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It is clear that competitive positioning and long-term successful operations in a global market require a working knowledge of the decision-making and negotiating process of managers from different countries. These processes are complex and often interdependent. While managers may make decisions that do not involve negotiating, they cannot negotiate without making decisions, however small, or they would not be negotiating. In addition, managers must understand the behavioral aspects of these processes to work effectively with people in other countries or with a culturally diverse workforce in their own country.
With an understanding of the environment and cultural context of international management as background, we move next in Part 3 to planning and implementing strategy for international operation
Japanese companies are involved in joint ventures throughout the world, espein cially with American companies. The GM-Toyota joint venture agreement
process was the result of over two years of negotiation and decision making. In this new company and in similar companies, Americans and Japanese are involved in decision making at all levels on a daily basis. The Japanese decision- making process greatly differs not only from the American process but from that of many other countries-especially at the higher levels of their organizations.
An understanding of the Japanese decision-making process, and indeed of many of their management practices, requires an understanding of their national culture. As previously discussed, much of the Japanese culture, and therefore the basis of Japanese working relationships, can be explained by the principle of Wa, meaning peace and harmony. This principle is one aspect of the value they attribute to amae, meaning indulgent love, a concept probably originating in the Shinto religion, which focuses on spiritual and physical harmony. Amae results in shinyo, which refers to the mutual confidence, faith, and honor required for successful business relationships. The principle of wa influences the work group, the basic building block of Japanese work and management. The Japanese identify strongly with their work groups, where the emphasis is on cooperation, participative management, consensus problem solving, and decision making based on a patient, long-term perspective. Open expression or conflict is discouraged, and it is of utmost importance to avoid embarrassment or shame-to lose face-as a result of not fulfilling one's obligations. These elements of work culture generally result in a devotion to work, a collective responsibility for decisions and actions, and a high degree of employee productivity. It is this culture of collectivism and shared responsibility that underlies the Japanese ringi system of decision making.
In the ringi system, the process works from the bottom up. Americans are used to a centralized system, where major decisions are made by upper-level managers in a top-down approach typical of individualistic societies. The Japanese process, however, is dispersed throughout the organization, relying on group consensus.
The ringi process is one of gaining approval on a proposal by circulating documents to those concerned throughout the company. It usually comprises four steps: proposal, circulation, approval, and record.68 Usually, the person who originates the written proposal, which is called a ringi-sho, has already worked for some time to gain informal consensus and support for the proposal within the section and then from the department head.69 The next step is to attain a general consensus in the company from those who would be involved in implementation. To this end, department meetings are held, and if necessary, expert opinion is sought. If more information is needed, the proposal goes back to the originator, who finds and adds the required data. In this way, much time and effort-and the input of many people-go into the proposal before it actually becomes formal.
Up to this point, the process has been an informal one to gain consensus, called the nemawashi process. Then the more formal authorization procedure begins, called the ringi process. The ringi-sho is passed up through successive layers of management for approval-the approval made official by seals. In the end, many such seals of approval are gathered, thereby ensuring collective agreement and responsibility and giving the proposal a greater chance of final approval by the president. The whole process is depicted in Exhibit 5-11.
The ringi system is cumbersome and very time-consuming prior to the implementation stage, although implementation is facilitated because of the widespread awareness of and support for the proposal already gained throughout the organization. But its slow progress is problematic when decisions are time- sensitive. This process is the opposite of the top-down decisions made by Americans, which are made quite rapidly and without consultation, but which then take some time to implement because unforeseen practical or support problems often arise.
In addition, another interesting comparison is often made regarding the planning horizon (aimed at short- or long-term goals) in decision making between the American and Japanese systems. The Japanese spend considerable time in the early stages of the process defining the issue, considering what the issue is all abotit, and determining whether there is in fact a need for a decision. They are more likely than Americans to consider an issue in relation to the overall goals and strategy of the company. In this manner, they prudently look at the big picture and consider alternative solutions, instead of rushing into quick decisions for immediate solutions, as Americans tend to do.
Of course, in a rapidly changing environment, quick decisions are often necessary-to respond to competitors' actions, a political uprising, and so forth- and it is in such contexts that the ringi system sometimes falls short because of its slow response rate. The system is, in fact, designed to manage continuity and to avoid uncertainty, which is considered a threat to group cohesiveness.
