Ultimate Guide to Cross-Cultural Negotiations

By Mark Sharp November 26, 2021 | 17 min read

Cross-Cultural negotiations are rife with challenges as diverse groups come together to reach a mutually beneficial agreement.

Intercultural negotiations are complex and challenging. Cultural competency is becoming a ‘must-have’ in the business world due to the intricacies involved such as the following:

  • Country’s culture
  • Culture of the company/business
  • Foreign currencies and volatilities
  • Commercial risks
  • Foreign laws
  • Bureaucracy complications

Modern technology has drawn the world together in ways never before dreamed. People can effectively communicate with each other from across the world using services such as Zoom and other platforms.

The social benefits of engaging with other cultures and perspectives have started to entice American businesses to enter international markets. Giant corporations such as NBA and Marvel are striving to gain a strong and strategic foothold in China

Cross cultural decision making often hinges on behavior along with core beliefs which means that cross cultures agreements are frequently reached in vastly diverse ways.

Cross Border Negotiation Problems

Most companies want their staff and coworkers to feel valued, respected, and heard, especially during negotiations. However, things that work in one region of the world might not work as well in another. Values are cultural and based on perception when working across countries and cultures,

An organization that is truly culturally inclusive takes a broad approach to business. Understanding ethnic differences, especially in large countries like India or Nigeria where the regional background, educational opportunities, religion, languages spoken, and socio-economic gaps can impact how businesses function.

When negotiating across borders, cultural differences such as language, differing values, philosophies, and perceptions remain indisputable factors. An example is American and Japanese business negotiations.

The Japanese view negotiations as the creation of a relationship and the written contract is just an expression of the newly formed relationship. Japanese often modify contracts and simply view the changes as a way to alter relations but Americans see the changes as reneging. Many American businesses insist on adherence to the original contract terms which builds distrust in the Japanese.

Cross-Cultural Negotiations in China

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Negotiating with businesses in China is dramatically different than two companies in the United States who sit down at the negotiation table together. The variances can span the preferred language, business etiquette such as role of pride and politeness, attitudes shared with figures of authority, and the entire decision-making process.

The Chinese word for negotiation is ‘tan pan’. The word is a combination of characters that mean to discuss and to judge - like a double-edged sword, both sides cut effectively. The Chinese perspective is that negotiation exists to build trust so that both parties can effectively work together to build mutually beneficial agreements.

Trust is honed through extensive dialogue which gives each party the time to evaluate and judge one another - the process cannot be rushed. Many things are assessed such as each person’s capabilities and status.

Ultimately, the entire negotiation process is used to reach an understanding where each side feels that a good deal was achieved. In addition, the process of negotiation builds a strong framework that is utilized for long-term relationships and problem solving that will run past a singular agreement.

Conducting Business in China

American companies who wish to do business in China must understand that is far different than within the United States. Pride and politeness are crucial components of the process. Typically, in China, they will negotiate as a team, but within the group is one genuine decision-maker and another individual who influences the decision-maker.

Continuing from the example above, doing business in China is vastly different from doing business within the United States. This spans not only the preferred language but also business etiquette, the role of pride and politeness, attitude toward figures of authority, as well as the typical decision-making process.

When you’re able to negotiate effectively with people from other cultures, you can anticipate these differences and act in a way that supports a favorable outcome – maximizing opportunities for success and company profitability.

Simply put, cross-cultural negotiation empowers you to craft better agreements with customers, suppliers, and coworkers. It also fosters better teamwork within your organization, especially when collaborating with colleagues from cultures you might be unfamiliar with. Above all, it allows you to communicate more effectively and efficiently in any cross-border or cross-cultural business setting you may find yourself in.

Example of cross-cultural negotiations:

An Nestle acquisitions expert and his team flew to Shanghai to potentially collaborate with a company that specializes in the manufacture of Chinese delicacies. At first, the meeting with the Shanghai negotiators overwhelmed him. He and his team from Nestle were friendly and offered details that they felt the Chinese wanted but the negotiations were at a standstill. Something had to be done and quickly. The acquisition team leader contacted a Chinese business consultant who said he would assist the Nestle team to better understand things so they could adjust their negotiations approach.

The Chinese executive explained that negotiations would not progress if ‘guanxi’ was not developed. Guanxi refers to a relationship that benefits both parties. He told the Americans to go have fun and try to forget about the deal. When they returned to the negotiations table the next day, they felt that the dynamic had changed, and the Chinese delegation was more welcoming and receptive. After that, negotiations continued smoothly and Nestle was able to establish a real partnership with the Chinese company to better achieve their goals.

