PSM2202 Procurement Business Negotiation

for Bachelor of Procurement and Supply Chain Management

Topic 7: International and Cross-cultural Negotiations

By
Matthew Kalubanga, PhD
Senior Lecturer in procurement, logistics and supply chain management
mkalubanga@mubs.ac.ug
+256704810579/784310579
A Quick recap of what has been covered so far
• The concept of negotiation—definition,
objectives/goals of procurement negotiations,
content, tactics, negotiation strategies, etc..
• The procurement negotiation process
• Analysis and decision tools that may support negotiation (or negotiators
as they undertake negotiations)
• Factors affecting procurement negotiation: affecting procurement
negotiation process and its outcomes, choice of negotiation
strategies/approaches, etc…
• Effective/good negotiators and their characteristics, behavioural factors
• Evaluating negotiation performance; what? why? When?
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Today’s Agenda
• Factors that make international negotiations different
• The most studied aspects of international negotiation
• The influences of culture on negotiations
• Cultural responsive strategies available to the international negotiator

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1. What makes international negotiations different?
• Environmental context • Immediate context
• Political and legal pluralism • Relative bargaining power
• International economics • Levels of conflict
• Foreign governments and • Relationship between negotiators
bureaucracies • Desired outcomes
• Instability • Immediate stakeholders
• Ideology
• Culture
• External stakeholders

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What makes international negotiations different?
The Context of international negotiations
Environmental

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Environmental context
• Political and Legal Pluralism
• Taxes that an organisation pays, labour codes or standards
• Different codes of contract law and standards of enforcement
• Political consideration
• International economics
• The exchange value of international currencies naturally fluctuates
• Any change in the value of currency
• Foreign governments
• The extent to which the government regulates industries and
organisations
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Environmental context
• Instability
• Lack of resources that a given country commonly expect during business negotiation
(paper, electricity, computers);
• Shortage of other goods and service (food, reliable transportation portable water);
and Political instability (coups, sudden shifts in government policy, major currency
revaluations)
Salacuse (1998) suggests that negotiators facing unstable circumstance should include
clauses in their contracts that allow easy cancellation or neutral arbitration, and
consider purchasing insurance policies to guarantee contract provisions.
• Ideology
• Individualism and capitalism. For instance, Americans believe strongly in individual
rights, the superiority of private investment, and the importance of making a profit in
business. *Negotiators from other countries do not share this ideology.

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Environmental context
• Culture
people from different cultures appear to negotiate differently, behaving
differently, and may also interpret the fundamental processes of
negotiation differently—deductive or inductive
• External stakeholders
The various people and organisations that have an interest or stake in
the outcome of the negotiation (by Phatak and Habib, 1996). Include
business associations, labour unions, embassies, and industry
associations, among others

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Immediate Context
• Relative bargaining power
Some of the factors may influence the relative bargaining power: the
amount of venture (financial and other investment); the management
control of the project; the special access to markets; distribution
systems or managing government relations
• Levels of conflict
The level of conflict and type of interdependence between the parties
to a cross-cultural negotiation will influence the negotiation process
and outcome. Those based on ethnicity, identity or geography are more
difficult to resolve.
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Immediate Context
• Relationship between negotiators
The history of relations between the parties will influence the current
negotiation, just as the current negotiation will become part of any
future negotiations between the parties.
• Desired outcomes
Some tangible and intangible factors play a large role in determining
the outcomes of international negotiations.
• Immediate stakeholders
It contains the negotiators themselves and the people they directly
represent such as their managers, employers and boards of directors
(Phatak and Habib, 1996).

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How do we explain international negotiation
outcomes?
• One-variable arguments cannot explain conflicting international
negotiation outcomes (Mayer, 1992).
• The negotiation processes and outcomes are influenced by many
factors, and that the influence of these factors can change in
magnitude overtime.
• The challenge for every negotiator is to understand the simultaneous,
multiple influences of several factors on the negotiation process and
outcome and to update this understanding regularly as circumstances
change.

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2. Conceptualising culture and negotiation
• Four ways to conceptualising culture in international negotiation
• Culture as learned behaviour
• Culture as shared value
• Culture as dialectic
• Culture in context
• Culture as learned behaviour
This approach to understanding the effect of culture documents the
systematic negotiation behaviour of people in different cultures. It
concentrates on creating a catalog of behaviour that foreign
negotiators should expect when entering a host culture.
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Conceptualising culture and negotiation
• Culture as shared value
This approach to conceptualising culture concentrates on
understanding central values and norms and then building a model for
how these norms and values influence negotiations within that culture.
Geert Hofstede (1980a, 1980b, 1989, 1991) conducted an extensive
program of research on cultural dimensions in international business
and suggested that four dimensions could be used to describe the
important differences among the cultures;
• Individualism/collectivism
• Power distance
• Career success/Quality of life
• Uncertainty avoidance
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Individualism/Collectivism
• Individualistic societies encourage their young to be independent and
to look after themselves. Collectivistic societies integrate individuals
into cohesive groups that take responsibility for welfare of each
individual.
• Hofstede suggests that focus on relationships in collectivistic societies
plays a critical role in negotiations, contrast this with individualistic
societies in which negotiators are considered interchangeable, and
competency is an important consideration when choosing a
negotiation.

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Power distance
• The power distance dimension describes “the extent to which the less
powerful members of organisation and institutions accept and expect
that power is distributed unequally”.
• According to Hofstede, cultures with greater power distance will be
more likely to concentrate decision making at top, and all important
decisions will have to be finalised by the leader.
• Cultures with low power distance are more likely to spread the
decision making throughout the organisation, and while leaders are
respected, it is also possible to question their decisions.

