In today’s increasingly globalised marketplace, cultural competence is a necessary attribute if business negotiators are to be effective. Ability to effectively negotiate with persons of different cultures is also critical for the development of inter-organizational relationships. With increasing globalization, the need for cultural competence is growing. This has led to a rise in interest in regard to how cultural factors affect organizations’ negotiation culture. The intention of this study is to attain better perspectives on cultural factors influencing negotiation process in intercultural business settings. To attain this objective a qualitative study has been conducted on the sales processes of Outokumpu and LKAB which are major players in the steel and iron ore industry. Data for the study was collected by means of focused interviews with two sales managers of the two companies. The study has brought to light evidence that there are several cultural factors, which greatly influence the negotiation process and as such should be taken into consideration in order to achieve successful cross-cultural negotiation. Ignoring these factors will have significant negative effects for the organization since it will negatively impact the negotiation process. It has also shown that in order to negotiate effectively it is important that two negotiating parties build a relationship. Lastly, the study has shown that culture greatly impacts the behavior of the negotiator, thus influencing the negotiation process.
Having the ability to negotiate in cross-cultural situations is an important aspect for enhancing organizational relationships. In a world which is increasingly globalised, the aspect of recognition of cultural differences is important for the success of any organization. Negotiation may be defined as a process through which two or more parties make effort to achieve an agreement in order to satisfy mutual interests (Wengrowski, 2004). While negotiation is an important aspect of organizations’ activities that happens all the time, it is differentiated by cultural differences in different countries. In order for negotiators to be effective, it is important that they are aware of the information they require about history, practices and customs, taboos and the concept of time. Negotiation skills, therefore, ought to be modified and adapted in accordance with the culture in which the negotiator is operating (Guibro & Herbig, 2006).
Culture has been said to be one of the aspects which differentiate the human being from the non human. Various definitions describe culture as communicable knowledge, while others deem it as the total sum of historical accomplishments, which are held dear by a certain society. The most suitable definition of culture is a system of integration, which enables the distinction of certain patterns of learned behavior of a given society. These include material artifacts, attitudes, feelings, and customs. In business negotiation distinction is made between high and low context cultures. Low context cultures usually express information clearly in their words as opposed to high context cultures, in which context plays an almost equally important role in the negotiation process (Fox, 2005). Culture is also defined in terms of individualistic and collectivist cultures. Individualistic cultures tend to focus on protection of self interests, independence, and self rule. Collective cultures, on the other hand, focus on relational harmony, interconnection, and protection of communal interests. Western cultures such as American, Australian, and European cultures tend to be more individualistic as opposed to East Asian, Latin American, and African cultures, which are deemed to be inclined towards collectivity. While every culture has its own dynamics and regulations which differentiate it from other cultures, there are aspects common to all cultures. All cultures have a common aspect of having three components: behavior, words, and material artifacts (Brett & Addair, 2005). Behavior offers feedback on feelings of people and techniques that are used in avoidance of confrontation. Words comprise diplomacy and politics, and material artifacts are a portrayal of power and status. Understanding and recognition of these three aspects of different cultures, therefore, offer a silent language, which the negotiator will find very useful in the negotiation process.
In many instances people conduct business in cross-cultural environments through reliance on instincts, which reduce the efficiency of negotiations. Since many aspects of business transactions and negotiations are done face to face, differences in language and culture present a major obstacle for effective negotiation if both parties are deficiently bicultural or bilingual. In order to negotiate effectively, it is of utmost importance that all parties have an understanding of each other’s culture.
This research is intended to identify cultural factors influencing negotiation processes in cross-cultural business situations and offer recommendations for improving this process.
What factors related to culture influence processes of negotiation in cross-cultural business situations.
Since culture and negotiations are complex subjects for analysis, this study will be limited to the sales aspect of cross-cultural negotiation.
Literature Review and Theoretical Propositions
There are several theoretical propositions which have been put forward to explain the instance of negotiation in cross-cultural situations. An important aspect to be taken into consideration is negotiation behavior. Negotiation strategies and the characterization of culture are broad matters, which make the process complex. This is because aspects of culture are expressed differently by different persons and in different situations (Lynn & Gelfland, 2010). A good example of this is the instance of confrontation. Negotiations in most instances involve direct speech between the two parties, but this may be indirect in some instances. For example, some confrontation over the quality of a consignment may be deemed rude in some cultures, yet a person may circumvent these through indirect means like asking if the goods are usually of that quality. Another aspect that may influence negotiation is the aspect of space, time, and communication. Communication depends on aspects of low and high context cultures, with Western cultures being low context, while Latino, African, and East Asian groups are deemed to be high context (Cai & Laura, 2010). Western cultures are deemed to have a tendency towards monochromic time, while other cultures are polychromic. Different cultures have different conceptions of space with Northern Europeans preferring larger personal space, as opposed to, for instance, Southern Europeans.