Cross-Cultural Negotiations and the Bottom Line

It is no secret that cross-cultural negotiation and its importance to bottom-line profitability continue to increase. Even if your business is not currently engaging with global customers and companies, it’s likely that you will eventually expand to encompass a worldwide market. Cross-cultural negotiations are quickly becoming the norm, which means that professionals

across all industries need to develop and hone a new and particular set of skills to remain competitive: cross-cultural negotiation.

RED BEAR reports that 72.2% of businesses show an increased volume of negotiation with people from unfamiliar cultures

The impact of cross-cultural negotiation on the bottom line for most businesses is indisputable. The foreseeable need for cross-cultural negotiation skills will only continue to increase as businesses expand their global reach to improve profitability and competitiveness.

3 Steps for Effective and Profitable Cross-Cultural Negotiations

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Here are three steps for more effective and more profitable cross-cultural negotiations.

1. Understand Your Blind Spots

We all arrive at the negotiation table with our own cultural biases and expectations. And when these don’t match the actual experience of the negotiation, it can lead to tension that builds frustration, erodes respect, and jeopardizes the entire discussion.

This is why it’s important to preempt your natural responses to cross-cultural situations, so you can keep unfavorable behavior in check. For instance, you might find that you often talk faster when you feel that you’re not being understood correctly. Being aware of this beforehand, you can adjust your approach and avoid potential problems before you even begin negotiating.

2. Identify the Cultural Gaps

Once you’ve considered the scope and nature of your intuitive cross-cultural reactions, it’s time to think about the specific challenges you’re likely to encounter when face to face with the other negotiating party. Their deeply held cultural values will drive their negotiation behavior, so conduct some research and think carefully about how this may influence their approach.

It’s especially important to identify gaps between your values and the other party’s values, so you won’t be caught off-guard and can avoid unnecessary misunderstandings.

3. Adjust and Refine Your Negotiation Strategy

Once you’ve identified likely disconnects between you and the other party, you’ll want to adjust and refine your negotiation strategy to close those gaps. This will involve thinking about underlying needs driven by cultural values, such as the need to maintain face and look good to one’s superiors, as well as the best ways to craft the best possible agreement.

Why Companies Need to Improve Cross-Cultural Negotiation Skills

Global commerce is becoming an integral part of everyday business. Ensuring that your employees have cross-cultural negotiation skills has become a necessity and not a luxury.

Factors that are spurring the need for cross-cultural negotiations include:

  • Economic growth within emerging market countries is spurring many American companies to take notice of the potential opportunities.
  • Business activity within particular geographic requests due to ever-evolving international trade agreements cannot be ignored by U.S. companies.
  • Manufacturing operations are moving to various foreign countries
  • Western companies are outsourcing to overseas call centers
  • Multicultural employment diversity is becoming the norm with remote work teams located across various countries.

RED BEAR Negotiation conducted a survey of sales and purchasing professionals from Fortune 100 organizations and found that 72.7 percent of the respondents reported that the number of cross-cultural negotiations has increased substantially during the past three years

  • Negotiations occur between headquarter staff and overseas suppliers
  • Between sales professionals and foreign buyers
  • Employees of the same office who are housed in different global geographic locations

It is imperative that companies ensure that their employees master the skills of cross-cultural negotiations to ensure that the channels of communication remain open and efficient. With increased endemic globalization, the cost of inferior performance has become unacceptable. The lack of negotiation skills with partners and peers not only impacts the company’s bottom line but makes reaching an agreement dangerously difficult due to potential misunderstandings.

6 Cross-Cultural Negotiation Strategy and Principles

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Cross-cultural negotiation strategy encompasses sound fundamental negotiation principles that are effective in any culture instead of tactical negotiation approaches which might fail in some cultures.

Let’s take a look at RED BEAR’s six negotiation principles for successful cross-cultural negotiation:

  1. Position Your Case Advantageously
  2. Set High Aspirations
  3. Manage Information Skillfully
  4. Know the Full Range and Strength of Your Power
  5. Satisfy Needs Over Wants
  6. Concede According to Plan

1. Position Your Case Advantageously

When a room full of people from other cultures comes together, first impressions matter! You want to make an impact. Studies have proven that most people weigh a person’s likeability and competence within 100 milliseconds and then make their mind up about the individual. That doesn’t give you exceedingly long to make a good first impression!

Exactly how you position your case as you launch negotiations will impact how the other party responds. You’ll want to weave a consistent theme with key points of communication to create a solid foundation that highlights your point of view.

