Successful International Negotiations (Management for Professionals) 3030334821, 9783030334826

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Management for Professionals

Marc Helmold · Tracy Dathe · Florian Hummel · Brian Terry · Jan Pieper Editors

Successful International Negotiations A Practical Guide for Managing Transactions and Deals

Management for Professionals

The Springer series Management for Professionals comprises high-level business and management books for executives. The authors are experienced business professionals and renowned professors who combine scientific background, best practice, and entrepreneurial vision to provide powerful insights into how to achieve business excellence.

More information about this series at http://www.springer.com/series/10101

Marc Helmold
Tracy Dathe
Florian Hummel
Brian Terry
Jan Pieper Editors

Successful International Negotiations A Practical Guide for Managing Transactions and Deals

123

Editors Marc Helmold IUBH Internationale Hochschule Berlin, Germany Florian Hummel IUBH Internationale Hochschule Berlin, Germany

Tracy Dathe Holzkirchen, Germany Brian Terry Regent’s University London London, UK

Jan Pieper IUBH Internationale Hochschule Berlin, Germany

ISSN 2192-8096 ISSN 2192-810X (electronic) Management for Professionals ISBN 978-3-030-33482-6 ISBN 978-3-030-33483-3 (eBook) https://doi.org/10.1007/978-3-030-33483-3 © Springer Nature Switzerland AG 2020 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Preface

In today’s world, negotiations are an integral part of governments, businesses, private areas and organisations. World trade is increasing, thus leading to more business transactions across borders. This trend leads automatically to an increased need for international business negotiations and intercultural awareness by organisations, companies and employees. This book has been written by five editors with different backgrounds and experience in international negotiations. This book is unique and is based on the A-6 negotiation concept developed by Dr. Helmold. The German book “Erfolgreiche Verhandlungen” (Helmold et al. 2019) contains elements of this industry-proven negotiation concept. Certain sections of the book refer to the aforementioned tools and A-6 concept. The knowledge and experience of this diverse group of editors helped to create a unique negotiation guide with many unique selling propositions (USP). It was a pleasure to see many ideas and inputs throughout the process of this book editing. The book project started in beginning of 2018 with the concept and was finalised in 2019/2020 with this publication. Professor Terry is Professor in London and teaches at various business schools in the UK and Germany. Professor Pieper teaches economics and acts as foreign direct investment advisor for foreign companies. Professor Hummel is one of the academic leaders of the IUBH Internationale Hochschule with great experience in service and hospitality industries. Dr. Dathe was in top finance positions and teaches at various business schools. In parallel, she has her own consulting company. Professor Helmold teaches supply chain management (SCM) and negotiations in the international context at the IUBH Internationale Hochschule in Berlin and other universities in the UK and China. He supports companies in supply, project management and negotiations. The collaboration of different personalities with their individual strengths has led to a unique book, which can be at present regarded as one of the most advanced books in this field. The book would not have been possible without the implicit and indirect support of practitioners, academics and students on doctoral and master levels. The majority of contributions of the country examples are from students of the IUBH Internationale Hochschule campus studies in Berlin. There are many students, who contributed to research about international negotiations and the studies on this exciting topic. Research on master levels in native and other languages triggered a process of creating winning and failing strategies in international negotiations of 37 countries

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Preface

in total. Besides economically powerful countries like Germany, the USA, China, India or Japan (top largest 20 economies), it was thus also possible to add smaller but very interesting examples of several regions in the world. Nisha Becker, who is lecturer in several business schools in Berlin, helped us in the country examples and in proof reading. The authors hope that the book will also contribute to understand other countries and cultures in a better way, as they are convinced that diversity and intercultural experience in enterprises is a key success factor in a highly competitive environment. There are a couple of groups and people we would like to mention. Firstly, we would like to thank all co-authors of the chapters. In this context, we would like to name Warda Samara, Juanira Gonzalez and Youssef Hammadi as students, who graduated with excellence in the master of leadership and master of business administration courses of the IUBH Internationale Hochschule. In this context, we have to mention the many students who contributed to this book. Additionally, negotiation experts from automotive, railway, service and other industries contributed directly or indirectly to this negotiation guide. Furthermore, there are some people to be named like the general manager of Midas, Mr. Li, who gave permission for using the photograph and some examples of negotiations. We may not forget our families and friends, who were supporting the authors through their confidence and trust in the authors. Finally, the authors would like to thank Springer International, especially Mr. Baun and Ms. Barrios-Kezic, for the professional and smooth completion of this project. Berlin, Germany July 2019

Marc Helmold Tracy Dathe Florian Hummel Brian Terry Jan Pieper

Reference Helmold, M., Dathe, T. & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler.

Contents

1

Best-in-Class Negotiations in the International Context . . . . . . . . . Marc Helmold

1

2

Prisoners’ Dilemma and Negotiation Types . . . . . . . . . . . . . . . . . . Marc Helmold

25

3

Competencies and Criteria for Successful Negotiations . . . . . . . . . . Marc Helmold

31

4

Negotiations as Integral Part of the Corporate Strategy . . . . . . . . . Marc Helmold

45

5

Negotiation Execution—Value Add and the ZomA . . . . . . . . . . . . . Marc Helmold

59

6

Negotiation Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marc Helmold

65

7

Negotiations in Different Cultures and Internationalization . . . . . . Tracy Dathe and Marc Helmold

83

8

Business Negotiations in Industry . . . . . . . . . . . . . . . . . . . . . . . . . . Marc Helmold

97

9

A-6 Concept for Successful International Negotiations . . . . . . . . . . 107 Marc Helmold

10 Nonverbal Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Marc Helmold 11 Tools for Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 Marc Helmold, Brian Terry and Florian Hummel 12 Outsourcing Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 Brian Terry and Marc Helmold 13 Negotiations in the Global Economy . . . . . . . . . . . . . . . . . . . . . . . . 189 Jan Pieper

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Contents

14 Negotiations in Companies with Financial Difficulties . . . . . . . . . . . 201 Marc Helmold and Tracy Dathe 15 Negotiations in the Service Industry . . . . . . . . . . . . . . . . . . . . . . . . 215 Florian Hummel 16 Negotiations in Project Management . . . . . . . . . . . . . . . . . . . . . . . . 229 Marc Helmold 17 Negotiations in Different Countries . . . . . . . . . . . . . . . . . . . . . . . . . 237 Marc Helmold 18 Negotiations in Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 Marc Helmold, Catherine Lee, Agne Aleksandraviciute, Mari Zakaryan, Damiano Filingeri and Daria Vlasova 19 Negotiations in the Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281 Marc Helmold, Nisha Becker, Juanira Gonzalez and Maria del Pillar Herrera 20 Negotiations in Japan, China and Asia-Pacific . . . . . . . . . . . . . . . . 297 Marc Helmold, Tracy Dathe and Anton Chan 21 Negotiations in Arabic Countries and the Middle East . . . . . . . . . . 315 Marc Helmold, Warda Samara, Ayat Abusini and Roshan Nelson 22 Negotiations in Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341 Marc Helmold, Youssef Hammadi and Vishal Panwar

Editors and Contributors

About the Editors Prof. Dr. Marc Helmold, M.B.A. is Professor at the IUBH Internationale Hochschule, Campus Berlin. He teaches bachelor, master and MBA students in negotiations, performance management, strategic management and SCM. Prior to this position, he had several top management positions in automotive and railway companies. From 2010 until 2017, he was General Manager in the International Procurement Office (IPO), China, and the head of SCM and procurement in the Asia-Pacific region. In 2016, he was appointed as professor in the IUBH in Berlin. In parallel, he gives workshops for professionals in international negotiations. Dr. Tracy Dathe is a freelance business advisor and lecturer in the fields of financial management and international communication. She owes her expertise in international cooperation not least to her practical experience in the industry. From 2012 to 2016, as CFO of an automotive spare part manufacturer, she was responsible for general commercial management at the German headquarter, as well as for the subsidiaries in China, France, Italy, Sweden, the Czech Republic, Turkey and the USA. Her professional focus lies in financial management and intercultural communication in multinational SMEs.

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Editors and Contributors

Prof. Dr. Florian Hummel is Vice-Rector of International Affairs and Diversity at International University of Bad Honnef (IUBH). He gained his industry experience in airport marketing and in the international car rental business. Prof. Hummel studied at the University of Brighton (BA Travel Management), Cranfield University (M.Sc. Air Transport Management) as well as The University of Sheffield (Doctor of Education). He is looking back at more than 15 years of management roles in higher education. After leaving the industry, he was involved in setting up a business school in Germany which he directed for nine years before he took on academic roles as Professor and Dean at Cologne Business School (CBS) which he subsequently led as Managing Director. The field of international university cooperation has been one of his main focuses, in particular designing and setting up international dual and join degrees as well as establishing campus locations for foreign universities in Germany. He is an external examiner at the Technical University Dublin and a board member of European Council on Hotel, Restaurant and Institutional Education (EuroCHRIE). Prof. Dr. Brian Terry was a full-time academic at Imperial College London and University of California, Berkeley. He is now an academic at Regent’s University London and director at his own management consultancy. His expertise lies in supply chain management, IT and business process outsourcing, strategic and business consultancy and transformation. Brian has worked throughout the world, including North and South America, Western Europe, Japan and Australasia. His former roles span many sectors, including industry, IT services and outsourcing, consultancy and education. Brian has been a director and board member at several multinational consultancies.

Editors and Contributors

xi

Prof. Dr. Jan Pieper is Professor of Business Economics at the IUBH, Campus Berlin, Germany. He holds a master degree in business administration from the University of Greifswald, Germany, and Ph.D. in management and economics from the University of Zurich, Switzerland. He currently teaches microeconomics, international business, corporate governance and research methods. His research interest focuses on the interplay of individual decision-making and market dynamics. His works have been published in several books and journals. Besides academia, Jan supports SMEs as an FDI consultant when they expand internationally.

Contributors Ayat Abusini Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Agne Aleksandraviciute Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Nisha Becker Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Anton Chan Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Tracy Dathe Holzkirchen, Germany; Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Maria del Pillar Herrera Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Damiano Filingeri Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Juanira Gonzalez Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Youssef Hammadi Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Marc Helmold Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Florian Hummel Campus Studies, IUBH Internationale Hochschule, Berlin, Germany

xii

Editors and Contributors

Catherine Lee Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Roshan Nelson Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Vishal Panwar Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Jan Pieper Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Warda Samara Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Brian Terry Regents University, Chislehurst, UK Daria Vlasova Campus Studies, IUBH Internationale Hochschule, Berlin, Germany Mari Zakaryan Campus Studies, IUBH Internationale Hochschule, Berlin, Germany

Abbreviations

AAA BATNA BME BRTE BT CIETAC CIF CISG CJV COO CPDM CPO CSR DAP DDP DTC EN EXW FAS FCA FDI FIE FOB GBO GBS GPO HKIAC IATF IBS ICC ICIC IFM IHK

American Arbitration Association Best alternative to a negotiated agreement German Association of Supply Chain Management Bombardier Railway Transportation Equipment Bombardier Transportation Chinese International Economic and Trade Arbitration Centre Cost, insurance and freight United Nations Convention on Contracts for the International Sale of Goods Corporation joint venture Chief Operating Officer Cameroon People’s Democratic Movement Chief Procurement Officer Corporate social responsibility Delivered at Place Delivery duty paid Design to cost European norm Ex-works Free Alongside Ship Free carrier Foreign direct investment Foreign-invested enterprise Free on board Global business owner Global business services Global process owner Hong Kong International Arbitration Centre International Automotive Task Force Integrated business services International Court of Arbitration International Chamber of Industry and Commerce Institut für Mittelstandsforschung Chamber of Industry and Commerce xiii

xiv

IPO ISO JIT JV LdO MBA MCIA MdO MEP MNC NCG NGO NPO OEM P&L PESTEL PR China QCD QCDT QMS ROP RPA SCM SME SSO SWOT TCO UN USP VMI WFOE WTO ZomA A-6 3R 5S 7P

Abbreviations

International Procurement Organisation International Organisation for Standardisation Just in time Joint venture Least desired outcome Master of Business Administration Mumbai Centre for International Arbitration Most desired outcome Margin enhancement plan Multinational corporations Non-conformity goods Non-governmental organisation Non-profit organisation Original equipment manufacturer Profit and loss account Political, Economic, Social, Technological, Environmental and Legal People’s Republic of China Quality, cost and Delivery Quality, cost, delivery and technology Quality management system Risks and opportunities Robot process automation Supply chain management Small- and medium-size enterprises Shared service centre Strengths, weaknesses, opportunities and threats Total cost of ownership United Nations Unique selling proposition Vendor-managed inventory Wholly foreign-owned enterprise World Trade Organisation Zone of mutual agreement Negotiation Concept by Dr. Marc Helmold Retention, Related Sales and Referrals Seiri, Seiton, Seiso, Seiketsu and Shitsuke Product, Price, Place, Promotion, Physical evidence, People and Process

List of Figures

Fig. 1.1 Fig. 1.2 Fig. 1.3 Fig. 1.4 Fig. 1.5 Fig. 1.6 Fig. 1.7 Fig. 1.8 Fig. 1.9 Fig. 1.10

Fig. Fig. Fig. Fig.

2.1 3.1 3.2 3.3

Fig. 3.4 Fig. 4.1 Fig. 4.2 Fig. 4.3 Fig. 4.4 Fig. 5.1

Value chain: input–transformation–output. Source Author . . . . Negotiations in the value chain. Source Author, adopted from Helmold et al. (2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interview strategies. Source Author . . . . . . . . . . . . . . . . . . . . . Salary and other benefits in job interviews. Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seven steps for an interview. Source Author . . . . . . . . . . . . . . Exports from Germany in 2017. Source Statistical Federal Office in Germany. Import and Exports . . . . . . . . . . . . . . . . . . Imports to Germany in 2017. Source Statistical Federal Office in Germany. Import and Exports . . . . . . . . . . . . . . . . . . . . . . . National and international make-or-buy strategies. Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cultural knowledge and need for training. Source Author . . . . Mr. Li and Dr. Helmold. The picture shows the general manager of Midas Mr. Li and the general manager of Bombardier Transportation in China, Dr. Helmold. Midas is world market leader in producing aluminium profiles . . . . . Prisoners’ dilemma. Source Author . . . . . . . . . . . . . . . . . . . . . Key competencies in negotiations. Source Author . . . . . . . . . . Balance of interest and relationship. Source Author . . . . . . . . . Win-Win or win-lose as negotiation objectives. Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Escalation levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategic triangle. Source Author, adopted from Johnson and Scholes (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Generic strategies. Source Helmold, Dathe, and Hummel (2019), adopted from Porter (1985) . . . . . . . . . . . . . . . . . . . . . Strategy clock from Bowman. Source Author, adopted from Johnson and Scholes (1997). . . . . . . . . . . . . . . . . . . . . . . . . . . Strategic pyramid. Source Author . . . . . . . . . . . . . . . . . . . . . . Focus on value-adding negotiations. Source Author. . . . . . . . .

8 9 11 15 16 19 19 21 22

22 26 32 34 35 41 47 49 50 53 60

xv

xvi

List of Figures

Fig. 5.2 Fig. 5.3 Fig. 6.1 Fig. 6.2 Fig. 7.1 Fig. 7.2 Fig. 7.3 Fig. 7.4 Fig. 8.1 Fig. 8.2 Fig. 8.3 Fig. 8.4 Fig. 9.1 Fig. 9.2 Fig. 9.3 Fig. 9.4 Fig. Fig. Fig. Fig. Fig.

9.5 9.6 9.7 9.8 9.9

Fig. 9.10 Fig. 9.11 Fig. 9.12 Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig.

9.13 9.14 9.15 9.16 9.17 10.1 10.2 10.3 11.1

Negative zone of mutual agreement (ZomA). Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Positive zone of mutual agreement (ZomA). Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negotiation concept by Dr. Marc Helmold. Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negotiation script. Source Author . . . . . . . . . . . . . . . . . . . . Strategical approach for intercultural negotiations. Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schein’s three levels of culture (interpretation by Dathe) . . . Hall’s concept for interpersonal distance (horizontal). Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internationalization strategies. Source Author . . . . . . . . . . . Supply management phases. Source Author . . . . . . . . . . . . . Buyer and sellers must have mutual interests. Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Q-C-D-T plus alpha. Source Author . . . . . . . . . . . . . . . . . . Elements and objectives in negotiations. Source Author . . . Step A-1: Analysis and negotiation preparation. Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Elements for the situation analysis (A-1). Source Author. . . Negotiation manuscript of the A-6 concept. Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negotiation concept and elements (Q-C-D-T plus alpha). Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Priority matrix. Source Author . . . . . . . . . . . . . . . . . . . . . . . Analysis of personalities. Source Author . . . . . . . . . . . . . . . Set-up and usage of V-Mann. Source Author . . . . . . . . . . . Cultural attributes. Source Author . . . . . . . . . . . . . . . . . . . . Strategies, tactics and motives in negotiations. Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategies for negotiations. Source Author . . . . . . . . . . . . . . Priority matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Concentration on motives and negotiation opponents. Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Flow and phases of the negotiation execution (A-4) . . . . . . Symmetric seating order layout. Source Author . . . . . . . . . . Asymmetric seating order layout. Source Author . . . . . . . . . Chaotic negotiation seating order layout. Source Author . . . Threat and warning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nonverbal communication . . . . . . . . . . . . . . . . . . . . . . . . . . Decoding recommendations . . . . . . . . . . . . . . . . . . . . . . . . . Step model for decoding nonverbal signals . . . . . . . . . . . . . PESTEL analysis. Source Johnson and Scholes (1997) . . . .

..

61

..

62

.. ..

76 77

.. ..

84 85

.. .. ..

90 95 98

.. .. ..

99 100 100

.. ..

108 109

..

111

. . . . .

. . . . .

112 113 118 120 121

.. .. ..

122 123 135

. . . . . . . . . .

138 139 141 142 142 152 164 166 167 174

. . . . . . . . . .

List of Figures

Fig. Fig. Fig. Fig. Fig. Fig. Fig.

11.2 11.3 11.4 11.5 12.1 12.2 14.1

Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig.

14.2 14.3 14.4 14.5 15.1 15.2 16.1 16.2 17.1 17.2

Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig.

18.1 18.2 18.3 18.4 18.5 18.6 18.7 18.8 18.9 18.10 18.11 18.12 18.13 18.14 19.1 19.2 19.3 19.4 19.5 20.1 20.2 20.3 20.4 20.5 20.6

xvii

Industry analysis. Source Author . . . . . . . . . . . . . . . . . . . . . . . SWOT analysis. Source Author . . . . . . . . . . . . . . . . . . . . . . . . ROP. Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7S model by McKinsey. Source McKinsey . . . . . . . . . . . . . . . Outsourcing services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Objectives for outsourcing of services . . . . . . . . . . . . . . . . . . . Phases to financial insolvency. Source Helmold et al. (2019), adapted from Müller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restructuring ways for financial turnaround . . . . . . . . . . . . . . . Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Profit and loss (P & L) account . . . . . . . . . . . . . . . . . . . . . . . . Profit improvements. Source Author . . . . . . . . . . . . . . . . . . . . Different complaint behaviour. Source Author . . . . . . . . . . . . . Feedback system. Source Author . . . . . . . . . . . . . . . . . . . . . . . Project phases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Project organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Structure and country examples. Source Author. . . . . . . . . . . . Ann Sun and Dr. Marc Helmold: Negotiations in Japan. Source Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negotiation strategies for Germany. Source Author . . . . . . . . . Negotiation strategies in France. Source Author . . . . . . . . . . . Negotiation strategies in Great Britain. Source Author. . . . . . . Negotiation strategies in Italy. Source Author . . . . . . . . . . . . . Negotiation strategies in Spain. Source Author . . . . . . . . . . . . Negotiation strategies in the Netherlands. Source Author. . . . . Negotiation strategies in Denmark. Source Author. . . . . . . . . . Negotiation strategies in Switzerland. Source Author . . . . . . . . Negotiation strategies in Russia. Source Author. . . . . . . . . . . . Negotiation strategies in Ukraine. Source Author . . . . . . . . . . Negotiation strategies in Latvia. Source Author . . . . . . . . . . . . Negotiation strategies in Armenia. Source Author . . . . . . . . . . Negotiation strategies in Poland. Source Author . . . . . . . . . . . Negotiation strategies in Lithuania. Source Author . . . . . . . . . Negotiation strategies in the USA. Source Author . . . . . . . . . . Negotiation strategies in Canada. Source Author . . . . . . . . . . . Negotiation strategies in Mexico. Source Author . . . . . . . . . . . Negotiation strategies in Brazil. Source Author . . . . . . . . . . . . Negotiation strategies in Peru. Source Author . . . . . . . . . . . . . Negotiation strategies in Japan. Source Author . . . . . . . . . . . . Negotiation strategies in the PR China. Source Author . . . . . . Negotiation strategies in India. Source Author . . . . . . . . . . . . . Negotiation strategies in Indonesia. Source Author . . . . . . . . . Negotiation strategies in South Korea. Source Author . . . . . . . Negotiation strategies in Vietnam. Source Author . . . . . . . . . .

177 178 179 181 184 185 202 204 206 208 209 222 225 231 231 238 239 245 249 253 255 257 259 261 263 265 266 269 271 272 277 282 285 287 289 291 299 301 304 306 307 311

xviii

Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig. Fig.

List of Figures

20.7 21.1 21.2 21.3 21.4 21.5 21.6 21.7 22.1 22.2 22.3 22.4

Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation

strategies strategies strategies strategies strategies strategies strategies strategies strategies strategies strategies strategies

in in in in in in in in in in in in

Australia. Source Author . . . . Saudi Arabia. Source Author Palestine. Source Author . . . . Israel. Source Author . . . . . . Jordan. Source Author. . . . . . Iran. Source Author . . . . . . . . the UAE. Source Author . . . . Turkey. Source Author . . . . . Morocco. Source Author . . . . Egypt. Source Author . . . . . . South Africa. Source Author . Cameroon. Source Author . . .

. . . . . . . . . . . .

. . . . . . . . . . . .

. . . . . . . . . . . .

. . . . . . . . . . . .

. . . . . . . . . . . .

. . . . . . . . . . . .

314 316 322 327 330 333 337 338 345 347 351 353

List of Tables

Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table

1.1 1.2 1.3 1.4 2.1 3.1 3.2 3.3 4.1 5.1 6.1 6.2 6.3 6.4 6.5 6.6 7.1 8.1 9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8 9.9 9.10 9.11 9.12 9.13 9.14 9.15

Motivation questions and answers in job interviews . . . . . . Additional questions and answers in job interviews . . . . . . Examples for negotiations in politics . . . . . . . . . . . . . . . . . . Ten most impacting trends in international trade . . . . . . . . . Negotiation personality concept: “schlagfertig” . . . . . . . . . . Ten commands for successful negotiations . . . . . . . . . . . . . Five important characteristics of negotiations . . . . . . . . . . . Reasons for failure in negotiations . . . . . . . . . . . . . . . . . . . Elements in the strategic analysis . . . . . . . . . . . . . . . . . . . . Recommendations for the negotiation execution . . . . . . . . . Hard negotiation and soft negotiation style . . . . . . . . . . . . . Recommendations of Schranner . . . . . . . . . . . . . . . . . . . . . Five principles of the Harvard concept . . . . . . . . . . . . . . . . A-6 negotiation concept in English and German . . . . . . . . . Recommendations for the A-6 negotiation concept . . . . . . . Comparison of the three negotiation concepts . . . . . . . . . . . Importance of context: communication with the Brits . . . . . Quality management systems (QMS) . . . . . . . . . . . . . . . . . Roles in negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Roles and recommendations in negotiations . . . . . . . . . . . . Characteristics of alpha people . . . . . . . . . . . . . . . . . . . . . . Argumentation (aggregation and affirmation of arguments) . Motives in psychology . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recommendations for step A-3: affirmation of arguments . . Question techniques in negotiations . . . . . . . . . . . . . . . . . . Examples for open questions . . . . . . . . . . . . . . . . . . . . . . . . Examples for closed questions. . . . . . . . . . . . . . . . . . . . . . . Examples for stimulating and motivational questions . . . . . Examples for alternative questions . . . . . . . . . . . . . . . . . . . Examples for confirming questions . . . . . . . . . . . . . . . . . . . Examples for indirect questions . . . . . . . . . . . . . . . . . . . . . . Examples for trap questions . . . . . . . . . . . . . . . . . . . . . . . . Examples for leading questions . . . . . . . . . . . . . . . . . . . . . .

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13 14 17 23 28 36 38 40 48 64 67 75 76 78 79 80 92 101 111 116 118 136 137 138 143 145 145 146 146 146 147 147 147

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9.16 9.17 9.18 9.19 9.20 9.21 11.1 11.2 11.3 14.1 14.2 16.1 16.2 20.1 21.1

Examples for drilling questions . . . . . . . . . . . . . . . . . . . . . . Examples for emotional thermometer or settling questions . Negotiation typologies and negotiation types . . . . . . . . . . . Positive and negative negotiation execution . . . . . . . . . . . . International commercial terms 2010 (Incoterms) . . . . . . . . Arbitration institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risks and opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . Action to improve productivity . . . . . . . . . . . . . . . . . . . . . . 5F concept for successful negotiations . . . . . . . . . . . . . . . . Cost reduction initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . Revenue increase initiatives. . . . . . . . . . . . . . . . . . . . . . . . . Project criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negotiations in project management . . . . . . . . . . . . . . . . . . Ranking of ethnic groups of Indonesian population . . . . . . Pillars of the Islam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Best-in-Class Negotiations in the International Context Marc Helmold

1.1

Definition and Elements of Negotiations

The business world of today is dynamic and changing constantly. Increasing international trade, the ongoing direction towards globalization, the movement towards digitalization and other trends lead to interactions between countries, companies across borders and increased negotiations in the international context. People negotiate with each other every day even when they do not realize it. They negotiate with family members, friends, colleagues, buyers, sales executives, superiors and businesses. Negotiations are a form of verbal or non-verbal communication, mostly verbal communication, about a certain and controversial aspect or element, which is characterized so that the negotiation parties aim to find an agreement. The agreement can only be achieved if all negotiation sides have common and overlapping motives, interests, objectives and the intention to resolve the conflicting views by finding a zone of mutual agreement (ZomA) (O’Brien, 2016). All people have various desires and motives. These desires or motives are important for the negotiation outcome (Helmold, Dathe, & Hummel, 2019). Buyers have the desire and the need to achieve the lowest purchase price in a transaction, whereas the sellers strive for the highest selling price. Both sides are aiming for the optimal price for their own advantage (O’Brien, 2016). Higher budget demands in international companies for new market developments are also needs or motives, which must be enforced in internal company negotiations (Helmold, Dathe, & Büsch, 2017). For example, in one company, there may be a wish for additional sales people to expand into other countries and markets, so that the sales executive has to negotiate the additional budget for the head count increase and international market expansion within your company. Job interviews also include the wishes and M. Helmold (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_1

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needs of those involved, namely to find the right employee or position. In addition to the actual position, there are numerous elements in the interview and job interviews, such as salary, fringe benefits or social benefits that are part of the negotiations. Not only in business, but also in private life, there are plenty of needs that end in negotiations. For example, a daughter’s desire to be taken by car to school by her father instead of using local public transport, or members of a family negotiate, where to go on vacation. All of these needs and desires are negotiating controversial issues and usually result in a more or less consensual outcome. Negotiations are interactions between two or more parties about a specific issue with the parties’ fundamental interest in reaching an agreement. Negotiations are characterized by an averted reconciliation of interests and a negotiated result (O’Brien, 2016). Negotiations are varied as all authors describe and take place in every imaginable area of life. Examples of negotiations can be the following situations: • Commercial discussions and agreements between buyers and sellers about a delivery of parts and the relevant commercial transactions • Technical agreements on performance characteristics of products between customer and supplier • Agreements between supplier and customer about the performance and specification characteristics of services • Coalition negotiations between two or more parties to form a government after the last federal elections • Online auctions of the purchasing department of a large corporation for scopes of a large project • Haggling with the seller at the flea market with the subsequent purchase of an antique piece of furniture • Students who have an oral exam and who have to answer subject questions from the professors • Applications and job interviews for a position with human resources and Department of Salary • Request for a salary increase of an employee with your supervisor due to a very good performance • Agreement of employee objectives between employee and manager in the context of the objective setting process in a company • Agreements of freelance consultants on project sizes and workload with the commissioning customer • Application of a fee lecturer at a university to lecture to students of economics • Discussion between parents and children, in which restaurant the family goes in the neighbourhood • Children asking their parents for sweets or toys while shopping in a supermarket at the cash register • Hostage-taking and the hostage-takers’ claims to the police to obtain money and to receive an escape or getaway vehicle.

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Everybody is in the context a negotiator but for the purpose of getting better, one has to train, acquire and improve certain skills that are becoming more important than ever in today’s business environment. Especially, cross-cultural communication difficulties make international business negotiations extremely challenging (BME, 2018). Even though one has international business experience, the negotiations need to be well prepared beforehand and the negotiator must have the right and appropriate negotiation skills to bring international transactions to a successful conclusion. Whereas in the 1980s and 1990s only multinational companies (MNCs) had international exposure in terms of supply and demand, it is visible that nowadays also small and medium-sized companies (SMCs) focus on international value chains in procurement and sales. The winner in 2017 of the innovation award of the BME (English: the association of the German procurement and supply chain management), the German company “Jokey”, emphasizes that global procurement and global negotiations are fundamental elements in order to achieve global excellence (Global Procurement Excellence Initiative, BME, 2018). As a result, this book describes how international negotiations can be pursued in a structured, professional and effective way. The word “n-e-g-o-t-i-a-t-i-o-n” comes from the Latin neg (no) and otsia (leisure) referring to businessmen who, such as the patricians, had no leisure time in their daily business life. It shifted to the meaning of business (le négoce in French) until the seventeenth century when it took on the diplomatic connotation as a dialogue between two or more people or parties intended to reach a beneficial outcome over one or more issues where a conflict exists with respect to at least one of these issues (Helmold et al., 2019; O’Brien, 2016). Negotiations can be defined as “the bargaining (give and take) process between two or more parties (each with its own aims, needs, opinions and viewpoints) seeking to discover a common ground and reach an agreement to settle a matter of mutual concern or resolve a conflict” (O’Brien, 2016). Negotiations and the bargaining process require two or more parties. Moreover, all parties must have the wish to reach an agreement and must consider mutual concerns with the objective to resolve the conflict. Negotiations have characteristics that can be outlined as follows: • Bargaining process • Two or more parties • Willingness to reach an agreement • Mutual concerns of parties • Overlapping motives and interests • Willingness of conflict resolution • Lose or firm business relationship • Buying or selling including consultancy • Common interest and common language • Communication between parties • All parties must want to engage • All parties must have a need to engage

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• Means of interacting in a direct or indirect way • Means of finding conclusion • Keeping agreements.

1.2

Principles for Successful International Negotiations

The book describes how international negotiations can be pursued in a structured, professional and effective way. The book has several unique selling propositions (USPs). It is written by experts from various industries in top management positions and includes examples and cases. These industries include, amongst others, the automotive, the railway, the machinery, the digital, the foreign investment, the public and the service sector. Included are here the practical experiences of the authors Professor Helmold, Dr. Dathe, Professor Hummel, Professor Terry and Professor Pieper in international transactions and bargains. Furthermore, the contribution of research by international master and doctor students has added valuable knowledge to the book. There are more than 35 country examples in the book, showing suitable strategies and openers in international negotiations. Additionally, many other negotiation experts from different industries and with diverse intercultural backgrounds have provided significant inputs to the publication. Finally, individual results of research projects from master and doctor theses have added practical facts to the negotiation guide. The book provides an extensive overview of negotiations and the successful breakthrough in conflicts. It ideally combines in a systematic way many elements such as negotiation preparation, execution, strategies, tactics and psychological factors with international elements and parameters. The publication outlines how negotiations can be successfully executed in six steps (A-6 negotiation concept) in order to reach the optimum negotiation outcome. The book emphasizes the practical relevance by integrating the experience of the authors as well as theoretical and practical attributes. It provides many unique elements and outlines country-specific strategies and recommendations for 37 countries, which is a unique feature in the existing literature. The target groups for this guide are employees who work in departments such as purchasing, sales, marketing or distribution and who have to negotiate product and service features in the international context such as quality, price, commercial elements, payment terms, technical specification on a regular basis. Furthermore, the guide is providing recommendations for people who work in areas such as engineering, design, quality management, human resources or finance. These departments indirectly contribute with their activities to the value creation processes of enterprises and have important negotiations, too. The third target group are managers and executives who deal with customers, suppliers and other stakeholders on an international basis. In addition, start-ups, small and medium-sized companies (SMCs) or larger companies in private or public sectors will benefit from the negotiation book, as the structured and systematic framework will enable them to have successful negotiation outcomes. Finally, academic staff, students, lecturers

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and professors can apply the book as text and case book at bachelor and master levels, as the logical set-up and many best practice examples will help them to successfully teach negotiation skills in every environment. The symbiosis of theoretical and practical examples in combination with the A-6 negotiation concept and international specifics makes the book unique. The concepts inside the publication will not make only negotiations successful, but also help to establish sustainable and long-term relationships with international business partners. The book closes the gap in the literature, academia and industry with the successful A-6 negotiation concept. The concept does not only outline how negotiations can be effectively and successfully be carried out, but also display ways how to maintain sustainable relationships with business partners in the international context. Recommendations from industry and practical examples enrich the value of the negotiation guide. The authors have in-depth experience from negotiations in multi-million euro projects in different industries. Expert, researchers and students contribute to the book by illustrating strategies and specifics of many countries. The negotiation concept conveys knowledge, guidelines and practical examples and how intercultural elements can be successfully utilized in negotiations in the international context. Based on various cases and examples from several leading industries, the authors draw attention to elements such as negotiation analysis, preparation and execution in combination with intercultural aspects and the psychology of bargaining and negotiating. Although the book contains several chapters including political negotiations, negotiations by non-governmental organizations, negotiations in job interviews, negotiations in project management, negotiations in the service sector, the book focuses on negotiations in international business transactions. Many examples underline the necessity of negotiation competencies and skills in multinational companies (MNCs) or small and medium-sized companies (SMCs). Terms such as negotiation partners, negotiation opponents or the other negotiation side are used neutrally and synonymously. This chapter outlines the existing gap in industry and academia to find suitable frameworks for professional and practice-oriented international negotiations. Although the market offers several books and guidelines, practitioners from industry stress that academic findings, practice-oriented negotiation elements and intercultural factors are not yet put into an integrated and user-friendly negotiation framework in today’s world. Chapter 2 outlines the prisoners’ dilemma and job interviews as negotiations. In Chap. 3, key skills and competencies are described as negotiation and intercultural capabilities in international companies will automatically lead to a competitive advantage (Helmold et al., 2017). This section appeals to SMC and MNC organizations that training and education are of high importance in globally acting companies. Chapter 4 outlines that negotiations are an integral part of the corporate strategy. It displays the significance of negotiations in the phases of strategy analysis, strategic choice and the implementation of strategies. This section describes that negotiations reflect a fundamental element of the strategic triangle with the analysis, choice and final implementation. The chapter is rounded up with the strategic pyramid as a suitable tool in conflict resolutions. Chapter 5 emphasizes

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on preparation and the need to have overlapping interests or a zone of mutual agreement. Preparing negotiations will take the majority of time and is crucial for the success. Chapter 6 describes three negotiation concepts by Ury and Fischer (Harvard negotiation concept), Schranner (negotiations on the edge) and Prof. Dr. Helmold (A-6 negotiation concept; successful international negotiations). This chapter ends with a summary and comparison of the three concepts. Although there are more concepts available in industry and academia, the three negotiation concepts by Ury and Fisher, Schranner and Dr. Helmold integrate the most significant methodologies and methods for successful negotiations. Chapter 7 outlines intercultural aspects with the research of Hofstede and Hall. Knowledge and awareness about different cultures and international aspects are important for achieving a competitive advantage in today’s business world. Chapter 8 focuses on negotiations in business transactions between suppliers (seller or vendor) and customers (clients or buyer). It describes the Q-C-D-T plus alpha objectives and elements that are important for negotiations. The concept is used in the majority of manufacturing and service industries as the foundation for developing strategic objectives, which must be negotiated with stakeholders such as suppliers, governments or customers. Chapter 9 outlines the A-6 negotiation concept by Dr. Marc Helmold. The concept is a structured way to successfully win and execute negotiations. It uses six logical and integrated phases with proven tools and templates. Chapter 10 illustrates the categories of non-verbal communication and gives examples, and how aspects such as gestures, body and face language (kinesics) can be recognized and be used in negotiations. Chapter 11 describes useful tools such as the macro- (PESTEL) or micro-analysis (Porter’s Five Forces), which can be ideally and smartly applied for the analysis in negotiations. Chapter 12 describes specific requirements for negotiations in outsourcing projects. Outsourcing, also described as “make-or-buyinitiatives”, is an increasing trend in many business sectors. Companies are concentrating on core companies and outsourcing activities, processes and products to suppliers. Chapter 13 outlines negotiations in the global economy with a practical example. Chapter 14 gives recommendations for negotiations of companies which are in financial difficulties. Müller outlines symptoms in four phases from a strategic crisis, profitability crisis and liquidity crisis to insolvency and bankruptcy. The chapter highlights what measures and actions to take in negotiations with stakeholders in such a situation. Chapter 15 deals with the service industries and displays tools such as the 7P or the 3R concept. Chapter 16 tackles the challenges in complex projects. Project management contains cross-functional members and often different motives. Subsequent Chaps. 17–22 illustrate strengths, weaknesses, ice bergs and ice breakers in different countries and cultures. The country examples have been categorized into five major regions such as Europe, Asia, Americas, Arabic countries, Israel and Africa. The section is unique in the literature as this section includes, amongst the global top 20 economies, a total number of 37 countries with intercultural negotiation elements for each of the countries. These chapters have been created by experience, detailed research and literature reviews. Experienced experts from these countries contributed to these USPs as part of their master studies.

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Negotiation competencies are key competencies and relevant to practitioners and academic staff. As international trade is increasing continually, it is one of the key competencies for employees of MNC or SMC. Business schools such as the IUBH Internationale Hochschule or the London Business School consider negotiation and intercultural skills as very important for future business leaders (IUBH, 2019; London Business School, 2019). Negotiation skills in the international context are key success competencies to drive better bargains and to create long-lasting and value-creating relationships in international trade (Helmold et al., 2017; London Business School, 2019). The book describes how negotiation can be successfully accomplished. Research on master and doctoral levels, case studies and the input by top managers from leading industries contributed to the negotiation guide. The recommendations and examples of the book will enable and engage employees in companies who have to negotiate in the international context (London Business School, 2019).

1.3

Negotiations in the Value Chain: Input– Transformation–Output

Negotiations are described as the bargaining (give and take) process between two or more parties. Each party has its own aims, needs, opinions and viewpoints and must be seeking to discover a common ground and reach an agreement to settle a matter of mutual concern or resolve a conflict according to O’Brien (2016). The major elements in negotiations are as follows: • Bargaining process • Two or more parties • Reach an agreement • Mutual concern • Resolve a conflict. Negotiations take place throughout the value chain and in all business transactions. The value chain contains inputs, the transformation and outputs as illustrated in Fig. 1.1 (Kürble et al., 2016). Inputs are used up in the process of creating goods or services. To distinguish between these, input resources are usually classified as: Transformed resources Transforming resources. Transformed resources are those elements that are processed, altered or modified (transformed) throughout the operation and organization to produce the goods or services that are its outputs. In the car industry, raw material and components are transformed into final vehicles, or raw goods are used to produce end consumer goods. Transforming resources are everything that are used to perform the

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Supply side

Input-transforma on-output Input

Human resources

Transforma on

Finance and accoun ng

Output

Demand side

Informa on technology (IT)

Support func ons

Fig. 1.1 Value chain: input–transformation–output. Source Author

transformation process. Machines, equipment, tools, knowledge or personnel are transforming elements in this context. Many people think of operations as being mainly about the transformation of materials or components into finished products, as when limestone and sand are transformed into glass or an automobile is assembled from its various parts. But all organizations that produce goods or services transform resources. Many are concerned mainly with the transformation of information (e.g. consultancy firms or accountants) or the transformation of customers (e.g. hairdressing or hospitals). The two types of transforming resource are staff (the people involved directly in the transformation process or supporting it) and facilities (land, buildings, machines and equipment). The staff involved in the transformation process include both people who are directly employed by the organization and those contracted to supply services to it. A transformation process is any activity or group of activities that takes one or more inputs, transforms and adds value to them and provides outputs for customers or clients. Where the inputs are raw materials, it is relatively easy to identify the transformation involved, as when milk is transformed into cheese and butter. Where the inputs are information or people, the nature of the transformation may be less obvious. For example, a hospital transforms ill patients (the input) into healthy patients (the output). The transformation processes include: • Changes in the physical characteristics of materials or customers • Creation of services by transforming input elements for customers • Changes in the location of materials, information or customers • Changes in the ownership of materials or information • Storage or accommodation of materials, information or customers • Changes in the purpose or form of information • Changes in the physiological or psychological state of customers.

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Many transformation processes produce both goods and services in combination. Goods are tangible items. Services are intangible and have additional specifics such as perishability, variability, lack of ownership and inseparability (Helmold et al., 2019). For example, a restaurant provides a service, but also produces goods such as food and drinks. Chapter 14 will describe the special requirements in negotiations in the service industry. Transformation processes may also result in some undesirable outputs (such as nuclear waste) as well as the goods and services they are designed to deliver. An important aspect of international organizations is the reduction of any environmental impact of waste over the entire life cycle of their products, up to the point of final disposal. Protecting the health and safety of employees and of the local community is thus becoming more important throughout the value chain and influences negotiations. Outputs are the result of the input resources and the transformation. The value chain of companies (input–transformation–output model) contains functions and departments, which are entrusted with the activities described before. These activities are shown in Fig. 1.2 and can be described as primary and secondary functions. Primary functions (procurement, operations, marketing) are directly involved in the transformation process, whereas secondary functions support the transformation process (finance, human resources, logistics and information technology). Procurement is responsible for inputs such as raw materials, components and incoming material from supplying companies (suppliers or vendors). Other inputs can be facilities, machines or equipment, which also needs to be purchased before the transformation can take place. The incoming goods and materials are then processed and altered within the transformation phase in the operations or production department including adding value. In the last phase, the output, it is the responsibility of the marketing and sales department to provide the goods or services to the customers. All phases necessitate negotiations with

Budgets, machines, produc on loca ons, degree of automa on etc.

Suppliers nego a ons on price, quality, deliveries, payment terms etc.

The value chain

Customers, consultants, auditors

Auditors

Logis cs service provider

Supply side (Suppliers)

Purchasing Management

Opera ons Management

Marke ng & Sales

Consultants

Sub suppliers nego a ons on price, quality, deliveries, payment terms and other elements etc.

Demand side (Customers)

IncoTerms, logis cs ser providers, capacity, fre insurance, customs clea me, lot sizes, quan e

Customers nego a ons on Price, quality, deliveries, payment Terms, insurance etc

Governments, environmental issues, taxes, compliance, ssafety standards etc.

Finance: Budgets, head count, head hunters,training budgets, promo ons, investments, outsourcing, shared service centers etc.

Banks, shareholders, make or buy, investors, capacity, logis cs providers, freigth forwarders etc.

Banks, shareholders, make or buy, investors, capacity, logis cs providers, freigth forwarders etc.

Fig. 1.2 Negotiations in the value chain. Source Author, adopted from Helmold et al. (2019)

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internal or external stakeholders as shown in Fig. 1.2. Negotiations in the value chain consist of: • Negotiations • Negotiations • Negotiations • Negotiations • Negotiations • Negotiations • Negotiations • Negotiations

with service providers such as consultants or logistics providers with suppliers about cost, quality or payment terms with human resources about head count or training with banks about credits and payments inside about the question to make or to buy components with government about technical and health requirements with investors about reinvesting the money or providing dividends with customers about quantities, price and delivery dates.

The value chain contains negotiations in all phases and across functions as outlined by many authors (O’Brien, 2016). People literally negotiate everywhere and any time. Input negotiations are often negotiations with raw material or component-supplying companies. Moreover, input negotiations are also linked to the recruitment of staff or bargaining with banks and investors in order to receive financial means and investments for operating the company. In production and operations, there are many discussions about budgets, quality gates and delivery times that must be negotiated. Negotiations take here also place about in-house or outsourcing capabilities (make or buy). As a last phase of the value chain, companies need to execute negotiations with customers on elements such as quality, cost, delivery or technical measures. Besides the three primary functions procurement, production and marketing, secondary functions get also involved into the negotiation process. The human resource department will negotiate with potential employees in job interviews or with workers’ council and unions. Other departments such as the finance department or IT department must be involved in negotiations. The finance department must take participate in negotiations with banks or new investors, the IT department in bargaining activities with companies that offer new IT infrastructure. Finally, interaction with auditors, consultants or other stakeholders requires negotiations in the value chain. Authors such as Dr. Helmold and other negotiation experts stress that successful negotiations are underpinned by generic guidelines. These are shown below (Helmold et al., 2019): • Effectiveness (quality of results) • Efficiency of negotiation process (time management) • Climate of negotiations (relationship) • Relative power balance (equality) • Understanding (communication) • Mutual benefits (fairness) • Formulation of objectives (clarity) • Outcome related (value claiming or creating).

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1.4

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Job Interviews as Negotiations

1.4.1 Right Preparation, Strategy and Plan in Job Interviews A job interview is a special form of a negotiation. Job interviews consist of a conversation between a job applicant (interviewee) and one or more representatives of a company or organization (interviewer) which is conducted to assess whether the applicant should be recruited or not. Interviews normally take place through verbal communication (interview) but can also be conducted in a non-verbal communication way (email). Interviews are one of the most popular ways for selecting employees in companies. The job interview process can be a complex and long process. Many companies have a standardized interview routine and process starting with screening interviews, which often take place on the phone, followed by in-person interviews, second interviews and even third interviews. The combination of the right preparation, the right strategy and the right plan will bring the right success as shown in Fig. 1.3.

1.4.2 Seven Important Steps in Job Interviews Step 1: Market Intelligence Interviews can be divided into seven steps from market intelligence to the final greeting. Market research and detailed preparation are essential for the potential interview. At the point of the application, it is therefore important to do market research and to analyse general elements and company data as follows: • What is the company doing? (business models of the company) • Where is the major scope of the company? (regional or global scope) • What is the company selling? (product range) • Where is the company generating value? (input–transformation–output) • What are the strategies? (strategic choice, make or buy) • What are the important financial ratios? (turnover, financial ratios, number of staff). Fig. 1.3 Interview strategies. Source Author

Prepara on

Success

Plan

Execu on

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In the phase, it is also important to narrow down the analysis to specific areas such as: • What position did I apply for? (position applied for) • Which roles and responsibility are assigned to the position? (tasks assigned to roles) • What are the necessary skills? (languages, soft and hard skills) • What are expectations? (objectives and goals in the role) • Who will interview me? (interview partners) • Who is the decision-maker? (superior or support functions such as human resources) • What is the salary range? (salary range and benchmarks in the industry) • What are conditions? (fringe benefits). Step 2: Greeting and Start of Interview Once the applicant is invited to an interview, the interview process will start. Interviews normally take place at the recruiting company, and sometimes other places (airports and conference centres) are also possible. Interviews and other negotiations begin with the warm-up and welcome. Mostly, the applicant is assigned a seat and offered a drink. In this phase, getting to know the candidate and the first assessment are done. Mostly in the form of a small talk, the first “sampling” takes place, the first assessment, how do the interlocutors interact, is one sympathetic, a positive (or negative) first impression emerges. Typical questions in this phase are for example (Köhler, 2007): • “Did you find your way here well?” Always respond positively, because of course you have prepared well and confidently found your way. • “Did you travel by train or car?” Answer what means of transportation you took. • “How do you like our city, our region, our new building?” Answer positively without exaggeration. • “Would you like to have a drink?” You should accept the offer and ask for water; alcoholic drinks are taboo. As soon as you meet the HR manager, you introduce yourself by shaking hands and saying your name. For example, you ask the applicant: “How was your arrival?”, “Did you find it well?” or “Such a nice weather today, right?”. Here, you should answer with friendly words and chat a little—on the one hand for sympathy points and on the other to relax yourself (Köhler, 2007). According to a study, in the early years of the 1990s it is decided whether a candidate is sympathetic or not (Helmold et al., 2019). Example: As the executive and general manager, Dr. Helmold had more than 100 interviews for various positions. Some interviews took place in restaurants or on airports due to time constraints. The first impression really counts, so that this is a very important phase in interviews (Helmold et al., 2019).

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Step 3: Own Introduction In the phase of your own performance, you are usually asked to introduce yourself in a few minutes. Since most people would have seen the curriculum vitae (CV), a presentation with the most important milestones of five to ten minutes is sufficient. The classic opening for this phase is the sentence: “Tell me something about yourself”. The interviewer should only be given the information that is important to them. Qualifications, achievements, project results and the professional experiences that are important for the desired position are important (Köhler, 2007). Step 4: Company Introduction After the own introduction usually follows the short description of the company, the department in which the position has been applied for and the vacant position. Listen carefully, and take notes if necessary. You can then use this information in your self-presentation, because requirements and expectations of you will certainly be discussed. Also, make a note of any points that are not clear to you and that you want to deepen. You can post these later as questions. Since the candidate has previously informed about the company, you can also cautiously integrate information in the negotiation. When presenting a company, one can collect and shine points with particular knowledge of projects, information or other developments (Köhler, 2007). Step 5: Core Negotiation and Motivation After the warm-up and the performances, the most important phase now comes with the core negotiation. Answers to questions should be short and well thought out. Typical questions that come up now are, for example: Why did you apply for this position?, What qualifies you for the position?, Why do you want to work in our company?, What do you know about our company?, Why do you want to change jobs? These questions should be well prepared and have good justification as shown in Table 1.1. Trained HR professionals use various interviewing and questioning techniques in job interviews. Even if the HR manager asks closed questions (yes/no questions), one should always justify the answer your answer with a descriptive explanation and a few words. Answers should be given in a short and structured

Table 1.1 Motivation questions and answers in job interviews Question What interests you have about the advertised position? Why is the company interesting for you? What qualifications do you bring to the job? Why does the job suit you and your career so far? Questions and answer in job interviews Source Author

Good answer The tasks and challenge Excellent and great company, exciting customers Study and experience with examples and successes. Show experience Point out possible further education and qualifications

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way. In addition to the professional qualifications and goals, a HR is also interested in the personality of the applicant. After all, it is not just about being able to fill the job competently, but also about being able to fit into the existing team and corporate culture. Step 5: Negotiations About Material Items After the discussion on suitability, motivation and capability, the negotiation of salary, benefits and organizational elements follows in phase 5. As a golden rule, the salary information is always a range of up to call as Table 1.2 shows. The analysis of the scope for position, experience, industry and region plays a central role here. Figure 1.4 shows the possible goals such as salary and both tangible benefits and intangible benefits. In principle, everything can be negotiated and regulated in the employment contract. In most cases, the employer without such a regulation has no right to arrange further training at the expense of the employee, and in principle the employer is otherwise not obliged to finance further private education of your employee, even if they represent or can present them as added value for the employment relationship. In principle, employers as well as employees are interested in the work being done as efficiently as possible. Therefore, many employers take the cost of training the employee or pay subsidies, without much discussion. Large companies offer their employees an additional budget, from which employees can finance their own further education as well as take advantage of motivational seminars. The framework conditions of these cost assumptions can be different in relation to incurred travel costs. The employer can tax these expenses as costs, so that there is an interest of the employer side. Continuing education can include training with and without completion. As part of a hiring, the costs of training negotiation techniques, a Master of Business Administration (MBA) or to a Six Sigma expert can be included in the negotiations. For executives, it is common to negotiate a bonus, the company car and elements of a company pension plan. The values of these elements can amount to more than 50% of the current annual gross salary.

Table 1.2 Additional questions and answers in job interviews Question

Good answer

What are your salary expectations?

Give a band or corridor. Between 75,000, -EUR and 80,000, -EUR. Salary higher band can be achieved after probation time of six months Company car, paid training, company phone, home office days, seminars, qualifications Show your flexibility or answer with question: “When would you such as me to start?” Ask one to three prepared questions. Ask for an introduction plan and mentor

Do you have any other ideas besides the salary? When can you start? Do you have any further questions or comments? Source Author

Best-in-Class Negotiations in the International …

1 • • • • • • • •

Salary and bonus Salary increases Christmas bonus Vaca on bonus Performance bonus Profit boni Company shares Gra fica ons

• • • • • • • • •

Mobile phone Smart tablets Laptops Company car Ticket public transporta on Real estate agent Reloca on cost Estate agaent cost

Direct benefits

Fringe benefits

Supplementary benefits

Indirect benefits

15 • Health insurance • Care insurances • Life insurance • Pension Fonds • Other social insurances • Credit and Loans • Vaca on • Home office days • Other fringe benefits

ï • • • • • • • •

Fitness center memberships Training Educa onal holidays Sabba cal MBA, Master educa on Doctoral educa on Special training (tax lawyer)

Fig. 1.4 Salary and other benefits in job interviews. Source Author

Step 6: Question and Finish of Negotiations Even before the negotiations, it is advisable for the candidate to write three to five questions about the vacant post which should be asked upon prompting by the interviewer (Püttier & Schnierda, 2014). One should not ask questions about things that have already been said or clarified in the conversation or that one can answer oneself. Also, questions about work or vacation time as well as special benefits and salary increases should not be asked (at least in the first interview), because that puts one’s own motivation into question. These things should be secondary or at least initially treated such as this (Püttier & Schnierda, 2014). Step 7: Farewell and Decision-Making If one notices that the conversation is coming to an end, deadlines and milestones should be set for further action. Likewise, you can learn about the sequence of the selection process and when you can count on a feedback. After that is clarified and no more questions are open, the HR will thank the candidate and say goodbye. The applicant should thank HR for the invitation and say goodbye. In some cases, questions related to reimbursement of travel expenses are also required. Based on the experience of the authors, the reimbursement of travel expenses should be clarified in advance. Failure to meet the deadlines, it is acceptable to make a request to the HR, as the state is (Püttier & Schnierda, 2014). Figure 1.5 displays the seven steps of an interview.

16

M. Helmold 0. Market intelligence 1. Gree ng and start of interview nego a on 2. Self introduc on 3. Company introduc on 4. Core nego a on and mo va on 5. Nego a ons about material items (salary, benefits etc.) 6. Ques on and end of interview nego a on 7. Farewell and decision making

Fig. 1.5 Seven steps for an interview. Source Author

1.5

Negotiations in Governmental Organizations

According to the German Duden dictionary, politics is defined as “an action aimed at the enforcement of certain goals in the state sphere and in the shaping of public life by governments, parliaments, political parties, organizations, etc.”, with the aim of enforcing positions. Tactics are used in the negotiations. Political negotiations, unlike economic negotiations, may also involve threats from various governments to solve conflicts militarily, as the negotiations between the USA and North Korea have shown. Political negotiations do not always have the same laws as economic negotiations, so the same tactics and strategies cannot always be used. However, one often sees similar strategies and tactics used in economic negotiations. Political negotiations are often an internal or external opinion and reflect interdependencies of numerous interest representatives, for example interests of party members or groups of voters, whose interests are contrary to the interests of enterprises. Table 1.3 shows examples of national and international negotiations. In politics, negotiations are traditionally carried out by government officials or government representatives who have been mandated to achieve a certain target corridor in order to achieve a negotiated outcome. National and international conferences often serve as lateral negotiation venues (Fetsch, 2006). This type of conference diplomacy is mostly organized by international organizations and leads to more or less permanent events with a large number of participants. In addition to lateral negotiations, there are also bilateral negotiations between two groups, countries or parties (Fetsch, 2006). Negotiations at the political level are mostly influenced by opinions, lobbyists, voters, or the public, so that results of negotiations in politics are often misinterpreted, as Brost describes in his interview with M. Schranner. Political negotiations have recently also frequently closed in conferences organizations from the non-governmental area (Fetsch, 2006).

