Globalization and Cultural Diversity in International Business Negotiations - Essay Example

Globalization and Cultural Diversity in International Business Negotiations” Sam Khoshgoo Supervisor: Dr. Paul Dobson “This dissertation is submitted as part of the requirements for the award the MSc in Management.” Month and year of submission: July 2010 ACKNOWLEDGEMENTS I would like to thank my supervisor, Dr. Paul Dobson, for his valuable insight, continuous support and guidance as well as Cass Business School for overseeing this project to fruition. Also I will be forever grateful to my family, who encouraged and supported me throughout this process. Special gratitude goes out to my best friend Amirali Afzali who was my moral support during this whole year. Thank you all for making this project possible. I shall always be most grateful. Executive Summary: An extensive literature was carried out in relation to the content and definition of culture and its correlated direct and indirect influential drives, by looking at history, morality, cultural differences, group norms, cultures and values. The survey explores the impact of cultural differences on business negotiations between different countries, and defines culture’s various dimensions which lead to those distinctive impacts. It will assess how businesses deal with the problems posed by a multi-cultured environment, and the ways in which problems are overcome. Overall, an analysis of the various dimensions of cultural clashes and contradictions will be acknowledged. After a definitional look at globalization and the extent to which its importance has grown in the world of business, its impact on multi-cultural negotiations will briefly be assessed. Whether the business world has managed to eradicate problems created by multi-cultural business activities and how it achieves these eradications will be evaluated through examination and an example interview. Abstract This dissertation focuses on the effect of cultural differences on business negotiations, and how businesses from different cultural backgrounds seek to bridge the gaps between their cultures during business negotiations. The paper explores exactly what is meant by the term ‘culture’ and how its different facets may be measured. Then, I review intercultural communication and cultural exchange; in addition, I talk about the impact of globalization on intercultural communication. Business negotiation is under discussion; I examine the impact of culture on international business negotiations and how to analyze a negotiation process. The main problems posed by cultural differences will be ascertained from the research and discussion, and how businesses overcome these differences will be examined through an example interview (German/Italian cultural differences). The interview will involve an analysis of the cultural differences between Germans and Italians, and how the interviewed businesses overcome the differences in order to participate in successful negotiations. Table of Contents 1. INTRODUCTION…………………………………………………………………… 2. OBJECTIVES AND METHOD…………………………………………………….. 3. CULTURE…………………………………………………………………………... 3.1 Definitions of Culture………………………………………………………. 3.2 Components of Culture……………………………………………………… 3.3 Cultural Difference………………………………………………………….. 3.4 Cultural Dimensions…………………………………………………………. 4. INTERCULTURAL COMMUNICATION…………………………………………... 4.1 Intercultural Communication………………………………………………… 4.2 Intercultural Business Negotiation…………………………………………… 4.3 Impact of Culture on International Business Negotiation…………………… 4.3.1 Analyzing Negotiation Process……………………………………. 4.3.2 Gaps in Cross Cultural Negotiation………………………………… 4.3.3 Background Factors…………………………………………………. 5. CROSS CULTURAL NEGOTIATION BEHAVIOR…………………………………. 5.1 Communication in Cross Cultural Negotiation………………………………. 5.2 Cultural Dissimilarity………………………………………………………… 5.2.1 Ethnocentricism and Stereotype……………………………………. 5.2.2 Impact of Individual Perceptions on Negotiation Results………….. 5.3 Culture and Negotiation………………………………………………………. 5.3.1 Influence of Culture on Negotiation……………………………….. 6. GLOBALIZATION…………………………………………………………………….. 6.1 Impact of Globalization on Intercultural Communication…………………….. 7. CASE STUDY………………………………………………………………………… 7.1 Cultural Differences Between Germany and Italy…………………………… 7.2 Cultural Differences and Potential Problems………………………………… 7.3 Interview with Bosch…………………………………………………………. 7.4 Interview with Fiat Group…………………………………………………….. 8. CONCLUSION………………………………………………………………………… 9. REFERENCES…………………………………………………………………………. 1. Introduction There has been a great deal of recent discussion as to whether barriers between different cultures have diminished (Nordström, 1991). It is suggested by such discussions that cultural integration has become focused and many researchers have put forward that the world, especially in the business community, is becoming more homogeneous (Vemon, 1979, Porter, 1980). But exactly how much ground can cultures of the world cover in conglomerating? Is there not a limit to how homogenous the world can become, especially in the business world? A number of researchers (Bartlett, 1986, Goshen and Nohria, 1989, Rosenzweig and Nohria, 1994) have pointed to the fact that units within multinational firms are not identical. According to Ghoshen and Nohria (1989, p. 323) a multinational corporation is a dispersed company with several different local subsidiaries made of different nationalities working in very heterogeneous environmental conditions. But do such corporations experience problems across their cultural borders, and if so, how do they tackle these problems? It could be said with some degree of certainty that cross-cultural businesses will encounter at least some hindrances, and it is how they function to overcome these differences which has become a major point of interest. But perhaps we are proceeding too swiftly; one must start at the beginning. Exactly what is meant by ‘culture’? What does it encompass? Culture is indeed a broad concept and proceeds on several levels, consists of many concepts and facets. Similarly, what is meant by globalization? Before we can proceed to analyze the impact of cultural differences in the business world, we must first arrive at an understanding as to what exactly culture and globalization is, and formulate a framework as to what aspects culture and globalization is comprised of. Only in this manner will these criteria be better applied to practical situations. Understanding cultural differences in business is crucial to ensure that cross-cultural partnerships are formed successfully and that businesses from different backgrounds may work together in a beneficial manner. To a large part, this involves the insurance that misunderstandings do not enter the realm of agreements and negotiations. Although globalization has to some extent been established, businesses still have difficulties due to differences in language, value systems and cultural backgrounds (Graham, Mintu, 1997). Indeed, “in such situations that people from different cultural backgrounds work together, misunderstandings are often happening” (Adler, 1986). Problems due to Cultural differences are thus of special interest in international firms, as they constantly attempt to formulate a way in which to function successfully on a global level. As Hofstede (1983) points out, cultural differences do matter, and differences in culture may become one of the most crucial problems, especially for managements in multinational and multicultural firms. Conflicts are also affected by cultural differences as individuals may have very different approaches to conflict resolution (Tömroos, 1993). Consequences of intercultural misunderstandings and conflicts in multicultural teams have a negative impact on teamwork, communication, morale and organizational performance in general (Milliman, Taylor & Czaplewski, 2001). The topic is certainly profound, and the potential for problems vast. Yet businesses have managed to function successfully amongst and with one another; a practice that is a necessity in today’s ever developing world. Exactly how they do so will prove an interesting analysis, and will help one to gain a deeper understanding as to the extent to which companies alter their practices to facilitate multi-cultural functions. 