In addition to affecting different stages of the decision-making process, value systems influence the overall approach of decision makers from various cultures. The relative level of utilitarianism versus moral idealism in any society affects its overall approach to problems. Generally speaking, utilitarianism strongly guides behavior in the Western world. In fact, research has shown that Canadian executives are more influenced by a short-term, cost-benefit approach to decision making than their Hong Kong counterparts. Canadian managers are considerably more utilitarian than leaders from the People's Republic of China, who approach problems from a standpoint of moral idealism; they consider the problems, alternatives, and solutions from a long-term, societal perspective rather than an individual perspective.
Another important variable in companies' overall approach to decision making is that of autocratic versus participative leadership. In other words, who has the authority to make what kinds of decisions? A country's orientation-whether it is individualistic or collectivist (as discussed in Chapter 3.- influences the level at which decisions are made. In many countries with hierarchical cultures-Germany, Turkey, and India, among others-the authorization for action has to be passed upward through echelons of management before final decisions can be made. Most employees in these countries simply expect the autocrat, the boss, to do most of the decision making and would not be comfortable otherwise. Even in China, which is a highly collectivist society, employees expect autocratic leadership because their value system presupposes the superior to be automatically the most wise. In comparison, in Sweden, decision-making authority is very decentralized. Americans talk a lot about the advisability of such participative leadership, but in practice they are probably around the middle between autocratic and participative management styles.
Arab managers have long traditions of consultative decision making, supported by the Koran and the sayings of Mohamed. However, such consultation occurs more on a person-to-person basis than in group meetings, and thus diffuses potential opposition.67 While business in the Middle East tends to be transacted in a highly personalized manner, the final decisions are made by the top leaders, who feel that they must impose their will for the company to be successful. In comparison, in cultures like Japan's that emphasize collective harmony, participatory or group decision making predominates, and consensus is important. The best-known example is the bottom-up (rather than top-down) decision-making process used in most Japanese companies, described in more detail in the Comparative Management in Focus.
One final area of frequent incongruence concerns the relative speed of decision making. A country's culture affects how fast or slow decisions tend to be made. The relative speed may be closely associated with the level of delegation, as just discussed, but not always. The pace at which decisions are made can be very disconcerting for outsiders. North Americans and Europeans pride themselves on being decisive; managers in the Middle East, with a different sense of temporal urgency, associate the importance of the matter at hand with the length of time needed to make a decision. Without knowing this cultural attitude, a hasty American would insult an Egyptian; a quick decision, to the Egyptian, would reflect a low regard for the relationship and the deal.
As a summary, Exhibit 5-10 illustrates how all the variables just discussed can affect the steps in the decision-making process.
It is crucial for international managers to understand the influence of culture on decision-making styles and processes. Culture affects decision making both through the broader context of the nation's institutional culture, which produces collective patterns of decision making, and through culturally based value systems that affect each individual decision maker's perception or interpretation of a situation.
The extent to which decision making is influenced by culture varies among countries. For example, Hitt, Tyler, and Park have found a more culturally homogenizing influence on the Korean executives' cognitive models than on those of U.S. executives, whose individualistic tendencies lead to different decision patterns. The ways that culture influences an executive's decisions can be studied by looking at the variables involved in each stage of the rational decision-making process. These stages are (1. defining the problem, (2. gathering and analyzing relevant data, (3. considering alternative solutions, (4. deciding on the best solution, and (5. implementing the decision.
One of the major cultural variables affecting decision making is whether a country assumes an objective approach or a subjective approach. Whereas the Western approach is based on rationality (managers interpret a situation and consider alternative solutions based on objective information), this approach is not common throughout the world. Latin Americans, among others, are more subjective, basing decisions on emotions.
Another cultural variable that greatly influences the decision-making process is the risk tolerance of those making the decision. Research shows that people from Belgium, Germany, and Austria have a considerably lower tolerance for risk than people from Japan or the Netherlands, whereas American managers have the highest tolerance for risk.
