Issues Relating To Negotiation

Meaning:

Negotiation is the process of communicating back and forth between two or more parties for the purpose of reaching a joint agreement on different needs or ideas. In the art of negotiation, persuasion, rather than power, is used. Framing the negotiation is the process of defining issues that are important to you. It is much like placing a simple painting in an elegant frame to help enhance its features, making it easier to sell. Likewise, framing your side of the issue in a negotiation makes it extremely appealing to your audience.

   Negotiating is the process of getting the best terms of a business deal. It is a means of achieving one's goals in every relationship regardless of the circumstances.

Also Negotiation is a process, a means to an end. It is the journey of how we get to the destination not the destination itself. This doesn't mean losing sight of the destination but rather, paying more attention to how we get there. Negotiation is different from a compromise.

What can we negotiate?

Price

Terms

Delivery

Quality

Service

Training

Resources (people, money and materials)

Win-win negotiation is crucial in international business to get what you want. We need to focus on interests, not positions, and meet the needs of the other side and respond to the question of, “What’s in it for them?”

Cultural factors also play a huge role in negotiations. People who are involved in negotiations have to do their homework before sitting at the negotiating table with their foreign counterparts. For example, in Saudi Arabia, bargaining back and forth shows people’s sincerity about striking a deal. In England British people favour discussion of facts in a formal and procedural way during the negotiation process.

Issues relating to Negotiation

1. Communication and Language

Communication is the heart of any negotiation. Due to cultural differences in the use of languages there may be a lot of impediments in the whole of the communication process. Further translation problems are also substantial in international negotiation. Exact translations in international interactions and negotiations are goals never attained. Examples

When Pepsi entered the Chinese market a few years ago, the translation of their slogan "Pepsi Brings you Back to Life" was a little more literal than they intended. In Chinese, the slogan meant, "Pepsi Brings Your Ancestors Back from the Grave".

American Motors tried to market its new car, the Matador, based on the image of courage and strength. However, in Puerto Rico the name means "killer" and was not popular on the hazardous roads in the country.

In this context Japan, Mexico, Indonesia, and the Philippines are the “high context societies”. “Low context societies” are the U.S, Germany, Canada, England, and France. Some differences in these societies use of language are:

Low context societies use language to share facts and figures and to persuade. While High context societies use language to allude, to avoid saying “no”, to connect with other people and to make them feel at ease.

In low context language is used to share information about individuals, concerns, efforts, opinions and rights. In High context societies individual concerns and efforts are not very important. Social role and connections are the most important facts anyone can communicate.

In low context the focus is on written and verbal communication and the use of flowery phrase is believed to be distracting. In high context the focus is on verbal communication and the use of flowery words is a way to honor others. Efforts here are made to communicate relationship and not specific words.

Gestures and non verbal communication also bring about various issues.

Examples

One company printed the "OK" finger sign on each page of its catalogue. In many parts of Latin America that is considered an obscene gesture. Six months of work were lost because they had to reprint all the catalogues.

A German manager may resume being silent for sometime without any meaning or intention. He may be reflecting or thinking about something which is unrelated to the business. If his negotiating counterpart is an English manager he would assume that the German is giving a negative response and if an Indian a positive one.

2. Cultural Stereotypes

To succeed in these international negotiations, one needs to know how to communicate with and influence members of other. This has lead to the stereotyping of negotiation styles of various cultures.

All white Americans are obese, lazy, and dim-witted. Homer Simpson of the TV series The Simpsons is the personification of this stereotype. 

Mexican stereotypes suggest that all Mexicans are lazy and came into America illegally.

Italian or French people are the best lovers.

All African Americans outside of the United States are poor.

All Asians are good at math. All Asians like to eat rice and drive slow.

All Irish people are drunks and eat potatoes.

All Americans are generally considered to be friendly, generous, and tolerant, but also arrogant and impatient.