2. Objectives and Method The objective of this paper is to discover how companies employ methods of organizational culture when undertaking business negotiations in multicultural environments. The literature review will provide the background knowledge and basis upon which to proceed. It will seek to define the different types of culture, and the components involved in such a definition so that an analysis of exactly which components are the most important during multicultural business negotiations can be achieved. Multicultural business conditions will be analyzed and intercultural communication on an organizational cultural level, which will lead to the case study. The case study will be conducted with two different companies in the form of an interview, and will attempt to uncover the techniques used by negotiators during the negotiations process. Finally, an evaluation of the research will be the overall aim, in which the literature studied and the application of its components in practicality will be compared to discover if the former gathers any ground in aiding the latter. 3. Culture 3.1 Definition of Culture The term ‘culture’ encompasses a complex abstract concept that is difficult to define. The word comes from the Latin ‘cultura’, deriving from ‘colere’, which means ‘to cultivate’. Culture in general presents particular patterns of human activity as well as the symbolic values, histories and religions that effect such reactions, habits and behaviors. “Culture is learned and shared. In addition, culture is adaptive; human beings adopt with their natural and social environment” (Spradley and McCurdy, 1987, p.6). In early philosophy, the term ‘culture’ was equated in meaning to the opposite of ‘nature’; culture was seen as having been constructed, while nature was a given element in itself. In eighteenth century Europe, the term emerged in relation to the worth of products: an elitist view that defined ‘high-culture’ as refined products usually exclusive to the ruling class. With the increase in volume production following the Industrial Revolution, the nineteenth century gave rise to the notion of ‘mass culture’, which consisted of daily interactions and widespread practices among the majority of a populace pertaining to consumption, lifestyle, media, and so on. However, these connotations of ‘culture’ as used in our everyday layman language are unscientific, while precise discourses have examined various aspects of culture through the lens of a range of social sciences. An alternative view of culture sees it as a set of values and attributions of a group to those values: in the words of Geert Hofstede, "the collective programming of the mind" (Victor, 1992). Similarly, other anthropologists speak of culture as "shared behavior” (Fisher, 1988) that functions as a systemizing mechanism or modus operandi (McGrath & Remenyi, 2003). Culture can be defined as a networked pattern of human knowledge, belief, and behavior, all of which are a framework of interlinked concepts. This pattern may depend on the human capacity for learning and transmitting culture from one generation to the next; one can define it as the way life progresses; as the way one sees and understands the world. In addition, culture can be viewed as an individual phenomenon, unique to each individual and unrelated to genetic material yet dependent on factors such as socioeconomic background, family, and education. Culture permeates and influences every aspect of life, but it is not static, rather, it is a process in a constant state of flux and adaptation to new contexts, demands, and needs. Culture is not a deterministic force but a perceptive and often unperceptive pattern of thinking which determines values, norms, and symbols of the organization (Parsons, Talcott & Shils, Edward 1990). It is this fluid nature and definition of culture which highlights its problems from the start, at least when applied to the sphere of business negotiations. If it is indeed constantly altering, progressing and somewhat subjective, then how can multicultural businesses and business negotiations not only adapt to such a broad concept, but keep up with its ever changing nature? How can a business don a completely different way of thinking and communication, depending on the culture it is set to deal with? Such questions require a more specific breakdown of the meaning of culture within the field of business. As far as is possible, the term must be deconstructed piece by piece, and specific criteria must be distinguished. 3.2 Components of Culture – The ‘Three Layered’ Approach From an archeological standpoint, culture consists of both material and non-material elements. A well-known model of breakdown is culture ordered into three layers (Reis, 1985), like an onion insofar as the visibility of its explicit outer shell and invisibility of its implicit core. According to Trompenaars & Hempden (1997) the three layers of culture are explained as: Outer layer: artifacts and products. Including language and food, architecture and fashion, etc, this is the outermost surface layer. Middle layer: norms and values. Norms define;” what is right or wrong" whereas values determine; “what is good or bad” (Trompenaars and Hempden Turner, 1997). Inner layer: Basic assumptions and belief about existence, this is the innermost core layer. Anthropologist Leslie White (1949) suggested that for analytical purposes, a culture could be viewed as a three-part structure composed of subsystems that he termed ideological, technological, and sociological. In a similar classification, the biologist Julian Huxley (1954) identified three components of culture: mentifacts, artifacts, and sociofacts, which correspond to White’s concepts. Together the subsystems identified by their individual components comprise the whole system as culture, and have reciprocal interaction with one another. Similarly, Edgar H. Schein (1997), a clinical psychologist and organizational theorist, recognizes three levels of organizational culture: Level 1- artifacts Level 2- values and beliefs Level 3 –basic underlying assumptions Here we can see the tendency of theorists to split cultural aspects into three main layers, or criteria. Although the specific terminologies are slightly different, the three main layers are similar, and incorporate the same elements, which are visualized below: 3.3 Cultural Difference – Measuring Differentiations Defining what culture is does not explain exactly how cultures differentiate between one another. In order to understand how multi-cultural businesses face problems, it is necessary to ascertain how the cultures are firstly distinct, and secondly in what way. This will also help us to understand what obstacles multi-cultural businesses may have to overcome. Several concepts are considered to determine the differentiation of cultures (Maletzke, 1996): National Character/ Basic Personality: The assumption that people from one nation share basic common behavioral patterns and personality traits, differentiable from other nations. However, data findings have been often contradictory in this respect, particularly from highly diversified cultures. Context: Distinguishes between high and low context cultures based on the contextual factors in the communication process. The meaning of a message can be fully understood only in the context of its transmission. Time Concept: Cultures are influenced by their perception of time as either linear (western perception) or circular (eastern