One importInt variable in the decision-making process is the manager's perception of the locus of control over outcomes-whether that locus is internal or external. Some managers feel that they can plan on certain outcomes because they are in control of events that will direct the future in the desired way. In contrast, other managers believe that such decisions are of no value because they have little control over the future, which lies in the hands of outside forces, such as fate, god, or nature. American managers believe strongly in self-determination and perceive problem situations as something they can control and that they should change. However, managers in many other countries, Indonesia and Malaysia among them, are resigned to problem situations and do not feel that they can change them. Obviously, these different value systems will result in a great difference in the stages of consideration of alternative actions and choice of solution, often because certain situations may or may not be viewed as problems in the first place.
Another variable that affects the consideration of alternative solutions is how managers feel about staying with familiar solutions or trying new ones. Many managers, particularly those in Europe, value decisions based on past experiences and tend to emphasize quality. Americans, on the other hand, are more future oriented and look toward new ideas to get them there.
Negotiation acftlally represents the outcome of a series of small and large decisions. The decisions include those made by each party before actual negotiations start-in determining, for example, the position of the company and what failback proposals it may propose or accept. They also include incremental decisions, made during the negotiation process on how to react and proceeds when to concede, and on what to agree or disagree. Negotiation can thus be seen as a series of explicit and implicit decisions, and the subjects of negotiation and decision making become interdependent.
For instance, sometimes just the way in which a decision is made during the negotiation process can have a profound influence on the outcome, as this example shows:
In his first loan negotiation a banker new to Japan met with seven top
Japanese bankers who were seeking a substantial amount of money.
After hearing their presentationi the American agreed on the spot. The
seven Japanese then conferred among themselves and told the American they would get back to him in a couple of days as to whether they
would accept his offer or not. The American banker learned a lesson he never forgot.
The Japanese bankers expected the American to negotiate, to take time to think it over, and to consult with colleagues before giving the final decision. His immediate decision made them suspicious, so they decided to reconsider the deal.
There is no doubt that the speed and manner of decision making affects the negotiation process. In addition, how well negotiated agreements are implemented is affected by the speed and manner of decision making. In that regard, it is clear that the effective use of technology is playing an important role, especially when dealing with complex cross-border agreements in which the hundreds of decision makers involved are separated by time and space.
The role of decision making in management, however, goes far beyond the finite occasions of negotiations. It is part of the manager's daily routine-from operational-level, programmed decisions requiring minimal time and effort to those nonprogrammed decisions of far broader scope and importance, such as the decision to enter into a joint venture in a foreign country
Much of the negotiation process is fraught with conflict-explicit or implicit, and such conflict can often lead to a standoff, or a lose-lose situation. This is regrettable, not only for the situation at hand, but because it probably will shut off future opportunities for deals between the parties. Much of the cause of such conflict can be found in cultural differences between the parties-in their expectations, in their behaviors, and particularly in their communication styles.
As discussed in Chapter 4, much of the difference in communication styles is attributable to whether you are part of a high-context or low-context culture (or somewhere in between), as shown in Exhibit 4-4.) In low-context cultures such as that in the United States, conflict is handled directly and explicitly. It is also regarded as separate from the person negotiating-that is, the negotiators draw a distinction between the people involved and the information or opinions they are representing. They also tend to deal on the basis of factual information and logical analysis. That approach to conflict is called instrumental oriented.61 In high- context cultures, such as in the Middle East, the approach to conflict is expressive oriented-that is, the situation is handled indirectly and implicitly and there is no clear delineation of the situation from the person handling it. Those negotiators do not want to get in a confrontational situation because it is regarded as insulting and would cause a loss of face, so they tend to use evasion and avoidance if they cannot reach agreement through emotional appeals. Their avoidance and inaction conflicts with the expectations of the low-context negotiators who are looking to move ahead with the business at hand and arrive at a solution.
The differences between high- and low-context cultures which often lead to conflict situations are summarized in Exhibit 5-9. As you can see, most of these variables were discussed earlier in this chapter or in Chapter 4 on communication. The reason for the overlap is that the subjects and culture and communication are really inseparable, and negotiation differences and conflict situations arise from variables in culture and communication.
The point here is, how can a manager from France, from Japan, or from Brazil, for example, manage conflict situations? The solution, as discussed before, lies mainly in your ability to know and understand the people and the situation you will face. Be prepared by developing an understanding of the cultural context in which you will be operating: What are the expectations of the persons you will be negotiating with? What kinds of communication styles and negotiating tactics should you expect, and how will they differ from your own? It is important to bear in mind your own expectations and negotiating style and to be aware of the other parties' expectations about your behavior. Try to consider in advance what it will take to arrive at a win-win solution. Often it helps to use the services of a host-country adviser or mediator who may be able to help with early diffusion of a conflict situation.
