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He knew he would not attain the $5 million and therefore seemed happy to take any offer. Rather, he could have leveraged the relationship to get a better figure.
With respect to home office, Jared should have been more direct with them. He did not inform them in a timely manner about the situation. He only came to them after it appeared he was going to be unsuccessful. This spurred Malcolm to feel that his direct involvement was the only way to resolve the situation. As a result, the situation was made worse. Malcolm may have had formal authority, but he was not a part of the relationship with Madjid and therefore his involvement set a negative tone for the negotiations.
Not only should Jared have spoken with home office earlier, but he should not have spoken to Malcolm.
Jared's boss did not have adequate knowledge of Indonesian culture or business practices to become involved. Jared had spoken prior to departure with advisors experienced in international business. He should have taken the situation to them for advice. This not only would have avoided Malcolm's involvement, but allowed to either achieve a better outcome or at least to understand that the $1 million offer was the best outcome.
Advise to a U.S. Company Seeking to Expand to Indonesia
The Indonesian market is one of the most difficult in eastern Asia. Though tempting because of its size, it is fraught with difficulty.
Any U.S. firm looking to expand operations into Indonesia should undertake significant research into the differences between U.S. business culture and Indonesian business culture.
These differences take many dimensions. The role and strength of the legal system is one major difference that needs to be understood. Had BWA understood this difference better, they would have been able to find a better outcome than they did. The role of relationships in business culture is also very different.
Furthermore, it is recommended that U.S. firms understand some of the religious and historical differences. Indonesia is primarily Muslim, which means U.S. firms will need to understand the implications of dealing with a Muslim culture. Moreover, the archipelago has a history that includes both colonialism and dictatorship. Colonialism will inevitably color the way in which locals deal with Westerners. When the country signed the Cochran-Subardjo Agreement in 1952, for example, the backlash forced Subardjo to resign (Negotiations.com, 2009). Dictatorship, under Suharto, colors the way in which Indonesians view formal authority and authority figures.
These are among many areas in which Indonesia differs significantly from the U.S.
There are certain costs associated with business overseas that may be different than in domestic markets. Part of the problem with BWA is that they did not anticipate some of these costs. Thus, they did not build them into their budget projections. As a result, they felt that they needed the $5 million remedy. Had they been better prepared, and armed with more knowledge, they might have known prior to the negotiations about such potential costs. Those costs could then have been built into the decision whether or not to enter into a contract with NEC at all, and if so, under what terms. It is also important that senior management have this knowledge as well, even if they are not directly involved in the project. This will help manage the expectations of senior management and reduce the likelihood that such un-knowledgeable people as Malcolm become involved.
Understanding the differences between two cultures is critical to success in the international business arena. Before making such a move, as much knowledge as possible should be gained, to better prepare management for some of the problems that will occur, and arm them with the means to remedy those problems.
Doing this will not avoid all problems, but it will help to mitigate the damage when problems do occur.
No author. (2009). Unequal Foreign Negotiation. Negotiations.com. Retrieved March 1, 2009 at http://www.negotiations.com/case/unequal-negotiation/
Taylor, Stephen. (2008). Indonesia. Cyborlink.com. Retrieved March 1, 2009 at http://www.cyborlink.com/besite/indonesia.htm
No author. (2009). Indonesia: Culture. Michigan State University. Retrieved March 1, 2009 at http://globaledge.msu.edu/countryInsights/culture.asp?countryID=20&CategoryID=6,1[continue]
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