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Article:  International Negotiation — How Do I Get Ready?

Example: An International Negotiation Failure

A marketing manager for a large U.S. techno­logy company was visi­ting one of Germany’s biggest corpo­rations.  He wanted to sell them on using his new product in their system.  Since the product and appli­cation were quite new, there was no estab­lished pricing in the market yet, and the vendor was hoping to get a premium for their techno­logical leader­ship.

The presen­tation went well, and the deci­sion maker on the German side seemed quite inter­ested.  He asked for the price.  ‘We think that this product will be well received by the market.  We’ll be able to sell it to you at 12 dollars.’, the American respon­ded.  For a long moment, the German said nothing.  ‘Well, if pushed hard, we will actually be able to go as low as 10 dollars with this product.’  The German still didn’t say a word.  Twenty-five pain­ful seconds later, the American couldn’t take it any longer:  ‘Long-term, we are con­fident that we will be able to push the price down to 7 dollars’.  The German now looked puzzled but pleased.

This is not a ficti­tious story – it happened a few years ago.  The American com­pany eventually won the business, but at a price around 2-3 dollars lower than what would have been achiev­able.  Volumes being size­able, the negative profit impact amounted to more than $1 million!  The funny thing is that the marke­ting manager, proficient in his field but lacking inter­national experi­ence, probably thought he got tricked into lower­ing his price by a smart nego­tiator, while the German may still be wonder­ing how he got such a great deal with­out ever asking for it.  (If you’re curious to find out what happened, skip forward to 'Silence' in the 'Negotia­tion Tech­niques' part of this paper.)

If your goal is to grow your inter­national business, no situa­tion presents greater risks to strategy exe­cution and bottom line than a cross-cultural negotia­tion.  Two factors often amplify this:

  • The negotiation partner is not well known, and strate­gies and objec­tives are unclear.

  • Interacting with the other culture is a first for one or both of the parties involved, and they are not well-prepared for it.

The challenge to under­stand the other party also exists in domestic negotia­tions, but as we will discuss in the follow­ing, under­standing strate­gies and objec­tives across cultures is much more diffi­cult.  A lack of culture-specific prepara­tion is a deadly sin in any inter­national business negotia­tion.  There are many skilled and resource­ful nego­tiators in the United States.  But without prior cross-cultural expe­rience or prepa­ration, most of them will assume that both sides share an impli­cit agree­ment over what repre­sents legi­timate nego­tiation tactics, and that both sides believe in or at least respect the value of a win-win approach.  Furthermore, they trust their ability to correctly inter­pret clues about where the other side stands in the deci­sion making process.

None of these may be the case in inter­national nego­tiations.  Conse­quently, an American nego­tiator may cry foul when a South Korean, for example, conti­nues to make demands after a contract has already been signed.  A Russian or Chinese nego­tiator may regard a conces­sion by their American counter­part a sign of weak­ness, happily take it without recipro­cating, and be even more moti­vated than before to extort further ‘free’ conces­sions.  An Arab might give small clues that they are willing to close the deal which their American negotia­tion partner may miss com­pletely, conti­nuing to make new offers.  All of these are ‘normal’ misunder­standings across cultures which can wreak havoc with your negotia­tion strate­gies and goals.

Cultural Differences That Affect Negotiations

Several aspects require careful study when preparing for an inter­national nego­tiation.  In this article, we will only be able to scratch the surface of a few of them.  Five major aspects deserve closer scru­tiny:

1.  Negotiation Objectives

In the United States, negotia­tion objec­tives are often obvious as the inter­actions follow a logical, factual approach.  Obtaining lower-cost goods or services, gaining access to technology or intellectual property, extending one’s influence on markets through alli­ances, and so on, all share a common deno­minator: the under­lying objec­tive is near-to-mid-term business success as defined by the bottom line.  Profit and growth are the ultimate moti­vators, and people will be flexible and crea­tive in finding ways to meet their objec­tives.  Nego­tiators are prepared to ‘slice and dice’ the package of condi­tions being nego­tiated, willing to make conces­sions if they help advance the nego­tiation, given that the overall value of the package will still meet their objec­tive.  Long-term aspects of the business relation­ship still matter, but play a secon­dary role.  American business­people may not engage in an agree­ment if it holds long-term promise but does not offer an advantage in the near term.