One contemporary tool in negotiation and decision making which helps to avoid circumstances of conflict is the on-line B2B marketplace: exchanges, where buyers and sellers negotiate prices, speed up the decision-making and transaction process, as described in the accompanying E-Biz Box.
The Chinese way of making decisions begins with socialization and ini tiatio of personal guanxi [friendships] rather than business discussion. The focus is not market research, statistical analysis, facts, power-point presentations, or to-the-point business discussion. My focus must be on fostering guanxi.
When westerners attempt business negotiations with representatives from the People's Republic of China, cultural barriers confront both sides. The negotiation process used by the Chinese-although there are variations among the Cantonese, Shanghainese, and northern Chinese-is dramatically different from that of Americans. For instance, the Chinese put much greater emphasis than Americans on respect and friendship, on saving face, and on group goals. Long-term goals are more important to the Chinese than the specific current objectives typical of Western negotiators.40'4'
Businesspeople report two major areas of conflict in negotiating with the Chinese-the amount of detail the Chinese want about product characteristics, and their apparent insincerity about reaching an agreement. In addition, Chinese negotiators frequently have little authority, frustrating Americans who do have the authority and are ready to conclude a deal.42 This situation arises because Chinese companies report to the government trade corporations, who are involved in the negotiations, often having a representative on the team. The goals of Chinese negotiators remain primarily within the framework of state planning and political ideals. Although China is tending to become more profit-oriented, most deals are still negotiated within the confines of the state budget allocation for that project, rather than assessment of profitability or value. It is crucial, then, to find out which officials- national, provincial, local-have the power to make, and keep, a deal. According to James Broeririg of Arthur Andersen, who does much business in China, Companies have negotiated with government people for months, only to discover that they were dealing with the wrong people.43
Research shows that for the Chinese, the negotiation process is greatly affected by three cultural norms: their ingrained politeness and emotional restraint, their emphasis on social obligations, and their belief in the interconnection of work, family, and friendship. Because of the Chinese preference for emotional restraint and saving face, aggressive or emotional attempts at persuasion in negotiation are likely to fail. Instead, the Chinese tendency to avoid open conflict will more likely result in negative strategies such as discontinuing or withdrawing from negotiation. At the heart of this kind of response is the concept of face-a concept so important that it is essential for foreigners to understand it to recognize the role that face behavior plays in negotiations. There are two components of face: lien and mien-tzu. Lien refers to a person's moral character, the most important thing defining that person, without which one cannot function in society. It can only be earned by fulfilling obligations to others. Mien-tzu refers to one's reputation or prestige, earned through accomplishments, bureaucratic or political power. Giving others one's time, gifts, or praise enhances one's own face. In negotiations, it is vital that you do not make it obvious that you have won because that means that the other party has lost and will lose face. To avoid this, token concessions and other attempts to show respect must be made, and modesty and control must be maintained, otherwise anyone who feels he or she has lost face will not want to deal with you again. The Chinese will later ignore any dealings or incidents which caused them to lose face, maintaining the expected polite behavior out of social consciousness and concern for others. When faced with an embarrassing situation, they will typically smile or laugh in an attempt to save face, responses which are confusing to Western negotiators.
The Chinese emphasis on social obligations underlies their strong orientation toward collective -goals. Therefore, appeals to individual members of the Chinese negotiating team, rather than appeals to benefit the group as a whole, will probably backfire. The Confucian emphasis on the kinship system and the hierarchy of work, family, and friends explains the Chinese preference for doing business with familiar, trusted people and trusted companies. Foreign negotiators, then, should focus on establishing long-term, trusting relationships, even at the expense of some immediate returns.