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Table 1.3 Examples for negotiations in politics National negotiations

International negotiations

Coalition negotiations of various parties

Negotiations on the budget of the defence alliance NATO agreements Struggle for a refugee quota by the Negotiations between the EU and the USA on governing coalition parties punitive tariff policy Negotiations on the use of a surplus in the Negotiations on Free Trade Agreement with Japan household Negotiations on contentious domestic Negotiations between Germany and France on a positions common foreign army Negotiations on important posts and Negotiations on refugee quotas in the European responsibilities Union Source Author

These so-called non-governmental organizations are non-profit and socially oriented organizations (NGOs, non-governmental organizations, NPO, non-profit organizations) that have humanitarian or non-profit motives (Fetsch, 2006). Non-profit organizations are not profit-oriented. That is, no profits are paid to members or owners (English: shareholder). You try to do business in such a way that all costs are covered. NPOs can be differentiated into public or private non-profit organizations (Fetsch, 2006): societies—associations—foundations— clubs—charities—churches. Public NPOs are public companies and public administrations. Good management is also important for NPOs in order to use the scarce resources such as labour or the financial resources as effectively as possible. An NGO is mostly international, an NPO rather regional. As a result, an NGO has a wider reach and often represents political issues (such as development cooperation, human rights). Especially in this context, negotiations with governments or political organizations are of central importance, as Fetsch states. In contrast, an NPO finances itself through self-generated financial resources, an NGO through membership fees and donations by parties, governments or stakeholders. The work of an NGO pursues the mission of improving the world. NPOs offer services and goods (Fetsch, 2006).

1.6

Importance of International Trade and Trends

1.6.1 Global Trade of Goods and Services Negotiations in the international context are becoming increasingly more important for companies, which produce goods and services. Fierce competition, the ongoing liberalization and trade agreements between countries force enterprises to enter new and foreign markets across the globe (Helmold et al., 2019). International trade has changed our world drastically over the last couple of centuries. In this section, we begin by analysing available data on historical trade patterns around the world and

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then move on to discuss more recent data, outlining trade patterns from the last couple of decades. From a historical perspective, international trade has grown remarkably in the last couple of centuries. After a long period characterized by persistently low international trade, over the course of the nineteenth century, technological advances triggered a period of marked growth in world trade (the first wave of globalization). This process of growth stopped and was eventually reversed in the interwar period, but since the Second World War international trade started growing again, and in the last decades trade expansion has been faster than ever before. Within the context of globalization, stronger links between some of the world’s most rapidly growing economies could be seen in 2017 and 2018 as outlined in the report of the World Trade Organization (WTO) (WTO, 2018). Global trade in goods and services continued growing above trend in 2017 and 2018 as the WTO outlined (Miles, 2018; WTO, 2018). The total amount of goods and services exceeded US$ 6700 billion in 2017. The forecast for 2018 sees a slight increase in international trade of goods and services (WTO, 2018). Over 70% of merchandize exports are manufactured goods. The top three merchandize traders in 2017 were China, the USA and Germany in 2017 with a total amount of US$ 5300 billion. Besides merchandizing trade, services are getting more and more important in international business transactions across borders. In 2017, the USA, UK and Germany were the top three commercial service exporters while the USA, China and Germany were the top three importers. The combined commercial service exports of the USA, UK and Germany totalled about US$ 1400 billion in 2017.

1.6.2 Germany and International Trade Relationships Negotiations in an international context are more important than ever for companies in Germany, considering the trade balance in Germany. In addition, the authors Dathe and Helmold state that internationalization will continue, especially in countries such as China, Japan or South Korea. Looking at imports and exports in the years 2016 and 2017, one can see that Germany was export champion in both years. In 2017, goods and goods valued at more than € 1279 billion were exported from Germany to other countries (Fig. 1.6). The most important countries for export are the USA, France, the People’s Republic of China, the Netherlands and the UK. In contrast, goods and goods worth € 1034 billion were imported. Here again, excluding Italy, the United States of America, France, the People’s Republic of China and the Netherlands are among the first five countries. As the Federal Statistical Office (Fig. 1.7) further reports on the basis of preliminary results, German exports were 6.3% higher in 2017 and imports 8.3% higher than in 2016. In 2017, the highest levels from 2016 were exceeded, when goods worth € 1203.8 billion were exported and goods worth € 954.9 billion were imported. The foreign trade balance ended in 2017 with a surplus of more than € 244.9 billion. In 2016,

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The five most important interna onal trading partners for Germany Exports in 2017 (in billion Euro) UNITED KINGDOM

84.4

NETHERLANDS

85.9

PR CHINA

86.2

FRANCE

105.2

U.S.A.

111.5 0

20

40

60

80

100

120

Fig. 1.6 Exports from Germany in 2017. Source Statistical Federal Office in Germany. Import and Exports

The five most important interna onal trading partners for Germany Imports in 2017 (in billion Euro) UNITED KINGDOM

55.8

U.S.A.

61.1

FRANCE

64.2

NETHERLANDS

91.4

PR CHINA

100.5

0

20

40

60

80

100

120

Fig. 1.7 Imports to Germany in 2017. Source Statistical Federal Office in Germany. Import and Exports

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the balance in the foreign trade balance of € 248.9 billion had reached its highest level in the country of Germany. In 2016, the German current account had a balance of € 259.3 billion. The foreign trade balance closed in December 2017 with a surplus of € 18.2 billion. Adjusted for the calendar and seasonally adjusted, the foreign trade surplus in December 2017 was € 21.4 billion euros. In the last couple of decades, transport and communication costs have decreased across the world, and preferential trade agreements have become more and more common, particularly among developing countries. Free international trade is often seen as desirable because it allows countries to specialize, in order to produce goods that they are relatively efficient at producing, while importing other goods. This is the essence of the comparative advantage argument supporting gains from trade: exchange allows countries to “do what they do best, and import the rest”. In 2016, Germany maintained its position as the world’s third largest exporter of goods (behind China, USA) and third largest importer (behind USA, China). Germany’s share of world trade (exports and imports of goods in USD) rose to 7.44% (2015: 7.16%). With a share of 11.52% in global trade, the USA was in first place again for the first time since 2012, just ahead of China (11.45%). The WTO states that Germany is one of the most open countries in terms of international trade (WTO, 2018). With a high degree of openness, characterized by imports plus exports in relation to the gross domestic product (GDP) of 84.8%, Germany is the “most open” economy of the biggest seven economies (G7 countries) and is becoming increasingly integrated into global and international value chains (WTO, 2018). As Germany is highly integrated into global value chains and international trade, employment in Germany depends on liberal and open markets. According to the WTO, nearly 30% of jobs in Germany are directly or indirectly linked to international trade (WTO, 2018). Another good example of growing international trade and global trade dependencies is China (WTO, 2018). China, in particular, has become increasingly important as a trading partner for Germany. Between 2000 (1.6%) and 2016 (6.3%), German exports to China nearly quadrupled (WTO, 2018). This means that in 2016 China was the second most important market for German exporters outside Europe, behind the USA (8.9%). China’s share of German imports also rose significantly in the same period: from 3.5% (2000) to 9.9% (2016). China is thus the most important supplier for the German economy outside Europe (ahead of the USA, which has share of 6.1%).

1.6.3 International Operations and Global Sourcing Internationalization strategies are part of the corporate strategies and will impact negotiations in the international context. Slack et al. stress that internationalization strategies can be pursued with own or not own resources as highlighted in Fig. 1.8 (Slack & Johnston, 2013). These choices are referred to as “make-or-buy-strategy” (Slack & Johnston, 2013). If own resources and assets are involved, Slack et al. talk about “international or offshore operations”. If companies are not using their own

Non core competencies Core competencies

(Buildings, Machines, Equipment)

(Buildings, Machines, Equipment)

Best-in-Class Negotiations in the International …

Own resources & assets Not own resources & assests

1

21

Domes c loca ons

Interna onal loca ons

Na onal or domes c

Offshoring or intern. outsourcing

outsourcing

Na onal or domes c opera ons

Buy strategy

Global sourcing

Offshore opera ons Interna onal or global opera ons

Make strategy

Fig. 1.8 National and international make-or-buy strategies. Source Author

resources and fixed assets, Slack et al. describe this as “buy or outsourcing strategy”. International operations (make strategy) are those selected where companies have a competitive advantage due to superior quality, efficient production, patents, knowledge or any other aspects in the foreign country. Alternatively, companies decide to use not own resources and assets, where they do not have a competitive advantage (non-core competencies) (Johnson & Scholes, 1997). Figure 1.8 shows the possibilities of internationalization through own or foreign resources. In this sense, resources are buildings, machines or installations. If a company decides to produce within its own resources outside the borders of Germany, this is called international in-house production. Outsourcing and the purchase of products or services from suppliers are referred to as global sourcing or international outsourcing. International negotiations engage stakeholders and representatives from different cultural backgrounds. If both negotiating parties have knowledge about the culture of the other side in international relationships, the negotiations can start immediately without intercultural expertise. On condition that both parties or one party has little or no knowledge about customs, culture and specifics, it is recommended by many authors to acquire expertise through an expert and trainer. Figure 1.9 displays the options in terms of cultural knowledge of my own organization (we, knowledge of the culture of the other party) and the other party of the culture of my organization (they, knowledge of my organization and my culture) (Helmold et al., 2019). Figure 1.10 shows the general manager of the Chinese aluminium maker Midas, Mr. Li, and the general manager of Bombardier Transportation in China,

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We Knowledge of the other party´s culture

Large Knowledge Li le Knowledge

They Knowledge of my culture

Li le knowledge

Large knowledge

We should consult an intercultural expert before nego a ons start

Nego a ons can start immediately on same cultural level as both par es are familiar with specifics

Both par es should consult interna onal expert and intercultural training

My nego a on partner should consult expert to familiarize with culture and prac ces

Fig. 1.9 Cultural knowledge and need for training. Source Author

Fig. 1.10 Mr. Li and Dr. Helmold. The picture shows the general manager of Midas Mr. Li and the general manager of Bombardier Transportation in China, Dr. Helmold. Midas is world market leader in producing aluminium profiles

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Dr. Helmold. Dr. Helmold was general manager of two legal entities (Bombardier Transportation Consulting and Bombardier Transportation Railway Equipment, BTRE) from 2013 until 2017 in China. In this capacity, he led all sourcing and sales activities of spare parts in China. The Bombardier Transportation Group has long played a key role in developing China’s urban mass transit and advanced rail networks (Bombardier Transportation, 2018). Presently, Bombardier is actively transferring our industry-leading technology and proven management expertise through joint ventures and wholly foreign-owned enterprises. Bombardier Transportation works with several Chinese partners to provide the country’s major cities with state-of-the-art rail solutions and services, from metro cars to very high-speed trains. More than 4000 employees work at four joint ventures and seven wholly foreign-owned enterprises in Bombardier Transportation in China, as well as at several offices in major cities such as Beijing, Shanghai, Guangzhou and Hong Kong. In rail transportation, Bombardier has a long-standing presence in China, which generated orders for over 5000 rail cars and more than 560 electric locomotives until 2018. In aerospace, Bombardier Aerospace accounts for one-third of the business jet fleet in China with over 100 aircraft. Six airlines operate 47 Bombardier commercial aircraft in Greater China. Several authors observe major international trends that are changing the nature of cross-border trade and intercultural relationships. Table 1.4 shows the major ten trends in international trade.

Table 1.4 Ten most impacting trends in international trade Trend no. Description of trend Trend 1

Liberalization of cross-border trade and increasing trade agreements (e.g. trade agreements of European Union (EU) with Canada or South Korea) Trend 2 Growth of emerging markets and intertrade (e.g. China, India, Brazil, Asia countries, African countries, etc.) Trend 3 Digitalization of international supply chains by standardized tools and supply chain solutions Trend 4 Transfer of technologies, specialization in manufacturing areas and division of labour amongst countries Trend 5 Concentration on core competencies and international or national outsourcing of components to best cost countries (e.g. China or India) Trend 6 Outsourcing of non-core competencies in service sector to countries such as Indonesia or Philippines (share service centres) Trend 7 Emphasis on intercultural skills and awareness by internationally acting companies Trend 8 Focus on sustainable energies and awareness of companies to protect environment Trend 8 Integrating corporate social responsibility (CSR) and business ethics into company culture across borders Trend 9 Importance of international trade leads to cross-country recruitment and talent creation including intercultural and negotiation skills Trend 10 Blockchain technology and new technologies introduction in international trade and trade relationships Source Author

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References BME. (2018). Bundesverband Materialwirtschaft, Einkauf und Logistik. Mittelstandspreis geht an Jokey. November 10, 2017. Retrieved May 18, 2018. https://www.bme.de/jokey-groupgewinnt-den-bme-innovationspreis-2017-2330/. Bombardier Transportation. (2018). Bombardier homepage China. www.bombardier.com. Fetsch, F. R. (2006). Verhandeln in Konflikten: Grundlagen—Theorie—Praxis (German Edition). Wiesbaden: Verlag für Sozialwissenschaften. Helmold, M. & Dathe, T. & Büsch, M. (2017). Praxisbericht aus der Bahnindustrie—Bombardier Transportation. Veränderte Anforderungen durch Global Sourcing. In: Beschaffung aktuell. Retrieved May, 4, 2017. https://beschaffung-aktuell.industrie.de/einkauf/veraenderte-anforderungendurch-global-sourcing/. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler. IUBH. (2019). IUBH homepage. www.IUBH.de. Johnson, G., & Scholes, K. (1997). Exploring corporate strategy. Text and cases (4th ed.). London: Prentice Hall. Köhler, D. (2007). Stressfrei ins Vorstellungsgespräch. July 16, 2007. Retrieved May 15, 2018. https://www.akademie.de/wissen/vorstellungsgespraech-vor-nachbereitung/gespraechsverlaufin-acht-phasen. Kürble, P., Helmold, M., Bode, O., & Scholz, H. (2016). Beschaffung, Produktion, Marketing. Heidelberg: Tectum Verlag. London Business School. (2019). London Business School homepage. https://www.london.edu/ programmes/executive-education/topic/leadership/negotiating-and-influencing-skills. Miles, T. (2018). WTO outlook indicator: Global trade growth to stay above-trend. Reuter’s Online Article. Retrieved January 28, 2019. https://www.reuters.com/article/us-trade-wto/wtooutlook-indicator-global-trade-growth-to-stay-above-trend-idUSKBN1FW0UP. O’Brien, J. (2016). Negotiations for procurement professionals (2nd ed.). Croydon: Kogan Page. Püttier, Ch., & Schnierda, U. (2014). Das überzeugende Vorstellungsgespräch für Führungskräfte: Wie Sie Headhunter, Personalprofis und Top-Manager überzeugen. Campus Frankfurt. Slack, N., Brandon-Jones, & Johnston, R. (2013). Operations management (7th ed.). London: Pearson Publishing. WTO. (2018). Highlights of the world trade 2017. Retrieved January 29, 2019. https://www.wto. org/english/res_e/statis_e/wts2018_e/wts2018chapter02_e.pdf.

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Prisoners’ Dilemma and Negotiation Types Marc Helmold

2.1

Prisoners’ Dilemma

The prisoner’s dilemma is a standard example of a game analysed in game theory that shows why two completely rational individuals might not cooperate, even if it appears that it is in their best interests to do so. It was originally framed by Merrill Flood and Melvin Dresher in the 1950s (Flood, Dresher, & Tucker, 2010). The prisoner’s dilemma is a paradox in decision analysis and negotiations in which two individuals acting in their own self-interests do not result in the optimal outcome. The typical prisoner’s dilemma is set up in such a way that both parties choose to protect themselves at the expense of the other participant (Davies, 2018). As a result of following a purely logical thought process, both participants find themselves in a worse state than if they had cooperated with each other in the decision-making process. Here is an example: My friend and acquaintance, Peter and I, went out for a joint dinner and later for drinks last night. Surprisingly, this morning, I wake up in an isolated prison cell with no recollection or memory of what happened the night before. This is apparently very disturbing, as I care deeply about my personal freedom. Shortly after waking, the cell door opens, and a policeman walks in and informs me that I and Peter robbed a couple of liquor stores last night. He then offers me the following options as outlined in Fig. 2.1, which can be described as the prisoner’s dilemma:

M. Helmold (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_2

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Fig. 2.1 Prisoners’ dilemma. Source Author

Do not confess

Myself Confess

confess

Released (free)

2 years prison

20 years Prisoner´s dilemma

20 years prison

16 years prison

Confess

Peter Do not

2 years prison

Released (free)

16 years prison

• I can confess to all crimes, and if your accomplice remains silent, I will drop the charges against you in exchange for your testimony. Bottom line, you will go free and your accomplice will do 20 years in the state prison. • I can remain silent, but if your accomplice confesses, I will drop the charges against him in exchange for his testimony. Bottom line, he will go free and you will do 20 years in the state penitentiary. • If we both confess, both of you will do 16 years in the state penitentiary. • If we both remain quiet, I can only get you on weapons charges and you will both do 2 years in the state penitentiary. He then informs me that he has made the same offer to Peter, additionally, the policeman tells me that I have only 15 min to decide, and walks out of the cell. What do I do? This game is known as the “Prisoner’s Dilemma”, and among other things, it illustrates the divergent motives present in negotiation. Should one compete, striving to get what one wants at the expense of another? Or should one cooperate, striving to maximise the final deal for all parties involved? Negotiation theorists refer to this conundrum as “Mixed Motive Negotiation”. In most negotiations, the parties involved to address and reconcile the divergent motivations of competition and cooperation. Most often, the question is not which of the two motivations to follow, but how to balance the motivations in the dynamic interpersonal exchange of negotiation. Negotiators are advised to create value (cooperate) with the other side before claiming value. This usually involves balancing integrative and distributive negotiation strategies within a single negotiation (Helmold, Dathe, & Hummel, 2019). Prisoners’ dilemmas occur in all negotiations. Davies explains that the prisoner’s dilemma can be observed in the trade war of the USA and China if both economies keep imposing tariffs and continue in trade protection (Davies, 2018).

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Prisoners’ Dilemma and Negotiation …

2.2

27

Negotiation Personalities

Traditional negotiation concepts often outline that three basic kinds of negotiators have been identified. These types of negotiators are often outlined as soft or collaborative bargainers, hard or competitive bargainers, and principled bargainers.

2.2.1 Soft Negotiator Personality Negotiators with a soft negotiator personality regard the process of negotiations as too close to competition, so they choose a gentle style of bargaining (Helmold et al., 2019). The offers they make are not in their best interests. They may also yield to others’ demands, avoid confrontation, and they maintain good relations with fellow negotiators. Their perception of others is one of friendship, and their goal is agreement. They do not separate the people from the problem, but are soft on both. They avoid contests of will and insist on agreement, offering solutions, and easily trusting others and changing their opinions (Helmold et al., 2019). Soft bargaining, on the other hand, recognises the potential dangers hard bargaining styles have, particularly for the current and future relationship between the negotiating parties. According to Fisher and Ury, soft negotiators see the other side as friends and instead of trying to reach victory at all costs, and they aim at securing agreement by yielding to the other side and their demands if necessary. Cooperation becomes the leading principle, whereas hard negotiation is based on competition. The result of soft bargaining will often be agreements that are reached quickly but that are not necessarily wise ones, as both sides might fail to reach their legitimate interests in the attempt to be more accommodating than the other side (Fisher & Ury, 1981).

2.2.2 Hard Negotiator Personality Negotiators, who use contentious and competitive strategies to influence, are hard or competitive negotiators. This group utilises phrases such as “this is my final offer” and “take it or leave it”. They are direct, make threats, are distrustful of others, insist on their position, and apply pressure to negotiate. They see others as adversaries and their ultimate goal is victory. Additionally, they search for one single answer and insist you agree on it. They do not separate the people from the problem (as with soft bargainers), but they are hard on both the people involved and the problem. Hard bargaining uses all instruments at hand in the pursuit of one-sided advantage. Pressure, threats, bluffing, tricks, etc., are tactics applied in order to outsmart someone or to make him or her do something that is not in his or her interest. Hard bargaining is about pushing through one-sided interests and it follows the competitive logic of zero-sum games in which one side’s losses are the other side’s gains (Fisher & Ury, 1981).

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2.2.3 Principled Negotiator Personality Negotiation professionals who bargain this way seek usually integrative solutions and do so by sidestepping commitment to specific positions. They focus on the problem rather than the intentions, motives, and needs of the people involved. They separate the people from the problem, explore interests, avoid bottom lines, and reach results based on standards independent of personal will. They base their choices on objective criteria rather than power, pressure, self-interest, or an arbitrary decisional procedure. These criteria may be drawn from moral standards, principles of fairness, professional standards, and tradition.

2.2.4 Situational Negotiator Personality: “Schlagfertig” Practical examples and field research show that negotiations do not require a static personality or behaviour. Instead of using one of the three personalities, the A-6 negotiation concept by Dr. Marc Helmold uses the competency concept “schlagfertig”, which includes several attributes a negotiator should have and apply in negotiations (Helmold et al., 2019). The competencies can be trained and will be outlined in chapter eight in detail. Negotiators must have the ability to act situational and circumstantial. Moreover, holistic analyses and logical thinking are key competencies for excellent negotiators. Good bargainers need to anticipate situations and must be looking for alternatives or ways to add value in negotiations. That requires a facts-based preparation and execution as well as reasonably made propositions to the negotiation opponent. Time management and intercultural skills round this personality up in order to have the optimum level and most genial personality for negotiations (Table 2.1).

Table 2.1 Negotiation personality concept: “schlagfertig” S

Situational

C Circumstantial H Holistic L Logical A Anticipative G Gainful F Facts-based E Engaging R Reasonable T Timely I Intercultural G Genial Source Author

Understanding situations for strategies like defence or offence Considering circumstances of own situation and opponent Considering the entire scope in negotiations Using a structured and systematic way Anticipating demands, strategies, and tactics of opponent Looking for additional gains and value add Grounding negotiations on facts and not good will or threats Looking actively for negotiation outcomes Making reasonable propositions to opponent Structuring negotiations in a systematic and timely manner Understanding intercultural specifics Using the “schlagfertig-attributes” for successful negotiations

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References Davies, G. (2018). Opinion Trade Disputes. Trade wars and the prisoners’ dilemma China’s response to US tariffs has been measured but the end game is uncertain. Retrieved January 28, 2019. https://www.ft.com/content/d288a98e-2e90-11e8-9b4b-bc4b9f08f381. Fisher, R., & Ury, W. (1981). Getting to yes. London: Penguin Group. Flood, M., Dresher, M., & Tucker, A. W. (2010). Prisoners’ dilemma. Game theory. Beau Bassin: Beta Script Publishing. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler.

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Competencies and Criteria for Successful Negotiations Marc Helmold

3.1

Key Competencies for Successful Negotiators

Negotiators need to adopt certain skills and competencies, which are crucial for the negotiation breakthrough and success as stated by several authors (Helmold, Dathe, & Büsch, 2017; O’Brien, 2016; Schranner, 2009). A new report from the McKinsey Global Institute has highlighted what skills will become more important by 2030. The report predicts that there will be a dramatic increase in demand for employees including skills sets, which are of cognitive, social and intercultural nature (Buhgin, 2018). Social and emotional, or so-called soft skills include advanced communication and negotiation skills, empathy, and the ability to learn continuously, to manage others and to be adaptable (Buhgin, 2018). The negotiation A-6 concept by Dr. Marc Helmold suggests the acquisition of certain skills, which are described as “schlagfertig-concept”. The key companies, which are derived by applied research, outline several key competencies for successful negotiations. These competencies include soft and hard factors as outlined in Fig. 3.1. Effective negotiators must have the skills to analyse a problem to determine the interests of each party in the negotiation. A detailed problem analysis identifies the issue, the interested parties and the outcome goals. For example, in an employer and employee contract negotiation, the problem or area where the parties disagree may be in salary or benefits. Identifying the issues for both sides can help to find a compromise for all parties. Before entering a bargaining meeting, the skilled negotiator prepares for the meeting. Preparation includes determining goals, areas for trade and alternatives to the stated goals. In addition, negotiators study the history of the relationship between the two parties and past negotiations to find areas of agreement and common goals. Past precedents and

M. Helmold (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_3

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endurable

strategic

results oriented

facilita ng

persuasive pa ent

persistent

Process oriented

flexible

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ra onal collabora ve

sustainable Problem solving

intercultural

competent

Fig. 3.1 Key competencies in negotiations. Source Author

outcomes can set the tone for current negotiations. Negotiators have the skills to listen actively to the other party during the debate. Active listening involves the ability to read body language as well as verbal communication. It is important to listen to the other party to find areas for compromise during the meeting. Instead of spending the bulk of the time in negotiation expounding the virtues of his viewpoint, the skilled negotiator will spend more time listening to the other party. It is vital that a negotiator has the ability to keep his emotions in check during the negotiation. While a negotiation on contentious issues can be frustrating, allowing emotions to take control during the meeting can lead to unfavourable results. For example, a manager frustrated with the lack of progress during a salary negotiation may concede more than is acceptable to the organization in an attempt to end the frustration. On the other hand, employees negotiating a pay raise may become too emotionally involved to accept a compromise with management and take an all or nothing approach, which breaks down the communication between the two parties. Negotiators must have the ability to communicate clearly and effectively to the other side during the negotiation. Misunderstandings can occur if the negotiator does not state his case clearly. During a bargaining meeting, an effective negotiator must have the skills to state his desired outcome as well as his reasoning. Negotiation is not necessarily one side against another arrangement. Effective negotiators must have the skills to work together as a team and foster a collaborative atmosphere during negotiations. Those involved in a negotiation on both sides of the issue must work together to reach an agreeable solution. Individuals with negotiation skills have the ability to seek a variety of solutions to problems. Instead of focusing on his ultimate goal for the negotiation, the individual with skills can focus on solving the problem, which may be a breakdown in communication, to benefit both sides of the issue. Leaders with

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negotiation skills have the ability to act decisively during a negotiation. It may be necessary during a bargaining arrangement to agree to a compromise quickly to end a stalemate. Effective negotiators have the interpersonal skills to maintain a good working relationship with those involved in the negotiation. Negotiators with patience and the ability to persuade others without using manipulation can maintain a positive atmosphere during a difficult negotiation. Ethical standards and reliability in an effective negotiator promote a trusting environment for negotiations. Both sides in a negotiation must trust that the other party will follow through on promises and agreements. A negotiator must have the skills to execute on his promises after bargaining ends.

3.2

The Win-Win-Illusion in Negotiations

Numerous negotiation books and seminars describe the win-win concept for resolving conflicts for decades and have been offered by trainers. This concept comes from game theory and is also known in the field of negotiation as the “Harvard Concept” and in conflict mediation as “conflict resolution without losers” (Fisher & Ury, 1981). The principle states that it would be possible to find outcomes that would result in both parties winning despite initial conflicting interests (Bauer-Jelinek, 2007). Furthermore, the win-win strategy is based on the willingness of the negotiators to achieve shared and lasting solutions by not insisting on superficial positions, but exposing their underlying motives. To achieve this, all parties involved must have a high level of communication skills and the mood must be reasonably confident and harmonious. Even the representatives of the theory limit that win-win works all the more if the interest differences of the parties are not too large (Fisher & Ury, 1981). The experience of the authors Helmold and Dr. Dathe shows, however, that in conflicts of interest in business or politics, both parties try to get the maximum for themselves, there is rarely the chance of a real profit for both sides (Bauer-Jelinek, 2007). Particularly, in the case of budget restrictions or projects with several interested parties and providers, negotiating positions are often accepted which are not regarded as win-win but as win-lose. In contrast to the win-win principle, there is a negotiating party in the win-lose concept that does not stand as a winner (Fisher & Ury, 1981). As long as there are enough people who are not solely concerned with their own benefit, but who value a fair balance of interests in negotiations, their attitude can be used on a large scale to assert their own interests. Those who want to get the maximum (negotiation maximizer) for their objective, go with the appeal to the joint profit a deception manoeuvre (Polwin Pass, 2016). The maximum (Latin: most) includes the greatest possible bargaining success and the maximum achievement of the negotiation goals for the negotiator or negotiation maximizer (Bauer-Jelinek, 2007). While the fair-acting negotiating partner is still searching for the similarities, the negotiation maximizer has already presented his positions. And

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if he masters the win-win technique well, the “do-gooder” realizes much later that his profit is worth nothing or less (Bauer-Jelinek, 2007). The following case study is intended to explain this situation in more detail (Bauer-Jelinek, 2007). An employee in procurement or sales has spent two years working in a company and has achieved significant success in achieving its budget goals. The savings have fundamentally improved the division’s business performance. The employee has several years of professional experience, but has been working in the company for two years. As part of his appraisal interview, the employee expects a bonus or a salary increase due to his savings. He expects that the supervisor will come to him, but this does not come to the employee. The employee then decides to approach the supervisor, who has his own goals in mind and wants to appease the employee with a “win-win-deal”. The budget savings will hire a new sales representative to handle the heavy workload. The supervisor puts the employee off to better times and the next financial year. He also said that providing additional resources in difficult economic times would guarantee job security. In his conversation, he emphasizes common interests, in particular, the well-being of the company in the long term, and ends the conversation in a friendly manner. The employee is now in a dilemma. Should he refrain from his motive and agree to the offer, so that new resources can be set, or should he continue to press for a salary increase? Practical examples like the one just mentioned show that the win-win situation is usually just an illusion. The supervisor won the negotiations in this case. Savings and budgeting help him to expand his department further, while the employee receives no benefit (Bauer-Jelinek, 2007). His job has not really become safer and due to his excellent performance, the individual goals might be significantly increased (Fisher & Ury, 1981). Figure 3.2 shows the respective concepts win-win, win-lose and lose-win in negotiations. With a high balance of interests between both parties and a high degree of target achievement on both sides (We/I and They/He or She as a negotiating partner or opponent), a win-win situation has been achieved. However, should one of the parties not be completely satisfied, since the goals have not been achieved to full satisfaction, it is called a win-lose or lose-win situation. Fig. 3.2 Balance of interest and relationship. Source Author

We/Me Balance of interest, rela onship importance and achievement level of objec ves

high

high

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They, he or she Balance of interest, rela onship importance and achievement level of objec ves

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Example: The boundaries of the matrix are floating and the interpretation if a negotiation ended with a win-win or lose-win sometimes vary. In a multi-million-euro transport project negotiation, which had been going on for several months were in the final stage. The contract was finally awarded to the company of Dr. Helmold (Maker and OEM of railways). The customer (state-owned railway operator) pushed for more than ten per cent cost reductions in the final offer price and scheduled the product launch to a minimum period of a few years. The OEM agreed to the reduction and delivery time. As a consequence, the project had to be offered below the cost base (long-term price floor) in a short period of time. If the company of the author had not admitted to these price reduction requests, the project would have gone to a competitor from the Far East. Despite the won project, it could not really be spoken of a win-win situation, especially by the drastic financial losses. However, winning the project at these levels was not a total lose-win-situation. Existing capacities and resources could be deployed. Furthermore, it was possible to work on cost optimization in the value chain with an efficiency program and all stakeholders. This example shows that there are floating boundaries between win-win and lose-win. Figure 3.3 shows the target corridor of the negotiations with the aspiration to emphasize its own points and interests (Helmold & Terry, 2016).

3.3

Elements and Successful Criteria for Negotiations

3.3.1 10 Commandments for Successful Negotiations The question “what makes a negotiation successful”? can be answered in a way, which explains the attributes that make negotiations prosperous. These attributes include the quality of negotiations including preparation and professionalism and are stressed by various authors (Helmold, Dathe, & Hummel, 2019; O’Brien, 2016). The elements of a successful negotiation are not the same every time. Negotiations

Fig. 3.3 Win-Win or win-lose as negotiation objectives. Source Author

We/Me Balance of interest, rela onship importance and achievement level of objec ves

high

high

Lose-win

Win-win Focus on:

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They, he or she Balance of interest, rela onship importance and achievement level of objec ves

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can be compared with a flight it an aircraft. Before take-off, the pilot of the aircraft has to do a proper analysis including safety and plausibility checks. While an airplane pilot must always get the right answers to a whole series of questions before the plane can take off, a successful negotiator knows that every situation has its own peculiarities, even if he or she is negotiating with the same negotiation partners on a regular basis. There are ten significant elements and attributes of the negotiation process that make negotiations successful as outlined in Table 3.1. These recommendations are described as “10 commandments” and are key success factors in flourishing negotiations (Helmold et al., 2019). Firstly, successful negotiations stipulate a proper analysis and quality in terms of preparation, analysis and execution. The thorough establishment of and compliance of negotiated agreements are also part of this stipulation for negotiations. Knowing whether commitment has been achieved and how to monitor implementation during the life of the agreement are key success factors and are crucial for sustainable success in the negotiation (Helmold et al., 2019). Secondly, understanding the priorities and following a systematic process is a key success factors for negotiations. Several negotiation frameworks from Ury & Fischer, Schranner, O’Brien or Dr. Helmold have therefore a systematic structure to follow (Fisher & Ury, 1981; Helmold et al., 2019; O’Brien, 2016; Schranner, 2009). In addition, all concepts are supplemented by templates and negotiation forms, e.g. a script or priority matrix, which help negotiators successfully achieve the negotiation breakthrough (Helmold et al., 2019; O’Brien, 2016; Schranner, 2009). Thirdly, best-in-class negotiation models emphasize the focus on interests and motives instead of positions. There are two essential paradigms of negotiations; position-based and interest-based. In position-based negotiations, the substance is important. Both parties focus on the actual item being negotiated about. In position-based negotiations, the other party is seen as an enemy to overcome. Each party tends to be self-serving in an attempt to see victory over the other. In interest-based negotiations, substance is still important. However, interest-based Table 3.1 Ten commands for successful negotiations No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Source Author

Recommendations for successful negotiations Quality and professionalism of negotiations Process and structure of negotiations Concentration on interests rather positions Creation of relationships in negotiations Balance of power in negotiations Understanding of negotiation contents Common benefits in negotiations Transparency and formulation of viewpoints in negotiations Using right argumentation in negotiations Striving for an outcome in negotiations

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negotiation also emphasizes the importance of relationships, especially if both parties work interdependently, they depend on each other to achieve a common goal or objective. In interest-based negotiations, the intent is to reach a mutually acceptable outcome, something that is mutually beneficial to both parties. The interest of both parties is being met. If a problem does emerge, the parties are hard on the problem and not on the person. And if they do yield, people yield to objective criteria, something that both parties can agree to as being legitimate and fair. The outcome of an interest-based negotiation is one where credibility is built between both parties as they develop a relationship of trust (Helmold et al. 2019). Fourthly, relationships are key to successful negotiations. Experienced negotiators know the importance of building a personal relationship before going into business negotiations. An overly heated atmosphere and negative feelings or anger can lead to failure in negotiations. Negotiators can avoid many problems when you establish a personal relationship with the people who will be on the other side of negotiations (O’Brien, 2016). Fifthly, it is important to be able to effectively asses the balance of power in any business negotiation before starting. The analysis of bargaining powers of buyers and sellers (Porter’s Five Forces) is a good tool for the identification of powers between the negotiation partners (Helmold et al., 2019; Porter, 1985). When a customer or potential client has all the bargaining power, negotiations are one-sided, and business may suffer (Porter, 1985). Therefore, power should be balanced between negotiation partners. In the event of an imbalanced power situation, it is recommended to establish competitive advantages and USPs, which help to bring the power into a balanced position (Helmold et al., 2019). Sixthly, the detailed and systematic preparation is key in successful negotiation to understand the full contents and scope of negotiations (Helmold et al., 2019). Seventhly, excellent negotiators also consider the benefits of both negotiating parties and give in in minor areas. Eighthly, negotiators must have the ability to formulate viewpoints and opinions in a clear and transparent way, so that national or international negotiation opponents are understanding the contents and importance of each element. Ninthly, it is important to utilize the appropriate balance of arguments for convincing the negotiation opponent. Concessions are part of any negotiations but should only be made with gains of the own side. Tenthly and lastly, excellent negotiators must be results-oriented and prove flexibility throughout the negotiation process to achieve optimum results (Helmold et al., 2019). Thirdly, best-in-class negotiation model emphasizes the focus on interests and motives instead of positions. There are two essential paradigms of negotiations; position-based and interest-based. In position-based negotiations, the substance is important. Both parties focus on the actual item being negotiated about. In position-based negotiations, the other party is seen as an enemy to overcome. Each party tends to be self-serving in an attempt to see victory over the other. In interest-based negotiations, substance is still important. However, interest-based negotiation also emphasizes the importance of relationships, especially if both parties work interdependently, they depend on each other to achieve a common goal or objective. In interest-based negotiations, the intent is to reach a mutually

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acceptable outcome, something that is mutually beneficial to both parties. The interest of both parties is being met. If a problem does emerge, the parties are hard on the problem and not on the person. And if they do yield, people yield to objective criteria, something that both parties can agree to as being legitimate and fair. The outcome of an interest-based negotiation is one where credibility is built between both parties as they develop a relationship of trust.

3.3.2 Attributes and Characteristics Negotiations are characterized by certain facts as shown in Table 3.2. Negotiation is a process, a sequence of activities. Negotiations are not a single event but a long-term activity including systematic phases from preparation to finalizing the agreement. The A-6 negotiation concept is a structured framework to have a systematic approach (Helmold et al., 2019). It can therefore not be regarded as mechanical or static, but as dynamic and variable process. The choices negotiators make affect how agreement is achieved and what the agreement will be. Negotiations require at least two sides and can therefore be described as multi parties’ activity. In many negotiations, there are stakeholders on both sides, which have different motives and interests. Two companies, involving the buying (customer) and selling side (supplier), which negotiate about a multi-million euros project will involve functional departments such as procurement, sales, marketing, operations, logistics, quality management or engineering. All stakeholders have different interests which need to be bundled by the process owner (usually procurement and sales). The Q-C-D-T plus alpha model is the ideal tool in this context of bundling interests (Helmold et al., 2019). Thirdly, there must be differences in opinions and viewpoints by negotiators. If there are no differences, there is no need to negotiate, and if there are differences, one can expect some conflict and competition. The parties must need to resolve their differences. It is this need that generates cooperation between the parties. That negotiation involves trying to reach agreement suggests that negotiators might not always succeed and also that reaching a good agreement takes some effort. If an agreement is reached easily, then it is probably not a good negotiation; it is likely that some value has been left on the negotiating table. There are two broad ways agreements can be found. The negotiators can explore possibilities and develop options that might possibly resolve the issue. Table 3.2 Five important characteristics of negotiations No.

Characteristic

1. Process driven 2. Multi party activity 3. Difference in views 4. Willingness to reach agreement 5. Keeping agreement Source Author

Explanation Negotiation is a process over a period Minimum two parties must be involved Negotiators have different viewpoints Negotiation partners seek conflict resolution Parties respect agreements and contracts

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This is the creative aspect of negotiation and is how negotiators add value. Secondly, and more commonly, negotiators can exchange offers around and between their stated positions which involves compromise and can be competitive. Finally, negotiations result in an agreement, which might be an agreement to walk away. The notion of “agreement” sounds positive but nothing about negotiation guarantees that an agreement is a positive outcome. The parties might agree but only reluctantly. While the focus of a negotiation is on reaching agreement the most important aspect of any negotiation is not the agreement itself, but how it is implemented. The agreement is only a part of the outcome of any negotiation.

3.4

Reasons for Unsuccessful Negotiations

3.4.1 Definition of Failure in Negotiations The fact that many negotiations fail despite intensive negotiations is certainly not unusual in our modern world (Söbbing, 2009). The reason for failure in negotiations or contracts can lie in many tangible or intangible aspects, e.g. you cannot agree on the price or the components of a purchased item or the parties cannot agree on quality standards for a negotiated price (Helmold et al., 2019; Söbbing, 2009). This can happen in a flea market where people buy things of little value, but also in international transactions of companies in volumes of billions of euros (Söbbing, 2009). To always talk about a failure of the contract negotiations implies a very broad definition of the term “failure”, which is certainly not always justified, because a “failure” is often associated with a “failure”. Yet the notion of “failure” in our modern-day world is something very negative and something that society has to say about it. Negotiations in which the parties disagree because one cannot agree on certain goals, rather than consider something significantly negative or reprehensible, seem inappropriate. Maybe it is more of an advantage for the respective party, if one does not agree, since a purchase price is too high or a service or a purchased object is delivered at a low price. Equally acknowledged in politics and the economy, the “Harvard Concept” is currently discouraging such negotiations, “… as there are realities in every negotiation that simply cannot be changed” In such cases, the “Harvard” approach advocates a course of action which, firstly, should protect against “reaching an agreement that would be better avoided and, secondly, making the best of a bad starting position so that in the end an agreement is reached can be achieved that serves the interests of the negotiator as well (Söbbing, 2009). A “failure” is also used as a synonym for the failure of a project. This can have many reasons; in general, a failure of the parties has not been wanted. Of course, this “unwanted” failure can be traced back to a variety of causes. The causes of failure of negotiations are i. d. R. we are not deliberately brought about, but partly based events that are brought to the outside from the outside or those involved unconsciously take actions that lead to failure (Söbbing, 2009). Table 3.3 highlights the ten major reasons for failures in negotiations.

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Table 3.3 Reasons for failure in negotiations No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Source

Reason Illusionary anchoring Extremism in positions Overconfidence and arrogance Intercultural unawareness Unrealistic objectives Not relevant elements Inadequate strategies Wrong tactics Threatening the other party Not understanding time and constraints Author

Description of failure Requests must be grounded on facts Objectives must be realistic Negotiations must be respectful Cultural specifics must be known Reality is essential for negotiations Negotiation must focus on priorities Appropriate strategies must be formulated Right tactics will lead to the success Threatening must be avoided Culture and time must be understood

3.4.2 Escalation Levels (Lose-Lose) The Austrian organizational scientist and conflict researcher Friedrich Glasl outlined in the 1980s how negotiations can fail. He developed a model for conflict escalation and resolution. He assumed that conflicts do not progress steadily but in stages, i.e. people are reluctant to escalate conflicts (Glasl, 2009). Accordingly, conflicts that have reached a certain point on the nine-step scale of conflict escalation can no longer be resolved without outside help. If the parties are aware of the stage they are at, they have the opportunity to analyse their conflict and to react better during the course of the conflict. The conflict escalation model according to Glasl is suitable for disputes between students or between spouses or divorces, disagreements in business life up to full-blown conflicts between states. Glasl, based on his experiences, outlines an escalation in nine descending stages, at which the first three stages can still be described as “win-win situations”. The stages four to six can be titled “win-lose”, i.e. only one party to the conflict can still win and finally the stages seven to nine, here we have a “lose-lose situation”. In this phase, there are only losers, and in the end, it only remains important to destroy the opponent, even at the price of losing everything yourself. When using mediation, the escalation levels by Glasl help to assess in which phase of the conflict the parties currently are. This helps to decide which conflict handing method should be used, or whether this conflict can still be resolved by means of mediation. He describes the phases one to three as win-win phases (see Fig. 3.4). Stage 1—Hardening According to Glasl, every conflict begins (step 1) with a slight tension, e.g. different viewpoints of partners (Glasl, 2009). This is normal and is not perceived as the beginning of a conflict by the negotiating parties (Glasl, 2009). When a conflict develops from this, the opinions become more fundamental and important to the negotiation partners. In this context, Glasl assumes that a conflict may have deeper root causes (Glasl, 2009).

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Phase 1: WIN-WIN

Phase 2: WIN-LOSE

Phase 2: LOSE-LOSE

Step 1: Hardening of positions

Step 4: Worry about image and coalition

Step 7: Destruction attacks

• • •

Conflicts of opinions (simple) Split of group Conflicts resolvable by talks

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Icing/Hardening of Posi ons Polariza on Factual distrust

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Confronta on Pessimis c expecta ons due to distrust

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• •

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• •

Step 8: Split •

Own party splits as countera acks harm own organiza on

Step 9: Joint elimination • •

A acks and countera acks destroy both par es´ results 3rd Par es might be affected

Fig. 3.4 Escalation levels

Stage 2—Debate From this point on (step 2), the parties think of strategies in order to convince the other of their arguments as way to resolve the conflict between them. Differences of opinion lead usually to a dispute. In this context, many negotiation partners are attempted to put the other negotiation party under pressure. The consequence can be that black and white thinking develops by the arguing parties (Glasl, 2009). Stage 3—Actions Instead of Words In the next step (step 3), the parties to the conflict increase the pressure on the respective other parties in order to get their way or press home their own opinion. Conversations, e.g. are discontinued, emotions are used in the negotiations. Additionally, non-verbal communication takes place and the conflict intensifies faster. The compassion for the “other negotiation partner” is lost. In the event, that parties reach phase four, Glasl talks about the win-lose phases. Stage 4—Coalitions The conflict hardens as a result of searching for supporters for the own side. As one negotiation partner believes that he/she is the right, it automatically leads to the conclusion that the other side is wrong. Both negotiating sides denounce the opponent. It is no longer about the issue, but about winning the conflict so that the opponent loses (Glasl, 2009). Stage 5—Loss of Face The opponent is to be annihilated in his identity by means of all kinds of allegations or the like. In this situation, the loss of trust is complete. Loss of face in this sense means loss of moral credibility (Glasl, 2009).

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Stage 6—Threat Strategies The parties to the conflict attempt to fully control the situation by using threats. It is aimed at demonstrating their own power. One threatens, for example, with a demand (10 million euros) which is enforced by a sanction (“otherwise I′ll blow up your main building”) and underlined by the potential for sanction (showing the explosive). The proportions decide the credibility of the threat (Glasl, 2009). Stage 7—Limited Destruction The last phases are considered as lose-lose phases. One tries to severely damage the opponent with all the tricks at one’s disposal. The opponent is no longer regarded as human. From now on, limited personal loss is seen as a gain if the damage to the opponent is greater (Glasl, 2009). Stage 8—Fragmentation The ultimate goal is the collapse of the enemy system. The front fighters are cut off from their allies and supplies, vital functions are attacked to the point of physical-material, mental-social or spiritual destruction (Glasl, 2009). Stage 9—Together Into the Abyss There is no going back, and there is a total confrontation between the two parties. If you can drag your opponent into the abyss with you, then you jump. Self-destruction is accepted. Damage to the environment or to descendants no longer prevents the opponents from destroying each other (Glasl, 2009). Deescalation Potentials The conflicts of levels 1–3 are still to be solved peacefully among each other, possibly someone intervenes mediating (e.g. the negotiation opponents are reconciling again (Glasl, 2009). At level 4, the affected parties need outside help to solve their conflict (Glasl, 2009). Glasl envisages recommendations to deescalate the conflict, which have been adjusted by Helmold et al. (2019). While conflicts and disputes in the steps 2 and 3 still have a chance to be settled by the parties themselves, external help will be required from step 4 to step 9. The steps from 6 to 9 also require a court of arbitration or a real court to settle issues (Glasl, 2009): – – – – – – –

Stage 1–3: Self-help is still possible by negotiators Stage 2–3: Help through top management and internal arbitrators Stage 3–5: Help through external professional consultancy support Stage 4–6: Help through external professional consultancy lead Stage 5–7: Help through external professional consultancy or voluntary arbitration Stage 6–8: Help through external professional consultancy support and arbitration Stage 7–9: Help through external professional consultancy support and court action.

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Leaders, in particular, should be aware of the nine stages of conflict escalation. Conflicts can thus be viewed from a neutral point of view and, if necessary, external help can be requested in good time. Also in conflicts, in which one is not involved, the value-free recognition of the conflict stages can lead to a faster solution of the conflict (Glasl, 2009).

3.4.3 Reasons for Failures in Negotiations There are several reasons for failures in negotiations as outlined in Table 3.3 Anchoring is an attempt to establish a reference point (anchor) around which a negotiation will revolve and will often use this reference point to make negotiation adjustments. Anchoring often occurs when the first offer is presented at the beginning of a negotiation. Misled anchoring is one of the most common reasons for unsuccessful negotiations. Negotiators tend to give greater weight to early information or positions, particularly if it is clear. As a result they often get stuck in the negotiations by defending a position that is unrealistic and unachievable. And why it is easier to negotiate around positions than interests. We tend to think that the other party’s positions are more extreme than they are. Which is why we expect the other party to make more concessions and to devalue any concessions they make—they should not have been holding their position in the first place! Illusion of transparency. We tend to think that others can understand us and discern our motives more than they actually can. Which is why we stay stuck in our positions and don’t do much to create a bridge of understanding between both parties (because that understanding is presumed). Knowledge of other we tend to ignore how the other party might be thinking, or why, and attribute their behaviour to themselves rather than their situation. Which is why we are not very good at predicting the effect our strategy and tactics will have on the other party. Over confidence of one’s own position is very often the reason for failures in negotiations. Negotiators often think that others (e.g. an arbitrator) are going to judge in their favour if they negotiate in a competitive way. They think that our coercive tactics will work on the other party but theirs will have no effect on them. This leads to a state why the negotiation party is not paying the right level of attention to information exchange and why they make fewer concessions because they think our best alternative to a negotiated agreement (BATNA) is better than it probably is. Intercultural mistakes and unawareness also lead to unsuccessful negotiations in many cases. Requests must always be grounded on facts. Objectives, motives and positions must be realistically evaluated to have successful negotiations. Emotions are allowed, but negotiators should not be threatening. Moreover, cultural aspects can lead to failure, especially in Asian or Arabic countries. Priorities combined with relevant aspects will help to achieve an agreement. Strategies and tactics will be ideal tools to achieve the negotiation breakthrough.

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References Bauer-Jelinek, Ch. (2007). Die geheimen Spielregeln der Macht und die Illusionen der Gutmenschen. Salzburg: Ecowin Verlag. Buhgin, J. (2018). Global Mc Kinsey Report. Retrieved Febraury 4, 2019. https://www.mckinsey. com/*/media/McKinsey/Featured%20Insights/Future%20of%20Organizations/Skill%20shift %20Automation%20and%20the%20future%20of%20the%20workforce/MGI-Skill-ShiftAutomation-and-future-of-the-workforce-May-2018.ashx. Fisher, R., & Ury, W. (1981). Getting to yes. London: Penguin Group. Glasl, F. (2009). Konfliktmanagement. Ein Handbuch für Führungskräfte, Beraterinnen und Berater. Auflage: 9., aktualisierte und ergänzte Auflage (18 November, 2009). Zürich, Haupt Verlag. Helmold, M., & Terry, B. (2016). Global sourcing and supply management excellence in China. Procurement guide for supply experts. Springer Singapore. Helmold, M. & Dathe, T. & Büsch, M. (2017). Praxisbericht aus der Bahnindustrie – Bombardier Transportation. Veränderte Anforderungen durch Global Sourcing. In Beschaffung aktuell. May 4, 2017. Retrieved. February 4, 2019. https://beschaffung-aktuell.industrie.de/einkauf/ veraenderte-anforderungen-durch-global-sourcing/. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler. O’Brien, J. (2016). Negotiations for procurement professionals (2nd ed.). Croyden: Kogan Page. Polwin-Plass, L. (2016). Checklisten für den Vertrieb. Verhandlungsstrategie. September 22, 2016. In: Die Vertriebszeitung. Retrieved March 20, 2018. https://vertriebszeitung.de/ verhandeln-im-grenzbereich-strategien-und-taktiken-im-vertrieb/. Porter, M. E. (1985). Competitive advantage. Creating and sustaining superior performance. New York: Free Press. Schranner, M. (2009). Verhandeln im Grenzbereich. Strategien und Taktiken für schwierige Fälle (8. Auflage). München: Econ München. Söbbing, T. (2009). Warum scheitern Vertragsverhandlungen, Ein politischer und ökonomischjuristischer Vergleich. Analyse von M&A Transaktion, Outsourcing, Koalitionen, UN Resolutionen, Fachbuch. Hamburg: Diplomica Verlag GmbH.

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4.1

Definition of Strategic Management

Negotiations are an integral part of corporate strategy (Helmold, Dathe, & Hummel, 2019). Strategic management has been defined in many different ways based on the organisation’s mission, policies, sector, structure, objectives, strengths, weaknesses, opportunities, threats, key success factors or decisions, capabilities, planning, implementation and sustainable competitive advantage. Research on strategic management has a long history. There are several definitions of strategy by key authors in the field of strategic management Henry Mintzberg or such as Michael E. Porter. Strategic management can be defined as “the management of an organisation’s resources to achieve its goals and objectives. Strategic management involves setting objectives, analysing the competitive environment, analysing the internal organisation, evaluating strategies and ensuring that management appropriately rolls out the strategies across the organisation”. At its heart, strategic management involves identifying how the organisation stacks up compared to its competitors and recognising opportunities and threats facing an organisation, whether they come from within the organisation or from competitors. Strategic management is important for organisations, which is making companies able to compete in a hostile and competitive environment (Johnson & Scholes, 1997). Translation of strategic management plans into practice is the most important aspect of the planning itself in any organisation. Strategic plans can include actions such as entering new markets, global sourcing, make or buy strategies, deployment of new products or services, centralisation or decentralisation of activities or aligning Parts of this chapter have been published in “Progress in Performance Management”, Marc Helmold & Warda Samara, 2019, Springer. M. Helmold (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_4

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leadership and resources as outlined by various authors (Helmold et al., 2019; Johnson & Scholes, 1997; Mintzberg, Quinn, & Ghoshal, 1995; Porter, 1980). Porter is best known for his strategic frameworks and concepts in his paper, which was published in 1980 (Porter, 1980). The five forces model has five elements that can be utilised to assess the attractiveness and competitive situation of the industry. Moreover, the generic strategies differentiation and cost leadership are a good method to define, in which direction a company should go to increase profitability and to acquire a competitive advantage (Porter, 1980; 1985; Helmold et al., 2019). Chapter 10 outlines the tools which have been derived from authors such as Porter. Mintzberg et al. (1995) define strategy as “the plan, which is a direction, a guide, or a course of action into the future. A pattern, which points to consistency of behaviour over time. A position, which places specific products in particular markets. A perspective, which refers to the fundamental manner of accomplishing goals. A ploy, which is a specific manoeuvre intended to outwit competitors”. Mintzberg provides five definitions of strategy, plan, ploy, pattern, position and perspective (Mintzberg et al., 1995). Firstly, strategy is always a plan. A plan integrates intended actions activities based on previous assessment of the situation. Secondly, as plan, a strategy can be a ploy too, really just a specific manoeuvre intended to outwit an opponent or competitor. If strategies can be intended (whether as general plans or specific ploys), they can also be realised. In other words, defining strategy as plan is not sufficient; we also need a definition that encompasses the resulting behaviour. Thirdly, strategy is a pattern. The definitions of strategy as plan and pattern can be quite independent of one another. Plans may go unrealised, while patterns may appear without preconception. Plans are intended strategy, whereas patterns are the realised strategy. Fourthly, strategy is a perspective. A perspective is not just of a chosen position, but consists of an ingrained way of perceiving the world (Mintzberg et al., 1995).

4.2

Strategic Triangle

The process of strategic management process is an approach with three steps as outlined in Fig. 4.1 (strategic triangle) (Johnson & Scholes, 1997). The three steps are (1) the strategic analysis, (2) the strategic choice and (3) the strategic implementation and will be described in the following sections (Johnson & Scholes, 1997).