Take the time to describe your case with accuracy. Let it convey value while being compelling. Do not get bogged down in excessive detail, benefits, features, or data points. You can branch out to those later but for now, you want to position your case advantageously.

2. Don’t Be Afraid to Set High Aspirations

When negotiating, don’t hesitate to have high aspirations. You want to achieve your best-case scenario. If you present things with a lack of confidence, then you are relinquishing your upper hand to your opponent. You’ll lose high ground that you can never get back.

You cannot come out ahead if you don’t try. Always maintain high aspirations in negotiations and then work to justify them. Avoid lowering objectives in the face of pressure from the other side - even if there is pressure from the other side. Remember, an inch given is a mile lost.

3. Manage Information Skillfully

Bring only high-quality information to the negotiation table. However, remember to exercise caution on how you use and communicate the information, especially during cross-cultural negotiations.

Share beneficial knowledge during the negotiation process at appropriate times and hold back sensitive items. It's always important to slowly uncover and edit shared information. Take the time to draft a plan on how you will share secure information and uncover valuable tidbits, so you don’t do it spontaneously. Everything should be well-orchestrated.

4. Know the Full Range and Strength of Your Power

Never lower the bar and underestimate your abilities. You need to negotiate from a position of strength and confidence. Negotiators who walk into negotiations feeling the other party is better, has greater skills or a more enviable position will create a self-fulfilling prophecy and you will start to falter.

Take the time to identify your power of negotiation and then apply it. Never assume that the other party is better at negotiating or has a greater position of power or you might be led to give in too early because you’ll doubt your own skills.

5. Satisfy Needs Over Wants

You’ll want to access and focus on the needs and wants of the person you are negotiating with. This can be challenging in cross-cultural negotiations. However, you’ll want to weigh the factors of your relationship with the person and then decide if you take their word for the way things are or perhaps take a closer look at things.

Ultimately, you need to identify their actual core needs which they might not be communicating.

With cross-cultural negotiations (or any negotiations) things are often not as they seem. You need to look closer. People are a lot like onions with multiple layers. Don’t be afraid to look deeper to discover the other party's needs.

6. Concede According to Plan

Holding firm and standing your ground is the wrong attitude to have when you enter negotiations. One of the most effective tools you can use is concessions. You’ll want to plan your concessions in advance and identify your negotiables. Make sure they are low value and save your high value wants. Use low-value negotiables for leverage and to gain a favorable outcome.

When conceding, always concede reluctantly. Have a plan to not give away anything too fast. Also, make sure that every time you give something, you get something in return.

The Challenges of Cross-Cultural Negotiations

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Currently, 75% of businesses report a decline in face-to-face cross-cultural negotiations. Undoubtedly, these are related to the special challenges faced by negotiators during cross-cultural meetings

Let’s examine the challenges faced in cross-cultural negotiations:

Distrust Combined with Stereotyping

Distrust develops quickly during cross-cultural negotiations. The dynamics often change when one party behaves in a way that makes sense in their culture. When this happens the reaction of many negotiators is to start stereotyping the other party and then question the underlying motivations.

Ultimately, these feelings lead to frustration and anger. It is imperative that a key moment takes place when a cross-cultural negotiator accepts and realizes that the other party is not ‘strange’, or ‘wrong’ but simply behaving in different and predictable ways due to their cultural differences.

Language Problems

Language and understanding are crucial for successful cross-cultural communication. Even if the other party appears to understand exactly what you said, it is not unusual to later learn that they actually had no clue what you were saying.

Successful cross-cultural negotiations take great care to minimize any misunderstanding by often summarizing and requesting that the other party share the key points. The sharing of such information over and over again might seem redundant but it is necessary to make sure that everyone at the negotiating table is on the same page and understanding each other.

Virtual Negotiation

Technology has absolutely freed global business. It can now be conducted from anywhere at any time. Negations take place via work chat, instant messaging, and even email. A survey carried out by the International Association of Contract and Commercial Management reported a 75% decline in face-to-face negotiations and an increase in phone and email negotiation. A skilled cross-cultural negotiator will use all communication tools at their disposal to achieve the results they look for.

More Virtual = Less Trust

The communication revolution has freed the global business world, but despite the many benefits of being able to communicate worldwide, there are drawbacks. It appears that virtual communications often equal less trust during negotiations.

Historically, negotiations depend on a combination of words, tone, and body language to effectively negotiate and communicate with another party. However, virtual communications often hide non-verbal cues. The lack of body language or tone makes negotiations challenging. The absence of such crucial signs appears to create an air of distrust.

Skilled cross-cultural negotiators understand that distrust occurs in such situations and will try hard to create trust-building activities and work them into their negotiation communications.

