Western negotiators like to start a business deal with a test transaction to build trust. Asians like to build trust first, and then start transacting. Both sides want to end up in the same place – with a cordial, profitable relationship – but our different approaches make that goal difficult to reach.
- In Asia negotiation starts at the first meeting.
- While Westerners often see small-talk and meet and greet meetings as preludes to the real business -- in Asia the social aspects of relationship-building are more like due diligence.
- Asian negotiators are on the job at banquets and dinner-parties, qualifying you as a potential partner and credit risk. They expect you to do the same when negotiating with them.
Let’s look at three distinct elements of cross-culture negotiation, and see how Westerners can manage the differences. We’ll be discussing national culture, business goals, and relationship building. Like most elements of negotiation, they are highly related and interdependent.
- Cultural Differences
Asians are collectivist and comfortable with high power-distance. Westerners are individualist, and tend to favor low power-distance (though not always). Asian cultures generally favor patience and restraint, while Westerners see boldness and innovation as positive attributes.
Figure 1 Hofstede’s 6 Cultural Dimensions model1 is a good place to start analyzing differences between national cultures.
Figure 1 – Hofstede’s 6 Cultural Dimensions Model
Collectivists favor consensus and are comfortable cooperating with people they are already familiar with. There is an “in-group” and an “out-group,” and getting access to (or even identifying) the true decision-maker can be challenging. Individualists are happy working on their own, and they use facts, data, and objective measurements to determine who would make an appropriate partner.
Power distance (Figure 1) refers how people feel about authority, wealth, and opportunity being unequally distributed in society. Asian cultures tend to accept that power will be distributed unevenly, while Westerners see themselves as more egalitarian.
For European and American negotiators working with Asian counterparties this means you have to qualify for partnership status if you want a relationship (and it also means that you SHOULD want a relationship in many cases). Social trust is as important to them as a credit check is to you.
Best Practice for Western Negotiators – learn about your counterparty:
Treat the early negotiation-build as part of the negotiation – not preliminary small-talk. I have my clients prepare a simple information plan for learning about the counterparty and his or her industry – and for deciding what kind of information you want the counterparty to know about you.
- Negotiating goals
You and your Asian counterparty both want to end up in the same place – a cordial relationship that yields at least one profitable transaction. But, unfortunately, you are starting from opposite ends of the transaction-relationship spectrum. As examples:
- Typical Western negotiators want to discuss financial and product data first, and then start with a small test order.
- You are probably operating with the implicit understanding that a successful transaction will lead to trust-based relationship with lots of significant transactions.
- The Asian side wants to start dealings by building a trust-based relationship that will lead to a series of transactions. He or she may be quite cautious about starting to discuss financial terms until trust is well-established.
This begs the question – do you prefer a relationship or an arms-length transaction?
- If you plan on doing the same deal a number of times with the same counterparty and/or expect them to operate at best-efforts levels in terms service or quality, then you should be going for a relationship.
- If you are buying a unique asset that you will never repeat or plan on switching suppliers often -- such as buying a commodity, or bidding in an automated marketplace -- then a competitive transactional negotiating style might be more suitable.
- If the other side has your molds, designs, intellectual property, or credit information, then you must negotiate the relationship.
Best Practice for Western Negotiators – be clear about key issues early on:
Relationships have a different function in Asia, and often take the place of third-party credit checks. Early-stage socializing is more due-diligence than casual hob-knobbing. If you plan on starting with test orders, make that clear to your Asian counterparty – and discuss the roadmap for more comprehensive deals.
This is the time to be clear about your expectations and requirements. Make an effort to pick up on subtle cues from them about their expectations – particularly in terms of order size, technology transfer, and intellectual property (IP). If you have IP that you plan on safeguarding, make that clear early and often.
- Actively negotiate the relationship
Western negotiators in Asia often make the mistake of being too passive in the early stages of the negotiation. You wait patiently for the relationship-building rituals and small-talk to end so that everyone can get down to the REAL business. In the process, you may be ceding leadership to the Asian side without knowing it – and when you get assertive later it will come as a surprise to them.
Asian negotiators tend to treat a long-term relationship as the default setting, and consider it normal business practice to get to know you and give you the opportunity to get to know them. Westerners, however, often treat early meetings like question and answer (Q&A) sessions where they are the guest and the Asian side is the interviewer. The Western side politely answers questions, but doesn’t play an active role – because they feel that this is just the idiosyncratic quirk of local Asian culture.
Nowadays the Asian side may confine their discussion to business issues, but the tradition has been for them to ask personal questions about age, income, family, and health (including weight) that many American and European businesspeople found off-putting and uncomfortable. Even though Asian partners have become aware of Western sensibilities, the idea of getting to know you on a personal level endures. They expect the same from you, and are often confused when the Western side doesn’t seem interested in their family, interests, or philosophy.
The result is often that the Asian side takes the lead in the relationship-build, and steps into the role of host or leader. They are therefore a bit surprised when Westerners later become quite assertive and controlling in business dealings. The Asian side assumed that they were running the show, and find your new-found aggressiveness inappropriate.
Best Practice for all when negotiating: Have a plan for building the relationship – and for gathering information from the other side. If you aren’t comfortable talking about personal issues, you can still get them talking about their business philosophy or general ideas about industry or economy. Some safe and useful questions for early-stage discussions are:
- What do you look for in an overseas partner?
- Where do you see the industry/economy in 5 years?
- What are your plans for the international market?
Relationships are an asset – building them is a significant investment!
To Asian negotiators, relationships are an asset and the time spent building that relationship is a significant investment. Make sure your initial test order doesn’t surprise, insult, or embarrass him or her. Speak in terms of the total size of the deal, and explain the roadmap you envision getting you there.
ABOUT THE AUTHOR
Andrew Hupert teaches International Negotiation in the MBA program at Hult International Business School, and consults with multinationals on cross-cultural negotiations and conflict management. He is based in Vietnam, where he is building a training company focusing on cross-cultural soft-skills.