Stereotyping a county or a culture can be useful or harmful depending on how it is used. For example, the table below shows some of the typical stereotypes developed from various studies

  Some of the typical stereotypes.

  US & Canada Arabs Russians

Primary Negotiating style & process

Conflict: Arguments countered with..

Making Concessions

Response to counterparts concessions

Relationship

Authority

Factual appeals made to logic

 

Objective facts

 

Small Concessions made early to establish a relationships

 

Usually reciprocate counterpart’s concession

Short term

 

Broad

Effective appeals made to emotions

 

Subjective Feelings

 

Concessions made throughout the bargaining process

 

Almost always reciprocate

 

Long Term

 

Broad

Axiomatic appeals made to ideals

Asserted Ideals

 

Few if any concessions are made. Concessions are seen as sign of weakness

Almost never reciprocate

 

No continuing relationships

Limited

Initial Position

Deadline

Moderate

Very important

 

Extreme

Casual

Extreme

Ignored

Source: International Journal of Inter cultural relations, 2010

Stereotyping deals with perceptions which are selectively learned and held rigidly thereby favouring others. While everyone wants to believe that he/she treats all others equally and favourably, the truth is that each of us have certain attitudes or biases toward race, gender and other traits. Thus, as much as a negotiator may think he/she is being “neutral,” the potential for bias and/or favouritism is there. It is something to be mindful about during each negotiation.

3. Time Pressure

Sharing flight arrangements with host countries overseas may put you on a hot frying pan. The Japanese and Chinese are particularly good at this: pretending to help you to reconfirm your travels but it’s their way to want to know as to how much of time you have budgeted for the negotiation. If you would day that your return flight is on a Wednesday morning they may spend most of the time on Monday and Tuesday making introductions, presenting the history of the company and may come to the central part of the agreement before late afternoon Tuesday which is when you are more likely to make concessions under time pressure.  

4. Incentive for Deception in Negotiation

Negotiation offers a setting in which individuals often feel a tension between ethics and self-interest. This happens when one party faces a temptation to deceive the other party, in hope of bettering the outcome for themselves. Notice that lying is only one tactic that may be used to deceive a negotiation partner. Lying, strictly interpreted, requires making a false statement (or at least a statement believed to be false by its maker). The clever manipulation of verbal and non-verbal signals to create or support a false impression, without making a false statement, also counts as deception. Likewise, concealing information is a deceptive tactic if and only if the concealment is intended to create or support a false belief. Further they also involve various dirty tactics and tricks in negotiation which would further pressurize opponents to accept unfair or undesirable agreements/ concessions.

5. Privileged Access to Information

It is common especially in an international negotiation forum for at least one of the parties to have privileged access to information about the subject matter under negotiation. In an exchange, often the seller has the information advantage. The classic example is the seller of a used car who knows more about the history and mechanical condition of the car than the buyer. Sometimes, however, the buyer has an advantage over an unsophisticated or uninformed seller. An example of this would be an art dealer buying a dusty old painting at a garage sale, or a real estate developer buying parcels of property for an unannounced development project.

6. Threats and PromisesStatements about future actions play a key role in many business negotiations. Such statements fall into two categories: threats, and promises. Threats are often used to place pressure on the other party to settle. They range from the simple threat of walking away from the negotiation to threats of causing harm to the other party. Promises are an essential element in most negotiations. Often one patty performs, or makes an investment before the other. Even if the central exchange appears to be simultaneous, there may be understandings and expectations about future actions. Sellers may promise to protect buyers in certain contingencies, for instance, allowing the buyer to return clothing that does not fit. On the other hand, buyers may ask for credit and promise to pay sellers at a later date.

