I believe that negotiation is a kind of necessity, a continuous process, and a form of art (Gates 1). However, as soon as I got an opportunity to be a negotiator and use all my skills and knowledge to succeed in negotiations, I realized that it is not enough to know some terms and understand their explanations. It is more important to realize the essence of a negotiating process and get ready for several unpredictable turns of events. However, negotiation should be regarded as an unavoidable part of a business or personal life or a kind of an obstacle that should be overcome (Wheeler 76). The current memo is proof that negotiation may take place anywhere and anytime. People may or may not be prepared for negotiations; still, they cannot neglect the fact that their knowledge and abilities to support the chosen position can define the quality and outcomes of the negotiations. Dayton/Northern Pines negotiations turned out to be very complicated, and both parties were too aggressive in supporting their positions and ideas.
The negotiation experience got helped me realize that negotiation is a kind of advertising of personal ideas and offers. There are two or more parties that have something in mind and want to share their positions with other people to prove their position as the only correct one. At the same time, to negotiate means to give something, as well as to take something (Maiese par. 2). There are many ways of how to organize negotiations, explain their importance, and prove their correctness. However, one of the first steps that should be taken is the creation of a strategy to rely on (Shell 127). Among the variety of options available to negotiators, I like the one offered by Hedges in Forbes: “You don’t have to put all of your cards on the table at the outset. Simply putting something of yourself out there” (par. 6). It helps me choose one of the most powerful tactics for my team and me. To be successful in negotiations, it is not correct to simply support or deny something. It is more effective to communicate, share information, and underline how crucial different facts can be. The attention to the examples, personal experience, and the opinions of different people should help to prove the appropriateness of the chosen position.
The aggressive nature of negotiations has bothered me a lot. I have read a lot about different aspects of negotiation, and aggression was defined as one of the reasons why gossips in negotiations could take place (Jeuken, Beersma, Velden and Dijkstra 137). I wanted to overcome the aggressive factors and tried to substitute its premises with some other options like the alternatives, captivating examples, and the promotion of trust in the relationship that could be developed based on the negotiations.
In general, the possibility to negotiate and support the chosen position is a good chance to comprehend personal skills and abilities. To participate in negotiations is not the same as to take a test. It touches upon some personal aspects and attitudes and makes the negotiator find a practical application to the theoretical knowledge gained so far. The Dayton/Northern Pines negotiation was a great opportunity to realize that even such definite concepts like water, ground, and air qualities can be discussed in a variety of forms and create such huge discontents and misunderstandings between people.
Works Cited
Gates, Steve. The Negotiation Book: Your Definite Guide to Successful Negotiating. West Sussex, UL: John Wiley & Sons, 2015. Print.
Hedges, Kristi. “Six Surprising Negotiation Tactics that Get You the Best Deal.” Forbes. 2013. Web. 30 Nov. 2015
Jeuken, Emile, Beersma, Bianca, Velden, Femke, and Maria Dijkstra. “Aggression as a Motive for Gossip during Conflict: The Role of Power, Social Value Orientation, and Counterpart’s Behavior.” Negotiation and Conflict Management Research 8.3 (2015): 137-152. Print,
Different nations have different approaches to negotiation processes. However, seeking to do business with foreign partners or striking an agreement for mutual benefit as witnessed in the current case that involves the US and Iran on matters of nuclear weapons requires them to engage in negotiations with various parties. Such parties have different cultural and ethical approaches to negotiations compared to those that are prevalent in a company’s nation of origin. For example, in the western and Chinese civilization, the concept of social networking is essential for the success of business negotiation. However, in the two cultures, business relationships do not develop through similar mechanisms.
From the perspective of the Australian negotiation approaches, even though the major business is focused on Asia, Australian negotiation approaches and values are much similar to the Canadian, American, and even British approaches when compared to the Asian approaches and practices. This observation implies that doing business in Asian nations such as China requires an organization to adopt approaches for business negotiations consistently with the Chinese business culture, which is based on the Guanxi principle. However, this claim does not imply that relationships and networks are not important in Australia. Rather, issues such as the form of relationships and their impacts on striking business deals with the two nations are different. Irrespective of the norms and cultural differences between people who engage in negotiations, adopting a five-stage model of negotiation aids in arriving at good decisions. The five stages, which form the discussion of this paper, include the investigation phase, the BATNA best practices phase, the presentation phase, the bargaining phase, and finally the closure stage. Using relevant examples, this paper discusses these five stages of a negotiation process.
Investigation Phase
Parties can engage successfully in conflict resolution through negotiations. The process is also important in arriving at mutually beneficial business deals. How does the process begin? The investigation phase marks the first step in any successful negotiation process. The investigation process is the stage of gathering information on the agenda and the desired outcome of the negotiating parties. It also involves gathering information on the practices of negotiation for different people, organizations, and even nations. For example, when negotiating with the Chinese people for a possible manufacturing outsourcing deal, the negotiator needs to gather information on the expectations of the Chinese parties before striking a business deal through negotiation. Organizations that seek to do business in China need to understand the Chinese approaches to business, cultural norms, and concepts about business relationships such as Renqing, Guanxi, Xinyong, and Mianzi. These concepts mean reciprocity, tailored association, confidence, and appearance respectively (Wilson and Brennan 653). In the negotiation table, they help in determining whether an organization can strike a business deal with a Chinese-based organization and/or government.
The investigation phase involves gathering information on one’s priorities and the anticipated outcomes. In fact, before determining the expectations of the other party, it is incredibly important to begin by analyzing one’s expectations of the negotiation process. This process involves determining what one can concede and/or what he or she cannot bargain, setting goals, and deciding on possible compromises. For example, in the ongoing negotiations between the US and Iran, the US escritoire, John Kerry, came on the table with a clear goal of ensuring that Iran does not pursue its capability to develop nuclear weapons, which pose a major threat to both the US territorial integrity and the global security. Indeed, the US advocates a reduction of both facilities and equipment for nuclear power capability by a threshold at which Iran cannot develop a nuclear weapon or atomic bombs.
When the US agreed to engage Iran in negotiations, it had analyzed information on the interest of Iran. Currently, Iran faces international economic sanctions due to its continued pressure and investment in supplies that are likely to give it a capability for developing nuclear weaponry. Following the economic challenges that it is facing because of sanctions, the US is aware that Iran can respect the negotiation process and most likely agree to concede on the further development of nuclear capability. Can the US compromise this issue? In the most recent negotiation between Iran and the US, John Kerry came out indicating that the US would not compromise. Iran must consider having its sanction lifted in exchange for lowering its investment in nuclear facilities and equipment. Rather than compromising, an attack on Iran is even a possibility that forms part of the US BATNA.
From the above example of the investigative step in the negotiation between the US and Iran, it is evident that in the process of negotiation, parties are involved in making different decisions, each with its consequences. Therefore, parties need to be clear and honest with themselves, especially their desired goals and objectives. Knowing what one wants attracts the best decision in the heat of the negotiation debate. For example, upon successful recruitment, some organizations involve their employees in the negotiation processes.
While negotiating for a new job position, gathering information on what the organization values most in a person and/or what the applicant values most in the job is important to help in making vital decisions in the process of negotiation. A similar situation is critical while negotiating with people from different cultural contexts. For example, in the Chinese people case, honesty and trustworthiness are incredibly important in the negotiation process. Therefore, while preparing to negotiate with them, one must ensure that he or she will not only demonstrate optimal honesty, but also good faith.
In negotiation processes, no amounts of information or preparations are overly important. It is crucial to gather information on how to handle the concession topic, including the necessary communication attitude and mode. While setting objectives and the minimum acceptable concession and outcomes, gathering information on market trends is important. This goal can be achieved through consultation with experts, partners, and even colleagues. A party must also engage in the process with clear and fluent objectives. Thus, rehearsing the process of negotiation is important to ease the articulation of one’s goals to achieve the desired minimum outcomes. Therefore, before proceeding to the next phase, parties need to prepare a good agenda, enumerate discussion topics, and/or decide on the participants that it will come with on the negotiation table.
Determining one’s BATNA OB Toolbox: BATNA Best Practices Phase
BATNA is the acronym for the best alternative to a negotiated agreement. It defines the necessary course of action if parties that are engaged in negotiation fail to reach the desired goals. It constitutes an important force that underlines any successful negotiator. Parties in a negotiation should not accept any solution or concession that is worse than the BATNA. However, in establishing the best BATNA, Fisher and Ury advise that it is necessary to adopt precautions “to ensure that deals are accurately valued, taking into account all considerations such as relationship value, time values for money, and the likelihood that the other party will live up to their side of the bargain” (135). Nevertheless, some of these considerations may be difficult to value. Hence, they are generally uncertain.
Considerations while arriving at the best BATNA are normally based on some qualitative aspects as opposed to specific quantifiable factors. For example, while approaching negotiations between the US and Iran, it is perhaps difficult to measure and quantify the likely damage, should Iran fail to accept the US offers and decide to pursue its nuclear program. Additionally, in case the parties fail to reach an agreement and that war is declared on Iran, its effects may also be difficult to quantify. War influences different mutually supporting aspects of an economy. Thus, it produces spiral effects on an economy. This claim suggests that while the US and Iran get to the negotiation table, both parties cannot have a precise quantification of the implications for the failures of the parties to reach an agreement.
Even though various hypothetical options need to be undemanding and easy to examine and appraise, the substitute that best corresponds to each negotiating person’s BATNA is essentially not provided. Nevertheless, actions need to be valuable and actionable. As evidenced by the case of the ongoing negotiations between the US and Iran, failure to invest time in developing BATNA alternatives gives rise to options that may fail based on one of such criteria. Indeed, the US ensures adequate time for negotiation so that it does not express its dire need for a solution to the Iranian nuclear problem. When one party realizes that its BATNA is stronger in comparison with the suggested proposals by the other party, it gains the power to demand a more attractive proposal.
BATNA helps in clearing uncertainties on what can transpire if negotiations fail. Without a BATNA toolbox, a party will most likely feel an immense internal pressure to reach an agreement, even though such an agreement may not be in the best interest of the party. Proposals that are made by the party may also prove so optimistic to the extent that they overcrowd any related costs. For example, in the case of a job negotiation, if the employer fails to offer the desired salary, BATNA alternatives may include advancing one’s education or looking for an employment opportunity with different organizations. It is also important to think about possible BATNA for the organization. Can it consider employing someone else if it proves inflexible?
Part of determining BATNA entails identifying the goals of the party that one is negotiating with. Thus, it is important to ask questions such as, ‘what could the organization or the party be looking for? Does it have other alternatives? For example, for a person who is negotiating for a job, one of the most important aspects is fair remunerations. This aspect calls for a person looking for the job to know the remuneration levels of the job. The employee also needs to work without conflicts with other employees or the organization. Therefore, he or she needs to know the organizational culture of the company that is employing him or her while developing BATNA alternatives. An emerging question is, ‘how should an OB toolbox for BATNA best approaches look like?
Although it is difficult to prescribe an OB toolbox that is suitable for all negotiation situations, negotiators need to consider certain aspects while developing their BATNA best approaches. First, a negotiator needs to understand and brainstorm various conceivable negotiation alternatives to reach acceptable favorable outcomes. Improving the most promising alternatives together with their conversion into a set of actionable alternatives should then follow. Thirdly, the negotiator needs to identify the most important alternative and keep it in reserve as the most preferred substitute in case of negotiation failure. BATNA alternatives evolve. Hence, it is important to review them to ensure that they remain accurate and reliable. Lastly, the top confidentiality of BATNA alternatives is incredibly important, as it constitutes bargaining power. When other partners in a negotiation realize that one’s BATNA is more demanding than anticipated, they are forced to make attractive offers. This situation ensures that one emerges the major beneficiary upon the conclusion of the negotiation process.
Presentation Phase
The presentation phase encompasses the third phase in the negotiation process. In the stage, negotiators bring together all the gathered findings in such a manner that they substantiate their standpoints. For example, in the presentation phase, while negotiating for a job, a job seeker assembles and presents information showing one’s value in the organization. This process can involve the presentation of one’s contribution to the success of the organization or previous employers. When such contributions are consistent with the current negotiated job requirements, they help in weakening the negotiating potential employer’s alternatives such as employing somebody else in case one does not accept the (employer’s) proposal. Rather, the employer considers reviewing his or her proposal upward to arrive at a mutually beneficial deal. In the presentation phase, appropriate communication strategies become important to help in articulating one’s position.
Different organizations and people adopt diverse presentation styles during negotiations, depending on the negotiated situation. For example, Nolan-Haley asserts that most people adopt aggressive and ruthless approaches to negotiation (41). The goal of such an approach is to ensure that the negotiating party complies with one’s offers at the expense of his or her BATNA alternatives. However, as Fisher and Ury confirm, a negotiation presentation does not have to take an adversarial approach (92). For example, while negotiating with the Chinese people, an adversarial approach will always lead to the failure of the negotiations.
Foreign people negotiating with Chinese citizens consider various Chinese approaches in their negotiation presentations. One of the important approaches encompasses Confucian. It defines the approach to orientation and law guiding establishments of interpersonal relationships. Indeed, Chinese people pay more attention to people as opposed to respecting contracts (Ghauri and Fang 322). However, it is important for foreign people who negotiate with the Chinese citizens to understand that even if they (Chinese) believe in people concerning guanxi, they only pay key attention to persons with whom they have established relationships and personal networks. Thus, arriving at mutually beneficial agreements is impossible through adversarial presentation approaches. Ghauri and Fang advise foreign firms that seek to strike business deals with the Chinese people that they “need to take a people-oriented approach and try to establish high-level trust with Chinese partners” (322). The success of the Ericsson Company in the Chinese market perhaps reveals well the effectiveness of this advice.
In the presentation phase, parties present their respective starting positions. For example, an employer may state that he or she requires a person with excellent project management skills. The person who is looking for the job position then presents his or her position. He or she might state that he or she has the skill. However, such people will need to support this position as a strategy for carrying the negotiation process. Going back to the case of negotiating with the Chinese people, the first position may be to establish past relationships record with the negotiator. If such relationships are not identified and presented by the person who is seeking to have business relationships with the Chinese people, the next phase of negotiation, namely bargaining, may fail to take place. This claim suggests that the presentation phase forms the stage in which parties establish a ground for carrying out the bargaining phase after identifying that each party has something of interest for the other.
Bargaining Stage
Bargaining makes up the second-last stage in a conciliation scenario. In this stage, the negotiating people lay down their agendas and endeavors to get the other party to concur with them. An important aspect of the process entails concession, which involves abandoning something to acquire an additional one in return. For example, in the ongoing negotiation between Iran and the US, although the US represents interests of many nations across the globe, the parties have considered some concession, despite the negotiation having not been concluded. Iran must reduce its current nuclear facilities by 20% or more in exchange for lifting economic sanction that has been imposed by the international community under the representation of the US in the negotiations.
Concessions are critical in a negotiation that involves unions. However, this claim does not mean that one party is weaker concerning the other. Concessions are important indicators of forwarding movement of negotiations, as they signify cooperation. In the context of labor unions, concessions may take the form of bargaining for work time, salaries and wages, job responsibilities, and even employee autonomy. They also apply to other kinds of negotiations. For example, when negotiating for manufacturing outsourcing, one can accept paying slightly higher prices for products to receive them in a shorter time. Alternatively, one may compromise the time of delivery by accepting to pay lower prices when the manufacturer wants more time to ensure flexibility and fulfilling other orders. However, when bargaining, it is important to consider the negotiation styles that the other party adopts to guarantee like-mindedness.
People from different cultural contexts adopt different negotiation styles. However, some contexts may have similarities. For instance, the negotiation styles and attitudes that characterize the Australian negotiation approaches are similar to those that are inherent in the Chinese guanxi techniques. Australians engage in friendly debates with the principal objective of arriving at agreeable solutions of mutual benefits to the negotiating parties. This style of negotiation constitutes cooperation of the parties together with compromising where necessary in the effort to propel negotiation processes forward. Compared to the Chinese approach to negotiations, as prescribed by guanxi, Australians believe in win-win negotiation results. Hence, similar to one of the impacts of guanxi on business and business relationships, Australians anticipate reciprocation of trust and respect for business relationship contractual terms. In China, “guanxi interaction is the exchange of rewards and benefits for focal actors” (Chen, Chen, and Huang 176). These similarities reveal why it is easier for Australia to strike business relationships with China than other western nations. The two parties easily get into a consensus due to their flexibility in arriving at a concession.
The bargaining phase involves asking numerous interrogatives. Indeed, it is inappropriate to state that one cannot do something and maintain rigidity. Rather, the best approach is seeking to understand why the negotiating party has a given constraint. For example, in the case of manufacturing outsourcing, the primary goal of the party that is seeking manufacturing services is to receive goods the soonest time possible and at the lowest possible price. However, the producer aims to charge the uppermost possible fee while taking the largest time possible to fulfill the service.
Instead of maintaining rigidity on the delivery and price preferences, the party that is seeking manufacturing services needs to consider options such as slightly higher cost for much quicker delivery or slightly extended dates of delivery at lower prices. The option that best suits a given bargainer depends on the arithmetic computations of costs that are related to each alternative. For example, supposing market forecasts indicate a high demand for t-shirts in summer. A delay by one month into summer causes the prices to go down by $2. The manufacturer states his or her position during bargaining that an early delivery by 1 week into the summertime will require $1.5 more. In this situation, the party that is seeking manufacturing outsourcing services is better off paying $1.5 per t-shirt for an early delivery to have an overall gain of $0.5 when the market is at a peak during summer. This strategy exemplifies a win-win situation in bargaining during negotiations. The manufacturer makes more money by delivering early while the person who is seeking outsourcing services makes higher profit margins by selling during the peak season.
Closure
During the closure, it is important to reflect on the negotiation process and various decisions that are made to establish what could have been done for the offers to be accepted by the other party. For example, consider a situation where an organization negotiates with a potential customer for the supply of hospital equipment. The negotiation fails while the bargaining process is sealed. Now, the organization has nothing remaining to lose by engaging the customer to know why its offer is not accepted. The organization’s CEO may learn that the offers for the supply of the equipment will fail since a competitor might offer higher prices and/or free after-sales services. Surprisingly, the offered cost of after-sales service may be met by the higher prices of equipment. Thus, the organization whose offers are not accepted may learn to include additional offers apart from the price when negotiating in the future.
Signals for negotiations closure emerge when parties revisit their objectives and goals to realize that an offer has been struck. However, they are only pushing for a better deal. This situation may be indicated by lowering the intensity of arguments, body language that can indicate tired negotiators, or when positions for negotiating have converged. Closure occurs when concessions are made together with pacts and commitments. When the offers are acceptable, closure of the negotiation can be marked by expressions such as ‘where can I approve’, ‘the proposal can truly work’, and ‘the tender works’ among others. These expressions signify the time to make legal agreements in the shortest time possible to signify legally binding contractual terms. After closure, it is also important to follow up on the other party’s commitment to delivering the agreed-upon terms. This procedure helps to determine the other party’s capacity to deliver or the intentions of contract frustration.
Conclusion
In business relationships, parties engage in negotiations. Nations also negotiate with others in the interest of encouraging direct foreign investments or enhancing their territorial integrity. Organizations also negotiate with employees to reduce incidents of turnover. Their goals for negotiation include addressing employee issues that negatively influence their productivity. Irrespective of the nature of negotiations, different parties adopt different negotiation approaches akin to differences in their cultural contexts or the nature of issues under negotiation, the success of a negotiation process depends on the extent of its investigation and preparation. Negotiators must approach the negotiation process with effective plans, strategies, and methodologies for bargaining their positions. This claim underlines the importance of understanding the goals and objectives of the negotiators. This way, it becomes possible to make safe concessions and agreements. Failure to understand the process of negotiation and following it with precision may translate into acceptance of offers simply because they seem attractive. This situation might lead to the signing of contracts that may be inconsistent with one’s goals, especially based on his or her poor understanding or setting of BATNA.