4.3

Strategic Analysis

The strategic analysis of an organisation is about understanding the strategic position of the organisation. The analysis investigates what changes are occurring in the environment and how they might affect the organisation and how it conducts its

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Fig. 4.1 Strategic triangle. Source Author, adopted from Johnson and Scholes (1997)

business (Johnson & Scholes, 1997). The existing competencies and resources of the organisation need to be assessed to determine if there are any opportunities to be gained from these and to determine if they need to be enhanced in order to pursue strategic objectives and goals (Johnson & Scholes, 1997). The major stakeholders who influence the organisation and the opinions or viewpoints must be taken into account as the purpose of all the strategic analysis to define the potential future direction of the organisation. The purpose of this phase (strategic analysis) is to create a suitable starting position and to understand the key influences on the present and future state of the organisation and what opportunities are afforded by the environment and the competencies of the organisation (Johnson & Scholes, 1997). Assessing the strategic position consists of evaluating the following elements as shown in Table 4.1 Since strategy is concerned with the position, a business takes in relation to its environment, an understanding of the environment’s effects on an organisation is of central importance to the strategic analysis. The historical and environmental effects on the business must be considered, as well as the present effects and the expected changes in environmental variables. The analysis of the environment can be done via the macro- and micro-analysis (PESTEL, Porters 5 Forces). Additionally, strengths, weaknesses, opportunities and threats complete the assessment of the environment. This step is a major task because the range of environmental variables is so great. Another area of the strategic analysis is the evaluation of the strategic

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Table 4.1 Elements in the strategic analysis Strategic analysis of elements

Strategic tool

Environment (e.g. markets, regulations and political impacts)

PESTEL analysis (Macro) Industry analysis (Micro) SWOT analysis (Internal) Cultural analysis Benchmarking Stakeholder analysis

Industry and competition (e.g. rivalry in industry) Internal strengths and weaknesses, external threats and opportunities Cultures and beliefs Strategic capabilities and competencies Expectation of stakeholders Adopted from Johnson and Scholes (1997) Source Author

capability of an organisation and where it is able to achieve a competitive advantage. Considering the resource areas of a business such as its physical plant, its management, its financial structure and its products may identify these strengths and weaknesses (Johnson & Scholes, 1997). The expectations of stakeholders are important because they will affect what will be seen as acceptable in terms of the strategies advanced by management. Stakeholders can be defined as people or groups inside or outside the organisation, who interest in the activities of the organisation. A typical list of stakeholders for a large company would include shareholders, banks, employees, managers, customers, suppliers, government and society. Culture affects the interpretation of the environmental and resource influences (Johnson & Scholes, 1997).

4.4

Strategic Choice

Strategic choice typically follows strategic analysis. Strategic choice involves a whole process through which a decision is taken to choose a particular option from various alternatives. There can be various methods through which the final choice can be selected upon. Managers and decision makers keep both the external and internal environment in mind before narrowing it down to one. It is based upon the following three elements. Firstly, the generation of strategic options, e.g. growth, acquisition, diversification or concentration. Secondly, the evaluation of the options to assess their relative merits and feasibility. And thirdly, the selection of the strategy or option that the organisation will pursue. There could be more than one strategy chosen but there is a chance of an inherent danger or disadvantage to any choice made. Although there are techniques for evaluating specific options, the selection is often subjective and likely to be influenced by the values of managers and other groups with an interest in the organisation. There are two basic options in this phase as shown in Fig. 4.2. A differentiation strategy seeks to provide products

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Fig. 4.2 Generic strategies. Source Helmold, Dathe, and Hummel (2019), adopted from Porter (1985)

or services that offer benefits that are unique and different from those of the competitors. Benefits are valued and recognised by customers. The aim of using differentiation strategy is to achieve a competitive advantage by superior elements like quality, innovation, brand image, knowledge, expertise, people, processes or other elements. The cost leadership strategy targets lower costs than its competition by superior efficiency or an advanced value chain. The choice can be industry-wide, offering its product across many market segments (broad) or be focused on niches (narrow). Bowman’s Strategic Clock (see Fig. 4.3) is a model that explores the options for strategic positioning—i.e. how a product should be positioned to give it the most competitive position in the market (Johnson & Scholes, 1997). The purpose of Bowman’s Strategic Clock is to illustrate that a business will have a variety of options of how to position a product based on two dimensions—price and perceived value (Johnson & Scholes, 1997). Recommendation: The authors recommend to strive for a strategy, which is focused on customer perceived added value. The extended value (in terms of Q-C-D plus alpha) will automatically lead to a situation in which the price and value elements will be increased too. Thus, the negotiators can base their negotiation on an extended scope (Helmold et al., 2019; Johnson & Scholes, 1997).

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Fig. 4.3 Strategy clock from Bowman. Source Author, adopted from Johnson and Scholes (1997)

4.5

Strategic Implementation

4.5.1 Assessment of Suitability, Acceptability and Feasibility Strategic implementation is concerned with the translation of the selected strategy into action (Johnson & Scholes, 1997). The ways in which strategies are implemented are described as the strategic architecture or framework of the organisation (Johnson & Scholes, 1997). Successful implementation of the chosen strategy will be dependent on several factors such as stakeholder’s expectations, the employees, the company culture, the will to change and the cooperation within the organisation. These elements and how the management and employees work together to adopt the new plan will decide the success of the strategy implementation. The available skills and/or the ability to develop new skills when required for the planned change and issues such as the structural re-organisation and resulting cultural disturbance would also affect success. Resource availability and planning for the utilisation of such resources need to be addressed as part of the implementation plan. The entire process necessitates the management of strategic change and will concern handling both hard and soft factors of the organisation, i.e. structure and systems and culture and motivation etc.

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Implementing a strategy has three elements. Organisational structure and layout: Where and how should the organisation be split into European, US and Asian divisions? How autonomous should divisions be? What parenting style should be applied? Enabling an organisation’s resources should support the chosen strategy: What are the appropriate human and non-human resources? What assets need to be acquired? Change management: Most strategic planning and implementation will involve change, so managing change, in particular employees’ fears and resistance, is crucial Johnson and Scholes argue that for a strategy to be successful it must satisfy three criteria (Johnson & Scholes, 1997). These criteria can be applied to any strategy decision such as the competitive strategies, growth strategies or development strategies: 1. Suitability—whether the options are adequate responses to the firm’s assessment of its strategic position 2. Acceptability—considers whether the options meet and are consistent with the firm’s objectives and are acceptable to the stakeholders 3. Feasibility—assesses whether the organisation has the resources it needs to carry out the strategy

4.5.2 Suitability Suitability is a useful criterion for screening strategies, asking the following questions about strategic options: Does the strategy exploit the company strengths, such as providing work for skilled craftsmen or environmental opportunities, e.g. helping to establish the organisation in new growth sectors of the market? How far does the strategy overcome the difficulties identified in the analysis? For example, is the strategy likely to improve the organisation’s competitive position, solve the company’s liquidity problems or decrease dependence on a particular supplier? Does the option fit in with the organisation’s purposes? For example, would the strategy achieve profit targets or growth expectations, or would it retain control for an owner-manager?

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4.5.3 Acceptability Acceptability is essentially about assessing risk and return and is strongly related to expectations of stakeholders. The issue of acceptable to whom? Thus, it requires the analysis to be thought through carefully. Some of the questions that will help identify the likely consequences of any strategy are as follows: • How will the strategy impact shareholder wealth? Assessing this could involve calculations relating to profitability, e.g. net present value (NPV). • How will the organisation perform in profitability terms? The parallel in the public sector would be cost/benefit assessment. • How will the financial risk (e.g. liquidity) change? • What effect will it have on capital structure (gearing or share ownership)? • Will the function of any department, group or individual change significantly? • Will the organisation’s relationship with outside stakeholders, e.g. suppliers, government, unions, customers need to change? • Will the strategy be acceptable in the organisation’s environment, e.g. higher levels of noise?

4.5.4 Feasibility Assesses whether the organisation has the resources it needs to carry out the strategy. Factors that should be considered can be summarised under the M-word model. Machinery. What demands will the strategy make on production? Do we have sufficient spare capacity? Do we need new production systems to give lower cost/better quality/more flexibility/etc.? Management. Is existing management sufficiently skilled to carry out the strategy? Money. How much finance is needed and when? Can we raise this? Is the cash flow feasible? Manpower. What demands will the strategy make on human resources? How many employees are needed, what skills will they need and when do we need them? Do we already have the right people or is there a gap? Can the gap be filled by recruitment, retraining, etc.? Markets. Is our existing brand name strong enough for the strategy to work? Will new brand names have to be established? What market share is needed for success —how quickly can this be achieved? Materials. What demands will the strategy make on our relationships with suppliers? Are changes in quality needed? Make-up. Is the existing organisational structure adequate or will it need to be changed?

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4.6

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Strategic Pyramid

A useful tool for the translation of the corporate strategy and strategic objectives into negotiations is the strategic pyramid as outlined in Fig. 4.4 (Johnson & Scholes, 1997). Strategy in this context is the long-term positioning as well as the decision of the enterprise, which business fields and which strategies to choose. Strategy is therefore “the fundamental, long-term direction of three to five years and organisation of a company in order to gain competitive advantages in a changing environment through the use of resources and competences and to realise the long-term goals of the stakeholders” (Johnson & Scholes, 1997). This chapter outlines the elements of the strategic pyramid with examples of the start-up and consultancy firm MaHeLeanCon, which was founded by Prof. Dr. Marc Helmold in 2016.

Fig. 4.4 Strategic pyramid. Source Author

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4.6.1 Mission and Vision The mission or mission statement of an enterprise is the long-term purpose of the company and the strategic direction (Johnson & Scholes, 1997). Example: Be fit and healthy. The vision or strategic intent describes more specifically what an organisation aims to achieve and the long-term aspirations (Johnson & Scholes, 1997). Example: Run the Berlin marathon in three years from now. The example of the mission and vision of the start-up of Dr. Marc Helmold (MaHeLeanCon) is: Creating value through offering consulting services to small and medium-sized enterprises (SMEs) from Germany, China. Asia Pacific and Japan with the aim to support them entering the Asian market or vice versa in Germany by designing and facilitating successful implementation. In addition, companies are prepared and supported in process improvements and in negotiations with customers or suppliers. In particular, successful negotiations with business partners from various countries in the international context, taking into account cultural elements, are one of the mainstays of the enterprise and mission. Vision: The vision or the strategic intent can be defined as follows: acquisition and support of 10–15 customers (SMEs) in the areas of market entry, negotiations and process improvements as well as generation of turnover of up to 500 thousand EUR over the next four to five years (Helmold et al. 2019).

4.6.2 Goals and Objectives The mission and vision are followed by generic goals and specific objectives. Generic Goals are not quantified and more general, but specific objectives are quantified and specific (Helmold et al. 2019). The strategists Johnson and Scholes distinguish in longer-term and generic (English: Goals) as well as shorter and quantified objectives (English: Objectives) for the company (Johnson & Scholes, 1997). Quantified goals can include sales, financial, quality, logistics, cost and alpha goals. Goal example: Lose weight, get healthy and reach BMI index. Objectives example: Lose 10 kg by end of the year, reach BMI index of xyz. The goals and objectives based on the example of the case MaHeLeanCon look such as this. Generic Goals: Acquisition of projects and subprojects by three (few) key customers over the next three to five years. Subproject A: Supporting an SME entering the Chinese market through consulting and sales activities. Turnover of EUR 150 K (one hundred and fifty thousand) over the next three to five years. First acquisition of projects by SMEs. Subproject B: Process improvement of a global company with the acquisition of subprojects in the field of the upstream value chain (upstream supply chain management) and supplier quality. Subproject C: Negotiation training and workshops over the next three years; Generation of a competence centre for negotiations and conflict management; Cooperation with at least five SMEs and creation of a concept of excellence for

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buyers and sellers. In addition, other goals include successfully conducting five to ten negotiation training courses and conducting intercultural workshops for SMEs and MNC (Helmold et al. 2019).

4.6.3 Core Competencies The next level in the strategic pyramid is the identification of core competencies. Core competences are those competences which allow companies to gain a superior or competitive advantage and that are very difficult for your competitors to emulate (Johnson & Scholes, 1997). These describe the resources, skills, knowledge or any other feature that lead to a competitive advantage. Core competencies must be perceived by customers and clients. Example: Talent and Experience in running, knowledge of previous plans to lose weight. In the example of MaHeLeanCon, these competences are an extensive and worldwide network, the many years of experience and the expertise in the respective fields. As part of the alignment, companies must conduct a detailed analysis of their core competencies. Johnson and Scholes define core competencies as a competitive advantage over competitors through which companies can differentiate and differentiate (Johnson & Scholes, 1997; Dathe & Helmold, 2018; Helmold, Dathe & Büsch, 2017).

4.6.4 Strategies for Negotiations After defining mission, vision, goals and core competencies, the elements must be translated into strategic objectives and key performance indicators (KPI). The long-term implementation of these elements is defined as the formulation of strategic objectives and important for the negotiations (Helmold et al. 2019). In implementing the strategic goals, negotiations will take effect. Exercise three times per week, associate with a running group to lose 12 kg of weight. Using MaHeLeanCon as an example, these focus on the agreements on hourly rates and expenses with customers, but also on the scope, time and quality of consultancy and services.

4.6.5 Strategic Architecture In addition to buildings, machines, plants, offices, resources or employees, the infrastructure in the sense of strategic management also includes knowledge and innovations of the company that ensure long-term success (Helmold et al., 2019). This requires facilities, buildings, factories or offices that represent the strategic infrastructure. In addition, however, other success criteria such as resources, knowledge, experts, name recognition, network or innovations are of central importance.

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Example: In the case of MaHeLeanCon, there are offices in Berlin and Munich, as well as the consideration of the construction of an office in China. Currently, the company concept refers to a few customers who want to have the expert knowledge and tools of the consulting firm. Especially in areas such as value chain management, supplier management or intercultural management, MaHeLeanCon has secured several unique selling points with an international network of experts.

4.6.6 Control and Execution The final element of the strategic pyramid is the performance control (control and execution) and a target-performance comparison. A suitable tool for this step is the Balance Score Card (BSC) or an action plan. The instrument of the BSC was already developed in 1992 by the professors Norton and Kaplan. The BSC is an instrument in strategic management and includes four categories (Johnson & Scholes, 1997): 1. 2. 3. 4.

Customer satisfaction Financial category Internal processes and improvements Learning organisation.

In practice, it seems that companies are adapting or expanding the original four dimensions to their specific needs (Johnson & Scholes, 1997). Example: Establishing process and key performance indicators (KPI) of monitoring improvements and successful execution of strategy. Creating scorecard and checking running time, sequence, weight and other elements on a daily basis. In the MaHeLeanCon consulting, there are a total of five categories based on the model of Norton and Kaplan, but include customer-specific aspects for the success of MaHeLeanCon. The five categories are: 1. Customer satisfaction and scope of orders (repeat orders) 2. Quality and achievement goals (degree of completion in time, costs and resources) 3. Cost and financial goals (sales targets, savings, process costs, costs and benefits) 4. Resource targets (days, number of employees, costs of employees) 5. Internal improvement goals (faster access to customers, improved financial ratios).

References Dathe, T., & Helmold, M. (2018). Erfolg im Chinageschäft. Handlungsempfehlungen für kleine und mittlere Unternehmen (KMU). Wiesbaden: Springer. Helmold, M. & Dathe, T. & Büsch, M. (2017). Praxisbericht aus der Bahnindustrie – Bombardier Transportation. Veränderte Anforderungen durch Global Sourcing. In Beschaffung aktuell. May 4, 2017. Retrieved May 17, 2018. https://beschaffung-aktuell.industrie.de/einkauf/ veraenderte-anforderungen-durch-global-sourcing/.

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Helmold, M., Dathe, T. & Hummel, F. (2019). Erfolgreiche Verhandlungen—Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer. Johnson, G. & Scholes, K. (1997). Exploring corporate strategy. Text and cases, 4th ed. London: Prentice Hall. Mintzberg, H., Quinn, J. B., & Ghoshal, S. (1995). The strategy process (Revised European ed.). London: Prentice Hall. Porter, M. E. (1980). Competitive strategy: Techniques for analysing industries and competitors. New York: Free Press. Porter, M. E. (1985). Competitive advantage. Creating and sustaining superior Performance. New York: Free Press.

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Negotiation Execution—Value Add and the ZomA Marc Helmold

5.1

Are There Mutual Benefits?

The profound preparation of negotiations in business, in politics or other conflicts is important to the successful outcome of a negotiation and is the foundation of any transaction. The time required for this process and activity can play a significant role and extend the time duration for the actual negotiation execution. In usual cases, the preparation phase may take more than 50–70% of the actual debate and discussion. Negotiations will only succeed if there is adequate information about the negotiation opponent, his/her motives, the scope and other important elements such as personalities, objectives and intercultural issues. Important aspects are the business position of the negotiation partner, the market position, conditions, pricing policy and the analysis of the strengths and weaknesses of the negotiating partners. In this context, it is important to ensure optimal preparation through professional manuscripts and standardized meeting protocols (O’Brien, 2016). The preparation may also include a rehearsal in which the participants negotiate with potential negotiating partners all options, much such as the rehearsal of an orchestra before a big concert. In preparation, it must also be explored which other categories of price or terms can be negotiated as additional items. Lanz describes in a good example that the negotiation cake is usually larger by adding value-adding elements. Here is an example: A freelancer who wants to rent a room. The landlord calls for 13 Euro square meters rent, the potential tenant sets against it and offers 7 Euro. After a long negotiation, both parties may agree at 10 Euro. Is that a good negotiation result, the negotiating expert wonders? O’Brien recommends looking for factors in the bargaining power that increase added value (O’Brien, 2016). Added M. Helmold (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_5

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value can be added by adding complementary elements, that are, additional or supplementary as shown in Fig. 5.1. The figures display the negotiation scope in terms of quality, cost, deliver, technology and other aspects (Q-C-D-T plus alpha), which can be enhanced in order to add value in each category. Negotiation experts try to identify elements and aspects in each category, which enrich and enlarge the scope of negotiations. Price negotiations often haggle for cent amounts, but additional elements such as payment terms, maintenance agreements, malfunction response times, future price reductions or assumption of installation costs can be included in the negotiations, which increase the added value in the bargaining power. Therefore, enriching the scope by adding value can offer the opportunity to include other profitable opportunities and ideas for both negotiation parties. Recommendations and steps for enriching negotiations can be highlighted as follows: • Identify alternative actions with different variations, • Develop choices by working together to make multiple decision options as possible, • Insist on objective assessment criteria for the final decision, • Evaluate the options based on the objective assessment criteria, • Choose the two to three best options. Another negotiation principle embodies the opening up of the solution horizon for additional, previously unthought-of alternatives. With creativity one should think outside the box and, together with the negotiating partner, seek and devise as many options for action as possible, which can be reconciled with the mutual and common interests. Another principle to enrich negotiations then follows with the decision-making process. In this context, it is a matter of jointly incorporating neutral and as objective as possible criteria for decision-making in order to make the decision-making process comprehensible for all sides—and thus to make it fair. These can be market comparisons and other benchmarks, legal standards or expert opinions, all the way to ethical norms. Not everyone has to agree with the needs of the negotiating partner, the main thing being that they are mutually accepted. Fig. 5.1 Focus on value-adding negotiations. Source Author

Nego a on scope

Q-C-D-T + alpha

Q-C-D-T + alpha

Value add

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5.2

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Zone of Mutual Agreement (ZomA)

The zone of mutual agreement (ZomA), or bargaining range, describes the intellectual zone in purchasing, sales and business transaction between two parties where an agreement can be met which both parties can agree to. Within this zone, an agreement is possible. Outside the zone, no amount of negotiation will yield an agreement. For example, take a person willing to lend money at a certain percentage as interest rate over a certain period of time and a person wanting to borrow money at a certain rate. If both parties can agree a rate and period then a ZomA can be established. An understanding of the ZomA is critical for a successful negotiation. To determine whether there is a beneficial overlap and zone both parties must explore each other’s interests and values. This should be done early in the negotiation as part of the analysis and be adjusted as more information is gained. Not a physical place, the zone of possible agreement (ZomA) or bargaining range is considered an intellectual range where two or more negotiating parties may find common ground. It is this area where parties will often compromise and strike a deal. In order for negotiating parties to find a settlement or reach an agreement, they must work toward a common goal and seek an area that incorporates at least some of each party’s ideas. No matter how much bargaining is involved in a negotiation, an agreement can never be reached outside of the positive zone of agreement (positive ZomA, see Fig. 5.2) as outlined in Fig. 5.3 (O’Brien, 2016). This is a negative ZomA (Fig. 5.2). In order to reach an agreement successfully, negotiating parties must understand the needs, values and interests of the other negotiation partner. For example, in order for Michael to sell his car to Peter for a minimum 15,000 Euro, Peter must be willing to pay at least 15,000 Euro. If Peter is willing to spend only 14,500 Euro for the car, then there is no overlap between his and Michael’s bottom lines. If Peter offers up to 15,750 Euro for the car, then there is an overlap and the zone of mutual agreement (ZomA). The ZomA is now between 15,000 Euro

Least desired outcome (LdO)

Most desired outcome (MdO) Maximum position We Buyer (Customer)

Minimum position

Buyer objecƟves NegaƟve ZomA Seller objecƟves Minimum position

Maximum position

Fig. 5.2 Negative zone of mutual agreement (ZomA). Source Author

They Seller (Supplier)

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Most desired outcome (MdO) Maximum position We Buyer (Customer)

Minimum position Buyer objecƟves PosiƟve ZomA

They Seller (Supplier)

Seller objecƟves Minimum position

Maximum position

Least desired outcome (LdO)

Most desired outcome (MdO)

Fig. 5.3 Positive zone of mutual agreement (ZomA). Source Author

(Michael’s minimum objective or LdO = 15,000 Euro; Peter minimum objective or LdO = 15,750 Euro). Within this range, a possible agreement is possible. Certainly, both negotiators will try to extend the ZomA by adding value (e.g., Michael could offer to deliver the car, to wash the car, to add winter tyres and to pay the first maintenance). When negotiating parties cannot reach a ZomA, they are in a negative bargaining zone. A deal cannot be reached in a negative bargaining zone, as the needs and desires of all parties cannot be met by a deal made under such circumstances. Negative bargaining zones can be overcome if negotiating parties are willing to learn about one another’s desires and needs.

5.3

Successful Recommendations for a Positive ZomA

In the event that the minimum objectives of the buying and selling party are not overlapping, negotiation experts speak about a “negative ZomA” (Helmold, Dathe, & Hummel, 2019). A negative bargaining zone may be overcome by adding value to the negotiation scope as recommended by several authors (O’Brien, 2016). The concept of Dr. Helmold (A-6 negotiation concepts) proposes actions and offers to extend the negotiations cope in all categories, and thus reaching the positive ZomA (zone of mutual agreement). Parties that combine interests to create value reach a far more rewarding agreement. Behind every position there are usually more common interests than conflicting ones (O’Brien, 2016). The green arrows in Fig. 5.2 illustrate the attempt of extending the negotiation scope and thus reaching common interests.

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In example, the buyer is unwilling to pay more than 30,000 Euro for a machine, whereas the seller will not accept a price less than 40,000 Euro. However, the buyer and seller are willing to other elements, such as set up support, service components or additional quality targets, so that both parties agree to extend their minimum targets. The buyer is now willing to pay 30,000 Euro to 40,000 Euro and the seller is willing to sell the machine from 35,000 Euro to 50,000 Euro. Hence, both parties were able to achieve a positive zone of mutual benefits (ZomA) between 35,000 Euro and 40,000 Euro. A negotiator should always start considering both parties’ ZomA at the earliest stage of his or her preparations and constantly refine and adjust these figures as the process proceeds. For every interest there often exist several possible solutions that could satisfy it. In the preparation or analysis phase has been finalized, one should be aware of the own negotiation targets and the relevance of each objective. This important step aims at the exploration of the possible scope for negotiation and the motives. The scope of negotiations in each category ranges from the minimum to the maximum goal, with no element in negotiations being completely static (Helmold et al., 2019). The identification of the negotiation margin should be carried out before the actual negotiation. If you have employees and colleagues, they can already in advance negotiate the reaction of the other side (Helmold & Terry, 2017). In addition to the maximum and minimum requirements, the point of termination should also be identified in order to show the negotiating party that the leeway has been exhausted. Potential added values are also part of the exploration of the scope for negotiation. In international negotiations, for example, the price of a provider may be a minor matter, as he intends to market entry in Germany with the order or perhaps wants to show from a marketing perspective that he has a renowned German customer (BME, 2018). Motives may also lie in building up a functioning logistics network to Europe or Germany in order to penetrate the market here. All authors recommend this important step in the early stages of the negotiation process. The following aspects are of central importance for the identification of the scope: • Identification of the potential maximum and minimum goals of the negotiator (What does the other party intend to do?), • Are there any added values that are attractive to the negotiating party? • Analysis of possible motives of the participants of the opposite side (different departments often have different goals), • Who could be used as an influencer? (Are there any possible influencers?) • Identify possible incentives of the other side (which offers are attractive for the other side?), • What chances do I have in each category to be negotiated? (Interests of the other side) • Are there constraints on the other negotiation side? (Table 5.1)

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Table 5.1 Recommendations for the negotiation execution Recommendations for identifying a ZomA Concentration on minimum and maximum objectives Generation of value-adding ideas and elements Assessment of motives and interests of the negotiation opponent Identification of cultural or customs specific constraints Understanding opponent and directing negotiations into ZomA Flexible and dynamic Identification of alternatives Objective evaluation of all demands and alternatives Source Author

References BME. (2018). Bundesverband Materialwirtschaft, Einkauf und Logistik. Mittelstandspreis geht an Jokey. November 10, 2017. Retrieved May 18, 2018. https://www.bme.de/jokey-groupgewinnt-den-bme-innovationspreis-2017-2330/. Helmold, M., Dathe, T. & Hummel, F. (2019). Erfolgreiche Verhandlungen—Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer. Helmold, M. & Terry, B. (2017). Global Sourcing und Lieferantenmanagement in China. Berlin: DeGruyter. O’Brien, J. (2016). Negotiations for procurement professionals (2nd ed.). Croyden: Kogan Page.

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Negotiation Concepts Marc Helmold

6.1

Aspects in International Negotiations

Increasing globalization and international transactions have put emphasis on the question how to conduct successful international negotiations as has been outlined by many authors. There are many training courses and workshops available on the market; however, many companies see a gap between the theoretical and the practical side in international negotiations. In negotiations, there are many methods which can lead to success. Methods including seduction, threats, warnings, exploiting the ignorance of the other, or being friendly with the hope of an uncertain reciprocity are numerous. Many workshop coaches and trainers have based their teaching on the Harvard negotiation concept by Helmold, Dathe and Hummel (2019), Schranner (2009). The Harvard negotiation concept or principled negotiation (sometimes also referred to as integrative negotiation) developed at Harvard University by Professors Roger Fisher and William Ury in the 1980s is one of the first negotiation concepts developed and applied in many business schools, workshops and universities. This negotiation strategy is based on focusing on the interests of the parties involved and not on the positions that the negotiators may initially take. The Harvard model is based on the assumption, that all negotiation partners are fair and open to each other. As a result, there will be mutual benefits for all negotiation parties and a win-win outcome. Reality and practical experience show, however, that parties are not always fair and that both negotiation partners want to win against the opponent as stressed by negotiation experts, so that a fair outcome is not possible (Helmold, Dathe, & Hummel, 2019; Schranner, 2009). Applied research and interviews with industry experts from leading and innovative industries, e.g. automotive, aerospace and railway, see, therefore, a gap between M. Helmold (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_6

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teaching and practical environments (Helmold et al., 2019). Furthermore, most of the taught negotiation concepts do not provide recommendations for international negotiations (Helmold et al., 2019). Finally, negotiation techniques or conflict management in an international context are not yet represented as an independent discipline in academia and universities. Few colleges or business schools offer negotiation techniques or conflict management in an intercultural context (IUBH, 2018). This is due to the fact that not very many experts in the universities have been exposed to international negotiations, so that the expertise in negotiations, especially on the international stage, focuses on general patterns of behaviour and recommendations. In addition, it can be observed that generally, larger companies send their employees from the sales, marketing, supplier management or purchasing departments to training courses or offer training courses internally (IUBH, 2018). However, studies show that global procurement, and thus, international negotiations are of central importance to many medium-sized companies (BME, 2018).

6.2

Harvard Concept

6.2.1 Introduction to the Harvard Concept In negotiations, various methods can be used, such as seduction, threats, exploiting the ignorance of the other or being friendly with the hope of an uncertain reciprocity. Fisher and Ury, two professors of Harvard university, wrote a seminal work on negotiation entitled “Getting to yes—Negotiating Agreement without Giving In” (Fisher & Ury, 1981; Helmold et al., 2019). In this book, they described how a “good” negotiation would work. Fisher and Ury outline that negotiations require certain elements and conditions in order to be regarded as successful negotiations (Fisher & Ury, 1981; Helmold et al., 2019). A good negotiation outcome is one which is wise and efficient and which improves relationships. Wise agreements satisfy all negotiation parties that are fair and lasting. With most long-term clients, business partners and team members, the quality of the ongoing relationship is more important than the outcome of the particular negotiation. In order to preserve and hopefully improve, relationships how you get to “yes” matters (Fisher & Ury, 1981; Helmold et al., 2019). Prior to the development and publication of the Harvard concept, one of the key questions referred to the question, what style of negotiation was the most effective and successful: cooperation (soft negotiation style) or competition (hard negotiation style)? In reality, research and practice have demonstrated that neither of these two styles has a monopoly on effectiveness (Fisher & Ury, 1981; O’Brien, 2016).

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Table 6.1 Hard negotiation and soft negotiation style Hard negotiation style

Soft negotiation style

Participants are adversaries Participants are friends The goal is victory The goal is the agreement Demand concessions as a condition of the Make concessions to cultivate the relationship relationship Be soft on the people and the problem Be hard on the problem and the people Trust others Distrust others Change your position easily Dig into your position Make offers Make threats Disclose your bottom line Mislead as to your bottom line Accept one-sided losses to reach agreement Demand one-sided gains as the price of Search for the single answer: the one they will agreement accept Search for the single answer: the one you will Insist on agreement accept Try to avoid a contest of will and yield to Insist on your position pressure Try to win a contest of will and apply pressure Source Author, adapted from Fisher and Ury (1991)

6.2.2 Key Elements of the Harvard Concept Effectiveness in negotiation does not depend on the hard or soft style adopted as given in Table 6.1, but rather on the right strategy deployed (Fisher & Ury, 1981). Real effectiveness in negotiation comes from having the flexibility to adjust and adapt oneself permanently to the context and the contact as Fisher and Ury outline in their Harvard concept (Fisher & Ury, 1981). The Harvard concept was published in the book “Getting to Yes” by Roger Fisher and William Ury. This vision of negotiation is centred on the interests of the parties present in the negotiation and focuses on conflict management and resolution. Given that the purpose of integrative negotiation is to find a common and satisfactory agreement, sometimes we find that the concept of “win-win negotiation” is synonymous with this strategy. Separate the People from the Problem The first principle of the Harvard concept by Ury and Fisher applies to the interaction between the two parties to a negotiation. The principle is broken down into three subcategories: perception, emotion and communication. The authors point out that negotiators are people first—people who have values, cultural backgrounds and emotions that vary by person. Getting to Yes teaches that this human aspect can be either helpful or disastrous. Negotiation can either build trust and understanding with a positive relationship established at the end or lead to frustration or dissatisfaction. The authors discuss how the relationship between parties tends to become entangled with the problem that the parties are discussing. Incorrectly deducing the intentions of the other party based on one’s own fear is a common mistake; the authors describe it as a bad habit that could cost “fresh ideas in the direction of agreement”. The authors explain that feelings are just as important as the content of

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the dispute during negotiation. Communication is the main aspect of negotiating, and the authors point out three common problems in communication: • Not clearly speaking with the other party, but instead attempting to impress those within one’s constituency by taking a side instead of working towards a mutual agreement • Not actively listening to the other party, but instead only listening to rebut the other party’s statements • Misunderstanding or misinterpreting what the other party has said. Similarly, in the book, I Win You Win, Carl Lyons explored the principle of “separating the person from the problem” and discovered that interests are an extension of values. People’s current interests are always attempting to satisfy something that they value. Understanding this principle is a key first step in understanding people’s behaviour in negotiations. The relationship tends to become entangled with the problem. The negotiators have to separate the relationship from the substance and have to deal directly with the people’s problem. How to do it? • Put yourself in the shoes of your counterpart • Talk about the ideas and expectations of both parties • Do not hold your counterpart responsible for your own problems • Make sure the other party is involved in the decision and actively participates • Make it possible for him to “save face”: Adapt your suggestions to the value system of your negotiation partner • Articulate your emotions and acknowledge that they are justified • Allow the other party to let of steam • Use symbolic gesture (e.g. shaking hands, a little gift) • Listen attentively and provide feedback on what has been said • Talk about yourself, not the other party • Establish active relations. Get to know the other person. Focus on Interests, Do Not Focus on Positions Negotiations are about the position that the parties hold and the interests that led them to that position. The authors Ury and Fisher recommend that negotiators should focus on the interests behind the position that each party holds. Both parties should discuss their interests and keep an open mind to the other side of the argument. It is crucial to put oneself in the shoes of the other side to try to understand “why” the other side is acting the way they are or rather “why they are not”. The authors state that the most powerful interests are basic human needs. Both authors recommend to look beyond the words of the other person. Why has the negotiation opponent chosen his words and what underlying interests can be recognized. The following questions should, therefore, be asked:

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• Which interests do I want to secure? • Which interests will the other side have? During the negotiation, one should identify the different interests of each side and work on them together, because the interests define the problem. How is it possible to identify the interests? Ury and Fisher recommend to ask simple questions: • “Why?” • “Why not? Think about their choice”. One has to realize that each side has multiple interests. For keeping the overview and acknowledging their standpoint as part of the problem, it is recommended to make a list of all interests. For the successful negotiation, it is necessary to be precise but flexible. Negotiators must be hard on the problem while, at the same time, keeping a soft attitude on the people. Develop Options for Mutual Gain of All Negotiation Parties Ury and Fisher emphasize that negotiations are about benefiting both parties that are doing business. This principle aims to help the parties and find an option that will impact each party in a positive way, making both sides feel like they did not get taken advantage during the negotiation. It is important to listen to the other party and not make a decision until both parties feel that they have been heard. Both parties should clearly explain their intentions and what they want out of the conversation. The conflict parts have to invent alternatives and options which offer advantages for both parties. The best way is to suggest the other side something which covers their interest and which costs me less then it gives the other party. The conflict parties have to develop options which serve the interests of both sides. It is helpful in this context: • to separate the process of finding options from the evaluation of the same options. • to broaden the options and create multi-options instead of the “one” solution. • to kook for benefits for all sides. • to develop proposals which will make the decision easier for the other party. • to brainstorm in a good atmosphere. Identify Objective Criteria for Selecting Negotiation Outcomes The fourth principle “to insist on using objective criteria” is about making sure that the conversation stays on topic and that it is productive. The parties are making deals based on objective and practical criteria. The three steps to use objective criteria are to find out what the other party’s intentions are, keep an open mind and never give into pressure or threats. Each party is in charge of keeping the other party committed to the conversation. Experiences, ideas or options are often

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controversial. It is possible to solve the problem, if the conflict parties can find common standards. The negotiator has to find out some mutually acknowledged criteria and standard: • convert every dispute into a search for objective criteria. • produce sound arguments, be open for arguments which are based on reasonable criteria • never give into any kind of pressure, only accept sensible principles. Know the Best Alternative to a Negotiated Agreement (BATNA) The fifth principle is setting the “BATNA (Best Alternative to Negotiated Agreement)”. It emphasizes that no method can guarantee success if all the leverage lies on the other side. The authors suggest two methods of going about negotiating from a position of power. First, each party should protect themselves first. Second, each party should make the most of the power within their own assets to negotiate and win against the opposite party (Fisher & Ury, 1981). When negotiating, the parties must resist the urge to constantly compromise for fear of completely losing the negotiation. Such compromises may allow for a shorter negotiation, but may also leave the primary party with a deal that did not benefit them to the full extent. Establishing a “bottom line” can protect the negotiator’s final offer, but may limit the ability to learn from the negotiation itself and may preclude further negotiation that possibly could result in a better advantage for all parties involved. When considering final decisions, each party may want to take a step back and consider all possible alternatives to the current offer being made. One example in the book describes a house on the market: Thinking of all other possibilities if the house were not sold should be compared with the option of selling the house to ensure the best decision is made.

6.2.3 Summary of the Harvard Concept James White, a professor of law at the University of Michigan, suggested that Getting to Yes is not scholarly or analytical and relies on anecdotal evidence, and that “the authors seem to deny the existence of a significant part of the negotiation process and to oversimplify or explain away many of the most troublesome problems inherent in the art and practice of negotiation”. There is no quantitative evidence presented that suggests outcomes using this technique will typically be better than an alternative method, such as positional bargaining (Helmold et al., 2019).

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6.3.1 Difficult Negotiations In the concept of “negotiations on the edge”, Schranner gives recommendations for critical and difficult negotiations (Schranner, 2009). He outlines seven principles or commands which are described in the negotiation guide “Verhandeln im Grenzbereich” or “Negotiations on the edge” (Schranner, 2009). Schranner founded, according to his website, the Schranner negotiation institute. According to his website, Matthias Schranner states he can provide proven and successful negotiation techniques that can be applied directly in business life. In various articles, Schranner is seen as the expert for negotiations in difficult cases. On the Schranner website, it is also stated that in 95% of all cases the customers can negotiate themselves, but that in difficult cases, which make up about 5%, his concept can be applied. Schranner identifies three different types of actors in conflict situations and negotiations as shown below (Polwin-Plass, 2016): • Escape negotiation types • Attack negotiation types • Mixed negotiation types.

6.3.2 Negotiation Types by Schranner Escape Types Escape types are described by Schranner as persons who tend to avoid or do not appear in critical situations (Polwin-Plass, 2016. These usually retreat in critical situations to avoid conflict. Although this prevents a conflict, the problem remains unresolved. In international negotiations, especially in Asian countries such as China, Japan or South Korea, one will come across persons who will make superficial escapes to avoid an open conflict. Attack Types In addition to the escape types, there are persons who engage in confrontational and direct negotiations (Polwin-Plass, 2016). This typology calls Schranner “attack types”. They face confrontation and solve problems at short notice. Very often, they destroy long-term relationships because they often say ill-considered and emotional things. According to Schranner, attack types speak too much and too thoughtlessly, especially in critical and dangerous negotiation situations, so that they often reveal confidential information without being voted on (Polwin-Plass, 2016). If attack types interculturally target escape types or persons who act more reservedly and

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passively, this can lead to a strong loss of face and the final failure of the negotiations (Dathe & Helmold, 2018). In the context of international negotiations, however, it is advisable to wait and to let the negotiators speak (Helmold, Dathe, & Helmold, 2018). Mixed Types In the definition of “mixed types” according to Schranner, there are persons who both show characteristics of the first two categories (flight and attack types) (Polwin-Plass, 2016). These are called mixed types. These exhibit characteristics of types of attack and flight in varying degrees (Polwin-Plass, 2016). Depending on the typology of the other side of the negotiation, one’s own tactics and strategy must be specifically one or the other (Polwin-Plass, 2016).

6.3.3 Important Steps in the Schranner Concept The concept of Schranner contains seven important rules and focuses on difficult negotiations (Schranner, 2015). Schranner sees the following steps and elements as priorities for negotiations in very difficult cases: • Never give in • Do not compromise • Do not play for time and do not postpone • Never say “no” • Increase the demands • Beware of threats • Help the negotiator to protect their face • Cancel concessions when withdrawing from negotiations • Put the anchor down • Clarifying the agenda • Increase the claims and requests • Create summaries. Schranner likes to compare difficult sales negotiations in his seminars with negotiations from his professional life as a policeman and negotiator in criminal cases and explains what can be learned and used for business life. For example, in a hostage-taking, a man threatened a woman with a gun and announced that he would shoot at his victim if the police did not immediately leave the room (Polwin-Plass, 2016). This leads to various alternative actions, according to Schranner. In the first step, there are the following alternative actions based on this real example (Polwin-Plass, 2016): • give into the aggressor’s desire and leave the room • pronounce a threat

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• offer a compromise • make a joke to ease the situation • appeal to the conscience of the hostage-taker. Negotiations become particularly difficult if the negotiating partners are convinced that they are right in one or all of the aspects of the negotiation (Polwin-Plass, 2016). Even a criminal and a hostage-taker have a conviction for his act, although his behaviour is not in conformity with the law (Polwin-Plass, 2016). Both when negotiating with a hostage-taker and during a sales negotiation, it is important, according to Schranner, that one does not get irritated or does not obviously respond to irritation (Polwin-Plass, 2016). Displeasure and annoyance cause stress; this stress in turn costs energy and stressed people become active and thus offensive (Polwin-Plass, 2016). Schranner recommends in this context (Polwin-Plass, 2016) to negotiate carefully so as not to jeopardize the conversation. Likewise, his advice is never to give in, especially if strategies and tactics come into play (Polwin-Plass, 2016). According to Schranner, giving in is by far the worst tactic. Indulgence without return leads to even higher demands and is a sign of weakness (Polwin-Plass, 2016). Assuming a protracted negotiation is in the final stages, the seller is under a lot of pressure, and now the signature is just the price in the way. The buyer and customer want agreement but now once again a higher price reduction in the multi-digit range. In this situation, an escape type would try to escape from this situation as described by Schranner (Polwin-Plass, 2016; Schranner, 2009). This behaviour carries great risks for future negotiations, because the customer would demand an even higher rebate with the successful strategy of putting pressure on the next negotiation. Schranner says: Concessions are allowed, but only with a demand for consideration. You have to weigh the demands exactly, summarize them several times and then offer cooperation with consideration. This is how goals are achieved and mutual benefits can be gained. Especially in price negotiations, you should never compromise. According to Schranner, compromises convey two dangerous risks. First, the buyer would be confirmed in his strategy (“there is something going on”), and secondly, the impression would be that exerting pressure is a successfully applied strategy (“by pressure we are always successful”) (Polwin-Plass, 2016). Although a compromise is a quick way out of a conflict, it does not lead to a sustainable solution. Thus, a conflict has to be settled and: A negotiation is a conflict. Making a compromise would mean addressing the middle of the negotiating partner, not your own. The result of this is that the counterpart next time starts from a higher position. You have to be able to withstand pressure to increase your own demands. It is important to emphasize similarities. Schranner, therefore, recommends making concessions only in return and not to make any compromises (Polwin-Plass, 2016; Schranner, 2009). Another recommendation involves the termination of negotiations with a long breath and without adjournments (Polwin-Plass, 2016; Schranner, 2009). Polwin quotes Schranner: When you play for time, you hope to be able to assume a more optimal starting position at a later date. But if both negotiating partners are playing for a while, it will be problematic, because this will make it impossible to get into a better

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position. One should not detract anything, because in the meantime, both negotiating partners will make their case even safer, and the next negotiation is even more difficult (Polwin-Plass, 2016); furthermore, the identification of the bargaining power of the negotiating partner plays a central role, which means that there are a maximum and a minimum price with a limit of pain. According to Schranner, there are always two prices in price negotiations, the obvious price and the invisible one. The invisible is much more important than the visible; the seller has to be careful about this. Power and relationship are the two important elements in Schranner’s concept of negotiation, which recommends the display of power but puts pressure on it as a critical tool in negotiation (Polwin-Plass, 2016; Schranner, 2009). Pressure and counterpressure lead to escalation and to a pure clarification of the power relations without readiness for cooperation (Polwin-Plass, 2016; Schranner, 2009). Negotiation professionals should, therefore, avoid statements such as “no” or “rejection” in order to keep all options open and flexible (Polwin-Plass, 2016). A suitable tactic is the introduction of different requirements with different prioritizations (Polwin-Plass, 2016). The introduction of claims creates room for one’s own negotiating side. Schranner recommends questions in the subjunctive to include claims: “Could you imagine, for example that you additionally buy or do this or that, so that we can meet you here and there (Polwin-Plass, 2016)?” Further, demands should not be communicated by threats (Polwin-Plass, 2016; Schranner, 2009). Face preservation is an integral part of any negotiation, as the negotiator needs support when making concessions and deviating from his maximum goal (Polwin-Plass, 2016; Schranner, 2009). The termination of a negotiation can also be understood as a tactic, but one should revoke the concessions made in this situation (Polwin-Plass, 2016; Schranner, 2009). This means that when the negotiations are resumed, the original starting point serves as the basis (Polwin-Plass, 2016; Schranner, 2009). The termination of the negotiations may be useful to gain more time. It is advisable to obtain the demolition yourself (Polwin-Plass, 2016; Schranner, 2009). Negotiations should always end positively, e.g. with comments like: “We have come a long way” or “we could not reach an agreement financially, but we have achieved a lot” (Polwin-Plass, 2016; Schranner, 2009). Because if the negotiating partner returns to the negotiating table after some time, a plausible apology must explain the re-entry into the negotiations (Polwin-Plass, 2016). Finally, the following aspects of the Schranner negotiation concept can be summarized in Table 6.2.

6.3.4 Focus of the Schranner Concept The Schranner concept is the ideal concept for critical negotiations as outlined by Schranner (2019). The concept has many elements which were developed by his experience in the German Federal Police. The concept provides a seven-step model which is easy to follow. The script gives recommendations, how to prepare and how to concentrate on the motives of the negotiation opponent. Schranner’s concept does not give specific recommendations for negotiations in international

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Table 6.2 Recommendations of Schranner Careful and thoughtful negotiations in order not to jeopardize negotiation break up Identification of negotiation scope and motives Concessions only when something is offered vice versa Never give in, especially when applying tactics Rejection and “No” should be avoided Steady and sequential increase of own demands Increase of demands of negotiation partner help to acquire useful information Caution with threats—warning is permitted Face value and respect are the integral part of negotiations With a break up the concessions should be withdrawn Source Adopted from Polwin-Plass (2016) and Schranner (2009)

negotiations, even though the negotiation academy offers training and workshops on a global basis (Schranner, 2019).

6.4

Dr. Helmold A-6 Concept for Negotiations

6.4.1 Six Steps for Successful International Negotiations Dr. Marc Helmold has been working in various management roles in the automotive and railway industries since the late 1990s. In these positions, he has negotiated with national and international customers and suppliers in the higher hundreds of millions. Projects worth billions of euros were won by well-known manufacturers of trams, commuter trains, regional trains and express trains. These projects have always involved difficult and mostly inappropriate negotiations. Since 2016 he has been Professor of Business Administration, Strategic Management and Supply Chain Management (SCM). In addition to teaching and research, he advises companies on international and intercultural business and complex negotiations. Within this function and due to the deficits and weaknesses of existing negotiation concepts in an intercultural context, he has developed the A-6 negotiation concept. This concept is novel, intercultural, innovative, up-to-date, sustainable and unique and has already been successfully implemented in various projects. The practical and easy-to-use concept comprises six phases from A-1 to A-6, which must be taken into account in each transaction in order to achieve optimal success (Helmold et al., 2019) (Fig. 6.1). In addition to practical relevance, intercultural issues are also described in international transactions in countries such as the USA, China, France, India or other countries. Although the model is aimed at business negotiations, other negotiations, e.g. political negotiations, negotiations among private individuals, negotiations on alimony, etc., is carried out. Lastly, the A-6 concept is a self-contained construct built sequentially in eight steps. This means that after the

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A-1: Analysis of Nego a on Scope and Nego a on Partners A-2: Alignment of Nego a on Strategies and Tac cs A-3: Aggrega on and Affirma on of Arguments A-4: Accomplishment and Amplifica on of Nego a ons A-5: Ascerta on of Resistance and a acking Counterarguments A-6: Administra on of Contracts and Agreements

Fig. 6.1 Negotiation concept by Dr. Marc Helmold. Source Author

first step is done, you can go to the second, third, up to the sixth and last step (A-6). The following figure shows the six steps from analysis to respecting and following the agreement. After the detailed analysis, a selection of appropriate strategies and tactics will take place. The basis here is the script or manuscript, which is described in the context of this chapter. The strategies and tactics determine the reasoning and the structure of the negotiations. Once you have completed these steps, you can go to the actual trial. Here, the action radius is determined. Within the strategy and argumentation, possible counterarguments of the other side and resistances were identified as well as tactics, in order to successfully break these resistances without leaving the negotiating partner losing face. As a final step, the design of the results of the negotiations and the observance of the negotiations are of crucial importance. The detailed explanation of each step will be in chapter nine. With this negotiation guide, the A-6 concept is available in two languages, German and English. Other languages (Mandarin and French) are being planned. Even though the framework was developed in German, the English version has been customized to the needs and in line with language and cultural specifics Prof Terry, Professor in the UK and co-author of this book, ensured that formal and cultural elements have been integrated. Table 6.3 outlines the English and German steps of the A-6 negotiation framework. The script or manuscript plays a central role as a bargaining tool in the Table 6.3 Five principles of the Harvard concept 1. 2. 3. 4. 5. Source Author

Separate the people from the problem Focus on interests, do not focus on positions Develop options for mutual gain of all negotiating parties Identify and agree on objective criteria for negotiation outcome Understand the best alternative to a negotiated agreement (BATNA)

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1. Nego a on tle: __________________________________________ 2. Scope

Quality:

Cost:

Delivery:

Technology:

Alpha (others):

Scope

Personali es 3. Analysis of nego a on opponents: Roles & responsibili es (alpha, beta, gamma, omega, delta and kappa): ______________________________________________ ______________________________________________ ______________________________________________ ______________________________________________ 4. Strategies and tac cs: Poten al strategies and tac cs: ______________________________________________ ______________________________________________ We: They: 5. Objec ves 6. Mo ves

We:

They:

Argumenta on:

Nego a on opponent:

My reac on:

Strategies & tac cs

Objec ves

Mo ves 4. Minimum- und Maximumziele: ______________________________________________ 7. Intercultural aspects

Intercultural aspects

Fig. 6.2 Negotiation script. Source Author

A-6 concept. The manuscript is the result of the individual steps, whereby the sequence is dynamic and flexible (not static). Dynamic in this context means to be very well prepared and to anticipate behavioural patterns of the other side. Dynamism in the negotiations also means reacting agile and flexible to advances by the negotiating party. Figure 6.2 shows the script in preparation with significant elements such as keywords of the negotiations, the analysis of the negotiating partners, the possible strategies and tactics and the minimum and maximum goals. The A-6 negotiation concept is described in detail in Chapter nine. Finally, Table 6.4 shows the most important elements in the concept of Dr. Marc Helmold. In addition to a systematic preparation and analysis, international specialties are at the centre of this model. Similarly, in practice, applied and proven tools are integrated so that the application in practice quickly and well applied is possible.

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Table 6.4 A-6 negotiation concept in English and German English A-1

Analysis of negotiation scope and negotiation partners A-2 Alignment of negotiation strategies and tactics A-3 Aggregation and affirmation of arguments A-4 Accomplishment and amplification of negotiations A-5 Ascertaining resistance and attacking counterarguments A-6 Administration of contracts and agreements Source Author

German Analyse der Verhandlungspartner und Determinierung der Ausgangsposition Auswahl geeigneter Strategien und Taktiken für die Verhandlungen Aufbau und Argumentation der Verhandlungen Ausführung der Verhandlungen (Verhandlungsführung) Abwehr von Gegenargumenten und Bekämpfen von Widerständen Ausgestaltung der Verhandlungsergebnisse und Achtung der Vereinbarungen

6.4.2 Success Factors of the A-6 Concept Dr. Marc Helmold and the co-authors of this book have been working in various management roles in the automotive and railway industries since the late 1990s. In these positions, Dr. Helmold negotiated with national and international customers and suppliers about complex projects in many countries in Europe, the Americas and Asia-Pacific, Japan and China. Projects worth billions of euros were won as manufacturers of trams, commuter trains, regional trains and express trains. These projects also always involved difficult and intercultural negotiations. Since 2016, Dr. Helmold is Professor of Business Administration, Strategic Management and Supply Chain Management (SCM) in Berlin. In this position, he teaches negotiations in the international context on master levels. In parallel, he is conducting research in this area of intercultural conflict management. In addition to teaching and research, he advises companies on international and intercultural business and complex negotiations. Within this function and due to the deficits and weaknesses of existing negotiation concepts in an intercultural context, he developed the A-6 negotiation concept (Helmold et al., 2019), (Table 6.5).

6.4.3 Focus of the A-6 Concept The A-6 negotiation concept is designed by the practitioner Dr. Marc Helmold as systematic and structured tool in negotiations of business transaction between two or more profit-oriented companies, either start-ups, SME or MNC. It applies to company in the public and private sector. The systematic and clear structure enables negotiators to achieve the breakthrough in business negotiations. Although many elements apply also in non-government or non-profit areas, the concept has not yet been applied in these areas. Furthermore, it is recommended to undergo some

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Table 6.5 Recommendations for the A-6 negotiation concept Regular training and acquisition of key competencies through workshops and training Systematic and structured analysis of core elements and critical success factors Assessment of scope, personalities and strategies. Tactics, motives, objectives and intercultural elements Consideration of intercultural aspects as key aspects for negotiations Quantification and prioritization of objectives Determination of scope with minimum and maximum objectives (Q-C-D-T plus alpha) Usage of non-verbal analytical tools and tactics (e.g. mirroring) Definition of suitable strategies and tactics (e.g. setting time deadline) Argumentation and sequential proceeding in line with the A-6 structure Application of adequate tools (egg. SWOT) Respect and compliance with agreement made (milestones to be protocolled) Respect and face value in all phases of the negotiations Source Author

training before independently negotiating in order to gain the full potential from this model. Finally, it contains unique international and intercultural elements. The book has been published by five authors and several co-authors with extended international work experience and research on master and doctoral levels, which gives the book a specific and unique nuance in industry and academia. In summary, one can say that the A-6 model is a track-proven international concept for business negotiations.

6.5

Comparison of the Three Concepts

The three negotiation concepts described have different characteristics and priorities, as given in Table 6.6. The Harvard concept has basically been developed for all types of negotiations, whereas Schranner focuses on difficult negotiations (Fisher & Ury, 1981; Schranner, 2009). The concept of Dr. Helmold targets negotiations between trading partners in an international context and offers intercultural recommendations for action (Helmold et al., 2019). All three concepts suggest an exact preparation, whereby the concept of Dr. Helmold aims at the scope of the negotiations, motives, roles and the negotiating types of persons (Fisher & Ury, 1981; Helmold et al., 2019; Schranner, 2009). The preparation can be ideally performed with the standardized and practice-proven templates, which have been developed and designed from many years of negotiations. The Harvard concept recommends accurate preparation with the determination of the best possible alternative (BATNA, Best Alternative to a Negotiated Agreement). In contrast to this, Schranner’s concept recommends the drafting of a preparation document, the script, a well-founded analysis of the motives, roles and potential arguments or counterarguments (e.g. decision makers). There are key differences in the

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Table 6.6 Comparison of the three negotiation concepts Harvard concept

Dr. Helmold concept

Schranner concept

Focus

All negotiations

Difficult negotiations

Structure Preparation

5 principles Analysis, interests and best alternative to a negotiated agreement (BATNA), not positions

Methodology and methods

WIN-WIN Concentration on motives. Principled negotiations. Negotiators are fair

Goal

Both parties should be winning. Mutual agreements. Fair results No

Business transactions (buyer-customer) in the international context 6 logical steps (A-6) Detailed and systematic preparation. Analysis of scope and consideration of intercultural aspects. Focus on objectives and motives. Assessment of roles and personalities WIN, but keeping face of opponent Systematic approach, rational emotions can be used. 6-phase model. Using tools and logic, combined with intercultural awareness Winning, but without face loss of negotiation opponent Intercultural elements. More than 30 country examples Yes

Global presence of Schranner Negotiation Institutes No

Yes, but using emotions in a rational and planned way Yes

Yes

Successfully applied international concept with many examples. Concentration on business negotiations

Concentration on difficult negotiations. No recommendations for international negotiations or intercultural elements

International focus Intercultural recommendations Emotions

No

Non-verbal Communication Critique of model

No

Source Author

No

Fairness not always existing. No recommendations for international negotiations or intercultural elements

7 principles Concentration on motives and analysis and typologising of negotiation opponent

WIN 7 successful steps in negotiations on the edge

Winning the negotiations

Few

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negotiation methodology of the three concepts presented. On the one hand, the Harvard approach suggests a focus on interests, fair and facts-based negotiation to achieve a result that can be viewed as a win for both parties (Win-WIN). Dr. Helmold and Schranner, on the other hand, have different suggestions, because a negotiator often strives to get out of the negotiations as the single winner. (Helmold et al. 2019; Schranner, 2009). Therefore, emotions can also be used purposefully and rationally to achieve the best possible negotiation result. By depicting country-specific peculiarities, the concept of Dr. Helmold has unique selling points among the three compared concepts and focuses on international negotiations including cultural and country-specific behaviour (Helmold et al., 2019).