perception). Orientation is also thought of in terms of monochronic versus polychronic time. Monochronic cultures take care of one activity at a time and set priorities, schedules, deadlines, and punctuality. Polychronic cultures handle multiple tasks simultaneously and revolve around interpersonal relation. Space Concept: The way people deal with space vis-à-vis concepts such as private space, interpersonal distance, space design and dimensionality, as well as orientation toward space, depends on culture. Perception: Far from being a passive or objective process, the human being distinguishes actively between important and non-important, thus perceiving sensory data selectively – some noticed and some ignored. Visual perception is the best indicator where the culture-specific view objects differently. Language: A symbolical abstract language is the defining feature of any culture as it is directly connected to the worldview of the group. Unconsciously, the real world is built on the language habits of the group to a large extent. “No two languages are ever sufficiently similar to be considered as representing the same social reality” (Sapir, 1985). Non-Verbal Communication: Cultures use a range of codes and cues to interact besides spoken language, such as ‘kinesics’ (body movements), ‘oculesics’ (eye contact),’ proxemics’ (space organization), ‘haptics’ (touching behavior) and paralinguistic’s (accent, intonation, etc.). In meeting face to face, people search for affirmative reactions from their counterparts, and this type of codified communication is directly linked to cultural context. Thought Patterns: Different approaches to thinking are an underlying prelude to a culture’s behavioral patterns, and can be compared from many angles, such as being inductive or deductive, abstract or concrete, alphabetic or analphabetic. Values and Belief Systems: People’s actions are largely based on values - what is perceived as good, evil, or neutral and therefore every society has its own value orientation that becomes embedded deeply in the fabric of its culture. Behavior (norms, rules, and manners): the norms, rules, manners of a society determine how to behave in everyday life. In other words, ‘do’s and don’ts’, etiquette, role-playing, and all patterns of behavior that the culture of a society accepts and expects as “correct” or “incorrect.” Social Groupings and Relationships: Every individual is part of a complex system of interaction within a set of relationships: family, peers, workplace, friends, and other types of social groups. The effect of these group dynamics are more evident in cultural attitudes that emerge in multicultural persons in a single cultural surrounding. With a wide range of factors to consider in measuring differences in cultures across national boundaries, it is difficult to provide a single model for the appraisal of diverse criteria for organizational culture on a global level. However, it has already been recognized that oversimplifying the concept of culture would not prove beneficial and would not do justice to its complex nature. It would be unlikely that two different cultures would differ greatly in each of the aforementioned criteria; rather some criteria would bring great differences and others less noticeable and thus less important differences. Though as a starting point, it provides one with a checklist which can be used as a basis to analyze exactly which ways two different cultures differ, and to what degree. 3.4 Cultural Dimensions Dutch organizational anthropologist Geert Hofstede conducted a cross-cultural study in a multinational corporation examining work-related values and attitudes. Hofstede’s Cultural Dimensions Theory (1984) is a well-known model used for rating specific kinds of differences between national cultures (Hofstede): Power Distance: The degree of inequality in wealth and power among people that the population of a country considers normal. Societies with high versus low power distance indexes may be compared to concepts such as caste system/equal opportunity and centralization/decentralization. Individualism/Collectivism: The extent to which people feel responsible for taking care of or to be cared by their families or groups they belong to. An individualist society tends to promote independence and looser interpersonal relationships, while collectivist societies reinforce interdependence and close ties between fellow members. Masculinity/Femininity: The extent to which a culture contributes to dominance, aggressiveness and acquisition versus feelings as well as the life quality. This dimension indicates gender roles and gender differentiation within societies (i.e., equality/inequality of sexes) as well as the overall culture of a society in valuing performance/achievement (masculine) or welfare/nurturance (feminine). Uncertainty Avoidance: The degree to which people in a country prefer structured or unstructured situations. High uncertainty avoidance indicates low tolerance for ambiguity, creating a conservative or rule-oriented society; low uncertainty avoidance indicates less concern about ambiguity and therefore a society that is less regulated with higher risk-taking. Universalism/Particularism: In universalistic cultures, rules and standards have priority over particular needs; for example rules would apply to the whole “universe” of members equally, and any exception would be considered as weakening the rule. Particularistic cultures appreciate the human friendship, extraordinary achievement and intimate relationships for an ideal culture. In other words the "spirit of the law" is considered more important than the "letter of the law"(Trompenaars and Hempden Turner, 1997). Communitarianism/Individualism: In an individualistic culture, people place the individual before the community. Individual freedom, happiness, fulfillment, and welfare are prioritized, while the community is judged by the extent to which it serves the interest of individual members. By contrast, communitarian cultures place the community before the individual and assess the quality of life for the individual in correlation to the degree to which he serves the interest of the community and takes care of his fellow man (Trompenaars and Hempden Turner, 1997). While the Hofstede model is quite close to Trompenaars and Hampdenin in many respects, another basis for cross-cultural classification by Halls and Halls (1997) is much simpler. They divide the world into two types of cultures: High Context/Low Context, each with its dimension of communication rated as the explicit or implicit flow of messages. In organizational culture, Halls contrasts the two in the following manner (Communicating Across Cultures); High Context Cultures: As messages are implicit, there is more reliance on the nuances of verbal communication. Emotions are given importance, and trust is more critical in relations, therefore personal background influences decisions. Lawyers are considered less important, and attitude as regards time is easygoing. Examples of such cultures include Australia, Greece, India, and Arab countries. Low Context Cultures: As messages are explicit, paperwork is the encouraged mode of exchange. Emotions are not appreciated, and trust does not play an important role since decision making is based on facts. Lawyers are important and time is precious. Examples for these cultures are the USA, Switzerland, and Germany. People in horizontal individualistic cultures desire to be unique and into their own thing, whereas people in vertical individualistic cultures not only attempt to be the best but also desire autonomy. People who are horizontal collectivists tend to merge with their in-groups. In contrast, hierarchy collectivists are mostly willing to sacrifice themselves for their in-groups, and are generally vertical in their orientation (Lee & Choi, citing Triandis 2001, Triandis & Suh, 2002). And thus we have a vast array of attempts to define and categorize the subsections of cultural aspects as a way of its application. While the theories are somewhat complex, and are in danger of overlapping, it has become increasingly apparent that an over-simplistic definition of culture would not do justice to its complicated nature and basis. Having assessed the different subcategories of what is considered to be the elements of culture, we are thus able to assess which of the elements are utilized and recognized within the business world, and whether improvements could be made on how business negotiations utilize these elements, if at all. Before this test is applied to the Italian/German example, it is necessary to make an analysis of the practice of business negotiation, and the different forms of intercultural communication, so that a more complete picture may be drawn and other factors may be brought into play to allow a more comprehensive analysis to take place. 