Works Cited
Chen, Chao, Xiao-Ping Chen, and Shengsheng Huang. “Chinese Guanxi: An Integrative Review and New Directions for Future Research.” Management and Organization Review 9.1(2013): 167-207. Print.
Fisher, Roger, and William Ury. Getting to YES. New York, NY: Penguin Books, 2011. Print.
Ghauri, Pervez, and Tony Fang. “Negotiating with Chinese: A Social-Cultural Analysis.” Journal of World Business 36.3(2000): 303-325. Print.
Nolan-Haley, Jaqueline. Alternative Dispute Resolution in Nutshell. London: Thomson West, 2001. Print.
Wilson, Jonathan, and Ross Brennan. “Doing Business in China: is the Importance of Guanxi Diminishing?” European Business Review 22.6(2010): 652-665. Print.
It is likely for human beings to be involved in conflicts at one point or the other in their lifetime. How do we address these disputes? The more we grow and mature, the more we learn how to share, compromise and suspend the fulfillment of our needs. This can be in form of a disturbance from a dog barking in your neighbor’s home or hanging tree branch.
Either way, we are tempted to turn to reason as a means to solve our differences. This reasoning often has its limit of logic resulting to an unfulfilled solution. Even though this is a way of providing a solution to the problem, it does not involve getting our needs met.
In other cases, we may require the skills of others to assist in resolving our conflicts through such methods like arbitration and mediation. Needless to say, these are methods that are very expensive to the pockets of the parties involved with the end result being a probable annoyance before the dispute is settled.
At this point, the link between the parties involved is so much negatively affected that the effect of the process may be worse than the pre-existing stalemate (HBSP, 2005).
In order to not only meet our needs but also sustain our relationships, negotiation is the preferred method of reaching agreements. When the exchanges we have with the other party are friendly, we may not even realize that we are negotiating in an attempt to solve our everyday problems . One of the areas in which negotiations have proved very useful is in the employment relations.
Indeed, employment relations were a fertile ground for the early development of negotiations theory especially in unionized settings . Negotiations in these settings are characterized by interaction between two clearly differentiated labor and management institutions each with clear sense of their best interests.
Since the 1970s, there have been changes in employment relations, therefore, necessitating new and different forms of labor negotiations. Many of the negotiations structures that have come up are analogous in nature. Nevertheless, they continue to play a key role in the transition from arms-length relations to more tightly coupled forms of economic and social relations.
The big question is why negotiation is the preferred method to other methods of conflict resolution. What does one need to keep in mind when negotiating? How can one develop good negotiation skills? These are some of the questions that will be handled in this essay which bases its argument on the Kolb’s model.
Regardless of whether we consciously realize it or not, our daily life is characterized by an almost endless array of negotiations. They range from simple tasks like the decision on what to cook for dinner to more sophisticated matters such as resolving a conflict with a customer or co-worker.
It is obvious that negotiation is a skill or art that we must have in order to co-exist harmoniously with other people. Any successful negotiation goes beyond the restrictions of resolving conflict to include a small balance of meeting our needs while building strong connections with others.
In order to understand what negotiation is, it is important to understand what it is not. If a boss in a company gives an order to a subordinate, the only choice that the latter has is to do it. This is not negotiation by all means. When an unfamiliar is brought in to make a decision between two warring sides via arbitration, the sides are legally bound to abide by the arbitrator’s decision.
Once again, this is not negotiation. Another popular belief that has been held for long is that negotiation is a competitive game. This is quite wrong because when we negotiate, we do not compete with the aim of defeating the opponents. Instead, we aim to do the best we can for ourselves.
In that case, for a negotiation to be termed as effective in its proper context, it should be viewed as a means of pursuing interests. Having looked at what negotiation is not, it is only fair now to embark on analyzing what it is.
Negotiation can be viewed as a process that involves making joint decisions in a scenario where the involved parties have varied preferences. Simply put, it is a way of getting what you want when making decisions. A lot of literature exists on the definition, types and how to negotiate effectively. However for purposes of this essay, I have chosen to stick to this simple definition of the negotiation.
This is because it has the fundamentals of the process. Though the contexts in which the negotiation may take place differ, the underlying principle is that each party has to genuinely desire an agreement. If the agreement cannot be applied, this affects the whole process because the solutions arrived at should be likely (Menhert, 2008).
There exist three major types of negotiations. These are the positional, principled and situational negotiations. Positional negotiation happens to be the traditional form of negotiation whereby the parties involved work under a command if they are in a position of no compromise; the whole process becomes unsuccessful . The process can only succeed if all aspects opposing positions are explored to find a middle ground.
This strategy, as the name suggests, involves holding on to a fixed position of what you want and arguing for it irrespective of the underlying interests. A classic example to this is when a customer goes to a store to buy a certain commodity.
He or she has the maximum amount that s/he is willing to pay while the vendor will sell the item at a certain minimum price. The two sides will start with an extreme position but eventually, a compromise will be made. This type of negotiation has its short falls (F3fundit.com).
One of the reasons that make positional negotiation an unlikely option in solving conflicts is because, as the process goes on, the parties involved become more and more inclined to their positions continually restating and holding them. This strong commitment to holding one’s position results to a lack of attention by both parties.
Any agreement that will be reached will be a reflection of a mechanical splitting of the disparities between final positions instead of a solution well-crafted in meeting legal interests of the parties (F3fundit.com). This strategy is unlikely to result to a win-win outcome and therefore leads to bad feelings between the parties due to a dissatisfaction of one of the parties with the outcome.
The second type of negotiation is often referred to as the ‘Harvard Model’, whereby the parties are encouraged to search for the basic principles supporting their positions. This process is mostly preferred by most of the specialists as it is full of creativity and a background of offering objectives rather than solutions.
There is a high chance of the process being successful because in contrast to positional bargaining, the parties involved possess a sense of achievement instead of loss (Vaux, 2011).
Moreover, there is a high possibility of this strategy changing into positional negotiation or overcoming the whole issue if emotions are allowed to be the part of the process. The last type of negotiation is situational in nature, and it takes place when the two types discussed earlier go against the set guidelines. Compared to the others, it is more indirect since messages are relayed to a third party hence time consuming.
Having explored the three basic types of negotiation that exist, the focus of the paper shifts to personal experience in acquiring. A number of issues will be addressed in this section. These include the whole experience of developing negotiations skills, what one should keep in mind while negotiating as well as lessons learnt from the complexity of the negotiation process.
There is no doubt that human beings behave differently in different situations. That is why it may prove difficult to give a personal account of the negotiation process. However, the essay concentrates much on the essentials of the process and less of individual experience.
This is because experiences rely heavily on outcomes whose nature is concrete, specific, quantifiable or measurable (Menhert, 2008). There is little one can do with the outcome to solve the issues at hand, after all.
From my experience, I have succeeded in challenging a few myths surrounding negotiation. One of this is the popular belief that negotiation is unpredictable. This is not true. Negotiating behavior at least from my point of view-happens to fall into patterns that are recognizable, and that can be responded by sensible observers.
When entering into any negotiation, the predictive power of knowing the workings of experienced negotiators should not be considered as useless . A classic example of this is to study how lawyers and attorneys argue their case.
As such, because they are daily involved in solving conflicts in courtrooms, people may think that they are effective negotiators. However, this may not be the case because there are many factors that determine how effective a negotiation is.
In an effort to know what makes an effective negotiation, it is important to understand the context in which negotiations are done determine the effectiveness of the process. On legal matters, for instance lawyers, effective negotiators may be viewed as those who get more money from their clients. Still on judicial matters, I also found out that an effective negotiator may be the one whose client is satisfied.
Another observation was that for negotiation to be effective, both parties have to be satisfied. A number of people also suggested to me that effective negotiation is the one that beats the opponent by . That is why while studying the composition of an effective negotiation process, it is important to consider the situation in which the negotiation is being held as well as the definition of effectiveness of the process.
Effective negotiation is a learned personality but not a case of being in a particular career. There are many models that suggest the stages one has to follow in order to be an effective negotiator. There is no doubt that we all learn through different styles. Some people are auditory learners, others are visual. However for purposes of this essay, the model that will be highly valued is the Kolb model.
Kolb (1984) identifies the learning process as knowledge creation by transforming experiences. He further adds that knowledge is a combination of what we experience and how we alter it. Why should negotiation be equated with learning? Are there any similarities between the two? In deed there exists a close link between the two concepts as shall be discussed.
According to Kolb, learning has six characteristics. Just like negotiation, learning is best considered as a process. The main focus in both is not on the outcomes but the means of arriving at them. In other words, the ends do not justify the means but the former do. Another characteristic that makes learning similar to negotiation is the fact that the two are continuous processes grounded in experience (Kolb, 1999).
Indeed, conflict resolution is the sole duty of the negotiation process. Tension exists in the learning process and so does in negotiation. The decision is a trial to be conventional. Another characteristic existing in both learning and the negotiation process is the fact that they include exchanges between a person and the environment.
For the case of negotiation, the environment is the other party on the negotiation table . Lastly, learning results from the transaction between social familiarity and personal understanding. These two requirements are also very important in the negotiation process.
The above similarities point out that the negotiation process is very much related to the learning. It follows suit that the process and experience gained in acquiring negotiation skills is much similar to that of learning. As such, this essay will explore the Kolb’s model of learning and how it is related with the negotiation process.
Before moving to extra details of the theory or rather the model, it is important to understand why the model is called the experiential learning model. The model is experiential because, it is based on pointer of what we experience but not our experimenting. Kolb argues that we learn and develop after we have experienced. This theory will prove very relevant when later in the essay I address its link with the negotiation process .
David Kolb’s learning model is founded on two steps forming a quadrant. The first one is called the processing step. This deals with our approach to a task like our preference to learn by doing to watching. The other one is perception. This affects our emotional reactions on preference on adopting a certain style of learning say thinking or learning.
The resultant matrix is composed of four phases that are very crucial for learning to be effective. It is crucial to establish that Kolb’s model is not only a learning style but also a program. Each of the stage is reflected in the learning process. The resultant cycle has four steps namely: feeling, watching, thinking and doing .
By concrete experience, Kolb suggests that it is better to learn by feeling and being sensitive to other people’s feelings. We then relate the specific experiences to people. Under reflective observation or watching, he argues that we observe the environment from many perspectives before making a judgment and in order to look for the meaning of things.
The thinking stage involves logic where one’s action on an idea is determined by the cognitive understanding of the situation at hand. The last stage is that of active experimentation or doing . This is the ability to do things through impartation on others and events via our actions.
It also includes risk taking. Although one may learn in any stage of the Kolb process, going through the four stages puts him or her in a more favorable condition depending on the prevailing circumstances.
Kolb (1999) holds that the learning process is a context of people who move from the four stages and therefore for one to learn effectively, they should balance the stages. He also adds that concrete experience and abstract conceptualization are a reflection of right brain and left brain in that order.
The four combinations of the Kolb model determine the learning style one prefers. This is because learning styles are not fixed qualities but instead they are a stable pattern of conduct grounded on a leaner’s background and experience. That is why learning styles are more of preferences than styles.
Having looked at the Kolb’s model in detail, the big question now is how it can be applied in acquiring negotiation skills. From a personal account, I have found the model very relevant. As a recap of an initial statement, negotiation is a process and so is learning. It is a skill acquired by following the four stages of the Kolb model of learning.
The first stage involves concrete experience. In order to negotiate effectively, one has to learn from specific examples; these may be earlier encounters or the daily interactions with people. It is also important to be sensitive to the party’s feelings by being empathetic.
Empathy will ensure that your relationship with the other party is not affected even after the process. This however does not imply that you become soft on them and lose your focus on meeting your interest in the bargain .
The second step is that of reflective observation. For one to be an effective negotiator, he or she ought to be watchful. One has to address the issue causing disagreement from different perspectives before forging your bargain. This will prevent bringing into the process to rigid stands and ideas that may stall the whole thing.
Under the abstract conceptualization stage, a negotiator has to logically analyze ideas and act only after he or she has intellectually understood the situation . One should not jump into conclusions before giving every opportunity for a middle ground a second thought. Lastly, under active experimentation, a negotiator should be in a position to influence the other party in order to reach a solution to a conflict.
This should go to the extent of risk taking in the form of compromise in order to reach a satisfying solution to the tight spot the two sides are faced with. The four modes are therefore as important in learning as they are in acquiring negotiation skills.
Based on the analysis of the Kolb model of learning and its relevance in the negotiation process, there are few lessons that an effective negotiator should keep in mind while on the negotiation table. The first thing is to analyze one’s position and define what they hope to achieve with the negotiations.
The analysis should be done objectively. Just like your case, learn about the other side and what they too want to achieve. The more informed one is before the negotiations, the better prepared they will be before the process starts.
A negotiator should also eliminate personal feelings. In any negotiation, it may be easy to let one’s personal opinion stall the process or become too emotional. One should learn to terminate the two tendencies, and instead employ a polite and professional conduct always. One should too be prepared to compromise. This does not mean that one should not stick to their guns.
The idea is for one to know what they are willing to fight for and never let the need for striking a deal to push them to a compromise . Another thing to put in mind when negotiating especially in formal situations is to prove and authorize any agreement you make. In fact, it should be put in writing, indicate all the details and be signed by every party.
To make the decision arrived at in a negotiation legal abiding, it may be necessary to notarize or have it looked by a lawyer. This confirmation of the agreement is prevention of future misunderstandings hence ensuring enactment of the agreement’s condition (Menhert, 2008).
In conclusion, putting into consideration all the above points will place one in a favorable condition on the negotiation table . The Kolb’s learning model will, by all means, come in hand for anyone who endeavors to become an effective negotiator.
However as noted earlier in this essay, it is important to note that the effectiveness of the negotiation process depends much on the nature of the conflict as well as definition of effectiveness. Nevertheless, the basic negotiation skills are extremely crucial in the contemporary world and every one should long to learn them. They should not be viewed as the duty of lawyers or human resource professionals.
References list
Asherman, A & Asherman, S (2001), Negotiation source book (2nd ed.), Harvard: Amherst.
Beauttah, A (2008), Major processes of negotiation, Prentice Hall: New Jersey.
BM, C., Bray, M., Wairing, P., & Cooper, R (2008), Employment relations: theory and practice, McGraw Hill: New York.
Clevend, B (2006), Negotiation skills.,Cengage Learning: New York.
Downs, L ( 2008), Negotiations skills training,ASTD East Petoria: Illinois.
F3fundit.com (2011), The art of negotiation-Positional bargaining. Web.
Harvard Business School Press (HBSP) (2005), The essentials of negotiation. Harvard University Press: Boston.
Kolb , D (1984), Experiential learning: experience as the source of learning and development, Prentice Hall: Englewood Cliffs.
Kolb, D (1999), The Kolb Learning Style Inventory (Version 3, ed.),Hay Group: Boston.
Menhert, M (2008), Negotiation: Definition, types, manager’ issues in negotiation, cultural differences and the negotiation process, GRIN Verlag: Norderstedt.
Vaux, R, eHow (2011), How to develop negotiation skills. Web.
International negotiation in general is an interactive process, which serves as an instrument to end a continuing conflict or to arrive at a solution for a controversy. Good preparation forms the basis for successful international negotiations. “It may also serve as a means to achieve common objectives or agreements among individuals or groups (parties) in relation to a specific object, material or immaterial, within a framework of pre-established rules, known and accepted by the parties involved. These parties are directly or indirectly interested in the object and in the objectives of the negotiation,” (Meridiano, 2010). International negotiations also include international business negotiations, which falls under the scope of this research.
While adequate preparation happens to be the most important aspect that precedes every round of international negotiations, negotiators often are found to be inadequately prepared and there has been dearth of research on the subject. Most of the existing guidelines have been developed over the period without any research backing. These guidelines focus on concepts such as the underlying concerns of a negotiator and the best alternatives to a negotiated agreement (BATNA), and mostly these guidelines are adopted by the negotiators in their encounters (Fisher and Ertel, 1995; Thompson, 1998).
In the realm of international negotiations, the terms planning and preparation are often used interchangeably. However, “preparation” is much more encompassing, as it includes all the efforts and activities of the negotiator undertaken before the actual negotiation takes place, when the negotiator is at the top of his form. Without undertaking an effective preparatory process, the negotiator in an international negotiation is not likely to get satisfying and successful outcomes. Therefore, preparation becomes an essential process in international negotiation. In this context, this presentation focuses on the preparation for international negotiations from a systematic perspective.
International Negotiations
This section reviews the perspectives on international negotiations to have a better understanding on the scope of the research inquiry. The objective of any international negotiation is to arrive at an acceptable conclusion, which reduces disagreements and enhances benefits for the parties to the negotiation. According to Martin et al., (1999), a comprehensible negotiation process forms the basis of any fruitful business association at an international level.
International negotiations for the purpose of this paper are restricted to international business negotiations. An international business negotiation can be defined as the interaction undertaken deliberately among two or more social units. Out of the social units involved in the negotiations, one of them represents a business entity. The parties to the negotiation originate from varied cultural backgrounds and each of them attempt to describe their affiliation to a specific business issue. International negotiations may take place between one company and another or between a company and a government.
The negotiations are interpersonal interactions over any business issue as the negotiation may relate to the conclusion of a sale contract, issue of licenses, entering of joint ventures or acquisition of one entity by another (Weiss, 1993: 270). The process of negotiation involves the stages of pre-negotiation, actual negotiation and post-negotiation. A negotiation becomes successful, when there is a smooth flow of the negotiation process in all the three stages.
“The pre-negotiation stage, which involves the preparation and planning, is the most important step in negotiation,” (Ghauri, 1996:14) and this stage is the central focus of this study. The pre-negotiation stage becomes important since it is the starting point in international negotiations (Lewicki, et al., 1994). Activities like building trust and relationship among the parties and “task-related behaviors” which concentrate on the choices of different alternatives available to arrive at a solution constitute the major interactions during the pre-negotiation stage (Graham & Sano 1989, Simintiras & Thomas 1998). “In brief, the first stage of negotiation emphasizes getting to know each other, identifying the issues, and preparing for the negotiation process” (Numprasertchai & Swierczek, 2006).
“The negotiation stage involves a face-to-face interaction, methods of persuasion, and the use of tactics. At this stage negotiators explore the differences in preferences and expectations related to developing an agreement,” (Numprasertchai & Swierczek, 2006). The post-negotiation stage involves exploring concessions, looking into compromises, evaluation of the agreement and follow up through documentation or other procedures.
In most international negotiations, these three phases are undertaken at the same time. “The negotiation process is a dynamic process, involving a variety of factors related to potential negotiation outcomes,” (Numprasertchai & Swierczek, 2006).
There is an element of complexity in international negotiations, since such negotiations take place between persons belonging to different cultures. “International business negotiations are typically more complicated and difficult to assess than the negotiations taking place between negotiators from the same culture,” (Numprasertchai & Swierczek, 2006). The reason for the difficulty is due to the differences in the values that the negotiators hold.
Negotiations are carried out based on various approaches developed on the exclusive standpoints of the negotiators concerned. “Other external influences such as international law, exchange rates, and economic growth also increase the complexity of negotiations,” (Numprasertchai & Swierczek, 2006). It is essential that the international negotiators understand the values of each party so that they may be able to amend their negotiating approaches and styles to meet the emerging situations and arrive at an amicable solution to the business issue.
Preparation for Negotiation – an Overview
The first rule underlying effective negotiation is to get prepared for negotiating. In general, there are three different activities involved in the process of preparing for a negotiation. They are
information gathering,
analysis,
planning.
In the practical handbooks outlining negotiation practices as well as other analytical papers, these three activities have been regarded as the most important tasks that a negotiator must undertake to ensure successful outcomes from any negotiation. Some of the authors argue that the preparation for negotiation will be better able to give an upper hand to a negotiator than any other activity in the process of negotiation.
