The influence of cultural differences on international business

negotiation.

English Name: Aimira Chinese Name: 艾美

Major: BUSINESS MAJOR 2018 Passport No. N10648788

Introduction

International business negotiations (IBN) play a fundamental and critical role in

just about every aspect of conducting business in today’s global economy”. With
increasing integration of globalization and the rapid development of international
trade, international business negotiation has become an indispensable part of
commercial activity. Metcalf, Bird, Peterson Shankarmahesh and Lituchy point out
that “business negotiation involves two or more distinct entities with various
cultural backgrounds” . Research from Graham (1985), Foster (1992), Li and
Zhang (2004), and Bülow and Kumar (2011) demonstrates that cultural difference
largely impacts the success of international business negotiations.

How Cultural Differences Impact International Business Negotiations.

Culture is complex, multiple and hard to understand. However, culture is always

present in international business negotiations and can include a variety of cultural
factors. According to Baack, Harris and Baack, “culture represents the beliefs,
customs and attitudes of a distinct group of people; the term culture can be applied
to a nation, a region, a city, or single business”. Cultures and negotiations are
interlinked and can supplement and limit each other. Thus, cultural difference
plays a crucial role in impacting international business negotiations. In order to
function in international business negotiations, negotiators should understand the
essence of cultural differences and figure out how cultural differences affect
international business negotiations.
 Concepts of Values

Cultural difference is manifested in values difference and is challenging to

navigate in international business negotiations. The influence of values differences
on international business negotiations are mainly seen through misunderstanding
and disgust due to differences in the concept of objectivity, equality and time.

In terms of objectivity, international business negotiation reflects behavior on the

level of distinction between people and things. Westerners, especially Americans,
have strong feelings for objectivity. For example, Americans tend not to practice
favoritism, find importance in economic performance, rather than individuals, and
believe that business is business. They do not rely on Guangxi (relations) when
doing business. Guanxi describes the basic dynamic in personalized networks of
influence, and is a central idea in Chinese society. Americans emphasize separating
people from things during international business negotiations. They pay much
attention to the substantive issues. In contrast, in some Eastern countries, like
China, “Guanxi is the foundation of Chinese business negotiation”. Separating
people from issues is perceived as impossible. Businessmen and businesswomen
use nepotism as a tool to get something beneficial in negotiations, and the outcome
of negotiations tends to affect more than the individual.

In international business activities, Britain and the U.S. pursue egalitarian values
and adhere to fair and reasonable principles . They hold to the ideal that two sides
traded, regardless of which party should be profitable. In way of introduction,
Western businessmen and businesswomen like to convince with real data.
Although Americans emphasize practical interests, they generally do not make
exorbitant demands, and the conditions and quotes they provide are comparatively
objective. Within the trading relationship, the sellers from the United States regard
the buyers as equal and the division of profits is comparatively equal. Many
American businessmen and businesswomen believe that fairness of the division of
profit is more important than how much profit they receive. Easterners are deeply
affected by hierarchy, so the sense of equality performed in commercial activities
is not the same as with Americans. For example, the Japanese are able to make a
big cake, but the approach of dividing the cake is not fair.

When it comes to the concept of time, different cultural backgrounds exhibit

different concepts of time. North American people have a strong sense of
managing time, and they hold the idea that time is money; in contrast, people in the
Middle East and Latin America have a weak sense of the concept of time. In their
view, time should be enjoyed. Edward Hall divides the concept of time into two
categories: the linear concept of time and the cyclic concept of time. The former,
including people from North America, Switzerland and Germany, emphasize doing
more than one task in one block of time. In contrast, people from the Middle East
and Latin America have relaxed schedules and deferred information feedback.
Different concepts of time result in different negotiating styles. The United States
has a linear concept of time. Americans have a strong sense of competition, and
they pursue speed and efficiency. They try to shorten time in every link of
negotiations and strive for a quick-fix. Chinese people’s concept of time is
cyclical. The Chinese people will use the method of long-term vision and
systematically and comprehensively analyze and evaluate issues and topics in a
wide range. Differences in concepts of objectivity, equality and time prove that
values differences greatly influence international business negotiations, and
figuring out how to eliminate these effects is difficult for negotiators.