4. 1 Intercultural Communication In this chapter, the discussion covers intercultural communication and also looks at relations between the buying behavior of the target market and its influence on intercultural communication in the consumer behavior sphere. The main area of consideration here is whether, and to what extent intercultural communication exists. Indeed, is intercultural communication a culture within itself? If so, what elements are commonly adopted to enable the effective communication between cultures in the business sphere? Cross-cultural communication is the attempt to bring unrelated aspects together in order to establish common areas of communication. Additionally, intercultural communication is part of the cultural exchange and is a crucial key to globalization. There indeed appear to exist ideological factors which serve to condition the existence of intercultural communication on different levels and in various ways (Stier 2006): Geolinguistic situation: The ways in which languages are distributed throughout regions and countries (Allwood 2004). Linguistic conditions: What is the proportion of the majority as well as the minority languages? What would be the advantages of learning other languages, especially among the predominant majority? So far, it has been ascertained that the concept is extremely complicated, and the definition and practices that comprise the term ‘culture’ contains several conflicting elements and concepts. But the benefits of not only crossing the boundaries, but adapting to the cultures beyond the boundaries are thousand fold. Now that the complication of the situation has emerged, it becomes an even more important task to analyze how businesses co-exist and interact with one another on a multi-cultural level. Indeed, it is apparent that the concept of cultural boundaries within the business sphere directly impact the negotiations which take place between businesses, and because this is the main concept of the interview example for this dissertation, it is worthy of further examination. It is thus necessary to analyze what business negotiations involve, and how the expansion and survival of the business depends greatly upon it. 4.2 International Business Negotiation Business negotiation is a process formulated to manage relationships between two companies. It is the basic interaction that exists between buyer and seller, employer and employee, and business associates. As business negotiation is often one of the most important processes for a company’s survival, it is necessary to plan and prepare the negotiation plan very carefully (Gauri, 2003). When parties negotiate, the purpose is to influence each other so that they may obtain more benefits than just accepting and rejecting what the other party is offering. Negotiation is a voluntary process between two parties where both can modify their expectations to come closer to each other’s needs. International business negotiation consists of a negotiation where parties belong to different nations and come from cultural backgrounds that do not share the same way of feeling, behaving and thinking. According to Deshpande, Farly and Bowman, organizational culture is the pattern or shared values and beliefs that help people understand how an organization functions. According to these authors, culture at the organizational level can be divided into four classifications (2004, pp. 5-29): Bureaucratic culture: Identified by regulation and formal structures (German culture) Consensual culture: Emphasizes loyalty and risk taking (Arabic culture) Competitive culture: Identified by an importance on competitive advantage and market superiority (Chinese culture) Entrepreneur culture: Developed innovation and risk taking (American culture) 4.3 The impact of culture on international business negotiation Negotiation and communication style is affected by components of culture. Culture also shows how people interpret information and also affects the kinds of strategies and tactics to practice. Adhering to a different culture to that of one’s background is a complicated process. However, cross-cultural negotiation is not about the “good way” or the “bad way”: it is about the adjustment of expectations, about preventive versus curative action, and ultimately, about increasing one’s options (Foster, 1992). 4.3.1 Analyzing the Negotiation process There exists a model anticipated by Ghauri which is clear and sufficient for the analysis of cross-cultural negotiation. This model makes it easier to understand the process of international negotiation despite the fact that it is universal and used as a general framework. It is essential that a model or structure is dynamic in nature; it needs to be adapted to the specific situation. In the model proposed in Figure 2, there are three groups of variables (Ghauri 2003, pp. 9): Figure 3: International business negotiation process Source: Ghauri, 2003 4.3.2 Recognizing and analyzing gaps in cross cultural negotiation Differences in cultural background between two parties in business negotiation is the most important gap affecting the interaction between them (Hofstede and Usunier 2003). Both parties must adapt their strategies and behaviors in order to obtain results from the negotiation (See figure 2)( Hollenson, Svend 2001). This figure shows that the first gap is reduced through adaptation of seller and buyer behavior; nevertheless, as neither of the parties have a full understanding of the other’s culture, the final decision will be different between two negotiators. This gap can create resistance in the negotiation and exchange process and also raise transaction costs. Today salespeople need different tools and training methods for each international business negotiation with a different culture. 4.3.3 Background Factors Background factors directly influence the process of negotiation and also atmosphere. A negative influence causes delay and creates obstacles during an international negotiation while a positive influence can save time and result in continuous efficiency. Based on Figure 3, there exist 4 background factors (Ghauri 2003, pp. 5-8): Environment: All social, political, and organizational factors appropriate to both parties involved in an international negotiation. Objectives: Concerning objectives, Ghauri (2003) defines it as the end that each negotiator desires to attain: common objectives, conflicting objectives and complimentary objectives. Negotiators: Negotiators could affect the negotiation process and atmosphere directly with their negotiation skills, personal skills, and acquired experiences. Third parties: Third parties could be agents, consultants, and in some cases, governments. Third parties have often a tendency to have different objectives to buyer and seller, and can influence a negotiation process directly. Thus far, it appears that many factors influence how negotiations take place on a cross-cultural basis. There is however no doubt that the cultural background of a member directly affects their communication with the other party, and vice versa. 