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Culture and Negotiations

Roman Sheremeta, Ph.D.

Professor, Weatherhead School of Management

Case Western Reserve University

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Exercise: Rules

Exercise: Alpha-Beta

Two-party negotiation over the sale of robots

A buyer: Alpha.
A seller: Beta.

Rules:

You will have 10 minutes to talk with your team members.
You will be matched with another team.
You will have 40 minutes to reach a deal.
All signed contracts must be submitted before the deadline.

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Exercise: Role Assignment

Roles:

Alpha = (1A, 1B, 1C, 2A, 2B, 2C, 3A, 3B, 3C)
Beta = (4A, 4B, 4C, 5A, 5B, 5C, 6A, 6B, 6C)

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Matching
1A-4A	2A-5A	3A-6A
1B-4B	2B-5B	3B-6B
1C-4C	2C-5C	3C-6C

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Exercise: Issues

What are the issues of negotiation?

(1) The number of models.
(2) The number of units.
(3) The vision technology.
(4) The royalty rate.

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Exercise: Alpha

What are Alpha’s interests?

(1) At least 6 models, but best 8 models.
(2) 1200 units the first year and estimated 2000 the next year.
(3) Limited access to the vision technology in exchange to access to the assembly technology.
(4) 3% of gross sales, and up to 7% if (1), (2) and (3) are satisfied.

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Exercise: Beta

What are Beta’s interests?

(1) Proportional to capacity, but best 4 models.
(2) Proportional to capacity, but in general 300 units of each model (1200 units with 4 models).
(3) Access to the vision technology in exchange to access to the assembly technology (one of the most important issues!)
(4) 5% of gross sales, but can take as low as 3% if (3) is satisfied.

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Exercise: Closing the Deal

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Issues
Group	Models	Units	Vision	Royalty
1A-4A	6	200	Share	5%
1B-4B	6	325	Share	3.5%
1C-4C	4/8	300	Limited	4%/5%/6%
2A-5A	7	300	Limited	3%
2B-5B	6	200	Share	4%
2C-5C
3A-6A
3B-6B
3C-6C

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Exercise: The Real Story

Negotiation between Hitachi (Japanese company) and General Electric (US company) in 1981.

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Robots of our days

How Tesla makes cars

https://www.youtube.com/watch?v=8_lfxPI5ObM&t=199s

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Culture

Culture is a way of thinking, behaving, or working that exists in a particular society.

If the Earth’s population was a village of 100 people:

68 Asians.
13 Africans.
12 Europeans.
9 South Americans.
5 North Americans.

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How Cultures are Different?

Unique language.

https://www.youtube.com/watch?v=yR0lWICH3rY

Unique institutions.

Economic, social, political, and religious institutions.

Unique behavior.

Culture influences mental models, behavior, and cause-and-effect relationships.

Unique values.

Shared values and norms.

Unique ideologies.

Formed historically.

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Culture as an “Iceberg”

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Three Dimensions of Culture

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Cultural Dimension

Goal:

Individual versus Collective Orientation

Influence:

Egalitarianism versus Hierarchy

Communication:

Direct versus Indirect

Individualists/Competitors:

Key goal is to maximize own gain (and perhaps the difference between oneself and others); source of identity is the self; people regard themselves as free agents and independent actors.

Egalitarians:

Do not perceive many social obligations; believe one’s value is determined by the resources one can offer, usually economic or intellectual.

Direct Communicators:

Engage in explicit, direct information exchange; ask direct questions; are not affected by situational constraints; face-saving issues likely to arise.

Collectivists/Cooperators:

Key goal is to maximize the welfare of the group or collective; source of identity is the group; individuals regard themselves as group members; focus is on social interaction.

Hierarchists:

Regard social order to be important in determining conflict management strategies; subordinates expected to defer to superiors; superiors expected to look out for subordinates.

Indirect Communicators:

Engage in tacit information exchange, such as storytelling, inference-making; situational norms.

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Individualism vs Collectivism

Individualistic cultures:

(1) People give priority to their own gain (“assertive types”).
(2) Personal goals are elevated (“the American dream”).
(3) Institutions reward individuals.
(4) Legal institutions protect individual rights.
(5) Desire more formal dispute resolution procedures.

Collectivist cultures:

(1) Priority is given to the group gain (“cooperative types”).
(2) Group goals are elevated.
(3) Institutions reward groups.
(4) Legal institutions protect group rights.
(5) Prefer informal procedures for conflict resolution.

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Implications for Negotiation

Trusting behavior towards friends/strangers:

Individualistic people trust friends and strangers.
Collectivistic people trust friends more than strangers.