Manners and Customs

Manners and customs refer to individual and collective traditional customs,

fashion, manners, and habits. It is a kind of behavioral pattern observed in a
specific socio-cultural area for a long time. Custom is formed from history, so it
has a very strong social behavioral effect on its members. Custom is the foundation
and complementary part of social morality and law, including national customs,
holiday customs and traditional etiquette. Each country has its own customs and
etiquette, which are not easily changed. In the United States when friends or
relatives meet each other, they often give a hug and kiss to each other. It is a
custom for Americans, but this scene rarely happens in China. International
business negotiations are often interspersed with some social activities, for
example, tea meeting, coffee meeting or business dinner. These events are greatly
influenced by cultural factors. Germans, for example, are often dress in suits and
display courtesy, and they never put their hands in their pockets because they think
this action is crude. The French have a special preference for art, history, and food.
When negotiating with them, having working lunch and going sightseeing are good
ways to relax the intense atmosphere and enhance mutual friendship. Nevertheless,
negotiators must not mention working when eating and touring. The Finnish show
special preference to steam baths because they see steam baths as an important
etiquette. When a business partner comes to their land, they will invite their
partners to have a steam bath to show hospitality; of course, guests cannot refuse
their invitation. The Australians always hold business activities in taverns, and
they feel casual and intimate in taverns. During negotiations in Australia,
negotiators should pay attention and remember which meal they should pay for.
South Americans have only eyes for dark suits and small gifts. Middle East
businessmen regard friendship as supreme and treat time with indifference. Nordic
and Americans have a strong sense of distance, and guests are even left waiting at
the door, which is normal within their culture. When doing business in some
regions, like within Latin America, putting a daisy on a negotiation table is taboo.
Thus, the customs, rituals, and habits in business negotiations play a crucial role in
international business negotiations. To sum up, in international business
negotiations, negotiators have to have a clear understanding of the partner
country’s customs, rituals, and negotiating habits. Understanding their preferences,
so as to leave a good impression, and knowing their taboos, and avoiding them in
order to keep negotiations going smooth, is significant. All in all, manners and
customs impact negotiators’ behaviors in international business negotiations.

Ways of Thinking

According to Hendon, Hendon and Herbig , “thinking patterns refer to forms of

reasoning and approaches to problem solution. Thinking patterns differ from
culture to culture; a logical, reasonable argument in one culture may be considered
as illogical and un-demonstrated in other culture”. Negotiators have different ways
of thinking, thus they have different thinking modes for negotiating. Thinking
differences are mainly reflected in two ways, inductive thinking and deductive
thinking. Inductive thinking focuses on an individual way of thinking, and this
kind of mode divides complex things into simple elements, and then solves every
simple element individually. Deductive thinking stresses holistic thinking, and it is
in accordance with the overall point of view to observe and think about things in
the world. Asians prefer imaginal thinking, and the Anglo-Americans have a
preference for abstract thinking. Asian cultural preference is comprehensive
thinking, and Anglo-American cultural preference is analytic thinking. Asian
culture focuses on unity while the Anglo-American culture emphasizes
confrontation. Based on the objective existence of differences in thinking,
negotiators from different cultures exhibit differences in decision-making, so the
conflict between a sequential decision-making method and a holistic decision-
making method is formed. When facing a complex negotiating mandate, western
negotiators, especially British and American negotiators, adopt a sequential
decision-making process. They usually break a large issue into small pieces, such
as segmenting price, delivery, warranty and service contracts into individual
issues, and every process solves one problem. There are concessions and
commitments from the start to the end, and the final agreement is the sum of a
series of small agreements. However, the overall decision-making process which
Asians adopt emphasizes discussing all the issues together. There is no apparent
order to the points, and usually in the end commitment and concessions will be
made on all the issues and finally reach a package agreement on negotiations. As a
result, different ways of thinking have a direct impact on the negotiation process
and outcomes.