Deeply ingrained in the Chinese culture is the importance of harmony for the smooth functioning of society. Harmony is based primarily on personal relationships, trust, and ritual. After the Chinese establish a cordial relationship with foreign negotiators, they use this relationship as a basis for the
give-and-take of business discussions. This implicit cultural norm is commonly known as guanxi, which refers to the intricate, pervasive network of personal relations which every Chinese carefully cultivates; it is the primary means of accomplishing things and getting ahead. In other words, guanxi establishes obligations to exchange favors in future business activities.49 Even within the Chinese bureaucracy, guanxi prevails over legal interpretations. Although networking is important anywhere to do business, the difference in China is that guanxi networks are not just commercial, but also social, involving the exchange both of favor and affection Firms which have special guanxi connections and give preferential treatment to one another are known as members of a guanxihu network. Says Sunny Zhou, general manager of Kumming Lida Wood and Bamboo Products, when he shops for lumber the lumber price varies drastically, depending on whether one has strong gun nxi with the local administrators.
Western managers should thus anticipate extended preliminary visiting (relationship building), in which the Chinese expect to learn more about them and their trustworthiness. The Chinese also use this opportunity to convey their own deeply held principles. They attach considerable importance to mutual benefit. The Chinese expect Western firms to sacrifice corporate goals and above-average profits to Chinese national goals and principles, such as meaningful friendship, Chinese national development, and the growth and enhancement of the Chinese people. Misunderstandings occur when Americans show polite acceptance of these general principles without understanding their significance, because they do not have any obvious relationship to American corporate goals, such as profit. Nor do such principles seem relevant to practical decisions on plant locations, employee practices, or sourcing.
Americans often experience two negotiation stages with the Chinese-the technical and the commercial. During the long technical stage, the Chinese want to hammer out every detail of the proposed product specifications and technology. If there are two teams of negotiators, it may be several days before the commercial team is actually called in to deal with aspects of production, marketing, pricing, and so forth. However, the commercial team should sit in on the first stage to become familiar with the Chinese negotiating style. The Chinese negotiating team is usually about twice as large as the Western team; about a third of the time is spent discussing technical specifications, and a third is spent on price negotiations.
The Chinese are among the toughest negotiators in the world. American managers must anticipate various tactics, such as their delaying techniques and their avoidance of direct, specific answers: both ploys used to exploit the known impatience of Americans. The Chinese frequently try to put pressure on Americans by shaming them, thereby implying that the Americans are trying to renege on the friendship-the basis of the implicit contract. Whereas westerners come to negotiations with specific and segmented goals and find it easy to compromise, the Chinese are reluctant to negotiate details; they find it difficult to compromise and trade because they have entered negotiations with a broader vision of achieving development goals for China, and they are offended when westerners don't internalize those goals. Under these circumstances, the Chinese will adopt a rigid posture, and no agreement or contract is final until the negotiated activities have actually been completed.
Patience, respect, and experience are necessary prerequisites for anyone negotiating in China. For the best outcomes, older, more experienced people are more acceptable to the Chinese in cross-cultural negotiations. The Chinese want to deal with the top executive of an American company, under the assumption that the highest officer has attained that position by establishing close personal relationships and trust with colleagues and others outside the organization. Western delegation practices are unfamiliar to them and they are reluctant to come to an agreement without the presence of the Chinese foreign negotiator. From the Western perspective, confusing jurisdictions of government ministries hamper decisions in negotiations. Americans tend to send specific technical personnel with experience on the task at hand; there fore, they have to take care in selecting the most suitable negotiators. In addition, visiting negotiating teams should realize that the Chinese are probably negotiating with other foreign teams, often at the same time, and will use that setup to play one company's offer against the others. On an interpersonal level, Western negotiators must also realize that, while a handshake is polite, physical contact is not acceptable in Chinese social behavior; nor are personal discussion topics such as one's family. However, it is customary to take small gifts as tokens of friendship. Pye offers the following additional tips to foreigners conducting business with the Chinese:
Practice patience
Accept prolonged periods of stalemate
Refrain from exaggerated expectations and discount Chinese rhetoric about future prospects
Expect the Chinese will try to manipulate by shaming
Resist the temptation to believe that difficulties may have been caused by one's own mistakes -
Try to understand Chinese cultural traits, but realize that a foreigner cannot practice them better than the Chinese.
The Chinese way of making decisions begins with socialization and ini tiatio of personal guanxi [friendships] rather than business discussion. The focus is not market research, statistical analysis, facts, power-point presentations, or to-the-point business discussion. My focus must be on fostering guanxi.