5. Cross Cultural Negotiation Behaviour As has already been explained, the negotiation is the communication process in which two or more parties agree to exchange services or products based on the contract which is agreed on. During each negotiation process both negotiators try to influence the other party in order to maximize their own objectives. According to Alexander & Seidman (1994), negotiation is characterized by: “Information exchange, joint problem-solving and influence of the negotiation outcome.” But what potential problems does cross-cultural negotiation pose for businesses? 5.1 Communication in cross cultural negotiation Communication is a two-way process of sending, receiving and interpreting verbal and nonverbal data. The need for congruence between verbal and nonverbal behavior elevates effective communication to the level of genuine art. Body language such as gestures and expressions say a lot about how one reacts to a person or situation. One can choose to send “power-full” or “power-less” messages through this silent persuader. Which format the negotiator chooses to undertake will have a major impact on the overall negotiation and its success or failure. Indeed, the negotiation path is littered with obstacles. Nonverbal messages either confirm or contradict messages spoken verbally. Ralph Waldo Emerson said, “What you are speaks so loudly that I cannot hear what you say.” When visual, vocal and verbal communications are incongruent, the nonverbal elements of appearance, body language and behavior speak the truth with a “silent shout.” Every communication could happen in verbal and nonverbal modes, but culture determines which mode will take place and will be predominant. In a transaction where the message sender and receiver come from a group with the same language and social background, there is more likelihood that both would ascribe the same meaning to the message. In a situation in which both parties come from different cultural backgrounds, misunderstandings can occur by the slightest action. Yet, with the ready availability of data and research on culture specifics of a particular country or culture, companies invest money and time into training and education of their negotiators to avoid such problems. That is not to say that the party will be able to alter his very basis of personality, yet a heightened awareness in terms of do’s and don’ts can result in successful negotiations. 5.2 Cultural dissimilarity According to Ferraro (2005), cultures vary in terms of how explicitly they send and receive verbal messages. Based on the writings of Hall & Hall (1990) and Ferraro (2005), 12 nationalities were placed on a high-context to low-context communication continuum. Countries such as Germany, Scandinavia, and the United States are on the low context while Japan, China, Italy and Arabic countries are high-context (Porter, 2003). In low-context countries, great emphasis is placed on words. Every effort is made to communicate unambiguously through the use of words. In high-context societies, the importance and power of words are de-emphasized and there is a tendency to overuse verbs, metaphors, aphorisms, and anecdotes in communicating. The meaning of a message depends less on the words. Nonverbal cues, social and physical contexts are used to ascribe meaning to a transmitted verbal message. Researchers have pointed out that in some high-context cultures certain pronouns are repeated in order to fully dramatize the message, and highly graphic metaphors and similes are common. It is not uncommon for an Arabic speaker to use a long list of adjectives in order to stress a point. A statement may be understated or overstated to bring out or stress a point and the message receiver is expected to easily pick up the cues and make meaning out of them. It appears that this area has the most potential for problems in negotiations. It is extremely easy to misunderstand a statement simply because the context or the way in which it was spoken is not grasped. While a direct question usually solicits a direct answer in North America, high-context societies intentionally give vague answers. Direct negative answer is considered impolite. A negative response may be in the form of non-verbal communication, such as folding of the hands with trepidation, silence, or lack of eye contact. Expression of Gods will also may send a message. In many cultures, like Arabic, African or Caribbean countries, a statement is usually started by thanking God or Gods will (Augustine Ihator 1999: When in Rome). This is often used to seek a common ground and affirm the universal and omnipotent power of God among the participants in the communication transaction. This may sound strange to some Western PR practitioners who expect religion or a belief in God to be outside the domain of business relationships. When placed in the context of business negotiations between Arabic and English cultures, the possibility of problems is vast, both in terms of non-verbal communication, religious references and manners of verbal expression. Although the problems that could be faced by a company depend on how different two particular cultures are, it is evident that all precautions must be made to minimize misunderstandings. Here begins to emerge the need for education and research. 5.2.1 Ethnocentrism and Stereotype Another potential problem for companies is the element of ethnocentrism, which is the belief that ones own culture is superior to others. Additionally, it describes the condition of viewing and judging other cultures and societies, according to the (usually taken for granted) assumptions of ones own society. There are notably three sections of ethnocentrism; positive, negative, and extreme negative. According to Herskovits (1973), positive ethnocentrism defines ethnocentrism in a way that ones own way of life is to be preferred to all others. However, there is nothing against such feelings, because it identifies the way that individuals feel about their own cultures. In any case, it would be important for companies to ensure that their representatives do not fall into the trap of judging other cultures in a negative way. This could be overcome by educating them about the other culture they are to negotiate with, for many of their perceptions could be based on ignorance. It could also be connected to a certain stereotype they may hold of a culture, which education could serve to eradicate and create a form of respect and knowledge rather than ignorant distaste. Stereotypes consist of presuppositions represented as normal or even universal by one’s own group towards another culture, for example the stereotype that Jewish people do not like to spend their money and are scrupulous business men. Walter Lippmann (2004) describes a stereotype as a “picture in our head”; according to Berger (1999) it is an image of a group commonly shared by that group or nation, a grossly simplified notion of how individuals or members of a group are constituted. A significant point in Berger’s quotation is the social aspect of the stereotypes which means that the stereotypes are not just an individual’s private approach but are constantly shared attitudes within a socio-cultural group. He emphasizes that stereotypes contain suppositions of other groups as absent in diversity and nuance. In other way he explains that stereotype prevent people from seeing reality and seeing individuals as what they are in fact (Berger 1999). So here we have the potential problem again as a result of cultural differences, which again seems to be the result of ignorance. These problems are not major, and can be eased by simple education about the other culture and the raising of cultural awareness within the business team. 5.2.2 The impact of individual perception on negotiation results According to Campbell N. Graham (1998), as shown in the following figure, in each negotiation situation, negotiator perception is related to negotiation behaviors and negotiation outcomes. Figure 4: Negotiation situational factors Source: Campbell, 1998 As seen in Figure 4, the effect of individual negotiator perception on negotiation outcomes acts as a go between in negotiation behaviors. However, the relationship between negotiator perception and negotiation behaviors and also between negotiation behaviors and negotiation outcomes are influenced by situational factors. 