This implies that those who prepare best will be able to negotiate the best. Nevertheless, in the negotiation literature there are few research findings about how much one should prepare. This situation gives an impression that one can never be too prepared for negotiating except that more preparation will yield better outcomes from the negotiation. Given the central role in the negotiation process there is no inclusive definition of the term “preparation” found in the literature, nor is there an analysis of its boundaries and limits and characterization of the preparation process as a whole.
Traditional View of Preparation
A number of activities have been identified which a negotiator has to undertake after the decision to negotiate has been taken, but before arriving at the negotiating table. These activities cover gathering information on the issue to be negotiated and information on the participants in the negotiation. The activities also include analysis of one’s own interests and preferences of the negotiator, as well as the parties on the other side, and planning the course of action, when the actual process of negotiation begins and face-to-face interaction takes place (Breslin and Rubin 1991; Fisher and Ury 1991; Johnson 1993; Keeney and Raiffa 1992, Lax and Sebenius 1986, Lewicki et al 1994, and Raiffa 1992). These activities can be grouped into three distinct categories such as
information gathering,
analysis,
planning.
Collecting Information about Parties and Issues
This can be taken as the first step in the process of preparation for a negotiation, where the activities of data collection and research into the history of the issues to be resolved are undertaken. This step involves studying the precedents for resolving similar issues, receiving consultation from external experts and interviewing those people who have negotiated with the other party in the past instances (Lewicki et al 1994). Raiffa (1992) includes all those activities in this group, where the negotiator can learn whatever is possible about the trustworthiness, ethics, style and personality of the other party to the negotiation.
Analysis of Preferences, Interests and Alternatives
According to Fisher and Ury (1991), a negotiator has to understand his own interests, and he should be able to distinguish interests from positions. This line of analysis is extended by Lax and Sebenius (1986), to separate interests in outcomes of the negotiation, from the interests of the parties in the relationship among them currently and in the future. According to Fisher et al., (1994), it is essential that the negotiator understand the interests, values and perceptions of the other parties to the negotiation, and based on the understanding the negotiator has to generate options that the other party is most likely to accept. Keeney and Raiffa (1992) and Raiffa and Sebenius (1993), based on multiattribute utility theory have developed a methodology “for quantifying interests, scoring and ranking preferences and evaluating tradeoffs among issues and outcomes” (Watkins & Rosen, 2001).
Negotiation Planning
In most of the cases, it is observed that the negotiators attend negotiation without adequate preparation based on the inherent belief that negotiation is an intuitive process and any emerging situation can be met with the experience and exposure to different situations. Conversely, when the negotiators are able to adequately plan ahead of actual negotiation, taking the negotiation as a process and campaign they are sure to come out with breakthrough results. Negotiation does not constitute a single and conclusive event but is a process consisting of a series of proposals and counter proposals made by the parties seeking to arrive at an equitable balance among them.
This section elaborates on negotiation planning which is a part of the preparation for international negotiation. Although authors like Lewicki et al (1994), use the term “planning” to denote the entire process of preparation for negotiation, this section deals with planning to identify a narrower set of activities, which are undertaken by the negotiator to decide on the course of action to be pursued at the negotiating table.
Planning includes the creation of an action plan. “The negotiation literature gives considerable attention to such tasks as generating options and combining them into packages or proposals (Raiffa and Sebenius 1993), anticipating the actions of the other side, envisioning possible responses, and planning for contingencies.” Lewicki and Litterer (1985) have identified three different types of planning activities –
strategic planning,
tactical planning,
administrative planning.
Setting long-term goals and identifying the ways of meeting these long-term goals is the focus of strategic planning. Tactical planning aims at developing specific short-term steps designed to achieve the long-term goals established through strategic planning. “Finally, administrative planning is the process of making logistical and allocative arrangements for the negotiation: assigning roles to team members, choosing locations for meetings, and clarifying lines of communication and authority” (Watkins & Rosen, 2001).
Negotiation planning is the systematic mapping of the different steps involved in the process of negotiation with the other party. “Negotiation Planning is not a stand-alone activity; it occurs within a process context and a variety of cultural variables and involves ongoing external and internal conditioning,” (Seacchitti & Guertin, 2005). The cultural variables affect the manner in which the plans and actions are proposed and developed. Irrespective of the influence of the cultural and other variables acting on the process, planning is an essential step in the process of negotiation and is often overlooked.
The Negotiating Process.
The above diagram illustrates the overall process of negotiation in general, which also applies to international negotiations. The first four steps encircled within bracketed areas reflect the important steps in the planning process. These elements are vital in nature and actions in these areas need to be undertaken at the phase preceding the actual negotiation. These steps also form part of the preparatory phase of the negotiating process. Preparation of negotiation strategies and tactics take place before the negotiation takes place.
In the process of negotiation, conditioning calls for placing a starting point in the minds of the opponents and this starting point is close to the end result, the negotiator is expected o achieve. Planning involves the consideration of the concerns relating to the objectives to be achieved, the opponents in the negotiation and the ways in which an agreement can be reached. In cases of international negotiations, the negotiators often tend to be concerned with cultural factors.
However, in most instances, the negotiators either underestimate or overestimate the influence of cultural factors on the negotiation process. The reason for such wrong estimation is that they consider the cultural factors without regard to the non-cultural factors or sometimes only in association with behavioral factors. They do not consider the cognitive or value-oriented effects of cultural factors on the negotiation process (Watkins & Rosen, 2001).
Problem Statement
In any international negotiation, the objective of the negotiators is to reach an optimal solution so that maximum gains occur to their sides. One of the vital factors for making a fruitful negotiation is to evolve a comprehensive negotiation approach. This calls for a undergoing an elaborate preparatory process so that the negotiator will be able to collect information, analyze it and make proper planning for successful negotiation.
Since the preparation process preceding the actual negotiation can ensure outstanding results, the study of the preparation approach becomes important. There are no well-defined procedures outlining the preparation process and this necessitates a relook into the preparation process for negotiation. Negotiations done with an “off the cuff” approach do not yield spectacular results, making the application of a preparatory approach not only significant but absolutely important for ensuring great success in negotiations.
Preparation for negotiation makes a key difference in the approaches of skilled and amateur negotiators and often determines the course of negotiations changing the outcomes. In addition, the negotiators, before entering the negotiation table, must have a better understanding of the situation and the range of acceptable and unacceptable solutions to the issue. The negotiator can improve such understanding and acquire self-confidence, only when a thorough preparation to negotiation is undertaken.
Aims and Objectives
The central focus of this research is to make an in-depth study of the preparation process for international negotiations. In achieving this aim, the research attempts to accomplish the following objectives.
To study the international negotiation process in general to understand the role and importance of the process of preparation in negotiation.
To recognize the limitations associated with traditional models of negotiation preparation process.
To understand the relationship between the process of learning and planning in international negotiation process.
To consider different approaches to preparation processes as practiced by negotiators from different regions/settings.
Research Methodology
This study follows a descriptive and exploratory qualitative case study for achieving the objectives of the research. In recent years, the roles of descriptive and qualitative research methodologies, which include case studies, participant observation, informant and respondent interviewing and document analysis have been emphasized and pursued (Scapens, 1990). In these approaches, the researcher is required to have closer involvement with the organizations or issues under study. Based on detailed examination of the institutions or organizations concerned, research findings are described instead of being prescribed.
One qualitative method, which seems to offer at least partial solution to the currently unsatisfactory research, is the case study approach. In contrast to simplistic and superficial findings of the quantitative method in some instances, case study provides the opportunity for the research to develop better theories in management and accounting control systems, which are based on real world managerial practices. In addition, a case study allows flexibility in the interpretation of the findings. The researcher for example, is not restricted to his/her original theory, but most often is encouraged to come up with new theoretical discoveries.
Case study has been used as a research tool by a number of researchers. “Case study is an ideal methodology when a holistic, in-depth investigation is needed” (Feagin et al. 1991). Different exploratory studies in the discipline of social studies have made use of the case study method for collecting relatable information about the topics researched. Following a case study as the research tool allows the researcher to follow well -developed techniques to meet the requirements of data collection for any kind of investigation. “Whether the study is experimental or quasi-experimental, the data collection and analysis methods are known to hide some details,” (Stake, 1995).
However, the case study method has the unique capability of retrieving additional information from different perspectives using multiple sources of data. There are varying kinds of case studies, which can be engaged for conducting studies in different settings. These are exploratory case studies, explanatory case studies and descriptive case studies. This research will use an exploratory case study method to analyze the preparatory process of international negotiations carried out by the negotiators belonging to China and will present an analysis of the negotiating process including preparation.
Structure of the Report
In order to make a comprehensive presentation this research report is structured to have the following chapters.
Introduction
The introductory chapter briefly described the background and scope of the research on preparatory approach to international negotiations. The chapter presented an overview of the preparation process and laid down the research objectives.
Literature Review
The second chapter reviews previous literature and research findings in preparation for the international negotiation process. The review addresses the underlying assumptions, problems in understanding of preparation and a rethinking of preparation.
Analysis
This chapter presents an analysis of the preparatory process in international business negotiations in the country of China.
Conclusion and Recommendations
The chapter summarises the research process and findings and make a few recommendations for future research studies.
Literature Review
International negotiation is the association between planning for international transactions and implementation of such planning. The ability to negotiate successfully depends largely on the efforts the parties put into the preparation for such international negotiation. The central objective of this research is to gain a better understanding of the preparatory approach to international negotiation, by exploring and describing the process of preparation.
The objective becomes significant in view of the fact that international marketers are becoming business negotiators engaged in continuous cross-border transactions with a number of different people ranging from consumers to competitors. Ghauri and Usunier (1996) argue that people entering into international negotiations will be able to enhance their ability to interact effectively with their foreign counterparts, when they are able to make the necessary adjustments to the cultural backgrounds that they come across during negotiations. The negotiation stage is the connecting link between planning and implementation in the management of international transactions (Deresky, 1996).
Negotiation can be defined as “a voluntary process of give and take where both parties modify their offers and expectations in order to come closer to each other” (Ghauri and Usunier 1996). Each international transaction has a negotiation aspect and every negotiation gives rise to challenges and opportunities to the people who are involved in the transactions.
Especially business negotiations are considered special as the negotiation in this case is purely voluntary and the parties have the option of quitting the process at any time on their own accord. Many growing companies find international negotiations a routine affair and when these organizations operate across geographical borders different cultures often tend to magnify the challenges of negotiation (Herbig and Gulbro, 1996). In this context, this review deals with the preparatory approach for international negotiations.
International Business Negotiations
Any international business involves the participation of parties belonging to two or more countries and it involves the movement of merchandise and service across geographical borders. In general, international business encompasses the field of international trade and commerce and international investments by parties from one country in the assets of another. Tsai (2003) defines international business to include the transfer of goods, which is tangible business or services, which are intangible merchandise between parties belonging to two countries. The term “goods” cover a wide range of commodities including raw materials, semi-finished goods and finished inventory. Similarly, the term “services” covers a number of activities including accounting, transportation, banking and insurance.
Loth & Parks (2002) argues that the term also includes the supply of intangible capital such as trademarks and patents and technical knowhow from one country to another. International investments in general denote the foreign direct investments that parties make in other countries. Apart from including buying of shares and securities, the term international investments include the provision of financial services to foreign owners (Weigel, Gregory & Wagle, 1997; Bergsten & Noland, 1993). The process of international investment incorporates the transfer of productive domestic technology and management from transnational companies to domestic companies (Kaminski, 1999; Bergsten & Noland, 1993).
In pursuing both international business as well as investments, managers increasingly engage themselves in the process of international business negotiations. Gilsdorf (1997) observes that international negotiation is one of the toughest jobs in businesses. Managers usually spend more than half of their time in negotiating (Adler, 1997). International negotiations involve higher stakes than the domestic business negotiations (Mintu-Wimsatt and Calantone, 1991).
Tung (1988) argues that although the parties to international business negotiations intend to reach successful agreements, there is an alarmingly higher level of failure in international negotiations. “The consequences of failure in international negotiations are also high, including limitations on the scope and profit potential of companies, significant increases in non-recoverable expenses, and, perhaps most importantly, decreases in the motivation of the international negotiators.”
There is the need for increased skill and competencies in conducting international negotiations as compared to domestic business negotiations. Several researchers have observed the existence of an extensive literature base covering domestic business negotiations (e.g. Eppler et al., 1998; Perdue, 1992; Sujan et al., 1988; Thomson, 1990). Simintiras and Thomas, (1998) are of the opinion that the international business negotiations literature is normative in nature and it is highly disjointed. However, these views have to be taken as expressed with an extensive review of the international business negotiations literature.
In these kinds of transactions, whenever two parties start negotiating, the complete process of negotiation takes place within the context of the environment under which the negotiation is undertaken and the immediate context under which the parties negotiate with each other. “The environmental context refers to forces in the environment that are beyond the control of either party involved in the negotiations. The immediate context includes such aspects as the relative power of the negotiators and the nature of their interdependence factors over which the negotiators have influence and some measure of control,” (Phatak and Habib, 1996). Both the environmental context and immediate context influence the process and outcome of the negotiations.
The Environmental Context of International Negotiations
There are different dimensions to the environmental context of international business negotiations. They include
legal pluralism,
political pluralism,
currency fluctuations and foreign exchange fluctuations,
foreign government controls and bureaucracy,
influence of external stakeholders (Phatak and Habib, 1996).
Legal Pluralism
“The principle of national sovereignty gives every nation-state the right to make laws that are supposedly in its national interests. An international business transactions must comply with the laws of the countries involved,” (Phatak and Habib, 1996). There are certain restrictions imposed by the laws of countries on entering into certain types of transactions. In many countries, there may be sectors such as telecommunications and automobile production, which may not be exposed to one hundred percent foreign investments. For instance, in countries like India and China, foreign enterprises can enter into such sectors only through forming a joint-venture arrangement with some of the domestic companies.
The joint-venture arrangement has an influence on the negotiations among the parties on several major factors such as management and control of the enterprise and international sales provisions. Apart from these, there are the legal obligations on both the sides, which have to be considered in concluding the joint venture arrangements. In such cases, it becomes important that the negotiators fully understand the implications of the currency of the laws in the country with which they would like to have business transactions. It is also important that the persons involved in negotiations refrain from taking any illegal actions prohibited by the laws of the countries involved. “Negotiators should be forewarned about the legal traps that could transform a supposedly good agreement into a nightmare if the legal implications of the transaction are not carefully examined,” (Phatak and Habib, 1996).
Political Pluralism
Each country in the world has its own political system and foreign policy, which determines its trade relations with other countries. International business negotiations are sometimes impeded in the conflicting foreign policies of the two countries. Foreign policies followed by the host county affect the international business negotiations. It therefore becomes important for the negotiators to understand the implications and constraints imposed by the foreign policies of the countries in international business negotiations, as these policies will have direct or indirect impacts on the outcomes of the negotiations. The negotiators should study the potential political fallout of an international business deal before the deal is negotiated and the agreement signed.
Currency Fluctuations and Foreign Exchange
Since international business transactions take place in an environment where multiple currencies interact with each other, the daily fluctuations in foreign exchange value can have a large impact on international business negotiations.
“A business deal that is not effectively structured to compensate and protect against foreign exchange fluctuations is likely to be a prelude to a disaster if the underlying currencies in which payments are to be received precipitously decline in value–or a windfall if they appreciate in value–against the recipient company’s home currency or other stable currencies,” (Phatak and Habib, 1996).
Therefore, it becomes essential that the negotiators for both companies obtain realistic and “most likely” exchange rates for the relevant currencies from international banks or currency future markets before arriving at any resolution based on the currency exchange rates. It is advisable that the negotiators include contingency clauses in the agreements, which would protect both sides from any unexpected fluctuations in currency exchange rates in future.
Foreign exchange control policies of different governments also have an influence on international business negotiations. Exchange control policies affect the import and payment of raw materials and repatriation of profits from one country to another. Therefore, negotiators from a foreign company should ensure that the contracts negotiated and entered into by them provide for the exigencies that might be created by the exchange control policies of the host governments.
Government Controls and Bureaucracy
In the case of certain countries, there will be excessive interference of the government in businesses. “Government agencies may have the authority to control the total output of an industry. Or they may have absolute control over the granting of permits to expand production capacity,” (Phatak and Habib, 1996). A company, which has a potential to increase its market share may be under an obligation to obtain the necessary licenses for expanding capacity, which may be denied many times by the bureaucrats attached to the government. Similarly, a company might need a government license to implement a new strategy in connection with the operation of a new product line. In all those cases where there is a major role played by the government in furthering the business of the company, the negotiations should include the government as one of the parties with whom the foreign firm has to negotiate directly or indirectly.
Influence of External Stakeholders
The external stakeholders are those people who have a direct or indirect interest in the outcome of international negotiations. Examples of external stakeholders include, competitors, customers, labor unions, chambers of commerce and industry and the shareholders of the respective companies. It is important that the negotiators take the interests of most of these external stakeholders if not the interests of all of them into account while drawing up international business agreements, as the stakeholders’ interests are to be protected by any international business negotiations.
Factors influencing Pre-Negotiation
According to Deresky (1996), there are twelve different variables, which influence the process of pre-negotiation and in turn, the preparatory process in any international business negotiations.
They are:
basic conception of the negotiation process implying whether the international business negotiation follows a competitive process or it depends on the culture of the country. This approach determines the progress of the process of negotiation;
selection criteria for the members of the negotiating team. There are different attributes to be considered in the selection of the members constituting the negotiation team like experience, status, personal attributes and some other characteristic features. The extent of value involved in the negotiation also determines the selection criteria;
the significance of the kind of issues involved in negotiation like the price, or the focus on formal and informal relationships;
the importance of the protocol concerning the importance of procedures and social behaviors;
the complexity of language implying the extent of reliance placed on verbal and non-verbal cues used to interpret information gathered;
the nature of persuasive arguments shown by the intention of the parties attempting to influence each other;
the individuals’ aspirations in the entire process of negotiation – the motivations based on individual, company or community affect the preparatory process to different degrees;
the feeling of trust and its basis in past experience, intuition or rules and continuance throughout the process of negotiation;
the propensity to take risk;
the attitude of each negotiating party towards the time taken for completing the process of negotiation;
the system of decision-making whether by individual determination or by group consensus;
the form of satisfactory agreements and whether such agreements are based on trust or the creditability of the parties involved in the negotiating process.
The important point to reckon here is that each of these factors is influenced by the culture of the country. The ease or difficulty in the negotiating process as influenced by each of these factors largely depends on the cultural differences between the countries involved in the negotiation.
Underlying Assumptions of International Negotiations
There have been a number of approaches made to the issue of preparing for international negotiations by various authors. However, there are two important assumptions that have been found to be more evident in most of the approaches. They are
a three-stage model of the negotiation process
the importance of preparation for effective negotiation.
Even though there are no explicit indications of these assumptions, they form the foundation for much of what has been written about the preparation for negotiation.
Three-Staged Negotiation Process
The first assumption relates to the existence of an implicit three-stage chronological model of the process of negotiation. This model underpins the overall negotiation process, which has the pre-negotiation stage as the first step in the process, followed by a preparation stage and the final step of the negotiating stage. Much of the previous literature has based its findings based on the premise that each of these three stages encompasses a definite set of activities characterizing the respective stage. They have also based their findings on the premise that it is possible to distinguish the stages from one another based on the activities of the parties involved in the negotiation process during each of the stage.
The pre-negotiation stage generally appears to start at the point where someone – this may be a party to the negotiation or a third party intervening in the process of negotiation – first identifies the possibility of a negotiation and ends at the point when the parties to the negotiation arrive at the negotiating table. The pre-negotiation stage can be considered to have ended when all the activities connected with the stage are completed. The activities involved in this stage are
all the parties to the negotiation have made an absolute commitment to continue with the negotiation process,
the agenda and the structure of the negotiation have been set and agreed to by the parties,
the participants to the negotiation are selected.
