Chapter 1 An Overview of

International Business Negotiation

Diplomacy is the art of letting someone else

have your way.
______ Daniele Vare, Italian diplomat
An Overview of International Business
Negotiation

Key Points
1. Concepts of business negotiation
2. Characteristics of international business
negotiation
3. Forms of international business negotiation
An Overview of International Business
Negotiation

1.1 Definition and Characteristics of

International Business Negotiation
1.2 Forms of International Business Negotiation
1.3 The Basic Forms of International Business
Negotiation
1.1 Definition and Characteristics of
International Business Negotiation

1.1.1 Definition and characteristics of

negotiation
1.1.2 Definition and characteristics of
business negotiation
1.1.3 Definition and characteristics of
international business negotiation
What is negotiation?

The definition of negotiation is very simple,

while its scope is wide. Every wish or need
may cause a negotiation. Once people
exchange their ideas to adjust their relation,
or they exchange views to reach
agreements, they are negotiating.

Gerard I Nierenberg, The Art of Negotiating

 What is negotiation?

 Various definitions have been given; but researchers have not agreed on a
 common one. A few are quoted for your reference:

 1. Negotiation is a basic means of getting what you want from others.

 - It is back-and-forth communication designed to reach an agreement when you

and the other side have some interests that are shared and others that are
opposed (Fisher, Ury & Patton, 1981).
Definition

 2. Negotiation is a discussion intended to

produce an agreement; a treaty with another
respecting sale or purchase; a transaction of
business between nations; the mutual
interaction of governments by diplomatic
agents, in making treaties, smoothing
differences, etc.
Definition

 3. Negotiation is an activity that all managers

and professionals engage in. It’s necessary
to negotiate at every stage of a project or
business transaction, in order to reach an
agreement.
Definition

 4. Negotiation is a basic, generic human

activity---a process that is often used in
labor-management relation, in business
deals like mergers and sales, in international
affairs, and in our everyday activities.
 What is negotiation?
  

 5,-Negotiation is a viable way of resolving a conflict when the following

 conditions hold true (See Lewickie, Litterer, Minton, and Saunders 1994:


Elements of a negotiation

 1) There are two or more parties---two or

more individuals, groups, organizations;
 2) There is a conflict of interest between two
or more parties; that is, what one wants is not
necessarily what the other wants, and the
parties must search for a way to resolve the
conflict, sometimes, through a third party;
 3) The parties negotiate because they think
they can use some form of influence to get a
“better” deal than simply take what the other
side will voluntarily give them or let them
have. Negotiation is largely a voluntary
process. It is a strategy pursued by choice;
seldom are we required to negotiate
 4) The parties, at least for the moment, prefer
to search for agreement rather than to fight
openly, have one side capitulate,
permanently break off contact, or take their
dispute to a higher authority to resolve it.
 6) Finally, when we negotiate, we expect give
and take. We expect that both sides will
modify or give in somewhat on their opening
statements, requests, or demands.
Definition of negotiation

Negotiation
->The action and the
process of reaching
an agreement by
means of
exchanging ideas
with the intention of
dispelling conflicts
and enhancing
relationship to
satisfy each other’s
needs. Zhuge, Liang Disputes With The
Southern Scholars
Characteristics of negotiation

(1) Every negotiation involves two or more parties. (role-

play negotiation, UNmarriage events)
(2) The objective of a negotiation must be definite.
(persuasion, mutual interests, rambling negotiation)
(3) Negotiation must be conducted on an equal basis.
(4) A consensus must be built on the basis of mutual
concession.
(5) Negotiation involves exchange of ideas,
communication, persuasion, compromise and
suchlike. (process)
Approaches: Integrative vs.
Distributive, Contingency

 Integrative approach (also called a cooperative or win-win approach)