Foreign negotia­tions can look quite differ­ent in contrast.  For starters, long-term aspects will weigh more heavily.  Also, nego­tiators may have a less holis­tic view of the package being dis­cussed.  Let’s say an Asian buyer is inter­ested in buying equip­ment from an American company that requires exten­sive training and main­tenance provi­sions.  The ini­tial nego­tiation may focus exclu­sively on the price of the equip­ment, in spite of efforts on the American side to use trade­offs in training or main­tenance cost to offset pricing concerns.  The set of objec­tives on the Asian side may indeed include a speci­fic price target, and they may not be willing to move on to nego­tiating other aspects before that target has been met.  This some­times becomes an issue of ‘face’, where not reaching their goal affects the self-esteem and repu­tation of the nego­tiator.  Such a situa­tion can become uncom­fortably emotional for the American side.

Other factors may work to the adva­ntage of a U.S. nego­tiator with­out them even reali­zing.  For example, entering a joint venture or other colla­borative agree­ment with an American corpo­ration can be quite presti­gious for business leaders in some countries.  They will usually be smart enough to not reveal that aspect, but with care­ful prepa­ration using the help of others, you can identify this upfront and use it to your advan­tage.

Overall, it is impor­tant not to assume that the objec­tives of the foreign side will be iden­tical with those you’d expect in a domestic nego­tiation.  Spending the time and effort to learn more about them prior to enga­ging can give you a strong advan­tage.

2.  The Importance of Relationships

While some form of a working relation­ship is required for nego­tiations in the U.S., it doesn’t have to be exten­sive and can usually be quickly estab­lished.  In most cases, evi­dence that you are a valid business partner and an indi­cation that you are willing to nego­tiate in good faith will suffice.

Success­ful nego­tiation abroad usually requires a lot of up-front relation­ship building, which is why Americans often complain that deal-making can be pain­fully slow abroad.  In most of the cultures in Asia, Europe, and Latin America, strong relation­ships are not only impor­tant to ensure proper exe­cution of an agree­ment but are a prere­quisite for entering into any formal or informal nego­tiations.  To vary­ing degrees, people will want to learn about your company back­ground and capa­bilities, prior expe­riences, strate­gies and objec­tives, long-term plans, and so on.  They also want to get to know you perso­nally before they decide to trust you.  In several cultures, people don’t want to conduct busi­ness with you unless you con­vinced them that you are seeking a long-term engage­ment rather than just ‘pursuing a deal’.

Several prepa­ration steps are impor­tant.  You’ll want to formu­late your long-term plan for the engage­ment, even if that means covering a longer time­frame that your normal business process might call for.  Everyone under­stands that things change, so as long as you’re willing to maintain a mini­mum level of consist­ency, don’t fear that you’ll find your­self ‘locked in’.  (Be prepared for people to track changes closely, though, espe­cially in Japan.)  Next, prepare exten­sive back­ground infor­mation about your­self and your company.  Espe­cially in many Asian countries, people expect to get such infor­mation in the ini­tial intro­ductions.

If your inter­actions cover an exten­ded time period, avoid changing team members.  That applies not only to the primary nego­tiator, but to every­one who inter­acts with the other party.  Any change in contacts means that relation­ship-building may have to start over, slowing the progress.

Further­more, realize that the defi­nition of what makes a good relation­ship varies widely between cultures.  In certain European countries such as the Nordics, the Nether­lands, Germany, also in Israel, frank and direct exchanges indi­cate trust and a posi­tive relation­ship, which is oppo­site to cultures such as China, where polite­ness and diplo­macy are virtues and where there is little trust in ‘objec­tive’ truths anyway.  A puzz­ling fact in China may be that confi­dentia­lity is not a require­ment of a trust­ing relation­ship, as many American com­panies have pain­fully expe­rienced.  Infor­mation is consi­dered free and using it in one’s best interest (which includes sharing it with other parties) is consi­dered legi­timate.  Confi­dentia­lity agree­ments may not change that but will be read as signs of mis­trust, hampering the relation­ship.

Lastly, it is also impor­tant to know that the rela­tive status of both sides can be differ­ent in a foreign culture.  In the U.S., a seller-buyer relation­ship, at least bet­ween parties of simi­lar size and power, is usually one of near-equa­lity.  Success­ful trans­actions follows the princi­ple of ‘win-win’, with both sides gaining some­thing (e.g., a good or service) and giving some­thing (e.g., money).  In Japan and South Korea, to a lesser degree also in other Asian countries, the seller is hierar­chically infe­rior to the buyer.  Such a distri­bution of roles can make for an irri­tating expe­rience to the foreigner.  In Japan, a sales­person is obliged to serve all of the buyer’s needs and provide which­ever informa­tion they request.  The buyer, on the other hand, has a cultural respon­sibi­lity to ensure that the seller still makes a profit from the business, but other­wise can manage the inter­action with the seller in a way that may strike some Americans as almost dicta­torial.  Foreign companies not willing to accept this distri­bution of roles may get nowhere in their attempts to win business in Japan.

