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TITLE:

‘Negotiation is not a process reserved only for the skilled diplomat, top salesperson, or ardent advocate for an organized lobby; it is something that everyone does, almost daily’ (Lewicki et al 2011: 2).

NAME:

STUDENT ID:

MODULE: International business negotiation (STRM060)

MODULE TUTOR:

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Contents 1. Introduction:………………………………………………………………………………………………….. 3

2. Defining Negotiation and understanding the meaning………………………………………………… 4

3. Negotiation skills …………………………………………………………………………………………….. 5

4. Negotiation Theories ………………………………………………………………………………………… 6

4.1 Prisoner’s dilemma: …………………………………………………………………………………………… 6

4.2 Game Theory: ………………………………………………………………………………………………….. 7

5. Culture and Negotiation…………………………………………………………………………………….. 8

5.1 Importance of understanding cultural dimensions ………………………………………………………. 8

5.2 Case-studies ……………………………………………………………………………………………………. 9

5.2.1 Telia-Telenor merger…………………………………………………………………………………….. 9

5.2.2 Cross-cultural negotiation between Google and Chinese Government …………………………10

6. Conclusion …………………………………………………………………………………………………….12

7. References:……………………………………………………………………………………………………13

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1. Introduction: People use negotiation as a device to obtain their goals and may face conflicts of

interest and goals (Spencer, 2013). However, it is the basic method that people use

to interact with each other, whether in personal life or in business dealings (Salacuse,

2013). Negotiators need special skills to have an effective negotiation, irrespective of

the varied contexts it happens in, whether negotiation is between countries or between spouses (Salacuse, 2013). Negotiation is very essential part of people’s lives and their

interactions with others. Every time people interact, they negotiate, verbally or

nonverbally, consciously or unconsciously, but it is up to them to make it good or bad.

Everyone does not negotiate actively or consciously, but those who negotiate

consciously get more of what they want and vice-versa (Diamond, 2010). Hence, as

truly said by Lewicki et al, (2006), mentioned that negotiation is not just restricted to

the experts or sales people or professionals and intellectuals like skilled lawyers, but

it is experienced and done by everyone, everywhere. In this assignment, the definition and meaning of negotiations will be explained along

with the different contexts it can happen. Also, the skills required for having effective

negotiations, formal or informal, have been highlighted. Two theories of negotiation

and their application in daily life has been discussed. Also, how culture is important to

understand negotiation style and importance of understanding cultural dimensions has

been discussed. Finally, to understand the application of negotiations in the

background of culture, study of two cases have been made.

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2. Defining Negotiation and understanding the meaning Fells, (2009, p.3) defines Negotiation as, “a process where two parties with

differences, which they need to resolve are trying to reach agreement through

exploring for options and exchanging offers and an agreement”. This definition

suggests that negotiation is a process and a series of events, along which the choices

are made. The outcome of the negotiations and how an agreement is achieved depends on the choices made by the negotiators. It also shows that are two or more

parties, there are differences between the parties, which need to be resolved. Shell,

(2006, p.6), define negotiation as ‘an interactive communication process that may take

place whenever we want something from someone else or another person wants

something from us’. According to Shell, (2006), people negotiate at home and at work,

on personal relationships or professional relationships, sometimes they co-operate

and sometimes they even sacrifice. People often negotiate in daily life but are not

always aware of it. Brett, (2014), defines negotiation as the process by which the people of conflicting goals try to reach agreement about how they are going to work

together in the future. The definition stresses on the incompatible goals of the resolving

them and coming to a contract.

While, according to Ghauri et al (2003), Negotiation is an integrative bargaining were

both parties benefit and believe in a co-operative negotiation and win-win outcome. It

is an everyday activity that involves managing relationships between children and

parents, sellers and customers, husband and wife, employers and employees, etc. Salacause, (2013), on the other hand also emphasizes that negotiation is about

resolving the conflicts which are raised by the different interests of the involved parties.

