural and distributive justice 50Unjust negotiations? 50

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Bribery and corruption 51Key points 52Questions for discussion and written assignments 53Bibliography 53

4 Negotiating Power 56Introduction 56What is negotiating power? 57

Concept and definitions 57Power parity 57Power-dependence theory 57Time constraints and negotiating power 59

Sources of negotiating power 59Capital and technology 59Relationships 60Knowledge and language 60Power and influence 61

Abuses of negotiating power 61Impact of globalisation 61Power deficits and how to overcome them 62

Unequal negotiations 63Hard-power and soft-power tactics 63Hong Kong negotiations 64Turkey/Syria/Iraq negotiations 65

Impact of emotions in negotiations 65Impact of emotion on outcomes 65Impact of emotions on negotiator performance 66Negotiator bias 67


5 Preparing to Negotiate 71Introduction 71Pre-negotiation planning 72

Key stage 72Wide scope 72

Essential pre-negotiation activities 73Four-phase framework 73Setting negotiating goals 75Information gathering 75Informal communication activities 77

Focusing minds 77Internal consultations 77Role allocation 78

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Agenda setting 79Publicity and perceptions 79

Physical arrangements 81Choice of venue 81Seating arrangements 81Location 81


6 Negotiation Process 85Introduction 85Negotiation process 86

Concept and definitions 86Negotiating goals and negotiating interests 86Integrative and distributive negotiation 86Joint gains process 87Assessing the reservation point 88

Negotiation stages 88Negotiation models 88Persuasion stage 89Making concessions and trade-offs 89Presenting options 89Assessing outcomes 90

Negotiation procedures 91Simple procedures 91Sophisticated procedures 91

Negotiation structure 93Components of structure 93Zone of possible agreement (ZOPA) 94BATNA (best alternative to a negotiated agreement) 94

Contract negotiation 95Western and non-Western approaches 95Contract management 96Contract construction 97International business risk 97


Part 2 – Practice 101 7 Multi-party Business Negotiations 103

Introduction 103Bilateral versus multilateral 103

Process differences 103

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Managing complexity 104Wide-ranging interests 104Strategic orientations 105Dealing with multiple issues 105Need for simple procedures 106Role of Chair 106Role of agents 107Role of coalitions 108Expert sub-groups 109

Voting patterns 110Negotiating with a single voice 110Consensus 110Majority voting 110Team leader decisions 110


8 Negotiating Strategies 114Introduction 114Strategy selection 115

Goals and strategies 115Negotiating interests 116Strategy fluctuations 116Limited number of options 116Relationship-building strategies 118Hybrid strategies 119

Negotiation tactics 121Offensive and defensive tactics 121

Guiding principles 122Simplicity 122Flexibility 123Appropriateness 124

Strategic orientations 126Fluctuating phases 126Highly competitive orientation 126Cooperative orientation 128Problem-solving approach 130Principled negotiation 131

Key points 131Questions for discussion and written assignments 132 Bibliography 132

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9 International Buying/Selling Negotiations 135Introduction 135Selling abroad 136

Selling to developing countries 136Overcoming sales resistance 136Risk factors 136Distributor agreements 137Licensing agreements 137Personality and sales success 137

Overseas marketing activities 138Cultural preferences 138Foreign advertising 138Sales negotiation practices 139Cultural intelligence and questioning 140Automated negotiation 141Email negotiation 141

International buying/selling negotiations 143Distinct stages 143Price negotiation 143Dealing with objections 144How to use an opening offer 144The quality issue 144Offering options 145Selling to the Chinese 148Negotiator training in China 148Shaping the agreement 149


10 Cross-Border Mergers and Acquisitions Negotiations 154Introduction 154Motivations to merge 155

Efficiency seeking 155Large-scale mergers 156AstraZeneca negotiation 156

M&A negotiation process 157Selecting a negotiating team 157Due diligence 157Monitoring M&A negotiations 158Payment options 158

Risks of cross-border M&As 160High failure rate 160Performance risks 161Control risks 162

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Financial risk 162Merging-cultures risk 163

Post-merger integration 163Overcoming cultural differences 163Managing integration programmes 164


11 International Joint Venture Negotiations 170Introduction 170International joint ventures 171

Purpose 171IJV negotiation phases 172Regulatory aspects 172Ownership and control 172IJV boards 173Training issues 173

Success factors 175Pre-negotiation investigation 175Partner selection 175Inter-partner trust 176

Key stages of IJV negotiation 178Evolving process 178Types of contract 179

IJV performance 179Management issues 179Performance measures 180Performance monitoring 180Performance and opportunism 181Performance and trust 181


12 Dispute Resolution 185Introduction 185International business disputes 186

Concept and examples 186Positive effects of conflict 186Types of conflict in negotiations 187Effects of fear and rivalry 187Cultural aspects 187Role of trust 188Western preferences 188Self-help conflict resolution 188

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International trade disputes 190Dispute resolution methods 190

Examples 190Danone-Wahaha dispute 191Collaborative and contentious approaches 191Litigation 191WTO adjudication 192Out-of-court settlements 194Mediation 194Conciliation 195Arbitration 195Post-settlement settlements 197Negotiation as a dispute resolution method 197Renegotiation 198


13 Negotiator Selection and Training 202Introduction 202Negotiator selection 202

Departmental versus company interests 202Advantages of negotiating teams 203Selection criteria 204

Negotiator attributes 205Positivity and flexibility 205Negotiating team leaders 205Women negotiators 206

Negotiator training 207Training providers 207Programme length 208Training impact 208Training methods 209Negotiation simulation 210Role-play 210Case studies 210Lectures 211Feedback 211Coaching 211Multilateral negotiations 212


Index 216

3

INTERNATIONAL BUSINESS NEGOTIATION: AN OVERVIEW

IntroductionMany thousands of international business deals are negotiated every day using a wide range of com-munication methods, including face-to-face discussions, phone calls, emails, faxes, letters, video confer-encing and virtual negotiation. Managers negotiating international business deals must be capable of using all these methods skilfully to achieve satisfactory outcomes. To be successful negotiators they also need to develop the right mindset – to recognise that negotiation is essentially a process which involves compromise, concessions and trade-offs. In many international business negotiations power is critical to improving a party’s negotiated outcomes (Khakhara & Ahmed, 2017).

Negotiation process involves cooperative exchanges of information and offers between the par-ties. The process is one of give and take. The negotiators make initial offers but then keep modifying them and making concessions to come closer to each other and eventually to reach a negotiated agreement. Most Western negotiators see the production of a binding contract as an essential part of the negotiation process, while Asian negotiators are more likely to see the building of a lasting business relationship with the other party as the main outcome (Leary et al., 2013). Such basic dif-ferences show the importance of cultural awareness and sensitivity in international business negotiations.

International business negotiation is not a monolithic activity. Numerous activities are involved such as procuring raw materials and supplies; distribution activities; licensing; technology transfer agreements; franchise agreements; cross-border mergers and acquisitions; establishing international joint ventures, among others – although sales comprise the great majority of international business transactions. In some international business negotiations government plays an important role as either a participant or a regulator (Gunia et al., 2016).

No single model of international business negotiation has gained general acceptance. Early researchers supposed that negotiations begin with a focus on power, with the most powerful party forcing the other to accept their demands. Later studies have found that successful negotiators rely less on power and more on coordination and cooperation. Often high joint benefit occurs when negotiators are concerned about the other party’s outcomes as well as their own outcomes (Das & Kumar, 2011).

Much negotiation theory has been developed based on game theory and the search for optimal solutions. But approaches based on economic models of negotiation falsely assume the rationality of negotiators and ignore the realities of real-life business negotiations where psychological factors and the impact of culture on negotiator behaviour are always present. Many studies adopt the per-spective of large, technology-driven and manufacturing companies from Western economies that seek international markets to sell their products or cheap labour to reduce their costs (Nippa & Reuer, 2019).