Next is the preparation stage, which covers the period from the time parties have decided to negotiate until the time when the first formal session of the negotiation process begins. This stage involves three main sets of activities;
gathering information in connection with the negotiation,
analysis of the information,
planning the process of negotiation.
The activities in this stage are distinct in many respects. These activities occur away from the formal actions involved in the negotiating process and at-the-table discussion. These activities are designed to improve the prospects of the party, which undertakes the preparatory process and the activities generally take place before the parties come to the negotiating table for the first time.
The negotiating stage starts at the point of time when the parties meet formally to discuss the issues and the associated offers, proposals and concessions. The negotiating stage concludes when an agreement is reached because of the negotiations or at the point of time when one or more of the parties leave the negotiating table. The tactics for creating and claiming value, which were developed during the preparation stage, are implemented during the negotiating stage.
Traditionally the interaction between parties or their agents at the negotiating table was the defining feature of the negotiating stage. Any activities or incidents happening prior to the first formal round were considered as preliminary to the negotiating stage itself, irrespective of the purpose or nature of the activities or incidents. The literature is rife with a number of variations of this three-stage approach. Even though there may be some difference in the number of stages and their nomenclature, the activities encompassed by them do not vary too much. All of these theoretical models tend to arrive at the same conclusion that the negotiating process from the start to finish passes through distinct and chronologically bound stages, each of which possesses a characteristic set of goals and activities.
Importance of Preparation to Negotiation
The second assumption made by most of the previous literature on international negotiation is the central importance of preparation to effective negotiation. Many of the widely cited books and articles on negotiation advocate the process of preparation as the basis for an effective negotiation. Much of the literature confirms that good preparation is the path to good negotiation. In some of the literature, the faith in preparation for the success of negotiation has been made explicit. For example, Lewicki et al. (1994) view negotiation success largely as a function of effective planning undertaken prior to actual negotiation.
According to Lewicki et al. (1994), planning provides the negotiator “a clear sense of direction on how to proceed. This sense of direction and the confidence derived from it will be the single most important factor in affecting negotiation outcomes.” Raiffa (1992) after considering a number of situations in which optimal solutions to conflicts could not be reached concluded that in all these cases lack of proper preparation for negotiation has led to the situation of no resolution to the conflicts. Therefore, there is the need for effective preparation before attending any negotiating process. Other authors like Lax and Sebenius (1986) appear to have implicitly relied on the assumption of importance of preparation for justifying their emphasis on the analysis of interests, alternative courses of actions and preferences before the real process of negotiation starts.
Because of their implicit faith in the preparation for the success of negotiation, many authors have not touched the question of the extent of preparation necessary for any particular type of negotiation. Similarly, the authors have paid little attention to the types of activities that should be given priority during the process of preparation. The authors have also not addressed the issue of costs or drawbacks of preparation. In the absence of answers to all these questions relating to preparation, it can safely be assumed that the greater the preparation, the greater is the chances of the negotiation being successful.
Therefore, the more prepared negotiators arriving at the negotiating table are likely to achieve better outcomes in the negotiations. The study of the literature relating to negotiation leaves a picture that if it were possible it is better to have an infinite amount of preparation.
Problems with the Understanding of Preparation
The review of the literature raises pertinent questions concerning the broad understanding of the preparatory phase of the process of negotiation. The analysis of the two assumptions gives rise to questions on the limits to preparation and on the limits to the value of preparation. The question pertains to the determination of whether the preparation is a distinct and coherent set of activities, which are undertaken and finished, within a specific chronological stage in the process of negotiation, or is the limit less than the undertaking of the activities. Secondly, it is essential to understand the value of preparation in the sense of the extent to which one should go in preparing for the negotiation.
The first problem can be identified as the determination of the point at which preparation starts and the point at which it ends. There is ambiguity in the literature about what exactly preparation entails. If preparation can be defined to include recognizable boundaries and characteristic activities, then it may be possible for a negotiator to say that he/she has prepared to the extent necessary. However, if the boundaries are not clear and well defined it becomes difficult for one to understand where preparation begins and where it ends.
It seems reasonable to define preparation to include “the set of activities undertaken by a party to a negotiation after it has decided to negotiate but before it gets to the table” (Watkins & Rosen, 2001). Although there are no uniform viewpoints of the authors on the activities included in the preparation for negotiation, they all agree that preparation encompasses three distinct types of activities – information gathering, analysis of the information and planning for the negotiation based on the information gathered and analyzed. This definition gives a picture of preparation in that it appears to be a discrete chronological stage in the overall negotiating process.
The preparation stage is preceded by the pre-negotiation stage in which the parties agree to negotiate and it is followed by the negotiation stage where the negotiation ends. Nevertheless, this definition does not provide a comprehensive idea of the host of activities, which overlap the borders of pre-negotiation, preparation and negotiation and therefore does not fit into the three-stage model described earlier. Four different problems have been identified when treating the preparation for negotiation as a distinct stage.
Inconsistency in Definitions
When preparation is considered as a distinct stage consisting of a specific chronological set of activities, significant inconsistency occurs in outlining the activities involved. This is because of the fact that the stages of pre-negotiation, preparation and negotiation – all suffer from multiple amount of interpretations and uses. These inconsistencies make it difficult to define the limits of preparation stage clearly and cohesively.
Among the three stages, the stage of pre-negotiation is especially ambiguous. The literature makes two uses of the term pre-negotiation – one in the broad sense and the other in the narrow sense. Zartman (1989), Stein (1989) and Saunders (1985) have provided a broader definition of the term pre-negotiation. According to these authors, pre-negotiation covers all the activities starting from the earliest mediation efforts until the arrival of the parties to the negotiating table.
The definitions provided by these authors reduce the number of stages in the negotiation process to two rather than three. The definition also includes the preparation stage under the dichotomy of pre-negotiation/negotiation classification of the total negotiating process. In this case, many of the activities that have been included in the preparation stage are included in the pre-negotiation stage. Breslin and Rubin (1991), using this broad definition, make a re-division of pre-negotiation stage into two elements – creating an internal agreement with the parties and meeting at the negotiation table. Thus, Breslin and Rubin (1991) adopt more or less a three-stage model. Other researchers like Fisher (1994) and Raiffa (1992) provide a narrower definition of pre-negotiation. They limit the use of pre-negotiation to interactions between the negotiating parties or their agents. Alternatively, they include the activities in the time-period before the formal negotiations start.
“Joint brainstorming sessions, dubbed “dialoguing” or “non-negotiations” by Raiffa (1992), in which the parties come together, often with a facilitator, to share information and generate the widest possible range of options for resolving the issues, are an example of this narrower definition of prenegotiation” (Watkins & Rosen, 2001).
Although this technique may find its use in international political negotiations, it is not normally used in business negotiations. There occurs a definitional problem even with the term negotiation. Some of the authors argue that the traditional definition of negotiation, which is formal and mostly external, and at the table interaction does not cover a number of activities that take place in the two earlier process of negotiation. For example, according to Zartman (1989), “the word ‘negotiation’ is being used, as it often is, in two ways, referring both to the whole process, including the preliminaries to itself, and to the ultimate face-to-face diplomatic encounters.”
Overlapping of Preparation and Negotiation Cycles
When one tries to distinguish between chronologically limited stages of preparation and negotiation, there is likely to be a problem of overlapping preparation and negotiation cycles. This is because most complex negotiations involve several rounds of action and interaction. Generally, interactions among and within the parties, which are purely informal in nature precede and intersperse formal negotiations at the table.
“When a negotiation is conducted in multiple rounds, the activities that the parties engage in between rounds may be nearly identical to those that they undertake before the first round: gathering and analyzing information, ranking possible resolutions, planning a strategy for the upcoming round” (Watkins & Rosen, 2001). In other words, it becomes imperative that the parties prepare for the next rounds of negotiation.
In many instances, the events of the first round might serve as the preparation for the ensuing round. Instead of a single, prolonged and chronologically limited phase of preparation, which is followed by the negotiating process, pursuing repeated and overlapping cycles of preparation and negotiation, in which each round acts as the preparation for the next round and running through the entire process of negotiation until a resolution for the issue is arrived is found to be more practical and appealing.
Preparation treated as Negotiation
In many negotiations, it may be necessary for the parties to conduct complicated and delicate internal negotiations in order to arrive at an agreeable resolution in the future negotiations. The parties to a complex negotiation are rarely a single large entity. There will be a number of sides representing diverse interests, who might have spent a longer duration in arriving at a unified strategy for bringing such strategies to the negotiating table and they devise plans for the roles to be played by each member of the negotiating team in the negotiations (Putnam, 1988). In negotiations involving two rounds, the first round of negotiations serve as the preparation for the next round.
According to some scholars, there might be a difficulty in deviating from a position, which is designed after careful and elaborate deliberations and this makes the internal negotiations the only means that really would lead to some acceptable solution. In these cases preparation itself is regarded as negotiation and it is difficult to differentiate as to where the preparation stage ends and where the negotiation begins (Zartman and Berman, 1986).
The preliminary discussions between the parties, which often occur before the formal negotiations take place, are another illustration of preparation taking the role of negotiation. If the parties to a negotiation arrive to the place of negotiation in advance and enter dialogues to set the agenda, make brainstorming session on the available resolutions or fix the procedures for the negotiating process, they can be said to be involved in the negotiation even though there are no formal offers or commitments made by any side.
Nevertheless, these preliminary dialogues also call for preparation by the respective sides and therefore in effect the parties must prepare to pre-negotiate. Thus, preliminary discussions among the parties present similar issues even though they are not held at the negotiating table with each encompassing both preparation and negotiation, which makes it difficult to differentiate preparation from negotiation.
There is yet another type of negotiation, which develops during the preparatory stage. In this, the parties make strategic moves away from the table to engage in altering the conditions that the parties eventually may face at the time they arrive at the negotiating table. These are the moves, which are undertaken by the parties primarily to reduce the attractiveness of the alternatives available to the opponents, to develop supportive coalitions and to cause divisions in the opposing coalitions (Lax and Sebenius, 1986, 1991).
“For example, if one side in a negotiation succeeds in luring unaligned parties away from the other side, convincing them that the other side’s proposals would be disadvantageous, the dynamics of the negotiation may change dramatically. Although activities like this take place before the formal sessions begin, they are also clearly moves in the game—both preparation and negotiation,” (Watkins & Rosen, 2001). This position may not be present in international business negotiations.
Improper Separation of Thinking and Acting
In the three-stage model of negotiation, it usually happens that the activities connected with the three stages of information gathering, analysis and planning are dissociated from the negotiating stage. At the same time, the activities connected with negotiating like acting and interacting are removed from the preparatory stage. In the three-stage model, the process of proceeding from one discrete stage to another covers the fact that both activities like planning connected with preparatory stage and activities such as acting connected with negotiating stage are undertaken throughout the process of negotiation.
At the start of the negotiating process, when the parties begin the pre-negotiation process, usually the parties undertake researching the associated issues and the likely stands of their opponents. The parties will also be involved in evaluating and ranking the interests of the other side and the alternatives available to them. Based on this evaluation they will plan the future course of actions. It is important to note that these activities continue to be critical throughout the process of negotiation, since the parties gather information from one another and based on this information evaluate the findings and make amendments to their strategies based on the analysis of the information gathered.
Because the parties to the negotiation cannot predict the motives and moves of the other parties precisely, the negotiators are left with no other option except to continue preparing until the end of the process of negotiation.
The need for continuous preparation in international negotiations can be equated with formulating business strategies. In the strategic planning process, separating planning and implementation often leads to poor results for the corporation engaging in the strategies because even the most carefully designed strategic plans struggle to take off if the designers do not indulge in learning and revising their anticipation of the results in line with changing market events which are unforeseeable (Quinn, 1992).
Better business results can be achieved from strategic plans when business leaders keep their options open and make progress on an incremental basis based on the new information acquired and adapt their plans as they move along. Quinn (1992) states effective strategic plans “are intended only as ‘frameworks’ to guide and provide consistency for future decisions made incrementally. To act otherwise would be to deny that further information could have a value.” Negotiators need to act in the same way as business strategists and must avoid the separation of thinking from acting and learn new information throughout the process of negotiation and change their plans accordingly (Mintzberg, 1990).
Combined together, these issues of inconsistencies in definition, overlapping of preparation and negotiation cycles, preparation treated as negotiation and improper separation of thinking and acting act as the limitations to the preparation stage. These issues illustrate the reasons for the inability to identify when the preparation stage starts and when the stage ends, especially in a complex negotiation, which comprises of multi-round and multi-party involvement.
The issues discussed also illustrate that preparatory and negotiating activities overlap each other and flow simultaneously repeating themselves. The overlapping of preparatory and negotiating activities suggest that a three-stage pre-negotiation-preparation-negotiation model does not precisely distinguish between the activities and events in each stage in a situation of complex negotiation process.
In the negotiation literature, the problem of boundaries is not just the definitional issue. It has several practical implications in the ways in which one thinks and describes the negotiation process. The purpose of establishing boundaries and definitions is to determine what one assimilates and regards as important and what one misses or disregards in the whole sequence of activities in the entire process of any negotiation. Therefore, clear boundaries and definitions become critical elements in the process of good research and analysis, and in offering good prescriptions to the negotiators.
The three-stage model, which assumes that the preparatory stage ends when the negotiation stage starts, gives a misleading impression to the negotiators that they can stop preparing when they arrive at the negotiating table. The model also draws attention away from the need to continue to acquire information, analyze such information and continue planning over the entire course of a negotiation process. The separation of thinking from acting leads one to a position where there is too much emphasis on information gathering, analyzing and planning preceding the stage of negotiation and too little on learning any new information and adapting to such new information while coming to the negotiating table.
Limits of Preparation
The review of negotiation literature indicates that more preparation, which precedes the actual process of negotiation, is likely to yield better results and therefore it is advisable to invest as many resources as possible in preparation. Nevertheless, there is no indication in the literature as to the point where preparation is enough or is too much. Just as the boundaries, problems deal with the meaning of preparing to negotiate, the second issue of limits to preparation deals with what it means to prepare enough to negotiate.
Limits on Resources
One of the most fundamental limits confronted by a party to a negotiation is the limitation imposed by the finite resources available for negotiation. Even the best-prepared negotiating team might have been subjected to the “constraints on time, expertise, money, data, access to documents” (Watkins, 2002) and other tangible resources. Limitations on available resources act as a restriction on the magnitude of the overall preparation efforts of the parties to the negotiation. It is not always possible for the negotiators to prepare as much as they would like to because of these limitations and this fact is often overlooked by the negotiation literature.
The limitations on various resources also force the negotiators to undertake a series of difficult cost-benefit calculations and decisions on allocating the available resources. The decisions may relate to the time to be devoted to information gathering and the time needed for analyzing the gathered information.
They have to make hard decisions on the time to be allotted for planning and on the gathering of the additional information as to whether such additional information to be gathered through more research is really worth the cost or whether it is worth the while to spend the additional time on analyzing the already gathered information. The need to make these types of decisions forces negotiators make a careful analysis of the different priorities and to decide in advance which types of preparatory activities are likely to give them greater benefits during the process of actual negotiation.
Limitation on Information Availability
Even when the parties have infinite resources available to them, they may not be in a position always to get what they want while preparing for the negotiation. Negotiations represent games of incomplete information. There are some fundamental reasons, which lead to this incompleteness in the information available. They are:
negotiations are characterized by a high degree of complexity, involving a number of variables, which interact with each other in mostly unforeseeable ways;
negotiations suffer from high uncertainty because of an inherent lack of knowledge about the future state of the world;
negotiations also possess the character of high ambiguity, which restricts the chances of getting complete information about one’s own interests and alternatives or those of the opponents and in addition there would always be shifts in the interests and alternatives;
negotiation also suffers from the limitation that parties to a negotiation engage in various deceptive activities of deliberately concealing information from the opposite side or providing misleading or inaccurate information on the party’s interests and alternatives;
negotiations are basically indeterminate, in that it is the interaction of the parties during the process of negotiation which determines the specific agreement within the range of all possible agreements that are possible. It is to be noted that no amount of information gathered would be able to predict the course of that particular interaction which decides the specific agreement;
negotiations represent a strong non-linear phenomenon, in which minor changes in the initial conditions are likely to lead to major consequences.
It may also happen that events occurring at an early stage of negotiation may become irreversible at a later point of time in the process of negotiation. In the process of negotiation, it is possible that there are a large number of initial conditions, in which even minor changes might affect the outcome of the process of negotiation. For instance, the simple event of whether the negotiators shake hands when they enter the negotiating room first may influence the course of the negotiation.
This will happen irrespective of the issues involved and the interests of the parties at stake. There are other factors like the chance of discovering common acquaintances, factors of gender and age of the negotiators or even the choice of the office building, which is used for negotiation, which might affect the outcome of the process. Just as it happens with many other non-linear systems, the important aspects of negotiation may become irreversible.
For example, a lost temper at an early stage of negotiation is likely to impair the relations between the negotiators throughout the process of negotiation until the end and it may not be possible to repair any damage once done. It is also not possible that negotiators could prepare for the impacts of non-linearity in the process of negotiation. At best, they can only recognize and adapt to the effects as and when the incidents occur during the course of negotiating process.
These reasons prevent the negotiators from knowing every piece of information they would like to know and any amount of preparation cannot equip them to know the extent they want to know. For example, one of the principal activities in the process of preparing is to gather information on the interests and alternatives of the other party.
Nevertheless, irrespective of whatever time, efforts, and other resources the negotiators apply in this activity, they may not be in a position to gain a complete understanding of the other party’s interests and alternatives because of the reasons listed above. It may not be possible for the negotiators to perceive the interests of the other party even if they apply infinite resources. In addition, the resources invested in the activity will provide only diminishing returns, as it is often difficult to obtain more and more information even on applying additional resources. “While the value of devoting some effort—and perhaps significant effort—to this activity is undeniable, it is equally clear that there is a limit to its usefulness. The information sought may simply not be available” (Watkins & Rosen, 2001).
Cognitive Limits
The characteristics and capacity of human perception and reasoning limits the value of the preparation process. These limits can be called “cognitive limits.” Although the cognitive limits are less obvious than the limitations emanating from finite resources and incomplete information, the cognitive limits may be important in deciding the possible extent of the preparation. Unlike the limitations of resources and information, the cognitive limits not only restrict the magnitude and efficacy of the preparation process but also actually weaken the process by reducing the ability of the negotiator to achieve a desirable outcome of the negotiation.
The nature of human perception and reasoning can affect some basic elements of preparation. To illustrate, analyzing one’s own interests being one of the activities of preparation, although crucial, carries with its own set of dangers. One of the fundamental assumptions underlying the analysis of interests is the stability of the interests and preferences of the negotiators. If the interests and preferences are stable, then it becomes easier to analyze, evaluate and solidify in advance, which acts to reduce the risk of the negotiators being sidetracked or losing sight of the original objectives.
The potential cost of this activity also needs to be recognized. However, interests and preferences, which are considered as stable and known cannot be expected to evolve or change during the process of negotiation, with the new opportunities arising or new information becoming available. These changes in preferences often become an important component in the dynamics of negotiation, which allows the negotiators to take into account new information, adapt to changes in their relationship and expand the possibilities of arriving at agreeable solutions.
However, considering the interests and preferences as stable becomes additionally problematic in the cases where complex internal negotiations are expected to establish a position covering the external negotiations. “Once an internal coalition has coalesced around an apparently stable set of interests, participants in the external rounds may have lost virtually all flexibility in responding to new proposals and concessions,” (Watkins & Rosen, 2001).
Similarly, negotiators who have invested a substantial amount of time and effort in the analysis of their own interests and preferences may tend to become overcommitted to the outcomes of these processes, which in turn is likely to create rigidity in their convictions about what would constitute an acceptable agreement. Keeney and Raiffa (1992) observe that a significant amount of work has been done on the process of quantifying interests and alternatives and in assigning values to the issues and possible outcomes so that negotiators could arrive at the negotiating table with a precise understanding of their preferences and the ability to score the other party’s offers and proposals.
