Impact of Culture on Negotiating Styles

1 January 2017

An effective business negotiation is very significant in achieving a successful business relationship. As the businesses expand globally, so do the conflicts between the interacting parties. These conflicts only get amplified if the interacting parties are from different cultural background. An individual’s cultural background plays a big role in his perception, which affects his judgment, motivation and behavior at the bargaining table.

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The perception of an individual is the manifestation of the deeper held values and beliefs he has grown up with. In short, culture affects the whole negotiating process. A better understanding of the intercultural differences helps to gain a better insight into the cultural aspects of the negotiating styles and thus achieve a mutually acceptable solution by avoiding unnecessary cross-interactions. This research paper endeavors to study the impact of Hofstede’s dimensions of national culture on negotiating styles for productive and successful business interactions.

Importance of Effective Cross-cultural Negotiations Negotiation is a significant part of business transactions. With the expanding global economy, there is a shift towards increased business interactions. Consequently, conflicts occur. These conflicts only get amplified if the interacting parties are from different cultural backgrounds. Negotiation is a way to come to a mutually acceptable solution in case of a disagreement between the parties in discussion. When negotiating, understanding the values of the parties involved goes a long way in striking a winning deal.

If the parties agree with each other by making an effort to establish a common ground, the chance of a win-win situation materializing increases. Goodwill and the desire to achieve a favorable outcome is generated amongst the negotiating parties which makes it easy for a party to compromise, if required. However, if the parties disagree with each other and make no substantial effort to resolve the conflict, they end up in a win-lose situation where one party views the gains of the other as its loss. The values of individuals are a derivative f their cultural backgrounds which explains the differences in their perception, judgment, motivation, and behavior. A better understanding of these cultural differences helps in avoiding misinterpretation and miscommunication during the negotiation process. Phatak and Habib (1996) observed that most of the international business negotiations could not fulfill their potential expectations because of cultural faux pas, and in order to succeed, the international business negotiators have to be well versed in the cultural nuances and unspoken language of the party at the other end of the table.

A study conducted by Brett and Okumura (1998) indicated that intracultural negotiators had better outcomes than the intercultural negotiators, who lacked in understanding of priorities of the other party. A study conducted by Imai and Gelfand (2010) illustrates that cultural intelligence is a key predictor of intercultural negotiation effectiveness. The culturally educated negotiator is better positioned to evaluate the risk profiles, expectations, and beliefs that can help avert conflicts. Hofstede’s Criteria for Cultural Behavior

Culture is a way of life, it is the sum total of learned behavior, values, and traditions developed by a group of people and transmitted from one generation to another. Hofstede (1980) states that people are mentally programmed to behave in a particular way depending on their national culture. He further based national culture on four dimensions: power distance, uncertainty avoidance (UAI), individualism-collectivism, and masculinity-femininity. Later, he added a fifth dimension, long-term orientation and a sixth dimension, indulgence versus restraint.

Appendix A gives a precise definition of these dimensions derived from Greet Hofstede’s website (http://www. geerthofstede. nl/). Hofstede’s website provides an overview of his research on dimensions of national cultures. Negotiating Tendencies Based on Cultural Background It is inferred from Hofstede’s research data for a few selected countries derived from his website (http://www. geerthofstede. nl/) and presented in Appendix B, that Mexico has a high power distance, uncertainty avoidance, and masculinity indices but low individualism index.

Cultures with strong ncertainty avoidance have low risk taking capabilities. A comparative analysis of negotiating tendencies by Metcalf et al. (2006) concludes that Mexican respondents are least likely to favor a high-risk approach to negotiating. This is consistent with the high uncertainty avoidance (UAI) scores assigned to Mexico in Hofstede’s research. Heydenfeldt (2000) studied the Mexican behavior based on the individualistic/collectivistic model of cultural variation and concluded that Mexicans exhibited collectivism by engaging in behaviors that suggested relational concern.

According to Metcalf et al. (2006), small power distance is characteristic of Finnish culture. The small power distance was evident from the Finnish team organization skills where individuals were responsible for decisions, but large power distance was evident for both Indians and Mexicans as the authority to make decisions was vested in a few at the top. According to Hofstede (1980), countries such as Austria, Denmark, Israel, New Zealand, Ireland, Sweden, Norway, Switzerland, Britain, and Germany have very small power distance.

Negotiators from these countries are more tolerant of democratic and flat organizational hierarchies. According to Metcalf et al. (2006), Turks and Indians are consensus-oriented. This explains their low individualism index (Appendix B). In contrast, U. S. negotiators are highly individualistic (INDV=91) and willing to accept risks (UAI=46). Japan is considered to be a male chauvinistic nation deeply influenced by the feudal ethical codes from the traditional Chinese culture. The three cardinal guides that state – ruler guides subjects; father guides son, and husband guides wife (Huang, 2010).

Also, Japanese exercise the power of information by hiding it (Brett & Okumura, 1998). Japan has a high masculinity index of 95 and a high UAI of 92 (Appendix B). Negotiating Styles Based on Negotiating Tendencies The influence of styles in negotiations cannot be underestimated. Applying the same negotiation style in different environments does not always have the same result. In other words, an approach that is successful in one situation, may lead to an impasse in another situation.

Every culture is different and as a result of that every negotiation process is different. Identifying the negotiation style best suited for the environment helps in attaining a productive outcome. The strong uncertainty avoidance cultures are intolerant of dissimilar cultures. They are averse to risk and feel a strong need for formalized rules and procedures. The low uncertainty avoidance cultures are more tolerant of others and they do not stress rules and formalities. People within these cultures are more contemplative and less emotional.

When dealing with cultures that have high uncertainty avoidance (UAI) scores, the negotiators need to focus on building the trust and fostering relationships between the parties. They should propose rules and mechanisms that will reduce the apparent risks in the deal. Collectivistic cultures prefer a consensual approach. The negotiating process with such cultures may take longer than usual as the roles of individuals at different levels in the organization are very important in the final decision making. Negotiators should respect their cultural priorities to strike a conclusive deal.

Cultures with large power distance accept inequality as a way of life. They assign a superior status based on family background, social status, performance achievements, etc. Negotiators from such countries tend to look up to the authority figures for exercising power. Cultures with small power distance accept equality among people and focus on individual achievements. Generally, the larger the power distance the more the inequitable distribution of wealth. Negotiators from these countries are more tolerant of democratic and organizational hierarchies.

Cultures with high masculinity index are not comfortable with too many business females in the group. They expect to see women in more family oriented roles of tending to household chores and taking care of the babies. . Conclusion Cultural dimensions like power distance, uncertainty avoidance, individualism, masculinity, and Long term Orientation help to better understand the cross-cultural differences relating to the individual perception, behavior and communication styles. Increased knowledge of nations’ cultural norms and values helps in developing a mutual understanding between two culturally diverse business parties. This can help in improving the negotiating styles for more effective cooperation and productive outcomes.

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