3.  Decision Makers

A frequent source of frustra­tion for Americans nego­tiating in some Asian and Latin American countries is that they find it hard to get access to the deci­sion maker, feeling they’re talking to the wrong person or group.  Back home, identi­fying the key deci­sion maker is usually easy, and getting access to them can always be arranged as long as you have some­thing of value to offer to them.

Accor­dingly, inexperi­enced nego­tiators in inter­national situa­tions may suspect that for some reason the ‘right person’ simply doesn’t want to talk to them, thinking they are stuck with an inter­mediary with limited autho­rity.  (This is compa­rable to car-buying in the U.S., where ‘I need to get my manager’s appro­val’ is a standard nego­tiation trick in almost every sales­person’s reper­toire.  Most Americans I know hate it with a passion.)  The rea­lity may be quite differ­ent: a ‘deci­sion maker’ in the American sense, i.e., a person with the autho­rity and willing­ness to make a direct deci­sion, may not exist at all.  Deci­sions are made by groups in many cultures.  ‘The person at the top’ still exists - organi­zations in these cultures often have power­ful leaders and clear hierar­chies.  However, the role of those individuals is not so much to make deci­sions them­selves, but rather to orches­trate and manage the process of how group deci­sions are being made and imple­mented.  Since group deci­sions require a series of inter­actions between all stake­holders to form opinions and estab­lish con­sensus, they cannot be made right at the nego­tiation table.  Suffi­cient time will have to be allowed between nego­tiation rounds for the group to go through itera­tions of the process.  Insight into the process itself is diffi­cult to gain, making it pivo­tal to iden­tify rele­vant members of the group making the deci­sion in order to try to influ­ence each of them in your favor.

In Europe and Latin America, only mana­gers at the top or at least high up in the organi­zation may have suffi­cient autho­rity to make decisions.  Except for matters of company-wide impor­tance, they might not be avail­able for the nego­tiation itself, relying on inputs from their middle mana­gement instead.  That still gives you a chance to (indirectly) influ­ence their deci­sion.

4.  Negotiation Techniques

People around the world are very creative when it comes to nego­tiating, bar­gaining, and haggling.  Americans may be at a slight disad­vantage in this field as people in many other countries receive exten­sive nego­tiation training already as children, watching their parents bargain at the market or in a shop. Nume­rous neg­otiation techni­ques exist that would be consi­dered unusual or exotic in America.  Here are but a few examples.

a.  Deception, False Demands, and False Concessions

These can occa­sionally be encoun­tered in the United States as well, but people in certain foreign cultures will use them more force­fully.  Preten­ding they are not at all inter­ested in your business propo­sition is one way for an experi­enced nego­tiator to gain an advan­tage.  A false demand, meaning the other nego­tiator disco­vered some­thing you want that they don’t value highly, serves as a strong pressure point for you to make a major conces­sion.  False conces­sions, like repea­tedly lowering the (overly inflated) price without getting any reci­procal conces­sion from you, may lead you to feeling guilty and giving up some­thing that is valu­able to you without getting equi­valent value in return.  In all of these situa­tions, it is impor­tant to reco­gnize the tech­nique.  Once you do, you can either call the bluff (caution – this may disturb the relation­ship) or care­fully outma­neuver it.

b.  Extreme Openings

Starting a nego­tiation with an extreme demand is common practice in several Asian and Arab countries.  There are two ways to counter the techni­que, the effi­ciency of which depends on the speci­fic culture: either counter-bid at the extreme other end of the spectrum (if they ask a ridi­culously high price, offer a ridi­culously low one and smile), or state firmly that if they indeed believe the value of their product or service to be that high, then there is no common ground for any further discus­sion.  Inevi­tably, you will be asked what you consider a more realis­tic.