After an international business negotiation has been concluded, clauses may need to be inserted into the contract specifying the governing law in case of future disputes between the parties. A recurrent source of disagreement between EU and UK negotiating teams during the Brexit negotiations in 2017 was about which court would decide any future disputes about the rights of EU citizens in the UK – the European Court of Justice or the UK’s Supreme Court.

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4 INTERNATIONAL BUSINESS NEGOTIATION

�Different�types�of negotiation ScopeInternational business negotiations deal with numerous issues ranging from the sale of goods and services to negotiating strategic alliances and joint ventures – all of which require a large number of issues to be negotiated and mutually acceptable solutions to be achieved. Typical examples are:

• A European manufacturer and a Chinese state-owned company negotiate to set up a joint venture in China.

• A Japanese multinational negotiates a licensing agreement with a small Korean manufacturer.

• A trading organisation in Russia negotiates a supplier agreement with a Turkish electronics group.

• Two South American governments embark on negotiations to resolve a long- standing trade dispute.

In all these cases, poorly conducted negotiations could create misunderstanding, conflict and the loss of overseas customers and earnings. That is why the ability to effectively plan and conduct international business negotiations is increasingly rec-ognised as one of the single most important global business skills.

Many international business negotiations are large-scale and complex, and may involve third parties, such as agents, consultants, advisers, sub-contractors and gov-ernments. In some international business negotiations government plays an impor-tant role as either a participant or a regulator in the background. The participation of government representatives can make the negotiation slow and bureaucratic and affect the outcome. Sometimes, for instance, a government insists on clauses being inserted into the contract aimed at creating employment opportunities or better infrastructure in the country concerned.

Domestic versus international negotiationsSome of the factors that lead to success in both domestic and international business negotiations are the same, including:

• Negotiator preparedness

• Negotiating skills of the negotiators

• Quality of information brought to the table

• Amount of shared information.

In many other ways international business negotiation differs from domestic nego-tiation and requires a different set of skills and capabilities – the ability to deal with complexity, for instance. International business negotiation can be a slow and dif-ficult process because the negotiators have to take into account tariff structures, import regulations, fluctuating exchange rates and numerous other complex details. Failure to do so means that any agreement reached may be inconclusive and short-lasting.

Complications faced by managers embarking on international business negotia-tions have been identified by Salacuse (2003) and other authors. They include:

5INTERNATIONAL BUSINESS NEGOTIATION: AN OVERVIEW

• International business negotiators must take into account the laws of two or more countries, depending on the number of parties involved in the negotiation. These laws are often inconsistent. As a result, clauses may have to be inserted into the contract specifying the governing law in case of disputes between the parties and specifying contingency arbitration arrangements in case of serious disputes.

• There may be sudden changes in the international business environment trig-gered, for instance, by devaluation of a foreign currency or an increase in taxes payable by foreign investors. Such reversals are commonplace in international business. Toyota’s vehicle sales in China in 2011 rose at the slowest pace in seven years after the sudden removal of tax breaks dented demand.

• Force majeure clauses may have to be inserted into contracts allowing for contract cancellation under certain conditions – e.g. in the event of international business conditions being disrupted by war or revolution.

Other complications stem from the differing negotiating customs and expectations of the negotiators. That is why a few basic rules and procedures may need to be agreed at the start of a negotiation to answer many of the participants’ initial questions.

�Bilateral�and multilateralMultilateral negotiations are a common feature of international business, yet nego-tiation research focuses mainly on bilateral negotiation. Most textbooks on negotia-tion are about two-party negotiation. A possible reason for this emphasis is that two-party negotiations are easier to comprehend and to write about, easier to orga-nise and conduct, than multilateral negotiations.

Bilateral negotiation generally consists of tit-for-tat bargaining with a regular exchange of concessions leading to a negotiated outcome. The two sides either reach an agreement or not. Multilateral negotiations, on the other hand, involve many parties and usually deal with multiple issues. They are difficult to organise and con-duct unless well thought-out procedures are imposed – for example, scheduled meetings and timetables, report-back sessions, a nominated or elected chair, and procedures which facilitate orderly discussion.

In multilateral negotiations consensus may be the only practical way of reaching a negotiated agreement. No one party can get what they want unless they are willing to allow other parties to achieve some of their goals. In practice, consensus is often considered to have been achieved when a significant number of parties are in favour of a proposal and the rest do not oppose.

�Single�issue�and multiple�issueSome negotiations focus on a single issue. What price should be paid for a particular export order? What should the deadline for completing an IT project in a foreign country? Lewicki et al. (2005) point out that single-issue negotiations such as these are typically characterised by competitive, distributive bargaining where one side’s gain is the other side’s loss.

In most international business negotiations, however, multiple issues have to be addressed and resolved. This is achieved when negotiators are willing to adjust their opening negotiating positions so that an agreement can be reached which spans all the issues. When multiple issues have to be resolved a process of give and take and


making concessions is essential if an agreement is to be reached. Trade-offs across issues, and adding additional issues, are used to create joint gain.

�Micro-level�and macro-levelMicro-level negotiation involves bargaining between individuals, as in simple buy-ing/selling transactions. In international business, numerous small-scale buying/selling transactions are carried out every day by individuals who are in business for themselves.

By contrast, macro-level negotiations take place between organisations such as two international companies, or between a company and a foreign government. An example of a very large macro-level negotiation was Boeing’s sale of 27 787-Dreamliners to Air India in 2006. Yet the Dreamliner negotiation was just one of many thousands of large-scale international business deals negotiated that year. In the same year Boeing completed negotiations for a huge supply contract with Japan’s Toray for the carbon fibre needed to produce the aircraft.

Macro-level negotiations tend to be large-scale in terms of the number of issues to be resolved (Weiss, 2006). The negotiators have to wrestle with tariff structures, import regulations, fluctuating exchange rates and numerous other complicating factors. In drawing up a contract the negotiators may need to weave their way around the laws of two or more countries, and a clause may have to be inserted specifying arbitration arrangements in case of serious disputes arising between the parties further down the line.

Hydro-electric project

Ready & Tessema (2009) describe a huge hydro-electric project in China which required a schedule of complex preliminary negotiations followed by full formal negotiations among the various parties. Major stakeholders included:

• International consulting groups

• Regional and national banks

• Construction contractors

• International and local equipment suppliers

• Provincial and central government departments.

Even after the main negotiations ended and construction of the project began, countless small-scale negotiations continued between various stakeholders. For example, two engineers from different equipment supply companies would regu-larly meet over a cup of coffee to discuss such matters as the specifications of an alarm system to be installed in a generating station or possible dates for the arrival of some new equipment.

Sometimes in multi-party negotiations the negotiators have to deal with a com-plex overall negotiating situation that defies an easy solution. For example, three or four companies may negotiate an agreement that is acceptable to the negotiating teams themselves. However, before the agreement can come into force the agree-ment must be approved within each company.


�Cultural�challenges Cross-cultural aspectsThe cross-cultural nature of international business negotiation is its defining charac-teristic. And this helps to explain why reaching an acceptable agreement can be a lengthy and difficult process. As Meyer (2016) shows, cultural preferences influence managers’ negotiating styles and choice of negotiating strategies. In cross-cultural negotiations many practical complications stem from the different mindsets and different first languages of the negotiating parties, and there is often less under-standing of the other party’s goals and priorities than in same-culture negotiations. An agreement satisfactory to both sides is therefore more difficult to achieve.

