Effective negotiation skills are becoming increasingly important for today’s global business. A lot of time is spent negotiating in a global setting as companies and individuals conduct business. This paper will attempt to critically assess the significance of cross cultural negotiation skills for the success of international mergers and alliances. To begin with let the definition of negotiation be deduced. Daniels, Radebaugh and Sullivan (2004) identify negotiation as a sequence of actions in which two or more parties address demands, initiate, conduct or terminate operations in a foreign country.
Gulbro and Herbig (1995) define it as the process by which at least two parties try to reach an agreement on matters of mutual interest. In order to be successful in such a diverse and complex business environment, negotiators must be globally aware and have a frame of reference that goes beyond a country or region and encompasses the world (Fowler, 2005). International executives attempt to negotiate for an optimal solution minimizing conflicts and maximizing gains. According to Martin et al. 1999) a clear negotiation strategy is the most important factor for successful international business relationships. Cross cultural negotiation skills are vital in today’s business. It is not just about closing deals but it also involves looking at all factors that can influence the proceedings. Cross cultural negotiation skills not only shows the people involved how to start from a strong position and find common ground with others, but also provides practical techniques for to use when talking and bargaining during business ( Kozicki, 2005).
People from other countries and cultures do things differently. For alliances and mergers to succeed, these cultural differences must be taken into account when negotiating to reach a deal that will last and bring benefits to both sides. Therefore as these people play an essential role for the success of merging companies, it is crucial to have an understanding of different national and organisational cultures. Cross culture is an integral art of the overall corporate culture of the firm, which is applicable for all international alliance and merging partners (Luo,1999). Negotiation skills bring added challenges that help the international negotiator to understand how partners from other cultures view negotiation and how they think it should be handled (Michal, 2005). Although there may be much commonality between members of both sides it should not be assumed that people have the same benefits, values or priorities as each other. Nowadays, businesses of all sizes search for international partnership.
The increasingly global business environment requires the approach to the negotiation process from the global business person’s point of view as the process can be complex and difficult but will create huge opportunities to develop and increase success in avoiding barriers and failures in international mergers and alliances. As one partner better understands that the other partner may see things differently, they will be less likely to make negative assumptions and more likely to make progress when negotiating.
Nations tend to lead a national character that influences the type of goals and process the society pursues in negotiations and this is why specifying and understanding cultural differences is vital in order to perform successfully in inter-cultural communication (Copeland, 1996). In addition, for international mergers and alliances to succeed, it is important for both sides to agree that no one approach is better than another. Lack of cross- cultural skills can cause difference in problem-solving and decision making and this can easily lead to misunderstanding.
Therefore it is important for everyone involved in the proceedings to be able to use a range of decision making and problem solving techniques. Nonetheless, companies from other countries run into problems which stem from cultural differences and this leads to difficulties between negotiating parties. Negotiators from cultures that place a high importance on punctuality and schedules are more prone to set deadlines and then make concessions at the last minute to meet the schedules than are negotiators from cultures that place less importance on punctuality and schedules.
They may underestimate the importance their counterparts place on the negotiations if their counterpart arrives late and do not adhere to schedules due to lack of cultural awareness (Daniels et al, 2004). Furthermore, one counterpart may understand and be adaptive to the other’s culture. Therefore it is important for both parties to have some cross-cultural knowledge as this will determine at the start whether they will follow some form of adjustment. The choice of response should be highly dependent on how well both sides understand each other’s culture.
Cross-cultural negotiation skills provide people with increased knowledge which means people have the opportunity to progress at international level. For alliances and mergers to work, there must be collaboration between the two parties for the betterment of both. Kanter, (1998) argues that communication is important to achieving synergy between partners. It is harder to derive the benefits of cooperation and easier for rivalries to escalate when there is no relationship history to draw upon.
Stereotypes are a pitfall when attempting to create an international merger or alliance. National stereotypes prejudice groups in the absence of evidence and should be avoided at all times. An entire culture cannot be relegated to one or two commonly held attributes. Culture is a very complex issue encompassing a plethora of subjects. A group’s customs, belief systems, values and behaviour must be understood in order to fully realise a successful partnership in a business context. A key component of successful international negotiation is effective ross-cultural communication. This requires that negotiators understand not only the written and oral language of their counterparts, but also other components of culturally different communication styles (Cullen and Parboteeah, 2005). In essence, it requires an understanding of the more subtle, nonverbal aspects of communication as they play a vital role in understanding the communication process. Cross-cultural communication problems can arise in any given situation, even huge co-operations can fall into this problem.
For example, when the U. S. car manufacturer Chrysler merged with the German Daimler – Benz Company in 1998, problems arose out of their different decision-making processes. Chrysler was accustomed to making quick, high–profile decisions while Daimler – Benz, with their hierarchical system, were used to a slow, cautious business model with little need for public pronouncements. Cultural difficulties occurred between the more easy-going and more flexible style of Chrysler and the well structured and bureaucratic style of Daimler-Benz.