This process actually facilitates the negotiators in developing elaborate scoring systems and in investing significant time in assigning values for the likely offers and proposals. There is one danger associated with the negotiators putting too much effort in analyzing the interests and alternatives in that they become committed to the systems they have developed. Such commitment encourages them to expect to obtain a predetermined score. This makes them judge the options and outcomes purely in terms of scores or points. Consequently, there may occur a loss of flexibility, creativity and receptivity to compromise which are essential qualities for achieving mutually beneficial outcomes.
The risks, which are inherent in analyzing one’s own interests and preferences, are even more apparent in the process of analyzing the interests of other parties. This prescription applies only to those who undertake the process of preparation preceding the negotiation process and one cannot dispute the value of such analysis. However, there is a high probability of stereotyping in which one party assumes its interests would match with those of whatever large group the party is associated with and this probability cannot be ruled out. This situation is most likely to arise in the case international negotiations.
There is also the probability of making wrong guesses about the things which matter, to the other party. Such mistaken beliefs and assumptions about the interests and alternatives of the other party have the effect of narrowing the range of options generated and considered in the course of the process of negotiation and they reduce the chances of arriving at an efficient agreement. If one of the parties becomes confident about his/her understanding of the interests of the other party, it may also lead to selective perception at the point of time when the parties begin to talk. Such confidence makes the negotiators less likely to listen carefully to the views of the other party and ask intelligent questions as they are sure that they already know the answers. This type of selective perception combined with stereotypes and mistaken assumptions might lead to self-fulfilling prophecies and opportunities for sabotaging likely agreements (Rubin, Pruitt and Kim, 1994).
The effect of these cognitive limits is that as and when the deliberations in the negotiating table proceeds and there is an exchange of views and proposals among the parties, the negotiators may have to “unlearn” many of the things that they presume they have learnt before arriving at the negotiating table. The analysis and planning that might take place before the parties meet at the negotiating table might have been based on information, which was incomplete. In order to avoid becoming stuck to initial assessments which may not be accurate, the negotiators must be willing to amend or even discard the beliefs formed earlier in the face of conflicting evidence. Thus, because of the effect of the cognitive limits the negotiators who have spent considerable time and efforts in gathering information, analyzing it and devising detailed plans may not be willing or able to amend their beliefs and adapt them to the course of the actual process of negotiation, which contain face-to-face discussions.
Resource, informational and cognitive limits inflict major constraints on the process of preparing to negotiate. These limitations suggest that there is a duty for negotiators to think carefully about the goals of preparing. They also advise that the negotiators must consider setting priorities as a crucial first step and that unlearning is as important as learning and it is even possible that they might get “too prepared” for the negotiations. Even though preparation is an important step in the negotiation process, it has some potential drawbacks. “Even the most basic prescriptions, such as those about analyzing interests, entail tradeoffs that a prospective negotiator must recognize and address,” (Watkins & Rosen, 2001). It is a fact that the existing literature has ignored the limits to preparing greatly and one cannot expect much help from the literature on the extent to which one should prepare to continue with the negotiation process.
Summary
The boundaries and limits discussed above point to the fact that there needs to be a complete rethinking of the process of preparing to negotiate. Based on the discussion it can be stated that preparation cannot be treated easily as a cohesive bounded stage. It appears that the activities undertaken during the stages of pre-negotiation, preparation and negotiation are not entirely different. Therefore, it is difficult and often not useful to distinguish one chronological stage from the other. It is problematic particularly with the preparation stage to deem it as a distinct stage because it is ambiguous because of the fact that all the three activities associated with preparation namely information gathering, analyzing and planning happen to take place through the negotiating process. It is not possible to separate thinking from acting.
Similarly, the existence of resource, informational and cognitive limits force the negotiators to make a cost-benefit analysis through the entire process of negotiation. Because of the fact that the activities connected with information gathering, analyzing and planning entail cost and are subject to diminishing returns, the negotiators must compare the costs of undertaking the activities with the benefits likely to occur from such activities. Based on such cost-benefit analysis the negotiators should make the allocation of the available resources. More particularly the negotiators have to make their decisions from three different perspectives –
the amount of time and resources to be invested in information gathering, analyses and planning away from the negotiating table as against at the negotiating table,
the time and resources to be invested in acting to adapt to the circumstances away from the negotiating table as against at the table
the ways of learning both away from and at the table.
The characteristics and context of the situation facing the negotiators will have to be taken into account by the negotiators in making these decisions.
An alternative to the three-stage preparation model, which advises more preparation, a model of repeated cycles of learning and planning will be of more use. In this model, learning implies gathering and analyzing of information available from whatever sources both away from the table and during the course of negotiations at the negotiating table.
Planning encompasses using the gathered information to devise plans for possible future action and to identify the other information needed both prior to the start of the negotiation and during the negotiation process. There is another stage of acting involved in this model, which implies taking steps to change the conditions, which may include moves away from the table. It also includes sharing of the available information emanating from any brainstorming session and exchanges of offers and proposals in a traditional way at the negotiating table. This model envisages the progression of the negotiators in an adaptive way through alternative cycles of the three core activities involved in the model.
The most important difference between this model and the theoretical three-stage model is the central role taken by learning throughout the process of negotiation. In this model, negotiation is not represented by a plan and then implemented as a process with one time learning and planning before arriving at the negotiation table. Instead, this model suggests that negotiation is a process of acquiring new information on a continuous basis from all the available sources including knowing the interests and alternatives of the other party. Based on such knowledge the negotiators adjust their expectations and devise new strategies based on the new information gathered.
This model also provides for managing the resource, informational and cognitive limits which find an inherent place in a negotiation process concentrating on the major decision areas discussed earlier. The limitations on resources do not allow the negotiators to do an unlimited amount of information gathering, analysis and planning based on the analyses. The new model enables resource allocation on an explicit basis and provides better solutions such as making tradeoffs between learning before and during the process of negotiation.
Unambiguous recognition of information limitations underlines the need to take the peculiar characteristics of specific negotiations into account when making tradeoffs between learning away from and during the course of negotiation. This leads to the formation of a contingency theory of learning, planning and acting in negotiation. In the case of negotiations, which are not complex uncertain and unambiguous, most of the information, which a negotiator wants to know can be learnt in advance and there will be very little to be learnt during the negotiation.
The negotiation in this case can proceed as portrayed with most of the planning done and with most of the acting carried out in one or few steps during the negotiations at the table. On the other hand, in the case of complex, uncertain and ambiguous negotiations, there are several limitations acting on the extent to which the negotiators can learn before they arrive at the negotiating table and on the resources, which could be invested in gathering information upfront and analyzing the information gathered.
Under such circumstances, negotiators can benefit more by using the time planning to learn once they arrive at the negotiating table. When faced with a high level of uncertainty, complexity and ambiguity, it is advisable that the negotiators adopt an incremental step approach through the entire process of negotiation, learning through the interactions taking place during the course of negotiation.
Because of the existence of cognitive limitations, the rigorous information gathering and analysis recommended by the literature may make the negotiators resort to misleading assumptions about the interests of other parties or make them rigid in their approaches to the whole negotiation process. In contrast to this position, concentrating on a continuous learning process both away from and at the table would enable the negotiators to adopt a scientific approach of hypothesis testing and deciding on the issues. A negotiator who goes to the negotiating table with a hypothesis about the interests and alternatives of the other party will attend to the negotiation with the goal of testing the hypothesis and will be in a position to unlearn where necessary.
The negotiator who is willing to unlearn is likely to ask a different set of questions during negotiations than the one who relies on the accuracy of his upfront analysis and leading assumptions to interpret the actions of the other party. The learning negotiator will also realize and look for shifts in the preferences and values of the other party during the course of negotiation. Therefore, this model help the negotiators to balance the investment of valuable resources in information gathering, analyzing the information gathered and planning in advance with learning and unlearning during the process of negotiation.
Analysis
Neslin and Greenhalgh (1983) observed that negotiation is one of the important matters for both sellers and buyers in international trade (as cited in Simintiras & Thomas, 1998). Gilsdorf (1997) as cited in Woo & Prud’homme (1999) indicate that negotiation is the most challenging task in communicating in business dealings. Negotiation is considered as the process of communicating backward and forward in order to discuss the issues and arrive at a resolution which both parties could not satisfy initially (Foroughi, 1998). “Negotiation is a process for managing disagreements with a view to achieving contractual satisfaction of needs” (Gilles, 2002).
Negotiation in international trade is a kind of social interaction entered into with the intention of reaching an agreement for two or more parties having different objectives or interests whom they think are important for themselves (Manning & Robertson, 2003; Fraser & Zarkada-Fraser, 2002). Differences in cultures, environments, communication styles, political systems, ideologies and customs or protocols make situations more complicated in cross-cultural negotiations (Hoffmann, 2001; Mintu-Wimsatt & Gassenheimer, 2000).
Role of Culture in International Negotiations
“Cultures are defined by values and norms. These may vary according to national, organizational, regional, ethnic, religious, or linguistic affiliation, and by gender, generation, social class, and family levels” (Chen and Starosta cited in Aydin & McIsaac, 2004). According to Simintiras and Thomas (1998), cultures are accepted values and norms, which lead people to have different ways in their thoughts, feelings and behaviors. “Culture has been defined as accepted beliefs, behavior patterns, values, and norms of a collection of individuals identifiable by their rules, concepts, and assumptions”, Salacuse as cited in Hendon, Roy, & Ahmen, 2003).
Janosik (1987) has worked on his seminal theory of cross-cultural negotiation research, which was based on his qualitative, phenomenological studies about the role of culture on negotiation. The theory advocated by Janosik (1987) has identified four different constructs, which are (i) cultures as a learned behavior, (ii) cultures as a system of shared values, (iii) cultures as dialectic and (iv) culture in context defined as cross-cultural negotiation research. Irrespective of the approach to be used, one of the main issues is to understand the individual variations in international business negotiation. In this context, this chapter presents an analysis of international business negotiation as carried out by Chinese nationals.
Style of Chinese Negotiation
The adoption of the Open Door Policy by the People’s Republic of China has resulted in significant economic growth. This rapid growth in the economy has opened up the chances for foreign investors to invest in Chinese companies. At the time when China opened up its economy for foreign investments, Sino-foreign joint ventures were the privileged forms of business organization that attracted most western investments. Many western companies are considering the formation of joint ventures in China, in view of the great potential they offer for a vast market for their products and the availability of cheaper labor.
Nonetheless, the existence of differing management styles between Chinese partners and foreign investors creates problems in the negotiation of business deals and the formation of joint venture arrangements. In forming such joint venture arrangements, the challenges the Chinese business negotiations pose is so great that there have been instances that a number of business deals between China and other western countries including the USA have failed because of poor negotiations. As John Graham and Mark Lam (2003) see this it is because often “Americans see Chinese negotiators as inefficient, indirect and even dishonest, while the Chinese see American negotiators as aggressive, impersonal and excitable”. Variations in the management style and problems in negotiations are created by strong cultural factors.
Despite these hindrances, it is possible to win negotiations with Chinese businessmen, provided a clear understanding of the social, cultural and economic aspects of the negotiation with Chinese entrepreneurs is evolved. This chapter presents an in-depth analysis of the intricacies of Chinese negotiations including the cultural background of such negotiations. The chapter also deals with the influence of Confucian traits like hierarchy, harmony and face on communication, characteristics of communication and the Chinese perception of negotiation. Further, the chapter discusses the challenges the Chinese negotiation process poses for managing international business in China.
A number of studies have been conducted in the area of business negotiations of the Sino – Western and Sino – American joint venture arrangements. These studies, which started around the 1980s, have made an in-depth study into the peculiarities of the negotiations of business deals with Chinese government and businessmen. The most important studies have been conducted by Blackman 1997; Chen 1993; Davidson 1987; Deverge 1986; Fang 1999; Frankenstein 1986; Lee and Lo 1988; Pye 1982; Stewart & Keown 1989; and Tung 1982. The primary objective of these studies is to bring out an exhaustive narration of the socio-cultural implications of negotiations with the Chinese and the intricacies thereof. It cannot be said that these studies have completely made recommendations for the successful negotiation of business deals with the Chinese business empires. An abstract of these studies is detailed in the following sections.
Role of Culture in Chinese Negotiation
The Chinese culture, which is 5000 years old, has a large influence on their business negotiations. The rural origin of a majority of the people has led them to retain their agrarian values. Social and economic theories attach more importance to the agricultural base than commerce and business. Because of the rural base, the human values assume more prominence in the negotiations than business profits and gains. Graham and Lam (2003) state, “Chinese negotiators are more concerned with the means than the end; with the process more than the goal.”
‘Morality’ is the next aspect of culture that greatly affects the Chinese negotiations. Confucianism, which is a 2500 years old Chinese philosophical tradition, makes morality the all-pervasive factor throughout the negotiation process. For coherence sake, the detailed discussion on ‘Confucianism’ is included in the section on Chinese Business Culture.
The Chinese believe in the holistic presentation of information relating to their business negotiations. This is because from a young age the Chinese get used to studying the Pictographic Language. Because of the pictorial character of the Chinese language, all Chinese learn to memorize many pictures rather than sequences of letters. This is reflected in the Chinese tendency to depend more on holistic presentation of information.
The Chinese cannot do away with their suspicion of foreigners. China was prone to violent attacks from foreigners over several historical periods. Such attacks resulted in internal conflicts and civil wars within the country. The effect of this history had been the reason for such wariness. Because of these bad memories, the Chinese have a tendency to believe only in their families and bank accounts. All these aspects of their cultural background are reflected in their business negotiations as well.
Chinese Business Culture
According to Tony Fang (2006) “Chinese business culture consists of three fundamental components: the PRC condition, Confucianism, and Chinese stratagems”. In business negotiations, the Chinese negotiator conducts the process of negotiation with his or her cultural background and changes the strategies during the process of negotiation depending on the trustworthiness of the other negotiating party. The adoption of such strategies is guided by the basic business culture embedded within the three essential components.
The PRC Condition
“Chinese politics, China’s socialist planned economic system, legal framework, technology development, great size, backwardness and uneven development, and rapid change all these make the PRC condition” (Campbell and Adlington, 1988; Child, 1990, 1994; Lockett, 1988; Porter, 1996)
These attributes represent the distinctive characteristic features of the Chinese business environment.
The PRC condition is represented by the Chinese Bureaucracy with its special character of centralized decision making and internal bargaining that result in red-tapism. The rapid progress in economic reforms made the Chinese overcome this shortcoming as they had to use the quality of their ability to quickly grasp the need for keeping themselves in pace with economic reforms. Such quick learning has made radical changes in the PRC condition. The emergence of efficient business managers and the rapid change of the country to a market economy are examples of the changed PRC condition.
Under the PRC condition, the personnel and administration departments assume greater importance and power than the other departments. This is because these departments acted as the nerve centre of the state-owned Chinese enterprises controlling business negotiations with foreign investors. However, this situation has completely changed with the passage of time.
Features of the PRC Condition:
The following features of the PRC condition make it an important factor that forms the foundation on which Chinese business ventures with overseas investments and contracts are built:
Politics: Politics centers round every aspect and spectrum of life and business in China. Hence, it becomes difficult to separate Chinese business and politics under the existing Chinese social system. Politics forms part of a normal business life.
Economic Planning: The retaining of control by the Chinese government over major industrial sectors with a view to carefully plan the economy is another important element of the PRC condition. This makes every foreign business negotiator go through the economic policies of the government thoroughly before they attempt to begin their negotiation. In fact, this can be considered as a very important aspect in the Chinese negotiation.
Legal Framework: Mention should be made about the legal framework that exists in China, which is another important PRC condition. However it must be understood that the laws and legal systems prevalent in China are relatively young and were influenced more by human values than sheer legal stances.
Technology: The PRC condition implies the adoption of modern technology. It may be appreciated that only the need to overcome the shortage of modern technology that hampered economic progress persuaded China to open up its economy for foreign direct investments. This is another important feature of the PRC condition, which helped China get an edge over the other developing countries, in the matter of technological advancement.
Magnitude of the Market: Another appreciable feature of the PRC condition is the extension of the world’s biggest market in exchange for the ultra modern technology, which has been made the state policy of the government. In fact, this policy helped China attract a record amount of foreign direct investments.
Backwardness: Economic backwardness still exists in a majority of the population. This is a distinguishing feature of the PRC condition. Though the communist face of the country changed long before, the government still bases its decisions to eradicate the poverty in the country through the various economic reforms on some of the basic tenets of socialist thought.
Rapid Change: China has the distinction of adapting itself to economic changes at a very fast speed, which no other country could match so far. Both the government and the people understood the necessity of the economic changes the country needed and did everything to take advantage of changes in the global economic scenario. Irrespective of the resistance by the people and even by some government authorities, rapid changes took place in the Chinese economy.
Chinese Bureaucracy: Bureaucracy coupled with the resultant red tapism characterizes the PRC condition. At the same time, the government will not hesitate to take quick decisions on buying when the product meets the requirements of the nation. This is a peculiar condition, which baffles many foreign negotiators.
Confucianism
The effect of Confucianism on Chinese business negotiations can be looked at from the following angles:
Moral Cultivation: “Confucianism emphasizes people’s self-moral cultivation and lifelong journey” (Ghauri and Fang, 2001) According to this ancient principle the rulers were advised to use moral persuasion and rules of propriety rather than legal processes in administering the people. This aspect of Confucianism is still being followed in Chinese negotiations. The moral aspects take prime importance in business negotiations and this is the reason the Chinese look into the moral values of their opponents before arriving at any business decisions.
Interpersonal Relationships: The affiliation and affinity of king and citizens, parents and their sons and daughters, man and wife, brothers and friends form the very basis of the lives of the Chinese people. These relationships collectively known as Gunaxi are closely related to etiquette, propriety and rules of conduct that have formed the way of life for the Chinese. Hence, it is difficult for the Chinese to attribute only monetary gains in their business dealings without giving importance to these human relationships.
Family and Group Orientation: From time immemorial, even when there were no well-defined legal systems, ‘family orientation’ and reliance on groups as social units influenced the conduct of Chinese lives. In this way, most of the social responsibilities are taken care of by the family structure without too much dependence on laws and regulations. This trait continues to grip the Chinese business negotiations even today.
Respect for Age and Hierarchy: Chinese are taught from generation to generation to give importance to social harmony and stability. Hence, the respect for age and the regard for hierarchical levels are embedded in the blood of the Chinese. This culture is being represented in their business negotiations also which needs to be understood and appreciated by the foreign negotiators.
Avoidance of Conflict and need for Harmony: The Chinese by nature do not want to create conflicts and want to have a peaceful resolution of all issues. This is due to the basic nature of the Chinese. According to Confucius, the men when made to compete will act like gentlemen exhibiting high moral values. (However, The Chinese can be quite aggressive when the need arises. Preferring harmony and peace they can act decisively if they think they are threatened or offended.) Thus, for the Chinese harmony in society is considered an essential part of social life and these needs find a place in their business negotiations also.
Concept of Chinese Face: The Chinese value social respect more than their lives. Any act to humiliate them in public will be viewed seriously by the Chinese people. Since, both criticizing too openly and or praising too openly in public can make someone lose face; Chinese do not want to have any situation that affects their ‘face’. The concept of Chinese face implies avoidance of humiliation for them in public. The Chinese believe that it makes a person stand out from the group and consider that as a great insult.
Chinese Stratagems
A Chinese proverb “The marketplace is a battlefield” reflects a deep-seated Chinese belief that the wisdom that guides the general commander in the battlefield is the same one that applies to business (Chu, 1991). This implies the application of strategy in wars, which in Chinese opinion equally applies to business situations. “The Chinese stratagem is a strategic component in Chinese culture,” (Chu, 1991; Faure, 1998; Mun, 1990; Tung, 1994).