Other complications springing from the cross-cultural nature of international business include the impact made by different legal and political systems and by different negotiating customs and protocols. However, agreeing on a few basic pro-cedures at the start of international business negotiations helps to answer many of the participants’ initial questions and uncertainties. Managers participating in negotiations usually want to know which language will be used, who speaks and in what order and for how long. A few simple agreed procedures are always appreciated by a culturally diverse group of negotiators and advisers and will help them to quickly get down to addressing the issues.

In some countries mistrust of foreigners causes communication barriers to appear in international business negotiations. According to Fukuyama (1995), the ability to trust others is linked to economic prosperity. In rich countries there is trust because deterrents to fraud and malpractices exist in the form of financial ser-vices authorities, compliance officers and contract enforcement mechanisms. Distrust of foreigners on the other hand is a characteristic of many poor countries.

International business negotiation differs from domestic negotiation in many important ways and requires a different set of skills and knowledge. International business negotiators need to do more than simply transfer the tactics and techniques they used successfully at home to the international scene. Cultural empathy and trust-building skills are also needed.

�Attitudes�to time

Time is valued differently in different countries. In Mexico, for instance, business-people tend to be habitually late for meetings while in Germany they are always punctual. For US managers time is money and they like to get the deal done quickly. In Japan it is preferable to take time to negotiate with less focus on time efficiency.

In time-oriented cultures such as those of Western Europe and North America meeting times are planned and adhered to. But in cultures with more flexible atti-tudes to time, starting and finishing times of business negotiating sessions some-times turn out to be approximate. Managers start and end sessions at flexible times, do not take lateness personally and take breaks when they seem appropriate.

�Language�complications

International business negotiations are often carried out by people with different first languages. When this is the case a decision has to be taken about the language in which the negotiation is to be conducted – a decision which creates winners and losers. For Suchan (2014) the winners are native speakers of the language chosen.


In Hong Kong many international business negotiations are carried out in Cantonese. Cantonese speakers are therefore the winners. Native speakers of other languages are the losers as they may have difficulty presenting their proposals and ideas in what for them is a foreign language. They may find it difficult to fully understand the arguments and proposals made by other speakers.

English is widely used as a lingua franca not only in international advertising campaigns but also in international business negotiations between negotiating teams who have different first languages. English is also widely used by international companies to communicate with their customers, for annual reports, for communi-cating with business partners in diverse locations and so on.

Mindset

A mindset is a system of thought that directs attention and reasoning. Gunia et al. (2016) argue that mindset varies systematically with culture and language.

People with holistic mindsets tend to consider not just an object but also the object’s context, using associative reasoning to understand the situation as a whole. People with analytic mindsets use linear reasoning during negotiations to understand each aspect of a complex negotiating situation in turn. Mindset varies systematically between Eastern and Western cultures, with Easterners often categorised as holistic and Westerners as analytic.

Understanding the mindset of the other negotiating team is essential for success-ful negotiation. Key components of the Chinese mindset are ambition and self- confidence stemming from the country’s economic success, and such qualities underlie Chinese negotiators’ slow, deliberate decision-making and tough bargain-ing (Leung & Yeung, 1995). For instance, price reductions of 50% or more may be demanded before a deal is made. Understanding the Chinese mindset enables for-eign negotiators to choose appropriate negotiating strategies when negotiating with Chinese opponents.

�Other�key�differences

Gunia et al. (2016), Salacuse (2003) and other authors have noted important differ-ences of style and approach between negotiators from different countries, including:

Different attitudes to risk. Cultural tendencies influence negotiators’ willingness to take risks. The Japanese, for instance, tend to be risk adverse while the Americans are risk takers. One way of reducing risk is to obtain as much infor-mation as possible when negotiating. Another is to propose rules and conditions that reduce the risks of saying yes to a deal.Win/lose or win/win? Prior knowledge about the other party may enable you to predict their attitude to negotiation – for example, the extent to which they have your interest in mind (win/win attitude) or only their own (win/lose attitude). An uneven balance of bargaining power in an international business negotiation may encourage the powerful party to adopt a win/lose approach.Formal or informal negotiating style. Businesspeople from some cultures prefer to use an informal negotiating style. For instance, they address members of the other team by their first names – which may be seen by the other side as disre-spectful. International business negotiators need to pay attention to the impact made by their own negotiating style on the other party since it is important to appear appropriate and respectful at all times.


Contract or relationship. Western businesspeople see the main goal of a business negotiation as the achievement of a signed contract, while Asian businesspeople may see the main goal as establishing or extending the business relationship.

�Need�for cultural�empathy

Cultural empathy is important for international business negotiators because it helps them to see the world as their opponents see it and so enables them to antici-pate the opponent’s strategies and tactics. In negotiations culture makes an impact by exposing ideological differences among participants. Managers from different countries have strong and conflicting ideas about such sensitive issues as human rights, political authority, and private and public ownership. Consequently, in negotiations managers need to present their proposals and recommendations in ways that are ideologically acceptable to the other side.

MINI-CASE:�Pace�of�negotiations

Working� in� pairs� or� small� groups,� study� the� following� situation� and�answer� the� questions� that� follow.� Each� group� then� makes� a� brief�presentation�of�its�answers�to�the�other�groups�for�their�comments.

When three senior managers from an Indian manufacturing company make a business trip to the US they are surprised by how quickly things get done. Business negotiations that would take weeks or months in India take just a few days to complete.

Other major differences become obvious to the managers. As they point out to their American counterparts, in India many people are usually involved in making important decisions and business deals take a long time to set up. But US managers seem to make decisions quickly. The Indian managers get the impression that the US managers don’t need to consult their colleagues or even their boss.

Questions:

1. Why is the pacing of business negotiations in the US faster than in India? What cultural factors are involved?

2. If the Indian managers try to introduce US-style business methods into their own company when they return to India, what problems will they be likely to encounter?

�Negotiation�process

Give-and-take processInternational business negotiation can be carried out through a simple exchange of emails or by two managers making a verbal agreement when they meet at an inter-national conference or in an airport lounge. At other times international business negotiation is more formal and more complicated. In all cases, however, negotiation process consists of an exchange of information and proposals between the parties. International business negotiation is essentially a process of give and take in which the parties keep modifying their offers to come close to each other and therefore make an agreement more likely.


Lukes (2005) notes that the outcomes of negotiation are usually assessed in terms of their effects on the negotiators’ interests. The decision-making method adopted by the negotiators at the start of negotiations (e.g. consensus, majority voting) greatly influences the nature and distribution of outcomes.

Draft agreementsIn theory, negotiation process involves an exchange of information, identification of a number of options and gradual movement towards an agreement. In practice, however, this kind of slow and systematic process can be accelerated. For example, one of the parties may present the other with a comprehensive draft agreement to serve as the basis for discussion throughout the negotiation. If the draft is accepted, then one party has set the agenda for the entire negotiation and thus accelerated progress towards an agreement.

Preparing the draft agreement obliges a company’s negotiators to consult with internal and external constituencies in advance of the actual negotiation. This ensures that when the draft agreement is presented at the start of negotiations it represents a negotiating position that has already gained widespread acceptance and support (Figure 1.1).

�Creating�value�and capturing�valueThompson (2014), like many authors, distinguishes sharply between cooperative and competitive negotiating styles. Brandenburger & Nalebuff’s (1996) theory of added value in business – ‘co-opetition’ – goes further. It explains how managers first create value in international business negotiations by being cooperative, then capture value by being competitive towards the end of negotiations. The authors see

Seek relevantinformation

Decidenegotiation

goals

Examineissues andproblems

Discuss alternativesolutions,

predict outcomes

Agree asolution.Discuss

implementationdetails

Implementation

POST-NEGOTIATIONSTAGE

NEGOTIATION STAGEPRE-NEGOTIATIONSTAGE

Figure� 1.1 Using a systematic, problem-solving approach to international busi-ness negotiation

Note: Factors that lead to successful outcomes in international business negotiations include the preparedness of the negotiators, the negotiators’ negotiating skills and the quality of information acquired by the parties.


international business negotiation as a kind of judo contest in which the fighters consciously use both their own strengths and also their opponents’ weaknesses to make their moves before claiming value as the contest ends.