7. Business Cultures Not only does a business need to understand the psychological make-up of the

main negotiators, the national culture if the negotiation is cross-border, but also need to understand the organizational culture of the company or organization they are negotiating with. Organizations are rather like tribes, they have their own myths and legends. the history of Apple Corporation reflected the influence of Steve Jobs and Steve Wozniak. Malone "Before and after everything, companies are about character. Before the first idea, the first money, the first employees, the first distributor, retailer and customer, before the creation of the company itself, there is the character of the founders". This pattern can be seen in a number of companies; Microsoft, Intel, De Beers, Hewlett-Packard. Ford is still dominated by the Ford family; a pattern of family influence that is common in many continental European firms. Some corporations are dominated by the dominant idea of their worth and function; quality may be the dominate driver, attention to the welfare of the employees, to the increase of shareholder value, domination of a sector, or to some other goal that has been defined and accepted within the organization. Anyone dealing with a company must have some concept and understanding of its value-system and culture.

Organizational cultures can empower organizations to achieve success after success, to sustain industry leadership over long periods and to create an attitude within the organization that everything is possible. Examples of positive organizational cultures can also be found in successful sports teams, such as New Zealand's "All Blacks" rugby team. However for the negotiator it is as important to understand the negative effects of culture, especially when organizations do not behave in a logical manner and exhibit resistance to new ideas. This can make life very difficult for the negotiator trying to secure agreement on a joint venture, or where the agreement requires a change in the behavior of the other organization.

8. Dominance of the US Power

For better or worse we live in an age dominated by one country, the United States of America. The political events of the early years of the 21st Century are determined by reaction to and from the policies of the United States. As the U.S is one of the most developed countries it many a times displays “cultural insensitivity” of its professionals on developing and underdeveloped countries.

US Power has its basis in the following key elements:

whelming military power technological superiority domination of global financial institutions & banking cultural dominance - via movies and TV concentration of political power in the hands of a small and extremely wealthy elite a generally accepted agreement within the US that others must accept US standards the international power of US business large and effective intelligence systems A "can-do" attitude to problem-solving Effective control of Middle Eastern oil reserves.

Due to having almost the whole of the world’s power the U.S usually brings about the following unethical issues in negotiation:

Using too much pressure when the less fortunate countries are vulnerable Failing to personalize a proposal and presenting it as a stricyly commercial

deal.

9. Differences Due to Culture

In looking at the effect of culture on negotiations it is easy to understand its importance in influencing the way in which people view the world. Apart from the nations differing on the basis of history and language they also differ in the following aspects and as such while entering into negotiation the parties must keep the following in mind.

Desirable objectives: India and China for example are keen to maximize the use of labour where possible, unlike the US.

The organizational structures: may vary enormously from those the negotiator is familiar with. Example: in Germany labor unions normally participate in key corporate decisions, via the supervisory board

Legal systems: may vary greatly. Behavioral norms: may be the opposite of those normally experienced by the

negotiator. For example: in Japan it's OK to sleep during meetings, but don't blow your nose in public, and be very careful to look at business cards which are handed to you.

Cultural differences can have a dramatic effect on negotiation. The distribution of influence (power) may involve different networks and players from those the negotiator is used to. The culture may have a centralizing and Statist tendency (as in China), or it may be decentralized and business-orientated, as in the US. The networks involved in the negotiations may include groups which you never meet face to face; civil servants, the members of the Saudi Royal family, party members, members of Congress or of Parliament, State Senators, diplomats, shareholders, crime-syndicates and the wife of the company President

10. Cultural Taboos:

Muslims and Jews don't eat pork, Hindus don't eat beef, in Eastern Asia you don't show the sole of your shoe to someone, pointing can be a problem, as can eye contact, standing too close or too far away, there are a thousand and one things to remember. Some cultures value punctuality and deal-focused meetings; others have little sense of the urgency of time and need to first develop relationships. Anglo-Saxon societies value lawyers and certainties in details, in other societies there are few lawyers (Japan) and the long-term relationship is the important thing. It is also important to understand to what extent the other side are negotiating as a group, rather than via one man.