Negotiation and Bargaining Styles

Because of different cultural backgrounds, negotiators from different countries

and regions have different negotiating styles. Generally, negotiation style is
divided into two types: horizontal and vertical negotiation styles. Horizontal
negotiation style is listing all topics to be discussed, then discussing them at the
same time and gaining ground together. Vertical negotiation style refers to
confirming all issues to be covered, then discussing issue by issue. In international
business negotiations, the American negotiators are representatives of vertical
negotiation style. Japanese negotiators mainly apply the horizontal negotiation
style. They prefer to draw a contour for the question, and then determine every
aspect in a certain issue, finally reaching an agreement. This is opposite to the
American negotiation style, and represents their character. The American scholar
Prestwich has conducted a mock international business negotiation between
Japanese and American students. During the preparation period, the Japanese team
did not consider how to convince their partner, instead; they focused on how to
defend. In negotiations, Japanese kept silent and remained defensive. The U.S.
team starkly showed a strong desire to win, and were eager to take the initiative to
talk . When every negotiator comes to the negotiating table, they are coming with a
deep imprint of their own cultures. The negotiation style in a negotiation process
not only reflects negotiators’ personalities but also their behaviors. Most
importantly, negotiation style affects the relationship of both parties, the whole
negotiation process, and the outcomes.

Handling and Reducing Cultural Differences

The manifestations of cultural differences are displayed in four aspects: concepts

of values, manners and customs, ways of thinking, and negotiation styles. What is
mentioned above demonstrates that every aspect of cultural difference influences
international business negotiations. If negotiators ignore cultural differences, it will
bring some risks and trouble to the process and outcome of international business
negotiations. Thus, an effective way to handle and reduce cultural differences in
negotiations is crucial. Negotiations generally include four stages: the first is
pleasantries, during this stage talking about some unrelated topic with work; the
second is negotiating; the third is to make concessions; and the last one is to reach
a final agreement. Prior to the formal business negotiation, negotiators generally
have an expectation for the business negotiation process. This expectation always
influences the control of the negotiation process and the choice of negotiation
strategy. Therefore, if negotiators want to make negotiation successful in
international business negotiations, effective ways of handling and reducing
cultural differences are necessary.

Flexible and Appropriate Pleasantries

Before beginning negotiations, talking about something unrelated to negotiations

and offering warm greetings is a good way to leave a good impression for the
partner party. During this stage, pleasantries could include topics such as, how was
the flight, how long did it take, are you adapted to living here, if you need
something do not hesitate to speak out, and so on. Also, a greeting is an effective
way to know the partner party’s background and interests, and it provides
important clues for the selection of appropriate follow-up communication and
negotiation styles. Therefore, a flexible and appropriate greeting is vital to a good
start.

Being Well-Prepared

Before international business negotiations, negotiators should be familiar with the

partner party’s cultural norms, customs, social values, and national conditions, so
as to neither cause unpleasantness or misunderstanding, nor affect the progress and
outcome of the negotiations. Negotiators cannot only know the surface, but also
have an extensive understanding of the other culture. A British businessman found
an ideal Chinese enterprise through long-term market research. In order to
establish a good business relationship to the enterprise, he decided to conduct a
tour and visit this enterprise. He heard that sending a gift could express sincerity
before negotiating. He originally wanted to buy a bottle of liquor, but feared
Chinese people would think he was a drunkard; he wanted to buy a high-tech
product, but was afraid it was impersonal. He remembered that in Guangdong
Province nearly every local restaurant he saw featured a Buddha. He thought that
maybe all Chinese people held a belief in Buddhism, so he bought a package of
joss-sticks and candles for his Chinese partner. A package of joss-sticks and
candles is used to worship dead people in Chinese custom, and it is a taboo for
Chinese. As a result, he missed the chance of negotiation and lost business because
of a package of joss-sticks and candles. This story proves that before negotiating,
negotiators should have a deep understanding of the other side’s culture and do
extensive preparation for the partner party’s cultural norms, customs and social
values. This preparation definitely determines the success of a negotiation and of a
future business relationship.

