Negotiating Across Cultures in Foreign Investments

Cross-cultural negotiations are a fact of life for the international manager, whether he is trying to get host government approval for a project, set up a local distribution system, acquire a local company, establish a joint venture, or start any other endeavor abroad. Indeed, it is not too much to say that the international manager needs to negotiate not only his own business affairs but his business environment as well. The ability to negotiate with foreigners in their own countries therefore is an indispensable skill of the.. international manager, a skill, moreover, that is becoming even more im­portant than in the past.

All business negotiations involve common interests (something to nego­tiate for) and conflicting interests (something to negotiate about). Negotia­tion therefore requires a clear understanding on both sides of their common and conflicting interests, coupled with a willingness to compromise their differences. A good negotiator finds out as much as he can about the other party, not only strengths and weaknesses but also how that party views the negotiations. Through such empathy, the negotiator is better able to antici­pate the offers and counteroffers of the other side and thereby to formulate a superior negotiating strategy. Gaining empathy is not always easy, even when negotiating with persons of one’s own culture, but it is child’s play compared to gaining empathy with foreigners. For to do so, the negotiator must be aware of the other side’s culture as well as his own; otherwise, no matter how hard he tries, he will fail to “put himself in the other fellow’s shoes.”¹⁸

International business negotiations break down through failures in cross-cultural communication even when both sides have much to gain from an agreement. Or an agreement is reached that turns out later to be only an apparent agreement, in which each side thought it understood the other side but did not. As should be evident by now, we are not speaking simply of failures in verbal communication but also—and more fundamen­tally—of failures by international managers to understand the local “lan­guage of agreements,” the way in which agreements are reached and the very meaning of agreement in the host culture.

1. Language of Agreements

Americans have a formal, legalistic approach to agreements, which is sym­bolized by the written contract. Indeed, Americans view the signing of the contract as marking the successful conclusion of negotiations and deserving a ceremonial recognition. According to Hall, however, the Greeks see the contract as a way station in the negotiations process, which will continue until the agreement’s implementation has come to an end.¹⁹ The point is that different cultures reveal different conceptions of what an agreement is and exhibit different negotiating styles.²⁰ To elaborate this point, the next section offers some observations on negotiating with the Japanese.

2. Negotiating with the Japanese

Because Japanese businessmen prefer face-to-face contacts, a personal call on a prospective business associate (based on an introduction) is generally more effective than trying to initiate contact through a letter.²¹ Between Japanese firms, the first contacts are ordinarily made at the top-executive levels: business cards are exchanged along with other formalities. The pur­pose of the meeting is to get acquainted, establish the broad interest of the calling party, and consider whether or not more substantive discussions are desirable. The traditional Japanese greeting is a bow, and the Japanese appreciate a slight bow by a foreigner, although they expect to use a handshake when dealing with foreign visitors. Japanese businessmen dress conservatively, and they seldom use first names in business relationships.

When an American or other Western company decides to go to Japan to negotiate a business agreement, it should prepare its representative or representatives with (1) a full explanation of what the company is willing to offer and what it wants to get and (2) a briefing on Japanese business etiquette and behavior and, if there is time, on Japanese culture in general, as well as on the economic and political situation in Japan. It should also give its negotiating team much more time in Japan to reach an agreement than it would take back home.

The Japanese go to extraordinary lengths to create an atmosphere of utmost cordiality for business transactions. The foreign visitors may be taken through several rounds of entertainment before negotiations start, and during negotiations green tea is likely to be served every hour or so along with dinners in the evening.

While the American negotiator is inclined to press for explicit agree­ment on specific issues, the Japanese prefers to feel out the other party and become rather certain of the other side’s position before putting forward a proposal which he believes both sides can agree on. To the American, the Japanese seems to have all the time in the world and be somewhat reluctant to get down to business. Patience not only is a virtue in Japan (as in most other Asian countries); it can also be used as a negotiating ploy, particu­larly with the impatient Americans. Americans often reveal their bargaining position before they start to bargain, and they may make ill-considered concessions just to keep negotiations moving along. The American negotia­tor, therefore, is well advised to say as little as possible and steadily pursue his objectives in a relaxed, friendly manner.

A common source of confusion in negotiating with Japanese is the meaning of “yes.” To a Japanese, “yes” may simply mean that he has understood, not that he agreed. The Japanese “yes” can be correctly inter­preted only by someone who is contexted in the Japanese culture. If the Japanese “yes” is ambiguous, the Japanese “no” is rarely expressed, be­cause the Japanese are reluctant to embarrass themselves or the other party.

Another problem is silence. Generally, Americans do not know how to respond to silence on the part of the Japanese for what is too long a time by American standards. They are apt to interpret a long silence on the other side (after they have made a statement or raised a question) as a rejection. Often Americans then give in on a point or say something unwise just to get the conversation going again. But what is happening on the other side is quite different. For one thing, the Japanese do not have the Western com­pulsion to talk, because they come from a listening culture. For another thing, the Japanese are unwilling to say anything until all members of the negotiating team (or possibly other company executives) agree or are will­ing to go along.

Because the Japanese dislike high-pressure tactics and prize sincerity, the American negotiator should present his proposal in stages in a modest way. This approach gives the Japanese plenty of opportunity to ask ques­tions and to feel that both sides are working together to establish the facts.²²

Negotiating with the Japanese is a lengthy exercise not only because of cultural gaps but also because the Japanese will not take a position until they have reached an internal agreement among a great many managers. But because of this consensus, the Japanese firm can move very quickly once an agreement is made. Since the Japanese value personal relationships, they prefer a broad agreement rather than a detailed contract, on the assumption that each party is willing to negotiate in good faith on any issues arising from the agreement’s implementation. Like the Greeks, the Japanese do not view the signing of a contract as the end of negotiations. Japanese firms want long-term, exclusive business relations based on katt, a word that can be translated as “emotional attunement.”

Source: Root Franklin R. (1998), Entry Strategies for International Markets, Jossey-Bass; 2nd edition.