Never touch the head of a Thai or pass an object over it, as the head is considered sacred in Thailand. Likewise, never point the bottoms of the feet in the direction of another person in Thailand or cross your legs while sitting, especially in the presence of an older person.

Avoid using triangular shapes in Hong Kong, Korea, or Taiwan, as the triangle is considered a negative shape in those countries.

Remember that the number 7 is considered bad luck in Kenya, good luck in Czechoslovakia, and has magical connotations in Benin.

Red is a positive colour in Denmark, but represents witchcraft and death in many African countries.

A nod means "no" in Bulgaria, and shaking the head side-to-side means "yes."

11. Developing Countries- Victims or Participants?

Can developing countries participate effectively in these negotiations, and can they obtain benefits from such participation?

Two pessimistic views argue that they cannot. If the outcomes of negotiations depend on the balance of power, then no amount of negotiating will make a difference. The predicted outcome can change only if power changes. The second cause for pessimism is based on observation. It is argued that developing countries have achieved little or even lost in trade, climate change, and other environmental negotiations. In contrary research on developing country participation in negotiations rejects this pessimistic standpoint. And in apparent contradiction to these views, developing countries themselves are putting more resources into participation in negotiations. Further to facilitate the developing countries in their negotiation multilateral negotiations- the bargaining power of the strongest nations is limited by the need for agreement should be used. If a powerful country considers market access or climate

change action beneficial and this requires action by another country, it must secure its agreement. The studies on negotiations and country experiences identify when small countries have been able to negotiate effectively and change outcomes.

12. Historical Issues

In addition, sometimes historical troubles make international negotiation, such as a territory and a hostile country. Now Korea and Japan has a territory problem because “Dokdo is the source of perennial squabbling between South Korea and Japan, never more so than in the past two months, when Japanese nationalists started pressing their claim to islands they call Takeshima” (Barbara Demick. 2005, May 1). It is a small island and the island has some economical advantages, so both countries are negotiating almost 10 years but they don’t find answer yet. As a result, both countries people feel bad about that and they are becoming nervous each other. This kind of situation makes trouble in international business negotiation. As well, when we do international business negotiation with a hostile country we have some problems about history because a hostile country’s people have bad experience between country and country. If we do business negotiation with a hostile country we should do business carefully and try to understand the country’s history. 

Issues Relating to Gift giving

Meaning of Gift Giving

Gifts are valuable items offered without an obligation to selected recipients by firm’s

representatives as an expression of appreciation or goodwill. Business gifts may be tangible

or intangible in nature. Intangible business gifts are such as vacations to exotic locations,

cruises and exclusive holiday destinations. These comprise of a significant portion of

corporate gift giving. Most large firms and public organizations have established policies for

giving or receiving business gifts.

Business gift giving has always been common many a times mandatory and continuous at the

same time. These gifts are given for three main reasons:

a) In appreciation of past client relationship and referrals to other clients

b) With an aim of creating a positively well established business relationship.

c) In an aim of returning a favour or expecting a favour in return for something.

Business gifts, especially one given during festive season is regarded as an invaluable

means of strengthening corporate relationships and creating goodwill and also in

increasing business and building long-term goodwill among realtors.

While it is generally accepted that gift giving may enhance the image of the company,

business must also be aware about the fact that business gift giving has several legal,

ethical and practical questions attached to it. A business gift should be something which

deepens a connection, something that is meaningful and isn’t meant to take advantage of

or influence another person.

There is a fine line between business gift giving and bribing and it’s seldom clear when

the line is crossed.

Example: Time reported, back in 1965, that in Finland any gift exceeding 30 dollars in

considered a straight bribe. Situations today are rarely so straight forward.

When does a Gift become a Bribe?

In lay man’s words a gift is something of value without the expectation of a return. While a

bribe is the same thing given in the hope of some influence or benefit. A bribe is any valuable

thing given or promised or any preferment, advantage, privilege or promise given or made in

a corrupt manner to someone in a public office capacity to violate or forbear from his duty ,

or to improper influence his behaviour in the performance of his duty.