Arguably, the theory incorporates a fundamental duality because:

• Creating value is an inherently cooperative process;

• Capturing value is an inherently competitive process.

The theory is based on the assumption that, to create value, negotiators cannot act in isolation: they have to recognise their interdependence and so need to behave cooperatively while creating value goes on.

�Stages�of negotiationFor most authors, both domestic negotiations and international business negotia-tions move through a series of stages. Graham’s (1987) model of negotiation, for instance, is based on five distinct stages:

Relationship-building. Giving time to relationship-building improves mutual trust between the teams and reduces the risk of conflict disrupting the proceedings.Information exchange. With Japanese firms, preliminary information exchange may last months or even years (Laroche, 2003).Persuasion. Western business negotiators often throw hard facts on the table and use them to persuade the other side to take the desired action.Concessions. In international business negotiations a common tactic is to start high then make concessions so as to encourage reciprocal concessions from the other side.Agreement. Foreign negotiating teams usually underestimate the time required to reach a negotiated agreement with Chinese negotiators, who often need to coor-dinate with numerous officials and committees.

MINI-CASE:�An�American�in�Shanghai

Working�in�small�groups,�study�the�following�situation�and�answer�the�questions�that�follow.�Each�group�then�makes�a�brief�presentation�of�its�answers�to�the�other�groups�for�their�comments.

The CEO of a North American electronic equipment manufacturing company pays a visit to a well-known Chinese manufacturer based in Shanghai to explore the possibility of the two firms’ forming a business partnership. The Chinese company is very willing to discuss a possible link between the two companies. It is keen to acquire new technology to meet increasingly sophisticated customer demands, which will enable the company to boost its already strong position in the Chinese market as well as to tap into regional and international markets.

When the American CEO arrives at the Chinese manufacturer’s office in Shanghai he finds that a formal presentation has been arranged for the foreign visitor. During the presentation, the Chinese general manager gives a brief introduction to his company. The Chinese interpreter translates what the general manager says word for word. The company is one of China’s second-class enterprises, the general manager says. On hearing this, the CEO’s enthusiasm for a business partnership immediately evaporates. Accordingly,


�Communication�technologies�Efficiency�gainsPhysical distance and time difference are important factors in determining which communication methods a manager should use when negotiating with foreign busi-ness associates. Many international business negotiations are carried out in face-to- face meetings, but phone calls, emails and faxes are also widely used, and managers increasingly rely on communication technologies for conducting negotiations (Leonardi et al., 2012). Among the technologies commonly used are:

• Instant messaging

• Video conferences

• Conference calls

• e-procurement

• e-bidding

• Software for classifying and evaluating suppliers

• Translation software

• Text and image digitisation software

In international business, using several communication technologies in combination is common practice. For example, a manager might use document sharing to com-municate pertinent information to a negotiating opponent before sending the same information as an email attachment and finally checking by phone that the infor-mation has been received and understood.

as the presentation ends the CEO leaves the building without requesting any further discussions.

On the next day the American CEO complains about the Chinese company to a local official who has been acting as his unofficial culture guide. The official is taken aback by the CEO’s unfavourable comments and explains that in China a ‘second- class enterprise’ is a locally owned major state enterprise.

The official goes on to say that it could be difficult at this stage to arrange a follow- up meeting to discuss a business partnership. The reason is that the Chinese general manager has lost ‘face’ because of the CEO’s abrupt departure from the presentation which was specially arranged for him.

Source: Zhao (2000)

Questions:

1. To what extent were the Chinese interpreter and the Chinese general manager responsible for the situation that has arisen?

2. Should the CEO have handled the situation immediately, following the Chinese general manager’s introduction? How should he have acted?

3. What should have been the CEO’s response when the Chinese official told him that a follow-up meeting to discuss a business partnership would be ‘difficult’ to arrange?


�Access�to international�marketsCano & Baena (2018) found that import/export companies in South America used information and communication technologies (ICT) at every stage of the interna-tional business negotiation process because ICT gives easy access to international markets and allows companies to make more efficient use of their resources, particu-larly with regard to cost and time savings.

Communication technologies enable managers to participate in negotiations with foreign customers or business partners without having to physically travel to the location. But although video conferencing and other electronic methods are adequate for dealing with routine or uncomplicated aspects of negotiation, face-to- face meetings are often essential for resolving more complicated matters.

Negotiation support systemsAs the number of international business negotiations conducted electronically increases, the need for negotiation support systems also grows. Negotiation sup-port systems (NSS) are computer techniques that support the social and analyti-cal aspects of negotiation. As NSS become more widely used in international business negotiations, care must be taken to adapt them to the negotiating con-text. In some contexts, for instance, the main value of NSS is in supporting the decision-making needed to rate and rank alternative options or packages that have been tabled.

However, NSS can only go so far. In the tense atmosphere of an international business negotiation human actors are essential in providing the experience and analytical capabilities needed for making the right decisions and achieving superior outcomes.

PRACTICAL�EXERCISE:�Which�language?

Working� in� small� groups,� consider� the� manufacturing� manager’s�dilemma,�outlined�below,�and�answer�the�questions�which�follow.�Make�a�brief�presentation�of�your�answers�to�the�other�groups.

A Swedish manufacturing manager is due to hold negotiations in ten days’ time with a Polish company with the aim of establishing an agreed framework for long- term cooperation. A big stumbling block, however, is that each side has only a poor knowledge of the other side’s native language – and very little experience of attempting to speak it either in negotiations or other business contexts.

This situation prompts the Swede to ring his Polish counterpart to discuss which language he thinks should be used in the forthcoming negotiations: Swedish, Polish or a neutral language such as English or French? At the end of their phone conversation no clear decision has been reached.

Questions:

1. What would be the advantages and disadvantages of using in the forthcoming negotiations (a) Swedish, (b) Polish, (c) English or (d) French?

2. What would be the advantages and disadvantages of bringing an interpreter into the negotiations?


Automated negotiationAutomated negotiation takes place when the negotiating function is performed by computers. Automated negotiation between intelligent (computer) agents appears in many areas of research, such as electronic commerce or distributed resource allo-cation. Machine learning techniques enhance the agents’ behaviour during negotia-tion. Some systems – e.g. Radu’s (2015) multi-agent system – allow different negotiating strategies to be used by agents.

Negotiating by phoneNegotiating by phone saves time and money. But carrying out cross-border transac-tions by phone can be risky since misunderstandings may occur caused by differ-ences in cultural norms. When negotiators from different cultures meet face to face they gain valuable insights from body language into the other person’s attitudes and priorities. However, this kind of information is lacking when negotiating by phone.

Conference callsConference calls are multi-party meetings or negotiations over the phone.

Because of the lack of body language signals, conference calls have fewer inter-ruptions, overlaps and pauses than face-to-face negotiations. Small talk is restricted to the beginning and end of calls if it happens at all, and side conversations among various participants do not occur.

Email negotiationGunia et al. (2016) note that emails are widely used to negotiate international busi-ness deals. With email the parties do not need to be present at the same time for negotiation to occur. Another advantage is that using emails to negotiate hides status differences between negotiators – a great advantage in high power-distance countries such as India, Russia and Turkey. Email negotiation encourages reflection and plays down impulsive decisions because it allows time for negotiators to deliberate and make necessary changes of negotiating strategy. When negotiating entirely by email, negotiators’ relationship needs can be met by friendly chit-chat before getting down to business or by exchanging photographs to help personalise the process.

