Negotiation and Culture Differences Exercise

Negotiation and Culture Differences

Exercise 1: Cultural Differences

One of the most important economic regions in Asia is Hong Kong, because although it is relatively small compared to mainland China, and thus one might expect it to have a similarly sized importance, but in reality its unique political and cultural history make Hong Kong a unique entryway into the wider culture of China. As such, any negotiation conducted in Hong Kong or with local companies and individuals must take these unique cultural differences into account.

Hong Kong is a city-state that enjoys relative autonomy from the People's Republic of China even as the larger country ultimately owns Hong Kong following a transfer of power from the British in 1997. This political autonomy is coupled with a geographical separation as well, because Hong Kong is surrounded by water on all sides (although it is fairly near to the mainland on its northern and northeast sides). The residents are mostly ethnic Chinese, but this does not mean that Hong Kong's culture is not distinct from the mainland, and in fact, Hong Kong has developed a fusion of traditional Chinese culture and modern aesthetics, leading to the creation of a business culture that retains elements of traditional Chinese business attitudes alongside contemporary strategies. This culture has arisen as a necessity, because Hong Kong's status as a preeminent port town and its unique political history make it the ideal nexus of Eastern and Western cultures.

For example, the success of cognac as a popular drink for special events in Hong Kong represents a consideration of what Kanter (1994) calls "the art of alliances," which is ultimately the act of "acknowledging and then effectively managing the human aspects "of alliances and negotiations in general (Kanter, 1994, p. 98). Unlike previous failed attempts at marketing Western goods to Hong Kong consumers, the successful integration of cognac into Hong Kong culture was predicated on an understanding of "the social fabric of Hong Kong" because "gift exchange, wedding banquets, business dinners, [and] household consumption" was the key to its stake of a certain market share in Hong Kong" (Smart, 2004, p. 219). By engaging with the new potential consumers at an individual level, cognac wholesalers successfully strengthened their ability to do business in a foreign country and in conjunction with local distributors and retailers. In turn, this allowed cognac to enter the cultural consciousness of mainland China so that it remains particularly successful even though "the Chinese population in Hong Kong is extremely light in their drinking habits with less than 4% of the population described as regular drinkers" (Smart, 2004, p. 219).

The importance of understanding the cultural norms of a country that one is planning on doing business in is paramount, because it is ultimately these cultural norms of interaction and interpersonal relationships that dictate a negotiation. Researchers characterize this importance in different language, sometimes regarding it as taking a humanizing approach to the practice of business, as in the case of Kanter's essay, or treating with a kind of scientific detachment by simply observing that "like an individual species in a biological ecosystem, each member of a business ecosystem ultimately" contribute to the outcome of the whole (Iansiti & Levien, 2004, p. 69). Thus, paying attention to the "human aspects" of negotiation means simply realizing that the end result of any given negotiation has as much to do with the collective influence of a number of small cultural differences as with major oppositions in the negotiation process. That this is so often a neglected feature of interactions between individuals or organization from different countries is somewhat surprising, considering how the practice of paying attention one's "ecosystem" is simply on the lower end of a spectrum that includes efforts at vertical integration geared towards controlling and accessing any given variable. In much the same way that the Dell computer company "eliminated the reseller's markup and the costs and risks associated with carrying large inventories of finished goods" by selling straight to customers and thus ensuring control over every variable of the production and sales process, any productive negotiation should be preceded by an examination of any cultural variables that might result in costly business errors, damaging relations, or missed opportunities in negotiations (Magretta, 1998, p. 73).

The most obvious cultural difference which might arise when conducting a negotiation in Hong Kong is the ever-present but often uncorrected tendency for Westerners to lump distinct regions into much larger cultural or national categories. Thus, care must taken to consider Hong Kong culture as such, and not necessarily the same as the culture of mainland China. In addition, one should not assume to know more about Hong Kong culture that one actually does due to the fact that certain parts of Hong Kong culture, and especially fashion and food, bear far more dramatic signs of Western influence than regions of mainland China. Though it may appear obvious to some, this process is actually the first step of "doing your homework on how to make your best case" using the particular cultural standards which apply in any given negotiation (Shell, 2006, p. 43). This is crucial because "by positioning your needs within the normative framework the other party uses to make decisions, you show him respect and, as a result, gain his attention and sympathy" (Shell, 2006, p. 46).

After recognizing a relatively pervasive ignorance on the part of Westerners when it comes to the nuanced differences between the culture of Hong Kong and mainland China, one may begin to consider the aspects of Hong Kong most important to consider when preparing for a negotiation. Firstly, one must recall that Hong Kong only transferred to China's control relatively recently, so depending on the age of the other person, his or her experience of the norms governing business interaction will be vastly different. This is especially true when dealing with companies making a transition from traditional Chinese management practices to more globalized standards, because the negotiation could be completely different depending on who is participating. For example, because Hong Kong represents a nexus between China and the West as well as between older traditions and globalized standards, the simple difference between a bow and a handshake could doom the negotiation before it even starts.