Four criteria can be used in determining the propriety of any gift: frequency, timing,

reciprocity and value. In general gifts should not be given more than once a year, typically at

Christmas or at the time of a national festival. There is a fundamental difference between a

gift given in hope of winning a contract and a small gift in appreciation of having won a

contract.

What is a Bribe?

Corruption is defined by Transparency International as “the misuse of public power for

private gain”. It takes many forms and can be intensely damaging. Corruption can be in the

form of “Grand” and “Petty” Corruption.

Grand Corruption is usually practiced by senior officials, government ministers and head of

state. It is about the distortion of decision making in matters of economic significance. It is

usually international because of its scale.

Petty Corruption is typically the realm of customs, clerks, immigration officers and other

low paid officials. Petty corruption is often about the removal of bureaucratic delays. Here

people are payed in order to do faster what they have already paid to do. Petty corruption is

mostly domestic, although the payer may not be a citizen, or even a resident of the country

concerned.

A bribe can consist of immediate cash or of personal favours, a promise of later payment or

anything else the recipient views as valuable. Bribery charges may involve public officials or

private individuals.

Example: in the corporate arena, a company could bribe employees of a rival company for

recruitment services or other actions with their employer’s interest.

Bribe is a form of Grand Corruption which are paid in order to win (or retain) business. In

bribery the interest of both the payer and receiver of a bribe should be concealed as well as

possible. Hence thus the use of middlemen often referred to as “representatives” or “agents”

is made off. Bribes can be in the form of money and also other pecuniary advantages such as

membership in an exclusive club or promise of a scholarship for a child.

Reasons for Involvement in Bribery and Issues with Gift Giving

I. Bribing has become a Necessity

Bribing is a new chant word and one of the main and easiest price paid for doing

business anywhere around the world. Economies like Germany which bases its

economic power on its ability to export goods and expertise, does business in parts of

the world where bribes and other off-the-book deals are common place and a

necessary part of doing business. Thus bribing has become a necessity.

II. Globalization changes the Playing Field

According to Transparency International’s 2010 Corruption Protection Index

many countries are in a position where their internal corruption is low.

However when we look at the various areas where these country’s firms do

business their rating on transparency is very low i.e. their external corruption

rate is very high. In some nations the fast changing global political landscape

has contributed to business corruption. What organizations and companies do

not realise is that bribery corrupts the economic system. The capitalist system

is based on competition in an open and free market, where people tend to buy

the best product at the best price. Bribery corrupts the free-market mechanism

by getting people to make purchases that do not reward the most efficient

producer. Also research has found out that countries which deal in corruption

and bribery have less of their GDP going into investment and education

thereby reducing their human capital. They also attract less FDI.

III. Culture Differences and Requirements

One of the biggest challenges in gift giving knows what gift to give working

colleagues and partners overseas to strengthen a relationship.

a. In many countries like Japan gift giving and receiving is very

crucial.

b. Many countries value politeness and formality.

c. Many a times one should keep in mind that gift giving is very

ritual based and involves a lot of tradition in it.

d. The most crucial and often neglected rules are the various types

of unwritten rules.

Example: many companies follow this- when u sit down for a

meal there will be a hierarchy that represents people’s power,

based on where they sit.

e. Gift giving is many times a symbolism of a person’s status. It is

important not to give the same gift to people with different

roles in the organization.

f. Colour and symbolism should be taken into consideration

Example: the number 4 associated with death in Japan while

number 2 is considered lucky.

IV. Harm to the Economy and the Company

In developing countries bribe can be moral issue where one small group

enriches themselves at the expense of their fellow countrymen paving path

towards damaging the framework of the society. The companies party to grand

corruption are doing serious harm to the country and the business they are

involved with. Further the risk of that corruption will become public

knowledge and therefore damaging the goodwill of the company involved.