The Art of War written by Chinese Military Strategist Sun Tzu forms the basis for the Chinese Stratagems. The basic principle underlying the Chinese stratagems is the admonition that, “To win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill.” (Sun Tzu 1982). The normal strategy that the Chinese negotiator adopts is not to force the opponent into accepting his terms but providing signals that one of the competitors is waiting to offer a better deal. The Chinese use 36 stratagems in dealing with the enemies and gain advantage over them by overcoming dangerous situations. The basis of all these 36 stratagems can be traced to their philosophical origins of ‘Yin Yang’ and ‘Wu Wei’ principles.
Yin Yang Principle
Chinese culture has developed based on three philosophical traditions namely; Confucianism, Taoism and Buddhism. Each of these has a different objective and approach in that Confucianism describes the human relationship while Buddhism deals with the immortal world, and Taoism advocates life in harmony with nature.
Yin Yang is a Taoist principle that is again based on ‘Dualism’ that represents unity and harmony. Cooper (1990) says “the Yin Yang image, probably the best-known symbol in East Asia and is illustrated in a circle being equally divided by a curved line forming the black and white areas.” Yin is the form of female elements like moon, darkness, mystery, softness etc, whereas Yang represents male element s like sun, day, fire, strength etc.
The white dot in the black area and the black dot in the white area signify that there is no absolute white or black that can exist. Chen (2001) suggests that the black and white spaces contain the power for the other to act and both of them combined from dynamic unity. The Yin Yang principle laid the foundation for the cultural inhibitions of the Chinese people. It led them to follow different philosophical teachings and such teachings controlled their behaviors in the varied circumstances the Chinese faced. This is originally the reason for the Chinese people to mix their cultural affiliations with their business negotiations.
Categories of Chinese Stratagems:
While the stratagems provide guidance to the Chinese to win over the enemy without fighting, Chiao, (1981) shows that the Chinese stratagems are the driving force for the Chinese in all Chinese societies to condition their minds in dealing with all situations. The stratagems backed by the Chinese culture acts as weapon that the Chinese use intentionally or unintentionally in complex business deals. On a theoretical basis, these 36 stratagems are grouped in to the following six categories (Chiao, 1981):
Stratagem 1 to 6 to be used when being superior.
Stratagem 7 to 12 to be used for confrontation.
Stratagem 13 to 18 to be used for attacking.
Stratagem 19 to 24 to be used for confused situations.
Stratagem 25 to 30 for gaining ground.
Stratagem 31 to 36 when being used in an inferior situation.
In fact, the Chinese negotiators often combine the elements of culture, PRC condition representing the bureaucracy and the influence of the 36 stratagems in their business negotiations. Unless the foreign negotiator has a clear understanding of the mixture of these factors in Chinese business negotiations, it would be difficult for him or her to win over the Chinese people.
Negotiation Process
In generic terms, the negotiation process is a process by which the parties try to reach mutual agreements with respect to the terms, conditions and guidelines for future relations. The Sino-western business negotiations can be divided into three stages:
Pre – negotiation: This is the initial stages of the business deal where actions like lobbying, presentation of a business proposal, informal discussions on the terms and conditions and trust-building exercises take place.
Formal – negotiation: Under this process the parties tend to exchange task – related information and undertake persuasion processes, concessions and agreements for furthering the deal.
Post – negotiation: This stage covers the actual implementation of the deal once a formal agreement is reached between parties on the various terms and conditions of the deal. In case the parties are unable to reach some consensus, they would go in for further rounds of negotiation to resolve the unfinished issues.
Under normal circumstances, the Chinese consider the negotiation process as a prolonged one that includes more rounds of dialogues than arriving at the final resolution immediately after a few rounds of talks. As discussed earlier, the Chinese would always prefer the negotiations to be done taking into account the hierarchical importance of the people involved in the negotiation. They also would like to ensure that social harmony is given due importance throughout the process of negotiation. At any point of negotiation, the Chinese would not like to have a situation of conflicts. Even when they have to say ‘no’ to some of the issues, they will try to use some circuitous ways to make the opponent know their negative reply. Hence, the period of length that the process of negotiation takes not at all matter for the Chinese.
Under both pre – negotiation and formal – negotiation processes the Chinese are very particular that the trustworthiness of the people with whom they are dealing is sufficiently tested before they form their opinion. ‘Trust building’ thus is an essential part of the whole negotiation process. These processes also involve the services of intermediaries, which are very vital in any trust building exercise. The Chinese are also particular that they maintain their ‘face’ throughout the process of negotiation. The processes are further influenced by other factors like group benefits and holistic thinking.
Usually the Chinese would like to take a longer time to review the negotiating process during pre – and post – negotiation processes. This is because the Chinese think that the pre – and post – negotiation periods are important in the whole process for building mutual relationships and in securing the commitment of both sides. When Westerners and the Americans consider that the negotiation process is over, while for the Chinese the negotiation process continues even after the deal is concluded.
Negotiation Structure
The structure of business negotiation from the side of the Chinese will take the following format:
While the negotiations take place in a formal environment, the discussions will start from general things down to specific details relating to the deal.
The Chinese team would normally consist of more people and appear larger than the opponents appear. However even when the contingent of fringe personnel changes, the core negotiators will remain the same.
The seating arrangements for the Chinese team will be done according to the hierarchical level and will be facing the opposite team.
Usually there will be a note taker on the Chinese team.
The Chinese team will speak unanimously on issues indicating that they have reached on a consensus on the issues internally before the negotiation process started.
It is not advisable to assume the function and authority of the Chinese team as sometimes the whole purpose of the meeting may be only to gather information rather than arriving at some business decisions.
Role of Intermediaries in the Business Negotiations
The peculiar characters of Chinese negotiations require the services of an intermediary or ‘Zhongjian Ren’ as he is otherwise called (Chiao, 1981). All meetings with strangers are looked at with suspicion and distrust by the Chinese. It requires a trusted business associate of the foreigner to pass him along to the former’s trusted business associate in China. It is very important for Chinese that a foreign businessman is introduced by a known source rather than dealing with unknown people directly.
This involves finding a person to act as an intermediary who must be known to both the parties of the business deal. It so happens in any business deal that the intermediary has a major role to play at times when some issues need to be settled between the parties. This is because it becomes a lot easier for a native business intermediary to read and understand the expressions and feelings of the Chinese side in any business negotiation. He would also be able to contribute much for an easy resolution by understanding the facial expressions and the actual body language of the Chinese side that have a lot to say more than the words spoken.
Managerial Implications in Chinese negotiations
There are quite a lot of managerial implications for effectively negotiating with Chinese businessmen. The qualities that the westerners may need are Priority, Patience, Price and People.
Priority: In order to be successful in business deals with China especially in large industrial projects, the foreign firm should understand the priorities, policies and plans of the Chinese government as the government was the ‘biggest boss’ in the Chinese industrial environment, although this situation changed in the due course Quite often, the government announces changes in its policies that determine the priority of industries in the government’s view. The foreign firm should carefully follow the latest guidelines to get to a win – win situation in business deals.
Patience: Since business negotiations in China often take longer and involve dealing with different hierarchies of the government departments, patience is the most important qualification that a foreign negotiator possesses in dealing with the Chinese successfully. It must be noted that the Confucian principles of relationship, face, etiquette and harmony that form the basis of the Chinese negotiations make the negotiation process time consuming. The foreign firm should have the required patience to go through these processes, which are not only lengthier but also non-cohesive with the western culture.
Price: If there are drastic price reductions by a foreign firm during negotiations, then that will arouse the suspicions of the Chinese negotiator. This would result in the loss of credibility for the foreign negotiator in the eyes of the Chinese. Similarly if the Chinese request a discount and price reduction and if the foreign firm rejects such a request then the Chinese will consider it as an insult, and will try to retaliate for it in their own ways. Hence, it is important for the foreign firms to consider the pricing of their products very carefully to get a business deal through with the Chinese.
People: Since the approach of the Chinese people towards contracts are rather secondary in importance than the interpersonal relationship of the people involved, it is necessary for the foreign firms to take a people-oriented approach and establish a trusted relationship with the Chinese partners. The appropriate time for the foreigners to build rapport with the Chinese people is the time during which the Chinese decision makers undertake business tours abroad, when the foreign team can develop the guanxi with the Chinese counterparts.
Apart from the above implications, there are certain other additional factors that the foreign firm should consider while dealing with the Chinese companies for the conclusion of major deals:
Sending the right team with the proper temperament to China.
Getting and showing support from the respective governments.
Identifying the real Chinese negotiators as there will be different fact finding and information gathering teams without real decision ,making authority.
Engaging the services of an able native Chinese intermediary.
As far as possible maintaining a consistent team will help in developing rapport.
Helping the Chinese counterparts to come out of the bureaucratic web.
Inviting the Chinese to come for negotiations abroad would also prove helpful in successfully concluding the deal.
Use appropriate techniques for face saving of the Chinese negotiators.
Preparation in Chinese Negotiations
Since negotiation with China involves cross-cultural aspects, it requires some preparation on the cultural front before negotiating with Chinese. “Preparation for negotiations in China includes conventional aspects of identifying goals (immediate, medium, and long-term); identifying goals and expectations of counterparts (requiring research and networking); and planning processes of “trade-off’s,” “what-if’s,” and fall back positions etc” (Potter, 2010).
However, there are other specific preparation that are needed before commencing negotiations with Chinese. These are institutional and personal mapping of the Chinese negotiators, which will help in identifying the goals and expectations. Preparation also involves identification of relational networks, which are likely to have strong influence on the Chinese negotiators.
On their side, Chinese negotiators also undertake adequate preparation before they start negotiating. Chinese adopt an efficient process through preparation, which help in creating and establishing procedures that are important for achieving their goals in negotiation. They specialize gaining the interplay between the strategy and the negotiation. Chinese are able to perform better in their negotiation because of their better preparation by collecting comprehensive information about the opponents. Such collection of information acts as the foundation for the preparation for negotiations, especially through mapping the interests of the counterparts. The process of collection of information enables the Chinese to develop an efficient negotiation strategy.
Conclusion
This research shows that the preparation and planning for international negotiation involves a number of issues, which influence the progress and success of the negotiations. Irrespective of the nature or size of industry or the extent of the negotiation, there are certain basic ingredients in the pre-negotiation stage. The findings indicate the aspect of gathering information is considered important and the negotiators should be careful in allocating the resources for gathering the required amount of information.
In general, companies having high stakes in negotiation are more concerned in gathering adequate information about the interests and alternatives of the opposite side to plan their course of action. The findings of this study indicate that companies involved in international negotiations need to perform all types of planning including strategic, tactical and administrative as advocated by theory. Usually companies involved in negotiations with high stakes do the tactical planning more thoroughly than other companies do. Nevertheless, the three types of planning are useful in describing the planning and preparation before any international negotiation starts.
As regards the factors that affect preparatory process of negotiation, the first important factor is the identification of the decision-maker in the opposite side and thus making the decision-making system of the opponent as an important influencing factor in the pre-negotiation stage.
Companies always perceive negotiations as resulting in some synergistic advantage to them. The findings indicate that in some cases the nature of persuasive arguments is most likely to have an impact on the preparatory stage. One of the major reasons for such influence is that the large amount of stakes involved in the solution arrived from the negotiations makes the parties involved rely more on rational arguments.
On the other hand, in the case of negotiations involving lesser value, negotiators are more likely to be involved in emotional persuasion rather than following rational arguments. The research indicated that different countries have different preferences as to the method of negotiation and as to the person who should handle the negotiation. With the nature of persuasive arguments, companies involved in negotiations having lesser value have the opportunity of adjusting the negotiator suited to different cultural-specific preferences. On the other hand, negotiations having larger values demand the selection of a fixed set of negotiators. Companies having larger number of members in the negotiating team adopt different selection criteria for choosing the negotiators.
In the preparatory stage, companies involved in negotiations with longer time-periods are likely to be influenced by factors other than those which are culturally specific. These factors, however, depend on the individual product, company, industry or segment and have a greater impact on the preparation for negotiation than cultural factors.
Implications for Managers
While attending international negotiations, preparation and planning is considered to be of utmost importance. The important aspect of preparation and planning is not realizing but actually doing the preparation and planning. There are a number of considerations about the preparatory phase, which have been presented in this research report and a majority of them might prove beneficial to negotiators.
It is especially important that the managers should adopt the policy of unlearning throughout the negotiating process and adapt their strategies to the changing circumstances emanating during the process of negotiation. The managers should understand conflict is unavoidable and they should expect and be prepared to face the conflicts. They should also understand that cooperation is fundamental and the mangers should take the necessary efforts to maintain and improve cooperation as early as possible. Another important factor which has an implication for the managers is that informal relationships are necessary for future relationships.
Nevertheless, the informal relationships assume a lesser degree of importance in the Western nations. Trust is another important factor, which should be maintained and improved throughout the process of negotiation. Gathering information about the interests and alternatives of the opponents and analyzing them to make proper planning are essential steps in the preparatory process and the managers should make careful allocation of the available resources among these activities to ensure success in the international negotiations.
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The international partnership agreement made between Renault and Nissan Companies in 1999 came due to numerous key decisions. The agreement committed the two companies to forging certain form of synergies while preserving their individual brand identities.
The companies agreed to give the Global Alliance Committee the mandate to direct their partnership through the leadership of the chief executive officers from the two companies. The Renault Company provided financial capital worth $5.4 billion (¥643 billion).
In return, the company purchased 36.8 per cent of the Nissan Motor’s shares 22.5 per cent of the Nissan Diesel. The total equity was worth ¥605 billion and to compensate for the remaining ¥38 billion, Nissan Motor agreed to transfer ownership of its European financial subsidiaries to Renault Company.
In addition, the agreement gave the Renault Company the freedom to increase its share in Nissan Motor and gave the Nissan Motor the freedom to buy equities from Renault. On management issues, the two companies agreed to give Renault Company the duty to manage three positions in Nissan Motor.
The companies made the decision to allocate one of the seats in Renault’s board of directors to a leader from Nissan Motor. The seat was given to Hanawa (Nissan Motor chief executive officer).
At the alliance level, the companies decided to come up with eleven cross-company teams to run the different fields of synergy as well as to coordinate sales and marketing efforts in the various markets dominated by the two companies. Some of the teams included the purchasing team, engineering team, and product-planning team, among others.
Introduction
In 2010, the Renault and Nissan formed one of the major global alliances in the automotive industry. In return, they gave rise to over 350,000 job opportunities and they had operations in 190 states. The alliance had done well for the past ten years to a level that many people considered it as the representation of a successful partnership.
When news of their intended alliance first became public, many auto executives perceived it as an impossible exploit (Tagliabue 41). They claimed that the two companies practiced different cultures. Besides, the executives claimed that their intention would face stiff opposition from the stakeholders.
During the negotiation process, Renault’s chief executive officer (CEO) had reached the verge of losing hope of striking a deal with Nissan Motor (Betts 18). Nevertheless, the deplorable condition of the auto industry and stiff competition from major automotive companies kept the CEOs from the two companies negotiating.
This paper looks at what the two CEOs did during the negotiation process to reach an agreement, the influences of cultural differences during the negotiation process, why the companies reached an agreement, and how the they benefited from the alliance.
How Renault negotiation team worked
Lax and Sebenius coined six critical steps to a successful negotiation. In a bid to strike a deal with Nissan Motor, the Renault negotiation team made sure that it did not overlook any of the six steps. According to Lax and Sebenius, negotiators ought to consider their interests as well as that of their counterparts (92-94). The team went past the apparent differences, investigated parties’ interests, and capacities for “fit”.
The majority of news reporters considered linguistic, cultural, and organizational differences as some of the factors that could have hindered the negotiations between the two companies (Donnelly, Morris, and Donnelly 435-437). Nevertheless, Renault’s negotiation team, through the assistance of Schweitzer, went to the extent of focusing on the long-term goals of the two companies to establish their negotiation strategies.
Besides, they considered the complimentary interests of the two companies as well as their respective capacities. Their stoutness on copious dimensions directed, motivated, and made sure that the negotiators continued with the negotiation process.
Not all the differences mattered equally between the organizations. Moreover, not all differences meant incompatibility. Indeed the Renault’s negotiation team used these differences to establish sustainable benefits for the two companies, which gave them an upper hand during the negotiation process.
The negotiation team ought to make broad preparations in cooperation, incessantly, and within (Lax and Sebenius 95). The team carried out systematic internal analysis and took time to work with staff from Nissan Motor long sending a letter to Nissan Motor expressing their intensions.
The joint preparation prior to official negotiations gave the team a chance to understand the interests of Nissan Motor and thus include them in their negotiation process (Woodruff 63). In addition, the negotiation team had enough time to avoid rushing during the negotiations.
The majority of negotiation processes fail for the negotiating teams do not have adequate time and they end up hastening during the process, thus not addressing most of the crucial issues. By preparing thoroughly, the Renault’s negotiation team had enough time to identify and address all the critical matters.
In a bid to facilitate in the negotiation, the team considered the possibility of adopting a novel form of alliance. The team came up with an alliance model that would allow the two companies to work together and at the same time preserve their individual brands.
Cross-shareholding and high-level coordination were common phenomena in both Japan and France (Woodruff 63). Nevertheless, they were not prevalent globally in the automotive industry. The Renault’s negotiation team came up with negotiation model that upheld the principle that the negotiating parties hold the power of establishing the design of their relationship.
The team ought not only conduct itself as a negotiator, but also as a potential partner (Lax and Sebenius). In most cases, negotiators work to achieve their interests at the expense of their counterparts. Nonetheless, Renault’s negotiators put into consideration the Nissan’s interests and they considered their future relationship after the alliance (Donnelly, Morris, and Donnelly 434).
They were conscious of the companies’ short history together, the chance that the negotiation provided them to prove their persona as a long-term partner, and the effect that their negotiation behavior would possibly have on the execution of an accord. These considerations earned the negotiators a reputation, thus winning the trust of the Nissan Motor leadership.
Lax and Sebenius (97-100) posit that negotiators need to work on making sure that they influence their counterparts and draw them away from their alternatives. Renault’s negotiators worked extra hard to control the influence of the Nissan’s alternative. For the Nissan’s CEO, he had a formidable alternative, and thus he did not take serious his possible alliance with Renault.
He was working towards enhancing his relationship with Chrysler. Therefore, to ensure that they won in the negotiations, the Renault team worked towards reducing the chances of Hanawa’s maneuvers in influencing the final decision. In addition, they stayed right to their dream of an alliance and tried to lure Nissan Motors through publications like the mock press release (Ghosn 37-39).
Besides, they made their commitment public and even requested Hanawa to sign freeze agreements. Eventually, they managed to draw Hanawa’s attention away from Chrysler and he ultimately agreed to collaborate with them.
In the attempt to strike a deal with Nissan Motor, the negotiation team assessed the possible outcomes of their alliance. In most cases, people appraise negotiations based on their instantaneous results.
Nevertheless, even though the alliance between Renault and Nissan received a lot of media attention, its outcomes could only be felt after several years (Donnelly, Morris, and Donnelly 440). The negotiation team knew that it was impossible to get immediate results, but the future looked promising.
How cultural differences influenced the negotiations
The cultural differences between the two companies played a significant role throughout the negotiation process. One of the cultural aspects that stood out as a barrier in the negotiation process was communication. The parties in the negotiation process could hardly communicate due to language barrier (Ghosn 39).
This aspect led to the delay of the negotiation process, as the Renault’s negotiation team had to enroll for Japanese classes to equip themselves with the basic skills in the Japanese language. Besides the language barrier, the two companies practiced different forms of leadership, which led to the two disagreeing on the form of relationship to embrace.
While the Renault team advocated for a joint venture or subsidiary, the Nissan’s team was strongly opposed to the same (Ghosn 39-41). The two companies had to compromise and settle for an informal relationship proposed by Ghosn. Moreover, Nissan Motor highly valued its brand name.
The company was not willing to lose the name in the process of the alliance. Hence, the two companies were forced to look for a way that would facilitate their alliance and at the same time allow the companies to continue using their brand names.