According to Wengrowski (2004), there are several key cultural considerations that a negotiator ought to take into consideration. These are aspects which the other party determines as normal and abnormal according to their cultural orientation. These considerations include: group or individual orientation, vertical or flat hierarchies, given or acquired status, personal or functional business relationships, communication, time, and physical proximity. Cultural awareness plays a great role in facilitating the success of negotiation, and as such the negotiator ought to be culturally aware of the given client’s country. Important aspects to be taken into consideration in cultural awareness are meeting rituals, language, local etiquette, perceptions of time, and assimilated information.
To answer the research question mentioned above, it is important to study key cultural factors that characterize various cultures, which influence the conduct of international cross-cultural negotiations. This study relies on the theories discussed in the literature review, which are deemed to be important in cross-cultural negotiations. There are several behaviors, which negotiators have to make use of in the negotiation process. Confrontation is usually direct interaction between parties, but in some instances it may be indirect. Motivation is a function of negotiator’s interest, which may take the form of self-interest, other party’s interest, or collective interest (Guibro & Herbig, 2006). Influence is the ability of the negotiator to influence the other party’s decision. Information is the prevalence of negotiation. In instances where there is lack of understanding of information transmitted by the other party, there is a deadlock.
According to Fox (2005) there exist three classes of underlying cultural variables with a possible effect on negotiations: communication (either direct or indirect), time (polychromic and monochromic time systems), and space (preferences of different cultures for personal space). Brett and Addair (2005) also put forward several do’s and don’ts that a negotiator has to take into account in cross-cultural negotiation situations. They concern touching, punctuality, eye contact, body language, deportment, eating, degree of formality, gift giving, greetings, emotions, and silence. In their study Lynn and Gelfland (2010) came up with seven criteria in reviewing negotiation that transformed the negotiation process into corporate capability. These criteria are: commitment, BATNA, communication, relationships, legitimacy, options, and interests. Another study came up with seven considerations, which were cultural differences, which were important in cross-cultural negotiations. These were group or individual orientation, given or acquired status, physical proximity, time, communication, personal or functional business relationships, and vertical or flat hierarchies. Last are the criteria of information assimilation, practices and customs, behavioral taboos, concept of time, and history.
This case study analyzes the influence of culture on cross-cultural negotiations. Since the issue of negotiation and its effectiveness is a function of people, the sample for this research study includes people involved in international negotiations in cross-cultural situations. In order to provide an answer for the above mentioned research question, it is important to determine a sample that is a source of persons for this study. It is important to select the most appropriate people that will serve as a sample in order to have a valid research. This study, therefore, focuses on the sales process in organizations operating in the iron ore and steel market in order to determine the effect of culture in intercultural negotiations. Additionally, workers from two different companies in this industry that are involved in the sales process are interviewed. This research is undertaken based on companies LKAB and Outokumpu, which are two largest companies in the industry that are headquartered in Sweden.
This study is undertaken through the means of qualitative research as its intended purpose is the analysis of the negotiation process through communicating with actual people involved in cross-cultural negotiation. Quantitative method cannot be used in this research study since it requires time, and hence would not be possible to complete due to the short time frame. Disadvantages and advantages of the method in use depend on the type of questions that the researcher intends to ask, focus on current happenings as opposed to historical data, and the degree of control that the researcher has over the behavior of respondents. In instances where the respondent asks why and how questions, the researcher has little control over respondent’s behavior, and the focus is on current happenings the case study is the best means of investigation (Cai & Laura, 2010). A case study is also appropriate when it is a researcher’s intention to increase the understanding of perspectives on certain aspects of phenomena. This study asks questions of what and why in order to find better perspectives on cultural factors influencing negotiation. Therefore, the case study method fits best.
In order to effectively answer the question of this research study, it is important to carefully select a means of data collection. There are six data collection methods normally used in case study research. These are direct observation, archival records, participant observation, interviews, and physical artifacts. Guided interviews are the best means for acquiring information since they are structured like conversations, hence they are more consistent. This study also uses the focused interview method. Interviews last approximately one hour with each respondent and adhere to a set of questions previously determined.
There are several methods of analysis available for the case study, however, there is a need to chose a method that is suitable for the kind of data being analyzed. There are five common techniques for case study data analysis: cross care synthesis, pattern matching, logic models, explanation building, and time series analysis. Pattern matching means of data analysis are used for this case study, which allows to compare data collected with the question put forward above. Additionally, this study uses a within-case analysis, which compares collected information from current study with the theory. This is different for cross-case analysis, which makes comparison of data between cases.
Confrontation. Conceptual definition: State of conflict between two parties.
Operational definition: Negotiations are usually face-to-face interactions between two parties, even though messages may be indirect in some instances.