Data Overload

Nowadays, businesses are being overwhelmed with a vast amount of information on cross-cultural negotiations. You’ll find information on the subject in articles, websites, and books. You can explore the culture, business etiquette, and customs of the various countries where you plan on conducting business.

If you are in the heat of negotiations, it is difficult to effectively access the information. Basically, successful cross-cultural communication is most effective when you study and learn about your business associations' cultural preferences so you can anticipate any likely issues that might arise. Basically, do your homework in advance. Do not wait until the last minute.

How to Address the Challenges of Cross-Cultural Negotiations

You need to develop a strategy to address the challenges of cross-cultural negotiations effectively. Ultimately, you'll gain performance improvements if you focus on improving the following four areas

Rely on Global Principles for Success

To effectively negotiate cross-culturally, you’ll need to follow sound fundamental negotiation principles that work effectively in any culture. Forego tactical negotiation approaches which can backfire in some cultures even if they prove effective in others. As outlined above, RED BEAR’s negation planning and execution hinges on key principles which are highly effective in a cultural setting.

Create a Memorable Image

Humans remember pictures and images more than words. In many instances, words are meaningless but if you want to make an impact then use images. RED BEAR’s negotiation approach is built on supplying a memorable image.

Insight, Attitude, and Skill

Cross-cultural negotiations should focus on insight, attitude, and skill, not just information. Many businesses provide an abundance of resources to the employees that teach about cross-cultural communication. The info is helpful but it's not enough.

You have to focus on developing activities that improve personal insight, strategies that ensure positive interaction, and greater awareness of one's own tendencies that can occur during a cross-cultural negotiation setting.

RED BEAR’s approach starts with activities in which negotiators are placed in simulated cross-cultural situations to discover how they respond. Participants are then given insightful and personalized feedback on cultural communications.

Improving cross-cultural negotiations performance includes a simple but disappointed appreciation that effectively anticipates negotiation issues that could arise from cultural diversity and also focuses on how to develop strategies to successfully address problems.

Effective Planning

Planning for negotiations helps ensure success. Negotiators should use a simple but disciplined approach to anticipate any issues that may arise as a result of cultural differences. They will then develop strategies to successfully address the difficulties.

Examining the Crucial Moment in Cross-Cultural Negotiations

The crucial moment in cross-cultural negotiations is when the negotiator realizes that the other party is not necessarily wrong or weird but different due to cultural variances. However, despite those differences, they still function in very understandable and predictable ways. A negotiator just has to learn about cultural differences and accept them.

The world has become a small place thanks to technology. Globalization of businesses is making cross-cultural negotiation acumen a necessity. Companies who strive to take the lead with world-class negotiators will more than likely perform better. Investment in cross-cultural negation provides an impressive return on investment. Cross-cultural negotiations should have a memorable visual image that they can rely on to assess their own cultural preferences so they can effectively anticipate any cultural issues that may arise.

Aperian Global’s Cultural Awareness Tool

RED BEAR uses Aperian Global’s Cultural Awareness Tool - The GlobeSmartⓇ Profile so individuals can better understand their own tendencies and preferences when interacting with others. The process also allows for comparisons of cultures and individuals.

The tool effectively measures individuals and cultures based on a scale with five dimensions. The feedback provided helps negotiators better anticipate the needs and behaviors they may encounter when cross-culturally negotiating.

  • Independent - Interdependent
  • Egalitarianism - Status
  • Risk - Certainty
  • Direct - Indirect
  • Task - Relationship

Understanding Negotiation Behaviors

When the momentum of cross-cultural negotiations starts rolling forward, a negotiator will need to have a firm understanding of behaviors and how to effectively use them.

A good negotiator will adjust their approach during intercultural negotiations when needed. The best negotiators rely on distinct negotiation behaviors to lay a successful foundation and come up with innovative solutions.

Negotiation behaviors usually fall into one of two categories:

  • Competitive Dimension: Self-interest behaviors move the negotiation forward to reach an amicable state
  • Collaborative Dimension: Uses behaviors to build a relationship while using collaborative details to sidestep an overly competitive situation.

Make Demands

In some situations, this might seem counterintuitive, especially if the negotiator is inexperienced. Being assertive and making demands for oneself interests often feels aggressive and combative.

However, if the situation is managed with confidence and a genuine belief that there is value in your position then it can be productive. The negotiator will need to be clear about wants, needs, and expectations so the other party quickly knows they are dealing with a skilled negotiator who will not be easily manipulated.

Always communicate what you want out right and then try to avoid discussion of price until all needs are explored.

