Flower 1 Petal – 3
Aspects for smooth Negotiation considerations
Context of International Business Negotiations
There can be no international business without the presence of at least two parties, each coming from different countries, sitting face to face and negotiating a business deal. Negotiations precede all international business transactions, whether they are the sale of a product to a foreign buyer, It is inevitable that negotiations between two or more sides will take place as occurring within two umbrella contexts: an environmental context of forces beyond the control of either party to the negotiations, and an immediate context consisting of controllable attributes and relationships that characterizes the negotiations process.
Whenever two parties negotiate, the entire process occurs under two umbrella contexts, environmental and immediate. The environmental context refers to forces in the environment that are beyond the control of either party involved in the negotiations. The immediate context includes such aspects as the relative power of the negotiators and the nature of their interdependence factors over which the negotiators have influence and some measure of control. The environmental context is in the outer circle, the immediate context, in the middle circle,. Both jointly have an impact on the process and outcome of negotiations.
Environ mental context,
We shall first explore the nature of the environmental context,
The dimensions of the environmental context include legal and political theory currency fluctuations and foreign exchange, foreign government controls and bureaucracy, instability and change, ideological and cultural differences, and the influence of external stakeholders.
Legal theory
The principle of national sovereignty gives every nation-state the right to make laws that are supposedly in its national interests. An international business transaction must comply with the laws of the countries involved. Certain laws prohibit certain types of transactions. In several countries, certain sectors of the economy are often kept off-limits to wholly owned foreign investments. It is imperative that negotiators be extremely careful in avoiding the risk of doing something illegal under the laws of either the home country or the host country.
Political theory
The world consists of more than 180 countries, each with its own distinct political system and foreign policy. International business people are often caught in the crossfire of sometimes conflicting foreign policies of two or more countries. The foreign policy of the host country also affects the conduct of international business negotiations it is vital to understand the constraints imposed on the process of international business negotiations by the foreign policies of countries that are directly or indirectly affected by the outcome of such negotiations. Parties involved should thoroughly study the potential political fallout of an international business deal before it is negotiated and the agreement is signed.
Currency Fluctuations and Foreign Exchange
International business transactions take place in a world of multiple currencies, the values (foreign exchange rates) of which fluctuate daily. A business deal that is not effectively structured to compensate and protect against foreign exchange fluctuations is likely to be a prelude to a disaster It would be prudent for negotiators of both companies to obtain realistic “most likely” forecasts of the exchange rates for the relevant currencies from such reliable sources as international banks and currency futures markets. They can thus build into the agreement contingency clauses that would protect either side from wild swings in the exchange rates of their respective currencies or engage in currency hedging contracts.Foreign exchange controls by many governments also influence international business negotiations.
Foreign Government Controls
The extent of governmental interference in business in many nations is extensive. Government agencies may have the authority to control the total output of an industry. Or they may have absolute control over the granting of permits to expand production capacity. A company with the potential to increase market share is obligated to obtain the necessary license to expand capacity, a license that is often denied by government bureaucrats…
Negotiations in the sorts of business environment described above almost always include the government as one of the parties with whom a foreign firm is negotiating, directly or indirectly. The government agency may not be physically present at the negotiating, but its silent presence is felt throughout the process because every issue negotiated has to be considered in light of the pertinent governmental regulations.
Instability
To cope with volatility and risks, negotiators should be prepared with advice from experts on the probability of economic and political risks in the target country. Armed with valid and reliable information on the most likely economic and political scenarios, international managers would be on a firmer footing to effectively negotiate the very best deal possible with their company counterparts in the host country.
International negotiators must have expertise in the target country as well as in the global business environment. Knowledge of global opportunities and risks for the company’s product is most useful because it serves as a benchmark against which to evaluate the costs and benefits of doing business in a particular country.
Ideological Differences
Ideology may be defined as the body of ideas on which a particular political, economic, or social system is based. International managers may be shocked to find that the ideologies–indeed, the very basis of life they have always taken for granted may not exist in other countries.
Cultural Differences
International business negotiations involve interactions between managers from disparate cultures. Cultural norms and differences between the negotiators have a significant influence on how they behave throughout the process.
Cultural differences in the value placed on the use of time as a resource can influence negotiations. During negotiations, Americans are inclined to make small concessions! early to establish a relationship and to keep the negotiation process moving forward smoothly. In contrast, Japanese have a tendency to hold back major concessions until very late in the negotiations. Differences also exist on how much and what type of information is shared with the other side. Most international business negotiations never fulfill their potential expectations because of cultural faux pas on one side or the other during the negotiations.
External Stakeholders
The various people and organizations that have an interest in the outcome of the negotiations are the external stakeholders. Examples include competitors, customers,, organized business groups such as chambers of commerce and industry associations, and the company’s shareholders.
Competitors are likely to apply the launch of a public relations campaign against the deal, illustrating real or contrived harmful effects of the deal or trying to have key permits and approvals denied by the government.
Consumers that are affected by the outcome of the negotiations may become involved in ways that may help or hinder the negotiation process. Consumers are in favor of opening the market to foreign competition because it would result in their getting a cheaper and wider variety of goods. So they have been lobbying for it.
International business negotiations – immediate context
Bargaining Power of Negotiators
There can be no negotiations unless both sides cooperate with each other to achieve their respective goals. Consequently, there is some measure of interdependence between them. In the context of negotiations, the nature of the dependence existing between the two sides determines the relative power of one side vis-avis the other.