References BME. (2018). Bundesverband Materialwirtschaft, Einkauf und Logistik. Mittelstandspreis geht an Jokey. November 10, 2017. Retrieved May 18, 2018. https://www.bme.de/jokey-groupgewinnt-den-bme-innovationspreis-2017-2330/. Dathe, T., & Helmold, M. (2018). Erfolg im Chinageschäft. Handlungsempfehlungen für kleine und mittlere Unternehmen (KMU). Wiesbaden: Springer. Fisher, R. & Ury, W. (1981). Getting to yes. London: Penguin Group. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler. IUBH. (2018). Negotiations in the international context. Master-Studiengänge. Retrieved May 18, 2018. https://www.IUBH-fernstudium.de/modul/negotiation-dlmnege/. O’Brien, J. (2016). Negotiations for procurement professionals (2nd ed.). Croydon: Kogan Page. Polwin-Plass, L. (2016). Checklisten für den Vertrieb. Verhandlungsstrategie. September 22, 2016. In Die Vertriebszeitung. Retrieved March 20, 2018. https://vertriebszeitung.de/ verhandeln-im-grenzbereich-strategien-und-taktiken-im-vertrieb/. Schranner, M. (2009). Verhandeln im Grenzbereich. Strategien und Taktiken für schwierige Fälle. 8. Auflage. München: Econ. Schranner, M. (2015). 7 Prinzipien für erfogreiches Verhandeln. BME-Keynote Matthias Schranner gibt sieben Tipps für zielführende Verhandlungen. January 15, 2015. Retrieved March 20, 2018. https://www.bme.de/7-prinzipien-fuer-erfolgreiches-verhandeln-888/. Schranner, M. (2019). Schranner Negotiations Institute. Accessed January 19, 2019. https://www. schranner.com/de/institute/matthias-schranner-ceo.

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Negotiations in Different Cultures and Internationalization Tracy Dathe and Marc Helmold

7.1

Negotiations in Different Cultures

Foreign trade has a long history. Yet, the cross-border exchange of goods and services has significantly intensified in the last decades (Dathe & Helmold, 2018). The cultural differences add another facet to the complication of negotiations. The commercial negotiations are complex enough in the same cultural group. Dealing with business partners with a different cultural background poses an additional challenge for the communication. Caution needs to be taken, in order to avoid culturally based misunderstanding. The overriding question in this context is: “What are cultures?”. According to Geert Hofstede, social psychologist and culture investigation researcher, culture is “the collective programming of the mind that distinguishes the members of one group or category of people from others” (Hofstede, 1991). In other terms, culture is the unique way a group of people think and cope. Without the knowledge and understanding for other cultures, such difference in thinking and behaviors may easily cause conflicts in intercultural communications (Helmold, Dathe & Hummel, 2019). Although cultures are not limited to national cultures (e.g., there could be cultural groups based on the gender, age groups, etc.), in this book, we shall focus on the national cultures to discuss how to deal with cultural differences during commercial negotiations. Each national culture has its own traditional philosophy and methods for negotiations which may be unknown or uncomprehensive to outsiders (Helmold et al., 2019). Negotiation participants with T. Dathe Südstrasse 5, 83607 Holzkirchen, Germany e-mail: [email protected] M. Helmold (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_7

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different cultural backgrounds often come with different expectation or even different targets to the meetings. An analysis of the different targets and expectations at an early stage could be very helpful, before they cause later frustrations and mislead the negotiation into deadlock (Lanz, 2018). One of the most interesting aspects of the analysis is how the relationship among the participants should be established (Liker & Choi, 2004). As culture significantly influences the way people perceive and react to information during the communication, it is an essential aspect that cannot be ignored when studying international negotiations (Helmold et al., 2019). Intercultural training has become popular in many countries, as it is believed to provide the understanding of the mentality and behavior codes of another culture in a crash course. In any case, the knowledge of the rules of the game shall have a positive effect on the outcome of cross-cultural interactions. The following matrix (Fig. 7.1) shows our recommendation on the approach of cultural training for international negotiations (based on Helmold et al., 2019).

How well do I know my counterpart’s culture?

Intercultural training for me

Independent "eye-level" negotiation

Intercultural training for both parties

Intercultural training for my counterpart

little

mu ch

How well does my counterpart know my culture?

much

little Fig. 7.1 Strategical approach for intercultural negotiations. Source Author

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Level of organization

Artifacts

85

Example

Architecture, languages and ceremonial rituals

and behaviors

Espoused values

Assumptions

National laws, the “family first” philosophy

Equality of all human beings

Fig. 7.2 Schein’s three levels of culture (interpretation by Dathe)

Edgar Schein distinguishes three levels in organizational cultures (see Fig. 7.2) based on how easily the cultural phenomena could be observed by outsiders who are no part of the culture (Danziger, 2008) (see Fig. 7.2): Artifacts and behaviors. These are the tangible, overt or verbally perceivable elements, e.g., architecture, languages or ceremonial rituals. Espoused values. These are the stated values and rules of behavior in the cultural group. These are often expressed in the public statements or literature, e.g., national laws, the “family first” philosophy. Assumptions or shared tacit assumptions. These are the roots of the culture and the key to understanding of the culture. However, the tacit assumptions are hard to recognize even for insiders of the culture, because the assumptions are usually taken for granted and unconsciously well integrated in their behavior. For example, in some cultures, it is assumed that every man should be treated equally, while in others, people are entitled to different levels of privilege based on their origin. We may learn the artifacts and behaviors through close observation. It doesn’t take long for us to find out that in business contacts, the Americans tend to call each other by the given name, the Germans by the surname and the Chinese, by a combination of the surname and the job title. One of the first things we learn is how our counterpart greets the business partners: with kisses on the cheeks, a kiss on the hand, shaking hands, a knock on the shoulder or somehow exotically, with a bow like in Japan. If we are ready to invest more time with the cultures, we will also get

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to more about the written rules. But how do we deal with the shared tacit assumptions, as even the cultural insiders are often unconscious of those, because they simply take the assumptions for granted? Is it possible at all to identify the most important assumptions in a culture without years of systematic study? The short answer is, yes. Researchers in the past have developed instruments to describe the essential features of cultures. In the following sections, we shall shed light on two culture models—frameworks generated to assess and differentiate cultures.

7.2

Hofstede’s Cultural Dimensions Theory

Geert Hofstede is researcher in the field of organization culture. During his engagement at IBM International between 1967 and 1976, he conducted employee opinion surveys in IBM subsidiaries in 74 countries. By applying statistical methods, he analyzed the large amount of cross-culture database (over 100,000 questionnaires) and aggregated the individual opinions into national cultural groups. As a result, he developed the culture VSM (Value Survey Model) with four dimensions (Hofstede, 1980, 2007). Today, the VSM framework has become a paradigm in the field of cultural research. Numerous researchers validated this model in various cultural contexts. The model also finds wide applications in the practice for intercultural communication, as well as international management, marketing and negotiation (Dathe & Helmold, 2018). In his later work, Hofstede extended the VSM into six dimensions (Hofstede, 1980, 2007; Hofstede, Hofstede, & Minkov, 2010): Power Distance Individualism versus Collectivism Masculinity versus Femininity Uncertainty Avoidance Long-term Orientation Indulgence versus Restraint.

7.2.1 Power Distance The individuals in any cultural group have different levels of influence on the society. The term power distance describes the readiness of the lower-ranking individuals to accept the uneven distribution of power. This cultural dimension shows how much inequality is expected in a society. Based on the empirical data, a power distance index (PDI) is generated and the comparison of different cultures allows certain conclusions (Hofstede, 1980, 2007). In low PDI cultures, the power is distributed less unequally. This implies that the society tends to be democratic and members of the society are less dependent toward the power holders.

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In business organizations of lower PDI cultures, managers and subordinates are more likely to maintain a consultative relationship and less concerned of their status in the organizational hierarchy. In terms of the negotiation, the decision-maker is likely to take the objective reasoning of his subordinates into serious consideration. Examples of low PDI countries are the USA, the UK and German. In high PDI cultures, the social hierarchy tends to be more clearly visible and the power holders have stronger influence with more centralized power. Although centralized power often misleads to abuse of their office and corruption, only few in high PDI cultures will ever question the formal authorities (Chia et al., 2007; Lee & Oh, 2007). In business organizations, leaders are more likely to dictate their decisions to the subordinates and questions in public are often understood as challenge of their personal authority (Hofstede, 2007). When dealing with negotiation partners from a high PDI culture, it is essential to identify the decision-maker in the first place. Very likely, his subordinates have only limited influence on the final decision. In the behavior code of a high PDI culture, it is important to treat the power holder with *distinctively more respect and not to question or even criticize him in public. Different opinions need to be “well packaged.” Examples of high PDI countries are Malaysia, Saudi Arabia and Japan.

7.2.2 Individualism Versus Collectivism In a society with strong individualist values, the individuals are encouraged to pursue his own goals and desires. In business organizations, independent thinking has a great importance. Members of individualist cultures tend to be more concerned of their privacy and self-determination (Hofstede, 2007). In the VSM framework, collectivism is considered the opposite to individualism. Collectivism is characterized by the identification of individuals with their social groups and the prioritization of the group over oneself. Conformity and self-sacrifice are emphasized behavior codes of collectivist cultural groups (Hofstede, 2007). Many Asian cultures are considered collectivist, and most western cultures tend to be individualist. While in individualist organizations tasks are often assigned to individual persons, they are more likely to be given to a group of people in a collectivist organization which in turn may lead to more intensive internal communication and longer time for the fulfillment. Harmony is a very important value in collectivist cultures, and confrontation needs to be avoided by all efforts. Collectivist business partners prefer to establish a harmonious and trustful relationship at the beginning of the negotiation. To accommodate their good will, the individualist counterparts need to comply with patience. Due to the smaller interpersonal distance among collectivist individuals, sometime curious questions during the conversation may appear being comforts of the individualists. A smart strategy to deal with such situations is probably to hide the irritation and choose to answer some “safe” questions, in order not to put the collaborative atmosphere in jeopardy.

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7.2.3 Masculinity Versus Femininity This dimension of culture depicts to which extend a society values achievement or nurture. In highly masculine cultures, gender roles are distinctive. Men are supposed to be tough and devoted providers with material success, and women are expected to focus on the maintenance of social solidarity with modesty and caring, nurturing behaviors. Quality of life is mainly concern of the women. In general, economic growth has a higher priority over environment protection. Women can be rarely found in management teams and receive less payment than men for equal work. In less masculine (feminine) cultures, gender equality is strived for and gender roles tend to overlap. Material success and quality of life are concerns of both men and women. Economic growth and environmental issues are equally important, and the conflict between the competing goals needs to be solved through negotiations. Societies usually exhibit both masculine and feminine characteristics. This cultural dimension shows whether the masculinity or the femininity overweighs (Hofstede, 2007).

7.2.4 Uncertainty Avoidance The cultural dimension uncertainty avoidance shows the level of anxiety uncertainty causes and reflects a society’s tolerance for uncertainty or ambiguity (Hofstede, 2007). In a culture with a high score of uncertainty avoidance, life is often perceived as hectic. Clear rules and structures are cherished. People prefer to be informed of all potential risks and tend to seek the help of experts in case of uncertainty. Emotional behaviors are interpreted as an act of losing control. In negotiations, relevant influence factors (for instance, the flexibility and tolerance of the business partner in addition to technical data of the products) are often quantified as far as possible. Examples of high uncertainty avoidance countries are Germany and Switzerland. Cultures with a low score of uncertainty avoidance are sometimes described as “chaotic.” Life is perceived as easy-going, and fewer rules and instructions are expected. Entrepreneurs potentially take higher risks, and the acceptance for new technologies is higher. In the negotiation, passion is a decision-relevant factor besides the technical and commercial issues. Examples of high uncertainty avoidance countries are India and China.

7.2.5 Long-Term Orientation Long-term orientation describes the readiness to invest in one’s own future by delaying material and/or emotional gratifications. Cultures with long-term orientation focus on the future and value persistence, perseverance, saving and the ability to adapt. In the negotiations, the decision-maker tends to take higher risks as investment in a promising future business relationship. Such kind gestures need to be recognized and reciprocated. Cultures with short-term orientation focus on the

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present and the past, value traditions and are more concerned of fulfilling the immediate gratifications and social obligations.

7.2.6 Indulgence Versus Restraint This is a relatively new dimension in the VSM framework and describes the level of subjective happiness and life control. Indulgent societies appreciated natural human desires leading to subjective happiness. There is less moral discipline and a higher perceived personal control of life. There are more extroverted personalities, and people tend to be optimistic, have more friends, participate more in sports and healthier and happier. Countries with the highest measured indulgence level are Mexico, Nigeria and Sweden. Restricted societies are less tolerant toward natural human desires and regulate by means of strict social norms. Professional obligations are considered more important than private life. There is much moral discipline, and life is essentially driven by the environment. People tend to be introverted, pessimistic and cynical. Having friends and participation in sports seem less import, and people feel less happy and less healthy. Countries with the lowest measured indulgence level are Egypt, Russia, China and India.

7.3

Edward Hall’s Culture Model

The American anthropologist and culture researcher Edward Twitchell Hall Jr. is best known for the introduction of the following concepts in cross-cultural studies: • Proxemics • Monochronic time versus polychronic time • High-context cultures versus low-context cultures.

7.3.1 Proxemics The term proxemics stands for the study of the human use of space and the influence of population. In his work, Hall describes the interpersonal distance (horizontal) as invisible circles (see Fig. 7.3) and divides it into the following sections (Hall, 1966): • Intimate distance • Personal distance (for interactions with close friends and family) • Social distance (for interactions among acquaintances) and • Public distance (for public speech).

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PUBLIC SPACE

SOCIAL SPACE PERSONAL SPACE INTIMATE SPACE

Fig. 7.3 Hall’s concept for interpersonal distance (horizontal). Source Author

The space within intimate distance and personal distance forms the personal space which is psychologically regarded as one’s own. By entering someone’s personal space without being his close friend or family member, one usually causes uneasiness in the communication. On the other hand, significantly exceeding the perceived reasonable distance may be interpreted as lack of trust of even hostility (Hall, 1966). According to Hall, the interpersonal distance is variable and can be significantly influenced by cultural differences (Hall, 1966). In Hall’s proxemics theory, there is a further important concept “territory.” While “personal space” refers to the immediate space around a person, territory stands for the space and objects a person lays claim to (e.g., the office). Intrusion in the territory may cause hostile reactions. For the international communication, knowledge of the business partner’s perceptions of personal space and territory is helpful to avoid unnecessary misunderstandings.

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7.3.2 Monochronic Time Versus Polychronic Time In a monochronic culture, people tend to do one thing at a time. In business organizations, predefined timeline for the assignments are of great importance. Interruptions of job at hand may easily lead to distress of the employees. In addition, members of a monochronic society tend to follow clear rules and show higher respect for private properties. In polychronic cultures, on the contrary, people tend to tackle several tasks at the same time. Potentially, this leads to more interruptions of the job(s) at hand. However, the jobs are not considered isolated assignments, but a part of the overall target. The main focus is the flexibility toward the changing environment, especially by means of maintaining a good relationship to the stakeholders, and the predefined schedule is only of secondary importance (Hall, 1983). The different working styles resulted by the different understanding of how time and relationship shall be value often lead to irritation and frustration in intercultural collaborations. A necessary step for a successful negotiation is to get to know the reasons for the business partner’s behavior and to be prepared to take time till the mutual understanding is established.

7.3.3 High-Context Cultures Versus Low-Context Cultures Hall uses the terms high-context culture and low-context culture to describe the importance of context in the communication. In a low-context culture, the information is explicitly stated in the wording of the message. The successful transmission of information depends on the precision of the verbal statements by the sender of the message. The personal relationship between the communication partners is non-substantial (Hall, 1976). In high-context countries, the transmission of information often involves non-verbal communication methods, e.g., gesture, facial expression, tone of voice or even the silence. The context situation and social norms may also be a part of the message. A close interpersonal relationship plays an important role in the communication. It usually takes an extended period of time to get to know the unwritten rules to be able to communicate effectively. The following table shows some amusing situations of context communication with the Brits to demonstrate the difficulties for the outsiders of the culture (foreigners) (see Table 7.1). Japan is regarded as one of the high-context countries. In a Japanese company, it is possible that sometimes, essential company strategies are not discussed explicitly at formal meetings, but at informal meetings over the lunch table with chosen participants. Business partners from a high-text culture usually prefer to solve problems in groups. For a sustainable success in high-context cultures, it is important to take time to be informed of the social norms of the business partner and to establish a trustful relationship at the very beginning of the business transaction.

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Table 7.1 Importance of context: communication with the Brits What the British say

What the British mean

What foreigners understand

I hear what you say

I disagree and do not want to discuss it further You are an idiot That’s good You are insane

He accepts my point of view

With the greatest respect That’s not bad That is a very brave proposal Quite good I would suggest… Oh, incidentally/by the way… I was a bit disappointed that… Very interesting I’ll bear it in mind I’m sure it’s my fault You must come for dinner

A bit disappointing Do it or be prepared to justify yourself The primary purpose of our discussion is… I am annoyed that… That is clearly nonsense I’ve forgotten it already It’s your fault It’s not an invitation, I’m just being polite I don’t agree at all Please rewrite completely

I almost agree I only have a few minor comments Could we consider some I don’t like your idea other options? Source www.telegraph.co.uk Author

7.4

He is listening to me That’s poor He thinks I have courage Quite good Think about the idea, but do what you like That is not very important It doesn’t really matter They are impressed They will probably do it Why do they think it was their fault? I will get an invitation soon He’s not far from agreement He has found a few typos They have not yet decided

Internationalization Strategies

7.4.1 Possibilities of Internationalization In the present world, globalization is growing and borders are shrinking as outlined by several authors. Companies are taking advantage of that, by internationalizing their businesses on the sales or supply side as shown in Fig. 7.1. Companies can thus gain new customers, gain a bigger market share, get an advantage point against rivals on the demand side or achieve better material or third-party service cost on the supply side. Market entry strategies differentiate a lot between each other, which makes them hard to compare to each other. Grunig and Morschett are using the criteria of control, resources, cost, flexibility, partner resources and knowledge to highlight advantages and disadvantages of each category (Grunig & Morschett, 2017).

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7.4.2 Direct Exports or Imports Direct exporting is selling directly into the market you have chosen using in the first instance you own resources. Many companies once they have established a sales program turn to agents and/or distributors to represent them further in that market. Agents and distributors work closely with you in representing your interests. They become the face of your company, and thus, it is important that your choice of agents and distributors is handled in much the same way you would hire a key staff person.

7.4.3 Licensing Licensing is a relatively sophisticated arrangement where a firm transfers the rights to the use of a product or service to another firm. It is a particularly useful strategy if the purchaser of the license has a relatively large market share in the market you want to enter. Licenses can be obtained or given for marketing or production purposes.

7.4.4 Franchising Franchising is a typical North American process for rapid market expansion, but it is gaining traction in other parts of the world. Franchising works well for firms that have a repeatable business model (e.g., food outlets) that can be easily transferred into other markets. Two caveats are required when considering using the franchise model. The first is that your business model should either be very unique or have strong brand recognition that can be utilized internationally and secondly you may be creating your future competition in your franchisee.

7.4.5 Third-Party Sourcing Third-party sourcing can be described as a supplier (or service provider) who is not directly controlled by either the seller (first party) or the customer (second party) in an international business transaction. The third party is considered specialized and independent from the other two, even if hired by them, because not all control is vested in that connection. There can be multiple third-party sources with respect to a given transaction, between the first and second parties. Third parties are specialized in certain commodities and possess an infrastructure that supports international trade and purchases beyond borders (international experts, relationships to manufacturers, warehouses, customs, freight forwarders, etc.).

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7.4.6 Investments and Partnering Partnering is almost a necessity when entering foreign markets and in some parts of the world (e.g., Asia) it may be required. Partnering can take a variety of forms from a simple co-marketing arrangement to a sophisticated strategic alliance for manufacturing. Partnering is a particularly useful strategy in those markets where the culture, both business and social, is substantively different than your own as local partners bring local market knowledge, contacts and if chosen wisely customers.

7.4.7 Joint Ventures A joint venture basically means two or more companies form collaboration to create a jointly owned enterprise by investing money, know-how and sharing the risk. This kind of venture can be permanent, and the ownership can attain from minor ownership to major ownership. A joint venture has many benefits. First of all the local partner would have the local know-how and have the familiarity with the local ways and market condition. With a joint venture also the risks would be shared, and this could speed up the process of entering the actual market. Joint ventures are a particular form of partnership that involves the creation of a third independently managed company. It is called the 1 + 1 = 3 process. Two companies agree to work together in a particular market, either geographic or product, and create a third company to undertake this. Risks and profits are normally shared equally. One example of a joint venture is the Sony-Ericsson in the cell phone JV.

7.4.8 International Procurement Office (IPO) International sourcing, and more generally the transfer of parts of the value chain to foreign countries, is characterized by complex factors such as cultural heterogeneities, the presence of multiple actors, relationships with different and distant interlocutors, and unfamiliar business rules and behaviors. One significant development in the purchasing field is the setting up of international procurement offices (IPO) by multinational corporations in many parts of the world. The emergence of IPOs is consistent with the trend toward the globalization of business. A strong cooperation can also be obtained attributing purchasing responsibility to an IPO belonging to a subsidiary. This solution is adopted by all the sampled companies (company 7, company 8) owning one or more facilities in the sourcing region. The main strength of this solution is that, being located inside the facility, the IPO is close to the supply network and to the production made in the facilities established abroad (Fig. 7.4).

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Sales

Ownership of assets and resources High

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Own company Joint Venture IPO

Investment Franchising

3rd Party Procurement

Licensing

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Export

Low

Import

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Fig. 7.4 Internationalization strategies. Source Author

7.4.9 Own Company with Sales and Production Subsidiary In this entry mode, the company that wants to enter the new market would put up a sales and production subsidiary, which means that the company would also produce and have sales personnel in the target market. This entry mode has high resource commitment, low flexibility and a higher risk than the other entry modes. The benefit with a sales and production subsidiary is that the new customers can clearly see that the company is committing to the new market. This method should not be used if there is not strong enough belief that the production and sales in the new market will have long-term potential. The benefits with this method are the local know-how and connections through the local personnel, the close access to the market and the domestic production will not get backlogged with work if the target market ends up being very profitable. This could be a great method for Company X for a more long-term strategy, but the start-up costs would be high.

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References Chia, H.-B., Egri, C., Ralston, D., Fu, P. P., Kuo, M. C., & Lee, C. (2007). Four tigers and a dragon: Values differences, similarities, and consensus. Asia Pacific Journal of Management, S. 24. Danziger, N. (2008). The construct validity of Schein’s career anchors orientation inventory. Emerald Group Publishing Limited. Retrieved October 24, 2018. https://www.emeraldinsight. com/doi/abs/10.1108/13620430810849506. Dathe, T., & Helmold, M. (2018). Erfolg im Chinageschäft. Handlungsempfehlungen für kleine und mittlere Unternehmen (KMU). Wiesbaden: Springer. Grunig, R., & Morschett, D. (2017). Developing international strategies. Heidelberg: Springer. Hall, E. (1966). The hidden dimension. New York: Garden City. Hall, E. (1976). Beyond culture. New York: Garden City. Hall, E. (1983). The dance of life: The other dimension of time. New York: Anchor Books. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer. Hofstede, G. (1980). Culture’s consequences: International differences in worked-related values. Beverly Hills: Sage Publication. Hofstede, G. (1991). Cultures and organizations: Software of the mind. Maidenhead: McGraw‐ Hill. Hofstede, G. (2007). Asian management in the 21st century. Asia Pacific Journal of Management, 24(4), 411–420. Hofstede, G., Hofstede, G. J., & Minkov, M. (2010). Cultures and organizations: Software for the mind (3rd ed.). Auflage: McGraw-Hill Books. Lanz, H. P. (2018). Der Kuchen ist größer als du denkst. Wirtschaftsmediation. Frankfurt. https:// www.wirtschaftsmediatoren-ihk.de/f%C3%BCr-hilfesuchende/beitr%C3%A4ge-zumkonfliktmanagement/teil-3-der-kuchen-ist-gr%C3%B6%C3%9Fer-als-du-denkst/. Retrieved October 24, 2018. Lee, S.-H., & Oh, K. (2007). Corruption in Asia: Pervasiveness and arbitrariness. Asia Pacific Journal of Management, S. 24(1), 97–114. Liker, J. K., & Choi, T. Y. (2004). Building deep supplier relationships. Harvard Business Review, 82(12), 104–113+149.

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8.1

Customer (Buyer) and Supplier (Seller) Relationships

Many industries are nowadays faced by fierce competition inside and outside Europe. Globalization and other elements of international trade are influencing the viewpoint of companies in terms of performance management. This is forcing manufacturing companies to concentrate on core competencies and to transfer the production of components, goods, and services to external suppliers (Aberdeen Group, 2006; Harland, Brenchley, & Walker, 2003; Helmold, Dathe, and Hummel, 2019). The number of value-adding activities has decreased constantly and now lies between 20 and 30% in this industry. Such a development has had a great influence on the structure of supply chains and supplier relationships. Supply chains (the terms “supply chains” and “supply networks” are used synonymously in the literature) have become more complex and international, as pointed out by several authors (Aberdeen Group, 2006; Harland et al., 2003). Christopher and Peck see the level of complexity increasing in the upstream supply chain management of manufacturing companies in the European transportation industry, a trend which is characterized by the growing transfer of activities to suppliers, high numbers of supply chain layers (tiers), and the ongoing globalization of supply chains. As a consequence, vulnerability and risk exposure have risen significantly. The rapid increase in supplier activities directly affects supplier relationship management (SRM), as emphasized by Emmett and Crocker. In recent years, many companies have reduced their value-adding activities and implemented efficiency-oriented cost reductions, e.g. outsourcing, single sourcing, low-cost country sourcing, platform concepts, lean management, and design-to-cost approaches (Gürtler & Spinler, 2010). SRM has become more important in core and peripheral business areas M. Helmold (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_8

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(Trkman & McCormack, 2009) and is aimed at building resilient supply chains. Resilience is based on being able to anticipate, manage, and prevent supply chain disruptions at an early stage. On the other hand, supply risks have risen due to increased dependency on supplier networks. In their research “An Empirical Analysis of the Effect of Supply Chain Disruptions on Long-Run Stock Price”, Hendricks and Singhal (2005) found out that enterprises without operational slack and redundancies in their supply chains experience negative stock effects. The authors revealed the tremendous impact of supply chain disruptions on stock price performance and shareholder value. Supply disruptions can easily lead to high recovery cost, waste, and sharp decreases in sales, as pointed out in the present study. External customers become dissatisfied and internal core functions (e.g. assembly) are disturbed. In most cases, supply disruptions have negative impacts on brand image, sales figures, and the company’s own financial situation (Tomlin, 2006; Trkman & McCormack, 2009). Although literature is already available on the topic, both top management and academia underline the need for a more holistic approach towards SRM. Several authors point out that there is a discrepancy between the proactive role of SRM in complex and global supply networks and the traditional view of how to deal with suppliers (Aberdeen Group, 2006). Christopher and Peck stress that supply chain resilience and SRM are a relatively new and still largely unexplored area of management. Supply chain risks have mainly been investigated on the direct level of tier-one relationships, but consideration has not been fully extended to sub-suppliers, i.e. tiers one, two, three, and beyond (Harland et al., 2003). Figure 8.1 outlines the six phases of supply management (Helmold & Terry, 2016a). These phases include strategy, supplier selection, supplier evaluation, supplier development, supplier integration, supplier monitoring, and control (Helmold & Terry, 2016a). In negotiations, it is important for both, the buyer and the seller, to achieve optimum results in the strategy and selection phase. The majority of negotiations take place in national or international trade between companies, when the customer’s purchase and the sale of the supplier are concerned, and it is a matter of transferring a product or a defined service to the best possible conditions. Naturally, the “optimal conditions” from a buyer’s point of view, other than from a seller’s point of view, so that there is usually controversy

Fig. 8.1 Supply management phases. Source Author

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Mutal interests to have agreement Objec ves

Buyer

Objec ves

Seller

Agreement

Customer

Supplier

Fig. 8.2 Buyer and sellers must have mutual interests. Source Author

that should be resolved through negotiations. For procuring and distributing companies, it is therefore imperative to acquire skills and knowledge in order to optimally place and implement their position and requirements. Figure 8.2 shows the buyer–seller relationship with the aim of both parties to negotiate the best possible outcome for each party.

8.2

Negotiation Objectives (Q-C-D-T Plus Alpha)

Negotiation objectives in trade usually refer mainly to the selling price (Helmold et al., 2019. However, besides the selling price, there are other important determinants. In addition to the price, i.e. the purchase or procurement costs for the buyers, there are elements like quality, delivery, and technical aspects (Q-C-D-T) as illustrated in Fig. 8.3 (Helmold & Terry, 2016b). Within this classification, the most important objectives can be defined for negotiations. If, in addition, there are other goals of interest for one or more negotiation sides, one speaks of the alpha (Q-C-D-T + a). Alpha is the first Greek letter a in the Greek alphabet and covers any aspect, which is not in the first four categories like quality, cost, delivery or technical items (Helmold et al., 2019). Alpha elements can be ethical requirements that the supplier must meet in order to be able to sell goods and services to a customer. Other aspects may be personnel elements, staff training or the introduction of special information systems for connectivity (Helmold & Terry, 2016a). For the seller, it is important to take into account the most important purchasing trends and the necessary requirements. In a survey with purchasing managers and decision-makers in supplier management, five important trends could be identified (Helmold & Terry, 2016a). These trends are (Fig. 8.4): • Centralization • Internationalization • Rotation principle • Digitization (e.g. online auctions) • Strategic supplier management.

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Quality

Technology

alpha

Cost

Delivery

Fig. 8.3 Q-C-D-T plus alpha. Source Author

• Design-to-cost • Change management • Design compeƟƟon • Engineering Budget • Technical changes • OpƟons • Design • Outsourcing

Technology

• Delivery Delivery • Packaging • Customs • Storage & VMI • InoTerms 2010 • Transport insurance • Delivery mode (air, sea or truck) • On-Ɵme-delivery

Quality

Cost

Fig. 8.4 Elements and objectives in negotiations. Source Author

• Quality at delivery • Field quality • Non conformiƟes • Reliability • Warranty • QMS • Defects • Quality repair • • • • • • • •

Recurring cost Non recurring cost Investment cost Launch cost QualificaƟon cost Packaging cost Cost saving Payment terms

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The rotation in purchasing is intentionally very high. Many a buyer does not spend more than two years at his post. Then, he changes the category and suppliers with whom he has business connections. Because otherwise, he could build an emotional bond with the supplier, and maybe not just look at the price. However, distribution on the supplier side often relies on this emotional bond (Helmold et al., 2019).

8.2.1 Quality Objectives Quality objectives are a fundamental part in all negotiations as stated by many authors (Helmold et al., 2019). The agreed elements must be integrated into contracts and quality agreements. Usually, the company distinguishes between delivery quality (0-km defects), field defects, and warranty issues or quality in the after service (Helmold et al., 2019). Bigger companies often use quality agreements covering these elements as part of the contract (Helmold et al., 2019). Delivery quality (0-km quality): The delivery quality describes the quality and state of goods at receipt by the supplying company. Companies are normally obliged by law or contracts to have sample checks of raw materials, goods or components that are delivered. Field quality: If the components have been received and assembled into a machine, system, automobile, train or plane, the companies will be used by customers and be in the field. Detection and repair of field defects are more expensive as the components are usually integrated into a system (e.g. car, train, plane or machine) and need to be disassembled and to be returned to the maker. Quality management systems: A quality management system (QMS) is defined as a formalized system that documents processes, procedures, and responsibilities for achieving quality policies and objectives. A quality management system (QMS) is a collection of business processes focused on consistently meeting customer requirements and enhancing their satisfaction. It is aligned with an organization’s purpose and strategic direction (ISO 9001:2015). It is expressed as the organizational goals and aspirations, policies, processes, documented information, and resources needed to implement and maintain. Table 8.1 shows some examples which all base on the ISO 9001 standard. ISO stands for the international standardization organization, so that a quality management system has validity throughout the world. Table 8.1 Quality management systems (QMS)

Quality management system VDA 6.1 IATF 16949 IRIS EN 9100 ISO 13485 TL 9000 Source Author

Description Automotive industry Automotive industry Railway industry Aerospace industry Medical industry Telecommunications industry

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Other quality objectives: Other quality objectives can consist of problem-solving tools and response times, non-conformity handling or other related issues to quality.

8.2.2 Cost Objectives Cost objectives comprise all costs that are involved in the process of acquiring a product or service. Besides direct cost (purchase cost) there are indirect cost involved (qualification, set up of machine). This concept of considering direct and indirect cost is the concept of total cost of ownership (TCO). TCO is a financial estimate intended to help buyers and owners determine the direct and indirect costs of a product or system. It is a management accounting concept that can be used in full cost accounting or even ecological economics where it includes social costs. TCO covers obvious cost like recurring and non-recurring cost and hidden cost that may occur for qualification, storage, warranty or any other process which is connected to the procurement of goods (Helmold et al., 2019). Recurring cost: Recurring cost is the cost for one component. The recurring cost can also be described as piece price. Non-recurring cost: Non-recurring cost is cost that occurs only once or twice and not repeatedly. This can be an investment like a machine or an agreed development fee that is paid once before delivery of goods. Escalation: Escalation is annual price increases caused by inflationary elements like labour cost increase, pay rise, higher energy cost or increased cost of raw materials. Productivity: Productivity is cost reductions, often annually applied, due to increased efficiency and improved processes. Payment terms: Payment terms have significant impact on the cash situation of any company. These are the payments terms that the seller and the buyer have agreed on. Terms such as cost, amount, delivery, payment method, and when the payment is expected or due. Payment terms will affect the cash situation and can be negotiated to 30, 60, 90 or 120 days. Qualification cost: qualification cost occurs when a new supplier is identified and made ready for future deliveries. Qualification cost is assessed as part of the TCO principle and usually added to the business case and piece price. Qualification cost contain: teaching for understanding, audits, product approvals, communication of customer-specific requirements, specification, translation, and processes.

8.2.3 Delivery Objectives Delivery and logistics cost include the costs of holding goods in inventory (capital costs, warehousing, depreciation, insurance, taxation, and obsolescence) and are commonly expressed as a share of the inventory value. Labour costs involve the physical handling of goods, including tasks such as packaging and labelling.

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Logistics cost can make up to 50% of the actual cost of a component in international trade (Helmold et al., 2019. International commercial terms are usually used in negotiations to allocate the responsibilities of maker and customer (Helmold et al., 2019). New concepts like vendor-managed inventory (VMI) in which suppliers and makers own the inventory before delivery to the customer. Packaging: Packaging cost is a significant factor in pricing a product. Different packaging materials are used in manufacturing industry for various products such as glass, wrappers, laminates, cartoon boxes, polythene, thermocol, cans, bags, papers, and so on. Packaging is an integral part of the materials supply chain and negotiations. Transport and logistics cost: Transport cost include all costs for moving goods between location of the manufacturers to the customers and clients. Transport cost includes intermode transport including transport by trucks, ships, railway or planes. In addition, there are also intra company movements which include handling, movement by forklifts or by workers. Logistics concept cost: Logistics concepts like an advanced warehouse, consignment stock or a VMI are concepts that are important for negotiations. Vendor-managed inventory (VMI) has become a widely used tool for supply chain performance improvement. Vendor-managed inventory (VMI) is a theory-based inspired by integration in supply chain management regarding systems dynamics. In recent years, various partnerships like vendor-managed inventory (VMI) approach have been used in inventory management as a method to cope with the bullwhip effect such. In the traditional inventory management, a retailer (sometimes called buyer) makes his own decisions regarding the order size while in VMI, a retailer shares his inventory data with a vendor (sometimes called supplier) such that the vendor is the decision-maker who determines the order size for both. Thus, the vendor is responsible for the retailer’s ordering cost, while the retailer has to pay for his own holding cost. This policy can prevent stocking undesired inventories and hence can lead to an overall cost reduction. Moreover, the bullwhip effect is also reduced by employing the VMI approach in buyer–supplier cooperation. Customs cost: Customs duty is a tax imposed on imports and exports of goods. The rates of customs duties are either specific or on ad valorem basis, that is, it is based on the value of goods.

8.2.4 Technology Objectives Projects and the purchase of components or goods often include technical aspects, which need to be part of negotiations. Technical criteria are often negotiated in an early state and can cause additional cost if not considered thoroughly. Engineering objectives contain engineering expenses, cost for patents, cost for development, technical changes, and features or engineering budget items (Helmold et al., 2019).

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Development and design costs: Development and design costs contain all costs that are necessary to develop a component or project. Normally, it is estimated in man hours or design budget. Man hours are the hours/days of engineers that are required for the development of a specified project. The days and hours are multiplied with an hourly fee of one engineer. Development services: Development projects and design often involve third parties, specialists, special devices, engineering programmes, testing or patents, which are part of the technology objectives in negotiations. Technical changes: Engineering change can be caused by an immature design or customers’ requests and impact the technology cost and budget. Technical options: Technical options can be part of negotiations and are usually customer requests. Options normally lead to higher functional requirements and increase the engineering and technical cost. Design-to-cost initiatives and cost reduction initiatives: Design-to-cost (DTC), as part of cost management techniques, describes a systematic approach to controlling the costs of product development and manufacturing. DTC is often combined with cost reduction ideas of a product without harming or affecting the functional tasks of the product.

8.2.5 Alpha Objectives Alpha objectives are all objectives which are not in the Q-C-D-T categories. Alpha objectives contain mostly ethical or people objectives by the customer. Ethics objectives: Business ethics and corporate social responsibility (CSR) include norms and values which corporate social responsibility (CSR) is a business model that helps a company to be socially accountable to itself, its stakeholders, and the organization. It contains the general norms and values of a company that companies want to act on, in particular, through acting responsibly towards society. The company translates these principles to employees and other interests such as suppliers. Ethics policies are often aimed at respecting human rights, creating sound and safe working conditions, protecting the environment, and promoting sustainable development. Competency goals: Competency goals include the skills of employees through a systematic and structured corporate culture of lifelong learning. Other alpha goals: Alpha goals are multi-faceted and can be developed for negotiation from a variety of negotiating parties’ motives.

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8.2.6 Cost Estimation as Fundamental Part of Negotiations Whether designing a building or developing software, hardware, systems, machines, cars, planes, trains or plants, successful projects require accurate cost estimates. Cost estimations forecast the resources and associated costs needed to execute a project, which helps ensure you achieve project objectives within the approved timeline and budget. Cost estimating is a well-developed discipline. By understanding the nuances of cost estimating and using standard estimation techniques, you can improve your forecasts. This complete guide to project cost estimating will walk you through the key concepts and major estimating techniques. Additionally, find how-to, templates, and tips for key industries to help you get started with your estimates. Cost estimating is the practice of forecasting the cost of completing a project with a defined scope. It is the primary element of project cost management, a knowledge area that involves planning, monitoring, and controlling a project’s monetary costs. (Project cost management has been practiced since the 1950s.) The approximate total project cost, called the cost estimate, is used to authorize a project’s budget and manage its costs. Professional estimators use defined techniques to create cost estimates that are used to assess the financial feasibility of projects, to budget for project costs, and to monitor project spending. An accurate cost estimate is critical for deciding whether to take on a project, for determining a project’s eventual scope, and for ensuring that projects remain financially feasible and avoid cost overruns. A cost estimate is a summation of all the costs involved in successfully finishing a project, from inception to completion (project duration). These project costs can be categorized in a number of ways and levels of detail, but the simplest classification divides costs into two main categories: direct costs and indirect costs. Direct costs are broadly classified as those directly associated with a single area (such as a department or a project). In project management, direct costs are expenses billed exclusively to a specific project. They can include project team wages, the costs of resources to produce physical products, fuel for equipment, and money spent to address any project-specific risks. Indirect costs, on the other hand, cannot be associated with a specific cost centre and are instead incurred by a number of projects simultaneously, sometimes in varying amounts. In project management, quality control, security costs, and utilities are usually classified as indirect costs since they are shared across a number of projects and are not directly billable to any one project.

References Aberdeen Group. (2006). Industry priorities for visibility, B2B collaboration. Trade compliance and risk management. Global Supply Chain Benchmark Report. Boston. 06/2006. Retrieved May 31, 2010 from http://www-935.ibm.com/services/us/igs/pdf/aberdeen-benchmark-report. pdf. Gürtler, B., & Spinler, S. (2010). A network oriented investigation of supply risk and implications to supply risk monitoring. International Journal of Production, 12, 1–27.

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Harland, C., Brenchley, R., & Walker, H. (2003). Risk in supply networks. Journal of Purchasing and Supply Management, 9(2), 51–62. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler. Helmold, M. & Terry, B. (2016a). Lieferantenmanagement 2030. Wiesbaden: Springer. Helmold, M. & Terry, B. (2016b). Global sourcing and supply management excellence in China. Singapore: Springer. Hendricks, K. B., & Singhal, V. R. (2005). An empirical analysis of the effect of supply chain disruptions on long-run stock price performance and equity risk of the firm. Production Operations Management, 21(5), 501–522. Tomlin, B. (2006). On the value of mitigation and contingency strategies for managing supply disruption risks. Management Science, 52(5), 639–657. Trkman, P., & McCormack, K. (2009). Supply chain risks in turbulent environments—A conceptual model for supply chain network risk. International Journal of Production Economics, 119(2), 247–258.

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A-6 Concept for Successful International Negotiations Marc Helmold

9.1

Six Steps for the Negotiation Breakthrough

Successful negotiations require an analytical, systematic structure and a resultoriented process, which enables negotiators to achieve the optimum outcome in business transactions. The book describes how international negotiations can be pursued with the industry proven A-6 negotiation concept. The A-6 concept by Dr. Marc Helmold has its own characteristics combined with existing and elements from industrial practice or negotiation research. The framework uses standardized tools, which enable negotiators to ideally prepare for and to execute negotiations in the best possible way. The concept was developed by Dr. Helmold during his work in top executive positions and general manager in leading industries. The concept could be applied in numerous international transactions in the railway and automotive industry and permanently improved. The six steps can be outlined as follows: A-1: A-2: A-3: A-4: A-5: A-6:

Analysis of negotiation scope and negotiation partners Alignment of negotiation strategies and tactics Aggregation and affirmation of arguments Accomplishment and amplification of negotiations Ascertaining of resistance and attacking counterarguments Administration of contracts and agreements.

The first step of every negotiation is the detailed analysis and a description of facts and the initial situation. The situation analysis must be the starting point of every negotiation and has a significant influence on the success of the negotiations as numerous authors indicate (O’Brien, 2016). The analysis within the A-6 concept M. Helmold (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_9

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should include five key areas: (1) the negotiating partners, (2) the motives, (3) the scope of the negotiations, (4) the minimum and maximum objectives with priorities and (5) intercultural factors. The manuscript in Fig. 9.3 can be used as a suitable preparation form. It helps to transparently present the analysis to internal stakeholders. The second step is to choose appropriate strategies and tactics, followed by a proper argumentation and the appropriate order of arguments in the negotiation in step three. Step four includes the actual negotiation execution. Finally, steps five and six deal with the successful defence against counterarguments and the finalization of the contract.

9.2

Step 1 (A-1): Analysis in Negotiations

9.2.1 Preparation as Key Success Factor in Negotiations The first step in negotiations is the profound situation analysis and the establishment of a suitable baseline. Step A-1 consists of the analysis of negotiation scope, objectives, motives, roles and intercultural characteristics as shown in Fig. 9.1. This phase decides about success or failure in the subsequent steps from A-2 until A-6. As a consequence, this step must be carried out with care and necessary accuracy. Step A-1 is probably the most time consuming one. In many negotiations, this step may last between 50 and 80% of the entire negotiation process. The negotiation scope in business transactions can usually be divided into quality, cost, delivery, technology and alpha aspects (Q-C-D-T plus alpha concept). The alpha scope is everything beyond the four elements quality, cost, delivery or technology. Alpha elements can consist of ethical (request for corporate social responsibility (CSR) standards of suppliers) or people-related negotiation elements (training and labour conditions). Fig. 9.1 Step A-1: Analysis and negotiation preparation. Source Author

Scope:

Objec ves:

What to nego ate?

What are the goals?

Culture:

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What are intercultural elements

What are the desires? Roles: What are the roles?

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After the detailed analysis of the negotiation scope and motives, it is necessary to determine the objectives on the own and on the opposite side. Part of this analysis is the anticipation and determination of the potential objectives of the negotiation opponent. Negotiation objectives must always have a corridor, a minimum target (least desired objective, LdO) and a maximum target (most desired objective, MdO) as emphasized by various authors (O’Brien, 2016). In parallel to the scope and objectives, it is important to understand the motives of the negotiation opponent. Motives can be described as the interests and desires behind scope and objectives. A motive is a stimulus (such as a need or desire) that causes a person or group to enter a negotiation and to take certain actions. Motives are normally difficult to assess, as negotiators do not disclose them openly. There are, however, techniques to identify motives and interests. The techniques will be outlined within this chapter. In addition, it is essential to assess the roles, responsibilities and important intercultural specifics. Negotiations are usually done in groups and with several stakeholders, so that the analysis is helping to determine decision-makers and influencers. Finally, international negotiations should take into account potential pitfalls with foreign companies. Figure 9.2 illustrates the important elements and questions in the phase A-1. In this phase, several questions have to be raised. It is recommended to utilize the W-question method (so-called W-questions as all questions start with a “W”, one exception: “How”). In many negotiations, there are often severe time pressures and constraints to reach an agreement in a certain deadline. Despite these pressures, it is important to start with a profound, fact-based and detailed analysis for successful negotiations in the next steps from A-2 (strategies and tactics) until A-6 (final agreement). Suitable W-questions (and H-questions) of the analysis in step A-1 are:

A-1 A-2

A-4 A-5

Preparation

A-3

Scope Objectives Motives

A-1

Roles Information source (V-Mann) Culture

Execution

A-6

What to negotiate? Who is negotiating? Who is the decision maker, who is the influencer? What do I want to achieve? What are my objectives? What are the interests? What roles can I observe? What are the motives of my negotiation opponent? Who can I utilize as information source? How can I use my information source? What are cultural elements?

Fig. 9.2 Elements for the situation analysis (A-1). Source Author

Agreement

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• What to negotiate? • Who is negotiating? • Who is the decision-maker? • Who is the influencer? • What do I want to achieve? • What are my objectives? • How can I achieve my objectives? • What are the interests? • What roles can I observe? • What are the motives of my negotiation opponent? • Who can I utilize as information source? • How can I use my information source? • What are cultural elements? • How to address my requests? The answer to the W-questions should be written down on the manuscript. Although leading negotiation concepts have a script for the analysis phase, the format of each concept varies (O’Brien, 2016). Figure 9.3 shows the negotiation manuscript of the negotiation framework. The manuscript is a structured and systematic tool for preparing the negotiations. It is the foundation and starting point for any discussion. Roles and responsibilities are also important, as negotiations have to focus on decision-makers and influencers on the opponent side. Table 9.1 shows generic roles in groups and negotiations. Psychologists allocate Greek letters to a certain behaviour and role. The A-6 concept has the following roles: alpha, beta, gamma, omega, delta and kappa. Understanding roles and responsibilities of the negotiation opponent are fundamental elements in the preparation phase. Negotiations are determined and led by the negotiation leaders and certain influencers. All roles must be analysed before any negotiation and can be categorized into these six negotiation categories. Table 9.1 summarizes the six categories of important and unimportant roles and responsibilities. The last element in the analysis phase is the identification of cultural issues, which might be important for the negotiations. Negotiating with China necessitates some Confucian principles, which are characterized in a strict hierarchy, group harmony, politeness and extremely strong work ethics. Moreover, political topics should be avoided, whereas family aspects will matter in negotiations. Another pitfall is the business focus versus the focus to establish relationships. Some countries, such as the USA, are very result- and task-oriented and place little emphasis on the relationships. In contrast to the U.S.A. negotiations in China or Japan must focus on creating and maintaining relationships (Chinese: Guanxi). Another example is direct versus indirect communication. Germans are renowned for their directness. This is a symbol for direct thinking, whereas the Japanese and other eastern societies are more concerned with respecting the face value. Face loss is in these cultures fatal and will finally end in an abundance of negotiations.

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Fig. 9.3 Negotiation manuscript of the A-6 concept. Source Author

111

1. Negotiation title: 2. Scope

Quality:

Cost:

Delivery:

Technology:

Alpha (others):

3. Analysis of negotiation opponents: Roles & responsibilities: (alpha, beta, gamma, omega, delta and kappa)

4. Strategies and tactics: Potential strategies and tactics:

5. Objectives

We:

They:

6. Motives

We:

They:

Argumentation:

Negotiation opponent:

My reaction:

4. Minimum- und Maximumziele: ______________________________________________ 7. Intercultural aspects

Table 9.1 Roles in negotiations

Type

Greek translation

Alpha ἄkua, A, a Beta bῆsa, B, b Gamma Cάlla, C, c Omega ὦ lέca, X, x Delta Dέksa, D, d Kappa Kάppa, K, j Source Author

Description Decision-maker Influencer Co-worker, supporter Critic Guardian Double agent, V-Mann

9.2.2 Negotiation Scope: Q-C-D-T Plus Alpha Methodology A crucial part of the negotiations in phase A-1 is the determination of the negotiation scope. The negotiation scope in business transactions can be categorized in quality, cost, delivery, technology and other elements (Q-C-D-T plus alpha concept, 4 + 1).

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Fig. 9.4 Negotiation concept and elements (Q-C-D-T plus alpha). Source Author Design to cost

0-KM defects

Options & changes

Field defects

Value engineering

Service defects

Price-value analysis

Warranty cases

Cost reduction ideas Value stream mapping

T

Development cost

Non-conformities Bonus/Malus system

Q

Quality management system

+ alpha

D

Duty cost & logistics Transport & packaging

Escalation/de-escalation

Storage and handling

Recurring cost

Transport Insurance

Payment terms

Incoterms 2010

C

Annual price increases

Non-recurring cost

Customs fees

Service cost

VMI or Stock

Productivity

Figure 9.4 shows the elements of the four groups. Negotiation experts like Ury & Fischer, O’Brien or Schranner suggest to determine always minimal and maximal goals in the relevant negotiation categories (O’Brien, 2016). The priority matrix (as part of the A-6 concept) is the ideal tool to identify and determine importance (and priority) and the corridors of objectives in the four categories. A corridor means that individual objectives need a minimum and maximum target.

9.2.3 Negotiation Objectives Designing Objectives: SMART and TCO In the phase A-1 (analysis of scope, objectives, roles, motives and intercultural issues), it is also important that objectives are defined in line with the smart methodology, that means that the targets must be specific, measurable, achievable, realistic, relevant and timely (SMART). Another important factor is the application of the total cost of ownership (TCO) principle. Many companies make the mistake that they focus on piece price and initial cost, rather than looking at total lifetime cost. TCO is defined as the financial estimate intended to help negotiators and businessmen to determine the direct and indirect costs of a product, service or system. Additional cost in international transactions can occur by additional transportation, logistics, audit or qualification cost. Part of the TCO methodology is to quantify all objectives in a monetary way, so that all objectives have a real value and some quantified cost behind. In the priority matrix in Fig. 9.5, it is visible that

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piece cost, payment terms or 0-KM quality have high priority, whereas other factors like productivity improvements, payment terms, code of conduct have a very low priority. Quality Objectives Quality objectives are often neglected or not fully integrated into negotiations or contracts as far as the monetary evaluation is concerned. Quality objectives can be quantified relatively easily and must be clearly indicated in contracts. For example, every part that is delivered as defect will lead to additional cost burdens for the customer through returns, replacements or administrative expenses. Such value can be easily quantified and added to any agreement (each defect and delivered part with a deviation will lead to a claim of 1000 euros per defect). In addition to the actual costs for the defective part, the non-conformity and claim cost can be extraordinarily high. Regarding quality, a distinction is usually made between the quality of delivery (0-KM defects), the quality in the field (Field defects) and the service quality (service defects). Delivery quality (0-KM quality) is the contractually agreed quality upon delivery or receipt according to the specification. By law, the buyer (customer) is obliged to check the delivery quality at the receipt of the goods on a random basis. The seller must produce and deliver the goods in accordance with the agreed performance features, unless otherwise agreed. The field quality is the quality level in the field that is to say in operation at the customer. Companies usually measure these on the basis of agreed performance characteristics, reliability systems and statistical methods (Helmold, 2010). After a warranty period, there might be an agreed service quality. Other quality elements are complaints (non-conformity). Complaints are claims due to deviations or defects (non-conforming goods or NCG) Claim management is the planning, execution and monitoring of all measures that a company has to take and initiate regarding missing features and the exchange of goods. Quality management system (QMS) includes external certification by authorized certifiers (e.g. Technical Inspection Association, TÜV, German: Technischer Überhungsverein). Many new customers insist on this certification (e.g. DIN EN ISO 9001: 2015) compared with

Priority matrix

Fig. 9.5 Priority matrix. Source Author

No.

Negotiation category

1.

Piece price or recurring cost

2.

Nonrecurring cost (machines, dies)

3.

Payment terms

4.

Productivity improvements

5.

Quality assurance agreements

6.

0-KM quality (at receipt)

7.

Field quality

8.

Supply conditions (IncoTerms)

9.

Logistis concept

10.

Code of conduct

Very high priority

High priority

Medium priority

Low priority

X X X X X X X X X X

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their suppliers, which can lead to costs in the higher six-digit range. Non-conformities or defects are the number of bad parts in relation to all delivered parts and goods. Contractual penalties are monetary penalties and may be imposed due to late deliveries or bad quality. Likewise, penalties may be agreed at a lower quality level or a lower delivered quantity (Helmold & Terry, 2016a, 2016b). Bonuses (Latin: good) are incentives for high-quality execution and delivery, malus negative incentives (Latin: bad). Cost Objectives Cost targets include all direct or indirect expenses necessary for the procurement of goods and services (Helmold & Terry, 2016a, 2016b). In addition to direct procurement costs (unit price or recurring cost), there are indirect expenses (non-recurring cost; qualification, construction of a machine; moulds or dies), which are closely linked with the procurement. Price increases or escalation are periodic (often annual) cost increases by the manufacturer. Most of these are justified by inflation and higher operating costs over the project period. Price increases can be rejected by the customer with the manufacturer and supplier’s commitment to productivity improvements as part of a continuous improvement process. The opposite of price increases (escalation) it is the periodic reduction of prices (de-escalation or productivity). Unit costs are the costs per component (recurring cost or piece price). Unit costs are recurring per delivered item. The number of parts ordered multiplied by the unit price gives the procurement volume (material spend). Non-recurring cost is one-time costs and expenses for development, machines or innovations that arise only once (usually) at the beginning of the project and represent investments that involve the capitalization of assets (non-recurring cost). Most of the one-off costs are investments in machinery or development costs. Service costs occur in connection with the operation or within the agreed warranty period are service costs. In complex projects, this share can account for up to 50% of the total project costs. Productivity involves improvements in cost structures through a continuous improvement process and the implementation of lean methods. Productivity improvements can add up to more than 30–40% in three years, as studies show. Payment terms are the period to pay goods or services after delivery. The payment date has a direct impact on the company’s cash flow. Very good companies have very short payment terms to their customers (payment on delivery) and longer to suppliers (e.g. 60 days). Delivery Objectives Delivery elements can account for more than 40% of the unit price for goods deliveries, especially in international goods traffic (Helmold & Terry, 2016a, 2016b). Germany has been export world champion for several years and has a significant trade surplus in 2017. Transport, packaging, insurance and customs clearance must therefore be taken into account in negotiations. In addition, to ensure delivery performance, there are logistics concepts, e.g. Vendor Managed Inventory (VMI), where suppliers are responsible for inventory management (Helmold & Terry, 2016a, 2016b). Packaging consists of the cost of packaging the goods and can be costly too. Packaging is primarily intended to protect the goods

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from damage, but also have other functions (overseas packaging, marketing, functional packaging). Transport and logistics costs are costs for transportation, storage, insurance and customs clearance. Other logistics costs are dependent on customers’ expectations and needs. Often customer demands high delivery reliability and usually has delivery concepts such as an advanced warehouse, specific distribution channels or just-in-time (JIT) deliveries. Technology Objectives At an early stage in negotiations, there are technical or design elements that have a direct impact on the budget and costs. External development services are cost for external companies for the complete or partial development of products with features of the customer. Technical changes (engineering change) usually entail cost increases, which have to be negotiated as part of functional or design alterations. Most discussions take place between the engineer or technician and an experienced sales manager. In this context, it is advisable to train technicians and engineers through a sustainable training in negotiations, too. Design-to-cost is the holistic estimation of cost by internal or external companies for the development of a component or system within a budget and target price. Ideas for cost reductions or (functional) improvements include future ideas for product improvement or cost reduction. Alpha Objectives Alpha goals are all goals that are not included in the first four categories. Alpha goals can include ethical, innovation or personal goals. Alpha goals are important and must be part of any negotiation.