In-group favoritism:

Individualistic people display less in-group (bias) favoritism.
Collectivistic people display more in-group (bias) favoritism.

Cooperation:

Individualistic people are less cooperative.
Collectivistic people are more cooperative.

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Egalitarianism vs Hierarchy

Egalitarian cultures:

(1) Everyone expects to be treated equally.
(2) People are empowered to resolve conflicts themselves.
(3) BATNA and information are key sources of power.

Hierarchical cultures:

(1) People are treated according to their social status.
(2) Superiors have stronger power in resolving conflicts.
(3) Status is the key source of power.

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Implications for Negotiation

Choosing representatives:

In egalitarian cultures, since BATNA is the main source of power, people of different status often negotiate at the table.
In hierarchical cultures, since status is the main source of power, it may be insulting to have a lower-status person negotiate with a higher-status person.

Conduct of negotiation:

In egalitarian cultures, it is expected to have back-and-forth negotiation.
In hierarchical cultures, negotiation is more like a father-son relationship.

Finalizing the deal:

In egalitarian cultures, negotiations are usually final.
In hierarchical cultures, negotiations often require several levels of approval.

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Individualism and Power Distance

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Direct vs Indirect Communication

Direct communication cultures:

(1) Messages are transmitted explicitly and directly.
(2) The meaning is contained in the message.
(3) Information is context-free.
(4) Negotiators ask direct questions.

Indirect communication cultures:

(1) Messages are transmitted implicitly and indirectly.
(2) The meaning is inferred from the message.
(3) Information is context-specific.
(4) Negotiators avoid direct questions.

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Implications for Negotiation

Integrative agreements:

People from direct cultures use direct integrative strategies (asking for interests and priorities).
People from indirect cultures use indirect integrative strategies (making multiple offers at the same time).

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Exercise: Q&A

Questions for Alpha:

What did Beta do to that frustrated you?
What inferences did you draw from their behavior?

Questions for Beta:

What did Alpha do to that frustrated you?
What inferences did you draw from their behavior?

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Exercise: Alpha Style

Alpha’s negotiation style:

(1) Individualist (each member is expected to speak up).
(2) Informal (easy-going, relaxed, friendly, etc.).
(3) Direct (frank discussion, reciprocation).
(4) Impatient (“time is money”, try to get the negotiation to move on).
(5) Emotional (facial expression and body language).
(6) Aggressive (self-confident, speak up, argumentative, etc.).

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Exercise: Beta Style

Beta’s negotiation style:

(1) Collectively (agree as a group, decide who is to speak for the group).
(2) Formal (customs, rules, ceremonies, exchange of business cards, etc.).
(3) Indirect (ask a lot of questions without revealing much themselves).
(4) Patient (make concessions at the every end of the negotiation).
(5) Unemotional (no facial expression and no body language).
(6) Passive (self-controlled and silently react to aggression).

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Strategies for Intercultural Negotiations

Strategy 1: Acknowledge differences.

Differences at the individual and social levels.
Differences in strategy and tactics.

Strategy 2: Learn about the other culture.

Conduct research so that you can avoid actions that are offensive in the other culture.

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Negotiating With People Around The World

In the book When Cultures Collide, Richard Lewis summarizes:

Americans are more open, they get upset when there's a disagreement, and resolve conflicts as fast as possible with both sides making concessions.
Canadians, compared to Americans, tend to be more low-key and inclined to seek harmony, though they are similarly direct.
Chinese tend to be more direct than the Japanese and some other East Asians; however, meetings are principally for information gathering, with the real decisions made elsewhere.
Germans rely on logic but tend to amass more evidence and labor their points.
Spanish and Italians regard their languages as instruments of eloquence and they will go up and down the scale at will, pulling out every stop if need be to achieve greater expressiveness.

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Strategies for Intercultural Negotiations

Strategy 3: Identify differences in values and expectations.

The more differences there are, the higher is the chance for integrative solution.

Strategy 4: Recognize the source of power.

BATNA and information are key sources of power for egalitarian cultures.
Status is the key source of power for hierarchical cultures.

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“Eleven”

Voice Recognition Elevator

https://www.youtube.com/watch?v=MNuFcIRlwdc

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Thank you!

Roman Sheremeta, Ph.D.

Professor, Weatherhead School of Management

Case Western Reserve University

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References

Thompson, L. (2004). The Mind and Heart of the Negotiator. New Jersey: Prentice Hall. (Chapter 10)
Lewis, R.D. (2005). When Cultures Collide: Leading Across Cultures. Nicholas Brealey Publishing.

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