International Negotiation Skills (NG302E_B - Fall 2024) PDF

International Negotiation Skills (NG302E_B - Fall 2024) Session 2. What is the International Negotiation Architecture? Olivier Moreau [email protected] 1  Session 2 The International Nego...

International Negotiation Skills (NG302E_B - Fall 2024) Session 2. What is the International Negotiation Architecture? Olivier Moreau [email protected] 1  Session 2 The International Negotiation Architecture? 1. The Negotiation Architecture 2. What make the International Negotiation different? 3. 10 ways that culture can influence negotiation. 4. How to manage cultural difference in negotiation?  1 - The Negotiation Architecture NG302E_B Fall 2024 S2 What is the Negotiation Architecture? Source : « Creative Solutions to Global Business Negotiations » Claude Cellich and Subhash C. Jain Negotiation environment: the business environment. Beyond control of negotiators. Negotiation settings: aspects such as the relative power of negotiators and nature of their interdependence, on which negotiators have influence upon Negotiation process: interaction and events that take place while reaching for an agreement NG302E_B Fall 2024 S2 4 The Negotiation Architecture: Overview Negotiation external environment Instability Foreign Currency fluctuations Political & legal External Ideological & and change Government and foreign pluralism stakeholders cultural control and exchange differences bureaucracy Negotiation Process Focus Planning Initiating Negotiating Closing business Undertaking in sessions prenegotiations/ negotiations: Making negotiations renegotiations Preparation (creating value?) 4, 5 & 6 concessions / phase Making the first Trade offs move Negotiation setting Levels of conflict Relationship between Impact of Relative Style of negotiators underlying potential negotiators before and immediate bargaining power negotiations during negotiations stakeholders of negotiators and nature of dependence NG302E_B Fall 2024 S2 5 Adapted from source: Claude Cellich and Subhash C. Jain, Creative Solutions to Global Business Negotiations. New-York: Business Expert Press (2016)  2 - What makes International Negotiation different NG302E_B Fall 2024 S2 The Negotiation Architecture Negotiation external environment Instability Foreign Currency fluctuations Political & legal External Ideological & and change Government and foreign exchange pluralism stakeholders cultural control and differences bureaucracy NG302E_B Fall 2024 S2 7 Negotiation External Environment Legal pluralism Case law vs common law vs no functioning legal systems Taxes, labour codes, standards,…(e.g. Child labor!) Political pluralism: What may be legal may not be politically prudent… NG302E_B Fall 2024 S2 8 Negotiation External Environment International economics : Currency control, Foreign Exchange, Risks,… (ex: Methods of foreign exchange + procedures of central bank & commercial banking constraints Doing Doing Business 2020 Fluctuations of exchange rate Business 2020 Foreign governments & bureaucracies: Some governments regulate industries and Organization,… Comparing Business Regulation in 190 Economies Examples: - legislative measures to protect humans’ rights & environment/Earth (US & EU) - Government-owned companies do not operate/negociate as private companies (France & UK) - Some countries are very difficult to penetrate (Japan) => ask for help of an expert in the host country regulations NG302E_B Fall 2024 S2 9 Negotiation External Environment Instability & changes : Lack of resources, shortages of goods and services, political instability, …. - be aware of government in place and the next elections & the impacts (policy changes) - anticipate changes may occur on sanctions, taxes over foreign operations (sovereign nations) => to protect their independence & assert their authority (eco domination is often perceived as political servitude Ideology : Potential diverging / conflicting ideology (eg US individualism, superiority of private investment, importance of making profit vs European Group Right) NG302E_B Fall 2024 S2 10 Negotiation External Environment External Stakeholders: Business associations,labour unions, embassies, industry associations,… Culture: People from different culture appear to negotiate differently,… Deductively: from the general to the specifics Inductively: settle on a series of specific issues that become a general agreement NG302E_B Fall 2024 S2 11 The Negotiation