9.2.4 Motives and Interests Motives and interests in negotiations are important in negotiations and can be described as the desire to do some action. Motives have internal and external factors that stimulate the desire and energy. When understanding the motives of negotiators, it is possible to understand the objectives and targets of the negotiation opponent. Motives are related to the motivation of people. Motivation is defined as a reason behind a character’s specific action or behaviour. This type of behaviour can be described as the character’s own consent and willingness to do something. There are two types of motivation: one is intrinsic, while the other one is extrinsic. Intrinsic motivation is linked to personal pleasure, enjoyment and interest, while extrinsic motivation is linked to numerous other possibilities. Extrinsic motivation comes from some physical rewards such as money or power. Intrinsic motivation, on the other hand, is inspired by some internal reward such as knowledge, pride, or spiritual or emotional peace or well-being. Business people and negotiators have some motivation for every action, as do people in their private or professional life. Questions to identify motives, interests and motivational elements from negotiators can be as follows:

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• What is important for the negotiator in this negotiation? • What items are of interest for my negotiation opponent? • What are extrinsic, and what are intrinsic factors? • How does he feel? • Why does he feel that way? • Where would he possibly agree to? • What are desires? • What are constraints?

9.2.5 Roles and Responsibilities The analysis of the negotiation partners is a crucial activity in phase A-1 and consists of the identification of decision-maker (alpha), influencers (beta), co-workers (gamma), guardians (delta) and potential critics (omega). This step can also serve to identify useful and helpful people, who provide suitable information and support (kappa). The personalities are assigned to letters of the Greek alphabet and have their origin from evolutionary psychology research. Table 9.2 summarizes the personalities in negotiations in line with the A-6 concept.

Table 9.2 Roles and recommendations in negotiations Type

Greek translation

Alpha

ἄkua, A, a

Description

Recommendation

Decision-maker He/She is the decision-maker. Often budget owner. Recognize as leader Focus discussion on decision-maker, and who is the trustee or influencer of the decision-maker Beta bῆsa, B, b Influencer He/She is the influencer. Often trustees and supporters of decision-maker The decision-maker is dependent on influencers and supporters Gamma Cάlla, C, c Co-worker, He/She is the co-worker. Administrative position supporter and supporter. Not important for decision-maker Do not specifically pay much attention but be respectful, focus on team ability, and in cases, he/she is asked to provide knowledge or data Gammas might become influencer Omega ὦ lέca, X, x Critic He/She is the critic in the group (German: Bedenkenträger). The critic may have concerns and may try to resist openly or secretly the alpha. Often informally strong in group Do not focus specifically on omega, be polite and respectful. Observe the omega, if he/she can be useful (continued)

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Table 9.2 (continued) Type

Greek translation

Description

Recommendation

Delta

Dέksa, D, d

Guardian

Kappa

Kάppa, K, j Double agent V-Mann

He/She is the guardian or watchdog in the group (finance, controlling, accounting, compliance, human resources) Figure out who is the watchdog. Convince with mutual benefits and advantages of deal and transactions He/She is the person who will help us on the other side. The kappa needs to be built up, and the relationship is very important. (Greek: Kasάrjopo1; Katakaspos = Spy; German: V-Mann, Verbindungsmann) The V-Mann can help me to convince the other side. Must be the winner

Source Helmold et al. (2019)

The situation analysis of personalities must focus on the roles and responsibilities of the involved people at the negotiation. Figure 9.6 displays an example of a company that is interested in purchasing goods or components from a manufacturer. The figure shows the people and functions involved. The general manager (Mr. A) is the decision-maker and the alpha, so that he must be targeted as leader in this group. The influencer is the purchasing manager (Mr. B). The focus should be put on these groups. The team leader (Mr. T) is the person who can help us by providing support or information. Alpha Type The term alpha comes like the other terms originally from evolution science. The alpha person in negotiations is the ultimate decision-maker in negotiation groups and parties. He/she is very often the department head or the budget owner. The alpha is recognized as leader. Leadership can be on formal and informal grounds. The alpha can be male or female and normally shows characteristics like dominance, assertiveness, leadership skills, protection, courage, physical and mental strength. Alpha people often have a strong personality. Alpha traits are in some ways inherent. The recommendation for negotiations is to focus the discussion on the alpha and his supporters and influencers (betas). The alpha is the formal decision-maker and has authority to make deals and agreements. In certain cases, informal alphas are accepted as leaders due to charisma, experience, knowledge or reputation. Alphas have to expose their dominance and authority (Hofert, 2015). Alphas can often easily be recognized due to behaviour, seating order, recognition in the group or status symbols. Table 9.3 summarizes the characteristics of alpha people. The alpha needs the beta as a supporter; therefore, the alpha treats as a decision-maker the beta as an ally mostly positive. The alpha is functionally mostly

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Person

Function

Role in negotiation

How to approach…

Mr. A

General Manager

Decision maker

Respect as decicision maker!

Ms. P

Procurement Manager

Influencer

Influence her on quality and price!

Mr. B

Commodity Buyer

Low Influencer

Ms. T

Team Leader

V-Mann

Try to get information – must be winner.

Ms. C

Purchasing Controller

Guardian

Convince with facts and benefits.

Mr. O

Buyer, former Manager

Critic

Observe, try to get Mr. O on our side?

or

Involve in discussion and figure out if influencer or not?

Fig. 9.6 Analysis of personalities. Source Author

Table 9.3 Characteristics of alpha people

No.

Features of alpha people

1. Alpha 2. Alpha 3. Alpha 4. Alpha 5. Alpha 6. Alpha 7. Alpha 8. Alpha Source Author

people people people people people people people people

make decisions are self-confident want to be successful want to move something take responsibilities mark their turf use (body) language as instrument take clear positions

the manager or department manager. He could take power himself if the well-being of the group or the achievement of the goal is in danger. In negotiations, the alphas and betas have to be identified within the analysis phase. The identification of these two groups helps to achieve the final negotiation success. Besides the decision-makers (alpha) and influencing people (beta) groups, there are group members without major importance (gamma). This group is normally consisting of co-workers who support the decision-maker or the managers. This group has no power, formal or informal and cannot significantly influence the decision-maker. It is advisable to treat gamma people with respect, but one should not pay too much special attention as they have no influencing role. Often the boundaries of betas and gammas are not clear, so that within the situation analysis of the person typologies, a clear identification must take place. In the international context, friends, spouses and family members can play a more important role because of their personal proximity to the decision-maker, so care must be taken here.

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Beta Type The beta is an expert or subject matter expert and influences the decision-maker by his expertise. Betas are often influencers of the decision-makers on manager, supervisory or expert levels. He supports the leader of the group (alpha) and helps him stay in his position. Expert buyers or sellers are often betas, as they usually do not have the final mandate to complete the negotiations, but influential power on the decision-maker. Usually, betas do have the final budget responsibility or decision-making power, so that the betas assert their influence on the alpha. The beta is a significant influencer of the decision-maker. In each negotiation, there are several influencers who need to be evaluated within the situation analysis. In international negotiations, betas can have a special or family relationship with the decision-maker. This can be same time place, same school, same university or same family. Gamma Type Gamma people are part of the group, but do not have a great influence. In the A-6 concept, gammas are co-workers. These are clerks or administrative staff who should assist in the negotiations, often in the form of logging or providing information (Hofert, 2015). Gamma people like to be led by strong betas or alphas. There can be several gammas in negotiations. Gammas are usually “simple” clerks or assistants who work for the beta and alpha. Omega Type Every group has people who have concerns or see risks. People of this group are called omega. The omega can be adversary and is the critic in the group. Omega people are often informally recognized by the group through reputation, experience or knowledge. Omegas can be or become potential competitors to the alpha. The omega can play an important role in one’s own negotiation, as he can be of information of interest for one’s own negotiation analysis. Omegas in the own group should not participate in the negotiation. Omegas on the other negotiation side should be carefully observed as they can help to influence the decision-maker of the other side. Delta Type The delta in negotiations is the so-called guardian or watchdog of the group. Delta types are in departments and functions, which have to control, that the agreements are within legal, financial, ethical and company boundaries. Watchdogs are usually participants or departments such as finance, controlling, accounting, compliance, business ethics or human resources. In negotiations, it is important to figure out who the watchdog is and to convince them with the benefits and advantages of the deal and transactions. Delta usually looks at the facts of a deal.

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Kappa Type The kappa (Greek: Kasάrjopo1; Katakaspos = Spy; German: V-Mann, Verbindungsmann) is the person who will help the other group with useful information and support. He is a sort of double agent with valuable information and data. The kappa needs to build up on the negotiation opponent side. A good and reciprocal relationship is very important. Very good alphas or betas have a network of kappa people installed on the other negotiation party. The kappa or the V-Mann can help their own side convince the other side’s influencers and decision-maker. It is important to appraise the kappa in front of the decision-maker. The kappa must be the winner out of the negotiations. Informants or kappa people (German: V-Mann, Verbindungsmann) in negotiations are persons who pass on special knowledge or information to us as part of our negotiation preparations. Information in this context consists of legal aspects, positions, strategies, competition, market development or other bargaining positions. Information is not necessarily business secrets or confidential data, but information that will help to implement the own negotiation objectives. As German synonym in this negotiator, the term “Verbindungsmann (V-Mann)” is used. Informants or V-men have to be specifically set up and promoted; usually, these are in the background. Informants in negotiations do not serve the purpose of revealing secrets, but to reveal inside information, moods, opinions, goals and negotiating strategies of the other side. The term V-man (double agent, whistle-blower) is in politics rather negatively cast, but in negotiations of business partners a legitimate and suitable means such as Helmold or Schranner recommend. Appropriate informants are omega or beta people, who have detailed knowledge on the other side. Both sides are suitable, with omega usually a more detailed knowledge and beta often more influence on the decision-maker have. Of course, the other side will try to build an informant network on their own negotiating page. In this case, it makes sense to let the other side believe that there are informants in their own ranks and provide the other side with selected information that is helpful for their own success. Fig. 9.7 shows the graphic representation of V-man on the other side of the negotiation who provides us with useful information.

Fig. 9.7 Set-up and usage of V-Mann. Source Author

Decision maker

α

β β

influencing

informing

κ

V-Mann

β

β

β

We

γ

warning

β

α They

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Informants are very popular in Asian countries such as China, Taiwan, Japan or South Korea. The informant can be the secretary, the buyer, the seller or the clerk. Important in the build-up of informants is that they stand in front of the decision-makers as winners and are regularly positively mentioned. The “positive memory effect” will cause the decision-maker (alpha) to be sympathetic to the informant (usually beta or gamma) and show it. There is even the possibility that a gamma informant grows into a beta informant by gaining the alpha’s trust.

9.2.6 Cultural Issues Globalization and increasing international trade require the consideration of intercultural elements in negotiations. This makes communication, negotiations and cross-cultural understanding more crucial for everyone, including executives, business leaders, workplace managers and employees. Intercultural elements are outlined in Fig. 9.8 and comprise norms, laws, religion, values, diversity aspects, language, emotions, individual and group behaviour, emotions or rationalism and customs.

Fig. 9.8 Cultural attributes. Source Author

Norms & values Law and rules

Diversity

Language

Time

Culture

Values & beliefs

Group vs. Individuals

Religion

Emotions & Rationality

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Step 2 (A-2): Alignment of Strategies and Tactics

9.3.1 Determinants to Develop a Suitable Strategy After the analysis of negotiation scope, objectives, motives, personalities and intercultural elements in step 1 (A-1), it is important to define the appropriate strategies and tactics for the negotiation execution. Figure 9.9 shows the complexity of negotiations and the determinants for selecting the right strategies and tactics in negotiations. Several factors like time, relationships, bargaining power, objectives, roles and personalities, motives, culture or the environment can significantly impact strategies and tactics in negotiations. The identification of motives belongs to one of the most significant steps in the preparation and is influencing strategies and tactics. In contrast to the Harvard concept, the A-6 negotiation model by Dr. Helmold recommends not to disclose any motives, strategies, tactics or bargaining power to the negotiation opponent. Thus, it is possible to carry out the negotiation in a flexible and strategic way to achieve the optimum results. Strategies and tactics should be carefully prepared and used in the negotiations to have successful negotiations. The Harvard concept by Ury and Fisher, however, suggests to reveal the own motives, strategies and tactics in order to ensure a fact-based, fair and objective negotiation. The four determinants objectives, motives, bargaining power and culture are the most significant triggers for ideal the design of strategies and the application of appropriate tactics. Negotiation strategies are fundamental ways to achieve the objectives in negotiations. These are the structured and systematic plans (master plan and sub-plans) to achieve long-term goals or the overall aim in negotiations. Negotiation strategies must be defined for each category as overriding guideline and as part of the negotiation process. Strategies are divided into five categories as

Scope

T

Relationships

Q

Negotiation success

Time

alpha

D

Culture

Motives

C

Q alpha

Environment Bargaining power

Roles &

T D

C

Personalities

Objectives

Environment

Fig. 9.9 Strategies, tactics and motives in negotiations. Source Author

Achievements

A-6 Concept for Successful International …

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low

Importance to succeed and

high

Fig. 9.10 Strategies for negotiations. Source Author

relative time requirement

9

competing

cooperating

pressurizing

collaborating

compromising accomodating

avoiding

giving in

diverting

accepting

low

Importance of relationship

high

shown in Fig. 9.10. Several authors highlight five major strategies in negotiations (O’Brien, 2016): 1. 2. 3. 4. 5.

Collaborating and cooperating strategies Competing and pressurizing strategies Compromising and accommodating strategies Avoiding and diverting strategies Giving in and accepting strategies.

The figure shows that collaborating and giving in strategies result in a better and long relationship compared to competitive and diverting strategies. Whereas collaborating/cooperating strategies are time consuming but good for creating or maintaining excellent relationships, the competing/pressurizing style and strategies are not recommendable for having good and sustainable relationships. Compromising and accommodating strategies take not so much time, but will also conclude in a good relationship with the negotiation partner. The two remaining strategies diverting/manoeuvering and giving in/accommodating imply that the own success is secondary and not important. Diverting and manoeuvering will most likely end in a low relationship with the negotiation partner, whereas giving in/accepting will lead to satisfaction and a good relationship with the negotiation partner.

9.3.2 Strategies in Negotiations Cooperating and Collaborating Strategies Collaborating and cooperating strategies focus on using problem-solving methods to create value and discover mutually satisfactory agreements. These strategies utilize the creativity of both parties to find solutions to both sides’ interests and are effective when long-term relationship is important and short-term task is important. Collaboration and cooperation in negotiations can be pursued if the negotiation

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partners know each other well and if there are common grounds of trust. The negotiation partners must be assertive about their needs and cooperative with the other side. Collaborating and cooperating strategies involve that all negotiation partners are interested in understanding the concerns, interests and constraints of the other negotiation party. In addition, collaborating negotiators must strive for identifying the issues or reasons underlying the dispute and then working together to identify a solution that is satisfying to all involved sides. Collaboration will eventually lead to a good relationship, but building up relationships are extremely time consuming. Certain countries and cultures build on strong relationships (Chaps. 17–22). The grounds for cooperating or collaborating strategies are usually a long-term orientation of parties in disputes and consider the own and the opponent’s outcomes (O’Brien, 2016). Cooperating and collaborating strategies require the set-up of good relationships and personal involvement of the negotiation partners. Frame agreements, long-term agreements or frame contracts with a period of three to five years or more can be negotiated in the context of cooperating strategies. Examples of phrases for collaborating and cooperating strategies can be as follows: – – – – – –

“For the consolidation of our relationship I propose the following xxx”. “We should cooperate here, or?” “If we collaborate in this field, we will have long-term benefits!” “We can achieve our goals to mutual benefits”. “A close cooperation will have advantages for both side”. “Together we are strong, don’t you think so?”.

Competing and Pressurizing Strategies Competing and pressurizing strategies are primarily concerned with achieving the own goals regardless of the impact on others. The negotiator views negotiation as a win-lose rather than a problem-solving activity. This strategy can be effective when the long-term relationship is not that important and short-term task is more important. Competing or pressurizing strategies are normally carried by dominant people with high bargaining power. Competitive negotiations are often used, when negotiators aim at a win-lose or win-win strategy. Competitive negotiators often neglect the importance of relationships. In the event of tight deadlines, stretched targets and the favourable bargaining position can be powerful and useful. Competitive negotiators must be aware that the importance of relationship does not have the same importance as in collaborative negotiations. Even though negotiators are pursuing negotiations in a competitive way, it is crucial not to threaten, intimidate or insult the negotiation opponent. Avoiding and Diverting (Manoeuvring) Strategies Avoiding or diverting (or manoeuvring) is the avoidance of confrontations in a certain negotiation element. In this case, the negotiation opponent is inactive and playing on time. Inaction is the passive means of dealing with disputes. Those who

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avoid conflicts adopt a “wait and see” attitude, might not want to quickly pursue the negotiation and play on time. Avoidance is a suitable strategy, when several options can be chosen or when not all information is available. Thus, it is possible to acquire more facts and to have a more detailed assessment of the situation. The strategy is primarily concerned with avoiding inter-personal conflicts of negotiation partners by diverting a topic or by ignoring it. This strategy can be useful when the stakes of a negotiated outcome are not worth the investment of time or the potential for igniting conflict. Avoidance is characterized by sidestepping, postponing and ignoring the issue or situation. It is very effective when avoidance of the situation or issue does not greatly affect the relationship and short-term task is not important to either party. Giving in can be a useful alternative within negotiation strategies if you are not fully prepared or cannot make a decision in the respective sub-area, as decision-makers from your own ranks may still need to be consulted. Other important meetings, an airplane, which takes off or other urgent appointments are usually signals of avoidance. Comments can look like this: • “Do we want to discuss the subject at the next hearing?” • “Why do not we discuss that next time”. • “I have other important dates”. • “We cannot discuss the topic, because I’m under time pressure”. • “I would like to negotiate at another time, because I do not want to miss”. Compromising and Accommodating Strategies Compromising and accommodating strategies are suitable for negotiators who enjoy solving the other party’s problems and who aim to preserve good relationships. A compromise is a settlement of differences, an agreement reached by adjusting conflicting or opposing viewpoints or positions through a reciprocal modification of needs and requests. It is essentially a meeting in the middle. A compromise is a critical component for any healthy relationship. Without a willingness to compromise, it is nearly impossible to find a middle ground where both sides are feeling recognized. In compromises, the rule of reciprocity is central and can be made with the following statements: – – –

“I propose the following compromise for further cooperation!” “The following common advantages have the result of the negotiations for us!” “To further strengthen our relationship, I make the following proposal …”.

Giving in and Accepting Strategies Giving in and accepting strategies are primarily executed by negotiators who wish to maintain a deep relationship with the other negotiation side. One side of both negotiators tends to neglect the own needs in favour of helping the other side get what they want. It is effective when long-term relationship is important and short-term task is not important. This strategy implies to make concessions to the

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other negotiation partner. It means that concessions for negotiation elements are easily given to the other side in hopes of strengthening the relationship. The strategy implies the risk to give away too much too quickly. Acceptance and concessions to the negotiation opponents should not be done without return as recommended by Helmold and other authors.

9.3.3 Tactics in Negotiations Useful Tactics Negotiation tactics are defined as the short- and medium-term actions and activities (methods) employed in negotiations, which are utilized to achieve the negotiation success. Tactics are often deceptive and manipulative and are used to fulfil one party’s goals and objectives. Tactics or dirty tricks are sometimes executed by negotiators to the disadvantage of others, so that Dr. Helmold recommends to be aware of distracting tactics. Tactics are always an important part of the negotiating process in phase A-3 and must be aligned with the right strategy. Tactics are often subtle, difficult to identify and used for multiple purposes. The tactics can be described as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

Anchoring Mirroring Good and bad policemen Setting a time deadline Focusing on visions and long-term endeavours Playing on time Using seating order as influential factor Highlighting mutual benefits Making flatteries and embracing Appeal to a higher authority Using precedents Saying the untruth (lies) Making promises Distracting and fake news Meeting at the halfway point.

Anchoring Anchoring in negotiations is the attempt to establish a reference point (anchor) around which a negotiation will revolve and will often use this reference point to make negotiation adjustments. Anchoring often occurs when the first offer is presented at the beginning of a negotiation. Example: Two parties want to finalize a business transaction about a machine. The buyer aims to get the lowest price and anchors with a purchase price of 10,000 Euro, whereas the seller targets the highest possible price and anchors with 20,000

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Euro. In a usual negotiation, both parties will narrow to each other to reach the zone of a mutual or possible agreement. The A-6 concept by Dr. Helmold recommends to use fact-based anchoring tactics by using the total cost of ownership (TCO) approach. This approach can also be utilised to force the other negotiation party to come closer to the ZomA. If the seller in the above example is asking for 20,000 Euro for the machine, fact-based countertactics are the outlining of TCO elements, such as market price of the machine, production cost, competition, benchmarks, quality, set-up or transportation cost. A second counteractivity can be to add value, such as adding transportation, set-up, maintenance, service or other aspects as outlined by several authors. Mirroring Mirroring is a light but effective technique in negotiations and conflicts. Mirroring is closely associated with active listening and is practically a special technique. Mirroring can be done in terms of speech or body language. Mirroring is the behaviour in which one negotiator subconsciously imitates the gesture, speech pattern or attitude of the negotiation opponent. When applying this technique, the negotiating partner will have a comfortable feeling in the conversation and regards both sides in harmony. You can also mirror someone’s language by adjusting the language level. In a company, one will find very different language levels and communication styles, depending on whether one is in a meeting of the management, in the recreation room of the marketing department or in the production workers. Mirroring should not be done with angry people. Example: The former Porsche boss Wiedeking was a master in mirroring. After an executive board meeting, he took off his jacket and tie, rolled up his shirt sleeves and went into production, where he talked to the men in a relaxed, shop floor manner. The workers were happy about the perceived eye level of their boss and thought to themselves: “You can talk to him” (Gramm, 2015). This is a good example for mirroring. Good and Bad Cop The tactic “bad policeman”, “good policeman” originally comes from the police interrogation approach from the USA. The tactics come from the Federal Bureau of Investigation (FBI) and have one or more good and one or more nasty policemen approaching the negotiating partner. The “bad policeman” usually makes comments to intimidate and to put pressure on the negotiation partner. He makes direct attacks and demands to intimidate or confuse the negotiating partner. In some cases, the evil policeman also makes threats or warnings. The goal of the evil policeman is to put the negotiating partner under stress. This is the starting point for the good policeman who is now approaching the negotiating partner in an understanding, supportive and cooperative manner in order to establish an emotional connection. By offering alleged concessions, which have previously been agreed with the evil police officer, the good police officer now tries to convince the negotiating partner to a negotiated result, which corresponds to their own target corridor. Often the negotiating partner is shown understanding in informal meetings and made

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concessions, which are not really any. Through the change of provocation, pressure, understanding and empathy, the negotiating partner is to be induced to enter into certain negotiating positions and make concessions himself. The “bad policeman” puts the negotiating partner in an emotionally troubled state; the “good policeman” sells him the concessions as a way out of a threatening situation. The technique can be quickly recognized by trained people, so this tactic should be treated with care. Tactics of “playing the good cop and the bad cop” involve a team of two or more interrogators or groups who take apparently opposing approaches to the subject. The bad cop and good cops or interrogators may interview the subject alternately or may confront the subject at the same time. Whereas the good cop is using tactics of confrontation to the negotiation partner, the good cop is acting empathically and sympathetically. Bad cops behave in the following way: • behave direct, sometimes aggressive • create negative stress • act in a time-limited period • have a negative stance towards the subject • often make accusations • threaten the negotiation opponent • create a situation of antipathy between the negotiation partner and yourself • demand a high and often unrealistic maximum objective. God cops behave in the following way: • act sympathetically • create positive stress • appear supportive • pretend to be understanding • show sympathy • use a defensive way to convince the negotiation partner • pretend to be cooperative • convince the negotiation partner to protect them • go from the maximum objectives to a more realistic and real minimum objective • is willing to make concessions with confessions. Phrases that can be used by the bad cop have to show understanding to the negotiation partner and target to receive concessions by the negotiation partner. Examples for phrases can be: “I understand your situation…” “I believe the request is quite high…” “I am on your side and will support you…” “What can we do to unblock the situation…?” “I am supporting you…”

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“I will persuade my colleague…”. This technique can be used from a negotiating position that relies on power. Thus, a purchasing manager can be the evil policeman who puts the supplier under stress, in which they make very high or excessive demands. At the same time, he suggests to the supplier that there are several alternatives (competitors). As a good police officer, the buyer who is in regular contact with the supplier and who understands the supplier’s concerns and needs as part of his relationship is now a good cop. Usually, one achieves such a concession of the seller (lower price or better quality standards), which lies in the target corridor (in advance between the bad policeman, the superior purchasing manager and the good policeman agreed). Example: Two parties want to finalize a business transaction about a machine. The negotiation already lasts several hours; both sides are struggling to achieve a compromise. The lead buyer (bad cop) wants to close the deal and is threatening the seller to stop and leave the negotiations, unless it makes a significant concession to lower the price by 30%. The seller is put under pressure and tress. Then, the buyer excuses himself and exits the room for a cigarette. His colleague (good cop) is then approaching the seller and is trying to convince him to make concessions and offers to persuade the colleague to agree on a business deal, if the seller reduces the price by 10–20%. In many cases, the seller will think over and make concessions to the good cop. Setting a Time Deadline Setting a time deadline is a last call and time frame for the negotiation partner to agree on concessions and to make the final deal. Helmold and other authors recommend to use the tactics of setting time deadlines not too frequently, as this negotiation pattern is direct and very competitive. The negotiation opponent has only a chance to agree or disagree, which might end the negotiations in a negative way without any outcome. Deadlines should follow rules: requests should be direct, but not be aggressive develop means to put stress on the negotiation opponent requires adequate bargaining powers (buyer or seller) should be used by setting short timeline, e.g. today, tomorrow or Friday aims at getting an immediate answer should not be applied too often will trigger a confirmation (Yes) or disconfirmation (No). Managers who negotiate under time pressure are mostly exposed to stress and will make concessions. Example: Two parties want to finalize a business transaction about a machine. The negotiation already lasts several days at the seller’s place in a foreign country; both sides are struggling to achieve a compromise. The lead buyer wants to close the deal and is asking to make concessions by the end of the same day (deadline); otherwise, he would leave the negotiations and look for an alternative source of the

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machine. The buyer actually does not want to search for an alternative supplier, but is trying to put pressure on the seller. Setting a time deadline causes stress to the other negotiation party and may close the door, if the negotiation partner continues playing on time. Visions and Appeals to Long-Term Endeavours Common long-term visions are understood as elementary tactics in negotiations. From a practical point of view, a long-term relationship is sought by both negotiation partners. Since projects usually last for a longer period of time, it is advisable to have a long-term business relationship. Often projects are being combined with follow-up orders in the future. In particular, where the substitution of suppliers or customers is difficult and where the replacement involves high costs, negotiations should aim at a long-term commitment and partnerships. Declarations of intent or longer-term framework contracts can be used here as an ideal tool, even without an infinite commitment and complete dependence of the negotiating partner. Example: A buyer negotiates with a new supplier in China. The seller is insisting on a sales price, which is 20% higher than the requested target price of the buyer. The buyer stresses that he must reach the target price and appeals to long-term and follow-up businesses that can be awarded by the Chinese supplier after successful completion of the first and initial project. Playing on Time A tactic practiced in certain regions such as China, Japan or other Asian countries is the negotiation in small steps and the playing on time. In practice, this can go so far that it can take several years from the initiation to the finalization of a business transaction. This tactic can be used consciously when large negotiation packages are negotiated, and these are processed sequentially by partial results. In addition, this strategy is recommended, for example, to use competitors from Asian countries of existing suppliers as so-called benchmarks and to include in this way by small order packages a new competitor in the list of strategic suppliers. Even with the threat to a negotiated abort of the business, partners can be negotiated with small concessions. Example: In a real case in China, the vice-president of the purchasing department of a multinational corporation in Beijing met his Chinese negotiating partner. It was clear that the purchasing manager would leave after three days and press for a quick result of the negotiations. However, the Chinese supplier had not been impressed. Upon arrival, the supplier invited the vice-president as a customer for a nice meal and sightseeing. The next day and the last day were also packed with activities such as company tours, karaoke events, dinners or theatre events, so that the actual negotiations focused on the departure day and put the purchasing manager under time pressure. In this case, the supplier knew the time limit of the customer and was able to obtain concessions in this way. Timing and deadlines can be successful techniques in negotiation, as they usually put the negotiating party under stress and pressure. Deadlines must be communicated convincingly, briefly and directly so that the negotiating partner responds. Temporal determinations

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should not be used too often; otherwise, they will lose their effect. Often, deadlines in negotiations are associated with direct success or failure when an ultimatum is associated with it (take it or leave it). Seating Order to Influence Negotiations The seating arrangements and environment have an important influence on the climate and the process of negotiations. The seating order can be symmetric, asymmetric or chaotic as described in detail in this chapter. This tactic is a suitable tactic, which is not used very often in Western cultures. In contrast to this, negotiation partners in Asian or Arab countries will plan and implement a seating order to influence the negotiation outcome. Negotiators in Japan or the People’s Republic of China often spend 10% of the preparation time to determine the appropriate seating arrangements and environment. Seating is often subject to certain stereotypes in the Central European or Western culture. Both sides will sit opposite to each other and decision-makers are centred in the middle and surrounded by their influencers. This seating structure is usually taught in bargaining schools as the optimum way. Other negotiation schools do not put any importance on this topic. A recommendation by Helmold, Dathe and Hummel is to break up with traditional systems. This tactic is used very often in Asia or Arabic countries. The aim is to either mix negotiation sides (to create harmony) or to irritate the other side (to create distraction). As a consequence, the decision-maker is separated from his own influencers. Breaking up the seating order enables the negotiation host to place his own influencers next to the decision-makers (in Asia often family members, interpreters, females who please the guest). The influencers of the other side will create a harmonic and pleasant atmosphere. Example: The seating order can be disruptive and changed in order to irritate and confuse the negotiation opponent. That enables one’s own side to place influencers next to the decision-maker of the other side and to place the opponent influencers more distant. Strong alpha people can also be influenced by placing family members, knowledgeable managers or attractive females next to them (especially in Asia). Using Flatteries or Sweet Talk Using flatteries and sweet talk is a negotiation tactic, which is common in Asian countries. This tactic is highly manipulative and makes the negotiation partner look extremely good and comfortable. It is suitable for strong alpha or important beta people. Asian negotiation partners use this tactic quite frequently. When used effectively, flattery has the impact of motivating the counterpart to respond in a very positive way. Flatteries are usually directed to decision-makers or strong influencers. Recommendations for this tactic are: • Flatteries should target the decision-maker • Flatteries should be made to decision-makers in front of his supporters and influences • Flatteries can include gender tactics

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• Flatteries can be acknowledgements and honours • Flatteries affect strong personalities • Flatteries can affect men and women • Flatteries very often used in Asia, Eastern Europe or Arabic countries • Flatteries can also include gifts, events, dinners, special events, honour titles, etc. Example: The president of a non-profit corporation asks a speaker to give the opening speech at the organization’s fund-raising dinner. The president begins his request with the statement, “Although I don’t have the budget to pay you, I need a great speaker and you are the best I know”. This type of flattery, combined with the opportunity to do something for a worthy cause, makes the request hard for the speaker to turn down the request. Appeal to Higher Authority The tactic “appeal to higher authority” can be a suitable tactic in negotiations. When a negotiation side is asked to make a decision or concessions, that he does not want to make, he can refer the decision to a higher authority. The higher authority can be the manager, the finance department or any other stakeholder. This tactic may be interpreted that negotiator lacks the authority to make a final decision. In fact, there are three possibilities. Firstly, the negotiator really does lack authority and will have to bring the proposed agreement back to the individual or group with the final authority (managers or stakeholders). Secondly, the negotiator states that his own authority is limited when in fact they could conclude the proposed agreement. He is aiming at a better deal. Thirdly, the negotiator technically lacks the authority but knows that in all probability the “higher authority” will approve the recommendations made by him. There are many opportunities to use this tactic in negotiations. The authority limit tactic can be used in a number of other ways as well. One of the most common uses is to gain more time as the referral to the higher authority will take some time to evaluate the proposed agreement. A second motive is to achieve a better deal within the bargaining process, as a referral might be time consuming. The negotiation opponent can decide to make more concessions within the meeting or he can wait for the response of the higher authority. Another use of the tactic is to obtain a “no” from the authority even when the negotiator could have said no by himself. The purpose here might be to reinforce and cement the refusal to gain additional concessions. It might also be an attempt to make the negotiator appear to be the good guy and the organization or the higher-ups the bad guys. Purchasers occasionally use the tactic “referral to higher authority” by achieving a specific budget range where they can make the deal on their own. They claim that they have certain budget authority and that in excess of that amount a lengthy review and approval process will be initiated. Thus, the buyer might indicate that he could purchase the instrument for 10,000 Euro (his budgetary authority), but if the salesperson insists on 12,000 Euro, it has to go through a complex approval process.

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Example: A salesperson might use the tactic by stating that she knew that the boss would reject the offer proposed by the buyer if it were just presented verbally. However, the boss “just might” approve it if it were presented in the form of a signed purchase order. You should always be concerned about the authority of the other party. Try to determine as early as possible their level of authority, or at least what they state to be their level of authority. If their authority is limited, you can try to involve the decision-maker. If this is not possible or you feel that it is tactically inappropriate, continue the negotiations with an acute awareness that the person you are dealing with either does not have, or says that he or she does not have, the final authority. One way to deal with this may be to use the person on the other side of the table as messenger, getting points agreed to by the person with authority step by step. Finally, there are two caveats that apply to the use of all negotiating tactics. Tactics usually carry with them some degree of risk or can backfire. For example, one of the most common counter-moves against the authority limit tactic is the end run; that is, “If you can’t make the decision, let me talk to the person who can”. Secondly, never utilize a tactic or strategy that you are uncomfortable with or that you believe to be improper. But always strive to recognize tactics and understand how they work so that you can respond effectively when they are used against you. Highlighting Mutual Benefits The emphasis on mutual benefits can be a suitable tactic, where the negotiation opponent does not really have big wins on his side. This tactic will give him the feeling to be a winner, too. Using Precedents The precedent case is a tactic which is often used by experienced negotiators and long-term relationships of companies. In this tactic, the negotiator refers to a similar negotiation case in the past (“in the last negotiation we agreed on…”). Often competitor’s cases are used for this tactic (“the competitor also agreed to that price!”). Schranner outlines that the tactic can be easily used and will not harm the relationship, even though this tactic can be understood quite easily. Saying the Untruth (Lies) A lie is a false statement made with deliberate intent to deceive the negotiation opponent. Lying in negotiations will cause negative impressions and feelings, so that it is recommended not to use lies. In certain countries with group orientation and long-term relationships, it might happen that the importance of minor issues is exaggerated to gain concessions and make the deal. On the other side, some critical elements might be described as less important. A deep and detailed analysis of the negotiation partner upfront is therefore recommended to assess the credibility of the negotiation partner.

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Making Promises Promises are verbal commitments given by one party (the promisor) to another (the promisee) to carry out or refrain from carrying out some activity in the negotiated business transaction. Concessions should not be made based on verbal agreements, unless both negotiation partners have long-term relationships and know that they can rely on the promises made. Promises must be kept as a general principle for negotiations. Certain cultures (Asia, Arabic countries) sometimes rely on verbal agreements if they deeply know their negotiation partner and have established a high level of trust and continuous business relationship to them. Promises should be always documented in the negotiation protocol. Distracting by Using Fake News Fake news, or false news, can be described as false or often sensational information or propaganda published under the guise of being authentic news by the negotiation opponent. Fake news is highly manipulative and can be utilized in negotiations as a form of distraction. Fake news can deal with competition, market developments or legal aspects to gain concessions in negotiations. False information can be used to put competitors or stakeholders in a bad picture to win a contract by the negotiation opponent. Meeting at the Halfway Point Meeting at the halfway point can be described at the middle. The middle is seen as fair and equal opportunity for both negotiation sides. Schranner outlines that this preference might be often abused by one of the negotiation sides. It is therefore recommended if the halfway point lies within the own minimum and maximum objectives. The compromising style involves meeting halfway. One side makes some concessions, while the other side makes some concessions too. In the end, there are no clear winners, but rather, what is believed to be a fair result instead occurs. Parties tend to start out at extreme positions, then work their way to the middle. This style is used often in positional bargaining. It works well when there are time constraints or there is an ongoing and strong relationship with the other party. While this format helps keep relationships strong, the agreements are usually not the most optimal agreements for both parties.

9.4

Step 3 (A-3): Aggregation and Affirmation of Arguments

9.4.1 Argumentation Strategy Negotiations will only be successful with the appropriate argumentation. The appropriate aggregation and affirmation of strong arguments are a key activity, followed by the definition and the prioritization of the rights arguments. This process represents the third step (A-3) of the negotiation model by Dr. Marc

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Helmold and is a crucial part of the analysis in negotiations. Important arguments must be carefully defined, selected and prioritized as shown in Fig. 9.11. Aggregation is the collection of arguments in each category that will be negotiated. Affirmation is also the confirmation of high-importance arguments and its prioritization. Categorization and prioritization help to find potential and strong arguments in advance for the negotiation. In this context, it is important to consider counterarguments from the negotiation opponent. By doing this, one can assess how strong or weak arguments are. The priority matrix helps to determine what counterarguments can be raised by the negotiation opponent. The purpose of the priority matrix is the visualization of arguments, the categorization and the evaluation how strong each argument is. The playing through and rehearsing supports the development of one’s own argumentation and may take some reasonable time in the preparation phase. Arguments should be critically assessed from the viewpoint of the negotiating opponent, so that one can recognize in this context the strengths and weaknesses of the own argumentation. A professional negotiation also involves the presentation of causal relationships with all the advantages and disadvantages. During the phase of the aggregation and affirmation of arguments in the phase A-3, it is necessary to involve all stakeholders from various departments and functions. Stakeholders can be experts from purchasing, quality, operations, marketing and sales, logistics, compliance, finance or any other department, which have negotiation objectives. In this phase, arguments will be selected and prioritized and the argumentation strategy will be designed for the next step in phase A-4 (execution of negotiations). The negotiations must be executed in the next phase A-4 with fact-based arguments

Priority:

My arguments:

Potential counter arguments

Arguments for the negotiation execution:

1. 2. 3. 4. Priority:

Negotiation opponent: Arguments for the negotiation execution:

1. 2. 3. 4.

Fig. 9.11 Priority matrix

Weaknesses of argumentation

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Table 9.4 Argumentation (aggregation and affirmation of arguments) No.

Recommendations for the argumentation

1. 2. 3. 4. 5. 6.

Collect (aggregate) and select right (affirmative) arguments Take a counter perspective and look at the view from the other angle Identify counterarguments and causal relationships Use of qualitative and quantitative facts and data Concise formulation of the arguments and prioritization Preparations by visualizing important issues in international negotiations

and backgrounds (qualitative or quantitative), such as sales figures, sales figures, operating costs, logistics costs, forecast values or other key figures (key performance indicators, KPI, or objectives’ key results—OKR). In addition, forecast trends, articles, forecasts, interviews or surveys can be used effectively and effectively as qualitative aids. Arguments must always be formulated in a fact-based way. In this context, it is advisable to translate in international negotiations the statements in the national language with translators or native speakers. It is also helpful in the international context to preventively visualize important facts, data or arguments, e.g. on presentation slides, as posters, in tables or on the flip chart. When prioritizing arguments, it should be noted that in addition to one’s own position, the perspective of the negotiating partner is also made transparent. Table 9.4 summarizes the most important steps for using the priority matrix (see Fig. 9.11).

9.4.2 Concentration on Motives and Arguments When designing a suitable negotiation structure, the motives of the negotiating partner are of central importance. A very important element in the majority of negotiation concepts is that one places motives and interests in the centre, and not positions (O’Brien, 2016). Motives are defined as the “reason and drive for a person to act in some way or to do something”. Motives describe how important individual negotiation goals and desires are. In psychology, motives are generally defined as a state of physiological or psychological desires which influences how we behave. For example, a physiological desire, such as hunger or thirst, motivates us to eat or get something to drink. Both physiological and psychological needs can occur together in combination (Sharma, 2019). Psychologists have divided motives into three types as follows: 1. Biological and primary motives 2. Social and secondary motives 3. Personal and tertiary motives.

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The three categories of motives are described in Table 9.5 (Sharma, 2019). Biological motives are called physiological motives. These motives are essential for the survival of the organism. Such motives are triggered when there is imbalance in the body. The body always tends to maintain a state of equilibrium called “Homeostasis”—in many of its internal physiological processes. This balance is very essential for the normal life. Homeostasis helps to maintain internal physiological processes at optimal levels (Sharma, 2019). The nutritional level, fluid level, temperature level, etc., are maintained at certain optimal level or homeostasis levels. When there is some variation in these levels, the individual is motivated for restoring the state of equilibrium. Physiological motives discussed above pertain to both animals as well as human beings, but the social motives are specific only to human beings. These are called social motives, because they are learnt in social groups as a result of interaction with the family and society. That is why their strength differs from one individual to another. Many social motives are recognized by psychologists. In addition to the above said physiological and social motives, there are some other motives which are allied with both of the above said motives (Sharma, 2019). These are highly personalized and very much individualized motives. Negotiations are usually dominated by social and personal motives, but also primary motives (biological) can play a significant role like tiredness after a long flight, the desire to smoke or hunger. Often the motives for international business ventures are that a supplier from the Far East, for example, wants to enter the German market with the help of the customer, so that his motives lie in supporting quality requirements, the logistics network and the creation of further sales channels (Sharma, 2019). On the other hand, the customer’s motives lie in the favour of a low price and the generation of savings (English: cost savings; German: Einsparungen) (Dathe & Helmold, 2018). Of central importance in this context is the understanding of the motivations of both sides and the identification of common goals (Sharma, 2019). According to the rule “speaking is silver, silence is gold”, one should first let the negotiator speak and listen well before speaking by oneself. Table 9.5 Motives in psychology Biological motives (primary)

Social motives (secondary)

Personal motives (tertiary)

Hunger, thirst, need to breath Regulation of body Temperature Need for sleep Avoidance of physical pain

Achievement motive Aggressive motive Power motive Acquisitive motive Curiosity and gregariousness

Habits Gaols of life Levels of aspiration Attitudes and interests Motivation

Avoidance of psychological pain Elimination of waste Sex motive, maternal and paternal motives Source Sharma (2019)

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Negotiator (We)

• Information

• Observations

Strategies &

Social motives

Objectives

Tactics

Motives • Anticipation

Arguments

• Questions

Biological motives

Personal motives

Fig. 9.12 Concentration on motives and negotiation opponents. Source Author

If the negotiating partner has revealed his interests and motives, then one can ideally point out his own viewpoints and the benefits for the negotiating partner. Figure 9.12 shows the elements that need to be focused on identifying subjects of the negotiating party. To identify motives of the negotiator, you should therefore take time and consciously pay attention to statements, arguments, interests and behaviour. In conclusion, it is visible that collection, categorization and prioritization of arguments are a crucial activity in the preparation phase. Moreover, one can reflect the arguments and counterarguments from the negotiation opponent’s viewpoint. Thus, one can see how strong or weak arguments are. Motives behind the arguments play an essential role behind arguments. Arguments must be backed with facts and data. Table 9.6 summarizes the steps and recommendations for step A-3 (affirmation and aggregation of arguments).

Table 9.6 Recommendations for step A-3: affirmation of arguments Actions and recommendations for phase A-3 Identification of motives and interests of the opposite sides Presentation of the arguments and counterarguments Prioritization of arguments and counterarguments Consideration of the behaviour and motives of the negotiating partner Use of quantitative and qualitative data Playing through arguments and counterarguments Arguments should be clearly formulated Consideration of the correct and goal-oriented formulation of the arguments in international negotiations by involvement of a native speaker and experts Consideration of own arguments from the point of view of the negotiating partner Weak point analysis of your own reasoning

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Step 4 (A-4): Accomplishment and Amplification of Negotiations (Execution)

9.5.1 Executing Negotiations The step A-4 is the actual negotiation execution and bargaining process after steps A-1, A-2 and A-3. Authors like O’Brien and Schranner stress also that negotiations must be systematically planned and executed on the basis of a well-prepared agenda (O’Brien, 2016). Preparation can take more than 80% of the actual negotiation. Bargaining is where the “give and take” happens. During the bargaining stage, it is necessary to focus on the increase of the value-added elements. Figure 9.13 displays the six steps in the negotiation execution. In the first phase, the preparation for negotiations, the agenda, problem description, background, data, information, precedents, legal situation, statistics, preliminary negotiations, information about negotiating partners, taboo topics, positive previous experiences, animosities and own interests, goals and motives have to be agreed internally. The aim of this phase is a profound and systematic preparation, the coordination with all departments and stakeholders and the harmonization of goals and demands within the own negotiating side. The negotiation

1. Negotiation preparation

• • • •

Agenda Background information Data and facts

•

Symmetric, asymmetric or chaotic seating order Venue and layout: small, big room, drinks

3. Greeting and introduction

• • •

Greeting and exchange of business cards Introduction Roles and responsibilities

4. Core negotiations

• • • •

Core negotiation Strategies and tactics Question techniques Using prioirity matrix and other tools

5. End and summary

• • •

Protocol Signing the protocol Highlight different viewpoints in protocol

• •

Farewell Determination of next steps and future meetings

2. Room layout and seating order

6. Farewell and going back

Fig. 9.13 Flow and phases of the negotiation execution (A-4)

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script and complementary tools are described as ideal tools. Similarly, the respective goals and sub-goals must be categorized and weighted into a priority matrix. Different scenarios and options can also be discussed in this phase with all stakeholders. In addition to the negotiation points, the roles must be distributed, e.g. negotiator, moderator, use of external consultants, observers and protocol takers. It is also advisable to talk about tactics and strategies, such as the allocation of roles such as good and bad policeman (O’Brien, 2016). Phase two covers the determination of the negotiation room and the seating arrangement. In Western-influenced countries, the selection of the meeting room as well as the location receives less attention compared to Asian or Arab countries. Chapters 18–22 describe country-specific elements for consideration in this phase. In addition to the own seating arrangements, one can tactically also influence the seating arrangements of the other side by trying to place influencers on the other side. The next step, phase three, focuses on the greeting and welcoming procedure. Especially in an international environment, this phase can take several minutes. Everyone involved should have business cards to introduce himself. Especially in highly hierarchical countries, the consideration of position and status is an important element. In phase four, the actual main negotiation (bargaining) takes place. This part should be clearly structured through an agenda and be run systematically. After discussing all negotiation points, the results and agreements should be summarized. The protocol should be signed by both parties and also highlight differences of opinion and dissent. As the last and sixth phase, farewell and going back is important. Thus, it may be that in Asian countries, the other side of the negotiations stands outside the building and says goodbye until the guest has left the venue.

9.5.2 Guidelines For the actual negotiation, there are numerous guidelines and rules to be taken into account. The 6-A concept proposes the following rules of conduct for the negotiation execution, which have proven themselves in industrial practice: • Focus your reasoning on a goal corridor, not static objectives • Be always respectful and pay tribute to the negotiator • Pay attention to intercultural aspects in all phases of negotiations • Show attention to the other side of the negotiation • Listen actively identify the motives of the negotiating partner • Convincingly pronounce your arguments • Convince with a slightly emotional language • Let the negotiator speak first, then reply • If you have nothing to say, do not talk • Do not immediately respond to statements of the negotiator • Name your strongest argument first • Try to understand and speak the language of the partner • Prioritize and weigh your arguments, use few arguments

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• Consider the arguments also from the perspective of the other side • Emphasize the importance of your arguments, not the correctness • Defuse the arguments of the opposite side • Focus on weaknesses in the argumentation of the negotiation side • Focus on the weakest argument of the negotiating partner • Make concessions only where it is useful • Request consideration for concessions • Consider in agreements elements in terms of Q-C-D-T plus alpha • Keep agreements and involve significant contractual elements.

9.5.3 Layout and Location An important influence on the climate of negotiations is the environment and the seating arrangement. The design of the room (room layout; German: Sitzordnung) and the external conditions such as seating, arrangement of chairs, lighting, climatic conditions, refreshments or no drinks can sustainably influence the negotiations in a negative or positive way. The appropriate room size, climatic conditions, light conditions, drinks or snacks can create a positive attitude and show the negotiator that the hosting party wants to have good relationships and a harmonious atmosphere. Conversely, one can create an uncomfortable climate by so-called dirty tricks. Too small, too cool or too hot rooms can create discomfort and negative stress. The negotiating partner feels uncomfortable and does not want anything more than leaving the place of negotiation. This makes him make ill-considered concessions. The golden rule is that the opponent should always be at the door. This leads to a comfortable feeling, as theoretically he can leave the room at any time. Figures 9.14, 9.15 and 9.16 show symmetric, asymmetric and the chaotic seating orders.

Window

Window

Window We

Symmetric seaƟng order

Decision Manager maker Manager

Expert

Expert

Door Expert Manager

Manager

Expert

Decision Maker

Opponent Fig. 9.14 Symmetric seating order layout. Source Author

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Window

Window We Decision maker

Window Asymmetric seating Order

Facilitator Expert

Expert

Manager

Observer

Door Expert

Manager Decision Manager

Expert

maker

Oppponent Fig. 9.15 Asymmetric seating order layout. Source Author

Window

Window We Expert

Window Chaotic seating order

Decision maker Expert

Expert

Manager & influencer Manager

Expert Expert Expert Influencer

Decision maker

Manager

Door

Influencer

Opponent Fig. 9.16 Chaotic negotiation seating order layout. Source Author

9.5.4 Question Techniques The right set of rhetoric and advanced verbal communication skills are significant criteria for successful negotiations. In the previous sections of this book, it was recommended that negotiators utilize skills and competencies in a flexible way.

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Besides the optimal skills levels, question techniques play in this context an important role in negotiations. Seminars, training and coaching will help people to obtain the right skill sets. There are many ways and methods to use questions and questioning techniques in negotiations as stressed by several authors. The most important are explained as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Open (ended) questions Closed (ended) questions Stimulation and motivational questions Alternative questions Confirmation questions Indirect questions Trap questions Leading questions Flattery question Reflective questions Drilling questions Directional questions Emotional thermometer questions.

Table 9.7 shows the approach, behaviour and effects on each of the questions in terms of question type, approach, behaviour and effects.

Table 9.7 Question techniques in negotiations Question type

Question approach

Question behaviour

Open or open-ended questions Closed or closed-ended questions Stimulation and motivational questions Alternative questions Confirming questions Indirect question

What do you think about…?

Collaborative Relieving

Are you the opinion of…?

Controllable

Dominating

Are you in charge for this excellent agenda in this negotiation …?

Stimulative

Opening

Do you want option A or option B Do you think that quality is important?

Forceful Affirmative

Determining Convincing

In the last project you had three Inaccurate suppliers, right? Was your opinion not just, that…? Suspicious After that outline, don’t you think that the Persuasive quality, cost and delivery terms are the best for our product?

Investigating

Trap questions Leading questions

Question effects

Distrusting Directing

(continued)

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Table 9.7 (continued) Question type Reflective questions

Question approach

If I understand you right, you mean, that …? Directional questions Did you say that…? Flattery questions Where did you gain such great experience? Drilling questions Can you explain in detail, what this means? Emotional After having agreed on, do you think we thermometer and can settle this issue finally? settling questions Source Author

Question behaviour

Question effects

Trustful

Detailed

Climate improving Initiating Appealing the ego Drilling

Concluding

Settling

Corrective Admiring

Open Questions An open or open-ended question is a question which requires a more precise answer from the negotiation partner than a closed question. Examples are shown in Table 9.8. It is a question type that cannot just be answered with a “yes” or “no” response by the opponent. Open-ended questions are aimed to identify the objectives, motives and behavioural style of the negotiation opponent. In contrast to closed-ended or closed questions, open questions give more time to the negotiation opponents and will and therefore obtain more information. Open questions start with a “W” or “How” (What, Who, Where, When, Why, How). Negotiations should therefore start with open questions, such as: “What are your expectations? What are your points? What about this is important to you? How can I help to make this better for us? How would you like me to proceed? How can we solve this problem?” Using open questions can be regarded as ineffective, as they seem to hand over too much control and time for speech to the other side. However, well-placed questions do leave the negotiator in control as he shows empathy and interest in the concerns of the negotiation opponent. Smart open-ended questions will engage the other side where the negotiator wants to be. When opening conversations, a good balance is around three closed questions to one open question. The closed questions start the conversation and summarize progress, while the open question gets the other person thinking and continuing to give oneself useful information. Closed Question Closed-ended questions are those which can be answered by a simple “yes” or “no”, while open-ended questions are those which require more thought and more than a simple one-word answer. Closed questions can be used in negotiations at any point when the negotiator is trying to win a concession or gain a bargaining advantage in a negotiation. The questions are effective because they are direct, and to the point, it forces the negotiation opponent to answer with “yes” or “no” without giving him much time for consideration. Table 9.9 gives examples of closed questions.

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Table 9.8 Examples for open questions Examples of open questions Which criteria are important for you to make the transaction? What price ideas do you have? Who are the competitors in the tender? When do you intend to close the deal? What are the criteria for the design of the component? Why are the criteria so important for you in this project? How can we collaborate in this important business transaction? Source Author Table 9.9 Examples for closed questions Examples for closed questions Do you want to have the specification characteristic …? Is quality more important than the price? Do you want to have the best supplier? Are you the decision-maker for this project? Do you need a good maker for project …? Can you confirm that you will place the contract within this week? Source Author

Stimulative and Motivating Questions Stimulation and motivation questions serve to create a positive mood on the negotiation opponent. Stimulation questions are often used in the international context in the form of flatteries. Examples are: “How do you know so well about our country?” Or “Why do you know our traditional customs and language so well?” Stimulation issues should be subliminally and subtly praised to make the negotiator positive. Especially with egocentric and alpha people, it is advisable to incorporate stimulation questions at intervals in order to appeal to the ego. Examples of stimulation and motivation questions are outlined in Table 9.10. Alternative Questions Alternative questions have two different possibilities in the room. This question technique is also used for manipulation and can distract the negotiating partner, e.g.: “Would you like to acquire the product A or the product B?” Alternative questions focus the opposing negotiation side on two alternatives we want, so that further options are excluded. Table 9.11 gives examples for alternative questions.