Ask Open Questions

Ask open questions to build behavior and diffuse any unhealthy tension to reduce the other party’s frustration. You can use this tactic to gather vital information about the other party’s needs versus their wants. Open questions are not the sort that can be answered in a simple yes/no fashion. Instead, they are used to encourage engagement and discussion.

This behavior helps you uncover information about the other party’s needs.

Test and Summary

Take the time to evaluate and summarize the other party’s response and position to help build a relationship. You’ll want to put their needs and wants in your own words and then ask them to confirm that you are understanding correctly. This is highly beneficial in cross-cultural negotiations to ensure that everyone at the table is on the same page.

This behavior helps build trust and a relationship by showing an interest in the other party’s standpoint - you’ll want to listen carefully to everything the other party says.

Propose Conditionally

After making demands, ask open questions and then take the time to access and summarize the other party’s answers and viewpoints. At this point, you can propose conditionally by coming up with innovative ideas so you can propel the cross-cultural negotiation forward in a positive way that helps to satisfy all parties' needs.

This behavior helps to generate creative solutions and form value.

Make Trades

Making trades focuses on value-based exchanges. It can be used to break a gridlock and move on. You might need to make a concession to go forward but always make sure you receive something of equal or greater value. Making trades is a part of understanding negotiables.

Use this behavior to reach favorable negotiations

Tension During Cross-Cultural Negotiations

During cross-cultural negotiations, most negotiators try to avoid tension, but to some degree, it is inevitable as a natural progression of the negotiation process. Tension occurs if both parties are striving to benefit from each other. Inevitably, the moment will come when those two desires clash and there will be a time of conflict and discomfort. Sometimes it’s hard to hold onto something of value while trading it to obtain something else.

RED BEAR theorizes that there exists three different negotiation dimensions that all help lead you down the path towards successful negotiations.

  • Collaborative
  • Competitive
  • Creative

Using the three dimensions can help negotiators build a solid foundation for a long-term relationship and will get more value from the conversations.

Collaborative Dimension

The Collaborative Dimension is used to build a productive relationship that levels the playing field by finding multiple negotiables to achieve a mutually satisfactory outcome for both parties. This dimension often occurs when a negotiator takes things to the extreme in an effort to end a tense situation. They will sacrifice achievable wins or abandon value on the table so that they can close the deal. This often occurs in cross-cultural negotiations.

Competitive Dimension

With the Competitive Dimension, a negotiator focuses on their own self-interests or those of the business they are representing. With this dimension, the negotiator protests their own desires and looks out for themselves. On occasion, they will play hardball and refuse to give up ground without achieving a gain in an exchange. Sometimes the focus is on something small like money or terms, and they have a win-lose mind set. Every win becomes an expense to the other party. In most situations, this does not work well with cross-cultural negotiations unless handled correctly.

The Competitive and Collaborative Dimensions

Both the Competitive and Collaborative Dimensions function as antagonists against each other, but they both work to reach the maximum potential in negotiations. If you do not have the competitive self-interest drive, then you might give in too quickly at the negotiation table. Also, if you don’t have the collaborative drive then you won’t form the needed cross-cultural relation that is needed to benefit from the give and take nature. Without the give and take aspects of negotiation, you cannot develop new ways of looking at a situation and impasses will occur which lead to bad feelings.

The tension levels attained from the two antagonistic elements has the potential to serve as a positive force which gives negotiations a push onward to a creative solution. However, humans usually try to avoid tense situations. RED BEAR strives to give negotiators the power to move beyond stagnation without giving up their own self interests. Instead, they tell negotiators to embrace tension and use it to create something productive during cross-cultural negotiations.

Creative Dimension

A healthy level of tension between parties and the desire to continue maintaining the relationship can actually spawn a creative breakthrough. The ability of both parties to craft a mutually profitable settlement increases using the Creative Dimension. You can effectively break through a deadlock and reveal additional solutions. Tension can fuel the creative solutions process.

RED BEAR Cross-Cultural Negotiation™ (CCN) provides clear insights with actionable guidelines on how to successfully approach cross-cultural negotiations.

  • Plan: With CCN, participants are shown a framework (planner) that helps them develop tried and true strategies to overcome challenging barriers when negotiating with culturally diverse business associates.
  • Build Awareness: Use data and insight about cultural differences to better negotiate.
  • Avoiding Cultural Faux-Pas: When differing cultures collide, frustration can occur. CCN assists participants with identifying differences so they can formulate concrete approaches to overcome the potential conflicts

Learn more about RED BEAR Cross-Cultural Negotiation™ (CCN) - Contact RED BEAR today.

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