Furthermore, someone coming from a Western background must be careful to mediate the aggression and almost violent sense of physicality that is common to business interactions. Aside from the more formalized communicative uses of the body such as handshakes and bows, body language is a crucial aspect of negotiation, and most people do not realize how fully body language is mediated by one's culture. Thus, even if one deems it acceptable to use a handshake when meeting someone, the vice-like grip which is so popular amongst aggressive, hyper masculine negotiators would likely feel out of place and even amateurish in a negotiation in Hong Kong.

Hong Kong offers the ideal country in which to consider the implications of cultural differences on negotiation, because its unique cultural and political history mean that the culture which has developed in Hong Kong has blended and integrated two seemingly oppositional social forces, namely, China and the West. Considering Hong Kong's unique cultural alongside relevant theory demonstrated the importance of understanding cultural norms when preparing for a negotiation, whether those norms cover topics as complex as the system of meaning which goes into regulating the practices of gift-giving or marriage, or even as simply as the decision to use a handshake or a bow upon greeting someone. The success or failure of a negotiation often has less to do with the particular terms of the negotiation (as both parties must already be in relative agreement if they are meeting in the first place) and more to do with the behavior and attitude of the negotiators, because negotiating anything is a simultaneously performative and personal act. Both parties attempt to psychologically manipulate each other while maintaining an air of mutual beneficiality, a delicate balancing act which can be severely disrupted by even the most minor inattention to cultural detail.

Exercise 2 (as buyer): Negotiation Process

The goal of this negotiation was to purchase a used 2010 Toyota Prius Hatchback for around $20,000, $5,000 under the seller's initial asking price in the online ad. However, this was just the ideal price for me and thus represents my goal in that it is my "highest legitimate expectation of what" I can achieve in the negotiation (Shell, 2006, p. 30). In reality, the upper end of my acceptable range was $23,000, as the car is a relatively good deal, listed as it is for only thirty dollars above the retail book value (at least according to the Carfax report included in the ad). While I did not know if my targeted price generated a positive or negative bargaining zone before the negotiation, it seemed reasonable to presume that the seller would be willing to go at least as low as $23,000, thus creating a positive bargaining zone in which to negotiate the final price, because the seller's lowest bottom line was likely lower than the highest I was willing to pay.

Negotiating the deal was surprisingly easy due to a combination of an apparently modest goal on my part and more negotiating ability on the part of the seller than was anticipated. While the seller implicitly made the initial offer in the publication of the ad, I ultimately initiated negotiation by stating that I had seen the ad and was wondering if the seller would take $18,000 for me to take it off his hands, stating that I knew the 2011 Toyota Prius had been expanded into a whole line of different vehicles and heavily upgraded, thus rendering the 2010 model somewhat more out-of-date than a year-old model usually would be. I did not expect the seller to accept this initial offer, but I was hoping to catch him in a consistency trap. Shell (2006) notes that "skilled negotiators know about the human need to appear consistent and try to use it as often as they can" by utilizing consistency traps, whose goal "is to precommit you to a seemingly innocuous standard and then confront you with the logical implications of the standard in a particular case -- implications that actually turn out to run against your interests" (Shell, 2006, p. 46). I was trying to get him to agree with my claim that the 2011 models rendered the 2010 Prius less desirable, and thus harder to sell, so that I would be able to use this shared assumption in order to justify selling the car for something closer to my ideal price. However, the seller effectively countered by noting that he was selling it for very near the retail book price and claimed that while my statement might be true, selling the car for $24,000 already represented his efforts at unloading it quickly. Thus, while my consistency trap succeeded in delineating and formulating the shared belief on which my offers could play, it was not quite as effective as I had hoped.

However, I was still able to utilize the shared assumption by claiming that the seller could not genuinely be planning on selling it for $24,000, as that was actually slightly above the retail book price, meaning that he was expecting to get full price for a used car rendered rapidly out of date by the dramatically advanced newer model. I then suggested that I could pay $20,000 for it considering that there was only one previous owner and it had relatively low mileage, but he claimed that this was reason enough to pay the full price. Although I was willing to pay more, I needed the seller to make a lower offer or else I would have been negotiating with myself. Thus, I claimed that I likely could not go above $20,000, and that it would simply be better to save the money for buying a 2011 model at a later date. Suggesting the presence of a negative bargaining zone seemed to work, because the seller then offered to go as low as $23,500. I responded that that was still too much, claiming that $22,500 was the sum total of what I had saved after selling my last car. Finally, the seller offered $23,000 and the option to receive partial financing by the car dealership so that I could purchase the car and pay off the full price over time, thus freeing me from having to spend "all" of the supposed $22,500 that I had. As $23,000 was the highest I was willing to go, and the financing option further lessened any sting that might be felt from falling $3,000 short of my goal, I took the offer.