All of this was as a result of the different working styles, decision making and communication processes within the company (Shelton, 2003). The incompatibility of the two different cultural aspects was realised too late and became very difficult to be overcome. In the end it was no merger of equals but one company dominating over the other. This case shows the different aspects of the need for cross- cultural awareness as its importance must be considered in cross-border alliance and merger processes in order to become global players.
Negotiation involves clear communication which involves important skills such as understanding, speaking and listening. It is not possible to have one skill without the others. Negotiation is most effective when people are able to clearly identify and discuss their source of disagreement and misunderstanding. Very different cultural attributes were evident when the French Pharmaceutical company Rhone- Poulenc merged with the U. S. Company Rouer. Not only did the Americans take issue with the French people’s lax attitude owards time-keeping and punctuality, they also had to deal with their propensity to express their emotions. Emotional outbursts such as crying or shouting were commonplace in the French company as they are not considered shameful; on the contrary, the French idiom ‘soupe au lait’, used to describe such outbursts, is believed to aliviate stress, allow them to vent anger and present them from bearing grudges (Dornberg, 1999). Perhaps the best example where cross-cultural negotiation skills were used effectively is in the case of Colgate Toothpaste Company.
In 1985, the U. S. Colgate Palmolive Cooperation bought Hong Kong based Hawley & Hazel Chemical Company. Hawley & Hazel’s Toothpaste, ‘Darkie’ had a 70% market share in Asia and it featured a smiley man in ‘black face’ and a top hat resembling a minstrel or Al Jolson. This image presented no protests in Asia since the association with the image was with brilliant smiles. However, Colgate knew the connotations of the name and image of the toothpaste would be offensive to many U.
S. minority groups and therefore had to enter into lengthy negotiations with the Hong Kong Company with a view to changing the name and image of the toothpaste. In order to give customers in Asia time to get accustomed to the new name and image, changes were brought in generally over a year long time frame. Eventually the product was called ‘Darlie’ and the image replaced by a racially-ambiguous smiling character in a tuxedo and top hat (Morrison and Conaway, 2004).
In all these examples, the negotiation skills in a cross-cultural context were successful as the negotiators took into account cultural differences, while allowing for compromise to take place. Negotiators were undoubtedly familiar with Hofstede’s models of value systems and used his suggested five fundamental dimensions to national culture: Hierarchy, ambiguity, individualism, achievement- orientation and long-term orientation to their advantage. Negotiation skills are essential in determining the terms under which a company may enter and operate in a foreign country.
International negotiations occur largely between parties whose cultures, educational backgrounds, and expectations differ, it may be difficult for negotiators to understand each other’s sentiments and present convincing arguments. Negotiation skills offer negotiators a means of anticipating responses and planning an approach to the actual bargaining (Daniels, et al 2004). The key to effective alliances and mergers is skillful management of relations from the initial handshake onward.
In cross-cultural alliances and mergers there is great challenge because each party brings different cultural schemata to the table through which they interpret events. For example, the French dislike being rushed into discussions, they prefer to examine various options in decisions and negotiations are likely to be in French unless they occur outside France. Punctuality is expected and they tend to be formal in their negotiations and do not move quickly to expressions of goodwill until the relationship has existed for some time.
Negotiation skills call for creative thinking that goes beyond the poorly thought out compromise such as those arrived at when there is a rush to solve before an effort is made to comprehend. A deep understanding of the true and often manifested nature of the underlying challenge is required if a long term solution is sought. Many conflicts that on the surface seem to be purely about resources, often have significant components related to issues of participation, face saving and relationships.
For negotiation to work in international mergers and alliances, people need to be able to share their needs and fears with each other. Negotiation skills include being well prepared, showing patience, maintaining integrity, avoiding the presumption of evil, controlling emotions, understanding the role of time pressures, breaking down bigger issues into smaller ones, avoiding threats and manipulation tactics, focusing first on the problem rather than on the solution, seeking for interest-based decisions and rejecting weak solutions (Richard, 1999).
All of these help one way or another when thinking through challenging or difficult business situations and also play a huge role in successful negotiation. The skills help negotiators to learn about other people’s preferences and also make their own clear. As logic is not the only thing that prevails in bargaining efforts it gives people time to work out essential problems especially when dealing with someone of a dissimilar culture and additional time may be needed to work out an agreement (Brett, 1998). In some cases emotional outbursts tend to escalate rather than solve a conflict.
This can be extremely difficult for some people to hide their emotions and this can permit negative emotions which can take control of some negotiators due to lack of skill. Business partners negotiate through life and while there may be no easy answers that will fit every negotiation need, there are many important skills that will help to become more effective. Without the relevant skills negotiation will not prosper in the absence of cooperative decision-making as it will suffer absence of commitment and participation from the individual’s part.
Limited knowledge of either the alliance or merger partners’ languages or cultures puts them at a disadvantage. They may hold power by maintaining a percentage of shares of the venture, but in reality many lose power through ignorance. Skilled negotiators spend twice as much time asking questions as opposed to average negotiators. They probe to clarify issues and understand underlying drivers and reasons for the stance a given party has taken. Talented negotiators also try to understand what the other side wants so they can develop a solution that satisfies all parties.