5.3 Culture and negotiation According to Kroeber & Kluckhohn (1952), cultural systems could be considered as products of action. In a negotiation process culture is considered to be a key factor in respect of results (Brett, 1998). According to Salacuse (1998), negotiation practices vary from one culture to another (negotiation style). How businesses deal with this will be explored, for it certainly poses a problem during negotiations, and the utmost care is required to ensure the smoothest possible transaction, or at the very least agreement, between the negotiating parties. 5.3.1 Influence of culture on negotiation Negotiation framework in general consists of seven interrelated parts; (Figure 5)( M. Majidi: Cross Cultural Management) As presented in Figure 5, the negotiator’s characteristics and situational constraints can directly influence the negotiator’s expectations level before he enters in the negotiation process. The negotiator’s characteristics and situational constraints could also influence the atmosphere of the negotiation process and also the negotiation process itself. Thus we can see the level to which cultural aspects can affect the negotiation process, even before it commences. So far, the dissertation has ascertained the different types of cultural aspects, and once can begin to see patterns as to how these aspects can affect the negotiation process. The potential problems are many, and the chance of a negative outcome is rather high. How businesses tackle such possible problems will be highlighted by the following case study which compares two very different cultural backgrounds and brings them together by way of the negotiation process. 6. Globalization Globalization has been defined in various ways, but it is most typically defined as the interconnectedness of political entities, economic relationships, or even computer networks. Globalization refers primarily to the ways in which economic and industrial Institutions interact in various locations throughout the world, with primacy given to no specific geographic location. Globalization offers great opportunities for worldwide development but that doesn’t mean that it is as progressive and neutral as it suggests. Thailand is a good example of a country that quickly began to integrate into the global economy. 6.1 Impact of globalization on intercultural communication It is arguable that talking about intercultural communication without talking about globalization makes little sense. Globalization has a large impact on intercultural communication, but how does this impact take shape? The progression of globalization is pressuring businesses to reconsider their strategies, whilst also providing an ‘evening out’ of the differences between economies. This could be described as the perfect environment for cross-cultural communication to thrive, but just how far the differences between economies are evened out is unclear. Additionally, just how far the ‘evening’ out of economies progresses towards aiding the practice of cross-cultural communication is also an aspect to consider. No doubt, the integration brought by globalization has caused companies to adapt more quickly to their practicing of cross-cultural communication, and this goes a long way to suggesting that just by this deeper involvement of businesses, a more refined attempt to solve cross-communicational problems is evident in businesses throughout the world. 7. Case Study – Business Negotiations Between Germany and Italy This case study consists of a negotiation process between a German company (Bosch) and Italian company (Fiat Group) to negotiate automotive parts. This case is an example and analysis of how Germany approaches a negotiation process and instructs its negotiators when working with the Italian company. This case will analyze how the German company (Bosch) deals with its negotiations with the Italian company Fiat Group, the latter of which may buy automotive parts. The interview was conducted with Bosch. 7.1 Cultural differences between the Germans and Italians In order to understand the context of the interview, it is firstly important to ascertain the main differences between Italians and Germans. This will also help us to understand the potential problems and the extent of the differences between the cultures. The following table denotes each country and their A or B type cultural differences, and the comparison of Italy and Germany for each category: We are immediately able to see the vast differences in cultural characteristics between Germany and Italy. On a more detailed level, the following table shows specific differences between the two countries: 7.2 Cultural differences and their potential problems It is evident that both cultures are strong and proud. In Italy, a collective work style is adopted, prioritizing the group interest over individual interests, which may prove difficult for Germans to comprehend, who focus more on the individual. The Italian is likely to introduce himself as part of the company for which he works, in relation to his position; whereas the German will refer only to the company he works for. Thus, German culture assigns high importance to the company relationship with other organizations and the strategic objectives of their firms while in Italy it does not have the same importance. Moreover a key negotiation implication for a German negotiator is that the Italian appears to be more concerned with the organizational code than with a legal framework. Another distinction between the two cultures is in the way that they express emotions. Italians are openly expressive whilst Germans tend to internalize their emotions in a much more controlled manner. This significant cultural difference could have negative consequences for both parties in a negotiation case, and is an important point to consider. An expressive Italian could cause discomfort in a German, who is likely to mistake his expressive nature as impolite or even mistake it for anger. Similarly, an Italian could conceive the controlled German stature to be stand-offish and may understand that the German is not comfortable conversing with him. This can cause a halt of communication, where the Italian may feel restricted in his expressive tendencies while the German may feel overpowered. In sharp contrast to Germans, who are task-oriented with a high appreciation of rules and structures, Italians give more attention to personal relationships. Germans place importance in reaching objectives and move aside all social and emotional aspects of communication. Germans consider emotional closeness to tempt co-employees out of their respective roles, which in turn could lead to a conflict between business necessity and personally emotional matter (Schroll, 2003). In Italy, there is relatively large power distance between two individuals; they tend to have a fixed hierarchical structure. In Italian business culture, there is a great respect for authority, power and older age; seniors in business are the most respect and attention. Only senior managers make decisions, whereas German business culture as egalitarian is displayed by the fact that social background and ethnicity are not supposed to influence career perspectives (Jodie R. Gorrill : Doing Business in Italy). So here we have a potential case for disaster – the two cultures are attempting to negotiate a business plan, while their characteristics, cultural backgrounds and expressive tendencies are worlds apart. There is a high risk of misunderstanding, and a high probability that both parties will find it difficult to communicate with one another. In such situations, it is worth noting, progress beyond the language difficulty – business negotiations suffer much more profound problems, of which negative results could be disastrous. How both parties deal with their counterpart is crucial, and how they have been instructed by their employers to deal with such situations is a vital element in business negotiation. Both parties much walk through a minefield of potential problems and misconceptions, whilst also not feeling the need to repress their own selves and thus cultural heritage. 