Evans (2013) points out that emails are a popular negotiation method in Hong Kong. Multinational companies in Hong Kong often insist on their staff using English in emails because doing so projects a professional image. Rosette et al. (2011) found that Hong Kong Chinese negotiators using email made more aggres-sive opening offers and claimed more value than their US counterparts.

Virtual negotiationVirtual negotiation is an efficient way of reaching a negotiated agreement without incurring heavy expenses. The negotiators communicate with each other mainly by using video conferences. Negotiating team members can continue to communicate with each other between formal sessions via email, intranet-internet systems, instant messaging and other electronic means.

During� a� management� seminar� held� in� London� one� participant –� an�export� sales� manager –� explains� how� he� successfully� negotiated� a�


contract�with�a�state-owned�company�in�Southeast�Asia�by�means�of�vir-tual negotiation, using computer-based document sharing to support the bargaining.

In virtual negotiations the discussion is interspersed with written files or docu-ments, which are shared through various kinds of electronic communication. However, as document sharing is not always tightly coupled with the talk, decisions often take longer to reach than they do in face-to-face negotiation. The absence of visual cues means that each participant has to rely on his or her own judgment about the most appropriate time to break a silence or to start a new turn.

Face-to-face negotiationAlthough electronic communication methods are widely used to carry out interna-tional business, negotiation is essentially an interactive and relational process. Kumar & Patriotta (2011) make the point that negotiators continually respond to each other’s moves and engage in self-presentation and impression management tactics. In face-to-face negotiations, investing in relationship building before getting down to serious bargaining sets the stage for an atmosphere of trust and openness during the formal negotiations and can make the difference between success and failure in the negotiation.

Nadler (2007) found that in face-to-face negotiations managers demonstrate their relationship-building ability by such micro-behaviours as:

• Taking turns speaking in business interactions

• Using nods and other signs of understanding during business conversations

• Unconsciously matching the verbal and nonverbal communication of the coun-terpart, including tone of voice, mannerisms, posture and facial expressions.

MINI-CASE:�Virtual�negotiationWorking�in�small�groups,�study�the�following�situation�and�answer�the�questions�that�follow.�Each�group�then�makes�a�brief�presentation�of�its�answers�to�the�other�groups�for�their�comments.

When a North American company and a public sector organisation in Jordan decided to form an international joint venture (IJV) based in the Middle East, the aim of the partners was to provide a range of services to Gulf region clients.

Negotiations between the two companies were conducted in a series of virtual meetings. The meetings would be attended by managers from the American company who were based in several countries throughout the Middle East and North Africa, and by senior officials from the Jordanian organisation.

Timing was important. Virtual meetings would be held during the working day of as many of the participants as possible. Between meetings the geographically dispersed managers and officials could continue to communicate with each other through emails and text messaging.

But according to Suchan (2014), the medium used had several limitations. It proved to be too lean to communicate non-verbal expressions of emotion. This was a major disadvantage for the Jordanian participants for whom effective


�Negotiation�theory�Lack�of a comprehensive�theoryAccording to Moor & Weigand (2004), a comprehensive theory of international business negotiation does not exist as no one theory is capable of fully explaining the processes, strategies and outcomes of international business negotiation. Moreover, different types of international business negotiation exist, each with its own distinct characteristics, so that several distinct context-specific theories will always be needed.

Although no model of international business negotiation has gained general acceptance, most models make a sharp distinction between cooperative and com-petitive approaches. Thus Das & Kumar’s (2011) model assumes that high joint benefit will occur if the negotiating parties are concerned about both their own outcomes and the other party’s outcomes. Gunia et al. (2016) point out that early researchers assumed that negotiations begin with a focus on power, with the most powerful party forcing the other to accept its demands. But later studies show that successful negotiators rely much less on power and much more on coordination and cooperation to achieve successful outcomes.

Negotiation research has focused mostly on the behavioural aspects of human interactions (Lewicki et al., 2014). Consequently, relatively little is known about the impact that culture makes on the process of international business negotiation.

Irrational negotiators?An important strand of negotiation theory has been based on game theory, an ana-lytical approach to decision-making in negotiations. The complex mathematics of game theory allows international business negotiators to keep track of the infinite

communication and emotional expression are closely linked and who complained that their negotiating position was being weakened.

Another disadvantage for the Jordanian team came from their inexperience in using the technology. They were unsure where to place the camera, or how to get close-up shots of the person speaking.

The room setup (one long table) made interaction between participants difficult. Moreover, the time lag between speaking and hearing caused people to talk over each other. After three sessions, both parties agreed to abandon the virtual meetings in favour of face-to-face discussions between the senior members of both negotiating teams, even though this meant that the American negotiators would need to make long weekly journeys to Amman.

In the second of these face-to-face discussions the American negotiators invited the Jordanian team to prepare a draft partnership agreement, the aim being to accelerate progress towards a negotiated agreement. Two weeks later a further face-to-face meeting was held in Amman to discuss the draft agreement and revise it.

Questions:

1. What�were�the�main�advantages�and�disadvantages�of�using�virtual�meetings�to�carry out the IJV negotiations?

2. How�could�the�disadvantages�have�been�eliminated?


possibilities and to move onto decision trees and path analysis that characterise more sophisticated decision-making.

However, approaches based on game theory falsely assume the rationality of the negotiators and the near-perfection of information, which ignores the realities of real-life negotiations. Non-rational and psychological factors have been studied by researchers (e.g. Lewicki et al., 2005) and found to strongly influence both negotia-tor behaviour and negotiation outcomes.

Leary et al. (2013) argue that negotiation theory has still not fully caught up with breakthroughs in neuroscience and psychology. For example, people with damage to the right hemisphere of the brain (the emotional side) have great diffi-culty making decisions in negotiations and other situations.

Exchange platformCaputo et al. (2019) raise the possibility of moving towards a more systematic and integrated perspective on international business negotiation by coordinating all negotiations that are held by a company’s negotiators and creating an exchange platform to exchange good practices. Management incentives could be introduced with the aim of aligning managers’ behaviours in negotiations with the company’s strategic goals. For this to happen, managers would need a good understanding of what their company’s strategy is and have it linked to company appraisal and bonus schemes.

�Shortage�of theory-based�applicationsNegotiation practice would be strengthened if more theory-based decision tools were available. Such tools would enable the negotiators to deal more effectively with the many complex problems and issues that arise in international business negotia-tions (Brett & Gelfand, 2006).

The shortage of theory-based applications is partly due to the fact that negotia-tion theories tend to be descriptive, not prescriptive. Descriptive models describe what actually happens in negotiations – for instance, by studying the thinking and behaviour of the negotiators in a particular situation. Prescriptive models, by con-trast, prescribe what negotiators should actually do and so lend themselves to appli-cations in various negotiating contexts.

�Choosing�an interpreter Amateur interpretersSometimes a member of one of the negotiating teams offers to act as interpreter, but the arrangement can be risky. When Western consultants were carrying out a socio-logical survey of villages in a rural area of India, a member of the Brahmin caste who knew the local language offered to act as interpreter.

But�the�villagers�gave�answers�that�they�thought�the�Brahmin�wanted�to�hear.� Sometimes� the�Brahmin�put�words� in� the� villagers’�mouths� and�supplied�answers�he�thought�they�should�have�made.

Such lapses led to numerous inaccuracies, and the consultants were forced to suspend the fieldwork until a professional interpreter could be brought in from the city.


Professional interpretersInterpreters used in international business negotiations need a good understanding of negotiating procedure and vocabulary as well as understanding commonly used technical terminology for the subject being discussed. They need to be briefed in advance on the background of the negotiation, the parties involved and any special-ised vocabulary that may be used.