Establishing Cross-Cultural Awareness

When two parties are negotiating, building cross-cultural awareness is

fundamental. The so-called cross-cultural exchange refers to when “the
participants not only rely on their own codes, habits, attitudes and behaviors, but
also understand and experience other’s codes, habits, attitudes, and behaviors”.
Understanding and experiencing the other’s codes, habits, attitudes, and behaviors
is considered to be strange and novel. Therefore, intercultural communication
includes all the features of self and strange novelty. It also refers to “relations
across system boundaries to experience all relationships between people”. In
simple words, intercultural communication refers to how people from different
cultural backgrounds are involved and perform in mutual communication. Building
and strengthening cross-cultural awareness is necessary in international business
negotiations. Of course, realizing cultural differences does not necessarily mean
that one is able to easily overcome one’s influences, but at least it will provide an
opportunity to overcome obstacles in order to avoid mistakes in international
business negotiations because of cultural differences caused by ignorance. Under
the correct guidance, negotiators should be flexible so that their negotiation styles
and strategies can adapt to different cultures and easily understand the partner
party’s motivation and purpose. Overcoming Communication Barriers After
knowing the partner party’s motivation and purpose, barrier-free communication is
also a priority. Language is the most important communication tool between
countries, and it is also a tool for cross-cultural communication. Sometimes, if two
sides cannot understand each other’s language, it is impossible for such a cross-
cultural exchange. “English language probably is the most common business
language”. English is normally used in international business negotiations, if
neither side’s mother language is English, they should try to use simple, clear and
concise English, and do not use polysemy, puns, slang, idioms, which can lead to
misunderstandings. Also, do not use words which are distasteful. In international
business negotiations, one party cannot subjectively believe that the other party
will be in accordance with their wishes and their habits to understand their speech.
The most typical example is the use and understanding of yes and no. Yes means I
understand or I’ll think about it. The expression of no is also very complicated.
Some cultural values oppose confrontation, so people generally do not directly say
no; instead they use some vague phrases to express refusal. For example,
Brazilians use “somewhat difficult” instead of “impossible”. When selecting
translators, businessmen must be careful. International Business English translators
must pay particular attention to cultural differences between different countries,
and try to make these differences disappear in the interpretation process,
simultaneously reproduced in the target language. Eliminating Bias In international
business negotiations, negotiators are often used to self-reference and want to
interpret and judge all other groups’ behaviors based on their own cultural
personality and values, which results in bias from different cultures. Finally, it
results in cultural conflict. In international business negotiations, eliminating
prejudice will be beneficial to successful negotiation. Negotiators cannot impose
their own culture on other countries, nor can they use their country’s culture to
measure other people’s cultures. Even if they do not adhere to principles, then they
may not win favor. When in international business negotiations, it is significant to
rationally deal with the obstacles caused by cultural differences. Conclusion
International business negotiation and culture are inseparable: international
business negotiation is a process of communication; culture is a catalyst for the
process of communication. Different countries have different cultures, and then
cultural differences are formed. The different languages, concepts of values,
manners and customs, ways of thinking, communication and negotiation styles are
the most obvious categories in cultural differences. Kennedy says: “negotiators
with different cultures have different negotiation styles, and negotiators are almost
completely defined by the negotiation content and methods in the negotiations
which the members of this community participant in”. Due to the way cultural
differences exist objectively, the strategies to understand, treat, master, and solve
these cultural differences become extremely necessary. International business
negotiators have to be aware of the impact of cultural differences on the
negotiations, recognize that different negotiators have differences in the way of
thinking and negotiation and bargaining styles; they must also recognize that
negotiators with different cultures have different understandings for the same
thing, a same sentence, and a same action. Conversely, culture differences can
easily lead to misunderstandings in two parties, and they become negotiation
obstacles. At last, cultural differences can make the negotiation fail which should
have been successful.
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