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Table 9.10 Examples for stimulating and motivational questions Examples for stimulating questions Are you responsible for this great department? Have you ensured the first-class and immediate implementation of the idea? Is it your responsibility to have such an excellent internet page? Have you chosen the great negotiation venue? Have you come up with this outstanding proposal? Have you selected this delicious restaurant? Source Author

Table 9.11 Examples for alternative questions Examples for alternative questions Do you want specification feature A or B? Is quality or the price more important? Do you want to place the order today or tomorrow? Are you or M. Müller the decision-maker? Do you want to buy the blue or red car? Source Author

Confirming Questions The questioning technique of confirming questions signals solidarity and an emotional closeness to the negotiating partner. Confirmation questions show the other side of the negotiation that their fears, worries and hardships are understood through active listening. Confirmation questions are also called mirroring questions and can be used effectively to create a personal bond with the negotiating partner. Confirmation questions will be answered by the other party with a clear confirmation (“Yes, that’s right!”). Table 9.12 shows examples of confirmation questions. Indirect Questions The use of indirect questions is recommended when direct questions are inappropriate. To obtain relevant and useful information, questions are superficially posed on a different topic. The question, however, is formulated so that the answer provides information about the actual question. Table 9.13 shows examples of indirect questions.

Table 9.12 Examples for confirming questions Examples for confirming questions Am I right that you will place the contract based on TCO elements? Do I understand you right that you want to have the best quality? If I understand you right, then you want an economical car with low gasoline consumption and low operating cost?

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Table 9.13 Examples for indirect questions Targeted information

Indirect question

Opportunities to win order

I would think that there are two major suppliers in the last round of the tender I think that you already have a client

Number of companies involved in this project. Finding out what competitors are in the race Target price corridor and overall size of project

I remember that you had a budget of more than billion 1 euro in the last and similar project available

Source Author

Trap Questions A trap question is the special form of a rhetorical question, in which our negotiation opponent is giving the desired answer with understanding this trick. Using the trap question method is the smart and ideal way to achieve that the respondent somehow confirms a fact (sometimes by betraying himself) and reveals something unintentionally. Table 9.14 shows examples of trap questions. Leading Questions Leading questions can be used in negotiations to guide the negotiation opponent to a specific point of view in a persuasive and manipulative manner. Table 9.15 shows examples of leading questions.

Table 9.14 Examples for trap questions Examples for trap questions Didn’t you just say that…? Don’t you agree that quality should be more important than only price or commercial issues? Don’t you think that our relationship is important? Don’t you believe that we should have advantages and benefits on both sides? Didn’t you just agree on that? Source Author

Table 9.15 Examples for leading questions Examples for leading questions With all the advantages I just like to point out, don’t you think that this package benefits us both and is the best way to go for both of us? And after we provide those documents that you just mentioned, you will do…? Source Author

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Drilling Questions Drilling questions can be used to obtain more information and when a negotiation side wants to have more clarity on certain elements. This technique can be used to gain a better insight into a person’s thought process to further illuminate their rationale or position in the negotiation (Table 9.16). Settling Questions There are occasions when a negotiation party will sense that something might be starting to boil beneath the surface. This might be a good time to address a pending emotional response that might de-rail the negotiation by simply checking out how the other person feels about certain issues. These questions are called emotional thermometer or settling question and can be the ideal question to conclude and close an element in negotiations. Table 9.17 shows examples for emotional thermometer questions. Personality Types in Negotiations In addition to questioning techniques, it makes sense to respond meaningfully and effectively to certain discussion and personality types as shown in Table 9.18. The table shows the different discussion types, the negotiation style and the recommended behaviour. Very often, it is possible to see a mix or combination of discussion types in practice.

Table 9.16 Examples for drilling questions Examples for drilling questions Could you provide us with more detail in how you analysed the data that you just described and how you reached your conclusion? Can you be more precise in this matter? Would you mind showing me more details, why…? Can you be more transparent in your explanation? Sorry, I did not understand that element. Can you be more specific? Can you please describe the benefits in more detail? Source Author

Table 9.17 Examples for emotional thermometer or settling questions Examples for settling questions How do you feel about that aspect of settlement package? Can we agree on this and go to the next point? Do you agree that we can finalize the deal? Are you prepared to make the deal? Do you agree on settling this point? Source Author

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Table 9.18 Negotiation typologies and negotiation types Typology The experiment negotiator The arrogant negotiator The quarrelsome negotiator The smart negotiator The sublime negotiator The omniscient negotiator The talkative negotiator The sluggish negotiator The blocking negotiator The cautious negotiator Source Author

9.6

Description of negotiation style

Recommended counter behaviour

Experienced and routineful Arrogant and dominant Destructive and criticizing

Open questions. Act on experience. Active listening and response to weak arguments Closed questions. Stimulation questions. Flattering. Pretending to be submissive Reflective questions. Facts based, calm. Demanding to be constructive. Not acting on emotions

Smart and cheeky Open questions. Let opponent talk. Try to make him to use own ideas and proposals Waiting to trap Trap questions. Few and direct answers. Let opponent somebody speak. Short answers Knows everything Directional questions. Closed questions to lead opponent better into the own direction Talks without Closed questions. Tactful interruption. Agree on talking breaks time Uninterested and Direct questions and asking for opinion bored Sabotaging and Addressing behaviour. Fact-based discussion. Direct blocking speech to stop negotiations. Leaving negotiations Silent and Closed questions. Involving in discussion cautious

Step 5 (A-5): Ascertaining Resistance

9.6.1 Open and Hidden Resistance Resistance is the activities and the action of individuals or groups of opposing something that should be agreed as an objective in the negotiation. Resistance can be shown in a visible and open way (open resistance) or more subtle and disclosed way (hidden resistance). Resistance in negotiations normally comes from the negotiation opponents, but can also come from individuals or groups of the same negotiation side. Resistance is a type of opposition and can be broken through analytically applying emotions or warning tactics. The most difficult problem is to identify signals of resistance where the negotiation partners do not formally or informally their critique and resistance. In such case, nonverbal analytical techniques help to identify signals of opposition. Resistance occurs verbally or non-verbally in negotiations in various forms, which in most cases is unaware of the persons involved. Negotiations through language (verbal) or gestures or facial expressions (nonverbal, i.e. behaviour or facial expression) must be negotiated (Hilsenbeck, 2004).

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9.6.2 Open Resistance Open resistance is characterized by the fact that it is deliberately exercised by opponents of the opposition and thus also connects a goal. Recognizing open resistance is relatively simple, as expressions and behaviours are openly visible: • Open contradiction (examples: “I disagree …”) • Open rejection (example: “I cannot agree with your proposal …”) • Open intervention (example: “I cannot accept your proposal, so I suggest that …”) • Rejection by obvious shaking of the head • Rejection by gestures with the index fingers or thumb. Normally, the reasons for open resistance have a rational cause, which can be discussed with those affected and whose overcoming all interested parties have an interest (Hilsenbeck, 2004). This form of resistance is usually constructive, so that dealing with open resistance is possible. To break resistance or to refute and mitigate it with a fact-based argumentation can be a suitable strategy here. In this way, the energy which the resisting persons have invested in their resistance can be channelled in the sense of reaching the goals of the negotiation, or in simple terms.

9.6.3 Hidden Resistance Much more difficult is dealing with covert or hidden resistance. In this context, people, who are resisting, usually have no interest in being recognized (Hilsenbeck, 2004). For personal or tactical reasons, they act in a hidden way or the second row. In many cases, one cannot see the resistance of people. This makes the handling of this form of resistance very difficult (Volk, 2018). If the hidden resistance is not recognized in time, the entire outcome of the negotiation may possibly be at stake. Signals for hidden resistance in negotiations can be: • Comments and statements with limitations (example: “I understand your point of view, but …”) • the absence of important decision-makers (alpha types) or influencing persons (beta types) • the late appearance in negotiations of important decision-makers (alpha types) or influencing persons (beta types) • the permanent postponement of negotiations due to alleged scheduling difficulties • Nonverbal signals of resistance such as mental absence or disinterest—the demand for perfect solutions • the demand that we move as a negotiator first

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• the extensive and long consideration and discussion of relatively unimportant special cases • the general agreement with simultaneous registration of reservations, which should be clarified later.

9.6.4 Handling Resistance Resistance must be recognized in negotiations, as well as it is of central importance to question the motives of the resistance. With open and rational resistance, counterarguments of one’s own goals can lead to the breaking of the resistance and the achievement of the own objectives. Unconscious or hidden resistance is more difficult to recognize as examples demonstrate: detect resistance, understand the resistance, weigh the resistance and finally break resistance. It is advisable to listen to the resistance of the other side and to understand the motives (Volk, 2018). A change of location or the discussion at lunch or in the evening while eating together can lead to the opposite side opening up and naming the motive and reasons. Breaking resistance can be done via certain negotiation patterns such as warning, making concessions, rationality, conviction by arguments, rational emotions or appeal to mutual benefits. Warning means to have a fact-based signal (verbally or non-verbally) that the negotiations will be suspended or terminated without concessions or agreement of the negotiation partner. A warning is factual and objective and should be phrased including a good argumentation. Another way could be the granting of small and for oneself minor concessions to the negotiation opponent. When understanding the motives of the opponent, it could be possible to identify areas to give in that are of importance for the negotiation partner but not important for oneself. When facing resistance, it can also be useful to change the place of negotiations or to have breaks. Deflection might also be a way to break such resistance.

9.6.5 Defending Counterarguments Counterarguments of the negotiating party can be invalidated by facts. If the demands are not one of their own priorities, so you can make concessions here, in turn, in significant aspects concessions from the other side demands. In addition, in defending and invalidating counterarguments, one’s own arguments can be made even clearer by using certain conjunctions or linguistic formulations that combine counterarguments with one’s own arguments: • You are right on some points, but on closer inspection … • I understand your reasoning, anyway … • I understood your point of view, but … • Even if you think that …, I still think …

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• Of course that’s true … but • Certainly, that’s right … but I mean …. • I admit that, … but in my opinion … • It’s true that …, but …. In addition to defence against counterarguments by the identification of weaknesses in the argument, a warning can be a useful instrument for the defence against counterarguments. Warnings are fact-based and rational signals and arguments for rejecting usually overstated or unacceptable positions of the negotiator instead of uttering threats (Fig. 9.17). According to Schranner, warnings are effective and will play out in the mind of the negotiator. Warnings will trigger him to get an understanding of the consequences of failure in individual points or the total negotiation. If you cannot come to an agreement, it may be a horrifying scenario for what will happen, for example, “What will happen if we do not agree?” If you think the negotiating partner is the strength of your own unconsciously he may be asked, “What do you think I will do if we cannot agree now?” The questions must be “open”. The more open the question, the more open must the negotiating partner be. However, it is important that you at the same time emphasize the desire for a common solution. Another variant in such a situation is the question “what should I do after your advice?” Here, you also give your negotiating partner recognition for his position because you ask him for advice. They rely on his expertise and knowledge. At the same time, it is the ideal entry into a fluid conversation, because his thoughts are “running” again. But what if your warning is ignored? Because it may be that your counterpart does not believe the warning. That is why you always have to show him the credibility of a warning pictorially. This demonstration will show you what you are planning to do without actually doing it. If your negotiator still refuses to give in after a warning, then you will have to take action. Make your warning come true. You need to show your counterpart clearly that he cannot win unilaterally and that it really is in his interest to return to

Difference

Warning

Threat

Threat & Warning

- Subjective - Emotional - Not allowed

Fig. 9.17 Threat and warning

-

Objective Facts-based Rational Allowed

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the negotiating table. The goal is again a satisfactory agreement. You should therefore use your funds only until you reach your goal—not to win. Because every action you start now leads to a reaction. The more aggressive your methods are, the more bitter your negotiating partner is. As a result, exactly the resistance that you wanted to overcome is hardening. Even in this situation: Do not drive your negotiating partner in a corner. A cornered enemy is dangerous. He will act rash and irrational. At any time, leave him a way out, a bridge to walk over. It shows your professionalism when you build a “Golden Bridge” for him. And if your negotiating partner does not enter the offered bridge? Now you have to make your warning come true and enforce all announced actions. If you back down now, you will lose face and become ridiculous and implausible.

9.6.6 Positive and Negative Defence of Resistance The way of the negotiation execution can be in a positive or negative way. Within the negotiation concept of Dr. Helmold, it is recommended to negotiate in a situational, dynamic and flexible way depending on the situation. Negotiation can deliberately be implemented positively or negatively. Table 9.19 shows examples of positive and negative types of negotiation that are central to step A-5. The topics help the reader to practice them in the respective negotiation situations.

Table 9.19 Positive and negative negotiation execution Way of negotiations

Theme

Example

Positive negotiation execution Positive negotiation execution Positive negotiation execution

Growth opportunities

Negative negotiation execution Negative negotiation execution

Difficult times

Negative negotiation execution

Significant market changes

There are many new projects coming. Do you want to grow with us? We are looking for partners, who want to grow jointly with us You are the most innovative supplier. You are a strategic partner to us. I am convinced that you want to continue to be that innovative You are our preferred and strategic partner. We consider you as the benchmark and No. 1. Do you want to lead the pole position as our best partner? We live in difficult times. We are in a difficult situation. The economy is not good. Market share is decreasing. Competition is strong The market environment changed significantly. Are you aware of the changed market landscape? Will you survive in the new market environment? We are confronted by a new market situation. Demand and supply changed drastically. There are numerous new players on the market. What do you do to maintain competitiveness?

Innovations

The pole position

Change of the market environment and landscape

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Step 6 (A-6): Administration of Contracts and Agreements

9.7.1 Protocol and Meeting Minutes Step A-6 is the final element in the negotiation concept of Dr. Helmold and has with the design of the contract a central importance. If an agreement is reached, both negotiating pages should record all important points in a protocol in writing and have them signed. It is also advisable to draw up an action plan with responsibilities and schedules, where both sides can see if the agreed activities are adhered to. The concretization of the negotiation results is a fundamental step to avoid intentional or unintentional misinterpretations. It is advisable to summarize in writing all results and agreements at the end of the negotiations. After negotiations, ideally the draft of the contract should already be completed, which contains cornerstones and milestones. In addition, it is appropriate for international negotiations to carry out the official ratification of the treaties with a festive celebration. This can be used ideally in the presence of customers, employees and other stakeholders as a marketing effect and motivator in the own company. Asian companies also use these events very often to publish press releases or to invite media. In addition to the celebrations, the negotiators should express a thank you to the negotiating team and pay tribute to it.

9.7.2 Significant Elements for International Agreements Due to the increasing internationality of trading transactions through international operations, cross-border sales or global sourcing, international legal transactions and international contractual elements are also gaining high importance as outlined by several authors. The following points should be considered in international negotiations and agreements: • Applicable law, United Nations (UN) convention • Place of transfer of properties and ownerships, Incoterms 2010 • Warranty, guarantees • Fees and interest rates for delays • Payment, currency and choice of bank • Place of jurisdiction.

9.7.3 The United Nations (UN) Law The United Nations Convention on Contracts for the International Sale of Goods (CISG). The purpose of the CISG is to provide a modern, uniform and fair regime

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for contracts for the international sale of goods. Thus, the CISG contributes significantly to introducing certainty in commercial exchanges and decreasing transaction costs. The contract of sale is the backbone of international trade in all countries, irrespective of their legal tradition or level of economic development. The CISG is therefore considered one of the core international trade law conventions whose universal adoption is desirable. The CISG is the result of a legislative effort that started at the beginning of the twentieth century. The resulting text provides a careful balance between the interests of the buyer and of the seller. It has also inspired contract law reform at the national level. The adoption of the CISG provides modern, uniform legislation for the international sale of goods that would apply whenever contracts for the sale of goods are concluded between parties with a place of business in Contracting States. In these cases, the CISG would apply directly, avoiding recourse to rules of private international law to determine the law applicable to the contract, adding significantly to the certainty and predictability of international sales contracts. Moreover, the CISG may apply to a contract for international sale of goods when the rules of private international law point at the law of a Contracting State as the applicable one, or by virtue of the choice of the contractual parties, regardless of whether their places of business are located in a Contracting State. In this latter case, the CISG provides a neutral body of rules that can be easily accepted in light of its transnational nature and of the wide availability of interpretative materials. Finally, small- and medium-sized enterprises as well as traders located in developing countries typically have reduced access to legal advice when negotiating a contract. Thus, they are more vulnerable to problems caused by inadequate treatment in the contract of issues relating to applicable law. The CISG governs contracts for the international sales of goods between private businesses, excluding sales to consumers and sales of services, as well as sales of certain specified types of goods. It applies to contracts for sale of goods between parties whose places of business are in different Contracting States, or when the rules of private international law lead to the application of the law of a Contracting State. It may also apply by virtue of the parties’ choice. Certain matters relating to the international sales of goods, for instance the validity of the contract and the effect of the contract on the property in the goods sold, fall outside the Convention’s scope. The second part of the CISG deals with the formation of the contract, which is concluded by the exchange of offer and acceptance. The third part of the CISG deals with the obligations of the parties to the contract. Obligations of the sellers include delivering goods in conformity with the quantity and quality stipulated in the contract, as well as related documents, and transferring the property in the goods. Obligations of the buyer include payment of the price and taking delivery of the goods. In addition, this part provides common rules regarding remedies for breach of the contract. The aggrieved party may require performance, claim damages or avoid the contract in case of fundamental breach. Additional rules regulate passing of risk, anticipatory breach of contract, damages and exemption from the performance of the contract. Finally, while the CISG allows for freedom of form of the contract, States may lodge a declaration requiring the written form. The CISG

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applies only to international transactions and avoids the recourse to rules of private international law for those contracts falling under its scope of application. International contracts falling outside the scope of application of the CISG, as well as contracts subject to a valid choice of other law, would not be affected by the CISG. Purely domestic sale contracts are not affected by the CISG and remain regulated by domestic law.

9.7.4 Incoterms 2010 The International Chamber of Commerce (ICC) in Paris has been issuing “International Rules for the Interpretation of Commercial Contract Formulas” known as Incoterms (International Commercial Terms) since 1923. The Incoterms rules have become an essential part of the daily language of international trade. They have been incorporated in contracts for the sale of goods worldwide and provide rules and guidance to importers, exporters, lawyers, transporters, insurers and students of international trade. After ICC’s creation in 1919, one of its first initiatives was to facilitate international trade activities. In the early 1920s, the world business organization set out to understand the commercial trade terms used by merchants. This was done through a study that was limited to six commonly used terms in just 13 countries. The findings were published in 1923, highlighting disparities in interpretation. To examine the discrepancies identified in the initial survey, a second study was carried out. This time, the scope was expanded to the interpretation of trade terms used in more than 30 countries in 1928. Based on the findings of the studies, the first version of the Incoterms rules was published das a global standard. The terms included FAS, FOB, C&F, CIF, Ex-Ship and Ex-Quay. Due to World War II, supplementary revisions of the Incoterms rules were suspended and did not resume again until the 1950s. The first revision of the Incoterms rules was then issued in 1953. It debuted three new trade terms for non-maritime transport. The new rules are comprised of Delivered Cost Paid (DCP), Free on Rail (FOR) and Free on Truck (FOT). The ICC launched the third revision of the Incoterms rules, which dealt with misinterpretations of the previous version. Two trade terms were added to address Delivery at Frontier (DAF) and Delivery at Destination (DDP). The increased use of air transportation gave cause for another version of the popular trade terms. This edition included the new term FOB Airport (Free on Board Airport). This rule aimed to allay confusion around the term FOB (Free on Board) by signifying the exact “vessel” used. With the expansion of carriage of goods in containers and new documentation processes, came the need for another revision. This edition introduced the trade term FRC (Free Carrier…Named at Point), which provided for goods not actually received by the ship’s side but at a reception point on shore, such as a container yard. The fifth revision simplified the Free Carrier term by deleting rules for specific modes of transport (i.e. FOR, Free on Rail; FOT, Free on Truck; and FOB Airport, Free on Board Airport). It was considered sufficient to use the general term FCA (Free Carrier at Named Point) instead. Other provisions accounted for increased use of electronic messages. The “License,

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Table 9.20 International commercial terms 2010 (Incoterms) Abbreviations

Description (English/German)

EXW FCA FAS FOB CFR CIF CPT CIP DAP DAT DDP

Ex-Works/Ab Werk Free Carrier/Frei Frachtführer Free Alongside Ship/Frei Längsseite Schiff Free on Board/Frei Board Cost and Freight/Kosten und Fracht Cost, Insurance and Freight/Kosten, Versicherung und Fracht Carriage Paid To/Frachtfrei Carriage, Insurance Paid To/Frachtfrei versichert Delivered at Place/Geliefert benannter Ort Delivered at Terminal/Geliefert Terminal Delivered Duty Paid/Geliefert verzollt

Authorizations and Formalities” section of FAS and DEQ Incoterms rules was modified to comply with the way most customs authorities address the issues of exporter and importer of record. The Incoterms 2010 is the most current edition of the rules to date. This version consolidated the D-family of rules, removing Delivered at Frontier (DAF), Delivered Ex-Ship (DES), Delivered Ex-Quay (DEQ) and Delivered Duty Unpaid (DDU) and adding Delivered at Terminal (DAT) and Delivered at Place (DAP). Other modifications included an increased obligation for buyer and seller to cooperate on information sharing and changes to accommodate “string sales”. To keep pace with the ever-evolving global trade landscape, the latest update to the trade terms is currently in progress and is set to be unveiled in 2020. The Incoterms 2020 Drafting Group includes lawyers, traders and company representatives from around the world. The overall process will take two years as practical input on what works and what could possibly be improved will be collected from a range of Incoterms rules users worldwide and studied (Table 9.20).

9.7.5 Warranties Warranty is described as the assurance that goods or services meet an agreed function, are free from defects or bad workmanship and meet statutory and specified characteristics. Warranty has to be agreed in writing or verbally and is legally binding. There are legal and voluntary warranty agreements and periods. A warranty describes the conditions under, and period during, which the producer or vendor will repair, replace, or other compensate for, the defective item without cost to the buyer or user. Often it also delineates the rights and obligations of both parties in case of a claim or dispute. Internationally, there may be different warranty periods that deviate from German warranty law. Warranty claims and warranty periods should therefore be discussed and agreed during the negotiations. In

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particular, replacement times, replacement deliveries, repairs or repairs must be taken into account (Helmold, 2018). If one wishes to comply with legal claims, clauses in international treaties can indicate which country law applies (AHK, 2018; Zwager, 2016). Example: German law on the sale of goods also requires the vendor to supply the purchaser with a fault-free item. If, however, the goods sold are defective, the statutory warranty clauses apply. Normally, risk is transferred when the item is handed over. If, however, the item is delivered to a particular location at the customer’s request, the risk may pass to the buyer when, for instance, the vendor presents the item to a forwarding agent. This is not the case if a consumer acquires a movable object (consumer good purchase) from a business. In this event, the risk does not pass to the buyer until he actually receives the item. Furthermore, in the case of a consumer good purchase, it is assumed that a defect that becomes apparent within six months of the transfer of risk existed at the time the risk was transferred. The vendor does, however, have the right to refute this assumption.

9.7.6 Late Payment and Fees for Delays Late payments from customers can have serious consequences to the cash flow and financial performance of a company. Delayed payments can therefore be especially harmful to any kind of business, especially smaller- or medium-sized or undercapitalized companies. Delinquent payments and credit losses will lead to cash shortfalls in paying salaries, supplier invoices or tax bills, when a company is financially distressed. Late payments increase the risk that a company will not be paid at all. Negotiating the legally right to claim interest from late-paying customers will encourage customers therefore to pay on time. The statutory right to interest and compensation applies to all contracts.

9.7.7 Currency and Payment Terms The determination of the currency and the securing of incoming payments represent a central issue in the international movement of goods. In 2017 alone with the USA, Germany realized more than EUR 160 billion. In addition, other countries such as China, Great Britain and Switzerland are among the strongest trading partners in the foreign trade balance (AHK, 2018). Even with the much smaller Switzerland, foreign trade turnover (imports and exports) amounted to more than 94 billion euros. Around a quarter of all claims and liabilities of German companies to foreign business partners is therefore denominated in a foreign currency, as shown by the balance of payments statistics of the Deutsche Bundesbank (Deutsche Bank, 2018). Internationally, other rules apply to payment transactions. This applies in particular to transactions outside the Eurozone. Thanks to the Single Euro Payments Area, called SEPA, money transfers between different European countries are now

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straightforward and cost-effective. However, as soon as orders or invoices are made in another currency, entrepreneurs have to hedge against corresponding exchange rate risks. On the other hand, different payment practices (such as payments of euros or US dollars in regulated markets to Asia and Latin America), non-transparent fees, strict reporting requirements or legal restrictions on foreign exchange may significantly impede foreign trade. Thus, sales failures, angry customers or even penalties threaten if a delivery of goods due to payment problems is delayed. Conversely, there may be liquidity disadvantages, unforeseen additional costs or lost sales opportunities if foreign clients are unable to pay for deliveries and services quickly, safely and cost-effective (Deutsche Bank, 2018).

9.7.8 Place of Jurisdiction In a transaction with no foreign element involved, it will not usually be necessary to specify the system of law which is to govern the transaction or the courts which are to have jurisdiction in the event of a dispute. However, where there are international aspects to the transaction, it is sensible to set out in the contract both the governing law and jurisdiction—i.e. which country’s laws govern the terms of the contract and in which country’s courts will any dispute be finally decided. The principal foreign element aspects that impact materially on a transaction are: 1. Where the parties to the contract are not both based in the same country 2. Where each party only has substantial assets in the country where it is resident 3. Where the transaction is governed by the law of another country, e.g. because it may be considered that the contract was formed in that other country 4. Where the whole or part of the transaction is to be performed in a different country from that in which one or both parties are based. Where any one or more of these foreign elements are present, it will be appropriate for the parties to be precise as to which system of law is to govern the contract and which country’s courts are to have jurisdiction in the event of a dispute. Simplistically, parties will tend to choose the system of law with which they are familiar, and such a choice of law will generally be respected by the courts of another jurisdiction—subject to matters of public policy and the mandatory laws of that other jurisdiction.

9.7.9 Trade Arbitration General Principles of Arbitration Arbitration is a form of dispute resolution. Arbitration is the private, judicial determination of a dispute, by an independent third party. An arbitration hearing may involve the use of an individual arbitrator or a tribunal. A tribunal may consist

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of any number of arbitrators though some legal systems insist on an odd number for obvious reasons of wishing to avoid a tie. One and three are the most common numbers of arbitrators. The disputing parties hand over their power to decide the dispute to the arbitrator(s). Arbitration is an alternative to court action (litigation) and, generally, just as final and binding (unlike mediation, negotiation and conciliation which are non-binding). General principles of arbitration are as follows: • The object of arbitration is to obtain a fair resolution of disputes by an impartial third party without unnecessary expense or delay • Parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest • Courts should not interfere. Arbitrators, or tribunal members, are commonly appointed by one of three means: • Directly by the disputing parties (by mutual agreement, or by each party appointing one arbitrator) • By existing tribunal members (e.g., each side appoints one arbitrator and then the arbitrators appoint a third) • By an external party (e.g. the court or an individual or institution nominated by the parties). Arbitration, while being nicknamed the “businessman’s method of resolving disputes”, is governed by state and federal laws. Most states have provisions in their civil practice rules for arbitration. These provide a basic template for the arbitration as well as procedures for confirmation of an arbitrator’s award (the document that gives and explains the decision of an arbitrator), a procedure that gives an award the force and effect of a judgment after a trial in a court. Many states have adopted the Uniform Arbitration Act, although some states have specific and individual rules for arbitration. Classifications of Arbitration International commercial arbitration is a method of resolving disputes and disagreements arising under international commercial contracts. It is used as an alternative to litigation and is controlled primarily by the terms previously agreed upon by the contracting parties, rather than by national legislation or procedural rules. International arbitration is arbitration between companies or individuals in different countries, usually by including a provision for future disputes in a contract. There are three types of arbitration as shown below: • Commercial arbitration is the most common of disputes. Just as it sounds, it is a dispute between two commercial enterprises • Consumer arbitration surrounds disputes between a consumer and a supplier of goods or services

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Table 9.21 Arbitration institutions Institution

Acronym

Location

Year

International Court of Arbitration Korean Commercial Arbitration Law

ICC KCAB

1923 1966

London Court of International Arbitration

LCIA

American Arbitration Association (International Centre for Dispute Resolution) Swiss Chamber’s Arbitration Institution

AAA (ICDR) SCAI

Vienna International Arbitral Centre Ljubljana Arbitration Centre

VIAC LAC

Arbitration Institute of the Stockholm Chamber of Commerce Singapore International Arbitration Centre International and Domestic Arbitration Centre India

SCC

Paris, France Seoul, South Korea London, United Kingdom New York, USA Geneva, Switzerland Vienna, Austria Ljubljana, Slovenia Stockholm, Sweden Singapore Vadodara, India

Hong Kong International Arbitration Centre Mumbai Centre For International Arbitration Chinese International Economic and Trade Arbitration Centre Source Wikipedia (2019)

SIAC IDAC India HKIAC MCIA CIETAC

Hong Kong, China Mumbai, India Hong Kong, China

1892 1926 2004 1975 1928 1917 1991 2016 1985 2016 1956

• Labour arbitration involves the settlement of employment-related disputes. This form or arbitration can be divided into two main categories: rights arbitration and interest arbitration. Institutions of Arbitration There are several major international institutions and legal bodies, which are permitted to appoint arbitrators for international trade conflicts (Wikipedia, 2019). The most significant is illustrated in Table 9.21.

References AHK. (2018). Außenhandelskammern. Offizielle Seite der deutschen Außenhandelskammern. Retrieved June 3, 2018. https://www.ahk.de/. Deutsche Bank. (2018). Internationalen Zahlungsverkehr erfolgreich steuern. Seite der Deutsche Bank. https://www.deutsche-bank.de/pfb/content/geschaeftskunden/zahlungsverkehr_dokumen taerer-zahlungsverkehr.html. Helmold, M. (2010). Best-in-Class Lieferantenmanagement in der Automobilindustrie. Aachen: Shaker.

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Helmold, M. (2018). Erfolgreiche Verhandlungen und Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Manuskript und Workshopunterlagen im Master- und MBA-Studium. Helmold, M. & Terry, B. (2016a). Lieferantenmanagement 2030. Wiesbaden: Springer. Helmold, M. & Terry, B. (2016b). Global sourcing and supply management excellence in China. Singapore: Springer. Hilsenbeck, T. (2004). Verhandeln. Handbuch von Dr. Thomas Hilsenbeck. Retrieved May 30, 2018. http://www.thomas-hilsenbeck.de/wp-content/uploads/Dr-Th-Hilsenbeck-HandbuchVerhandeln-Vers-5_0.pdf. Hofert, S. (2015). Rangdynamik. Warum Alphas Betas brauchen und Omegas eigentlich nützlich sind. November 20, 2015. Retrieved March 25, 2018. https://teamworks-gmbh.de/ rangdynamik-warum-alphas-betas-brauchen-und-omegas-eigentlich-nuetzlich-sind/. O’Brien, J. (2016). Negotiations for procurement professionals (2nd ed.). Croydon: Kogan Page. Sharma, A. (2019). Types of motives: Biological, social and personal motives. Psychology. Online Article. Retrieved February 8, 2019. http://www.psychologydiscussion.net/motive/types-ofmotives-biological-social-and-personal-motives-psychology/694. Volk, H. (2018). Emotionale Dynamik eines Gespräches verstehen. Was den alltäglichen Wortwechsel entgleiten lässt. In Beschaffung aktuell. 06 2018 (S. 70–71). Wikipedia. (2019). Institutions for international trade arbitration. Retrieved January 11, 2019. https://en.wikipedia.org/wiki/International_arbitration. Zwager, D. (2016). Warranty claims under German law on the sale of goods. Consumer and Marketing Law, Corporate Law, Germany. Retrieved February 9, 2019. https:// legalknowledgeportal.com/2016/03/31/warranty-claims-under-german-law-on-the-sale-ofgoods/.

Nonverbal Communication

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10.1

Elements of Nonverbal Communication

Negotiations are primarily characterized by verbal communication in which the negotiating partners communicate with each other through language and exchange their views. However, in addition to the spoken word, there are still fundamental signals defined as nonverbal communication or body language (Mühlisch, 2006). Nonverbal communication (Latin: understanding without words) refers to the part of communication that does not refer to the conventionalized rules of a spoken language, which expresses itself according to nonconventionalized rules of a language used. Nonverbal communication includes the use of visual cues such as body language or face language (kinesics), eye contact and blink rate (oculesics), paralanguage and voice signals (vocalics), personal appearance, personal space elements or distance (proxemics), touch elements (haptics), time (chronemics) and the physical environment as outlined in Fig. 10.1 (Helmold, Dathe, & Hummel, 2019). Body language is any type of nonverbal communication in which physical behaviours, as opposed to words and speech, are used to express or convey information. Such behaviour can include body postures, gestures, facial expressions or eye movements like pupil dilution or blink rate. Eye movements can also be reflected by blushing, sweating, frowning or raising eyebrows. In particular, movements of the head, the body, the arms or the hands are strong signals in negotiations that can provide information about feelings, positions, doubts, agreements or resistance. Facial expressions including the eyes, also called coalesces, are often reflected by signals of facial features such as blushing, sweating, frowning, blinking or raising eyebrows. Body language exists in both animals and human beings and is described as kinesics. Besides body and face language, there are nonverbal elements known M. Helmold (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_10

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as paralanguage, including voice quality, rate, pitch, volume, and speaking style, as well as prosodic features such as rhythm of speech, intonation or stress, so written texts have nonverbal elements such as handwriting style, spatial arrangement of words or the physical layout of a page (Helmold et al., 2019). Negotiators often try not to use emotions in business negotiations because they believe that feelings are inappropriate in business situations. However, they do so unconsciously because the behaviour and body language are directly related to feelings (Mühlisch, 2006). The body does not know if he is travelling privately or on business and sends out nonverbal signals. Negotiation experts such as Schranner or Dr. Helmold recommend the opposite and use emotions in a targeted and situational way (Helmold et al., 2019; Schranner, 2009). Emotions can also be deliberately used to deceive, dodge, yield or exert pressure on the opponent of the negotiations. Elements of nonverbal communication refer to: • Upright or casual posture • Closed or folded legs • Attitude of the hands • Fixed or facial expression • Comfortable or uncomfortable standing • Spontaneous smile • Drooping corners of the mouth • Hectic movements • Sweating and/or blushing • Touching of body parts such as nose, arms or ears • Adjusting clothes such as tie or the suit. Nonverbal communication is the process of sending and receiving messages without using words and speech, either spoken or written. Nonverbal communication between people in negotiations is the communication through sending and receiving wordless cues, such as visual cues or body language. Nonverbal

Nonverbal communica on categories Body language Body postures, gestures & face language (kinesics)

Eye contact, blink rate (oculesics)

Touch elements (hap cs)

Personal space elements (proxemics)

Paralanguage and voice (vocalics)

Time elements (chronemics)

Physical environment

Personal appearance

Fig. 10.1 Nonverbal communication

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communication involves the conscious and unconscious processes of encoding and decoding. Encoding is the act of generating information such as facial expressions, gestures and postures. Encoding information utilizes signals which we may think to be universal. Decoding is the interpretation of information from received sensations given by the encoder. Decoding information utilizes knowledge one may have of certain received sensations. The psychologists and conflict mediators Paul Ekman and Wallace Friesen stress that there is interdependence between nonverbal and verbal messages (Ekman & Friesen, 2015). The scientists identified six important steps how nonverbal communication directly affects our verbal discourse (Ekman & Friesen, 2015). Firstly, people can use nonverbal signals to stress the outspoken words. All good speakers know how to do this with forceful gestures, changes in vocal volume or speech rate, deliberate pauses and so forth. Secondly, the nonverbal behaviour often repeats what people say or think. Negotiators are saying something and nodding or shaking with the head. Thirdly, nonverbal signals can substitute words. Often, there is not much need to put things in words. A simple gesture can suffice (e.g. shaking your head to say no, using the thumbs-up sign to say). Fourthly, people use nonverbal signals to regulate speech. Called turn talking signals, these gestures and vocalizations make it possible for us to alternate the conversational roles of speaking and listening. Fifthly, nonverbal messages sometimes contradict what people say. A friend tells us she had a great time at the beach, but we’re not sure because her voice is flat and her face lacks emotion. Sixthly, people can use nonverbal signals to complement the verbal content of our message. Being upset could mean we feel angry, depressed, disappointed or just a bit on edge. Nonverbal signals can help to clarify the words we use and reveal the true nature of our feelings.

10.2

Understanding and Decoding Nonverbal Communication

Signals of nonverbal communication are important in negotiations but also difficult to detect or decode as outlined by several authors (O’Brien, 2016). Dr. Helmold therefore recommends to concentrate on the most visible signals in terms of body, face and eye signals, which can be more easily decoded by experienced negotiators than others (Helmold et al., 2019). Experienced negotiators will certainly also focus on all signals, categories and elements of nonverbal communication; however, body, face and eye characteristics can be considered as the most suitable for consideration and decoding. The three-step approach in Figs. 10.2 and 10.3 highlights the steps to understand repeated signals of nonverbal communication. Step 1 deals with repeated patterns and signals of the negotiation opponent. Based on repeated patterns and behaviour, one can establish a baseline and start testing signals and behavioural action of the negotiation opponent. Step 2 contains the clustering of consistent behaviour and patterns. The last step is the most important to watch out for changes in the behaviour (body language, facial expressions, voice, etc.) and to

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Nonverbal communication signals Body language, postures, gestures & face language (kinesics) Eye contact, blink rate (oculesics)

Paralanguage and voice (vocalics)

Time elements (chronemics)

Touch elements (haptics)

Personal space elements (proxemics)

Physical environment

Personal appearance

Fig. 10.2 Decoding recommendations

use knowledge for the own negotiation. Negotiation experts recommend to use any information gained from nonverbal analyses secretly without revealing the findings to the negotiation opponent (O’Brien, 2016). In order to understand the importance of nonverbal communication, the overall context must be accurately analysed in order to understand signals.

10.3

Body Language and Face Language (Kinesics)

Body language signals consist of body signals, gestures, facial expressions, eye movement, touch and the use of space. Body language exists in both animals and human beings. Human body language is defined as kinesics (Helmold et al., 2019).

10.3.1 Body Postures Emotions can very often be detected through body postures (Ekman & Friesen, 2015). Research has shown that body postures are more accurately recognized when an emotion is compared with a different or neutral emotion (Ekman & Friesen, 2015). For example, a person feeling anger would display dominance over the other negotiator and the body language would show tendencies of approaching or attacking the negotiation opponent. Comparing this to a person feeling fearful, they would feel weak, submissive and their posture would display avoidance tendencies, the opposite of the angry negotiator. Sitting or standing postures also indicate one’s emotions. A person sitting till the back of their chair leans forward with their head nodding along with the discussion implies that they are open, relaxed and generally ready to listen. On the other hand, a person who has their legs and arms crossed with the foot kicking slightly implies that they are feeling impatient and emotionally detached from the discussion. There are many body

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Decoding

Pay attention to repeated signals.

Step 1

Create a baseline. Test the signals and the behaviour

Step 2

Create consistent patterns of behaviour: clustering of groups

Step 3

Watch out for changes and draw your conclusion. Use it for your negotiation strategies and tactics

Fig. 10.3 Step model for decoding nonverbal signals

signals and postures including the body, the arms, the legs, the face or the eyes that can be observed in negotiations. It is therefore important to understand repeated patterns and to draw cues out of these signals.

10.3.2 Gestures Gestures are movements made with body parts. Examples are hands, arms, fingers, head, legs or other body parts. Body movements can be voluntary or involuntary by negotiators. Arm gestures can be interpreted in several. In a discussion, when one negotiator stands, sits or even walks with folded arms, it is normally not a welcoming gesture. It could mean that the negotiation opponent may have a closed mind and is most likely unwilling to listen to the speaker’s viewpoint on negotiation objectives and proposals (O’Brien, 2016). Another type of arm gesture also

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includes an arm crossed over the other, demonstrating insecurity and a lack of confidence. Finger gestures are also commonly used to exemplify one’s speech and denote the state of well-being of the person making them. In certain cultures, pointing using the index finger is deemed acceptable. However, pointing at a person may be viewed as aggressive in Western cultures (Pease & Pease, 2006). For example, people who share Hindu beliefs consider finger pointing offensive. Instead, they point with their thumbs (Pease & Pease, 2006). Likewise, the thumbs-up gesture could show “OK” or “good” in countries like the USA, France and Germany. But this same gesture is insulting in other countries like Iran, Bangladesh and Thailand, where it is the equivalent of showing the middle finger in the USA (Pease & Pease, 2006). In most cultures, the nodding of the head is used to signify “Yes” and confirmation (Pease & Pease, 2006). It is a stunted form of bowing. The person symbolically goes to bow but stops short, resulting in nodding (Pease & Pease, 2006). Bowing is a submissive gesture, so the head nod shows we are going along with the other person’s opinion. Research conducted with people who were born deaf, dumb and blind shows that they also use this gesture to signify agreement, so it appears to be an inborn gesture of submission (Pease & Pease, 2006). Handshakes are regular greeting rituals in Western cultures like Germany, France or the USA and are usually carried at the start of a negotiation and as a greeting. Handshakes are also done as offering, as congratulations or after the completion of an agreement (Pease & Pease, 2006). They usually indicate the level of confidence and emotion level in people. Studies have also categorized several handshake styles, e.g. the finger squeeze, the bone crusher (shaking hands too strongly) and the limp fish (shaking hands too weakly) (Pease & Pease, 2006). Handshakes are popular in the Western cultures and are appropriate for use between men and women (Pease & Pease, 2006). However, in Islamic countries and Muslim cultures, men may not shake hands or touch women in any way and vice versa (Pease & Pease, 2006). Likewise, in Hindu cultures, Hindu men may never shake hands with women (Pease & Pease, 2006). Instead, they greet women by placing their hands as if praying. Body language related to breathing and patterns of breathing can be indicative of a person’s mood and state of mind; because of this, the relationship between body language and breathing is often considered in contexts such as business meetings and presentations. Generally, deeper breathing which uses the diaphragm and abdomen more is interpreted as conveying a relaxed and confident impression; by contrast, shallow, excessively rapid breathing is often interpreted as conveying a more nervous or anxious impression.

10.3.3 Facial Expressions Facial expressions and signals of the face are an integral part of negotiations when expressing emotions through the body as stressed by Pease and Pease (2006). Combinations of eyes, eyebrow, lips, nose and cheek movements help form

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different moods of an individual (e.g. happy, sad, depressed, angry). A few studies show that facial expression and bodily expression (body language) are congruent when interpreting emotions (Pease & Pease, 2006).

10.3.4 Eye Movement (Oculescis) Oculesics, a subcategory of body language, is the study of eye movement, eye behaviour, gaze and eye-related nonverbal communication. As a social or behavioural science, coalesces is a form of nonverbal communication focusing on deriving meaning from eye behaviour. It is also crucial to note that oculesics is culturally dependent. For example, in traditional Western European culture, avoiding eye contact usually portrays a lack of confidence, certainty or truthfulness. However, in the South American culture, direct or prolonged eye contact means that you are challenging the individual with whom you are speaking or that you have a romantic interest in the person. Also, in many Asian cultures, prolonged eye contact may be a sign of anger or aggression.

10.3.5 Touch (Haptics) Haptics, a subcategory of body language, is the study of touching and how it is used in communication or negotiations (Pease & Pease, 2006). As such, handshakes, holding hands, back slapping, high fives, brushing up against someone or patting someone all have meaning (Pease & Pease, 2006). Based on the research of body language, touching is the most developed sense at birth and formulates our initial views of the world (Pease & Pease, 2006). Touching can be used to sooth, for amusement during play, to flirt, to express power and maintain bonds between people, such as with baby and mother (Pease & Pease, 2006). Touching can carry distinct emotions and also show the intensity of those emotions. Touch absent of other cues can signal anger, fear, disgust, love, gratitude and sympathy depending on the length and type of touching that is performed. Many factors also contribute to the meaning of touching such as the length of the touch and location on the body in which the touching takes place (Pease & Pease, 2006).

10.3.6 Human Space (Proxemics) Negotiations are also reflected by certain aspects of how close negotiation opponents come to each other. In negotiations, it is recommended to understand proxemics, particularly in intercultural negotiations. Proxemics is the study of human use of space and the effects that population density has on behaviour, communication and social interaction. It contains four territories:

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• Public territory • Interactional territory • Home territory • Body territory. The public territory is a place where one may freely enter. This type of territory is rarely in the constant control of just one person. However, people might come to temporarily own areas of public territory. Negotiations can but do normally not take place in public territories very often. An airport, a restaurant, a sports event or a park could be a public territory, where negotiations can take place. Secondly, there is the interactional territory. In most of the cases, negotiations take place in venues, which were agreed by the negotiation sides. Interactional territory is the place where negotiators congregate formally. Interactional territories are usually the companies or conference centres of choice of the negotiation partners. The third group is the home territory. This is a place where people continuously have control over their individual territory, normally the home. Whereas most of the negotiations take place in the interactional territory, some cultures like also to partly involve the home territory. The home territory is often used by Chinese negotiators to influence the other side for concessions as outlined later (negotiations in China). The last and fourth territory is the body territory. This is the place and the space, which is immediately surrounding us. Respecting the body territory is important for negotiations (Pease & Pease, 2006).

10.4

Paralanguage (Vocalics)

Paralanguage is a component of meta-communication in the voice. Elements are those that may modify meaning, give nuanced meaning or convey emotion, such as prosody (rhythm), pitch (level of voice; German: Stimmlage), volume or intonation. Paralanguage may be expressed consciously or unconsciously. In negotiations with experienced businessmen, paralanguage signals are normally difficult to identify. Trained and experienced negotiators will probably not be major signals unless they are in extreme situations like anger, fear or doubt.

10.5

Time Elements (Chronemics)

Time elements or chronemics can be defined as the study of human tempo as it is related to human communication. More specifically, chronemics involves the study of both subjective and objective human tempos as they influence and are interdependent with human behaviour. Further, chronemics involves the study of human communication as it relates to interdependent and integrated levels of time experiencing. Previously, these interdependent and integrated levels have been outlined

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and discussed as: biological time; psychological time; social time; and cultural time. A number of classification systems exist in the literature of time. However, such systems are not applied to human interaction directly. Chronemics can be defined as “the interrelated observations and theories of man’s use of time” the way in which one perceives and values time, structures time and reacts to time frame communication. Time perception plays a large role in the nonverbal communication process. Time perceptions include punctuality, willingness to wait and interactions. The use of time can affect lifestyle, daily agendas, speed of speech, movements and how long people are willing to listen. Time can be used as an indicator of status. For example, in most companies the boss can interrupt progress to hold an impromptu meeting in the middle of the work day, yet the average worker would have to make an appointment to see the boss. The way in which different cultures perceive time can influence communication as well.

10.6

Physical Environment

Research on the physical environment in negotiations is quite low compared to other nonverbal communication factors (Young, 2004) Only few authors describe factors of the physical environment which can significantly influence negotiations. The physical environment includes the venue, surroundings and arrangements of negotiations. A negotiation can take place in a meeting room of the own company, in the other company, in a restaurant, in a public space like an airport or in any other location. Experts recommend to think about the following questions: • Where will the negotiation take place? • How big should the room be? • What are the cultural implications? • Where will everybody sit? • How should the comfort level be set up? • Will I use a table, what shape? • Will there be barriers on the table? • Will I make arrangements for refreshments? Thoughtful consideration of the negotiation environment will enhance self-determination, supports quality decision making and will lead to a more successful negotiation result (Young, 2004). The comfort level can be increased by a spacious and bright room. Refreshments can also add a sympathetic atmosphere, whereas a small and dark room can lead to a more uncomfortable position (O’Brien, 2016). Especially, negotiations in Asian countries, which normally start in the company venue, will be concluded in a friendly atmosphere in a restaurant, often including all participants and stakeholders.

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Personal Appearance

Personal appearance is an important item in negotiations and can be described as physical characteristics of a negotiator. Appearance characters can be seen with the eyes and encompass anything one can describe about a person or group of people, just on sight. Personal appearance contains the dress, the hair style, clothes, shoes and other elements, which can be seen by the other negotiation side. Negotiators may rely on appearance attributes to indicate respect for the negotiation situation (Gelfand & Brett, 2004). How attractive a person is can actually influence a negotiation too. Research has found that physical attractiveness determines how a person is perceived by the other negotiation partner and the way he may perceive the other side (Gelfand & Brett, 2004). Attractive people are better liked, get better jobs and have more self-esteem and social power than unattractive people. When people feel very comfortable about their appearance, then they have a nice self-esteem level. This person then appears happier and thus has an easier time negotiating. For instance, if a person had high self-esteem, then he or she would probably think more positively and would be more likely to use negotiation techniques (Gelfand & Brett, 2004). Especially, when negotiating in the intercultural context, it is of the utmost importance to understand formal and informal practices in terms of personal appearance. This can include an informal dress code like in Japan or other Asian countries, or a formal one like in Arabian countries.

References Ekman, P., & Friesen, W. (2015). Unmasking the face. A guide to recognizing emotions from facial expressions by Paul Ekman. Psychologist Publishing. Gelfand, M. J., & Brett, M. (2004). The handbook of negotiation and culture. Stanford: Stanford Business Books. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler. Mühlisch, S. (2006). Körpersprache in Verhandlungen. Wie Sie nonverbale Signale richtig deuten und einsetzen. In Fragen der Körpersprache – Antworten zur Nonverbalen Kommunikation. Paderborn: Jungfernamnn Verlag. O’Brien, J. (2016). Negotiations for procurement professionals (2nd ed.). Croydon: Kogan Page. Pease, A., & Pease, B. (2006). The definitive book of body language: The hidden meaning behind people’s gestures and expressions. Bantam. Schranner, M. (2009). Verhandeln im Grenzbereich. Strategien und Taktiken für schwierige Fälle. 8. Auflage. München: Econ. Young, P. (2004). The where mediation. Choosing the right location for facilitated negotiations. March 2004. Mediation. Retrieved January 19, 2019. https://www.mediate.com/articles/young19. cfm.

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11.1

PESTEL Analysis (Environmental Forces)

11.1.1 Categories of the Model A PESTEL analysis or PESTLE analysis (formerly known as PEST analysis) is a framework or tool for strategic analysis and negotiations used to analyse and monitor the macro-environmental factors that may have a profound impact on an organization’s performance (Helmold, Dathe, & Hummel, 2019). This tool is especially useful when starting a new business or entering a foreign market. It is often used in collaboration with other analytical business tools such as the Porter’s Five Forces analysis (micro-analysis) or SWOT analysis to give a clear understanding of a situation and related internal and external factors. PESTEL is an acronym that stands for Political, Economic, Social, Technological, Environmental and Legal factors. However, throughout the years people have expanded the framework with factors such as demographics, intercultural, ethical, digitalization or ecological elements resulting in variants such as STEEPLED, DESTEP and SLEPIT. In this book, we will stick simply to PESTEL since it encompasses the most relevant factors in general business. Each factor will be part of the negotiation analysis as shown in Fig. 11.1 (Johnson & Scholes, 1997).

M. Helmold (&)
F. Hummel Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] F. Hummel e-mail: [email protected] B. Terry Regents University, 16 Beechwood Rise, Chislehurst BR7 6TJ, UK e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_11

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Political Economic

Legal Macro analysis

Social

Environmental Technological

Fig. 11.1 PESTEL analysis. Source Johnson and Scholes (1997)

Political Factors These factors are all about how and to what degree a government intervenes in the economy or a certain industry. Basically all the influences that a government has on your business could be classified here. This can include government policy, political stability or instability, corruption, foreign trade policy, tax policy, labour law, environmental law and trade restrictions. Furthermore, the government may have a profound impact on a nation’s education system, infrastructure and health regulations. These are all factors that need to be taken into account when assessing the attractiveness of a potential market (Johnson & Scholes, 1997). Economic Factors Economic factors are determinants of a certain economy’s performance. Factors include economic growth, exchange rates, inflation rates, interest rates, disposable income of consumers and unemployment rates. These factors may have a direct or indirect long-term impact on a company, since it affects the purchasing power of consumers and could possibly change demand/supply models in the economy. Consequently, it also affects the way companies price their products and services. Social Factors This dimension of the general environment represents the demographic characteristics, norms, customs and values of the population within which the organization operates. This includes population trends such as the population growth rate, age distribution, income distribution, career attitudes, safety emphasis, health consciousness, lifestyle attitudes and cultural barriers. These factors are especially important for marketers when targeting certain customers. In addition, it also says something about the local workforce and its willingness to work under certain conditions.

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Technological Factors These factors pertain to innovations in technology that may affect the operations of the industry and the market favourably or unfavourably. This refers to technology incentives, the level of innovation, automation, research and development (R&D) activity, technological change and the amount of technological awareness that a market possesses. These factors may influence decisions to enter or not enter certain industries, to launch or not launch certain products or to outsource production activities abroad. By knowing what is going on technology-wise, you may be able to prevent your company from spending a lot of money on developing a technology that would become obsolete very soon due to disruptive technological changes elsewhere (Johnson & Scholes, 1997). Environmental Factors Environmental factors have come to the forefront only relatively recently. They have become important due to the increasing scarcity of raw materials, pollution targets and carbon footprint targets set by governments. These factors include ecological and environmental aspects such as weather, climate, environmental offsets and climate change which may especially affect industries such as tourism, farming, agriculture and insurance. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer. This has led to many companies getting more and more involved in practices such as corporate social responsibility (CSR) and sustainability. Legal Factors Although these factors may have some overlap with the political factors, they include more specific laws such as discrimination laws, antitrust laws, employment laws, consumer protection laws, copyright and patent laws, and health and safety laws. It is clear that companies need to know what is and what is not legal in order to trade successfully and ethically. If an organization trades globally, this becomes especially tricky since each country has its own set of rules and regulations. In addition, you want to be aware of any potential changes in legislation and the impact it may have on your business in the future. Recommended is to have a legal advisor or attorney to help you with these kinds of things.

11.1.2 Benefits of the Model A PESTEL analysis helps an organization identify the external forces that could impact their market and analyse how they could directly impact their business. It is important when undertaking such an analysis that the factors affecting the organization are not just identified but are also assessed—for example, what impact might they have on the organization? The outcomes of a PESTEL analysis can then be used to populate the opportunities and threats in an industry and the SWOT analysis (Johnson & Scholes, 1997).

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Industry Analysis (Porter’s Five Forces)

11.2.1 Benefits of the Model Porter’s Five Forces (Fig. 11.2) is a simple but powerful tool for understanding the competitiveness of your business environment, and for identifying your strategy’s potential profitability. The tool was created by Harvard Business School professor Michael E. Porter, to analyse an industry’s attractiveness and likely profitability. Since the first publication in 1979, it has become one of the most popular and highly regarded business strategy tools (Porter, 1985). Porter recognized that organizations likely keep a close watch on their rivals, but he encouraged them to look beyond the actions of their competitors and examine what other factors could impact the business environment. He identified five forces that make up the competitive environment, and which can erode your profitability. These are rivalry amongst competitors, bargaining power of suppliers, bargaining power of buyers, threat of new entrants and threat of substitutes (Porter, 1985; Johnson & Scholes, 1997).

11.2.2 Competitive Rivalry This looks at the number and strength of your competitors. How many rivals do you have? Who are they, and how does the quality of their products and services compare with yours? Where rivalry is intense, companies can attract customers with aggressive price cuts and high-impact marketing campaigns (Porter, 1985). Also, in markets with lots of rivals, your suppliers and buyers can go elsewhere if they feel that they’re not getting a good deal from you. On the other hand, where competitive rivalry is minimal, and no one else is doing what you do, then you’ll likely have tremendous strength and healthy profits (Johnson & Scholes, 1997).

11.2.3 Bargaining Power of Suppliers This is determined by how easy it is for your suppliers to increase their prices. How many potential suppliers do you have? How unique is the product or service that they provide, and how expensive would it be to switch from one supplier to another? The more you have to choose from, the easier it will be to switch to a cheaper alternative. But the fewer suppliers there are, and the more you need their help, the stronger their position and their ability to charge you more. That can impact your profit (Porter, 1985).