During negotiating sessions the interpreter should not be expected to work non- stop for long periods, as the strain of prolonged concentration leads to translation errors. Most interpreters find it easier to provide accurate translations when manag-ers speak clearly and slowly and utter only a few phrases before pausing for the translation to be made.

Interpreters should ideally have the same cultural background as one of the nego-tiating teams, together with an excellent knowledge of the other teams’ cultural values and practices. This level of experience and understanding allows the interpreter to communicate a speaker’s intended meaning. If, for example, ‘fair play’ has to be trans-lated into Russian the interpreter should be able, from her knowledge of Russian culture, to find a Russian phrase that captures the intended meaning. Professional interpreters should also be capable of clearing up many cross-cultural misunderstand-ings by providing appropriate explanations, such as: ‘The speaker’s facial expression indicates that she thinks the time-frame being proposed is unrealistic.’

Arguably, managers negotiating abroad should provide their own interpreters. It can be a mistake to rely on the other side’s interpreter unless someone on your team understands the language and can check the translation. Worm & Kumar (2014) advise foreign negotiators to bring their own interpreter when holding negotiations in China.

�Meeting�Chinese�people Communication problemsWide cultural differences make communicating with Chinese people difficult for Western businesspeople. Consider what happened when British consultants were asked by the Asian Development Bank to assess plans for a hydroelectric project designed by Chinese experts. The project would provide water and electric power to the rapidly expanding urban population of the coastal plains area of an eastern province.

Meetings were held with Chinese technical experts to evaluate the project and assess the organisation set up by the Chinese side workers to operate and maintain the dams, generating stations and water conveyance systems. Communication was potentially a huge problem since none of the consultants spoke Chinese and the Chinese officials had difficulty understanding and speaking English. However, both teams were composed of technical experts – engineers, geologists, hydrologists, organisation experts and so on – with similar qualifications and professional inter-ests. There was thus a common understanding of the issues to be discussed, which helped to bridge the communication gap.

Just as important, the Chinese side representatives provided a team of highly trained interpreters who attended all meetings between the two sides and made sure that all the information required by the consultants was obtained and translated into English. Each interpreter was competent in at least one technical area and so could understand the concepts and technical terminology used in the meetings. Minutes were produced in Chinese and English within a few hours of each meeting, enabling the two sides to confirm or correct details of any decisions taken.


�Influence�of ideologyBut as the meetings went on clashing ideologies were exposed. In one meeting, for instance, the consultants argued that the high staffing levels proposed by the Chinese representatives for the generating stations would lead to high production costs and high tariffs and so needed to be cut. But the Chinese businessmen brought their own values to the meeting. They failed to see how eliminating hundreds of jobs could possibly strengthen the project or help the country.

In another meeting, the consultants asked why people were to be moved out of the inundation area to another area hundreds of miles away without consulting the families concerned. For the consultants the issue was one of fundamental human rights for individuals. But the Chinese businessmen stressed the overall needs of society. If society benefitted then so did the individual.

Gradually the consultants learned that concepts of individual rights and free-doms are not readily understood in a society where authority is deferred to and the collective good is seen as supreme.

Key points

1.� Negotiation�is�essentially�a�process�of�give�and�take�which�involves�cooperative�exchanges�of�information�and�offers.�The�parties�keep�modifying�their�offers�and�making concessions to come close to each other and eventually reach an agree-ment.�Trade-offs�across�issues�are�commonly�used�to�create�joint�gain.

2.� In�multilateral�negotiations�consensus�may�be�the�only�practical�way�of�reaching�overall agreement. Consensus decision-making encourages cooperative nego-tiation�because�no�one�party�can�get�what�they�want�unless�they�are�willing�to�allow�other�parties�to�achieve�some�of�their�negotiating�goals.

3.� International�business�negotiations�must�take�into�account�the�laws�of�at�least�two�countries,�and�these� laws�are�often� inconsistent.�Clauses�may�have�to�be�inserted�into�the�contract�specifying�the�governing�law�in�case�of�future�disputes�between�the�parties.

4.� Communication�technologies�can�be�powerful�negotiating�tools�and�save�time�and money. Hundreds of thousands of international business deals are negoti-ated�every�day�using�a�wide�range�of�communication�methods.

5.� Email�negotiation�encourages�reflection�and�reduces�the�risk�of�impulsive�deci-sions� since� it� allows� time� for� negotiators� to� deliberate� and� make� necessary�changes of negotiating strategy.

6. Face-to-face meetings are time- and travel-intensive, but they are needed to allow�negotiators�to�discuss�confidential�matters�and�to�allow�negotiating�teams�to�get� to�know�each�other.�The�participants�have�access�to�each�other’s�body�language, so misunderstandings and misinterpretations are less likely.

7. Conference calls are multiparty meetings over the phone. Because of the lack of body�language�signals,�conference�calls�have�fewer�interruptions,�overlaps�and�pauses than face-to-face negotiations do. Small talk is restricted to the beginning and end of calls if it happens at all.

8. Government plays an important role in some international business negotiations as either�a�participant�or�regulator.�There�are�many�cases�of�a�government�refusing�to�approve�a�draft�agreement�on�grounds�of�protecting�the�public�welfare.


9. Relationship-building is a crucial stage in international business negotiations. It can� make� the� difference� between� success� and� failure� in� a� negotiation.�Emphasising� relationship-building� cuts� the� risk� of� conflict� during� the�negotiations.

10. Economic models of negotiation such as game theory falsely assume the ratio-nality of the negotiators and the quasi-perfection of information. Such assump-tions� ignore� the� realities� of� real-life� negotiations� where� psychological� and�cultural factors play important roles.

11.� Virtual�negotiation�allows�companies� in�different�countries� to�reach�a�negoti-ated�agreement�without�incurring�heavy�expenses.�The�negotiators�communi-cate�with�each�other�mainly�by�using�video�conferences.

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4. What are the main stages through which international business negoti-ations tend to move? Explain how each stage affects the negotiators’ outcomes.


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216

AACAS, see Advisory, Conciliation and

Arbitration ServiceAccess to international markets, 13Accommodators, 31Advisory, Conciliation and Arbitration Service

(ACAS), 195Agency theory, 181Agenda setting, 79Agents, role in multi-party business

negotiations, 107Agreement, 11Airbus, 173Amateur interpreters, 17Appropriateness, 124–125Arab-style negotiation, 146–147Arbitration, 195–197AstraZeneca merger negotiations, 156–157, 164Attitudes

to risk, 8to time, 7win/lose, 8win/win, 8

Australian acquisition, 155–156Automated negotiation, 14, 141Avoiding style, 31

BBarclays, 155BATNA, see Best alternative to a negotiated

agreementBehavioural continuum, 87Best alternative to a negotiated agreement

(BATNA), 61–63, 88, 94–95Bidland Systems, 181Big Five personality traits, 114Bilateral negotiations, 5Bowing, 34Bribery, 51–52

CCapital, as source of negotiating power, 59–60Capturing value, 10–11Case studies, 210–211Chair, role in multi-party business negotiations,

106–107

ChinaChinese people, meeting

communication problems, 18ideology, influence of, 19

Chinese sensitivities, 32Chinese stratagems, 117negotiation strategy in, 125negotiator training in, 129, 148–149

China Media Capital, 171Cisco, 122Clashing values, 35Cloud support, for negotiators, 142Coaching, 211–212Coalitions, role in multi-party business

negotiations, 108–109Codes of conduct, 48–49Collaborative approach to dispute resolution, 191Collaborative negotiators, 31, 43–44Collectivism, 23–24Communication

activities, informal, 77with Chinese people, 18technologies

access to international markets, 13automated negotiation, 14conference calls, 14efficiency gains, 12email negotiation, 14negotiating by phone, 14negotiation support systems, 13virtual negotiation, 14–15