The core of their thinking is mutual success and convergence of interests.
Seeking convergence of each other’s interests is to conduct negotiations by
exploring mutual benefits so that a better and bigger cake of common interests
will be jointly made for mutual sharing. To put it simple, “Everybody wins”.
 Integrative approach is opposite to distributive (also called competitive or win-
lose approach) approach. Conventional practice of distributive approach takes
the following steps: 1) Determine each party’s own interests and stance; 2)
Defend one’s own interests and stance; 3) Discuss the possibilities of making
concession; 4) Reach an agreement of compromising; or 5) Declare failure of
negotiation. Negotiators guided by this approach would protect and defend
habitually each party’s utmost interests by taking firm stance in negotiations,
therefore concessions often prove to be very difficult to make, which would
inevitably throw negotiations into impasse or failure. The two dimensional
concept largely accounts for numerous failed negotiations. Of course, there are
cases of a much stronger party forcing the weaker party into agreement.
Nevertheless, these cases cannot be labeled as negotiations but rather a
practice of hegemony or playing the bully.
Figure 1 The Dual Concerns Model
Definition of Business negotiation

Business negotiation
->a process of conferring in which the
participants of business activities
communicate, discuss, and adjust their
views, settle differences and finally reach a
mutually acceptable agreement in order to
close a deal or achieve a proposed financial
goal.
Characteristics of
Business Negotiation

(1) The objective of business negotiation is to

obtain financial interest
(2) The core of business negotiation is price
(3) Its principle is equality and mutual benefit
(4) Items of contract should keep strictly
accurate and rigorous
Principles of business negotiation

 1. Equality principle
 2. Cooperation principle
 3. Flexibility principle
 4. Positions-subjected-to-interests principle
 5. Depersonalizing principle (Separating the
people from the problem)
 6. Using objective criterion
Definition of
International Business Negotiation

International Business Negotiation

-> the business negotiation that takes place
between the interest groups from different
countries or regions.
Features of
International Business Negotiation

(1) Language barrier

(2) Cultural differences
(3) International laws and domestic laws are both in
force
(4) International political factors must be taken into
account
(5) The difficulty and the cost are greater than that of
domestic business negotiations
1.2 Forms of
International Business Negotiation

1.2.1 Classification by chief negotiator

1.2.2 Classification by negotiation object
1.2.3 Classification by form
1.2.4 Classification by procedure
Classification by chief negotiator

(1) Government- to- government’s negotiation

(2) Government- to- Business’s negotiation
(3) Producer- to- Producer’s negotiation
(4) Producer- to- Trader’s negotiation
(5) Retailer- to -Producer’s negotiation
(6) Business- to- Business’s negotiation
(7) Business- to- Consumer’s negotiation
Classification by negotiation object

(1)Product trade negotiation

(2)Technology trade negotiation
(3) Service trade negotiation
(4) International project negotiation
Classification by form

(1) One- to- one negotiation

(2) Team negotiation
(3) Multilateral negotiation
Classification by procedure

(1) Horizontal Negotiation

(2) Vertical Negotiation
 1.3 The Basic Forms of
International Business Negotiation

1.3.1 “Host Court” negotiation and “Guest

Court” negotiation
1.3.2 Oral negotiation and written negotiation
1.3.3 Formal and informal negotiation
“Host Court” negotiation and “Guest
Court” negotiation

(1) Host- Court negotiation

(2) Guest- Court negotiation
(3) Changing- Court negotiation
(4) Third- place negotiation
Oral negotiation and Written
negotiation

(1) Oral negotiation

(2) Written negotiation

Advantages VS. Disadvantages

Formal and Informal negotiation

(1) Formal negotiation

(2) Informal negotiation
 Tips for International Business
Negotiations

 Do’s and don’ts rules for international business negotiations are listed in many
textbooks and guidebooks. The value of these prescribed rules mostly lies in their
attempt to raise awareness of cross-cultural diversity. The following basic rules should
be followed by the international business negotiator:
 1. Organize a competent delegation.
 2.Identify a couple of dependable contacts in the host country and work with them on
logistics prior to your visit.
 3. Do homework on the host country’s time consciousness, communication styles,
protocol and etiquette, etc.
 4. Bring proper gifts because gifts are appreciated in every culture.
 5. Choose proper topics for socializing.
 6. Bring along a qualified interpreter in case of need.
 7. Learn how to pronounce names of host contacts correctly and clarify their positions
and job titles.
 8. Be well prepared; define in advance your basic interests, objectives and bottom line,
and room for manoeuvre. Before participating in a negotiation, learn the basics about
the behavioral norms in your partner’s culture, especially concerning appointments,
punctuality and planning.
 Tips for International Business
Negotiations