There were problems with decision-making processes in the two companies. In Nissan Motor, the management propagated a culture that promoted consensus decision-making system. This culture aimed at ensuring that all the staff worked in harmony and participated in making critical decisions on matters affecting the organization.
Every employee in the company was keen in all his or her actions to avoid chances of making mistakes, which could see him or her lose the job (Ghosn 42-43). These cultural norms were the major hurdles in the decision-making process in the company.
In addition, they contributed to the negotiation process as stakeholders from Nissan Motor sought to understand how decisions would be made in the event of the alliance.
Therefore, to ensure that all parties were satisfied, the two companies agreed to come up with a committee that would be responsible of making a decision on matters affecting the companies through the assistance of the two chief executive officers.
Why Nissan and Renault reached an agreement
Generally, the reason behind any alliance between two or more companies entails the possibility of future growth. Companies agree to collaborate whenever they sense that an alliance would help them to gain access to advanced technology and market development in the future. The same thinking informed the alliance between Renault and Nissan (Ghosn 45).
The alliance helped the companies to share their geographical coverage and improve on their weaknesses. Renault dominated both the Latin America and the European markets. On the other hand, Nissan dominated the Japanese, North America, and Asian markets. According to Renault, the alliance would help it to expand its market coverage beyond the Latin America and Europe.
Hence, Renault saw the alliance as the only way through which it could establish a lasting competitive survival. The alliance would help it to reduce its dependence on the European market and to be credible in an international context; Renault needed to establish itself in the Asian Pacific and North American markets (Korine, Asakawa, and Gomez 41-43).
Nevertheless, it could hardly achieve this goal without collaborating with another company because of the cost. Renault could not merge with an American company since most of the American motor companies were busy trying to consolidate their alliances with European motor companies. Therefore, Renault turned its attention to Japan where it found Nissan Motors, which was operating independently in the market.
General Motors was already controlling most of the Japanese motor firms like Isuzu and Subaru. Therefore, Nissan Motor was the only company that offered a chance to venture into new markets and Renault was not ready to lose the opportunity. On the other hand, Nissan Motor saw the alliance as a good chance to help it expand its market coverage across the globe (Korine, Asakawa, and Gomez 44-46).
Through the alliance, Nissan could venture into the untapped European markets. In return, the company could now make use of its half-idle manufacturing plants. The new markets would increase the demand for Nissan cars, and thus increase the amount of work in all the manufacturing platforms.
The two companies possessed different technologies and expertise. Renault had expertise in research and development as well as concept design and marketing. On the other hand, Nissan Motor had expertise in engineering. By combining their expertise, the two companies would stand a chance of countering competition in the market as well as in the products.
Relatively, Renault would use the Nissan’s engineering and technological skills to revive its Safrance (Korine, Asakawa, and Gomez 47). Moreover, Nissan would help Renault to complement its products through its reputation in off-road and pickups vehicles as well as quality models. On the other hand, Nissan would take advantage of marketing experience of Renault to increase its sales volume.
Apart from forming an alliance, the two companies had the option of operating independently. For instance, Renault had enough money to assist in venturing into the North American market. Besides, it had the opportunity to liaise with smaller automakers in the United States to address its operational challenges.
Nevertheless, this alternative would not have helped Renault to improve its market coverage across the United States (Korine, Asakawa, and Gomez 47-49). In addition, Renault did not have adequate engineering and technological expertise to manufacture quality and modern vehicles.
Consequently, failure to collaborate with Nissan would have rendered the company uncompetitive and thus lose most of its market shares to other superior companies. The partnership did away with competition between the two companies. Failure to form an alliance would have led to Renault suffering from stiff competition from Nissan’s quality products.
In spite of the Nissan Motors having the technological and engineering skills, the company would have also suffered if it did not form an alliance with Renault. In a bid to pursue its interests, Nissan Motor had the opportunity to raise capital through borrowing from commercial banks. Besides, the company could have raised capital through equity.
Nevertheless, the company’s shares had significantly depreciated and spinning off some of its subsidiaries would have negatively affected its market dominance (Korine, Asakawa, and Gomez 50). The alliance proved as the only alternative that could be of mutual benefit to the two companies.
It not only helped to counter competition between the two companies, but also helped to improve the market share and profit margin of the two companies through sharing their distinct expertise.
Failure of Daimler-Chrysler and success of Chrysler-Fiat merger
Numerous factors contributed to the failure of the merger between Daimler and Chrysler. Some of the factors included cultural differences, lack of due diligence, mismanagement, and Asian challenge. One of the challenges that affect cross-boarder mergers is cultural differences.
Cultural differences affect the work attitude as well as the management system. Daimler and Chrysler hailed from two different cultural backgrounds. The two companies were different with respect to working style, organization, and compensation (Das and Rajesh 686). Daimler considered itself as superior in terms of innovation in the motor industry.
On the other hand, Chrysler was popular for flexibility, efficiency, and vehicle design. In spite of their merger having a lot of potential to improve the companies, the differing cultures made it hard for the companies to operate amicably. Daimler felt superior and thus tried to use its management style to manage Chrysler’s operations in the United States.
Daimler advocated for methodical decision-making while Chrysler advocated for equal representation and employee empowerment (Das and Rajesh 698). The attempt by Daimler to apply a hierarchical system of leadership in Chrysler led to conflicts between the two companies.
At the beginning, the management teams from the two companies claimed that the companies had equal powers over the merger. However, Daimler purchased Chrysler and took absolute power over its management. This dominance led to the mismanagement of Chrysler Company eventually leading to the collapse of the merger (Das and Rajesh 700).
Most of the managers that had contributed to the success of Chrysler Company ended up moving to other companies that had a promising future like the General Motors. According to Das and Rajesh, “the American vigor faded under restrained German influence; however, the Germans were unable to enforce their own managers” (699).
The success of Chrysler and Fiat merger is credited to proper management, and observation and respect of cultural diversity of the two companies. While Daimler overlooked the culture practiced by Chrysler, Fiat embraced the diversity in cultural practices and endeavored to preserve it (Harvey 132-136).
In an interview, Marchionne posited that the merger between the companies would not lead to the erasure of their distinct heritages. Instead, the two companies would work on modalities to preserve their heritages while at the same time to improve on their performance, and thus aspect underscores where the Daimler’s leadership went wrong.
Rather than respecting the cultural diversity between the companies, the management sought to stamp out the Chrysler’s culture and replace it with its culture (Harvey 138-142).
This move not only led to challenges in the company’s management system, but also left most of the managers that saw the company grow with limited influence over the company’s management. Eventually, the managers felt betrayed and opted to look for other companies where their contribution would be of value and appreciated.
The success of Renault-Nissan alliance
Ten years after the alliance between Renault and Nissan, the companies were still enjoying the fruits of their alliance. Based on the reasons for the alliance, one may claim that Renault Company benefited from the alliance more than the Nissan Company.
Through the assistance from Ghosn, Nissan managed to cut down on the number of its plants in Japan, a move that helped the company reduce its operational costs (Donnelly, Morris, and Donnelly 428).
By 2000, Nissan Motor had already started enjoying profit and it maintained that until 2008 when all the motor firms suffered from the economic crisis. The company’s operating margin improved thus ranking it among the best four motor companies in the industry. By 2004, Nissan had paid off all its debts and it increased its sales volume by over 78 per cent by 2007.
The alliance had immense benefits to Renault. The company managed to recover the money it invested in Nissan. By December 2009, the value of its shares in Nissan was worth more than its total market value (Donnelly, Morris, and Donnelly 429-432). In addition, Renault managed to work on its defective parts ratio through the skills it acquired from Nissan Motor.
Renault’s productivity went up because of adopting Nissan’s production mechanisms. In 2005, Ghosn assumed the leadership of the two companies. He set high targets for Renault as a way to improve its operating margin (Betts 18). Nevertheless, he did not achieve the targets.
Renault continued with its effort to internationalize its operations by acquiring majority of shares from Samsung Motors in South Korea (Donnelly, Morris, and Donnelly 435-438). Additionally, the company went on and purchased 25 per cent of the shares from AvtoVAZ in Russia and collaborated with automotive firms from India and China.
Since Renault was yet to establish itself in the United States market, the alliance approached some of the smaller companies in the United States to see if they could help them in this venture. Finally, the alliance agreed to work with Daimler, which led to Renault gaining access to the United States market (Donnelly, Morris, and Donnelly 440).
The Renault-Nissan alliance has grown since 1999. Besides welcoming other partners into the alliance and sharing a common chief executive officer, the two companies have significantly augmented their cross-shareholding and inflated their organizational linkages (Das and Rajesh 699). Nevertheless, Renault has benefitted more from the alliance relative to Nissan Motor.
Conclusion
Automotive firms have negotiated for global alliance for many years and they will continue negotiating in future due to the high levels of competition in the motor industry. Nevertheless, the alliance between Renault and Nissan Motor is of its own kind.
Most observers believed that the alliance would not last for long due to cultural differences between the companies, but to their surprise, the alliance turned out to be very successful to the extent that it became a representation for industrial alliances.
Numerous factors contributed to this success. One of the factors was the decision by the two companies to accommodate their cultural differences and run their operations separately. This move avoided cases of the two companies disagreeing on various issues during their daily operations. Culture contributes to organizational success.
The reason why the merger between Daimler and Chrysler failed was that Daimler undermined Chrysler’s culture and tried to substitute it with its culture. The move altered the management system in Chrysler leading to a majority of the company’s managers leaving the company. Besides embracing their cultural differences, the Nissan and Renault were in need of alliance to help them enhance their competitiveness in the motor industry.
While Nissan had all the requisite engineering and technological skills, the company lacked the marketing skills. On the other hand, Renault had the marketing skills, but lacked the requisite technological and engineering capabilities. Hence, the alliance gave them a chance to share their capabilities, which gave them an opportunity to enhance their competitiveness.
Works Cited
Betts, Paul. “Carlos Ghosn gets second chance to rev up Renault.” Financial Times 29 April 2010: 18. Print.
Das, Titiksava, and Rajesh Kumar. “Learning dynamics in the alliance development process.” Management Decision 45.4 (2007): 684-707. Print.
Donnelly, Tom, David Morris, and Tim Donnelly. “Renault-Nissan: A marriage of necessity?” European Business Review 17.5 (2005): 428-440. Print.
Ghosn, Carlos. “Saving the business without losing the company.” Harvard Business Review 24.7 (2002): 37-45. Print.
Harvey, Francis. “National cultural differences in theory and practice.” Information Technology and People 10.2 (1997): 132-146. Print.
Korine, Harry, Kazuhiro Asakawa, and Pierre-Yves Gomez. “Partnering with the unfamiliar: lessons from the case of Renault and Nissan.” Business Strategy Review 13.2 (2002): 41-50. Print.
Lax, David, and James Sebenius. “Deal Making 2.0: A Guide to Complex Negotiations.” Harvard Business Review 90.11 (2012): 92–100. Print.
Tagliabue, John. “Renault pins its survival on a global gamble.” The New York Times 02 July 2000: 41. Print.
Woodruff, Chris. “Renault bets Ghosn can drive Nissan.” Wall Street Journal 31 March 1999: 63. Print.
The Canwall Case examines the Canadian and Chinese negotiations that were expected to end with a successful sale of equipment but failed. The case represents how cultural differences may influence business and co-working and shows what results an insufficient knowledge of these cultures might bring.
Needs and Benefits
As the Canwall case proves, intercultural business and its success depend on some variables that need to be considered. Barrett (2006) examines such variables as context, time, language, collectivism or individualism, etc. (p. 261). As one can see, none of these variables were considered by the Canadian team which led to a failure. An analysis of this case will help avoid mistakes in the future. Some limitations of the communication can be turned into contributions if the rules of intercultural business relations are considered.
Goals and Boundaries
In the analysis of this case, I will focus not only on the differences between Chinese and Canadian cultures but also on the general distinctions that may cause ineffective business communication. The goal of this analysis is to show that all cultures involved in the business need to consider the possible problems that may appear during the meeting and learn to solve them, especially if those problems are connected to cultural differences. However, I will not be able to provide a detailed description of every cultural issue because such analysis requires a very profound understanding of all aspects of the cultures.
Cultural Frameworks
As it was mentioned above, Barrett provided an analysis of variables that can help conduct a successful business meeting. First of all, context needs to be considered. Barrett (2006) notices that the context can be high or low (p. 262). High-context cultures find interpersonal relationships and nonverbal messages important and rely on them during communication (Barrett, 2006, p. 262). In return, low-context cultures are impatient, used to direct communication and prefer explicit verbal messages (Barrett, 2006, p. 263).
Such cultures find individuality important. Time is also perceived differently: for high-context cultures, it is polychronic (many events occur at once), for low-context cultures, it is monochronic (linear time) (Barrett, 2006, p. 266). At last, collectivism (the community is important) or individualism (an individual is important) also shape the business communication and influence its outcome.
Findings of the Analysis
High-context vs. low-context cultures
As the Canwall case has shown, the deal failed because both teams, the Canadian and the Chinese, did not consider the cultural differences. The Canadians supposed that politeness and warm reception were indications of success, while the Chinese did not realize that the Canadian team relied on a direct form of communication.
Collectivism and individualism
It was unclear and perhaps confusing for the Canadians why ten Chinese showed up at their presentation. However, it was a sign of predominant collectivism in the Chinese culture. The Chinese discussed the director’s employee to understand what relationships there were between them; the Canadians missed that and considered it a topic unrelated to business.
Time
Time is perceived differently by the cultures. High-context culture regards time as a state of being. That is why the Chinese did not rush to discuss the sales but preferred to get acquainted with the Canadians (O’Rourke and Tuleja, 2008, p. 136). The Canadians, in return, did not plan their trip according to the cultural preferences of Chinese and ran out of time.
Language
As it was stated in the case, the Canadian team did not have an interpreter, so the Chinese offered help. However, an interpreter should be familiar with the team and, preferably, work in it to know the insights. This mistake also influenced the deal’s outcome.
Recommendations
The variables discussed above always need to be considered because any mistake or misunderstanding may be fatal for the business communication. The differences between high and low-context cultures are of utter importance because they influence other variables such as perception of information, time, community, etc. The representatives of both cultures should not dismiss the rules and traditions of others to extract advantages.
References
Barrett, D. (2006). Leadership communication. New York, NY: McGraw-Hill.
O’Rourke, J., & Tuleja, E. (2008). Module 4: Intercultural communication for business. Boston, MA: Cengage Learning.
A negotiation is a dialogue which is aimed at settling a dispute so that a conclusion is reached which is agreeable between the parties involved. A negotiation is also a bargain which results to an individual advantage. There are many styles of negotiations which are currently in use. A particular style in use will depend largely on the context and interest of the opposite party which is involved in the negotiations. The approaches used during a particular negotiation also depend on the prevailing circumstances which led to the dispute.
Negotiation happens in, organizations, public offices, legislative processes, internationally and also in marriages during divorce. Therefore, in everyday life, we will always face challenges which will lead us to the path of negotiating with the other party. Negotiation theory is thus the study of negotiation which is quite crucial in contemporary society. In the modern world, there are professional negotiators who can act to represent an individual, organizations and any other party involved.
Factors to consider when preparing for a negotiation
Generally speaking, there are many factors which a person should consider before they engage in any kind of negotiation. As NTI (2010) observes these aspects consist of;
Competitive investigation- Identifying the behavior of market can help demystify the prevailing working operations of the market.
Identifying the objectives of the negotiation is also another factor which needs to be considered. Since all sides want to gain form the deal, a party should prioritize their objectives so as not to risk being exploited.
Price and payment of the negotiation object should also be considered in that negotiators should relate their bargains to a synergistic approach in a joint problem solving situation.
Maintenance cost of the goods should also be considered. The revenue during maintenance of machinery for example should be considered together with the cost of fuel, safety and performance monitoring.
The delivery cost can also be imposed on the buyer. Thus a buyer, while negotiating should consider such costs.
BATNA
BATNA is an acronym for Best Alternative to a Negotiated Agreement. It is a term coined by Roger and Ury, renowned writers and business people. There is no way a wise decision can be made unless the parties involved know what the alternatives are at their disposal.
The individual BATNA is the threshold that protects the individual’s both accepting an offer which is not favorable, or from rejecting a favorable offer (Spangler, 2003). This indicates that one should consider withdrawing from a negotiation should they find it hard to improve the agreement. In doing all these, the cost of withdrawing from negotiation should also be taken into consideration.
Negotiation power is increased when a person has a good BATNA. Determination of ones BATNA should be a critical factor before engaging in any type of negotiation. Thus one should develop a list of actions which serve as an alternative to the agreement, improve some of the prospective ideas which should be also converted to practical options and select the best options from the alternatives (Spangler, 2003).
As an example, when a person does not receive a good job from a particular company, there are a number of things the person needs to do. First the person should invent options which may include whether or not to take a different job, go to another city or even considering going back to school. After doing this invention, the person is required to choose the best option from the alternatives.
Negotiation price
Negotiation price is the lowest price which is favorable to a party, in which the party can accept as a final settlement in a negotiation. For instance when person A wants to sell a property to person B, person A will have to consider the walk away point or the threshold value for the property before accepting the offer given by person B. thus this is the minimum price which a seller would accept from a buyer, or the maximum price which a buyer is willing to accept from a seller. Reservation prices are quite familiar to the auctioneering field. These prices are often developed from the BATNAS of the negotiators (The Negotiations Experts, 2010).
Ethical and unethical behaviors in negotiations
During negotiations there are people who may engage themselves in unethical behaviors. This is the dark side of this story. Thus gambits can be used to deceive a party during the act of negotiation.
Multiple gambits include the act of misrepresentation and a negotiator becoming hard nosed with his bargaining. Unethical behavior can also include referring the issue to a higher authority. Thus as a negotiator, you should be able to chose between one or two alternatives on how to respond to such gambits (The Negotiations Experts, 2010).
The other way of reacting to unethical behavior is when the seller mimics the characteristics of the buyer. In this situation, both parties get on each other and both are not willing to back down. Thus the chances of coming up with an agreement are lessened. Worse still, one or both parties are likely to back down from the negotiations.
There are however remedies to these situations. A person is advised to know and differentiate the different kinds of unethical behaviors which can arise during negotiations. This is because it will be much easier to succeed in a counter move should such behavior occurs.
One is also advised never to attack. Instead, one should take up the opportunity and challenge it. It is also good for a person to know their BATNA. Always have an alternative to any given situation.
One should remember that they know how to play their own game better than the other party’s game (The Negotiations Experts, 2010). Thus they should play their own game. It is also worth noting that in any given negotiation, it is all about a person’s future, not the other party’s future. Hence, the reputation of the person after they have struck a deal is critical here.
The use of distributive and integral negotiations
Distributive negotiations also called win-lose bargaining is a sort of negotiating strategy which is competitive in characteristic. It is used to find ways of distributing fixed resources amongst two parties involved at the negotiation table. Hence the more one party gains the more the other party losses (The Negotiations Experts, 2010). Thus in this kind of negotiation, each party will always find itself trying to gain the most for themselves and does not mind about how much the other party loses.
An integrative negotiation, on the other hand is a situation in which all sides of the negotiations will cooperate so that the outcome is a win-win situation. This results into realization of maximum mutual gains by the two parties. Integrative negotiation is critical because its outcomes are more satisfying than the outcomes from distributive negotiations.
Interest based, rights based, and power based approaches applied in the process of conflict or dispute resolution
Interest based approaches are those approaches which focus on competing interest. This type of bargain demonstrates its ability to enhance negotiation agreement without harming the sides involved (Stepp, Sweeney, & Johnson, 1998).
Thus there is sharing of information, creatively exploring the market and working towards mutual benefit like in the case of integrated negotiation. A good example is when parents quarrel on whether to purchase a new automobile. The father’s interest may be to impress his friends while the mother’s interest may be the issue of transport (Ury, Bret, & Goldberg, 1998).