Competitive negotiators, 31, 43–44Compromise strategy, 119, 185Compromising style, 31Concession-making tactics, 122Concessions, 11, 89, 148Conciliation, 195Conference calls, 14Contentious approach to dispute resolution, 191Contract negotiation

construction, 97international business risk, 97management, 96–97non-western approaches, 95–96western approaches, 95–96

INDEX

217INDEX

Contract or relationship, 9Control-oriented contracts, 179Cooperative orientation, 128–129Coordination-oriented contracts, 179Corruption, 51–52Corruption Perception Index, 51Country risk analysis, 97Country similarity theory, 33Creating value, 10–11Cross-border mergers and acquisitions

negotiations, 154–166motivations to merge

AstraZeneca merger negotiations, 156–157

efficiency seeking, 155large-scale mergers, 156

post-merger integrationcultural differences, overcoming,

163–164integration programmes, managing,

164process

due diligence, 157–158monitoring, 158payment options, 158team selection, 157

risks ofcontrol risks, 162financial risk, 162–163high failure rate, 160–161merging-cultures risk, 163performance risks, 161

Cross-cultural aspects of international business negotiationattitudes to risk, 8attitudes to time, 7contract or relationship, 9cultural empathy, need for, 9formal negotiating style, 8informal negotiating style, 8language complications, 7–8mindset, 8win/lose attitude, 8win/win attitude, 8

Cross-cultural communication ability, 205Cultural distance, 28–29Cultural empathy

high context/low context cultures, 26

need for, 9relational emphasis, 26tight/loose cultures, 26

Cultural intelligence, 140, 205Cultural preferences, for overseas marketing

activities, 138Cultural surveys, reliability of

central tendencies, 24

collectivism/individualism, 23–24decision-making, 25–26outcomes, 25

Cultureinfluence on outcomes, 25macro-level perspectives, 27micro-level perspectives, 27and negotiation, 22–36nonverbal differences, 33organisational, 27wide differences, 23

DDanone-Wahaha dispute, 191Decision-making, culture’s influence on, 25–26Defensive tactics, 121–122Dispute resolution, 185–198

international business disputesconcepts and examples, 186cultural aspects, 187–188fear and rivalry, effects of, 187positive effects of conflict, 186self-help conflict resolution, 188–189trust, role of, 188types of conflict in negotiations, 187western preferences, 188

methodsarbitration, 195–196collaborative and contentious

approaches, 191conciliation, 195Danone-Wahaha dispute, 191examples, 190–191litigation, 191–192mediation, 194–195negotiation, as dispute resolution

method, 197out-of-court settlements, 194post-settlement settlements, 197renegotiation, 198WTO adjudication, 192–193

Distributive justice, 50Distributive (competitive) negotiation, 86–87Distributor agreements, 137Domestic negotiations, 4–5Downplaying relationships, 119Draft agreements, 10DreamWorks Animation, 171Due diligence, 157–158DuPont, 170

EEfficiency gains, 12Efficiency seeking, 155EITI, see Extractive Industries Transparency

InitiativeEmail negotiation, 14, 141–142Emotional conflict, 187

INDEX

218 INDEX

Emotionsimpact on negotiating power, 65–67impact on negotiator performance, 66–67impact on outcomes, 65–66negative, 114positive, 114

Ethical codes and standardsbehavior abroad, 49codes of conduct, 48–49global, 49lack of international standards, 48

Ethicsgender differences, 45–47in negotiation, 40–52unethical negotiating tactics, 41–45

Exchange platform, 17Experiential learning, 210Expert sub-groups, 109Extractive Industries Transparency Initiative

(EITI), 49Eye contact, 34

FFace-to-face negotiation, 15, 32, 187Facial appearance, 46Fear, 187Feedback, 211Feminine charm, 205–206Fiat, 181First-offer effect, 124–125Five-stage model of negotiation, 88Flexible negotiators, 123, 205Force majeure clause, 5Foreign advertising, 138–139Formality, 32Formal negotiating style, 8Four-stage model of negotiation, 88French-Egyptian bargaining, 149

GGender differences, 45–47Give-and-take process, 9–10Globalisation, impact on negotiating power,

61–62GLOBE survey, 23Good cop-bad cop approach, 119–120Good Friday Agreement, 104

HHard-power tactics, 63–64Hierarchy barriers, 118High-context culture, 26Highly competitive orientation, 126–127Hong Kong negotiations, 64–65Hot tubbing, 196HP-Compaq merger, 165–166

Hybrid strategies, 119–120Hydro-electric project, 6

IIBM, 58–59, 163ICT, see Information and communication

technologiesIdealism, 44Ideological distance, 29IJV, see International joint venture negotiationsInBev-SABMiller merger, 156Indian-style negotiation, 33–36Indirectness, 32Individualism, 23–24Indonesian-style negotiation, 31Informal communication activities, 77Informal negotiating style, 8Information and communication technologies

(ICT), 13Information exchange, 11Information power, 61Information sharing, 87–88Integrative (cooperative) negotiation, 86–87Intel, 122Intergroup dialogue, 189Internal consultations, 77–78International business disputes

concept and examples, 186cultural aspects, 187fear and rivalry, effects of, 187positive effects of conflict, 186self-help conflict resolution, 188–189trust, role of, 188types of conflict in negotiations, 187western preferences, 188

International buying/selling negotiations, 135–149agreement, shaping, 149China, negotiator training in, 148–149dealing with objections, 144offering options, 145–146opening offer, using, 144overseas marketing activities

automated negotiation, 141cultural intelligence and

questioning, 140cultural preferences, 138email negotiation, 141–142foreign advertising, 138–139sales negotiation practices,

139–140price negotiation, 143quality issues, 144–145selling abroad

distributor agreements, 137licensing agreements, 137

219INDEX

personality and sales success, 137–138risk factors, 136–137sales resistance, overcoming, 136selling to developing countries, 136

selling to the Chinese, 148stages of, 143

International joint venture (IJV) negotiations, 170–181boards, 173key stages of

contract, types of, 179evolving process, 178

ownership and control, 172–173performance

management issues, 179–180measures, 180monitoring, 180and opportunism, 181and trust, 181

phases of, 172purpose of, 171regulatory aspects of, 172success factors

inter-partner trust, 176–177partner selection, 175–176pre-negotiation investigation, 175

training issues, 173trusts and performance, 177

International negotiations, 4–5Interpreters

amateur, 17professional, 18

Iraqnegotiations, 65

Irrational negotiators, 16–17ISO 14000, 48Issue bundles, 106

JJapanese-Pakistani venture, 174Japanese-style negotiation, 31–36Jardine, 172Johannesburg Stock Exchange, 52Joint drafting of texts, 97Joint gains process, 87–88Justice

distributive, 50procedural, 50

KKnowledge, as source of negotiating power,

60–61

LLanguage

complications, 7–8as source of negotiating power, 60–61

Large-scale mergers, 156

Lectures, 211Licensing agreements, 137Logical, sequential approach, 30–31Longer negotiation training courses, 208Loose culture, 26Low-context culture, 26

MMacro-level negotiation, 6Macro-level perspectives of culture, 27Maruti, 136McKinsey & Company, 175Mediation, 194–197Meritor, 164Micro-level negotiation, 6Micro-level perspectives of culture, 27Midea, 148Mindset

analytic, 8holistic, 8

MTN-Bharti Airtel negotiations, 158–160Multilateral negotiations, 5, 212Multi-party business negotiations, 103–111

bilateral versus multilateral, 103–104binding agreements, 104complexity management

agents, role of, 107Chair, role of, 106–107coalitions, role of, 108–109dealing with multiple issues, 105–106expert sub-groups, 109simple procedures, need for, 106strategic orientations, 105wide-ranging interests, 104–105

voting patternsconsensus, 110majority voting, 110negotiation with a single voice, 110team leader decisions, 110–111