7.3 Interview with Bosch What are the basic objectives of the negotiations between Bosch and Fiat? The negotiation case is based on developing and implementing a strategy of profitable growth to achieve the three following objectives: a) to sell automotive parts in order to improve rapidity, efficiency and productivity; b) to help management make better decisions; c) to improve customer satisfaction. How did you seek to achieve these objectives in terms of your negotiator and the negotiation process? In order to achieve these objectives, the goals of the negotiation appear to be based on clear decision making for speed, accountability and high-level performance. In order to implant the automotive parts in the next step, both companies need to develop synergies through common organizations, cross-company teams, shared platforms and components. This conglomeration requires both companies’ groups working simultaneously. To what extent do you consider the German and Italian cultures to be different? How do you see the cultural differences between Bosch and Fiat Group as affecting the negotiation process? Indeed, the cultures are extremely different, in terms of thought and expression – beyond just language. As a result, the differences between cultural backgrounds could influence a negotiation and also be the result and implantation of the negotiators. What preparation is conducted when instructing the negotiator as to how he will conduct the negotiation with Fiat? It is considered important to identify the cultural characteristics of the country we are negotiating with, and to make the negotiator aware of such characteristics. A good negotiator must be able to identify the important cultural aspects of the country he will be dealing with. What do you consider to be the most important objectives for negotiators from different cultures to understand and achieve during the negotiation process? A mutual respect for and understanding of the other culture’s background, which can be achieved simply through education, honesty and briefing. What would you consider to be the biggest differences between the German and Italian cultures? Definitely the mode of expression; the Italians are much more personal, which is not considered appropriate in German business. Also, Germans need a framework of rules and work by the regulations; this often conflicts with the Italians, who are more blaze and less structured in their business manner. How do you overcome the problems posed by the second difference you state – the low degree of structure in the Italian business? This difference poses many problems, and can cause distrust for the German negotiator. However, it is not an impossible problem, and if both negotiators are instructed properly, then an appropriate framework can be constructed for a negotiation. This requires much deliberation, so that the Italian does not feel undermined, but also so that our negotiators do not feel they have lost their sense of organization in the deal. How do you propose to overcome potential problems caused by differences in how one introduces oneself in terms of the company and position the negotiator works for? The negotiator is instructed to introduce himself both in terms of which company he works for and in which position he works – it is considered important to tolerate and combine both cultural characteristics, wherever this is possible. The difference in means of expression between Italians and Germans are inherently different – how do you instruct your negotiators in terms of expression when dealing with Italian counterparts? It is understood that the German mode of expression can be considered rude or unsociable for the Italian. This is difficult to change to a large degree in German negotiators, but they are informed to be as open and relaxed as possible, and are trained to not become overwhelmed by the Italian ‘expressive overdrive’. Negotiators are also trained in this form of expression so that control of the negotiations is not lost. What general framework do you provide for negotiators in this particular negotiation with the Italians? The negotiators, after careful research and consideration, and given training and a form of checklist of dos and don’ts which they should adhere to as much as possible when dealing with Italians: German negotiators must express themselves as clearly as possible and exercise control; if the other party perceives that one makes a sincere effort, he will certainly pardon occasional miscommunications and misunderstandings. German negotiators must understand that communicational mistakes and errors are inevitable on both parts. They must strive to achieve a co-operative atmosphere, on a more relaxed level than is usual in Germany. Italians are likely to mistake personal control and politeness as impolite. They must be aware that if both parties continue to compromise then a long-term business partnership will undoubtedly be the result of these struggles for a common understanding and vision. As the hierarchical system is more prevalent in Italy than in Germany, at first contact, German negotiators should pay attention to their Italian counterparts business card. This permits them to show respect and awareness towards the others hierarchical level. German negotiators are advised to socialize about personal issues such as family and political views in order to build trust and relation, before moving straight to the business. As the Italian people have a collectivist culture, a German negotiator has to be very careful not to show that he has only his self-interest in mind. Showing warmth and willingness is the key to successful communication with the Italians. A German negotiator has to stress commitment to the long-term rather than the current. It is essential to maintain a constructive attitude at all times. 7.4 Interview with Fiat Group What are the basic objectives of the negotiations between Bosch and Fiat? Our objectives are to achieve a connected working environment in which each company will be able to benefit the other through this connection. We hope to establish a long term business relationship with the company so that our pooled resources and expertise can enhance the development of both companies. How did you seek to achieve these objectives in terms of your negotiator and the negotiation process? The negotiation process is understood as being one of the most important stages because it begins or ends the relationship from the start. In order to ensure a long-term business relationship, we establish the work ethic of the other company, whilst they can see our ethic, so that we may create a joined ethic with both components. In order to work together, we must have the same basis objectives, and the negotiation process ensures this. To what extent do you consider the Italian and German cultures to be different? How do you see the cultural differences between Bosch and Fiat Group as affecting the negotiation process? Italians are very different from Germans in many, many ways. Completely different. I think, though that if we implement the correct