The companies which engage in corruption run the risk of being blacklisted by

institutions which fund them. The World Bank has made it clear that it will not

hesitate to debar, temporary or permanently any company it believes to have

used corrupt means to win a contract in which the Bank is involved.

V. Cultures of Corruption

Many of the countries either lack the political will to take corruption seriously

or simply accept it as the price for doing business. For many businesses

bribing remains an integral part of business culture. Political decisions are

supposed to be made on the merits of the case and not based on whether or

not the decision maker has received a lovely and expensive gift from one of

the parties.

VI. Cost of Corruption

Countries suffering from shortage of hard currency, harm are caused by the

fact that grand corruption bribes are almost always paid offshore. The major

contributor here is the trade. Between 2002-2008 the top ten arms exporting

countries sold an annual average of 30 billion dollars worth weaponry of

which two thirds went to developing countries.

Industry insiders have estimated that not less than 15% of this value was

effectively paid to politicians and military chiefs, even if it was 10%, 3 billion

dollars would have been diverted into the bank account of these individuals.

The direct cost of grand corruption is the way that distorts the decision making

process. Hence the cost involved for personal gain may result in construction

of projects that may use poor resources or the purchase of equipment or goods

that are unsuitable or are of inferior quality. The national interest may be

completely ignored in favour of projects/ purchases whose only attraction is

that they carry potential for huge commission.

VII. Depletion of Natural Resources

In some parts of the world corruption and bribery are contributing to the rapid

depletion of natural resources. This leads to various adverse effects due to loss

of forest cover and displacement of local communities. The impact on the

environment has been disastrous. Almost 75% of India’s primary forest has

been lost lending to ecological imbalances such as erosion and changes in

local climate. Similarly 50 dollars are paid as bribes for every cubic meter of

timber felled in Cambodia.

VIII. Lack of Cultural Understanding

This can lead to misunderstandings which may result in offence. Cross cultural

awareness and an understanding of foreign etiquette is important for today’s

globetrotting business person. Understanding gift giving and etiquette

surrounding it can help international business people cement better

relationship with foreign colleagues, clients and customers.

IX. Confusing and Uncertain

Certain cultures especially the Latin culture do not really have formal

ceremonies. Hence it is confusing and uncertain as to when to develop a

business relationship or a personal relationship. The Duty Laws should be

specified.

Example: Jews especially orthodox Jews are not allowed to eat pork and in the

case of Muslims Quran forbid alcohol.

X. Desire for an Unfair Advantage

Many of the firms are motivated to participate in corrupt behaviour because of

the inherent selfish desire to have an unfair advantage over the other

competing firms. Thus through bribery dishonest people go ahead while the

public pays the price. Thus through bribery firms practicing unfair trades and

possessing unfair unethical trade behaviour get an unfair advantage by means

of paying huge amounts in courts to escape from long legal processes, pay

bribes to tax collectors and indulge in such unethical practices in order to

overcome a penalty.

XI. Lack of Punitive Measures

This mostly happens in public undertakings and public sectors. When legal

agencies do not impose sanctions on government officials who have violated

their public duties, there is lack of punitive measure for corrupt behaviour.

This is the case for example when judges are influenced by ruling party or

there are too few police officers to enforce the law. Hence there are no

punitive measures to assure transparency, monitoring and accountability.

XII. Ethical Dilemmas associated with Gift Giving

People do not go into government work to make a lot of money. Especially at

the local level, elected officials may receive only token payments for the

number of hours they put into the job. In this context it is tempting to say that

tickets to the local performing arts centre or sports like cricket are well

deserved perks of office. Also gifts are given in the form of Christmas/ Diwali

hampers and gifts

XIII. It is very difficult to understand the difference between a gift and a bribe. If

you give a gift to someone and it leads to a business deal- is it a bribe or a

gift?

Cheryl Louis

1121727

2nd Sem M.Com