Architecture Negotiation settings Levels of conflict Relationship between Impact of Relative Style of negotiators underlying potential negotiators before and immediate bargaining power negotiations during negotiations stakeholders of negotiators and nature of dependence Settings are related to : What is interdependency in negotiations ? - nature of relationship Independent versus Dependant ? NO - negotiation skills of negotiators INTERdependent ? YES. => we NEED each OTHER to achieve - Individual stakes/motives our goals NG302E_B Fall 2024 S2 12 Negotiation Settings Relative bargaining power: Management control of projects, special access to markets, distribution systems, management of government relations, perceived value of one BATNA,…. ➡ Who has power? Is it balanced? Interdependency or dependency? What about alternatives (BATNA?) Levels of conflict: Type of interdependance (= we need each other to achieve our goals i.e. the more alternatives we have, the less interdépendant we are) ➡ What is the nature of the negotiation? Does it call for tough discussions, hard bargaining (distributive) or is there room for creating value (integrative). NG302E_B Fall 2024 S2 13 Negotiation Settings Past & present relationship between negotiators: The history of relations between the parties will influence the current negotiation (process and outcome) ➡ Do the negotiators know each other? What about Trust? Desired outcome / Style of negotiation: Tangibles and intangibles management Tensions can exist between short term and long term objectives (i.e. parties settle for less than their desired short - term outcomes because of the importance of long term relationship) NG302E_B Fall 2024 S2 14 Negotiation Settings Immediate stakeholder: The negotiators and the people they directly represent (managers, employers, boards of directors,…) The personal motivations have a large influence on the negotiation process and outcomes Intangible factors : how the process or outcome will make them look in the eyes of both the other party and their own superiors, personal career advancement,… ➡Will they impact on either negotiator’s incentive to get to a deal? NG302E_B Fall 2024 S2 15 The Negotiation Architecture Negotiation process Planning Initiating Negotiating Closing business Undertaking prenegotiations/ negotiations: Making negotiations renegotiations Preparation (creating value?) concessions / phase Making the first Trade offs move Will be discussed in detail during sessions 4, 5 & 6 NG302E_B Fall 2024 S2 16 3 - Culture & Negotiation 10 ways that culture can influence negotiation NG302E_B Fall 2024 S2 17 Culture is…non negotiable Research report of J. W. Salacuse (1998) Negotiators must accept the difference & adapt Culture is an ever-present & deep-rooted aspect of our lives. ✓ Transmitted from generation to generation ✓ Shared between people of same group ✓ Slowly evolves over time NG302E_B Fall 2023 S2 S1 18 10 ways that culture affects negotiation style Research report of J. W. Salacuse (1998) Negotiation Factors Range of Cultural Responses Definition of Negotiation/Goals Contract. Relationship Negotiation Opportunity/Attitude Distributive Integrative Selection of Negotiators Experts Trusted Associates Protocol/Personal style Informal Formal Communication Direct Indirect Time Sensitivity High Low Risk Propensity High Low Team Organization One leader Consensus Nature of Agreement Specific General Emotionalism Low High NG302E_B Fall 2024 S2 19 1. Definition of negotiation Negotiation is interpreted differently from one culture to another: Mechanical exercise of offers and counteroffers that leads to deal / contract oriented (in the US) Sharing information and developing a relationship that may lead to a deal (in Japan) https://www.youtube.com/watch?v=i0hWnFJGOS4 NG302E_B Fall 2024 S2 20 2. Negotiation attitude Is the opportunity distributive or integrative/problem solving ? Asian people tend to view the negotiation as a win-win process (Japan, China,…) Whereas Spanish, Brazilian people mayl behave in a win-loose approach. NG302E_B Fall 2023 S2 S1 21 3. Selection of negotiators What does influence more between « Expertise » (knowledge of the subject matter) and « Trust » (seniority, family connections, gender, age, experience, status,….) ? Example of priorities In the Middle East: age, family connection, gender and status In the US: knowledge of the subject matter, experience and status NG302E_B Fall 2024 S2 22 