This paper examines the role of cultural differences in negotiation through two exercises. The first analyzes Hong Kong's unique cultural identity — a blend of traditional Chinese and Western influences — and explains why negotiators must understand local norms around body language, gift-giving, and social relationships before entering any business discussion. Drawing on scholars such as Shell, Kanter, and Iansiti and Levien, the paper argues that cultural attentiveness is as important as the substantive terms of a deal. The second exercise presents a first-person account of a simulated buyer negotiation for a used Toyota Prius, illustrating concepts such as the bargaining zone, consistency traps, and anchoring, and reflecting on what the negotiator would do differently to achieve a better outcome.
One of the most important economic regions in Asia is Hong Kong. Although it is relatively small compared to mainland China — and one might therefore expect it to carry a similarly modest significance — its unique political and cultural history make it a singular entryway into the wider culture of China. As such, any negotiation conducted in Hong Kong or with local companies and individuals must take these cultural differences carefully 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 governs Hong Kong following the transfer of sovereignty from Britain in 1997. This political autonomy is coupled with a degree of geographical separation: Hong Kong is surrounded by water on all sides, though it sits fairly close to the mainland on its northern and northeastern edges. The residents are mostly ethnic Chinese, but this does not mean that Hong Kong's culture is indistinct from that of the mainland. In fact, Hong Kong has developed a fusion of traditional Chinese culture and modern aesthetics, producing a business culture that retains elements of traditional Chinese attitudes alongside contemporary practices. This distinctive culture has arisen out of necessity: Hong Kong's status as a preeminent port city and its unique political history have made it the ideal nexus of Eastern and Western influences.
For example, the success of cognac as a popular drink for special occasions in Hong Kong illustrates what Kanter (1994) calls "the art of alliances" — ultimately, the act of "acknowledging and then effectively managing the human aspects" of alliances and negotiations in general (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 (Smart, 2004, p. 219). By engaging with prospective consumers at an individual level, cognac wholesalers successfully strengthened their ability to do business in a foreign country in conjunction with local distributors and retailers. This, in turn, allowed cognac to enter the cultural consciousness of mainland China, where 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 in which one plans to do business cannot be overstated, because it is ultimately these norms of interaction and interpersonal relationship that shape any negotiation. Researchers characterize this importance in different ways — sometimes treating it as a humanizing approach to business practice, as in Kanter's essay, and sometimes adopting a more detached analytical stance by observing that "like an individual species in a biological ecosystem, each member of a business ecosystem ultimately" contributes to the outcome of the whole (Iansiti & Levien, 2004, p. 69). Paying attention to the "human aspects" of negotiation means recognizing that the outcome of any given negotiation has as much to do with the collective influence of many small cultural differences as with major substantive disagreements.
That this is so often a neglected feature of cross-cultural business interactions is surprising, given that attending to one's "ecosystem" is simply the lower end of a spectrum that extends all the way to efforts at vertical integration aimed at controlling every variable in a process. In much the same way that Dell eliminated "the reseller's markup and the costs and risks associated with carrying large inventories of finished goods" by selling directly to customers and thus controlling every variable from production to sale, any productive negotiation should be preceded by a thorough examination of cultural variables that might result in costly errors, damaged relationships, or missed opportunities (Magretta, 1998, p. 73). Cultural preparation is, in this sense, the negotiator's equivalent of supply-chain discipline.
The most obvious cultural pitfall when conducting a negotiation in Hong Kong is the persistent tendency among Westerners to collapse distinct regions into much larger national or cultural categories. Care must therefore be taken to understand Hong Kong culture on its own terms, and not to treat it as interchangeable with mainland Chinese culture. Moreover, one should not assume familiarity with Hong Kong culture simply because certain domains — particularly fashion and food — display far more obvious signs of Western influence than comparable areas of the mainland. Though it may seem obvious, this kind of careful preparation is the first step in "doing your homework on how to make your best case" using the particular cultural standards that apply in any given negotiation (Shell, 2006, p. 43). As Shell (2006) further notes, "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" (p. 46).
Beyond this foundational awareness, negotiators should also note that Hong Kong's transfer to Chinese sovereignty occurred only relatively recently. Depending on the age and background of one's counterpart, his or her experience of the norms governing business interaction may differ dramatically. This is especially relevant when dealing with companies in transition from traditional Chinese management practices toward more globalized standards, since the expected style of negotiation could vary considerably depending on who is at the table. Even something as seemingly simple as the choice between a bow and a handshake could undermine a negotiation before substantive discussion begins.
Negotiators from a Western background must also be mindful of the aggression and forceful physicality that can characterize certain Western business interactions. Beyond formalized gestures such as handshakes and bows, body language is a crucial dimension of negotiation, and most people underestimate the degree to which their body language is culturally conditioned. Even if a handshake is judged appropriate, the vice-like grip common among aggressive Western negotiators would likely feel jarring and even unprofessional in a Hong Kong context.
Hong Kong is an ideal case study for examining the implications of cultural differences in negotiation precisely because its history has blended two seemingly opposed social forces — China and the West. Reflecting on Hong Kong's culture alongside relevant theory underscores the importance of cultural preparation, whether the norms in question cover something as complex as the social meanings embedded in gift-giving and marriage rituals, or something as apparently simple as the choice of greeting. The success or failure of a negotiation often hinges less on the specific terms being discussed — since both parties must already be in broad agreement if they are meeting at all — and more on the behavior and attitude of the negotiators themselves. Negotiating is simultaneously a performative and a personal act. Both parties attempt to manage each other's perceptions while projecting an air of mutual benefit, a delicate balance that can be disrupted by even the most minor inattention to cultural detail.
The goal of this negotiation was to purchase a used 2010 Toyota Prius Hatchback for around $20,000 — $5,000 below the seller's initial asking price in the online advertisement. This figure represented my "highest legitimate expectation of what" I could achieve in the negotiation (Shell, 2006, p. 30). In reality, the upper end of my acceptable range was $23,000, as the car appeared to be a reasonably good deal, listed only thirty dollars above the retail book value according to the Carfax report included in the ad. While I did not know in advance whether my target price fell within a positive or negative bargaining zone, it seemed reasonable to assume the seller would be willing to go as low as $23,000, thus creating a positive bargaining zone in which to reach a final price, since the seller's minimum was likely below the maximum I was prepared to pay.
Negotiating the deal proved surprisingly straightforward, owing to a combination of a modest opening goal on my part and greater negotiating skill on the seller's side than I had anticipated. While the seller implicitly made the first offer by publishing the ad, I initiated the negotiation by stating that I had seen the listing and asking whether the seller would accept $18,000 to take the car off his hands. I supported this figure by noting that the 2011 Toyota Prius had been expanded into a full model line and substantially upgraded, which rendered the 2010 model more dated than a one-year-old vehicle would ordinarily be. I did not expect the seller to accept this opening offer; rather, I was hoping to set 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 aim "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" (p. 46). My aim was to get the seller to agree that the 2011 models had reduced the 2010 Prius's desirability and made it harder to sell, so that I could later use this shared assumption to justify a lower price. The seller countered effectively, however, pointing out that his asking price was already near the retail book value and that setting it at $24,000 already reflected his intention to move the car quickly. While the consistency trap succeeded in establishing the shared premise on which my subsequent offers could draw, it did not land as powerfully as I had hoped.
"Deploying and evaluating the consistency trap"
"Final deal assessment and negotiation critique"
Always verify citation format against your institution’s current style guide requirements.