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11.2.4 Bargaining Power of Buyers Here, you ask yourself how easy it is for buyers to drive your prices down. How many buyers are there, and how big are their orders? How much would it cost them to switch from your products and services to those of a rival? Are your buyers strong enough to dictate terms to you? When you deal with only a few savvy customers, they have more power, but your power increases if you have many customers (Porter, 1985).

11.2.5 Threat of Substitutes This refers to the likelihood of your customers finding a different way of doing what you do. For example, if you supply a unique software product that automates an important process, people may substitute it by doing the process manually or by outsourcing it. A substitution that is easy and cheap to make can weaken your position and threaten your profitability.

11.2.6 Threat of New Entrants Your position can be affected by people’s ability to enter your market. So, think about how easily this could be done. How easy is it to get a foothold in your industry or market? How much would it cost, and how tightly is your sector regulated? If it takes little money and effort to enter your market and compete effectively, or if you have little protection for your key technologies, then rivals can quickly enter your market and weaken your position. If you have strong and durable barriers to entry, then you can preserve a favourable position and take fair advantage of it (Porter, 1985).

Threat of subsitutes Industry analysis Bargaining power of suppliers

Rivalry of amongst competitors Micro analysis Threat of new entrants

Fig. 11.2 Industry analysis. Source Author

Bargaining power of buyers

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SWOT Analysis

A SWOT analysis is a high-level strategic planning model that helps organizations identify where they’re doing well and where they can improve, both from an internal and external perspective. It is an acronym for Strengths, Weaknesses, Opportunities, and Threats as outlined in Fig. 11.3. Organizations usually conduct a SWOT analysis at the beginning of a negotiation and strategic planning process. Your entire leadership team should be heavily involved, because they should have the ability to look across your organization and offer insight into your competitive environment and/or business landscape. When the leadership team offers appropriate recommendations regarding your strengths, weaknesses, opportunities and threats, you will end up with a SWOT analysis that has the credibility to be used constructively in the strategic planning process. SWOT analysis in Fig. 11.3 is a framework used to evaluate a company’s competitive position by identifying its strengths, weaknesses, opportunities and threats. The SWOT analysis is a foundational assessment model that measures what an organization can and cannot do, and its potential opportunities and threats. Strengths and weaknesses analysis is an ideal tool for investigating negotiation latitude and location in complex negotiations, as well as individual processes, products, teams or other objects of observation and for developing alternative solutions. During the negotiations, it can be used as a proactive tool to explore negotiating positions during the analysis phase (A.1), strategy selection (A-2), structure of argumentation (A-3) and actual negotiation (A-4).

Strengths (internal)

SWOT analysis

Opportunities (external)

Fig. 11.3 SWOT analysis. Source Author

Weaknesses (internal)

Internal analysis

Threats (external)

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Risk and Opportunity (ROP) Analysis

Monetary risks and opportunities (ROP analysis in Fig. 11.4) projects often have a multi-year lifecycle from development to delivery to after-service (Helmold & Terry, 2016a). Each project involves risks and opportunities (ROPs) in connection with project completion. A risk is a potential event with a negative impact. The event lies in the future of the project and jeopardizes or weakens the successful achievement of the project. These risks belittle the profitability of the project in a monetary sense. The opportunities, on the other hand, are events that have a positive impact on the project outcome. In practice, these risks and opportunities are correlated with probability factors and quantified in monetary terms (Helmold & Terry, 2016b) (Table 11.1).

Client claim: -500,000 euro Audit cost: -100,000 euro Add. producƟon cost: -300,000 euro

Risks (external)

Total monetary risks: -800,000 euro

ROP analysis

OpportuniƟes (external)

Global sourcing: +500,000 euro Budget improvements: +250,000 euro AddiƟonal sales: +700,000 euro Total monetary opps: + 1,450,000 euro

Fig. 11.4 ROP. Source Author

Table 11.1 Risks and opportunities Risks Additional resources like man-hours and increased design budgets Material cost increases by suppliers Additional customer requirements without contractual adjustments Source Author

Opportunities Less consumption of resources, e.g. material or people Make strategies and global sourcing Implementation of client requests with lower budgets

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Table 11.2 Action to improve productivity

11.5

Faster finalization of milestones in design and production Global sourcing or outsourcing strategies Less quality work and audits Increased sales prices or increased sales quantity Additional orders and changes from customers (options) Source Author

Margin Enhancement Plan (MEP)

The profitability analysis and project improvement (English: Margin Enhancement Plan) is the systematic and structured planning and execution of activities that have a positive effect on the economic situation of the project (Helmold & Terry, 2016a). These measures ensure the improvement of economic efficiency along the entire project life cycle and all functions. MEP measures cover all functions from development through purchasing to marketing and sales (Helmold & Terry, 2016a) (Table 11.2).

11.6

5F Concept

The 5F concept describes the attributes for successful negotiations. Negotiations must be firm and decisive in argumentation. The arguments can be based on a detailed analysis of the scope of negotiations and negotiators. Arguments must be fact-based and objective. In addition to this attribute, negotiations must be focused to achieve a negotiated outcome. This may also include giving in subpoints. Nonetheless, arguments should be urgently and forcefully put forward in the negotiations. Finally, negotiations should be friendly and truthful. Table 11.3 shows the German and English terms of the 5F concept.

Table 11.3 5F concept for successful negotiations

English Firm Factual Focused Forceful Faithful Source Author

German Fest und entschieden Faktenbasiert und objektiv Fokussierend und ehrlich Forsch und eindringlich Freundlich und wahrheitsgetrau

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Critical Success Factors

When considering strengths and weaknesses, it is important to match these to the critical success factors. CSFs in the industry are our strengths the same as the ones necessary for success? In particular, if a business can obtain unique resources and core competencies that meet the CSFs in a market, then this should lead to its success.

11.8

The 7S Model by McKinsey

McKinsey 7S model is a tool that analyses firm’s organizational design by looking at 7 key internal elements: strategy, structure, systems, shared values, style, staff and skills, in order to identify if they are effectively aligned and allow organization to achieve its objectives. McKinsey 7S model was developed in the 1980s by McKinsey consultants Tom Peters, Robert Waterman and Julien Philips with a help from Richard Pascale and Anthony G. Athos. Since the introduction, the model has been widely used by academics and practitioners and remains one of the most popular strategic planning tools. It sought to present an emphasis on human resources (Soft S), rather than the traditional mass production tangibles of capital, infrastructure and equipment, as a key to higher organizational performance. The goal of the model was to show how 7 elements of the company—structure, strategy, skills, staff, style, systems and shared values—can be aligned together to achieve effectiveness in a company. The key point of the model is that all the seven areas are interconnected and a change in one area requires change in the rest of a firm for it to function effectively. You can find the McKinsey model, which represents the connections between seven areas and divides them into ‘Soft Ss’ and ‘Hard Ss’. The shape of the model emphasizes interconnectedness of the elements (Fig. 11.5).

Hard S categories Structure Strategy

Systems 7-S model: McKinsey Shared values Style

Skills

Soft S categories

Staff

Fig. 11.5 7S model by McKinsey. Source McKinsey

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References BME. (2018). Bundesverband Materialwirtschaft, Einkauf und Logistik. Mittelstandspreis geht an Jokey. November 10, 2017. Retrieved May 18, 2018. https://www.bme.de/jokey-groupgewinnt-den-bme-innovationspreis-2017-2330/. Büsch, M. (2012). Praxishandbuch Strategischer Einkauf: Methoden, Verfahren, Arbeitsblätter für professionelles Beschaffungsmanagement (German Edition. 3. Auflage). Wiesbaden: Springer. Dathe, T., & Helmold, M. (2018). Erfolg im Chinageschäft. Handlungsempfehlungen für kleine und mittlere Unternehmen (KMU). Wiesbaden: Springer. Helmold, M., Dathe, T., & Büsch, M. (2017). Praxisbericht aus der Bahnindustrie – Bombardier Transportation. Veränderte Anforderungen durch Global Sourcing. In Beschaffung aktuell. May 4, 2017. Retrieved May 17, 2018. https://beschaffung-aktuell.industrie.de/einkauf/ veraenderte-anforderungen-durch-global-sourcing/. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler. Helmold, M., & Terry, B. (2016a). Lieferantenmanagement 2030. Wiesbaden: Springer. Helmold, M., & Terry, B. (2016b). Global sourcing and supply management excellence in China. Singapore: Springer. Helmold, M., & Terry, B. (2017). Global Sourcing und Lieferantenmanagement in China. Berlin: DeGruyter. IUBH. (2018). Negotiations in the international context. Master-Studiengänge. Retrieved May 18, 2018. https://www.IUBH-fernstudium.de/modul/negotiation-dlmnege/. Johnson, G., & Scholes, K. (1997). Exploring corporate strategy. Text and cases (4th ed.). London: Prentice Hall. O’Brien, J. (2016). Negotiations for procurement professionals (2nd ed.). Croydon: Kogan Page. Porter, M. E. (1985). Competitive advantage. Creating and sustaining superior performance. New York: Free Press.

Outsourcing Negotiations

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Brian Terry and Marc Helmold

12.1

Key Drivers for Outsourcing Shared Services

Shared services and outsourcing of services are increasing and help the companies to increase efficiency, to concentrate on core competencies, and to reduce cost (Nair, 2017). Shared services organizations (SSOs) can deliver and demonstrate the value to their internal customers in many ways, and managers can take advantage of outsourced shared services to improve the areas’ services, people management, processes, and technology (Helmold, Dathe, & Büsch, 2017). Most companies try the shared services model in their home country first and then export the concept to other parts of the world. As a result, each region often functions as a separate unit, trying independently to improve productivity and reduce costs. Shared services are offered in areas alongside the value chain (procurement, operations, or marketing and sales) and support functions like logistics, human resources, quality, accounting, and claim management or financial services as illustrated in Fig. 12.1 (Nair, 2017). More than 80% of shared services organizations have implemented robotic process automation technology. Successful organizations take a long-term view of shared services from day one and establish policies and organizational structures for a global model. These firms are careful not to get carried away and open too many physical offices, usually opting for a major global center and several minor regional centers. The leader of the SSO is responsible for all global operations and for providing consistent service to business units in all regions (Nair, 2017). The first job of most shared services projects is to consolidate and standardize high-volume B. Terry Regents University, 16 Beechwood Rise, Chislehurst BR7 6TJ, UK e-mail: [email protected] M. Helmold (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_12

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IT IT & Network Infrastructure

Marke ng

Other specific Services

Procurement

(e.g. Quality)

Project Management

Finance & Accoun ng

Supply Chain & Logis cs

Customer Sales Services

Industry specific Services (Claims)

Human Resources

Fig. 12.1 Outsourcing services

activities, such as accounts payable or cash application. Many SSOs stick with this role and become pigeonholed as transaction-processing utilities. Forward-thinking firms work to expand both the geographic scope and the breadth of their service offerings. For these companies, there are no opt-out options for business units. The SSO serves every country, location, business unit, and employee of the company. Progressive companies expand the scope to include expert functions and do not limit the criteria to whether the SSO yields the same kind of cost savings as those achieved by taking on high-volume transaction processing. Many shared services projects target cost and productivity improvements within a single process (such as accounts payable). The most advanced companies often go well beyond those limitations and appoint global process owners (GPOs) for end-to-end processes such as order-to-cash or purchase-to-pay. GPOs look to standardize these activities across all locations. GPOs target the following aspects:

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Measure and improve process quality Apply best practices Manage external relationships Monitor customer satisfaction Identify technology needs.

12.2

Objectives for Outsourcing Shared Services

Companies have different objectives and plans to achieve them. Many companies have invested significantly into themselves and have looked at supplier solutions while others focus on competence and improved delivery across processes. Figure 12.2 displays objectives in terms of cost advantages, more agility, better quality of services, global presence, and the outsourcing of non-core competencies to specialized organizations and shared service centers. When deciding to outsource services to SSOs, it is important to understand the processes and the associated cost to enter negotiations with SSOs. Understanding the own process landscape will help to identify the optimum service providers. Usually, the objectives for outsourcing are the concentration on core activities, the usage of experts on a global scale, the improvement of quality, the optimization of cost, and the application of agile processes (Nair, 2017). Figure 12.2 show the objectives of using SSOs.

Fig. 12.2 Objectives for outsourcing of services

Cost

Core Competencies

Quality of Services

Agility

Global Presence

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Trends in Outsourcing Shared Services

12.3.1 Integrative Services An integrated business services model is a key to deliver high-value services on an enterprise-wide basis in a consistent and cost-competitive manner. While the global business services (GBS) model has helped organizations scale up, it is the breaking of functional silos that generate real value for the organization. Executives and managers who use integrated business service (IBS) models experience less internal complexity in their businesses. Today, IBS is designed from the outside in and is fully focused on improving customer outcomes. To achieve operational efficiency savings, GBS integrate end-to-end processes including procure-to-pay, order-tocash, and record-to-report. Top-performing GBSs enjoy non-labor cost savings. Most of these processes are being integrated with governing metrics and data analytics to monitor the performance. This optimizes processes and allows IBS to deliver ongoing improvements and value to organizations. Finance is the most mature shared service function that is provided through an integrated, centralized global model. Finance as an integrated service is transparent and enables CFOs to view working capital throughout the system. While this data enables strategic management decisions, an end-to-end governance service also eases transactional activities throughout the business. The standardized nature of GBS models not only reduces costs but also streamlines any future M and A activity or divestitures.

12.3.2 Digitization and Automated Processes Digital technologies are transforming all business functions from SCM and finance to HR, customer experience, and more. While robotic process automation (RPA) reduces the costs by automating individual processes, cloud-based IT environments enable end-to-end integration of operations. Those integrated processes provide data to analytics, and analytics drive better decisionmaking, more effective operations, and increased enterprise performance through high-value business insights. Artificial intelligence (AI) tools help manage customer experience and control vendor management to create improved and sufficient service. Digital transformation is essential in the journey to next-generation shared services. It will marry operations and technology to create innovative, seamless service lines on a global scale. Shared services organizations are already building digital capabilities across automation, social media, and advanced analytics. Large data lakes are harnessed to drive KPIs and operational reviews. Advanced analytics provide insights on customers and products and aid business planning. With shared services, bolstering their social media skills with training programs, responsiveness, and rapport with customers will improve. The shared infrastructure of an integrated end-to-end service benefits the supply chain management (SCM) function’s increasing requirement for segmentation strategies. Efficient integration can harmonize service-level differentiation based on delivery model, procurement strategy, product strategy, stocking strategy, and other

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metrics. Focus on optimization software, visualization software, and RFID strategy generates better performances for service owners. IBS improves the flexibility and resilience of SCM and drives integration with the finance function, as majority of SCM leaders would like to see.

12.3.3 Globalization and Global Networks As business functions become more and more integrated, organizations progress toward developing governance models that may ease the move to IBS. Businesses prefer governance through global shared services because it improves proximity of businesses, reduces dependence on time zones, and increases scale of operations. This helps the company to build expertise, achieve economies of scale, standardize processes, and focus on the core business. Governance dictates both the strategic and operational aspects of a business. Strategic governance addresses scope, service, investment, and price while operational governance covers daily items related to processes, technology, and people. As businesses evolve, the way in which they interact with the world will change. Decreasing geographic barriers are encouraging global networks of operations. Concerns over regulations, time zones, and languages are overcome by competitive cost structures offered by increasing globalization. Business leaders are increasingly leveraging economies of scale, labor arbitrage, and improving global presence and standards in their sourcing decisions. Increasingly, the majority of the top-performing global shared services centers are the regional centers with global management oversight. Often, when establishing a new shared services center (SSC), a strategic choice is made to balance cost optimization against proximity. Key considerations typically include regulatory or political challenges in the destination country, the likelihood of a natural disaster, and the economic, and currency stability. Well-tried destinations for SSCs, such as India, China, Poland, and Brazil, are being increasingly complemented by the emerging destinations of Vietnam, South Africa, and Latin American countries. Hybrid model operations, combining captive operations with true outsourcing vendors, are emerging as the most successful way of optimizing the geographical and process benefits of SSCs. Companies adopting hybrid sourcing models have realized savings in operating costs. Finance and accounting and HR processes, followed by procurement and IT, are the most preferred areas of sourcing. And in the future, finance and accounting and HR processes will be ready for hybrid sourcing. Delivery organizations worldwide remain captive shared service operators. A major current trend is toward multitower sourcing, i.e., outsourcing different functions to different providers in an attempt to maximize efficiencies and cost savings. A changing resource mix is a critical element of transition to the IBS model. Most mature GBS businesses maintain maximum in-house (captive) resources as opposed to outsourced resources. The increasingly integrated structure of developing GBS models, driven by digitization and RPA, will reduce headcount considerably. With significant cost savings from captive centers, the changing resource mix will affect third-party outsourcing SSCs the most.

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References Helmold, M., Dathe, T., & Büsch, M. (2017). Praxisbericht aus der Bahnindustrie – Bombardier Transportation. Veränderte Anforderungen durch Global Sourcing. In Beschaffung aktuell. Retrieved May 4, 2017. https://beschaffung-aktuell.industrie.de/einkauf/veraenderte-anforderungendurch-global-sourcing/. Nair, Ch. (2017). Trends in shared services and outsourcing. Expert Blog KPMG. Retrieved April 25, 2019. https://blog.kpmg.ch/change-is-the-only-constant-trends-in-shared-servicesand-outsourcing/.

Negotiations in the Global Economy

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Jan Pieper

13.1

The Mainstream Globalization Narrative

For decades, the mainstream narrative, told by politicians, business people, globalization theorists, and the business media, has been that we live in an increasingly “global” economy. The key players in this story about the global economy are multinational companies, such as Walmart, Procter & Gamble, Tata, or Nestlé, who offer their products and services in almost all parts of the world. As the term “multinational” implies, those companies have gone beyond their original national boundaries. Although they may still have their headquarters in the country where they were founded, most of their value chains are performed outside their home country. Their employees including their top decision-makers come from across the world. In a “war for talent” (Michaels, Handfield-Jones, & Axelrod, 2001), the multinationals strive to recruit and retain the best and brightest minds, regardless of their country of origin. And in serving the profit motive of their supposedly nation-less investors, the multinational companies are able to relocate even their headquarters to the most “business-friendly” location. In such a global economy, the story goes, and any national attempt by governments to develop distinctly national economic policies appears doomed to fail. If a country’s government discriminates against them, multinational companies will not invest in that country. The policy makers’ intention may be to help the national economy by promoting national firms, but such policies actually harm it by preventing the most efficient firms from establishing themselves in the country. Of course, international economic integration had been going on since the sixteenth century. According to the mainstream globalization narrative, however, this development has reached an entirely new level. In light of technological revolutions J. Pieper (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_13

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in communications (the Internet) and transportation (air travel, container shipping), a widespread conviction was that we were witnessing the “death of distance” (Cairncross, 1997). In the long run, market forces lead business practices across the world, once very different and based on unique historical conditions, to become more similar as differences between regions and countries fade away. Bestselling book titles like “The Borderless World” (Ohmae, 1990), “One World, Ready or Not” (Greider, 1997), and “The World is Flat” (Friedman, 2005) captured this notion of a convergence toward a singular form of “global best practice.” Serious doubts about whether the world was really becoming “flat” and whether multinational companies, unconstrained by country borders, would (and should) increasingly dominate the world economy surfaced during the 2008–2009 financial crisis. More recently, the globalization narrative seems to have changed fundamentally, especially in the US and other advanced economies. In an analysis of media mentions for the term “globalization” across several major newspapers (i.e., the Wall Street Journal, the New York Times, and the Washington Post in the USA, and the Times of London, the Guardian, and the Financial Times in the UK), Ghemawat and Altman (2019) finds that media sentiments have taken a sharply negative swing in 2016, reflecting increasing skepticism against globalization in those countries. In light of Trump’s presidency, Brexit, other independence movements in Europe (for instance, in Scotland and Catalonia), and increasing protectionist pressures in many parts of the world, the current interpretation seems to be that globalization as “the biggest business idea of the past three decades is in deep trouble” (Economist, 2017).

13.2

Toward a More Realistic View of Globalization

At closer inspection, the mainstream narrative about our global economy turns out to be simplistic and misleading. The hypothesis of a convergence toward a singular form of global best practice is “exaggerated and mythological” (McCann, 2014). Likewise, today’s cries for a pullback from globalization are also an overreaction in the other direction (Ghemawat and Altman, 2019).

13.2.1 A Look at the Data To see how globalization is actually evolving, the biennially compiled DHL Global Connectedness Index (GCI) measures the international flows of trade, capital, information, and people across 169 countries and territories. The index provides historical coverage back to 2001 and uses more than 3 million data points to track both the depth of countries’ international flows relative to their domestic activity and the breadth of those flows across origin and destination countries. The 2018 GCI report, accounting for the Brexit referendum in the UK and the 2016 presidential election in the USA, finds that despite growing anti-globalization

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tensions in many countries, international connectedness reached an all-time high in 2017. The flows of trade, capital, information, and people across national borders all intensified significantly for the first time since 2007. Strong economic growth boosted international flows, while key policy changes such as US tariff increases had not yet been implemented. The GCI also shows, however, that most of the movements and exchanges are currently domestic rather than international. Surprisingly, even after globalization’s recent gains, the world is still less connected than most people think it is. At the global level, the GCI shows, for example, that exports of goods and services add up to “only” 29% of world GDP, but even that figure comes down to about 20% if adjusted for output that crosses borders more than once. About 7% of all phone call minutes (including calls over the Internet) are international, and only 3% of the all people on the planet live outside the countries where they were born. The report also demystifies the popular belief that distance is becoming irrelevant. Most countries are much more connected to their neighbors than to distant nations. It is important to recognize that global market integration is still limited in absolute terms. Recent data on companies ranked among the top 100 with the most assets located outside their home countries documents that while these companies tend to operate in dozens of countries, their top four markets, including their home market, account for around 60% of their revenues and probably a larger share of their total profits (Ghemawat, 2017). Overall, only about 0.1% of the world’s firms are multinationals. And although international trade is highly skewed toward larger firms, the foreign operations of those multinational firms around the world generate only about 9% of global output. Of course, trade occurs also without multinationals—about 50%, in fact. A rising cohort of small firms, for example, uses e-commerce to do business across borders. But e-commerce is still significantly less internationalized than off-line commerce (DHL, 2019). Thus, despite the increasing internationalization of capital, most multinational companies remain in fact national companies with international operations, rather than genuinely nation-less companies. They conduct the bulk of their core activities, such as high-end research and strategizing, at home. Most of their top decision-makers are home-country nationals. When they have to shut down factories or cut jobs, they usually do it last at home for various political and, more importantly, economic reasons. This means that the home country appropriates the bulk of the benefits from a multinational corporation (Chang, 2014).

13.2.2 Reasons for Misconceptions About Globalization Evidently, there is a discrepancy between mixed-to-positive evidence about the development of our global economy and the sharply negative swing in the mainstream view on globalization. One explanation for this discrepancy may be the tendency to overestimate the degree and the effects of globalization, even among seasoned executives. Exaggerated perceptions about the depth of globalization (i.e.,

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how much economic activity is international relative to domestic) as well as the breadth of globalization (i.e., the extent to which international economic activity is distributed internationally rather than geographically focused) may come at a cost. In a survey study, Ghemawat (2007) finds that respondents who overestimated the actual depth and breadth of globalization were more likely to believe incorrect statements about international business strategy and public policy. Businesspeople, who think the world is more globalized than it actually is, will be prone to underestimate the need to understand and respond to differences across country markets. Similarly, uninformed public policy makers are likely to underestimate the potential gains from increased globalization and overestimate its negative effects for society. After all, a neutral look at the available evidence can contribute to more productive debates about globalization by calming fears due to exaggerated perceptions of globalization. What is specifically lacking in much of the debate of the global economy is the notion of contingency. There is certainly no one-size-fits-all approach to evaluate globalization-related decisions. Rather, a case-by-case approach is required for companies to decide where (i.e., their selection of foreign markets) and how to compete (i.e., their globalization strategy).

13.3

Where to Compete in a Global Economy

Analytical tools to evaluate the attractiveness of a foreign target market, such as Country Portfolio Analysis, typically plot a company’s market potential on a simple grid, with a measure of per capita income on one axis and some measure of product performance, often market penetration rates, on the other. Such tools tend to focus solely on the potential benefits companies stand to gain from competing in a particular foreign market. The problem with such tools is that they ignore the actual costs and risks of doing business abroad. Moreover, companies tend to underestimate that their key activities, such as production processes or knowledge transfer procedures, and resources, such as human capital or physical resources, are largely location-specific and cannot be easily found or replicated elsewhere. As a consequence, globalization strategies tend to place too much emphasis on international standardization and scalar expansion. Companies routinely overestimate the expected benefits of globalized markets and substantially underestimate the costs. This biased perception can lead to expensive mistakes.

13.3.1 The CAGE Distance Framework With his CAGE Distance Framework, Ghemawat (2001) offers a practical and straightforward tool to assist firms in assessing the potential opportunities and risks involved in their international expansion. The author takes into account that

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national borders represent significant barriers to market integration, “but not high enough to insulate countries completely from each other” (Ghemawat, 2003, p. 139). The framework focuses on the concept of “distance” between countries, encompassing four distinct dimensions: cultural, administrative, geographic, and economic distance. It provides examples of each dimension of distance and explains how they impact different industries, highlighting which industries are more or less sensitive to each type of distance. In sorting out which foreign markets to focus on, the framework applies to foreign direct investments as well as trade.

13.3.2 Cultural Distance Attributes that increase the cultural distance between two countries include • different languages • different ethnicities • lack of connective ethnic of social networks • different religions • different social norms and traditions. Cultural distance strongly affects cultural products such as television (because of linguistic differences) or food (because of religious differences). Commodities, such as cement, or industrial products, are largely insensitive to cultural distance.

13.3.3 Administrative Distance Attributes that increase the administrative distance between two countries include • absence of colonial ties • absence of shared monetary or political association • political hostility • protectionist government policies • weak legal and financial institutions. Administrative distance strongly affects industries that employ a significant share of the workforce and thus represent a significant voting bloc (e.g., farmers in many countries). Governments will also intervene to protect those domestic industries that are considered central to the national security, such as telecommunications, or to national identity and pride, such as cars in Germany. Footwear and furniture, on the contrary, are examples of industries largely insensitive to administrative distance.

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13.3.4 Geographical Distance Attributes that increase the geographic distance between two countries include • physical distance • lack of a common border • lack of sea or river access • relative size of country • weak transportation or communication links • differences in climate. Geographic distance strongly affects products with low value-to-weight ratios, such as plastic containers and sand. Likewise, costs for transporting fragile or perishable products, such as fruits and flowers, become significant across larger distances. Watches or coffee, on the contrary, are examples of industries largely insensitive to geographic distance.

13.3.5 Economic Distance Attributes that increase the economic distance between two countries include • differences in consumer incomes • differences in costs and quality of – – – – – –

natural resources financial resources human resources infrastructure intermediate inputs information or knowledge.

Economic distance tends to negatively affect industries when both economies of scale and buyers’ spending power matter, such as in retail. Here, companies should focus more on countries with similar economic profiles. However, economic distance can also positively affect industries when companies can exploit cost and price differences between markets, such as in the garment or the IT services industries.

13.3.6 Empirical Evidence The CAGE Distance Framework was published in 2001, in the wake of a sharp rise in foreign direct investments across the world, and the resulting enthusiasm about the prospects of globalization among business practitioners and media. Ghemawat’s

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ideas stood in contrast to the mainstream globalization narrative of the time, and it triggered a line to empirical studies to test the frameworks explanatory power. Nachum and Zaheer (2005) were the first to use the CAGE Distance Framework ideas in a study of technology’s impact on multinational companies’ motivations for foreign investment. The authors concluded with a call “for more research on the various dimensions of distance […] and its implications for international business strategy.” Tsang and Yip (2007) investigated the economic dimension of CAGE Distance Framework, demonstrating its effectiveness in explaining the hazard rates of foreign direct investments. Lavie and Miller (2008) incorporated the framework in their empirical study of alliance portfolio internationalization. The authors provide empirical evidence about the relevance of different measures of distance between partners in an international alliance. Arikan and Shenkar (2013) also found empirical support for Ghemawat’s ideas. Having analyzed data on international alliances, they document that administrative distance in the form of animosity between countries is negatively associated with the number of alliances companies form between these countries. Similar supporting results have also been found by Salomon and Wu (2012), especially with respect to geographic and institutional distance. Tochman Campbell, Eden, and Miller (2011) expanded on Larvie’s and Miller’s (2008) contribution by employing the CAGE Distance Framework to study the effects of distance on how multinational companies conduct corporate social responsibility activities in host countries. Their findings confirmed the predictions of the framework, showing that foreign affiliates from more distant home countries are less likely to engage in social responsibility practices than affiliates from closer home countries. It may be too early to judge whether Ghemawat’s ideas will form an academic school of thought, but his work has already led to a greater appreciation of the importance of distance in the international business debate. After all, an appreciation of cross-county differences will continue to be centrally important to a serious and detailed understanding of how the global economy functions. Countries have developed very distinct “rules of the game” in terms of how companies are financed, who they do business with, how they recruit, train, and retain staff, the role of labor unions and other forms of worker representation, how they develop and deploy technology, and how they restructure when facing financial trouble. These rules of the game and the business decisions they shape clearly change over time. In doing so, however, the national rules retain certain fundamental features despite the pressures of globalization and convergence (Coates, 2000; Steinmo, 2010). Just because the world is (arguably) getting more integrated and globalized, this does not necessarily mean that economic behavior is becoming more similar. Rather the concept of path dependency suggests that history has very powerful influence on current events. Choices taken in the past affect our choices today as well as our choices in the future. Certain characteristics of our national economies are “locked-in” to the system and thus unlikely to change, whether advantageous or not.

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The complex challenge, however, is to first grasp the relevant differences between economic systems and then apply them to the specific situation of a company. The CAGE Distance Framework provides a balanced view of global expansion, not denying the benefits a company may gain from becoming multinational, but at the same time calling for a careful analysis and consideration of all factors, both positive and negative, that may affect business. Adopting this point of view may help readers to think critically about globalization dynamics and consider how the distance between countries impacts international business, particularly in the light of recent political, economic, and social events affecting globalization. To facilitate quantitative analysis based on the CAGE Distance Framework, Ghemawat has developed an online tool for practitioners called the CAGE Comparator. The CAGE Comparator covers 163 countries and 65 industries and allows users to measure the impacts of 16 types of CAGE distance measures (ghemawat.com 2019).

13.4

How to Compete in a Global Economy

If a company decides to do business in a particular foreign market, it needs to figure out whether to change the type or mix of strategies in response to cross-country differences. Ghemawat (2007) distinguishes between three basic components to customize a company’s globalization strategy: adaptation, aggregation, and arbitrage. Companies use adaptation when they tailor their products and services to suit local tastes and needs in order to increase revenues and market share. They use aggregation when they exploit economies of scale and scope that extend across borders. And they use arbitrage when they can benefit from cross-country differences in labor costs, tax regimes, government incentives, and other factors. How companies should design their globalization strategies based on these three components needs to be reevaluated at a time when protectionist pressures seem to be rising, yet the precise policy decisions affecting international businesses still being unclear.

13.4.1 Applying Adaptation Strategies Increasing the adaptation toward more country-centric “localizing” and away from scale-based aggregation may be an effective strategic response to (potential) protectionist measures as well as rising anti-globalization sentiments. The drawback of increased adaptation, however, is that each variation increases costs and complexity. Smart adaption strategies offer as many variations as required, yet as few variations as possible. To be efficient, companies could consider to design a common platform upon which localized variants are offered. Alternatively, they may be able to outsource some of the adaptation costs by means for franchising, joint ventures or other types of partnerships.

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13.4.2 Applying Aggregation Strategies Aggregation, rather than adaptation, tends to be the focal globalization strategy of multinational companies, especially those from advanced economies. They typically invest in intangible technological or marketing assets that they can scale across countries. To succeed abroad, their size-driven advantages must outweigh their local competitors’ home advantage. For multinationals that have established a healthy operation abroad, the competitive logic of economics scale and scope will certainly not become obsolete—even if some countries make it more expensive to operate within their border or if being a foreign company becomes a bigger liability in the eyes of the buyers. For multinationals that have operations in foreign markets where they are only marginally profitable, however, it may make sense to reduce their global footprint.

13.4.3 Applying Arbitrage Strategies With respect to arbitrage, the opportunities for multinationals to globalize their supply chains rather than their customer base have narrowed somewhat in recent years, but they are still substantial. Even with rising prosperity in large emerging markets, GDP per capita in France and the UK, for example, is still more than four times higher than China and more than 20 times higher than in India (Countryeconomy.com, 2019). Even in India’s well-established offshore IT services industry, programmers’ salaries are still just a fraction of those in advanced economies. Significant differences in tax regimes across countries will continue to provide additional arbitrage opportunities. A 2019 OECD report documents that the dispersion of corporate tax rates across countries has hardly changed since 2007, and progress at curbing tax havens has been slow. Further cross-country differences in safety, health, and environment standards continue to persist, even if their exploitation raises ethical concerns (OECD, 2019).

13.5

The Need for Nonmarket Strategies in a Global Economy

Beyond their market strategy questions about where and how to compete, companies that compete internationally face an increasing need to devise nonmarket strategies about how to engage with society more broadly. Especially in the face of growing anti-globalization sentiments, their interactions with governments, (social) media, NGOs, and the public in general need to be carefully considered and orchestrated. The backlash against globalization is also a backlash against big businesses. For example, the Pew Research Center investigated in 2016 survey study how much Americans trusted people in 10 different occupations to act in the public’s best interest. At an all-time low, business leaders ranked next to last, ahead only of elected officials (Kennedy, 2016).

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Regaining and maintaining legitimacy is not a trivial exercise. Multinational companies need to design both market and nonmarket strategies that are both localized and linked across countries. Beyond compliance to the national rules of the game, they need to deliver additional local benefits and make the public aware of it. Also, they need to rectify popular, yet misleading beliefs about globalization. For example, one principal complaint about globalization and multinational companies is that they contribute to rising income inequality, leaving an increasing share of the population in advanced economies behind. Increasing income inequality is real, and corporate profits running close to their highest historical levels are real too (e.g., Piketty & Goldhammer, 2014). The causal link between both phenomena, however, is empirically implausible. Most research rather suggests that misguided domestic policy decisions, a lack of technological progress, and the decline of unions have had a bigger effect on inequality than globalization (e.g., Stiglitz, 2012). If the Netherlands manage to preserve a more reasonable income distribution despite having a trade-to-GDP ratio which is six times bigger than that of the USA (DHL, 2019), it seems questionable to point fingers at globalization as the root cause of much higher income inequality in the USA. Moreover, protectionist measures provide no solution to deal with automation-related threats to jobs that dominate the debate about the future of work. In the long run, it is a bad idea for multinational companies to actively support protectionist policies that reduce trade and capital flows, make people less mobile, and delegitimize the notion that companies can contribute to the well-being of people in more than one society—even if they mostly care about shareholder value.

13.6

Conclusion

International business activities as well as their constraints are both significant, and they vary over time as well as across locations, industries, and companies. Business leaders, who think the world is more globalized than it actually is, are likely to underestimate the need to understand and respond to case-by-case differences. Similarly, uninformed public policy makers are prone to underestimate the potential gains from increased globalization and overestimate its negative effects for society. After all, a neutral look at the available evidence can contribute to more productive debates about globalization by calming fears due to exaggerated perceptions of globalization. Clearly, globalization is not an inevitable consequence of technological progress. During the Golden Age of capitalism (1945–1973), for example, the world economy was much less globalized than during the Liberal Golden Age (1870–1913). And this was despite having much more advanced technologies of transportation and communications than the steamships and wired (not even wireless) telegraphy of the earlier period (Chang, 2014). The world has become globalized in the way it has in the last decades mostly because powerful governments and business leaders in advanced economies decided that they wanted it that way.

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The next years may bring a new wave of globalization, a plateau, or a reversal. Whichever scenario plays out, successful negotiators in business and policy making alike embrace globalization’s complexity rather than succumbing to simplistic narratives. In the face of such ambiguity, it is essential to know what you don’t know.

References Arikan, I., & Shenkar, O. (2013). National animosity and cross-border alliances. Academy of Management Journal, 56, 1516–1544. Cairncross, F. (1997). The death of distance: How the communications revolution will change our lives. Cambridge, MA: Harvard Business Press. Chang, H.-J. (2014). Economics: The user’s guide. Gretna: Pelican. Coates, D. (2000). Models of capitalism: Growth and stagnation in the modern era. Cambridge: Polity Press. Countryeconomy.com. (2019). Retrieved April 20, 2019. https://countryeconomy.com/. DHL. (2019). DHL global connectedness index 2018. February 12, 2019. Retrieved April 20, 2019. https://www.logistics.dhl/global-en/home/insights-and-innovation/thought-leadership/ case-studies/global-connectedness-index.html. Economist. (2017). Multinationals: The retreat of the global company. January 28, 2017. Retrieved April 20, 2019. https://www.economist.com/briefing/2017/01/28/the-retreat-of-theglobal-company. Friedman, T. L. (2005). The world is flat: A brief history of the twenty-first century. New York: Farrar, Straus and Giroux. Ghemawat, P. (2001). Distance still matters: The hard reality of global expansion. Harvard Business Review, 79, 137–147. Ghemawat, P. (2003). Semiglobalization and international business strategy. Journal of International Business Studies, 34, 138–152. Ghemawat, P. (2007). Managing differences: The central challenge of global strategy. Harvard Business Review, 85, 58–68. Ghemawat, P. (2017). Globalization in the age of trump. Harvard Business Review, 95, 112–123. Ghemawat, P., & Altman, S. A. (2019). The state of globalization in 2019, and what it means for strategists. Harvard Business Review, Web Article. February 06, 2019. Retrieved April 20, 2019. https://hbr.org/2019/02/the-state-of-globalization-in-2019-and-what-it-means-forstrategists. Greider, W. (1997). One world, ready or not—The manic logic of global capitalism. New York: Simon & Schuster. Kennedy, B. (2016). Most Americans trust the military and scientists to act in the public’s interest. A PEW Research Report. October 18, 2016. Retrieved April 20, 2019. https://www. pewresearch.org/fact-tank/2016/10/18/most-americans-trust-the-military-and-scientists-to-actin-the-publics-interest/. Lavie, D., & Miller, S. R. (2008). Alliance portfolio internationalization and firm performance. Organization Science, 19, 623–646. McCann, L. (2014). International and comparative business—Foundations of political economies. London: Sage. Michaels, E., Handfield-Jones, H., & Axelrod, B. (2001). The war for talent. Brighton, MA: Harvard Business Press. Nachum, L., & Zaheer, S. (2005). The persistence of distance? The impact of technology on MNE motivations for foreign investment. Strategic Management Journal, 26, 747–768.

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OECD. (2019). Corporate tax remains a key revenue source, despite falling rates worldwide. January 15, 2019. Retrieved April 20, 2019. http://www.oecd.org/tax/corporate-tax-remains-akey-revenue-source-despite-falling-rates-worldwide.htm. Ohmae, K. (1990). The borderless world: Power and strategy in the interlinked economy. New York: Harper Business. Piketty, T., & Goldhammer, A. (2014). Capital in the twenty-first century. Cambridge, MA: The Belknap Press of Harvard University Press. Salomon, R., & Wu, Z. (2012). Institutional distance and local isomorphism strategy. Journal of International Business Studies, 43, 343–367. Steinmo, S. (2010). The evolution of modern states: Sweden, Japan, and the United States. Cambridge: Cambridge University Press. Stiglitz, J. E. (2012). The price of inequality: How today’s divided society endangers our future. New York: W.W. Norton & Co. Tochman Campbell, J., Eden, L., & Miller, S. R. (2011). Multinationals and corporate social responsibility in host countries: Does distance matter? Journal of International Business Studies, 43, 84–106. Tsang, E. W. L., & Yip, P. S. L. (2007). Economic distance and the survival of foreign direct investments. Academy of Management Journal, 50, 1156–1168.

Negotiations in Companies with Financial Difficulties

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Marc Helmold and Tracy Dathe

14.1

Phases of a Financial Crisis and Symptoms

Financial distress or financial crisis is a term in corporate finance which is a situation in which a company faces severe financial problems and struggles in satisfying financial obligations, e.g. debts, loan payments, etc. (Gabler-Wirtschaftslexikon, 2018). The term is used to indicate a condition when promises to creditors of a company are broken or honoured with difficulty. If financial distress cannot be relieved, it will ultimately lead to insolvency. Financial distress is usually associated with some costs to the company. These are known as costs of financial distress. Financial distress refers to a condition in which a company cannot meet, or has difficulty paying off, its financial obligations to its creditors, typically due to high fixed costs, illiquid assets, or revenues sensitive to economic downturns. Recent examples like the company Jack Wolfskin show that companies must anticipate and prevent a situation, which puts the company under stress (Handelsblatt, 2017). A financial crisis can be prevented and involves immediate actions and related negotiations with stakeholders like banks, employees, suppliers, or investors. A company under financial distress can incur costs related to the situation, such as more expensive financing, opportunity costs of projects, and less productive employees. Employees of a distressed firm usually have lower morale and higher stress caused by the increased chance of insolvency, which threatens them to be forced out of their jobs. There are often alarm signals indicating the upcoming crisis as outlined by various authors (Müller, 1986; Schmuck, 2013). Alarm signals like M. Helmold (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] T. Dathe Südstrasse 5, 83607 Holzkirchen, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_14

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decreasing revenues, high operating cost, and low profits usually indicate that a company is not in a good financial health situation (Schmuck, 2013). Struggling to reach profitability targets over a longer period indicates a business cannot sustain itself from internal funds and needs to raise capital externally. This raises the company’s business risk and significantly lowers its credit rating with banks, lenders, suppliers, or investors (Schmuck, 2013). Limiting access to funds typically leads to liquidity issues and results often in a company failing as shown in Fig. 14.1 (Four phases model of Müller, 1995). Poor sales growth or decline indicates the market is not positively receiving a company’s products or services based on its business model. When extreme marketing activities result in no growth, the market may not be satisfied with the offerings, and the company may close down. Likewise, if a company offers poor quality in its products or services, consumers start buying from competitors, eventually forcing a business to close its doors. When debtors take too much time paying their debts to the company, cash flow may be severely stretched. The business may be unable to pay its own liabilities. The risk is especially enhanced when a company has one or two major customers (Helmold, Dathe, & Hummel, 2019). Müller describes four phases (see Fig. 14.1) from a strategic crisis, the profitability crisis, the liquidity crisis to the insolvency (Müller, 1986; Helmold et al., 2019). The four phases of a financial crisis are described Müller by the strategic crisis, the profitability crisis, the liquidity crisis, and the insolvency. Müller describes the strategic crisis as threat to the potential and substance of a company, which occur due to inadequate strategies in terms of differentiation, knowledge, innovation, or cost advantages (Schmuck, 2013). In this strategic phase, market needs and elements are not fully taken into account so that the foundation of the company is gradually weakening (Helmold et al., 2019). In this situation, the symptoms are weak, the corrective actions are long term, and the need for actions is rather low compared to the following phases (Müller, 1986). The strategic phase is followed by the profitability crisis, which is characterised by signs of a weak

Fig. 14.1 Phases to financial insolvency. Source Helmold et al. (2019), adapted from Müller

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financial performance in terms of revenues, cost, cash, and profitability (Schmuck, 2013). Signs in this phase are stronger, often resulting in a loss, struggling to achieve targeted financial ratios or non-achievement of profit targets (Schmuck, 2013). The third phase is the liquidity crisis, in which a company is not capable of meeting its financial obligations anymore (Schmuck, 2013). This situation is severe as the cash situation and balance is not sufficient to pay the debts. As the credit rating decreases in this phase, companies tend to borrow money with higher interest rates or to prolong payments to suppliers, employees, or banks where possible. The last phase of the model by Müller is the insolvency (Müller, 1986). Insolvency is the state of being unable to pay the money owed, by a person or company, on time. Those companies in a state of insolvency are said to be insolvent. There are two forms: cash flow insolvency and balance sheet insolvency. Cash flow insolvency is when a person or company has enough assets to pay what is owed, but does not have the appropriate form of payment. For example, a person may own a large house and a valuable car, but not have enough liquid assets to pay a debt when it falls due. Cash flow insolvency can usually be resolved by negotiation. For example, the bill collector may wait until the car is sold and the debtor agrees to pay a penalty. Balance sheet insolvency is when a company does not have enough assets to pay all of their debts. The person or company might enter bankruptcy, but not necessarily. Once a loss is accepted by all parties, negotiation is often able to resolve the situation without bankruptcy. A company that is balance sheet insolvent may still have enough cash to pay its next bill on time. However, most laws will not let the company pay that bill unless it will directly help all their creditors. For example, an insolvent farmer may be allowed to hire people to help harvest the crop, because not harvesting and selling the crop would be even worse for his creditors. In some jurisdictions, it is illegal under the insolvency laws for a company to continue in business while insolvent. In others (like the USA with its insolvency law and Chap. 11 provisions), the business may continue under a declared protective arrangement, while alternative options to achieve recovery are worked out. Increasingly, legislatures have favoured alternatives to winding up companies for good. The major focus of modern insolvency legislation in many countries and business debt restructuring practices no longer rests on the liquidation and elimination of insolvent entities but on the remodelling of the financial and organisational structure of debtors experiencing a financial crisis so as to permit the rehabilitation and continuation of their business (Helmold et al., 2019). This is known as restructuring, business turnaround, financial crisis mitigation, or business recovery. Implementing a business restructuring plan includes various measures and can be described.

14.1.1 Definition of Restructuring Restructuring or financial turnaround actions (mitigations) are sets of corporate activities taken when significantly modifying the debt, operations, or structure of a company as a means of potentially eliminating financial harm and improving the

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Fig. 14.2 Restructuring ways for financial turnaround

business. These mitigations require communication and negotiations with all affected stakeholders as outlined by Helmold and other experts in negotiations. When a company is having trouble making payments on its debt and financial commitments, it will often restructure to pay its debts and to improve financial and operational performance (Helmold et al., 2019). A company restructures its operations or structure by cutting costs, such as payroll, operations, suppliers’ costs, or reducing its size through the sale of assets. Restructuring is often linked to external experts who help the company to restructure its operations, performance, and financials. Restructuring means to have the appropriate actions and leads to many discussions and negotiations with stakeholders such as employees, suppliers, or customers to fundamentally improve the financial situation of a company (Helmold et al., 2019; Schmuck, 2013). Due to the vital significance, restructuring plans must be designed, executed, and controlled by top management (Helmold et al., 2019). Restructuring involves top management and negotiations with stakeholders. The four types of restructuring can be outlined as shown in Fig. 14.2: Strategic restructuring Structural restructuring Restructuring for profit improvements Financial restructuring.

14.1.2 Strategic Restructuring Strategic restructuring is the fundamental change of the structure, business model, and basis of the company. It involves the questioning and reformulation of mission, vision, and long-term strategic objectives. Actions of strategic restructuring often involve the assessment of existing business models and the redefinition of the strategic pyramid including mission, vision, and strategic objectives (Helmold et al., 2019; Schmuck, 2013). The aim is to gain and secure a sustainable position at existing or new markets. Actions in this strategic restructure can be the shift into new business models, expansion into new business regions, or to enter new

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markets. Actions in restructuring necessitate also the deletion of unfavourable cost structures and production lines. Moreover, it can include the relocation of existing manufacturing location to overseas countries. Finally, the concentration on core competencies, the cancellation of unimportant customer niches, and the stoppage of costly product lines are effective actions in strategic restructuring (Helmold et al., 2019). For example, Mannesmann AG, a former engineering and steel trading company, had diversified into wireless communication in the 1990s and fixed-line phone service, redesigning its strategic portfolio and strategy. Mannesmann could hence increase its value significantly and was later merged with Vodafone (Krahnen & Schmidt, 2004). Another example is super market chains like REWE in Germany, which entered the other business areas (discount, specialist and deliver service area or tourism and travel, thus increasing business and wealth) (REWE, 2015).

14.1.3 Structural Restructuring Structural restructuring targets the structure of a company and has an impact on organisation and the existing structure. Aligning the organisation and re-align operations lead to more efficient and effective processes (often central, decentral, or a hybrid form) with smoother roles and responsibilities. Structural restructuring is often pursued from a polycentric management towards a matrix organisation and requires systematic and suitable information systems and controlling structures. Example: Volvo Truck re-aligned its organisation to a brand-centric organisation, thus improving efficiency and effectiveness (Deal, 2016). Restructuring for profit improvements targets the revenues and expenses (Helmold et al., 2019). Actions comprise anything that will increase revenues like a special sales programme, increased focus on cash cows in sales, or deletion of unprofitable products or services. In addition, the company will take drastic actions in order to minimise expenses and cost. This is normally all areas of expenses as shown in Fig. 14.4. Companies are often tackling cost drivers like material, personnel, or operating cost by global sourcing, outsourcing to shared service centres or the implementation of lean principles (Helmold et al., 2019). A trend shows that MNC and SME are concentrating on core competencies and outsourcing products, services, and activities to foreign companies (Helmold et al., 2019). Example: The Deutsche Bahn (DB) announced a cost reduction programme by cutting operational cost by 300 million euros from 800 million euros to 500 million euros to drastically improve financial performance (Reuters, 2018). Financial restructuring includes the fundamental improvement of the financial performance and financial ratios (Schmuck, 2013). Activities include assets improvements, which can be seen in the balance sheet (see Fig. 14.3), the review of

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Fig. 14.3 Balance sheet

elements in the profit and loss sheet, and cash initiatives. Cash improvements can be realised through pulling ahead customer payments, advanced revenue income and as late as possible outflows of payments to employees, suppliers, banks, or other stakeholders (Olfert, 2013, 2015). Late payments to suppliers and other stakeholders can be negotiated through the agreement of extended payment terms (normally from 30 days to 60 or 90 days). Example: The company Zalando introduced an initiative to extend payment terms to suppliers to minimum 90 days in order to improve the cash situation (Zalando, 2019).

14.2

Balance Sheet, Profit and Loss, and Cash Situation

14.2.1 Negotiations Affecting the Balance Sheet The balance sheet is a statement of the financial position of a business which states the assets, liabilities, and owner’s equity at a particular point in time. In other words, the balance sheet illustrates your business’s net worth. The balance sheet may also have details from previous years, so you can do a back-to-back comparison of two consecutive years. This data will help you track your performance and will identify ways in which one can build up your finances and see where you need to improve. One can also use the balance sheet to determine how to meet the financial obligations and figure out the best ways in which you can use credit to finance the company´s operations. The balance sheet is the most important of the

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three main financial statements used to illustrate the financial health of a business. Figure 14.2 illustrates the areas of negotiations and how the negotiations influence the situation of the balance sheet (Olfert, 2013, 2015). A standard company balance sheet has two sides: assets, on the left, and financing, which itself has two parts, liabilities and ownership equity, on the right. The main categories of assets are usually listed first, and typically in order of liquidity. Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company, and according to the accounting equation, net worth must equal assets minus liabilities. Another way to look at the balance sheet equation is that total assets equals liabilities plus owner’s equity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner’s money (owner’s or shareholders’ equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections “balancing”. In a financial crisis, companies will sell unnecessary fixed assets like land and real estate, buildings, or machines in order to obtain additional revenues and cash. Investments with a high amount of funding must be limited to necessary purchases; in some cases, it is possible to lease instead of purchasing. Secondly, inventories and supplies (assets) must be evaluated. Inventories must be reduced or fully eliminated so that any associated cost of working capital can be reduced. A recommendation in this context is the agreement of vendor-managed inventories (VMI), in which the suppliers (vendors) take care of their inventories. Vendormanaged inventory (VMI) is a supply chain management (SCM) and logistics tool, in which a supplier of goods, usually the manufacturer, is responsible for optimising and managing the inventory held by himself or a by a third-party warehouse or logistics service provider (Helmold & Terry, 2016). VMI requires a communication link, usually typically electronic data interchange, or Internet platforms, that provides the supplier with the customer sales figures and forecasts. Based on forecasts, the suppliers keep and own the inventory until the goods are called off by the customer. The benefits of a vendor-managed inventory system include better inventory accuracy, forecasting, and service (Helmold & Terry, 2016). Other assets like patents, intellectual proprietary rights, or brand names which might also help to improve the financial situation can be liquidated into cash. An example is the Ford Motor Company, which faced financial distress in 2006. Ford had to get a lifesaving loan by providing the rights of the Ford logo to investors to receive money (Vlasic, 2012). The other side of the balance sheet contains equity capital, which are shares and loans. In this area, companies have to negotiate with investors on additional investments or shares. The banks play an important role when negotiate on loan conditions, repayments, or shifting short-term debts into long-term debts. In many cases, companies also pay their invoices from suppliers or salaries later in order to improve the balance sheet.

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14.2.2 Negotiations Affecting the Profitability: P & L Account The profit and loss account (P & L statement or account) or company statement is a financial statement that summarises the revenues, costs, and expenses incurred during a specified period. The P & L account provides information about a company’s ability or inability to generate profit by increasing revenue, reducing costs, or both. Some refer to the P & L statement as a statement of profit and loss, income statement, statement of operations, statement of financial results or income, earnings statement, and expense statement. Figure 14.4 shows a P & L account including revenues (left side) and cost or expenses of the company (right side) (Olfert, 2015). Revenues contain sales or special revenues from activities that are not directly linked with the business of the company. Expenses normally include material expenses, salary expenses, and other expenses (Olfert, 2015). The trend to concentrate on core competencies leads in many organisations to a high portion of material expenses. Figure 14.5 outlines the way restructuring is aimed at improving the revenue situation with a parallel reduction of expenses in order to become profitable (profit in green). Cost reduction initiatives targets elements, for which the customer is not willing to pay. These elements are described as waste and must be eliminated or reduced. The cost emphasis focuses therefore on the efficiency of the firm’s processes. General cost reduction efforts (e.g. lean management, downsizing) do not necessarily improve efficiency, but quality efforts that reduce costs always do. Successful programmes tend to increase the productivity of quality efforts by reducing the input (labour and materials) required to produce a unit of output. These improvements can be incremental (continuous improvement) or discontinuous (process reengineering). In either case, the focus is internal and the goal is to reduce

Fig. 14.4 Profit and loss (P & L) account

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Fig. 14.5 Profit improvements. Source Author

costs. Customer satisfaction improvements are sought only indirectly, through such results as increased reliability or lower prices. Cost reduction programmes thus transfer their savings to the bottom line directly and can be applied to all areas of the value chain. Actions for profitability improvements can contain numerous activities throughout the value chain of a company. Most effective actions normally occur in the area of material, design, sales, or personnel cost as outlined in Table 14.1. Revenues must be increased by the sales and marketing function through negotiations with existing and new customers (Table 14.2).

14.2.3 Negotiations Affecting the Cash Situation The cash flow statement is a tool which shows the movements of cash and cash equivalents in and out of the business. Companies must have a good cash situation as chronic negative cash flows are symptomatic of troubled businesses (Olfert, 2013, 2015). On the sales side, it is recommended to negotiate on advanced and early payments via marketing and sales management, whereas on the supply side the procurement function must negotiate standard and longer-term payment terms, e.g. 60 or 90 days after receipt of goods. In severe cases, it also possible to negotiate with banks, investors, or employees on later payments of repayments, dividends, or salaries. All actions need to be thoroughly taken into account, including positive and negative effects (Schmuck, 2013).