Skilled negotiators also make many more positive comments than average ones (Hayman, 2007). This emphasises and builds on the good in the negotiation to make it easier to deal with other issues. Without any knowledge of the other party’s culture they may not have any idea of what the other side wants and therefore, it is vital to explore more options to test limits. These skills help to think about how the partner should be approached, what can be given away, and what must remain non-negotiable and all is due to tolerance for differences in culture and outlook.
No matter how many companies want to merge or become an alliance, success rests upon skillful management from the beginning and without this relationship between the business partners will suffer from poor initial planning, mismatched expectations, poor communications, inequitable power distribution and inadequate negotiation potential and decline can be quite rapid. Success rests in accepting the other partner despite differences in values, beliefs, educational experiences, ethnic backgrounds or perspectives.
The skills involved permit partners to examine a problem from all sides, and to promote understanding and interest in the other without necessarily agreeing to one party’s viewpoint. Genuine interest in contributions help to build trust and this provides a foundation for continuing relationship and also eases future efforts to solve problems ( Herbig and Kramer,1991). The negotiation skills allow everyone involved in the business to make suggestions openly without fear of criticism and is accepted.
All negotiations are completed by consensus and a negotiated solution is reached when every partner has given up something to gain common benefits. A hypothetical example of a skilled negotiator dealing with another in a foreign country could be that they both have identical proposals and packages. If one has no knowledge of cross-culture believing the proposal will speak for itself and the other party has the knowledge which involves the culture, beliefs, values, etiquette and approaches to business, meetings and negotiations the latter will most likely succeed over the rival.
This is so because it is likely they would have endeared themselves more to the host negotiation team and would be able to tailor their approach to the negotiations in a way that maximises the potential of a positive outcome. It is very important to know the commonest basic components of our counterparty’s culture. It is assign of respect and a way to build trust and credibility as well as advantage that can help us to choose the right strategies and tactics during the negotiation.
It is not possible to learn another culture in detail but when something is learnt especially at short notice the best that can be done is to try to identify principal influences that the foreign culture may have on making the deal (Salacuse, 1991). Apart from adopting the other side’s culture to adjust to the business environment, difficulty in finding common ground, focusing on common professional cultures may be the initiation of business relations.
The skills needed to approach negotiation differs across cultures, for instance the Japanese will negotiate in teams and decisions will be based upon consensual agreement while in Asia decisions are usually made by the most senior figure and in Germany, decisions can take a long time due to the need to analyse information and statistics in great depth. Clearly there are factors that need to be considered when approaching cross-cultural negotiation. Through having the skills, business personnel are given the appropriate knowledge that can help them prepare them effectively and this will help succeed in maximising their potential.
CONCLUSION In an increasing global business environment, cultural misunderstandings may sabotage even the simplest negotiation therefore, cross-cultural negotiation skills are an essential, highly accessible resource for navigating boundaries for the success of international mergers and alliances (Brett, 2001). It helps to understand how people from different countries behave and conduct business, also to close deals that create value, resolve disputes to preserve relationships, and make decisions that get implemented around the world.
Cultural negotiating skills are necessary for managing in multinational network organisations. Managers heading abroad to negotiate a deal, businessmen relocating to foreign countries, multicultural teams within large organisations and individuals involved in international merger and alliance activities are those who will benefit having the skills to negotiate and acquire knowledge and development that are indispensable in today’s global business world.
If there is no knowledge of cross-cultural negotiations involved, a great deal of difficulty in understanding the findings of cross-cultural experiments concerning co-operation and conflict will arise because the partner or partner’s identity is not clear to the subjects in the business (Smith and Bond, 1993). Negotiation is a specific type of interaction that should be known to partners and professionals. For mergers and alliances to succeed those involved must also recognise that cultural differences can lead to different behaviours and assumptions at work and that these can sometimes cause misunderstandings or delay.
Despite their risks, mergers and acquisitions are becoming increasingly common events as a result of rapid globalization and it is important for those involved to aim to develop levels of cultural awareness and understanding within organisations so that their clients can operate more effectively and profitably within the global market place. Negotiation helps to put things in context, gives a broader perspective, and increases the likelihood that an agreement that comports well with the interests of constituents will be reached. In addition, careful attention should be paid to the interests of other parties in the negotiation process.
This can help to craft a solution that makes for a successful negotiation (Cohen, 2002). Finally, everyone must do their best to learn about the cultures of their negotiating partners as this drives decisions and the more they comprehend in their strategy and tactics, the greater the likelihood that the agreement they reach will provide their negotiation partner something to bring back to whomever they consider the powers that be. Negotiators need to be well prepared for the beginning, collecting information from possible sources, clarifying their objectives, and setting their limits.
During the negotiation, the relationship orientation is most important. An appropriate emphasis on time should be considered. At the end of the negotiation, consensus is the most important consideration. The success of international business relationships depends on effective business negotiation. If negotiators are well prepared, understanding how to achieve international business negotiation outcomes and the factors relevant to the process will allow negotiators to be more successful. Word count 3,185