 9. Take time for adequate preliminaries: getting to know the other party is most often crucial. More time
is needed in international business negotiations, since cultural as well as personal knowledge has to be
acquired.
 10. Be flexible with the negotiation agenda if the other party does not stick to it.
 11. If needed, be prepared to renounce a negotiation, because the stakes are too low, or send lower
level, less expensive executives. If possible, negotiation at home (turf/home soil advantage) where you
have a competitive advantage over your foreign partner in terms of time control.
 12. Be ready for different communication styles (verbal) and be cautious in interpreting (non-verbal)
silence, emotionality, threats and any kind of manipulative/instrumental communication.
 13. Never tell the other side when you are leaving because this gives them control over your time.
 14. Respect the sensitivities (hot buttons) of your partner in the area of (i) personal status and (ii)
national pride.
 15. Allow yourself plenty of time, and even more. Patience is an asset for negotiation and it is destroyed
by time pressure.
 16. Do not get fooled by the other party seemingly sharing your time pattern: try to set realistic dates
and deadlines and plan modestly and realistically. (monochronic vs. polychronic) Tight deadlines may
result in jumbo delays that ruin the credibility of the whole planning process.
 17. Try to balance relationship- orientation and deal-orientation: wait for the negotiation process to
extend beyond the signature of the deal.
Exercises

 1. Think of a negotiation you were recently

involved in. How do you think it went? If you
had the negotiation again, would you do
things differently?
 2. Answer the following questions according
to the text:
 How is negotiation defined?
 In what aspects do distributive and integrative
approaches differ from each other?
 What is the essence of business negotiation?
 What are the six principles of business negotiation?
 Exercises
 3.Please read and reflect on the following anecdotes for their morals. Then work in pairs for possible
solutions to the following problem: Suppose that you are the seller and your partner is the purchaser.
The seller’s position is stated as selling a certain number of sewing machines at X dollars per unit
whereas the purchaser’s position is expressed as receiving a certain number of sewing machines
within a month’s time at X minus US$30 per unit. Please jointly work out a solution and report to the
class.
 Anecdote 1
 Recently two of my sons were squabbling over some apple pie, each insisting that he would have the
larger slice. Neither would agree to an even split. So I suggested that one boy cut the pie any way he
liked, and the other boy could choose the piece he wanted. This sounded fair to both of them, and
they accepted. Each felt that he had gotten the square deal.
 Anecdote 2
 Two kids are squabbling over the last orange in the fridge. When Dad hears the ruckus, he goes into
the kitchen and is sure he’s got the answer. He slices the fruit into equal halves and gives one to
each kid. Surprising, no one is happy. Why? Because one kid just wanted the pulp, and the other just
wanted the rind.
 Anecdote 3
 Two men were quarrelling in a library. One wants the window open and the other wants it closed.
They bicker back and forth about how much to leave it open: a crack, halfway, three quarters of the
way. No solution satisfies them both. The librarian enters. She asks why he wants the window open:
“To get some fresh air.” She asks the other why he wants it closed: “To avoid the draft.” After thinking
a minute, she opens wide a window in the next room, bringing in fresh air without a draft.
Exercises

 4. Discussion: Business is negotiation. Please

comment on this statement.
 5. Name the six basic principles for international
business negotiations.
 6. What is the moral of the following nursery rhyme?
“Jack Sprat could eat no fat
His wife could eat no lean
And so betwixt them both
They licked the platter clean.”
Homework

 Review Chapter 1.
 Preview Chapter 2 and 3, you could divide
the work among group members, then learn
from each other.
 Case group one please send the case slides
you are going to present into my e-mail box
before this Sunday.