Mastering Cross-Cultural Business Negotiations

Understanding Cross-Cultural Negotiations

Negotiation is the interaction of two or more parties that are attempting to define or redefine their interdependence in a business matter.

The Role of Cultural Intelligence

Cultural intelligence is the capability to relate and work effectively in culturally diverse situations. Two primary factors influence international negotiations:

• Environmental context: These are environmental forces that any of the parties control, including ideological differences, legal diversity, and political diversity.
• Immediate context: These are factors over which negotiators appear to have some control, such as the desired outcomes of negotiations.

Defining Culture: Values and Norms

Culture is a set of norms and values embedded in a human collective that gives it identity and makes sense of its behaviors.

1. Values: Abstract ideas about what a group believes to be good; sharing the same ideas in terms of justice, democracy, and more.
2. Norms: Social rules and guidelines that prescribe appropriate behavior in particular situations.

Internationalizing the Value Chain

Internationalizing the value chain functions when a firm is internationally oriented. There is a clear distinction between downstream functions (related to the buyer) and upstream functions (independent of the buyer).

Strategic Focus on Value Chain Activities

Some industries focus on either downstream or upstream activities in order to improve their competitive advantages (CAs):

• When downstream activities are vital for CA, industries tend to be multidomestic. These are firms that assume customers differ drastically in each country and that products should be personalized to fulfill their needs.
• When upstream activities are vital for CA, industries tend to be global. These firms assume all consumers in all countries are the same, utilizing standardized products such as Coca-Cola.

Internationalization Theories and Motives

International strategy refers to the management processes through which companies analyze the international environment and develop accurate responses according to their resources.

Proactive vs. Reactive Motives

Proactive motives act as a stimulus to attempt strategy changes:

• Profit and growth goals
• Tax benefits
• Foreign market opportunities

Reactive motives are reactions to facing pressures or threats in their own markets:

• Competitive pressures
• Overproduction capacity
• Small domestic market

Triggers for Internationalization

Several factors initiate the internationalization process:

• Internal triggers: Perceptive management and specific internal events.
• External triggers: Market demand and competing firms.