But these conflicts can be about anything in daily life or work life of a person. For

example: Two room-mates might have incompatible interests, where one wants to

watch TV, while other wants to study or a couple gone on a dinner date must decide

which food to order, when one wants Thai food, while the other wants to have Mexic an

food.

According to Downs, (2009), negotiation is defined to reach mutual agreement through communication. It is a set of behaviors that may take different forms of different people.

This definition emphasizes on reaching a solution through cooperativeness and

through use of effective communication in different context formal or informal. It

involves different steps such as analysis, preparation, communication, proposal and

commitment. According to Barber et al, (2015), in a business context, negotiation is

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an opportunity to create value for business and further business opportunities, and

hence it should be a constructive conversation in which the parties involved take back

at least as much value as they need. According to Firth, (2014), negotiation in a formal

setting is characterized by negotiation based on a predetermined term of exchange, often engaged on other’s behalf, often prolonged, generally preceded by written

agendas, summarized in minutes and reports and if successful, settled with signing of

declarations, agreements, contracts etc.

Hence, it can be said from the different definitions that negotiation refers to resolving

conflicts, coming to an agreement, bargaining etc. through either competitive strategy

or co-operative strategy. Competitive way in negotiation gives win-lose outcome while

co-operative way gives win-win outcome. However, it is very much evident negotiation

is generally considered to be done in the companies or by professionals, but people negotiate everywhere, in different settings, formal or informal.

3. Negotiation skills Negotiation skills are used by most people every day, some use these skills in

business and some in indirect negotiations. Example: haggling over a product in the

market or convincing teenage son to tidy up the room. Thus, negotiation skills are used

by people in their daily lives at different levels. To negotiate well, people have to be

good in many related areas such as bargaining, psychology, empathy, planning,

scheduling, language, politics etc. (Spencer, 2013). According to Downs, (2009) every step-in negotiation requires specific skills, using effectively these skills would help the

negotiators to move through the process faster than others. Analyzing opposite party’s

style of negotiation, choosing correct strategies, managing obstacles in negotiation,

attending to ethical issues and being self-aware are some of the important skills

required for effective negotiation. According to Gates, (2015), consciousness,

calmness, to make negotiations exercising nerve, self-discipline, to keep emotions

away from negotiations, tenacity, instinct or gut feeling and caution, curiosity and

creativeness, finding information about the other party and adding valuable considerations, humility and respectfulness etc. traits are very important for a

negotiator to have effective negotiation.

Cohen (2002), highlights, the seven pillars of wisdom that the negotiator should have

to make successful negotiation, viz:, focusing on the priorities, which suggests that the

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negotiations should be around what is required and in the right direction, relationships ,

Interest, which implies that the parties should also try to understand other party’s

interests along, BATNA, where the negotiator should have the best alternative to their

negotiation agreement, if the former fails then the other should be preferred. Creativity which means negotiators must be alert and creative with different ideas and

strategies to crack the deal, fairness and commitment, which indicate fair practice and

keeping the promises and Communication which includes, alert listening, clearly

putting forth points, responding well etc. Imai and Gefland, (2010), have also pointed

out that in negotiations across cultures, negotiators with cultural intelligence quotient

(CQ), along with other types of intelligence such as having cognitive ability, emotional

intelligence, openness, and international experience produce better outcomes in

negotiations. Hence, to have effective negotiations, anywhere in different situations in life, whether

at workplace or at an informal occasion, everyone needs to consciously have the

above-mentioned negotiation skills. The skills and strategies used by them may

change according to the context.

4. Negotiation Theories

4.1 Prisoner’s dilemma: It is based on the classic story of two suspects in a robbery. The suspects are kept in

two different rooms for interrogation, and the police investigator tries to convince them

to accept their offence. The police convince both to confess they shall get a lighter

sentence of 2 years. If both did not confess, they both shall get maximum sentence of

10 years. If one of them confesses and becomes state’s witness, he will be set free and the other one will be imprisoned for 5 years (Galin, 2015).