4. Protocol/Personal style Negociators will interact in different forms (formal/unformal) depending on their culture : ✓ Methods of greetings, ✓ Dress code (keep or take off the jacket, roll up the sleeves..) ✓ Organisation of meeting rooms Ex : Germans are more formal than American (will not talk about their private life and will address counterparts by their job title). Ex : US/French will use the first-name to address counterparts and will interact as in a friendly relationship. NG302E_B Fall 2024 S2 23 5. Communication Methods of communication vary among cultures : indirect/direct Languages: Many languages do not translate literally from one to another Understanding symbolism is even more difficult No verbal communication: Certain types of body language may be innocuous in a culture while insulting in another Be aware of signals & try to interpret correctly Ex : German & US : direct (clear & definite question/response) Ex: French & Japanese : indirect (assumptions, circumlocution, allusions, figurative form) NG302E_B Fall 2024 S2 24 6. Time sensitivity The meaning and importance of time vary from culture to culture (promptness + amount of time devoted to negotiation) : In some, time is fixed and valuable (time is money!) In others, the important thing is to complete the task, no matter how long it takes… Ex : Japaneses negotiate slowly (consensus building) compared to Americans NG302E_B Fall 2023 S2 S1 25 7. Risk propensity Risk taking differs from culture to the other one. Risk taking could be to share information, try new approaches, or tolerate uncertainties in a proposed course of action. In cultures were risk propensity is high : Negotiators are able to close a deal, even if certain information are lacking, if the business opportunity looks attractive. Ex : France / India / UK / China / USA In risk-averse cultures : All sides of a deal are examined carefully before coming to a final agreement Ex : Japan NG302E_B Fall 2024 S2 26 8. Group vs individuals Culture affects the way groups are organized & the way organizations function (really important to understand how counterpart is organized & make decision) In cultures where individuality is highly valued, Individuals can make swift decisions Ex : US/Latin American will have a Team Leader approach in negotiation with complete power of decision In group-oriented cultures, negotiation takes more time (group consensus must be built) Ex : Japan, India, Germany NG302E_B Fall 2024 S2 27  9. Nature of agreement Forms of agreement vary depending of the culture : general to specific In traditional cultures, a deal is struck depending on the family or political connections (even when certain aspects of the agreement are weak) In some cultures, agreement are not detailed to let room for easy adjustments while in others agreements are very detailed to ensure any adjustment will require the opening of new negotiations. Ex : In the US, an agreement is satisfactory when it can be enforced in a court law, detailed contract would be preferred in order to anticipate & put under control Ex : In China, contract with general principles would be preferred as the relationships is the goal of negotiation. So they will solve problems in any circumstances NG302E_B Fall 2023 S2 S1 28 10. Emotionnalism Cultures influence the extent to which negotiators display emotions… Ex : latin Americans & Spanish demonstrate further emotions Ex : Japaneses, Germans & English share less emotions NG302E_B Fall 2024 S2 29 4 - How to manage cultural difference in negotiation NG302E_B Fall 2024 S2 Cross-cultural negotiation : to be informed about… To manage cross-cultural negotiation, you have to be informed on : Deeper cultural characteristics (incl. Hall and Hofstede’s frameworks): ✓ Traditions ✓ Etiquette ✓ Group behavior Players and process ✓ Key individuals ✓ Process ✓ Informal influence https://www.youtube.com/watch? v=kujUs_6qeUI NG302E_B Fall 2024 S2 31  Edward T. Hall’s cultural factors « Silent language » framework 3 categories of how cultures differ which mainly based on relationship (Is the culture deal-focused or relation-focused ?) : 1. Communication / Context: Are communications indirect and high context or direct and low context ? Ex : French contracts tend to be short (in physical length, not time duration) as much of the information is available within the high-context French culture. American content, on the other hand, is low-context and so contracts tend to be longer in order to explain the detail. Do communications require detailed or concise information ? 