Multiple issues negotiation, 5–6

NNational cultures, influence on negotiation

styles, 30–32Nationality, unethical negotiating tactics and, 42Negative emotions, 114Negotiating goals, 86Negotiating interests, 86, 116Negotiating power, 56–67

abuses of, 61–63deficits, overcoming, 62–63definition of, 57emotions, impact of, 65–67parity, 57power-dependence theory, 57–58sources of, 59–61time constraints and, 59unequal negotiations, 63–65

220 INDEX

Negotiating teamleaders, 205–206performance assessment, 203selection of, 204size of, 203–204

Negotiationautomated, 14, 141bilateral, 5contract, 95–97culture and, 22–36as a dispute resolution method, 197distributive (competitive), 86–87domestic versus international, 4–5email, 14, 141–142ethics in, 40–52face-to-face, 15integrative (cooperative), 86–87macro-level, 6micro-level, 6multilateral, 5multi-party business, 103–111multiple issues, 5–6noise in, 29–30pace of, 9by phone, 14price, 143process (see Negotiation process)scope of, 4single issue, 5–6stages of, 11unjust, 50–51virtual, 14–16

Negotiation proceduressimple, 91sophisticated, 91–92

Negotiation process, 85–97capturing value, 10–11creating value, 10–11definition of, 86draft agreements, 10give-and-take process, 9–10joint gains process, 87–88reservation point assessment, 88

Negotiation simulation, 210Negotiation strategies, 114–131

corporate strategy, 115–116fluctuations, 116goals, 115–116guiding principles

appropriateness, 124–125flexibility, 123–124simplicity, 122–123

hard, 115, 122interests, 116

limited number of options, 116–118maximum gain, 117relationship-building strategies, 118–119selection of, 115–121soft, 115, 122strategic orientations, 126–131

cooperative orientation, 128–129fluctuating phases, 126highly competitive orientation,

126–127principled negotiation, 131problem-solving approach, 130

Negotiation structureBATNA, 94–95components of, 93–94zone of possible agreement, 94

Negotiation stylesconcessions and trade-offs, 89formality, 32indirectness, 32models, 88–89national cultures, influence of, 30–32options for presentation, 89–90outcome assessment, 90persuasion stage, 89

Negotiation support systems (NSS), 13Negotiation tactics, 121–122Negotiation theory

comprehensive theory, lack of, 16exchange platform, 17irrational negotiators, 16–17theory-based applications, shortage of, 17

Negotiators, 22attributes, 205–207bias, 67, 209characteristics of, 114cloud support for, 142collaborative, 31, 43–44competitive, 31, 43–44irrational, 16–17performance, impact of emotions on,

66–67women, 45–46, 129, 206–207

Negotiator selectioncriteria for, 204departmental versus company interests,

202–203negotiating teams, advantages of

team performance assessment, 203team size, 203–204

Negotiator trainingcase studies, 210–211coaching, 211–212feedback, 211impact of, 208–209

221INDEX

lectures, 211methods, 209–210multilateral negotiations, 212programme length, 208providers, 207–208role-play, 210simulation, 210

New ZealandExporter Education Programme, 207

Noise, in negotiations, 29–30Nonverbal differences, 33–35Non-western approaches to negotiation, 95–96Northern Ireland

Good Friday Agreement, 104NSS, see Negotiation support systems

OOffensive tactics, 121–122Opportunism, unethical tactics and, 41Opportunities

missed, 24–25Organisational culture, 27Outcomes

culture's influence on, 25emotions, impact of, 65–66negotiation styles, 90unethical negotiating tactics, 42–43

Out-of-court settlements, 194Overseas marketing activities

automated negotiation, 141cultural intelligence and questioning, 140cultural preferences, 138email negotiation, 141–142foreign advertising, 138–139sales negotiation practices, 139–140

PPersonality, 137–138Perspective-taking ability, 205Persuasion, 11Persuasion stage of negotiation, 89Physical arrangements

choice of venue, 81location, 81–82seating arrangements, 81

Poland, compromise strategy in, 125–126Positive emotions, 114Positivity, 205Post-contract negotiation, 96Post-settlement settlements, 197Power

deficits, 63imbalances, 105information, 61negotiating (see Negotiating power)

parity, 57psychological, 61role, 61

Power-dependence theory, 57–58Pre-negotiation activities

four-phase framework, 73–75goals, setting, 75informal communication activities, 77information gathering, 75–77PowerPoint presentation, 80

Pre-negotiation planningkey stage, 72wide scope, 72–73

Preparing to negotiate, 71–82focusing minds, 77–80physical arrangements, 81–82pre-negotiation activities, 73–77pre-negotiation planning, 72–73

Price negotiation, 143–144PricewaterhouseCoopers, 192, 207Principled negotiation, 131, 185Problem-solving approach, 130Procedural justice, 50Professional interpreters, 18Psychological power, 61Psychological pressure tactics, 62Publicity, 79–80

QQuestioning, 35

RRational influence tactics, 122Relational emphasis, 26Relationship-building strategies,

11, 118–119, 210downplaying relationships, 119hierarchy barriers, 118

Relationshipsas source of negotiating power, 60unethical negotiating tactics and, 43

Relativism, 44Religious values, 46–47Renault, 136Renegotiation, 198Reservation point assessment, 88Rivalry, 187Role allocation, 78–79Role-play, 210Role power, 61

SSales negotiation practices, 139–140Sales resistance, overcoming, 136Sales success, 137–138Seating arrangements, 81

222 INDEX

Self-help conflict resolution, 188–189Selling abroad

distributor agreements, 137licensing agreements, 137personality and sales success, 137–138risk factors, 136–137sales resistance, overcoming, 136selling to developing countries, 136

Shanghai Media Group, 171Siemens-Gamesa merger, 155Simplicity, 123Single issue negotiations, 5–6Six-stage model of negotiation, 88–89Soft-power tactics, 63–64Stakeholder theory, 176Starbucks, 172Strategic orientations

highly competitive orientation, 126–127principled negotiation, 131problem-solving approach, 130strategic orientations, 126

Syria negotiations, 65System 1 thinking, 209

TTask conflict, 187TCL, 163–164Technology, as source of negotiating power,

59–60Telefonica, 181Thomson, 163Three-stage model of negotiation, 88Tight culture, 26Tit-for-tat strategy, 119Trademark dispute, 193Trade-offs, 89Transparency International

Corruption Perception Index, 51Trust, role in international business disputes, 188Turkey negotiations, 65Two-phase negotiation, 117–118Type-A Behaviour syndrome, 119

UUK Foreign Office, 65Unbundling negotiation issues, 139

Unethical business practices, 49–50Unethical charging, 47Unethical negotiating tactics

cooperative and competitive negotiators, 43–44

idealism versus relativism, 44and nationality, 42and opportunism, 41outcomes, 42–43and relationships, 43widespread tendency, 41–42

Unjust negotiations, 50–51

VValue Survey, 23Venue, choice of, 81Virtual negotiation, 14–16Volkswagen, 136Volvo, 164Voting patterns, in multi-party business

negotiationsconsensus, 110majority voting, 110negotiation with a single voice, 110team leader decisions, 110–111

WWalking, 34Western approaches to negotiation, 95–96Win/lose attitude, 8Win/win attitude, 8Women negotiators, 45–46, 129, 206–207World Trade Organization (WTO), 104, 109

adjudication, 192–193Dispute Settlement Body, 190, 192

WTO, see World Trade Organization

XXizi, 148

YYielding strategy, 119

ZZara, 124Zone of possible agreement (ZOPA), 94, 124ZOPA, see Zone of possible agreement

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