So, if one of the negotiating parties is co-operative, they might be vulnerable to

exploitation, while if all the parties use competitive strategy in negotiation, the outcome

will be very low. While all the parties involved decide to co-operate, would be the best

strategy. Sometime the reactions of the other side are not known, which might make

it a worst strategy as well (Galin, 2015). This kind of behavior is seen in daily life

examples such as, the lending between neighbours is regulated by an unsaid rule of

co-operative norms of the society, or for e.g. Barbers association often make rules

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forbidding all the barbers in the region to open their shops on Mondays. In some place,

the barbers who challenge this rule get their windows broken (Pruitt, 2013).

Hence, it is important for the negotiators have skills to use strategies upon the others

in the negotiation, which are relevant for the situation, by understanding the other person’s motives, interests and by using cultural quotient, making valuable

considerations and to be cooperative with others to not lose out in the negotiation.

4.2 Game Theory: Game theory is based on a mathematical conflict, generally seen in players, where

every player the game has a strategy but there is a joint outcome to the game. The

players often must take a decision to choose out of the various alternatives they have

for the game. It also involves thinking about how others will act. Similarly, multiple

decision makers must choose right strategies of the various strategies for a situation,

also considering other people’s possible strategies. Game Theory is used by politicians, economists, biologists, gamblers and it applies to many people in general

in daily life (Rosenthal, 2011).

Common examples of application of Game theory in everyday life are Gambling,

Auction, shopping etc. For example: If a customer does not offer a current offer of the

seller as the customer believes that the seller would quote a better price. The seller

must convince the buyer that he can’t lessen the offered price and can walk away from

the negotiation. Thus, in real life situations, people compete to get high scores and Game Theory is about how smart, ruthless people act and interact in strategic

situations (Miller, 2003).

Thus, in such situations, according to the Game theory, it is the competitive skills of

the negotiators that help them to gain in a negotiation, unlike the Prisoner’s dilemma

cooperative skills are more important.

Thus, it can be said that the negotiation theories, including those mentioned above

have practical application in daily life situations, formal or informal and it is essential

that the negotiators use different skills for different types of situations in negotiation.

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5. Culture and Negotiation Culture is defined as ‘a system that consists of patterns of traditions, beliefs, values,

norms, symbols that are passed on from one generation to the next and are shared to

varying degrees by interacting members of the society’ (Ting-Toomey & Oetzel, 2001,

p.9). According to Ghauri et al, the definition of operating culture is changed now, with

the growing cross-cultural interactions in today’s societies with multilingual people, binational, international professional culture or people working in multinationals

(Ghauri et al, 2003).

According to Hendon et al, (1996), Culture influences the way negotiation is done as

it conditions one’s perception of reality, it blocks out information inconsistency and

assumptions, it develops the meaning of other party’s sentences and urges to an

incorrect credit of purpose. Culture affects the ways and degree of strategies that

negotiators use and implement. For example: Israeli prefer to communicate directly,

while Egyptians prefer indirect forms of communication. Sometimes people judge people of other culture by their own standards and norms (Hendon et al, 1996).

5.1 Importance of understanding cultural dimensions GLOBE (Global Leadership and Organizational Behavior Effectiveness), identified

nine dimensions of cultures. Some of the dimensions help to understand the

contrasting values of the opposite culture and implement in the negotiation. Individual-

collective dimension, where some cultures believe in individualism and some believe

in collectivism, family, community etc. For E.g. USA has an individualistic culture,

China has collective culture. Equality-hierarchy dimension, change oriented

dimension, Time oriented dimension are other dimensions that suggest whether a culture believe is high status-low-status differentiation or equality, whether a culture is

adaptable to change easily, whether a culture believes in following time-bound (busy)

schedules or loose culture, whether they are past, present or future oriented etc.