procedure, that the differences will be of help rather than a hindrance to the two companies. What preparation is conducted when instructing the negotiator as to how he will conduct the negotiation with Bosch? A form of briefing is given to the negotiator, so that he can understand the ways of the German, and understand them. Although he is not expected to act German himself, he will overcome the problems that can be brought by misunderstandings of the German’s character. We try to fit the objectives in with the difference of culture. What do you consider to be the most important objectives for negotiators from different cultures to understand and achieve during the negotiation process? Awareness of the other culture, and its differences. It should be seen as an adventure, and not a problem – after all, we are all human beings. What would you consider to be the biggest differences between the German and Italian cultures? The German is seen by Italians as…….’cold’. They make their point quickly and get down to business. We Italians are more relaxed, and while we don’t waste time, it is important in Italy to make the negotiation a little more personal and easy going than the Germans do. How do you overcome the problems posed by the first difference you state – that Germans are ‘cold’? We cannot overcome it exactly, we can only be aware of it. This does, and has caused friction in previous experience of negotiations. We simply understand that this is their culture, that it is not rudeness. Negotiators are told of the differences, and expected to remain unaffected by them, or at least will not ruin the negotiations because of them. What general framework do you provide for negotiators in this particular negotiation with the Germans? We make research, or we have the research ready, and the negotiators are told what the Germans will be like, and how they will differ and why. Although we do not like to instruct negotiators to change their personality or reject their Italian heritage (we hope that the German company is also becoming aware of the Italian culture), we ask them to be careful as to how they deal with the German attitude. So we give them guidelines. 8. Conclusion In reality, cultural differences cannot be judged, but in the professional world they may raise conflict and cause unnecessary confrontation. Therefore, one must keep one’s mind open and alert to the sensitivity of the person they will be negotiating with, whilst also being prepared to correspond their behavior and communication to the cultural basis of their counterpart. This can be achieved by educational practices, so that one may be aware of the cultural tendencies of the company/person he will negotiate with. An Italian who is aware of the more conserved tendencies of the German is more likely to take care to not over exaggerate his method of expression. A German who is educated about the expressive nature of an Italian is less likely to be offended or perplexed by the Italian’s loud and open manner. This in turn can cause both parties to be more tolerant of the other, and provide an explanation at the very least for the background of their behavior. This requires more understanding than repression, so that the Italian may barter, whilst the German will not be offended by his ridiculously low starting offer. On a more general basis, companies can compile case files on certain cultures that they deal with across the globe. Even the basic information could progress a long way into educating the negotiator as to how he will appear to the other, and how the other will act with him. If a basic understanding can be compiled, then a cultural tendency, no matter how seemingly odd, can be tolerated and business operations can run smoothly. Indeed, no perfect formula exists which will guarantee success when one negotiates with a different culture. However, by taking in measure these cultural differences, a German negotiator could come to the negotiation table prepared in advance and thus avoid surprises. This could take the form of recommendations based on the cultural factors mentioned, as to how the German negotiator could successfully converse with the Italian: Skilled negotiators must be attentive to two main elements: how others view his culture, and how he views the other’s culture (stereotypes). Knowledge about these stereotypes helps a negotiator to prepare himself before going into the negotiation process. In order to avoid cultural problems and misunderstandings it is beneficial that negotiators inform themselves about cultural stereotypes. It seems that the key element here is understanding – if both parties can gain at least a very basic understanding of the culture of the other, then misconceptions and misunderstandings will be minimal. Each party can conduct himself in accordance with the information given, and both parties are likely to fit together in a respectable manner, whilst not completely shunning their cultural background. In turn, via this newfound understanding, both parties are joined in a form of sub-culture, in which each has tolerated and conducted himself in accordance with that toleration to maximize a successful negotiation. This study has explored how cultural differences affect international negotiation processes, and how cultural differences may impact the outcome of the negotiation. In effect, cultural differences are not good or bad in themselves. Nonetheless, in the professional world they may cause conflict and unnecessary confrontation, if research and understanding of another culture is not achieved. Therefore, one must attempt to understand the basis of a culture different from their own, and attempt to tolerate it in the interests of business. It appears that the process of negotiation between cultures is based on compromise. Although globalization in all fields such as business and economic decreases the significance of nationality, it does not go as far as to repress the culture of a person, the way in which he has been raised and the traditions which shape his character. One may often realize the enhancement of business interaction, trading, or nature of economic relationships through cultural understanding. When deals are planed between business people who come from different cultural backgrounds, the process of organizing between relationship and atmosphere becomes more complicated. As a result, negotiation is the key part for handling this complication. It is however important to note that the case study conducted is not realized as a worldwide application of intercultural business negotiations. It is understood that on a global level, companies will have their different techniques and methods, and perhaps none at all. Suffice it to say that the ever-diminishing boundaries in the world of business will require some form of awareness in reality, if not on paper. The case study is also limiting in that it related to one form of business negotiation; it is understood that different forms of negotiation for different purposes will require different levels of adjustment to a different culture. For example, two different businesses hoping to work together in a long term partnership will arguably require more than a checklist of dos and don’ts when working with another company. There are many variable which could change the findings of the interview, but it appears to be a good basis to understanding how businesses deal with multicultural negotiations on a minor level. Moreover, this study provides for an understanding of the influence of culture on the business negotiation relationship. The case example has provided a firsthand rendition of how businesses deal with cross-cultural negotiations. It also suggests the benefits of negotiators who evaluate how cultural values are classified, so that they may adopt an altered strategy in order to achieve successful negotiations. Negotiators must exercise strategic and Read More