When westerners attempt business negotiations with representatives from the People's Republic of China, cultural barriers confront both sides. The negotiation process used by the Chinese-although there are variations among the Cantonese, Shanghainese, and northern Chinese-is dramatically different from that of Americans. For instance, the Chinese put much greater emphasis than Americans on respect and friendship, on saving face, and on group goals. Long-term goals are more important to the Chinese than the specific current objectives typical of Western negotiators.40'4'
Businesspeople report two major areas of conflict in negotiating with the Chinese-the amount of detail the Chinese want about product characteristics, and their apparent insincerity about reaching an agreement. In addition, Chinese negotiators frequently have little authority, frustrating Americans who do have the authority and are ready to conclude a deal.42 This situation arises because Chinese companies report to the government trade corporations, who are involved in the negotiations, often having a representative on the team. The goals of Chinese negotiators remain primarily within the framework of state planning and political ideals. Although China is tending to become more profit-oriented, most deals are still negotiated within the confines of the state budget allocation for that project, rather than assessment of profitability or value. It is crucial, then, to find out which officials- national, provincial, local-have the power to make, and keep, a deal. According to James Broeririg of Arthur Andersen, who does much business in China, Companies have negotiated with government people for months, only to discover that they were dealing with the wrong people.43
Research shows that for the Chinese, the negotiation process is greatly affected by three cultural norms: their ingrained politeness and emotional restraint, their emphasis on social obligations, and their belief in the interconnection of work, family, and friendship. Because of the Chinese preference for emotional restraint and saving face, aggressive or emotional attempts at persuasion in negotiation are likely to fail. Instead, the Chinese tendency to avoid open conflict will more likely result in negative strategies such as discontinuing or withdrawing from negotiation. At the heart of this kind of response is the concept of face-a concept so important that it is essential for foreigners to understand it to recognize the role that face behavior plays in negotiations. There are two components of face: lien and mien-tzu. Lien refers to a person's moral character, the most important thing defining that person, without which one cannot function in society. It can only be earned by fulfilling obligations to others. Mien-tzu refers to one's reputation or prestige, earned through accomplishments, bureaucratic or political power. Giving others one's time, gifts, or praise enhances one's own face. In negotiations, it is vital that you do not make it obvious that you have won because that means that the other party has lost and will lose face. To avoid this, token concessions and other attempts to show respect must be made, and modesty and control must be maintained, otherwise anyone who feels he or she has lost face will not want to deal with you again. The Chinese will later ignore any dealings or incidents which caused them to lose face, maintaining the expected polite behavior out of social consciousness and concern for others. When faced with an embarrassing situation, they will typically smile or laugh in an attempt to save face, responses which are confusing to Western negotiators.
The Chinese emphasis on social obligations underlies their strong orientation toward collective -goals. Therefore, appeals to individual members of the Chinese negotiating team, rather than appeals to benefit the group as a whole, will probably backfire. The Confucian emphasis on the kinship system and the hierarchy of work, family, and friends explains the Chinese preference for doing business with familiar, trusted people and trusted companies. Foreign negotiators, then, should focus on establishing long-term, trusting relationships, even at the expense of some immediate returns.
Deeply ingrained in the Chinese culture is the importance of harmony for the smooth functioning of society. Harmony is based primarily on personal relationships, trust, and ritual. After the Chinese establish a cordial relationship with foreign negotiators, they use this relationship as a basis for the
give-and-take of business discussions. This implicit cultural norm is commonly known as guanxi, which refers to the intricate, pervasive network of personal relations which every Chinese carefully cultivates; it is the primary means of accomplishing things and getting ahead. In other words, guanxi establishes obligations to exchange favors in future business activities.49 Even within the Chinese bureaucracy, guanxi prevails over legal interpretations. Although networking is important anywhere to do business, the difference in China is that guanxi networks are not just commercial, but also social, involving the exchange both of favor and affection Firms which have special guanxi connections and give preferential treatment to one another are known as members of a guanxihu network. Says Sunny Zhou, general manager of Kumming Lida Wood and Bamboo Products, when he shops for lumber the lumber price varies drastically, depending on whether one has strong gun nxi with the local administrators.