(Ferraro & Broidy, 2017). Peleckis, (2013), suggests that the differences between the

negotiators due to their different cultures and dimensions can cause some

misunderstandings between them or misperceptions of the symbols can be made,

which can affect the negotiation outcome. Cross-cultural negotiations can influenc e

the way different negotiators from different cultural backgrounds negotiate. Hence, in cross-cultural negotiations impact of culture is substantial. Hence, by understanding

the culture of the other party helps to find out the cultural and negotiation strategies

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and style. Negotiators can alter their own behavior after understanding the other party’

culture and style and accommodate it to smoothly and smartly negotiate, thus avoiding

errors and misunderstandings (Carte & Fox, 2008). Hofstede, (1980), described

cultural dimensions based on national cultural differences, namely, Power distance, Individualism, Masculinity, Uncertainty avoidance & long-term orientation.

5.2 Case-studies The following case-studies evaluate how cross-cultural elements may affect

negotiations between two parties from different countries.

5.2.1 Telia-Telenor merger The merger of Telia a Swedish telecom company and Telenor a Norwegian telecom

company involved the two companies and their respective Governments. The main intention of the merger was creating Nordic-based growth-oriented international

telecommunications and IT corporation and the common interest of both the

companies was to become dominant together in North Europe and Baltic regions. The

negotiation had initiated in 1997, and both the companies had a dominant position in

their country. Revenue wise Telenor was slightly on the upper-side. The negotiations

included conflicts on various issues such as composition of the Board, division of

power, location of mobile head-quarters etc. In initial agreement mobile-head-quarters

was to be decided on the commercial grounds, however, Swedes changed their stand, and Norwegians felt ‘cheated’. After a series of negotiations, eventually the

Norwegians refused to accept the mobile head-quarter to be located in Stockholm

(Sweden), and the Telia-Telenor deal became a failure (Fang et al, 2004).

The two countries are culturally similar and are identical in Hofstede’s cultural

dimensions (1980), such as power distance, individualism, masculinity, uncertainty

avoidance etc. The companies were similar also in terms of technical platforms,

languages and corporate culture. In this case, the two conflicting issues between them

were, the different interpretation of the agreement by both the companies and whether the headquarters should be located in Sweden or in Norway. Both the parties stood

strong in their stand and were not willing to give-up. Also, through the series of

negotiations that took place, nationalistic sentiments of Norwegians aroused strongly,

(with the background of Sweden-Norway rivalry in the history), and the negotiations

for merger were pulled back.

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It can be analyzed that, even though both the countries have strong feminine cultures,

which are considered easier, the lack of preparation due to perceived similarities

between the two countries, which led to ignoring the nationalist sentiments and cross-

cultural differences and sub-cultural differences led to the failure.

5.2.2 Cross-cultural negotiation between Google and Chinese Government In, 2005, when Google had emerged as the world’s Internet Titan with Google.com

stood becoming one of the most visited sites on the internet. While, it had expanded

to other countries in the world, China, was a country that remained behind its reach.

A team of Google representatives were assigned to negotiate with the Chinese

Government officials, where the team was briefed with the Chinese Culture and press cover of China’s recent policy announcements regarding the internet. Google was

already available in China but could not offer reliable and efficient services to the

market due to restrictions by the government. Google tried to protect its financial

interests by joining hands with Chinese search engine company Baidu. Although

Chinese customers could access Google’s censorship-free sites, their searches were

monitored by the Chinese Government and some were blocked by them using the

Great Firewall, a system that blocks sites black-listed by Chinese Government. This had reduced the speed and efficiency of Google in China, which was a threat to

Google’s financial interests in China.

China, having a nationalist culture, foreign brands were not accepted willingly by the

Chinese customers. However, the main aim of Google was to get the domain name

‘.cn’ in China, but there was a fear that Chinese censorship could harm the credibility

of the company. Both the parties had different interests. The Chinese wanted to

achieve technological parity with the US and giving Google to have a Chinese domain

name would allow Chinese engineers to have access to Google’s proprietary research technology, which would also avoid brain drain and create jobs for Chinese citizens.