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Career Success/Quality of life
• According to Hofstede (1989), this dimension (career success/quality
of life) influences negotiation by increasing the competitiveness when
negotiators from career success cultures meet; negotiators from
quality of life cultures are more likely to have empathy for the other
party or seek compromise.

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Uncertainty avoidance
• This dimension indicates to what extent a culture programs its members
to feel either uncomfortable or comfortable in unstructured situations.
• Negotiators from high uncertainty avoidance cultures are less
comfortable with ambiguous and are more likely to seek stable rules
and procedures when they negotiate.
• Negotiators from low uncertainty avoidance cultures are likely to adapt
to quickly changing situations and will be less uncomfortable when the
rules of the negotiation are ambiguous or shifting.

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Shalom Schwarz’s 10 Cultural Values
• He concentrates on identifying motivational goal underlying cultural
values and found 10 values. These 10 values may conflict or be
compatible with each other.
• He also proposed that the 10 values may be represented in two
bipolar dimensions:
Openness to change/conservatism, and
self-transcendence/self enforcement

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Schwartz’s 10 cultural values

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Culture as dialectic
• Janosik (1987) recognises that all cultures contain dimensions or
tensions that are called dialectic. This approach has advantage over
the culture-as-shares-values approach because it can explain
variations within cultures.
Culture in context
• Tinsley, Brett, Shapiro, and Okumura (2004), proposed cultural
complexity theory in which they suggest that cultural values will have
a direct effect on negotiations in some circumstances and a
moderated effect in others. Values are proposed to have a direct
influence when they have strong effects across several different
contexts, whereas values that have a moderated effect are those that
have different contextual instigators in the culture.
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Cultural differences
• Cultural differences cause four kinds of problems in international
business negotiations. These differences are manifested in:
• Language
• Nonverbal behaviours
• Values
• Thinking and decision making process
• Language
• Problems of comprehension/use of ‘false friends’ words, especially in high-
context cultures
• Misuse of language or using commands

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High context Vs Low context
• High context: communication draws on shared culture, fewer words need
to suggest meaning.
• Low context: communication is more direct and explicit.
• Translators
• Use to communicate with the other side
• Use to gain time in making responses
• Use to study the nonverbal communications on the other side
• Internal group conversations should be allowed and followed
• Nonverbal behaviours
• Anthropologist Ray L. Birdwhistell: less than 35% of the message in conversation is
conveyed by the spoken word while the other 65% is communicated nonverbally.
• Albert Mehrabian: where meaning in face-to-face interactions comes from
• 7% from the words used
• 38% from speaking style: tone of voice, loudness etc.
• 55% from facial expressions

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3. The influence of culture on Negotiation (both the
managerial and research perspective).
• First: The managerial perspective
• Cultural differences have been suggested to influence negotiation in several different
ways. The table below summarises 10 ways that culture can influence negotiation

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The influence of culture on Negotiation (both the
managerial and research perspective).
• Second: The research perspective
• A conceptual model of where culture may influence negotiation has been
developed by Jeanne Brett (2001).
• Jeanne Brett’s (2001) model identifies how the culture of both negotiators
can influence the setting of priorities and strategies, the identification of the
potential for integrative agreement, and the pattern of interaction between
negotiation.
• Brett suggests that cultural values should have strong effect on negotiation
interests and priorities, while cultural norms will influence negotiation
strategies and the pattern of interaction between negotiators will also be
influenced by psychological processes of negotiators, and culture has an
influence on these processes.

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How culture affects negotiation (Brett, 2001)

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4.
Culturally responsive negotiation strategies
• Negotiators should be aware of the effects of cultural
differences on negotiation and to take them into account when
they negotiate.
• Weiss (1994) has proposed a useful way of thinking about the
options we have when negotiating with someone from another
culture.
• Weiss’s (1994) culturally responsive strategies may be arranged
into three groups, based on the level of familiarity (low,
moderate, high) that a negotiator has with the other party’s
culture.
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 Low familiarity
• Employ Agents or Advisors (Unilateral Strategy).
• This relationship may range from having the other party conduct the
negotiations under supervision (agent) to receiving regular or occasional
advice during the negotiation.
• Bring in a Mediator (Joint Strategy)
• Interpreters will often play this role, providing both parties with more
information than the mere translation of words. Mediators may encourage
one side or the other to adopt one culture’s approaches or a third culture
approach.

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 Moderate familiarity
• Adapt to the other negotiator’s approach (Unilateral Strategy)
• This strategy involves negotiators making conscious changes to their approach
so that it is more appealing to the other party. Rather than trying to act like
the other party, negotiators using this strategy maintain a firm grasp on their
own approach but make modification to help relations with the other person.
• Coordinate Adjustment (Joint Strategy)
• This strategy involves both parties making mutual adjustments to find a
common process for negotiation. Using this strategy requires a moderate
amount of knowledge about the other party’s culture and at least some
facility with his or her language

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 High familiarity
• Embrace the other negotiator’s approach (Unilateral Strategy)
• This strategy involves adopting completely the approach of the other
negotiator, the negotiator need to be completely bilingual and bicultural.
• Improvise an approach (Joint Strategy)
• To use this approach, both parties to the negotiation need to have high
familiarity with the other party’s culture and a strong understanding of the
individual characteristics of the other negotiator.
• Effect Symphony (Joint Strategy)
• This strategy allows negotiators to create a new approach that may include
aspects of either home culture or adopt practices from a third culture.

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 Conclusion
• Culture is an important aspect to consider in procurement (and other
business) negotiations.
• Negotiators acting in international procurement negotiations should
appreciate the effects of differences in culture (especially as culture
changes from one country context to another).

Next lecture: Ethical considerations in cross-cultural/international

procurement negotiations.

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End of the lecture presentation
Thank you for listening

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