Western managers should thus anticipate extended preliminary visiting (relationship building), in which the Chinese expect to learn more about them and their trustworthiness. The Chinese also use this opportunity to convey their own deeply held principles. They attach considerable importance to mutual benefit. The Chinese expect Western firms to sacrifice corporate goals and above-average profits to Chinese national goals and principles, such as meaningful friendship, Chinese national development, and the growth and enhancement of the Chinese people. Misunderstandings occur when Americans show polite acceptance of these general principles without understanding their significance, because they do not have any obvious relationship to American corporate goals, such as profit. Nor do such principles seem relevant to practical decisions on plant locations, employee practices, or sourcing.
Americans often experience two negotiation stages with the Chinese-the technical and the commercial. During the long technical stage, the Chinese want to hammer out every detail of the proposed product specifications and technology. If there are two teams of negotiators, it may be several days before the commercial team is actually called in to deal with aspects of production, marketing, pricing, and so forth. However, the commercial team should sit in on the first stage to become familiar with the Chinese negotiating style. The Chinese negotiating team is usually about twice as large as the Western team; about a third of the time is spent discussing technical specifications, and a third is spent on price negotiations.
The Chinese are among the toughest negotiators in the world. American managers must anticipate various tactics, such as their delaying techniques and their avoidance of direct, specific answers: both ploys used to exploit the known impatience of Americans. The Chinese frequently try to put pressure on Americans by shaming them, thereby implying that the Americans are trying to renege on the friendship-the basis of the implicit contract. Whereas westerners come to negotiations with specific and segmented goals and find it easy to compromise, the Chinese are reluctant to negotiate details; they find it difficult to compromise and trade because they have entered negotiations with a broader vision of achieving development goals for China, and they are offended when westerners don't internalize those goals. Under these circumstances, the Chinese will adopt a rigid posture, and no agreement or contract is final until the negotiated activities have actually been completed.
Patience, respect, and experience are necessary prerequisites for anyone negotiating in China. For the best outcomes, older, more experienced people are more acceptable to the Chinese in cross-cultural negotiations. The Chinese want to deal with the top executive of an American company, under the assumption that the highest officer has attained that position by establishing close personal relationships and trust with colleagues and others outside the organization. Western delegation practices are unfamiliar to them and they are reluctant to come to an agreement without the presence of the Chinese foreign negotiator. From the Western perspective, confusing jurisdictions of government ministries hamper decisions in negotiations. Americans tend to send specific technical personnel with experience on the task at hand; there fore, they have to take care in selecting the most suitable negotiators. In addition, visiting negotiating teams should realize that the Chinese are probably negotiating with other foreign teams, often at the same time, and will use that setup to play one company's offer against the others. On an interpersonal level, Western negotiators must also realize that, while a handshake is polite, physical contact is not acceptable in Chinese social behavior; nor are personal discussion topics such as one's family. However, it is customary to take small gifts as tokens of friendship. Pye offers the following additional tips to foreigners conducting business with the Chinese:
Practice patience
Accept prolonged periods of stalemate
Refrain from exaggerated expectations and discount Chinese rhetoric about future prospects
Expect the Chinese will try to manipulate by shaming
Resist the temptation to believe that difficulties may have been caused by one's own mistakes -
Try to understand Chinese cultural traits, but realize that a foreigner cannot practice them better than the Chinese.
Modern technology can provide support for the negotiating process, though it can't take the place of the essential face-to-face ingredient in many instances. A growing component for electronic commerce are applications to support the negotiation of contracts and resolution of disputes. As web applications develop, they may provide support for various phases and dimensions, such as:
Multiple issue, multiple party business transactions of a buy-sell nature, international dispute resolution (business disputes, political disputes), internal company negotiations and communications, among others.
Negotiation Support Systems (NSS) can provide support for the negotiation process by:
Increasing the likelihood that an agreement is reached when a zone of agreement exists (solutions that both parties would accept)
Decreasing the direct and indirect costs of negotiations, such as costs caused by time delays (strikes, violence), and attorneys' fees, among others
Maximizing the chances for optimal outcomes
One Web-based support system, developed at Carleton University in Ottawa, Canada-called INSPIRE- provides applications to prepare and conduct negotiations and for renegotiating options after a settlement. Users can specify preferences and assess offers; the site also has graphical displays of the negotiation process.