Internet censorship was not as important to the Chinese as for Google, their main aim

was economic development in China. Chinese Government has strict control over

media including internet to limit political opposition and westernization of China.

Eventually Google had to accept the censors to get license to establish their server in

China. During the negotiations at Beijing, there was clear distance between two parties

over various issues, and neither of the party was confident that the deal would be

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cracked. The Google team settled the deal accommodating the censors (Brett &

Grogan, 2006).

From the above it can be said that as Peleckis mentioned, the cultural backgrounds

influence the negotiations, the Chinese being nationalist (from history and culture) and having a political unwillingness to accept foreign brands were stubborn on their stand.

The contrasting values of both the parties and their motivations needed to be

understood by both the sides.

Both the case-studies show that negotiations are done in every country in business or

in day-to-day life, but the culture, background, value and even political willingness or

unwillingness influence the negotiations. Hence, it is important to understand the other

party’s motives, along with the cultural similarities which can be materialized upon,

and cultural and sub-cultural differences which can cause limitations to negotiating a deal. Considering cultural values of the other party and understanding their cultural

and subcultural influences, such as values, history, political will, level of nationalis m

etc., can help to design negotiation in a better way, and a mid-way through the

contrasting values could be possible with the help of experts in negotiation.

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6. Conclusion Negotiation is the basis of human interactions and is very essential part of human

lives. Negotiation happens between professionals, business parties, work colleagues ,

between customer and salesman, between boss and employee, between labour

unions and management of companies as well as between parents and children,

between friends, between siblings, between room-mates etc. Negotiation is basically referred to as an interaction to get something you want from the other person or to

resolve the conflicting interests or other struggles and come to an outcome. If the

negotiators are competitive, the outcome may not be good for both, or good for one

and bad for the other (win-lose outcome). However, it the negotiators are co-operative,

generally both the parties benefit in some way or the other at a small compromise

(win-win outcome). Hence, it is very important to have essential negotiation skills to

make negotiations fruitful. The strategies that are used by negotiators change

according to the context. Curiosity, creativity, empathy, self-discipline, good listening, planning, scheduling, calmness etc. are some of the important skills that the

negotiators should use to make effective communications, whether in business or at

other informal occasions. Understanding culture is also important to understand the

negotiation style of the other party. Understanding the different cultural dimensions,

help negotiator to be more tolerant or accepting and lessens the misunderstandings

and errors in cross-cultural negotiations. Since, the world has become global, cross-

cultural interactions are seen everywhere, at schools and colleges, between students, between work colleagues at workplace, between professionals and their clients,

between friends of different cultural backgrounds, or two parties in an international

business.

Hence, it can be concluded that negotiation happens everywhere in daily lives of

people and is just not reserved for skilled diplomats, experts, professionals,

businesses, but to everyone at different levels in life.

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7. References: Barber, W.W. & Fletcher-Chen, C., (2015) Practical Business Negotiation, NY: Routledge.

Brett, J. & Grogan, C., (2006) Google and the government of China: a case study in

cross-cultural negotiations, Kellogg School of Management, Florida: SAGE

Knowledge.

Brett, J.M., (2014) Negotiating Globally: How to Negotiate Deals, Resolve Disputes,

and make decisions across cultural boundaries.

Carte, P., & Fox, C., (2008) Bridging the Culture Gap: A practical guide to International

business communication,2nd Ed., UK: Kogan Page. Cohen, S., (2002) Negotiating Skills for Managers, USA: McGraw-Hill.

Diamond, S., (2010) Getting More: How can you negotiate to succeed in work and life,

UK: Penguin.

Downs, L.J., (2009) Negotiation skills Training, USA: ASTD.

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Imai, L., & Gelfand, M.J., (2010) The culturally intelligent negotiator: The impact of

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