International negotiations – know the cultural background of the negotiating partner

The success of international negotiations is directly related to being able to assess the cultural profiles of all negotiating partners.

Two examples of failed international negotiations

  1. Daimler and Chrysler
    When Jürgen Schrempp and Bob Eaton appeared in front of the press in 1998 and both raved about the “wedding in heaven” between Daimler and Chrysler, they both believed in a great future for their companies, which with the merger would become the third largest automobile manufacturer in the world. What began with fanfare and advance praise ended less than two years later in protracted disputes and significant losses.
  2. Volkswagen and Suzuki
    Volkswagen and the Japanese Suzuki group have shared a similar fate in the past. Since December 2009, the two automotive groups have been linked to one another through mutual holdings. The declared aim of the negotiations was a long-term strategic partnership. Volkswagen wanted to benefit from Suzuki’s know-how in the small car segment and from its strong market position in emerging Asian countries, especially India. Suzuki hoped to receive some technological advantages from VW. Here, too, it took barely two years before the disputes between the supposed partners came to light. In September 2011, Suzuki’s CEO Osamu Suzuki went public and offered to dissolve the investment links between the two companies. An unusual step for a Japanese company. After all, harmony and the concept of “preserving appearance and saving face” play a crucial role in Japanese culture and etiquette. One can well imagine the misunderstandings and violations of trust that must have occurred in the course of the cooperation for a Japanese person to consider such an approach. In 2015, Porsche Automobile Holding bought back 1.5% of the ordinary shares of Suzuki over the counter – the Japanese manufacturer no longer wanted them.

Why did intercultural negotiations fail?

In both the Daimler-Chrysler case and the VW-Suzuki example, cultural differences were used to explain the failed cooperation.

International negotiations are not only conducted across national borders but above all across cultural borders. A person’s cultural imprint has an enormous impact on how a person thinks, communicates, and acts. While we calculate logistics costs exactly in advance before making decisions, factor in exchange rate fluctuations in our sales or procurement activities and closely follow the development of raw material prices, we often do not prepare sufficiently for the cultural peculiarities of our negotiating partner. Furthermore, are we even aware of our own cultural imprint and its effect on others?

And when we prepare, we’d be happy to do so in the form of so-called dos and don’ts. Certainly you can avoid the odd faux-pas, the one or the other embarrassment. However, I might not achieve my negotiation goals without knowing that in Brazil or Japan one does not blow one’s nose in public – and certainly not noisily – or that in some countries the left hand is considered unclean and therefore food is not touched by the left hand.

Especially when I negotiate with people from different nations, I cannot deal with every cultural peculiarity. Rather, it is about developing an understanding and feeling for the way my negotiating partner thinks and acts and taking them into account in my negotiation strategy. To do this, I should get to know the cultural profile of my negotiating partner well and observe the conversation partner. Perhaps he or she is Chinese, but spent their youth and university years in the United States. Perhaps he or she is Indian, but grew up in a diplomatic family with many foreign deployments.

Cultural profiles in international negotiations

What are the main influencing factors in determining the cultural background of a negotiating partner?

1. Subject orientation vs. Relationship orientation

When asked about the goal of a negotiation, cultural differences become apparent. If you come from a German-speaking area, you will probably expect an agreement or a contractual agreement on a specific topic as your goal. You exchange figures, data and facts, and put forward factual arguments in order to convince the negotiating partner. Other cultures, for example from the Asian, Arab, or Latin American regions, see the goal of a negotiation rather in building a personal and trusting relationship between the negotiating partners – especially when you meet for the first time and don’t know each other well, or if there are disagreements during the negotiations. And this good relationship can be achieved, for example, through joint business meals where there is hardly any talk about business or about activities, such as sports or karaoke. The relationship-oriented negotiating partner wants to get to know the private person and then decides whether he or she can trust this person and want to do business with them. This is often too personal for the factual negotiator. You don’t want to tell your life story or share photos of your wife and children at the first meeting.

2. Formal vs. Informal interaction

The way in which we deal with one another in a negotiation, the atmosphere in which we speak and the style of clothing are also factors that are often influenced by culture. While you remain more formal in negotiations in Germany, and use titles, the formal address of you (“Sie”), and your surname to address the other side, you can quickly address each other informally and on a first name basis in Anglo-American countries. In Spain, addressing with the surname is almost “extinct.” Being formal as you meet someone, you create an almost unbridgeable gap between the interlocutors, which is probably not conducive to the negotiation.

A casual tone should create a relaxed and friendly atmosphere for conversation, which also allows you to take off your jacket or loosen your tie. People in Great Britain often use humorous allusions, and self-depreciating comments as an ice breaker and during the negotiation, Germans generally view negotiations and business issues as serious and not to be joked about.

3. Direct vs. Indirect style of communication

The way negotiators communicate is also a common cause of misunderstanding. A negotiator who communicates in a direct manner makes his arguments and expectations clear and straightforward, uses little subjunctive, and sends first-person messages. The indirectly communicating counterpart, on the other hand, packs their messages in hints, often uses subjunctive language such as “could,” and weakens commitment with such words as “perhaps.” They also leave out controversial topics for the time being and tend to speak in the “we” style or uses passive language. A straightforward “no” rarely comes from people who communicate indirectly. Rather, the context “speaks” or gestures indicate the rejection.

While the person communicating directly will probably call his indirect counterpart vague, slippery, lacking a point of view, and perhaps even incompetent, the person communicating indirectly finds his negotiating partner disrespectful, rude, dominant, and arrogant. Not a partner to do business with.

4. Handling and understanding of time and planning

An Arabic proverb says: “You have the clock, we have the time.” Dealing with time constraints and (non-) adherence to deadlines often lead to misunderstandings in negotiations. If one is concerned with a rough schedule on paper, the same paper is understood as a fixed timeline for the other.

The term “long-term” imeans very different things in the USA, Germany, and Japan. For Americans it may mean a period of one or two years, Germans see a period of around five to ten years as long-term. The Japanese, on the other hand, sometimes consider several decades in long-term projects or planning.

5. Decisions: Expert influence vs. hierarchy, group vs. single

In any negotiation, it is important to know who will make the final decision. It makes sense to have the right negotiators at the table, i.e. those with decision-making powers. However, this is exactly what leads to misunderstandings again and again in international negotiations. In hierarchy-oriented societies only very few people have the final decision-making authority regardless of the detailed knowledge or know-how of the decision maker. All topics “run” through the top level of the hierarchy. In cultures with a tradition of flat hierarchies, however, everyone has their own area of responsibility (e.g. in the form of value limits), within which they can make their own decisions. It is believed that an expert will make better decisions because they are rooted deeper in the topic and have considered details.

Another factor influencing outcomes is the decision making process. In Asian and Scandinavian countries, consensus decisions are made by the group. A typical Asian negotiating team is often made up of many members for this very reason. Everyone has their task and observes the negotiation from a different perspective. German-speaking and US-American negotiation teams are usually smaller. As already mentioned, it is assumed that a single or a few experts will make the right decision on a subject-specific basis.

Conclusion: international negotiations & cultural profiles

In international negotiations, a decisive success factor is to study the cultural profile of the negotiating partner carefully and to take it into account when developing the negotiation strategy. Make yourself aware of your own cultural background and effect on the interlocutor. Because when dealing with many international partners, sympathy and personal relationships play a major role in building a successful business relationship or achieving negotiation goals.

Author: Alexandra Metzger, expert for intercultural negotiations and trainer of the Frieder Gamm Group