Levels of Conflict
The level of conflict on key issues underlying a potential negotiation establishes whether the relationship between the negotiators will be supportive or hostile. The more the negotiators agree on key issues and thus the more supportive of each other their relationship will be. On the other hand, the more they disagree on the key issues, the greater will be the conflict between them, resulting in a more hostile relationship.The likelihood of a supportive relationship between negotiators is enhanced in a so-called “win-win” situation or integrative bargaining. The goals of the two sides are linked with each other in such a way that the extent to which one party attains its goals determines the extent to which the other does so..
Relationship between Negotiators before and During Negotiations
The nature of the relationship between the two sides before the very first negotiating session would have a significant impact on their relations during the negotiations. If the two sides have had a harmonious relationship–perhaps a long and positive business relationship or having engaged in mutually beneficial win-win types of negotiations–then the negotiating strategies adopted by each side would tend to be supportive of another win-win outcome. Prior relationships build expectations concerning the future of the current relationship that influence negotiation behavior.
The entire process actually consists of a series of negotiating sessions. So the experience–positive or negative–of each session serves as a backdrop for the next one, continuing to the culmination of the entire process. Consequently, each “positive” negotiation session serves to facilitate a favorable outcome at the next session; a “negative” session has the potential to do damage to the atmosphere of the next.
Desired Outcome of Negotiations
The outcome of negotiations can be both tangible and intangible. Tangible outcomes include agreement on such matters as profit sharing, technology transfer, royalty rates, laws for the protection of intellectual property, equity ownership, and other assets having real substance that can be appraised for value. Intangible outcomes include the goodwill generated between the two sides in the negotiations, the desire to make concessions to enlarge the stockpile of goodwill among the parties, and the overall desire to attain win-win outcomes through collaboration and compromise.The strategies and outcomes of negotiations will be conditioned by the short-term vs. long-term relationship emphasized by the two sides. It must be emphasized that most tangible outcomes in international business negotiations require goodwill and long-term relationships for them to become a reality.
Impact of Immediate Stakeholders
The immediate stakeholders in a business negotiation process are:
(1) the negotiators on each side and their characteristics; and
(2) the companies’ managers, employees, and boards of directors.
The characteristics of the negotiators include such aspects as their cumulative experience in past international business negotiations and their cultural background. People who have negotiated numerous international business deals in the past will have a body of knowledge in their repertoire that could be quite an asset in impending business negotiations. The negotiator’s cultural background has perhaps the most profound impact on the negotiation process. After all, there can be no international negotiations without the interaction between at least two people of different cultural backgrounds. Culture, is the amalgam of a set of values, beliefs, and norms that have been internalized by people in a society.
The personal stakes of the managers, the employees, and the boards of directors in the outcome of the negotiations have a bearing on the strategies made during the process. All three groups may have one or more of the following stakes in the outcomes of the negotiations: financial, career advancement, ego and prestige, personal power, wages and employment, or economic security. Managers are likely to think twice before negotiating an agreement that would erode any of their personal stakes, or those of the employees or the board of directors.
Negotiation–a process in which one party tries to change the attitudes, beliefs, or behavior of another party–is essential in conducting international business. Negotiators should start with the environmental context and study its impact on the immediate context and on the negotiations process and outcome. Then the direct impact of the immediate context on negotiations should be studied. It is also important to reevaluate the other party’s situation. Negotiators should remain on the lookout for new and emerging needs of the other party and try to communicate openly with them for generating feasible solutions. International business negotiations are not seldom restricted to a single issue, nor are both sides necessarily negotiating for the same outcomes.
. They should be prepared to accept new conditions and incorporate new agendas as long as they are credible and productive. Flexibility is important because it can generate creative solutions rather than traditional compromises. It certainly helps if the negotiators have a good knowledge of the potential obstacles in the host country.
Above all, negotiators will have to practice patience in international negotiations. It usually takes a long time to reach an agreement between the parties because of all the complexities involved. Patience is vital because it sends a signal of the negotiator’s commitment to the project, helping to build trust and a long-term relationship with the other party.. Only a well-prepared, highly adaptive strategy will ultimately guarantee success in international negotiations.
Communication
Communication style and manner is imperative for the successful negotiation. Normally as we are Indian we are having affluent communication styles to influence with others. In India, many of its states have different local languages, some more than one. Almost all business people speak English well. However, it is advisable
to speak in short, simple sentences and avoid using jargon and slang.
Indians, especially those in the southern and western parts of the country, usually speak in quiet, gentle tones. At times, they may even appear shy. Do not mistake this for a lack of confidence. Their reticence and humility only reflect their politeness and respect for others. Loud and boisterous behavior is often perceived as a lack of self-control. Loudness may also be equated with dishonesty. However, positive emotions may be shown openly. Indians generally converse while standing around three feet apart.
Because being friendly is so important in this culture, communication is generally indirect. When responding to a direct question, Indians may answer ‘yes’ only to signal that they heard what you said, not that they agree with it. Open disagreement and confrontation are best avoided, so you may not hear a direct ‘no.’ Instead, they may give seemingly ambiguous answers such as ‘I am not sure,’ ‘we will think about it,’ ‘this will require further investigation,’ or ‘yes, but…’ Each of these could mean ‘no,’ as does a ‘yes’ that sounds hesitant or weak.. Polite nods and smiles do not always signal agreement. Instead, they help preserve a friendly atmosphere. It is in your best interest to give feedback in a positive and constructive spirit while masking any negative feelings with a smile.
An Indian who considers you a superior may hesitate to give you direct feedback. Instead, the person may tell you what he or she thinks you want to hear, especially when others are around. Similarly, if asked to give constructive feedback, people may resort to highlighting only the positives,. Candid comments and criticism may only be conveyed in private,.
Gestures and body language are usually much more extensive in India than in most other Asian countries. However, avoid any physical contact with other people except for handshakes.