Data analysis is usually composed of examination, classification, tabulation, testing, and taking into account qualitative and quantitative evidence, which are compared with proposed hypothesis. Five methods for data analysis in a case study are thus pattern matching, explanation building, time series analysis, logic models, and cross case synthesis. These methods may be used in instances of multiple or single case design. Pattern matching involves comparison of an empirically based pattern with a predicted one. Explanation building involves a variety of pattern matching and is more complex, thereby requiring special attention. The objective of explanation building is the analysis of case study data through making explanations about the case study. Time-series analysis makes a times-series analysis that is particularly similar to that performed in experiments and quasi-experiments. Logic models call for a complicated chain of occurrences over time. These happenings are done in a cause-effect manner, thereby leading to a situation of interchange of the independent and dependent variable over time. Finally, cross case synthesis focuses mainly on the analysis of multiple cases.
Data analysis for this case study is undertaken using the pattern matching method, which makes a comparison of case study findings with theoretical propositions outlined previously. There are four tests which are normally utilized in the assessment of quality of empirical research. These tests are construct validity, internal validity, external validity, and reliability tests. Construct validity entails coming up with correct procedural measures to gather data about the aspects being investigated. Internal validity entails the formation of causal relationships through which particular conditions may be determined to result to other conditions as opposed to false relationships. External validity entails the extent to which the findings of the investigation may be generalized. Reliability of the study is proved when the same conclusions may be drawn from the data if the study is to be repeated on the same sample (Wengrowski, 2004).
This study involves interviewing participants from two companies instead of one in order to enhance validity and reliability. These to measures are enhanced since the data is correlated in order to come up with realistic estimates. Validity and reliability of this study are enhanced through the use of note taking and use of a tape recorder during interviews in order to capture everything said. The use of face-to-face interviews generally facilitates a better understanding of responses through analysis of facial expressions and body language.
Nevertheless, while it was planned that interviews would be conducted in a face-to-face manner, schedules of respondents could not accommodate the meeting. Therefore, telephone interviews were conducted instead. Phone interviews were easy to carry out and allowed for flexibility even though the element of person-to-person contact was degraded.
Guibro and Herbig (2006) outline a range of behaviors such as confrontations, information strategies, influence, and motivation, which influence cross-cultural negotiation. The first respondent agreed that knowledge about issues of confrontation of cultural practices was important in negotiations since it influenced communication opinions and requests. Fox (2005) asserted that communication time and space were important aspects in cross-cultural international negotiation process. The second respondent agreed that some cultures put a lot of emphasis on communication, time, and space, while other people in countries such as Turkey and Spain did not put as much emphasis on them. Brett and Addair (2005) emphasize punctuality, degree of formality, deportment, greetings, touching, eye contact, eating, body language, emotions, and silence as important aspects in cross cultural negotiation. Both respondents agreed that these aspects played an important role in enhancing cross-cultural negotiation. Since this was a global industry, both respondents agreed that differences in culture made understanding and recognition of these aspects crucial in negotiation.
Lynn and Gelfland (2010) assert that negotiation ought to be turned into an opportunity for the development of corporate capacity. Both respondents agreed that the negotiation process ought to be used as a tool for evaluating themselves in areas, in which they had done well and in areas, in which improvement was required. Fox (2005) outlines seven considerations to be taken into account during international cross cultural negotiations. Both respondents agreed with this, though to different extent. The first respondent asserted that he negotiated with a view to benefit the company and also the other party in the negotiation. Wengrowski (2004) described culture as an important aspect of cross-cultural negotiation on the basis of information assimilation, customs and practices, concept of time, taboos, and history. The second respondent agreed that the concept of time could be particularly problematic in instances involving people of different cultures, who are not bilingual or bicultural.
Implications for Theory
This study intended to gain better perspectives of how cultural factors influence the negotiation process in cross-cultural situations. The study has demonstrated that there exist several cultural factors, which affect the negotiation process, and hence they ought to be taken into consideration in cross-cultural negotiation process. If these factors are not taken into consideration during cross-cultural business negotiation, this will result in a situation where negotiation capacity of negotiators will be severely impaired. This is because these factors play an important role in the creation of rapport among negotiating parties.
Implications for Practitioners
Practitioners ought to be aware that lack of consideration of crosses-cultural factors negatively impacts the negotiation process. Findings of this study show that in order to have effective negotiation in cross-cultural situations, a good relationship between the negotiating parties should be established. Long-term relationships usually make the negotiation processes more effective, since cultural knowledge assimilation has been developed by both groups. It is thus important to build upon past negotiation meetings in order to learn from negatives and positives, which may act as a guideline for future successful negotiations.
Implications for Further Research
The impact of culture on negotiation process is a complex field, which is yet to be fully investigated. Areas that could benefit from further research include an analysis of the impact of cultural factors on negotiations in instances of new or existing customers or in instances of joint venture transactions. Another suggestion would be to perform an analysis of cultural influence on negotiation in organizations which operate in different lines of business since this research was based on companies operating in one line of business.