Note that in some cultures, people will be irri­tated and may even be offen­ded by extreme openings.  An example is Sweden, where people expect you to start with a close-to-final offer.

c.  Aggression and Strong Emotions

In the U.S., nego­tiations commonly follow a logi­cal and factual flow.  Emotions are being read as an indi­cation of the process going astray.  In many foreign countries, the use of aggres­sion and strong emo­tions may be viewed a legi­timate tactic.  It is there­fore wise not to let oneself be alarmed.  If you continue to stay friendly and focused, the other side will quickly drop the tactic as ineffec­tive.

d.  Silence

The example in the intro­duction of this paper is inter­esting to analyze.  In American ‘cultural langu­age’, silence signals a nega­tive response.  Extended silence makes the message stronger.  In Germany and in nume­rous other countries, silence doesn’t mean much.  In the parti­cular situa­tion, the German mana­ger may have been reflec­ting upon the price or thinking about some­thing comple­tely unrelated.  Keep in mind that if the conver­sation takes place in English and if English is a foreign langu­age for the other side, trans­lation also takes time and may occupy the minds.

Foreign nego­tiators who pre­viously gained nego­tiation expe­rience with Americans may attempt to use silence against you.  It is best to not read anything into breaks, even extended ones, in the conver­sation flow.

e.  Best-Offer Pressure

This is my best offer’, stated in a nego­tiation in the U.S., usually means ‘take it or leave it’.  When nego­tiating abroad, it may not mean that.  Nego­tiators in some Asian countries are known to some­times make a series of ‘best’ offers, each a little better than the previous one.  Be care­ful when using the phrase your­self – rather than under­standing that this is your final word, the other side may mistake it for a tactic.

f. Time Pressure

Don't share your flight arrange­ments with your host when nego­tiating over­seas.  The Japa­nese and Chinese are parti­cularly good at this: pre­tending to help you ‘recon­firm your travels’, what they really want to know is how much time you have budge­ted for the nego­tiation.  If, say, you are on a Wednes­day morning return flight, they may spend most of the time on Monday and Tuesday making intro­ductions, presen­ting the history of their company, discus­sing insigni­ficant details of your pro­posal, and so on.  You may not get to nego­tiating central parts of the agree­ment before late-after­noon on Tuesday, which is when you are more likely to make conces­sions under time pressure.  Most cultures prefer a more relaxed approach to the often-hurried U.S. style anyway, so they can use your prefer­ence for quick and effec­tive inter­actions against you.  It is best to always let the other side know that you have plenty of time and will be able to change flight bookings if needed, even if that may not really be the case.

5. Reaching Closure

When approach­ing the final stages of an inter­national nego­tiation, you need to care­fully look for clues that the other side is ready to close.  Too many variants exist to be dis­cussed here, but just like in a nego­tiation back home, you will pay a price if you miss them.  Realize that in several cultures, ‘yes’ won’t mean ‘I agree’, but rather only signals ‘I hear what you’re saying’, so it does not convey consent.

How the closure itself looks will again vary.  The good old hand­shake, still in use in America but normally acco­mpanied by signing a contract, works well to confirm an agree­ment in countries such as Brazil, most Arab countries, India, and many others.  That doesn’t mean that no written agree­ment should be prepared, but it is advi­sable to consider the hand­shake, rather than the signa­ture, the critical step.  The paper­work becomes a mere forma­lity.  The other side might be alie­nated if you focus too much on the written contract, feeling that you don’t trust their word.  In Japan, a signed written agree­ment is not important.  Once both sides clearly stated and spelled out their agree­ment orally and then put it in the meeting protocol, you can be assured that they will follow it to the letter.  Gene­rally, you don’t want to bring a legal counsel to any inter­national nego­tiation.  Except­ions exist in a few countries if you hire a local one, but you are almost always better advised to consult legal specia­lists out­side of the nego­tiation itself.

One final caveat is that closing an agree­ment and signing a contract may still not end the nego­tiation.  In China and espe­cially in South Korea, a contract is viewed a ‘snap­shot in time’.  New demands are still likely to be brought up later, so you’ll want to keep some maneu­vering room.


Proper prepa­ration for your inter­national nego­tiation will require study­ing in-depth mate­rial about the target culture and/or enga­ging a coach who commands exten­sive know­ledge of the country and its business prac­tices.  The five aspects described in this paper deserve parti­cular atten­tion, but there is more you’ll need to know, such as customs and manners in the other culture, levels of forma­lity, how to present infor­mation, and so on.

A success­ful interna­tional nego­tiator will never engage without care­ful prepa­ration.  It is a pivo­tal step towards achieving your objec­tives, and a very risky one to skip.

Printable PDF version written by  Lothar Katz

( Copyright 2004-2015, Leadership CrossroadsTM )

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