Another way of solving conflicts is by investigating who is right. The word rights is used here as the short hand for who is right. The outcome here determines who gets what that is why the two parties involved usually outsource the services of another party to resolve the conflict. The third party often has the power to hand down a binding decision.
For instance when a worker claims to be given new overalls to replace the ones he had which were stolen. The boss doesn’t want to replace it so the issue develops into a dispute. The dispute will be resolved by a third neutral party which may compel the company to give in to the worker’s demands.
Power based negotiations are those disputes resolved in line with the basis of power. Thus one party is able to coerce the other inferior party, something that would not be otherwise done by the inferior party (Ury, Bret, & Goldberg, 1998). A good example is when employees go on strike. They exercise their powers by imposing economic costs to the company they are employed in.
Reference List
Negotiations training institute. 2010. Negotiations Training Tips, Negotiation Seminars Preparation is the Key to Unlocking a Successful Negotiation. Web.
Stepp R. John, Sweeney M. Kevin, Johnson L. Robert. 1998. Interest based negotiation: An Engine Driving Change, The Journal for Quality and Participation.
The Negotiations Experts, 2010. The Unethical Side of Negotiation, Some Objective Insights and consequences of using unethical means to achieve results. Web.
Ury L. William, Bret M. Jeanne & Goldberg B. Stephen. 1998. Negotiation Fundamentals, Three Approaches to Resolving Disputes: Interests, Rights, and Power, section 1, Jossey-Bass, Inc.
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The situation in the case refers to diverse types of interests among the involved parties: shared, differing, and conflicting. Harborco shares the economic and developmental interests with Fujairah Department of Economic Development and Federal Agency of Coastal Resources. At the same time, the primary interests of the UAE Environmental League profoundly differ from those held by the organization. Lastly, the interests of other ports in the UAE enter into the conflict with Harborco’s interests as they want the same things. As stated by Patton (2005), identical interests often become the source of the most intense conflicts.
Thus, during the negotiation, Harborco should pay significant attention to the ports’ concerns regarding the maintenance of financial profitability as this area is the most challenging to deal with in the given case. The parties should consider as many potential solutions to the given problems as possible in order to create a win-to-win situation. To do so, both possible negative and positive circumstances of the conflict (e.g., the effects of partnerships or their lack of financial performance) must be taken into account.
Legitimacy
Patton (2005) states that often the need for legitimacy and fair treatment is “the main driver in a dispute” (p. 281). As in the case of conflicting interests, the parties that claim fair treatment and have different views on the legitimacy of a solution may have the same interests as their counterparts. In the case, Harborco considers that it is reasonable to establish a new deep-water port, while other UAE ports may consider the realization of the proposed project as an unfair decision because it may be detrimental to their performance.
However, the opposing views of legitimacy may be supported by differing interests as well. For instance, from the perspective of the UAE Environmental League, the provision of freedom to develop any industry mix to Harborco would be unfair. To come to a well-crafted agreement, researchers suggest the involved parties seek the understanding of opposing views as the combination of different stories helps generate new insights (Weiss, 2013).
Relationships
Relationships among parties constitute a core of the negotiation process. Patton (2005) notes that “having a fond or trusting relationship may make dispute resolution easier, while hostile feelings can make it much harder” (p. 282). There are several ways in which Harborco’s relationships with other parties may go wrong. The major threat, however, is hidden in the fact that the organization needs to reach the agreement with only four of the five parties. In the given situation, Harborco may decide to prioritize relationships with those stakeholders that have less differing interests with it while neglecting the party with the major opposing views (i.e., the UAE ports).
Nevertheless, such a decision may be considered unethical and, moreover, by disrupting relationships with one of the stakeholder groups, the company may influence its performance in a negative way. To avoid unfavorable outcomes, Harborco should treat other ports as potential business partners and regard them as legitimate stakeholders − those who may have a direct impact on organizational performance and, at the same time, can be directly influenced by it (Santana, 2011). Santana (2011) states that by addressing legitimate stakeholders’ needs and providing an added value for them, the company will contribute to own sustainability and profitability.
Harborco Negotiation BATNA
In the case, many alternative solutions can be identified including the likely BATNAs for both Harborco and its counterparts. However, their BATNAs not always meet. For instance, while the best alternative for the organization will be the exercise of total freedom in the development of industry mix, the BATNA for the Federal Agency of Coastal Resources and the UAE Environmental League will be the imposition of limitations on the industry mix and the encouragement of all clean industries only. It can be thus suggested to evaluate all options and find the sufficiently acceptable one for both parties.
Options
“Options create value in negotiation by maximizing the satisfaction of shared interests…or by exploiting differences in interests” (Patton, 2005, p. 284). In the analyzed negotiation process, diverse options are provided, and they cover a wide range of the parties’ interests. For instance, in the dispute with the environmentalists, Harborco takes into account such options as some harm to ecology (i.e., neglect of green organizational practices), maintenance of ecological balance (i.e., realization of a few green initiatives), and improvement of ecological setting (i.e., organization-wide compliance with ecological standards). In this way, Harborco reviews all potential solutions from doing nothing to the consideration of public interests and their integration in the future business operations. Such an approach supported by efficient communication can help to reach a positive outcome.
Commitments
Commitments are actual decisions. They determine what the company is ready to do in order to create mutual benefits. In the context of the given negotiations, Harborco’s potential commitments may be referred to as its willingness to implement stakeholder management strategy. By addressing “an extended web of stakeholder interests,” including the needs of the “silent” stakeholder groups – local communities and the ecology, – not merely will the company meet the current public needs (e.g., Emiratization of workforce) but also succeed in the fulfillment of the organizational economic mission (Jamali, 2007, p. 217). It would be thus beneficial for Harborco to make offers based on the counterpart’s interests in case the solution does not entail significant costs.
Communication
Harborco’s goal during negotiation is the attainment of the agreement among all parties. Thus, in the communication with them, it will aim to evaluate all perceptions and doubts which they have. Patton (2005) notes that in order to understand each other better, the parties should take into account the emotional aspect of perceptions. It means that negotiators should critically evaluate their interests and implement the principles of active listening to be able to comprehend the stance of others.
Harborco Negotiation Outcomes
A desirable negotiation outcome implies the attainment of legitimate, practical, “no-waste solution that captures as much available value as possible” (Patton, 2005, p. 285). It is also expected that negotiators will develop positive relationships throughout the course of communication. However, there is a chance that Harborco may not reach the agreement with some of the parties.
Based on the situation and the nature of the conflict, the issue related to the compensation of other ports in the region may remain unresolved. While win-to-win solutions in other areas are more feasible, e.g., implementation of unlimited local preference in employment, because they are not associated with significant financial losses, and the company may relatively easily adjust to them, the large compensation does not meet Harborco’s interests at all. However, the organization considers that the construction of the port may benefit other companies as well. The outcome in this disputable area will largely depend on the efficiency of the communication and ability of the organization to convey its stance and vision.
Strengths and Weaknesses
Harborco is aware of the counterparts’ interests and, thus, understands what BATNAs they may have. The given understanding may be regarded as the company’s strength because it will guide the process of the selection of the most appropriate solution. The major weakness, however, is the lack of a clear plan of the management of disagreements and the presence of potentially insoluble conflicts.
It is possible to say that Harborco may compromise some of its initial interests and make concessions, e.g., in limitation of the industry mix, reduction of the ecological impact, and implementation of the unlimited local preference employment regulations. In some way, these agreements may be beneficial for the company as they help to balance the organizational needs and various stakeholder concerns. Thus, some compromise can contribute to long-term sustainability of the enterprise. Nevertheless, the agreement on large compensations (50-100%) may be considered inappropriate as it contradicts the company’s vision.
Recommendations
Active listening is an intrinsic part of successful communication (The art of negotiation, n.d.). Thus, it can be recommended for Harborco to implement models that facilitate active listening, e.g., the Ladder of Inference which implies that personal beliefs and assumptions are largely defined by the environment in which people operate (Lutz, 2016). From this point of view, negotiators’ unwillingness to accept the counterparts’ views may be determined by their previous experiences and backgrounds.
The principles of effective communication, as provided by the model, allow revealing these causes of current positions on issues by using inquiry and active listening. Harborco may significantly improve the mutual understanding and effectively convey its messages by applying these simple techniques. In order to explain its own way of thinking, it should invite dialog through the process of non-judgemental questioning and respectful inquiry. Harborco representatives should necessarily consider the parties’ opinions and try to integrate them into own vision of the problem to raise mutual understanding and provoke the shift toward desirable outcomes.
References
Jamali, D. (2007). A stakeholder approach to corporate social responsibility: A fresh perspective into theory and practice. Journal of Business Ethics, 82(1), 213-231. doi:10.1007/s10551-007-9572-4
Patton, B. (2005). Negotiation. In M.L. Moffitt & R.C. Bordone (Eds.), The handbook of dispute resolution (pp. 279-303). San Francisco, CA: Jossey-Bass.
Santana, A. (2011). Three elements of stakeholder legitimacy. Journal of Business Ethics, 105(2), 257–265.
Local 190 is in an awkward position as a result of the proposal and implementation of the wage reduction strategy in 1983 by the Deloitte plant of Adam Baxter Company. This is due to the poor economic situation of the industry in which the firm is operating. Since the late 1970s and early 1980s, rival firms in the same industry have experienced losses with some reducing the wages of their employees and others winding down. Despite these trends, the Deloitte plant operations within the industry are phenomenal as a result of its increased production, sales, and profitability. It is as a result of this fact that Local 190 believes that the firm should actually be looking into the possibility of raising and not reducing the wages of its employees.
Given the prevailing relationship between the company, the trade union, and the employees, there are several factors that might determine the outcome of this negotiation for better or for worse. First, the firm can give in to the trade union’s demands of raising basic wages earned, introduce an incentive program to boost the morale of employees, reduce the production rate by 80% as a means of reducing injury at the workplace, and most importantly, improve the overall training offered to employees before commencing and during their work tenure at the firm.
These considerations will not only improve the productivity of the employees but will also reduce the firm’s operational costs, which will, in turn, enhance the profitability and sustainability of the firm in the short and long term.
On the other hand, the firm can choose not to meet the demands of the trade union. In this respect, they will have the option of firing and replacing all the employees after the expiration of the contract. However, this move will trigger a strike from the current employees. This will negatively affect the operations of the firm. Secondly, this approach will also increase the operating costs of the firm since it will have to incur additional expenses in the process of advertising, hiring, and recruiting new employees. Finally, the productivity of the firm will be reduced since new employees will require time to adjust to new working conditions to meet the current production targets.
Mistakes Made and Best Moves by Each Side
Adam Baxter and Local 190 have both made several mistakes in the course of these negotiations. The biggest mistake made by Adam Baxter was to totally ignore the grievances raised by its employees that have been presented to them through their trade union with regards to the wage reduction proposal in 1983. It thus became clear that the firm had no intentions of raising the wages of its employees, especially after critically analyzing its move of encouraging veteran employees to retire and, in the process, hire rookie employees who are not covered by the escrow account, hence reducing the firm’s expenditure on wages.
Furthermore, the firm has also threatened to terminate the contract if no consensus is arrived at, a move that threatens the job security of all employees since the 52-week lay-off notice will not be effective. This further increases the tension between the firm and its employees and encourages the possibility of a strike.
Local 190, on the other hand, did not rigorously analyze the 1978 contract, hence the development of the current situation. Local 190 should have critically analyzed every term and condition of the contract, especially with regards to the wage increment and reduction clause. It would have been wise for the union to have presented other factors that could have been used to consider the terms of increasing and reducing wages, such as the profitability of the firm. This move would have ensured that despite the poor economic performance of the industry, the Deloitte plant employees would have been enjoying a wage increment other than a cut.
The best move made by both sides was to abide by the terms and stipulations of the 1978 contract. This was important as it eliminated the possibility of a strike prior to the expiration of the contract. In the process, the firm’s operations have been improved, and employees’ job security has been guaranteed in the entire period.
Different Outcomes
Positive outcomes would have been achieved if the 1978 contract was drafted in a manner that protected the best interest of both the employer and the employee. This contract should have thus considered enhancing factors such as working conditions, incentives, production targets, calculation of wage rates, and, most importantly, dispute resolution mechanisms. These are critical considerations as they aim at enhancing the relationship between a firm and its employees, resulting in the short and long term sustainability (Bowen, 2013).
Recommendations to Improve the Overall Outcome
Given the fact that the firm is operating efficiently and profitably, there are high chances that the firm could have changed for the better. This can, however, be achieved if the following recommendations are achieved. The union should advocate for a sit-down strike instead of the traditional outside strike and take the plant hostage to deter any production activities. This approach will reduce the possibility of the employer hiring a new workforce or relocating the production plant, hence leaving them with no option but to agree to negotiations for a new contract that will be fair to all.
Reference
Bowen, H.R. (2013). Social responsibilities of the businessman. Iowa City, Iowa: University of Iowa Press.
Heated business disputes demand thorough negotiation since it is vital to reach a specific goal and receive benefits. As seen from the case study, Local 190 was in an uncomfortable position as a result of the proposal and implementation of a wage reduction strategy in 1983 by the Deloitte plant of Adam Baxter’s Company (ABC). This occurred because of the poor economic condition of the industry in which the firm operates. Hence my team decided we need to change the situation, and our goal was to make a deal with Baxter’s company. Since the late 1970s and early 1980s, competing firms in the same industry have suffered losses, with some cutting their employees’ wages and others ceasing operations. Therefore, we wanted to ensure that these issues are covered during the negotiation.
Provided we knew the case and the union’s position, we were prepared to negotiate the deal. As a result, our team was ready to give evidence on each matter throughout all the rounds. In addition, active listening was our main tactic; since we intended to make a deal with Baxter’s company, it was indispensable to listen to their terms. Some of the strategies we learned from the course material worked well. For example, several of our strategies, which are mostly taken from the class lectures, manuals, and articles, including low level, evasion, use of silence, good cop-bad cop, and taking one’s time, really helped us encourage our colleagues to make their information public, convince them, and achieve a favorable outcome (Steers & Osland, 2019).
The offering was amongst our best strategies because it could provide the opposing side with numerous options they did not consider before the debates. Finally, and most importantly, there was a trustful bond between the two parties, which helped reach an agreement (Steers & Osland, 2019). Especially, because the first round started with a high level of trust, the rest of the rounds went quite smooth.
The strategies and tactics used in the course of all three rounds were quite efficient since the agreement was entirely satisfactory for both parties. I think our team was confident about each piece of evidence used to reach a compromise. Given the high level of trust used as the primary strategy in the first round, we had to stick with it, as it was slightly undermined over the following rounds. Because of the mutual interest that appeared at the beginning, I can state the first round was successful. Although, the second round had sort of a distributive nature since it pivotally concerned the establishment of the wage. Therefore, it was complex to base it upon a proper level of trust. Hence, in this round, we should have been more compromising to receive more benefits. In this round, we had a defensive position since we had to protect the Me-Too-Clause because the management team used it to reduce workers’ wages. Therefore, we started negotiating powers and rights instead of focusing on the issues.
The third round showed that by putting the barbed wires across Baxter’s factory, we lost mutual trust and tried to pretend we were genuinely interested in their offers. Yet, we had to avoid discussing the solution to some problems to re-establish interest to benefit the employees and raise their wages. As a result, we implemented a collaborative approach and weight all the advantages and disadvantages that contribute to the decision-making. I think our team should have focused on mutual interests rather than powers in the final round.
The power distribution was unequal between the two teams. During negotiation, ABC was more potent regarding each issue, including employee layoff, increase in wages, and moving the plant. The main factor conditioning the lack of power for Local 190 was that the plant could still exist without their control. In our negotiation, we tried to convince ABC to compromise our interests while they were claiming their own. It is evident that ABC’s best alternative to a negotiated agreement (BATNA) was more effective than ours; hence, the opponents’ control was unavoidable. It also should be noted that in the actual negotiation, Local 190 was not supported by the larger unions, which caused a reduction in their power. Therefore, in our simulated negotiation, power played a significant role in reaching an agreement. We had to concede to receive benefits.
As far as it concerns reading the opposing group, I think we did not have any difficulties; yet, there were moments of slight misconceptions. I think at first we had a mutual interest in each other’s plans and goals which let us get on well. Yet, when our bond was slightly undermined, it was complicated to reconnect to fulfill the set objective. To my mind, the opponents were generally happy with the outcomes because they utterly reached their goals. In addition, I think they were content with the fact that our team conceded at some point, and they could take advantage of it. Nevertheless, I consider the outcomes of the negotiations to be successful because we received what we claimed even though there were complications in solving specific issues such as plant and employee moving. However, I suppose we could have argued more to receive additional benefits from ABC.
In my opinion, dyadic negotiation brings out a lot more questions for further discussion, which typically creates more complexities in the decision-making process. Besides, dyadic communication has a shade of personal context because its primary goal is to share views and build a relationship; therefore, it sometimes dismisses the professional context targeted at goal fulfillment. When two or more people are in the group, it is advantageous in a way that it allows for considering different perspectives on the issue and finding the most appropriate. Even though we encountered numerous inconsistencies during these negotiations, I think it was more efficient in terms of solving the problem and reaching an agreement because the dyadic approach presumes carrying out a subjective opinion. What is more, I believe it is easier to find a strategy for one opposing team instead of trying to do it for one person. In general, group negotiations are better in terms of solving a set of business issues rather than focusing on a particular problem.
Our team’s primary challenge was the error that we made when negotiating the wages in the second round. We tried to claim as much value as possible, but we had to back down because ABC had much power. Hence, our team lost control over the situation and had to diminish the demands. We were also on the verge of launching a strike but realized it would not be worth it. I think we overestimated our abilities at this point since we could lose a big deal with Baxter’s company. This is called overconfidence, which has been implemented by threatening a strike, which will only do more harm to our side, as the union members will suffer. In addition, ABC did want to comply with Local 190’s requirements which was a challenge for our team. They also set relatively low wages, which contradicted our expectations. Besides, I believe the most challenging was to regain trust from ABC because we wanted an agreement.
I think the first round created a solid ground for the following ones since we managed to establish mutual trust with the ABC representatives. The first negotiation was based upon a common interest, which partially influenced the next rounds; yet, it has also caused controversies. The cornerstone of power distribution was wage bargaining. In the second round, ABC could have decided not to comply with the requirements of the union. Therefore, this also influenced the opportunity to dismiss and replace all employees after the contract’s expiration. These events caused Local 190 to trigger a strike which would affect further interrelations. This almost resulted in a negative impact on the company’s operations. Yet, we managed to find common ground and reached an agreement despite several obstacles in the third round.
Each team member contributed equally to the negotiation. I cannot say one person was better than the other since it was a group negotiation, and altogether we have achieved the set objectives. Notably, each team member was thoroughly prepared to provide specific evidence and respond to the opponents’ questions. I think the main factor that contributed to the success of the deal was our determination and willingness to negotiate despite numerous impediments. I guess at some point we were confused by the opposing group’s decisions. Yet, we managed to regain confidence in the final round and respond to their requests in a determinative manner instead of viewing them as a severe impediment. However, we could have been more confident when discussing the incentive pays and plant moving because we did not receive each benefit we claimed. In general, I can evaluate the level of our performance as decent as we reached almost every goal even though we had to concede at some points.
The opposing team was successful during each round due to their persistence. In the course of the first negotiations, they demonstrated a genuine interest in the worrying issues, which was appealing to our team since we intended to collaborate with them. What I also admired is the way they found the argument for each of our pieces of evidence presented during all rounds. The second round of negotiation was marked by their interest in taking control over wage raises. This made them influential over us within the following rounds. Moreover, I believe that their debating skills are excellent since most of the decisions made and the results obtained were due to their negotiating power. Overall, our opponents were powerful and competitive because they demonstrated a decent level of negotiation skills and strategies. I believe it would be interesting to negotiate some other business dealings with them and collaborate in I future.
Reference
Steers, R., & Osland, J. (2019). Management across cultures: Challenges, strategies, and skills. Cambridge University Press.