32 Edward T. Hall’s cultural factors « Silent language » framework 2. Time : Is the culture considered monochronic (punctuality, schedule - Ex : Western cultures) or polychronic (fluid, flexible, interpersonal relationships > schedule - Ex : US approach) ? NG302E_B Fall 2024 S2 33 Edward T. Hall’s cultural factors « Silent language » framework 3. Space : do people prefer a lot of personal space or less? The need for space Some people need more space in all areas. People who encroach into that space are seen as a threat = Personal Space Ex : A Japanese person who needs less space thus will stand closer to an American, inadvertently making the American uncomfortable. Some people need bigger homes, bigger cars, bigger of ces and so on. This may be driven by cultural factors, for example the space in America needs to greater use of space, whilst Japanese need less space (partly as a result of limited useful space in Japan). Territoriality (high vs low) Some people are more territorial than others with greater concern for ownership. They seek to mark out the areas which are theirs and perhaps having boundary wars with neighbors. It’s true at all levels inside a company as well as between countries. Territoriality also extends to anything that is 'mine' and ownership concerns extend to material things. Security thus becomes a subject of great concern for people with a high need for ownership. People high territoriality tend also to be low context 34 NG302E_B Fall 2024 S2 fi Geert Hofstede’s “Cultural Dimensions” 1980 : Hofstede analyzed the results of a global survey of IBM employees to determine the dimensions in which different cultures vary. Between 1967 and 1973, approximately 117,000 employees across 50 countries were asked about workplace values and leadership and how they were influenced by culture. 6 dimensions to compare cultures : 1. Power distance: “the extent to which the less powerful members of organisations and institutions accept and expect that power is distributed unequally” 2. Uncertainty avoidance: how confident when facing risky, unstructured situations ? NG302E_B Fall 2024 S2 35 Geert Hofstede’s “Cultural Dimensions” 3. Individualism vs collectivism: What is more important: the individual or the group? 4. Masculinity vs femininity: Self interest and goals (competitive) vs relationship focused? 5. long - term vs short - term orientation: perseverance, large savings, face-saving vs spending, low savings, …. 6. Indulgence vs restraint: personal happiness and freedom of speech vs strict and regulated social norms https://www.hofstede-insights.com/country-comparison/ NG302E_B Fall 2024 S2 36 Players and process Key individuals: Identify people inside and outside the company whose approval must be sought before a negotiated deal is finalized Process: What role each individual plays? What particular aspect of the deal he is concerned with? Who has the authority to override the concerns? Informal influence Which webs of influence are more powerful than the formal bosses? NG302E_B Fall 2024 S2 37 What about organisational culture? Type of company Cultural trait Entrepreneurs/Executives Managers from Senior Officials From Public / From Start-Ups Multinationals State Enterprises Believes in risk-taking calculated risks avoiding risk Seeks high returns high and sustainable stable returns profits Makes decisions rapidly decisively after lengthy meetings Sees themselves as doers decision makers policy makers Concerned with fast growth reputation stability/continuity Responsible to self/partners stakeholders public at large Negotiates in small teams/alone multidisciplinary teams large teams Appreciates self-realization power status/reputation Communicates using direct/technical directly but cautiously indirectly/conservatively jargon NG302E_B Fall 2024 S2 38 Source: Claude Cellich and Subhash C. Jain, Pactical Solutions to Global Business Negotiations. New-York: Business Expert Press (2012) In class exercices NG302E_B Fall 2024 2023 S2 S1 39 Thank you for your attention 40  Video Japan vs US : Manager’s Hot seat https://www.youtube.com/watch?v=i0hWnFJGOS4 Video advices Asia vs West countries : secret of cross-cultural com° https://www.youtube.com/watch?v=kujUs_6qeUI Video Japan vs US : Cross Cultural in Business Negotiation between America and Japan https://www.youtube.com/watch?v=p_ympJCNYKk 41