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Table 14.1 Cost reduction initiatives Cost area

Action and area of negotiation

Generic strategy

Material and purchase cost Material and purchase cost Material and purchase cost Material and purchase cost Material and purchase cost Engineering and design cost Engineering and design cost Operational and production cost

Material cost savings through commercial negotiations Material cost savings through global sourcing Material cost savings through economies of scale and bundling Material cost savings through improved logistics management Material cost savings through value engineering Engineering offshoring to best cost countries Optimum design and target costing

Commercial savings

Operational and production cost Operational and production cost Operational and production cost Personnel cost

Shifting production to foreign operations

Lean production services

Global sourcing Economies of scale Logistics optimisation Value engineering Outsourcing, offshoring Design-to-cost Just-in-Time (JIT) production system Internationalisation

Personnel cost

Deciding to outsource labour intensive processes Increasing efficiency through machines and robots Reducing total amount and budget of salaries and wages Reducing headcount

Personnel cost

Shifting services to shared service centres

Marketing and sales cost Marketing and sales cost Marketing and sales cost Stationaries Training cost

Reducing marketing and advertising cost

Optimisation of workforce Organisational alignment Outsourcing, offshoring Advertising

Optimisation of distribution cost

Distribution

Closing unprofitable niche markets

Downsizing

Suspension of any new orders Eliminating all training cost. Introducing train the trainer concept Reducing waste, recycling and disposal cost Shifting to inventory to suppliers and customers Selling buildings and leasing back

Elimination Train the trainer

Energy cost Inventories Cost for buildings and maintenance Source Author

Make or buy Automatisation

Sustainability VMI Lease back

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Table 14.2 Revenue increase initiatives Revenue increase

Action and area of negotiation

Strategy

Sales programmes

Approaching existing customers to buy more Adding new products and services Designing and selling new products Moving to foreign markets like China Considering new customer groups

Sales promotion

Additional products and services Adding new products and services Entering new markets Approaching new target groups Source Author

14.3

Value add extension and growth Diversification International market growth Market growth and customer segmentation

Recommendations for the Turnaround

14.3.1 Strategic Turnaround and Restructuring Restructuring the business offers many advantages to companies to achieve successfully a turnaround in financial performance as outlined by Helmold et al. or Schmuck (Schmuck, 2013). A company can face new opportunities by realigning and restructure business models and organisations. A restructuring plan must incorporate detailed financial ratios, which affect positively balance sheet, profit and loss account, and the cash situation. An integral part of restructuring is the process to bring in all key stakeholders as necessary to increase the effectiveness of the turnaround plan.

14.3.2 Involve a Specialist Restructuring necessitates knowledge and the urge of actions which improve the financial side of the company quickly (Schmuck, 2013). If a company struggles with debt management issues or serious cash flow pressures of any sort as a business, then it is strongly recommended by various authors to get external support to get specialist advice on the most essential subjects at key moments. Impartial expert advice is always available, and for companies in distress, third-party support and guidance for directors can make a huge difference for the better (Schmuck, 2013).

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14.3.3 Taking All Financing Options Available Even if your company’s credit rating is not great or you have been rejected for loans by mainstream lenders, there are other finance options available that might be able to help you overcome your funding problems. Increasingly popular alternative funding solutions include invoice factoring and discounting, while asset financing and refinancing are other options well worth considering. Crowdfunding and peer-to-peer lending are also major growth areas at present, with both markets adding valuable variety to the funding equation for small companies with big ideas.

14.3.4 Liquidation of Unnecessary Assets When your business is facing up to significant financial problems, then it could be that you will need to take drastic action. Liquidating assets that are not fundamental to the way your company operates can help raise cash and open up the prospect of satisfying creditors and overcoming the worst of your debt-related issues. It is important to be clear in understanding precisely what is and is not essential to your business in terms of tangible assets. Arriving at decisions on these points will likely require careful consideration but by liquidating equipment, tools, vehicles, inventory or property assets, you can give your company a potentially vital lifeline as you look to climb out of debt and move towards sustainability.

14.3.5 End Non-essential Relationships The reality is that when your company is under severe financial pressures and your debts are mounting up, tough decisions have to be made in the longer-term interests of your business. It could be that long-serving employees have to be let go and relationships with trusted suppliers have to end. From the perspective of directors, this is can be a difficult process but, where the alternative is your company going out of business entirely, it is preferable and advisable to take these kind of tough choices before they are out of your hands entirely.

References Deal, L. (2016). Volvo Group restructuring to brand-centric organization. Retrieved January 5, 2019. https://www.successfuldealer.com/volvo-group-restructuring-to-brand-centricorganization/. Gabler-Wirtschaftslexikon. (2018). Unternehmenskrise. Retrieved May 26, 2018. https:// wirtschaftslexikon.gabler.de/definition/unternehmungskrise-49331.

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Handelsblatt. (2017). Finanzielle Zukunft Gläubiger verschaffen Jack Wolfskin Luft für Verhandlungen. Die Verhandlungen über die Zukunft Jack Wolfskin haben begonnen. Um die zu vereinfachen, verzichten die Banken vorerst auf die Rückzahlung von Krediten. Finanzinvestor Blackstone bangt um die Kontrolle des Unternehmens. In Handelsblatt. January 13, 2017. Retrieved May 26, 2018. http://www.handelsblatt.com/unternehmen/handelkonsumgueter/finanzielle-zukunft-glaeubiger-verschaffen-jack-wolfskin-luft-fuer-verhandlungen/ 19247752.html?ticket=ST-874329-5m5EZ42jWMfXaeA6SVbH-ap2. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler. Helmold, M., & Terry, B. (2016). Liefeantenmanagement 2030. Sicherung der Wettbewerbsfähigkeit durch Wertschöpfung in globalen und digitalen Märkten. Wiesbaden: Springer. Krahnen, J. P., & Schmidt, R.H. (2004). The German financial system. Oxford University Press. Retrieved January 5, 2019. https://books.google.de/books?id=NS_oCwAAQBAJ&pg=PA267 &lpg=PA267&dq=financial+times+mannesmann+diversifying+telecommunications&source =bl&ots=EbK16_LA5U&sig=iSidxuQCDKwhC6hBxtwS0XobOCw&hl=de&sa=X&ved=2ahUKEwj5_bypp9bfAhXHKFAKHUlOCFkQ6AEwA3oECAQQAQ#v=onepage&q=financial %20times%20mannesmann%20diversifying%20telecommunications&f=false. Müller, R. (1986). Krisenmanagement in der Unternehmung: Vorgehen, Massnahmen und Organisation. Bern: Peter Lang Verlag. Olfert, K. (2013). Investition (13. Auflage). Herne: NWB Verlag. Olfert, K. (2015). Finanzierung. 15. Auflage. NWB Verlag Herne. REWE. (2015). REWE Group is experiencing profitable national and international growth. Rewe Corporate Communications Group. March 31, 2015. Retrieved January 5, 2019. https://www. rewe-group.com/en/newsroom/press-releases/1420. Reuters. (2018). Deutsche Bank 2018 restructuring costs to rise to 800 mln from 500 mln on new cuts. April 26, 2018. Retrieved January 5, 2019. https://www.reuters.com/article/briefdeutsche-bank-2018-restructuring-c/brief-deutsche-bank-2018-restructuring-costs-to-rise-to-800mln-from-500-mln-on-new-cuts-idUSF9N1L900W. Schmuck, M. (2013). Financial distress and turnaround. An empirical analysis of the automotive supplier industry. Wiesbaden: Springer. Vlasic, B. (2012). Prized logo is returned to ford. The blue oval is back home. New York Times. Retrieved January 6, 2019. https://www.nytimes.com/2012/05/23/business/a-prized-logo-isreturned-to-ford.html. Zalando. (2019). Zalando SE general conditions of purchase for indirect purchase. Retrieved January 5, 2019. https://eprocurement.zalando.com/wp-content/uploads/2017/04/Zalando-SEGeneral-Conditions-of-Purchase-for-Indirect-Purchase.pdf.

Negotiations in the Service Industry

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15.1

Characteristics of Services

Conventional marketing theory is replete with the 4Ps (product, price, place and promotion), underscoring much of business and management literature (Heskett, Sasser, & Schlesinger, 1997). In its most commonly recognizable avatars, product is about product and programme policy decisions, price equates towards price policy decisions, place associates itself with distribution policy decisions and promotion lends itself towards communication policy decisions. As celebrated as the concept of the 4Ps of marketing is, it cannot be seamlessly transferred towards the realm of service marketing. The distinct nature of the industry poses special challenges in marketing services through our familiar tools at disposal.

15.2

Special Features of Service Marketing

The special challenges within the framework of service provision relate particularly towards the fundamental characteristic that services can only be experienced once they have been provided (Scheuer, 2015). Extending the intrinsic nature of all services—a service can therefore only be used and consumed at the moment in which it is provided. Furthermore, it is essential that active customer involvement is essential in the provision of the service so that the service can be provided in the first place. The prerequisite of consumer participation in the creation process can be referred to as an integration of an indispensable external factor. Given that the service provider is undoubtedly dependent on the F. Hummel (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_15

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customer and their participation; Haller (2015) argues that the customer participates in the service process as a “co-producer” and that the necessary interplay between co-producer and service provider greatly limits any degree of service standardization rendering it a cumbersome task, because the customer participates in the provision of services, the process is not predictable”, neither is the result. The inability to accurately predict the nature of a customer’s behaviour may lead to problems in the provision of services, whereby making the provision of the service more difficult or, at times, even impossible. Services differ from products in that they are “characterized by the characteristic of immateriality” (Meffert, Bruhn, & Hadwich, 2015), making services beyond physical touch (Scheuer, 2015). The immaterial nature of services sheds light upon two additional characteristics of services: non-stockability and non-transportability (Meffert, Burmann, & Kirchgeorg, 2012; Meffert et al., 2015). Given that services are materially intangible; they cannot be stored. Neither are they transportable, as they are only created or provided at the moment and place of their eventual use—referred to as the “Uno-Actu Principle”. Unlike other product characteristics, the abstract nature of services makes their adoption by human senses challenging. In its very essence, a service-product is one which can only be illustrated prior to its consumption by means of service descriptions and promises (Scheuer, 2015); hence, it is a very abstract nature. Awareness of the inability for a consumer to grasp a service, due to its intangible form, is a defining feature of a service. This difficulty is further amplified since a service practically does not exist before it is created and simultaneously making it challenging for it to be tested prior to purchase. At their disposal, service providers can counteract these challenges by materializing services, for example, through external, tangible factors such as personnel or equipment, because “tangible help convey the value of the service transaction’s intangible aspects” (Thomas & Applegate, 2010).

15.3

The 7Ps

Having highlighted some of the defining features of services, the conventional application of the 4Ps of marketing is often discussed and criticized due it its incompatibility with service marketing. To bear purpose towards a more fruitful end, the limited application of the 4Ps is to be facilitated by the introduction of additional components that render greater synchronicity with the unique characteristics of service marketing. Rafiq and Ahmed, therefore, present the concept of the 7Ps, in which the original 4Ps (product, price, promotion and place) are supplemented by three additional Ps, namely: personnel, physical facilities and process (Rafiq & Ahmed, 1995). The relevance of the 7Ps warrants the attention of managers across all industries. Every business entity—regardless of the product— provides a service to the customer in some way, shape of form. The ability to develop an impeccable service provision positions itself as a distinguishing feature, whether in the context of new customer acquisition, sales, after sales and customer support (Goldsmith, 1999).

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The employees of a company can be viewed as the internal customers of any business entity. The first of the three additional Ps, the personnel policy, addresses the employees of a company across the dimensions of personnel recruitment, personnel development, employee satisfaction and internal communication (Beibst, 2011). The effect of a company’s personnel policy upon the calibre of service provision plays a decisive role in determining the extent of a firm’s competitive edge. Services provisions which target external customers can usually only be delivered via personal, interpersonal interaction with a firm’s internal customers— its personnel. Hence, for employees, a pronounced customer and service orientation is therefore necessitous for achieving a high level of service quality. An equally justifiable element concerns a company’s physical facilities. This P appropriately manifests itself as a company’s equipment policy and adds a highly relevant dimension within the framework of service marketing. The physical attributes of company’s facility act as a tangible platform through which, otherwise invisible and intangibles, services at the service location can be materialized. This can be facilitated through tangible equipment or visible design elements making the service more accessible and less abstract. The needful relevancy of paying attention towards the service environment in the marketing of services is imperative. Its inclusion allows invisible and intangible services the ability to differentiate itself from the competition by processing this component accordingly. In its penultimate form, process policy refers to the business processes within a company and examines, among other things, the service and relationship process. Having established that the customer plays the role of a co-producer and is a vital cog in the genesis of service provision, efficient, goal-oriented and customer-centric business processes should be a focal point of all companies, since the quality of the business processes is an essential ingredient for yielding an expected level of service quality. Any compromise on the efficiency level of a company’s internal processes warrants a lower level of perceived service quality on the customer side satisfaction and vice versa. Keeping in mind, the objective of value creation, the greater the customer satisfaction, the more recurring business, the more personal recommendations, the larger the customer base all of which translates into higher turnover. Goldsmith (1999) mentions “personalization” as an eighth P. Service which is delivered through a personalized touch is gathering greater importance in determining business success and hence demands greater focus in marketing decisions. It can be argued that in the near future, personalization could be ranked as the most important component in formulating an effective service provision strategy during the construct of a marketing mix. The idea of personalization is not mutually exclusive during product development, and its ethos extends to decisions regarding the other Ps as well. These can be customized to achieve the desired degree of personalization in order to meet today’s customer needs. An important aspect to consider that post consumption of either product or service, because the product has already been developed or the service has already been defined and provided customer opinion is a lagging indicator. Efforts must be instated to ascertain the customer’s point of view should therefore be obtained, researched and taken into

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consideration prior to product or service being developed. This will enable a customer’s wishes and expectations to appropriately influence the development of the product or service.

15.4

The 3Rs

The established framework of the 4Ps was given a further dimension by Heskett et al. who advocated the “three Rs of lifetime customer value”: retention, related sales and referrals. In the center of this is the notion of Reichheld and Sasser (1990), that the longer the business relationship with a company lasts, the more profitable customers become. Heskett et al. aptly referred to this assumption as the “lifetime customer value” concept (Heskett et al. 1997). Practical implications of this notion imply that market share is no longer the barometer for measuring company’s success, but rather its “market share quality”, i.e. how many profitable customers a company has and the manner in which these profitable customers are calculated over their entire length of business relationship with the company. Retention can be defined as the “continuing, active relationship with a customer that yields a stream of revenue from the sale of the initial product or service” and forms the first of three cardinal constituents of increasing customer profitability. The notion is fairly simple—the more protracted the business relationship between customer and company, the more economical customer acquisition and marketing costs become for a company. The lengthened tenure of the client-business relationship allows marketing costs to be spread over a longer period of time, whereby requiring diminished investment in marketing efforts to garner heightened customer enthusiasm towards product or service. It is not uncommon for companies to invest copious sums in marketing during the inception of a customer relationship in a bid to “win” the customers and to educate and habituate them with the product or service features. In this context, Heskett et al. (1997) describe this as the “get acquainted marketing effort”, which often accounts for the largest marketing expense at the beginning of a business relationship. While having a loyally retained customer base is of importance, many companies primarily do battle on the acquisition of new customers. Importance is given towards developing new customers’ trumps that which is allocated towards retaining existing customers despite the costs for the latter being much lower than the costs associated with acquiring new customers. The nature of reward systems which sometimes creates false incentives encourages the concentration of efforts on the acquisition of new customers over the retention of old. The negative effects prompted by the departure of existing customers on the overall performance of a company are, hence, often overlooked and the rich opportunities which are associated with long-term success often remain unearthed or poorly leveraged (Reichheld & Sasser, 1990).

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With a focus on achieving continued success, Heskett et al. (1997); therefore, recommend focusing on customer-binding measures which lay an emphasis on the customer lifetime value. Related Sales is the second constituent of successfully bolstering customer profitability. At the very heart, it is based on the assumption that it is easier to sell new products and services to existing customers than to new customers. As in Retention, here, too, less resource allocation in marketing required towards acquainting customers as the company and its product/service portfolio is already well known. Having developed a prior purchasing history with the company, the prospect of selling new products and services to existing customers is eased which facilitates higher margins since such customers relatively less price sensitive than new customers with no prior relationship. As a by-product, additional sales can allow companies to enjoy a reduction of operating costs per unit. Pivotal to the success of related sales is the proactive involvement of feedback management which aids crucial product and service improvements. Enhancement in products and services can be dynamically promoted through customer feedback channels prompting their development in a manner which is tailored specifically to more efficiently serve target groups. Feedback from existing customers enables the company to identify up-selling and cross-selling potentials and react accordingly. The final constituent of augmenting customer profitability is through referrals. Referrals generate additional product and service sales via the recommendation of new or existing customers to other customers. The underlying assumption for a business to enjoy referrals is the existence of previously satisfied customers to act as a catalyst for future recommendations. In a revealing study conducted by McKinsey&Company, results highlighted the importance of previously satisfied customers towards customer profitability. Previous customers with emotional ties to a company are three times more likely to recommend a product to new ones or buy the product again. Managers must be conscious of the reinforcing nature of the 3Rs which renders them to be mutually dependent: should the service provision yield customer satisfaction as per the quality demanded, higher the likelihood the customer remains loyal to the company or service provider (retention). Having established a sense of customer satisfaction sows the seed of loyalty which increases the propensity of the customer to be receptive more to other products from the same provider (related sales). Lastly, should the service provider have convinced the customer at several touchpoints across the entire spectrum of the customer journey (Maechler et al., 2016), the customer will introduce the product to others (referral). Clearly, those customers which remain with the company across a longer horizon have a tendency to generate continuous sales, which boosts the overall “lifetime customer value” (Reichheld & Sasser, 1990). In an era of higher operational costs, fuelled by wage inflation, successful mitigation can be achieved through the optimization of existing performance (Ernst & Young, 2017). The targeted use of the 3Rs act as potent levels to drive and sustainably design business optimization.

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15.5

F. Hummel

Negotiation of Services

The aforementioned unique traits of service industry have a significant impact in the arena of negotiations—namely, the negotiation of services. Since such negotiations are often conducted abstractly about those services which have not yet been provided and which, in truth, do not yet exist. Within the framework of negotiations, it is also possible to structure and draw conclusions about the expected quality of services from a more tangible framework. The initiation of negotiations, the communication in advance, the quantity and quality of any preparations are made, the premises of the negotiations, and finally, of course, the competence and professionalism of the negotiating partner are only some of several possible indicators that can be used as additional evaluation criteria in addition to the content of the negotiations.

15.6

Negotiations in Purchasing

While purchasing services, it is imperative to try to gauge the expected service quality in the best possible way, given the industry norm of service purchases to involve sizable contract values (e.g. wholesale in tourism). Hence, when negotiating the purchase of services, sound practice advocates defining a catalogue of criteria of sets of obligatory and optional negotiation points prior to the outset. Lending to the intangible nature of services, the obligatory criteria, in particular, should be contractually guaranteed within the defined framework of negotiations. Since it is not uncommon for purchases of wholesale services to be parcelled further onwards to a large number of smaller buyers, vital infrastructure to relay direct feedback between the calibre expected and actual service provision is not established—as neither is the end user guaranteed to always make obligatory use of service nor do they test them before purchasing. Therefore, it is recommended that the onus of responsibility falls upon the initial bulk purchaser who is responsible for testing the negotiated service prior to its purchasing it in large quantities and eventually distributing it in lesser quantities to the end customer. Such action serves as a vital cog in establishing a lasting quality assurance wheel, since the salesman is best positioned to uncover and rectify possible discrepancies between expected and actual service provision quality prior to being filtered through to the final customer. The ability of wholesalers to demand changes in the characteristics of service provision rectification prior to purchase is plausible given the magnitude of the order size being negotiated. Consider, for example, a bulk buyer of hotel room reservations who is able to successfully negotiate with the hotel the necessity to offer a 24-h room service, as otherwise the buyer will not buy quotas for the next season. By consciously seeking and negotiating a corresponding improvement in quality both existing customers can be retained and new customers won. However, in the example illustrated, it is assumed that the purchasing department is distinctively aware of customer’s needs and consciously takes these preferences into

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account during the negotiations. Thus, the relevance of customer feedback is a close ally in the context of service negotiations and is described in detail at the end of this chapter. At this point, reference is only made to the relevance of regular communication and to the importance of a close exchange between the purchase of the corresponding service and the opinion of the user. Feedback from customer, collected and communicated from feedback management, enables service purchases with characteristics that more accurately reflect the customer needs. Furthermore, ensuring smoother acceptance, fuelling higher customer satisfaction and amplifying referral rates towards establishing sustainable revenues.

15.7

Negotiations at Events

Akin to the act of purchasing, the focal point of negotiations at events is also clearly communicating expectations before using the service. The importance of such an act cannot be overstated, as there is often only one opportunity for the provider to provide the service, for example, at weddings in a hotel. Though the acute relevancy of paying heed to feedback in the context of negotiations prior to purchasing has already been emphasized, customer feedback displays relevancy also when taking account contractual obligations for subsequent purchases. Consider a wholesaler who after buying a cluster of rooms in a hotel receives customer feedback which highlights that guests were not well received. Being armed with customer feedback post its purchase, allows the wholesaler to re-negotiate certain features of the hotel service in order to remedy the criticisms identified by the guests for the next season, or the purchasing department contracts another hotel. Additionally, should the guest rebook the hotel a second time through the buyer, they can benefit from the improved service born from the initial feedback provided. If, however, the expectations of a bridal couple, for example, were not communicated clearly enough to the hotel for a wedding, or if the hotel has not conscientiously noted the expressed wishes and does not implement some points at the event, the service actually provided deviates from the expected one and unintentional differences arise. Then, however, the possibilities of compensation are limited, as the hotel, in contrast to the hotel room booking, will hardly be able to offer the bridal couple to remedy their mistakes at the next wedding celebration. Negotiations at events are, therefore, of particular importance in order to establish a clear horizon of needs and expectations in advance of the event.

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Negotiations Within the Scope of Customer Feedback

There are several conduits through which customers can express their dissatisfaction after the purchase and consumption of a product or a service. Customers may express complaints directly to the company or to a third party, move to a competitor, engage in negative word of mouth, or by continuing to use the product or service in tapered measure (Kim et al., 2003). The influence of emotions on a customer’s complaint behaviour, after experiencing a negative service, was examined in a study by Svari and Olsen (2012). The two authors identified three distinct complaint behaviours: “complaining to the company, switching, and engaging in negative word-of-mouth communication”. These three types of behaviour demonstrated also represent the main complaint behaviour patterns expressed by dissatisfied customers. The three-primary complaint behaviours identified by Svari and Olsen (2012), can be elegantly visualized below and further complemented by the two added dimensions “chance of success in making amends” and “effects on the company”. Figure 15.1 shows that the chances of success of reparations are highest in comparison to alternative complaint behaviour. Furthermore, the resulting effects on the company are lowest in instances when the customer complains directly to the company. The key takeaway for management should be to therefore encourage customers, at all times, to direct their complaints and feedback directly to the company (Huppertz, 2007; Kim et al., 2003). In cases, where the customer has already switched providers, the probability of success through compensation is diminished and the effects on the company noticeable pronounced. Should the customer migrate to a competitor and indulge in spreading negative word-of-mouth, the probability of successful reparation is at its lowest and the negative effects on the company at its highest, because in addition to lost sales, bad word-of-mouth propaganda distributes the dual damage of an intangible loss of image as well as a tangible loss of sales.

Complaining to the Company

Switching

Engaging in negative word-of-mouth communication

Effect on Corporation

Fig. 15.1 Different complaint behaviour. Source Author

Indirect complaining

Direct complaining

Chances of success for inemdification

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Svari and Olsen (2012) elaborated their study by further examining the relationship between the cause of the complaint and the corresponding complaint behaviour. Results revealed that the likelihood that customers will either address a complaint directly to the company or share with family and friends is notably lower in instances where the customer is (at least in part) to blame. In such cases, the likelihood that the contributory fault will be discovered and that a loss of face will occur is much greater. Nevertheless, the surfacing of negative emotions resulting from the negative service experience needs to be invented which most often takes the route of an online complaint—owing to the blanket of anonymity the World Wide Web offers where complainants can freely express themselves negatively but also save face. In the digital era, online complaint behaviour has a potent role to play, particularly via social media channels and aggregator online portals, which efficiently facilitate the evaluation and comparison of service providers. Publicly visible evaluations can influence potential future buyers in their purchasing decisions, making it imperative for companies to not only react to published complaints, but increasingly also develop a strategy for online service recovery (Jeong & Lee, 2017), even if not every online complaint may be based exclusively on the fault of the company. Nevertheless, in the eyes of digital public, a company must be quick to react to online complaints or face the potential prospect exponential negative exposure (Svari & Olsen, 2012). With social media encompassing the ability to reach thousands of potential customers in real time who may in turn reconsider their purchase decision. However, the alacrity of exposure via social media which demands swift processing of online feedback and complaints can also be seen as an opportunity. Diligent and successful complaint processing signals to potential buyers that they take their feedback seriously and react accordingly—even online—indicative of a potential insurance policy in the event of a potential negative experience. Businesses should, however, direct their focus on capturing feedback directly on site, logging it in, processing it and reacting accordingly, since the chances of success on property are greatest.

15.9

Salary Negotiations in the Service Sector

Having ample exposure to the special features of the service sector presented in detail through the course of our research it is important to focus our attention on salary negotiations in the service sector. In sharp contrast to the manufacturing sector, measuring work success in the service sector is a more challenging prospect. Key metrics in the form of costs and productivity are often determined in the primary and secondary sectors on the basis of inputs such as, for example, unit numbers, material consumption and directly attributable costs. However, in the tertiary sector, attaining similar performance metrics for determining the position of a business within the service sector are obscure and not standardized. Employees in the manufacturing industry have the luxury of calling upon clear tangible indicators

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in the context of salary negotiations to justify, for example, a higher wage. Consider a garment manufacturing worker who, over time, is able to produce 12 jeans per day instead of 10 jeans per day through an increase in experience and skill. Should the goal be 10 jeans per day, then the worker has the possibility of negotiating a higher salary due to a metric which effectively captures the increase efficiency. In the service industry, for example, should an employee want to negotiate a better salary in a hotel, he or she cannot justify their demands by drawing upon tangible metrics such as the fact that more guests come back thanks to his or her commitment. Logically speaking, the guest must always interact with multiple employees during their stay making the assignment or traceability a blurry assessment to make. Hence, ever so often, the desire for a higher salary is invalidated due to the difficulty in establishing a measurable channel which correlates direct influence of individual work performance on indicators of business success. It should, therefore, be advocated to always consider the ‘bigger picture’ when negotiating salaries in the service sector and to trace instances of success back to the combined effects of the entire workforce or to a specific team. A strategy which attempts to establish traceability to individual employees is shrouded in difficulty and therefore makes little sense, especially as the motivation of the entire team may suffer as a result.

15.10

The Importance of Feedback When Negotiating Services

Having illustrated that service negotiations usually take on an abstract nature in complexion, since they are towards services which have most likely have not yet been provided and which do not yet exist, the importance of feedback discussions after the agreed service has been provided are therefore essential. Without which, a comparison between expected and actual quality would not be possible. Subsequently, feedback discussions would facilitate towards establishing realistic expectation management—a vital tool which companies can adopt to influence the consumer’s perception of a service by its use. Hence, to achieve sustainable excellence it is essential to for all departments in a business to co-operate cross-functionally, so too minimize the likelihood of unintentional divergences between expected and actual service quality. Take for example, a situation where the marketing department devises an advertising campaign which highlights a particular feature of a service offered to consumers. However, the agreement of the campaign content was not executed in unison with the operational departments. The company would expose itself towards multiple risks resulting in not fully, or partially, being able to meet customer expectations about that particular feature advertised. Such a mishap would fuel customer disappointment levels, which in turn will most likely negatively affect customer satisfaction quotients and referral rates, whereby being a detriment against long-term company performance. Through the implementation of a holistic feedback management system, companies can succeed in reflecting and retrospectively evaluating the service that was initially

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negotiated and finally provided. With an eye towards the future, possible discrepancies can be identified, minimized, or eliminated, for a higher pedigree of service quality in future. Hatz (2018) has developed a 12-step model in which he utilized the luxury hotel industry to exemplify how a sustainable competitive advantage can be achieved through holistic customer feedback management. The model builds upon the customer process of perceived complaint handling by Stauss and Seidel (2007) and highlights three key phases: pre-complaint, complaint and post-complaint. In the main phase of the model, identified as the complaint phase, the customer provides feedback on the service provided. During this phase, the primary focus hinges upon how the company reacts to the feedback and what solution it presents. At this juncture, it is crucial to assimilate this main phase into the overall model, because “while handling individual complaints is an important part of complaint management, it tends to address symptoms rather than causes” (Lapidus & Schibrowsky, 1994). The usefulness of the feedback received can only be leveraged further by placing it in the grander scheme of things made possible by elevating it to a higher-level context. Strategically, it is well advised to investigate complaints in order as opposed to only treating them symptomatically, but also to get to the bottom of them in order to expose the root(s) of their main causes. Hence, the model presented by Hatz (2018) expresses a holistic approach by drawing additional focus on the remaining two phases: pre-complaint and post-complaint. Respectively, the upstream and downstream phases to the actual core phase—complaint. Figure 15.2

Preparation of (new) negotiations

Negotiations

Identification of potential for improvement

Implementation

Feedback Fig. 15.2 Feedback system. Source Author

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depicts the necessity and usefulness of a holistic feedback system during service-oriented negotiations. Furthermore, it shows the individual cause-effect relationships. The integration of feedback into the negotiation process can be supplemented by the component of the continuous improvement process (CIP).

References Beibst, G. (2011). Dienstleistungsmarketing (2. Aufl.). Studienbrief 2-033-0009. Brandenburg: Hochschulverbund Distance Learning. Bhattacharjee, D., Moreno, J., & Ortega, F. (2016). The secret to delighting customers: Putting employees first. McKinsey&Company Article (März 2016). Online Unter. https://www. mckinsey.com/business-functions/operations/our-insights/the-secret-to-delighting-customersputting-employees-first. Zugriff am October 22, 2017 Ernst & Young [EY]. (2017). Global hospitality insights: Top 10 thoughts for 2017. Online Unter. www.ey.com/Publication/vwLUAssets/EY-global-hospitality-insights-2017/$FILE/EY-globalhospitality-insights-top-10-thoughts-for-2017.pdf. Zugriff am January 04, 2018. Goldsmith, R. E. (1999). The personalised marketplace: Beyond the 4Ps. Marketing Intelligence & Planning, 17(4), 178–185. https://doi.org/10.1108/02634509910275917. Haller, S. (2015). Dienstleistungsmanagement: Grundlagen – Konzepte – Instrumente (6th ed.). Wiesbaden: Springer Gabler. Hatz, N. (2018). Wettbewerbsvorteil durch exzellenten Service: die optimale Gestaltung von Kundenfeedback-Management in der Luxushotellerie als nachhaltiges Differenzierungsmerkmal (Master-Thesis). Krems an der Donau, Österreich: Donau-Universität Krems. Heskett, J. L., Sasser, W. E., Jr., & Schlesinger, L. A. (1997). The service profit chain: How leading companies link profit and growth to loyalty, satisfaction, and value. New York: The Free Press. Huppertz, J. W. (2007). Firms’ complaint handling policies and consumer complaint voicing. Journal of Consumer Marketing, 24(7), 428–437. Jeong, M., & Lee, S. A. (2017). Do customers care about types of hotel service recovery efforts? An example of consumer-generated review sites. Journal of Hospitality and Tourism Technology, 8(1), 5–18. Kim, C., Kim, S., Im, S., & Shin, C. (2003). The effect of attitude and perception on consumer complaint intentions. Journal of Consumer Marketing, 20(4), 352–371. Lapidus, R. S., & Schibrowsky, J. A. (1994). Aggregate complaint analysis: A procedure for developing customer service satisfaction. Journal of Services Marketing, 8(4), 50–60. Maechler, N., Neher, K., & Park, R. (2016). From touchpoints to journeys: Seeing the world as customers do. McKinsey&Company Article (März 2016). Online Unter: https://www. mckinsey.com/business-functions/marketing-and-sales/our-insights/from-touchpoints-tojourneys-seeing-the-world-as-customers-do. Zugriff am October 22, 2017. Meffert, H., Bruhn, M., & Hadwich, K. (2015). Dienstleistungsmarketing: Grundlagen – Konzepte – Methoden (8th ed.). Wiesbaden: Springer Gabler. Meffert, H., Burmann, C., & Kirchgeorg, M. (2012). Marketing: Grundlagen marktorientierter Unternehmensführung (11th ed.). Wiesbaden: Gabler. Rafiq, M., & Ahmed, P. K. (1995). Using the 7Ps as a generic marketing mix: An exploratory survey of UK and European marketing academics. Marketing Intelligence & Planning, 13(9), 4–15. https://doi.org/10.1108/02634509510097793. Reichheld, F. F., & Sasser, W. E., Jr. (1990). Zero defections: Quality comes to services. Harvard Business Review, 68, 105–111. Scheuer, T. (2015). Marketing für Dienstleister: Wie Sie unsichtbare Leistungen erfolgreich vermarkten (3rd ed.). Wiesbaden: Springer Gabler.

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Stauss, B., & Seidel, W. (2007): Beschwerdemanagement. Unzufriedene Kunden als profitable Zielgruppe, 4. Edition, Munich: Springer. Svari, S., & Olsen, L. E. (2012). The role of emotions in customer complaint behaviors. International Journal of Quality and Service Sciences, 4(3), 270–282. Thomas, A., & Applegate, J. (2010). Pay attention! How to listen, respond, and profit from customer feedback. Hoboken: Wiley.

Negotiations in Project Management

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16.1

Definition and Characteristics of Projects

A project is a purposeful and mostly unique project, which is subject to constraints on time, resources, costs and other elements, e.g. the use of personnel, financial means or operating resources (PM, 2018). Within projects, there are customerspecified start and finish dates within which the project must be processed (Helmold, Dathe, & Hummel, 2019). Complex projects and project management are different from normal buyer–seller negotiations, as normally several functions are involved. The functions often comprise project management, design, production, procurement, quality management, logistics, human resources, finance and other department. The term project is derived from the Latin language (Latin: proiectum, thrown forward). In the seventeeth century, the meaning of “construction project” as a project definition prevailed in Germany (PM, 2018). Because of their growing complexity, projects place special demands on project management and, thus, also negotiation management for both clients and the contractor or order processor. Often there are several involved groups or departments in complex projects. Due to their complexity, projects involve significant negotiations with customers, suppliers, banks or other stakeholders. Examples of projects include: Construction of a railway station in one of the major cities such as Stuttgart, e.g. Stuttgart 21st Construction of an airport, e.g. Construction and completion of Willy Brandt Airport BER Renovation of a museum, e.g. Neues Museum in Berlin

M. Helmold (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_16

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Construction of a high-speed train, e.g. Construction of the ICE by Siemens and Bombardier Construction and completion of an opera house, e.g. the Elbharmonie in Hamburg. According to the project management manual, projects have certain criteria (PM, 2018). Key criteria for projects can be defined in Table 16.1 as follows. If these project criteria are not met, there is usually no real project. This does not mean that methods of project management cannot be put to good use beyond project work. However, one should not speak of project work in order not to confuse. Projects always include an organizational structure and a process organization (Helmold, 2018). The organizational structure forms the hierarchical framework of the project organization and defines the organizational framework, in which tasks are to be managed by which functional units and sub-departments. By contrast, the process organization regulates the processes that take place within this framework (process and information processes within the project phases). Companies usually have a line organization or a project matrix organization, whereby in many cases, there is a combination or a hybrid of both forms of organization (Helmold, 2018). Projects usually take place under pressure of costs, production and performance, so that projects involve numerous negotiations. For the realization of projects, project teams are formed, which consist of different functions (PM, 2018). These then take over control and steering tasks as part of project management (PM, 2018). Projects go through four phases as shown in Fig. 16.1. Projects start with a feasibility check. If the feasibility is given, project planning will begin in the next phase. In this context, a project assignment is recommended in which important key figures such

Table 16.1 Project criteria Criteria of projects

Description

Time limit

Projects are limited in time, meaning that both the beginning and the end are defined by dates Projects are unique, they are not suitable for the reproduction of existing things (this process management is much better suited) Projects are equipped with limited resources in terms of budget, people or assets Projects have a clearly specified and positively formulated goals and objectives Projects require their own project management organization including a project manager Projects work interdisciplinary and cross-departmental, i.e. project management, purchasing, design, quality, etc. Projects are breaking new ground. They realize solutions that do not yet exist in the desired form Projects are handled in certain phases and contain project milestones Projects include internal and external negotiations with stakeholders

Uniqueness Resource scarcity Targets Organization Interdisciplinary Novelty and risk Project phases Negotiations

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Strategic Project pre-planning

Projectfeasibility

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Projectexecution

Projectexecution

Projectplanning

Projectapplication

Projectfinalisation

Projectorder

Projectvalidation

Projectconfirmation

Projectapproval

Fig. 16.1 Project phases

as quality, costs, time or resources are clearly defined (PM, 2018). After confirmation of all features, the project can be started in phase three. After successful completion of the project, the project validation takes place with a target/actual comparison. In particular, deviations must be negotiated via the supplementary management (Helmold, 2018). Complex projects are usually carried out in cross-functional and interdisciplinary project groups, which contain experts from departments like project management, procurement, production, marketing and sales, quality management, finance and controlling or other departments as shown in Fig. 16.2 (Helmold, 2018; Helmold et al., 2019). Advantages of a project management organization are the following:

Project A

Project B

Project C

Project Management

Project Management

Project Management

Procurement

Procurement

Procurement

Produc on

Produc on

Produc on

Marke ng

Marke ng

Marke ng

Quality Management

Quality Management

Quality Management

Finance

Finance

Finance

Human Resources

Human Resources

Human Resources

Fig. 16.2 Project organization

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Short decision-making through co-allocation Representation of all functions Operational alignment leads to quick decisions to implement measures Project-specific material budgets create transparency about the real purchasing costs for all products Group dynamic advantages through cooperation of all areas (no “silencing” or autonomous thinking of departments or functions, but joint project thinking).

16.2

Critical Success Criteria for Projects

16.2.1 Key Criteria in Projects The project management manual defines key criteria and success factors for controlling and steering projects (PM, 2018). These criteria comprise a total of nine categories that must be taken into account for the successful completion of the project.

16.2.2 Integration Management Integration management in project management describes the processes and processes that are required for good coordination and integration of the different activities of a project. It includes project plan development, project plan implementation and change management (PM, 2018).

16.2.3 Performance Management The project scope management deals with the ongoing planning and control of the progress of the project. As part of the scope management, it is checked at regular intervals whether the project is within the objectives defined in the project order or whether there are deviations. Project scope management includes project initiation, content and scope planning, performance definition, performance verification, and performance review (PM, 2018).

16.2.4 Time Management Time management in projects has to ensure that a project is completed on schedule from project start until the final validation (PM, 2018). Time management in projects contains processes like scheduling, progress control, the scheduling and sequence of operations and the estimated time for the operation (PM, 2018).

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16.2.5 Cost Management Cost management includes the cost and expenses for the approved project (PM, 2018). Objective of this category is that the project is monitored and closed within forecasted budgets. Subcategories of the cost management are resource planning, cost estimations, budgeting and cost control (PM, 2018).

16.2.6 Quality Management Quality management in projects should ensure that the quality requirements defined by the client are met or even exceeded. These include quality planning, quality assurance and quality control (PM, 2018).

16.2.7 People Management The main task of HR management is to make sure that the people involved in the project work as efficiently as possible. The following functions and tasks can be assigned to Personnel Management: Project Organization, Personnel Acquisition and Team Development (PM, 2018).

16.2.8 Communication Management The aim of communication management in the project is to create, collect, disseminate, store and define all project information in a timely and appropriate manner. These include the development of information and reporting system, the distribution of information, and the determination of progress and administrative completion (PM, 2018).

16.2.9 Risk Management Risk management describes all the iterative processes necessary to identify, analyze and respond to project risks. These include risk identification, risk assessment, risk mitigating and risk tracking (PM, 2018).

16.2.10 Procurement Management The knowledge field procurement management includes the procurement of goods and services outside the organization as well as the associated contract design. This area includes procurement preparation, quotation preparation, bid solicitation, supplier selection, contract drafting and contract PM, 2018).

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Table 16.2 Negotiations in project management

16.3

Recommendations for successful project management Leadership and management Social competencies and expert knowledge Project milestones and objectives through project order Objectives setting according to SMART aspects Sustainability in project management Success control and project validation Incentive system and career opportunities Return to line organization after project finalization Internationality and diversity Usage of digital tools

Recommendations for Project Negotiations

Projects with complex objectives need a competent project leader or manager. This requires both hard (e.g., project management skills) and soft skills (e.g., emotional intelligence) to convince both internally and externally. In addition to a good and sustainable relationship with the management, one of the key components of project managers is to lead a team successfully. Project managers must choose their employees to have a healthy mix of expertise and social skills. Projects should be projected by a robust project job in which performance parameters are clearly defined and scheduled (PM, 2018). Goals must have specific attributes and be specific, measurable, acceptable, realistic and timed (SMART methodology: English, specific, measurable, achievable, realistic, and timely). Sustainability as well as a permanent and regular success control complete the SMART goals. Here, an incentive system is recommended, so that employees are sufficiently motivated by material or immaterial advantages for project success. Internationality and diversity strengthen project teams and help to successfully implement projects in an international context. The use of digital media supports networking, especially across country borders and time zones. Finally, organizations should allow project members to return to the line function. Table 16.2 summarizes the main recommendations (PM, 2018).

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References Helmold, M. (2018). Erfolgreiche Verhandlungen und Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Manuskript und Workshopunterlagen im Master- und MBA-Studium. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler. PM. (2018). Retrieved July 7, 2018. http://www.pm-handbuch.com/begriffe/.

Negotiations in Different Countries

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17.1

Structure and Examples

Overcoming cultural barriers in negotiations and the importance of communication in international business transactions are becoming increasingly important. Communication in negotiation is the means by which negotiators can achieve objectives, build relationships and resolve disputes with international partners. Most negotiators know that it is the most important tool one can have for successful negotiations. Communication becomes even more important when negotiations include counterparts that are from different cultures and countries. The foreign chamber of industry and commerce predicts that this trend will further increase. The rising growth of the global economy is ensuring good business for German companies abroad. The current business climate and the expectations of German companies and member companies of the Chambers of Commerce Abroad (AHK) remain at a high level. Negotiations in different cultures are based on peculiarities that companies have to take into account. Although the sellers or buyers of companies in international trade should not “twist”, they should know and respect cultural and country-specific behaviour patterns in intercultural negotiations (Bügner, 2017). Where it is quite common to say a clear “No” in Germany, such direct rejection might be considered as disrespectful in Asian countries and might lead to a significant “face loss” of the negotiation opponent. Another example of intercultural differences is the structure and process of negotiations. Whereas Germans have a clear agenda and prefer a systematic and structured negotiation approach, other countries such as India or Italy negotiate rather dynamically and in an unstructured

M. Helmold (&) Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_17

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Country

Flag

Succesful Strategies

Failing Strategies

Ice Breakers – what to do (Openers)

Ice Bergs - what not to do (Barriers)

Fig. 17.1 Structure and country examples. Source Author

manner. In international negotiations, there are specific successful and unsuccessful (failing) strategies for individual countries as outlined in Fig. 17.1. Several authors stress that awareness is a substantial advantage in international negotiations (Brooks, 2016). Besides these strategies, it is also suitable to know icebergs (barriers or pitfalls) and ice breakers (openers) in such countries. The authors also recommend that companies provide necessary training to employees, who are directly or indirectly involved in business transactions (Helmold, Dathe, & Hummel, 2019). The country examples of this book are unique in literature and are based on practical examples and research. Figure 17.2 shows Ann Sun, Manager Supply Management, and Dr. Marc Helmold, General Manager, at international negotiations with a maker of railway component in Japan. Negotiations in Asia are quite unique for westerners and necessitate the awareness of negotiation routines and strategies.

17.2

Country Examples

In the following chapters, there are more than 35 country examples in total which include recommendations for negotiations. All countries are described in a standardized way including successful negotiation, unsuccessful strategies, ice breakers (openers) and icebergs (barriers). In the selection of a total of more than 35 country examples the economic power (gross domestic product), the foreign trade balance and the trade relations with Germany were considered (OECD, 2018). The global biggest 20 economies have been chosen in this book for the chapter countries from Chaps. 18 to 22. The top 20 global economies in terms of GDP are according to the OECD (2018):

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Fig. 17.2 Ann Sun and Dr. Marc Helmold: Negotiations in Japan. Source Author

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

The USA PR China Japan Germany United Kingdom India France Brazil Italy Canada South Korea Russia Australia Spain Mexico Indonesia Turkey The Netherlands Saudi Arabia Switzerland.

In addition, countries with a high degree of international trade were selected for this book. Finally, countries of the researcher´s interest or origin (Palestine, Israel) supplement this unique section of intercultural success and failure strategies in negotiations (Brooks, 2016; Bügner, 2017).

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Chapter 18 concentrates on European countries including the biggest economies and economic leaders such as Germany, France, Great Britain, Spain and Italy. In addition, neighbours of Germany such as Austria, Switzerland, Netherlands and Poland are included within this section. Finally, Eastern European countries such as Russia, Armenia, Ukraine, Latvia, Poland and Lithuania are also included in chapter eighteen. Chapter 19 deals with two big North American economies, the USA and Canada along with Mexico. Additionally, countries like Brazil and Peru are included. Chapter 20 focuses on countries in Asia and Asia-Pacific. Asia reflects a diversity of countries and negotiation features. The section starts with negotiations in Japan followed by the People’s Republic of China. Japan is located west of the Pacific Ocean in the Northern Hemisphere. Japan’s neighbours include the Republic of Korea, China and Russia. Japan has a long tradition as an export country in several industries, e.g. automotive, machinery and information technology. China has recently overtaken Japan and become the second-largest economy in the world. According to a Chinese myth, the Chinese citizens are dependants of the “Long” (Chinese: Long de Chuan Ren). The meaning of “Long” in the Chinese language is “Dragon”. The dragon is the national symbol of China and people identify with the dragon itself and the features of the dragon (Katz, 2008, 2017). These features comprise grace, strength, power, growth, beauty, prosperity and success. The third example is India. One of the key differences for India in contrast to countries such as China, Japan and South Korea is that the Indian economy is heavily reliant on service industries especially in her export sector. Finally, Indonesia and Vietnam are included as part of this section. Chapter 21 outlines how to negotiate in countries such as Saudi Arabia, Palestine, Israel Jordan, Iran and Turkey and includes important Islamic elements in this section. The last Chapter 22 deals with countries in Northern Africa, Central Africa and South Africa. The examples are Morocco, Egypt, South Africa and Cameroon. Even though there may be similarities between countries in Northern Africa (Morocco, Tunisia, Egypt), Western Africa (Cameroon, Ivory Coast) and the Southern parts (South Africa, Namibia, Tanzania), Africa counts as one of the most diverse continents (Njinkeu & English, 2008). Institutions such as the WTO or the World Bank see an increasing trend in imports and exports to and from African countries (World Bank, 2019).

References Brooks, A. W. (2016). Verhandeln mit Gefühl. In Harvard Business Manager. Retrieved June 10, 2018. http://www.harvardbusinessmanager.de/heft/d-141171019.html. Bügner, T. (2017). Lost in Translation. Sind Sie fit für die Geschäftsverhandlung im Ausland? Durch Unkenntnis fremder Mentalitäten kann die Geschäftsreise zum Abenteuer werden. Diese Fehler sollten Sie bei internationalen Verhandlungen vermeiden. 15. Mai 2017. In Wirtschaftswoche. Retrieved June 22, 2018. https://www.wiwo.de/erfolg/lost-in-translationsind-sie-fit-fuer-die-geschaeftsverhandlung-im-ausland/19803368.html. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler.

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Katz, L. (2008). The negotiator’s reference guide to 50 countries around the world. Charleston: Booksurge Publishing. Retrieved January 28, 2019. Katz, L. (2017). The negotiator’s reference guide to 50 countries around the world. Charleston: Booksurge Publishing. Retrieved January 28, 2019. Njinkeu, D., & English, P. (2008). African countries in the new trade negotiations, interests, options and challenges. New Jersey: Africa World Press. OECD. (2018). Die OECD in Zahlen und Fakten. Die wichtigsten Volkswirtschaften nach dem Bruttoinlandsprodukt. Retrieved June 17, 2018. http://www.oecd.org/berlin/statistiken/. World Bank. (2019). Economic facts about Africa. www.worldbank.com.

Negotiations in Europe

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Marc Helmold, Catherine Lee, Agne Aleksandraviciute, Mari Zakaryan, Damiano Filingeri and Daria Vlasova

18.1

Negotiations in Germany

18.1.1 General Guidelines Germany is the largest economy in the European Union and the fourth largest in the world. Negotiations in Germany are usually structured and take place in a systematic way (Schulz, 2017). German negotiations therefore tend to follow a clear agenda, which will often be distributed in advance to all negotiation stakeholders, who are involved in the negotiations. Negotiations are taken very seriously in Germany and will mostly go into great detail. Germans are often technically educated and technocrats (German: Technokraten) and will follow the agenda in a formal way. German managers work from precise and detailed plans, which are usually followed rigorously, and negotiators want to win in negotiations. Furthermore, meetings always aim for decisive outcomes and results, rather than providing

M. Helmold (&)
C. Lee
A. Aleksandraviciute
M. Zakaryan
D. Filingeri
D. Vlasova Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] C. Lee e-mail: [email protected] A. Aleksandraviciute e-mail: [email protected] M. Zakaryan e-mail: [email protected] D. Filingeri e-mail: damiano.fi[email protected] D. Vlasova e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_18

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a forum for open and general discussion as is often the case in other polycentric cultures. This element is important, so that any negotiation preparation must include result winning scenarios in the negotiation elements. The formality of a meeting may make it difficult for an outsider to assess how things are going, but a lengthy examination of a proposal will indicate serious intent. In German business negotiations, it is important to provide solid facts and examples to back up proposals, given the German preference for analytical thinking and rational explanations. It is not recommendable to use exaggerated or indirect communication styles during business meetings with your German counterparts as this will be viewed with suspicion. Also metaphors often present in other cultures to explain something should not be used. German business culture has a clear and transparent hierarchy, with clear responsibilities and distinctions between roles and departments. In formal German business meetings, it is customary for the highest-ranking person to enter the room first. Academic titles should be respected and mentioned at the introduction (e.g. Doctor and Professor). Contacts are vital to the business’s success in Germany, so that banks, German representatives, chambers of industry and commerce (German: Industrie- und Handelskammer) or other associations (e.g. the Association for Supply Chain Management, Procurement and Logistics (BME) must be used whenever possible. The Association for Supply Chain Management, Procurement and Logistics (BME), founded in 1954, is the professional association for supply chain managers, buyers and logisticians in Germany and Central Europe. The BME provides a support service for its members who belong to all industrial and service sectors, including distributive trade, banking, insurance and public institutions. The BME looks back on a 60-year-old history in which its member number has grown to 9600 individual and corporate members from small businesses to large enterprises. In 2010, the purchasing volume of BME members amounted to 1.25 trillion euros, representing around the half of the German gross domestic product (GDP). Meetings and negotiations should not be planned on public holidays or after 4 pm, the weekends or during summer vacation around July and August, as German negotiators have a clear separation between private and business environment (Helmold, Dathe, & Hummel, 2019a, 2019b).

18.1.2 Successful and Unsuccessful Strategies Figure 18.1 outlines successful and failing strategies, additionally openers (ice breakers) and barriers (ice bergs) will be explained as general recommendations for negotiations in Germany. When setting up a meeting with German business negotiators, it is important to be punctual. Appointments in Germany are mandatory and meetings in German companies are generally scheduled well in advance. Meeting invitations must be organized a few weeks beforehand by telephone or email including time, agenda, venue, and participants. With this process, it is possible to modify the agenda to suggest additional points. Brief preliminary meetings may sometimes be arranged at short notice. The planning process is often very time consuming. However, once this is

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Germany Succesful Strategies

Failing Strategies

Punctuality and compliance with schedule

Not being punctual at start, during negotiations and at the end

Following agenda and structure

Non-compliance with agenda or significant change of negotiation items

Respecting and understanding roles and responsibilities

Not respecting hierarchies

Fact-based and detailed negotiations

Personal contact or too close narrowing to negotiation partner

Summarizing agreements, following agreements – no change during time

Lies or not keeping promises

Ice Breakers (Openers)

Ice Bergs (Barriers)

Positive attitude towards Germany as open society

Early mentioning of family and private background

Interests of German culture, history, industry, innovations etc.

Germany and World War 2

Sports, especially football (do not call it soccer)

Defeats in sports

Fig. 18.1 Negotiation strategies for Germany. Source Author

over, a project will move very quickly and deadlines are expected to be honoured. Letters should be addressed to the lead person in the functional area, including the person’s name as well as their proper business title. Rank is very important in German business. Never set up a meeting for a lower ranked company employee to meet with a higher ranked person. If you write to schedule an appointment, the letter should be written in German. Expeditious handling of correspondence is mandatory. Telephone calls and faxes should be returned promptly. Although German is the preferred business language, most upper level managers are quite capable of carrying out a conversation in English. Punctuality is taken extremely seriously. If you expect to be delayed, telephone immediately and offer an explanation. It is extremely rude to cancel a meeting at the last minute and it could jeopardise your business relationship. Meetings are generally formal and initial meetings are used for the parties to get to know each other. They allow your German colleagues to determine if you are trustworthy. Participants must arrive punctually and dress up rather than down for the occasion. As with most European countries, meeting etiquette in Germany relies on professionalism, good business sense and formality. Bearing the above in mind, together with a positive attitude will ensure good results. When entering into business negotiations with German business people, there are a number of important points that you should be aware of in order to ensure a positive outcome from negotiations. Germans are competitive,

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ambitious and hard bargainers. In German business, a person’s word and handshake are considered his/her bond. If a verbal agreement is made in a business meeting, it is generally considered binding. Business negotiations tend to be analytical and factual. A well-researched speech with lots of graphs, empirical arguments, and statistics is usually preferred. A direct, matter-of-fact approach will be most appreciated. Business is hierarchical. Decision-making takes place at the highest levels of the company i.e. top down. It is not appropriate to bypass an associate of equal ranking by consulting with his or her superior, even if negotiations take a long time. Deference is given to authority. Subordinates rarely contradict or criticise the boss publicly. Decision-making is often a slow and detailed process. Do not expect significant conclusions to be reached based on spontaneous or unstructured results. Every aspect of the deal you propose will be examined by many executives. Do not anticipate being able to speed up this process. As such, decision making during negotiations is slower than in some other European countries. An impatient businessperson will be unlikely to garner the same respect as a patient, reasonably spoken individual. If Germans feel rushed to complete a business deal, they may perceive this as a lack of commitment and professionalism. You must be patient and not appear ruffled or irritated by the strict adherence to protocol. Germans are detail- oriented and want to understand every innuendo before coming to an agreement. Germans have an aversion to divergent opinions, but will negotiate and debate an issue fervently. Avoid confrontational behaviour or high-pressure tactics. It can be counterproductive. Avoid contradictory statements, such as following a compliment with a complaint; the inconsistency may cause a German to reject your statements outright. Jokes, anecdotes, a “hard sell” approach (which may entail insulting a competitor), or spontaneous presentations are generally considered inappropriate. Slang language and colloquialisms should be kept to a minimum or better yet, not used at all. Decisions are often debated informally and are generally made before meetings with compliance rather than consensus expected in the meeting. Final decisions are translated into rigorous, comprehensive action steps that you can expect will be carried out to the letter. Once a decision is made, it will not be changed. Your attention to detail will not go unnoticed by your German counterparts and will highlight your genuine willingness and enthusiasm to do business with them. When greeting people in Germany, particularly in business meetings, it is imperative that you always use formality. The following are points of importance when greeting Germans. Germans are still quite formal and like their hierarchies. Therefore, titles and last names are commonly used when not knowing a person and in business relationships. A man should be addressed as Herr (Mr.) and woman with Frau (Mrs.). In business settings it is good to use the honorific plus the professional designation. In more casual situations where the last name is unknown, titles alone (Herr and Frau) can be used. Germans offer a firm, but brief, handshake as a greeting. The handshake is often accompanied by saying “Guten Tag” (Good Day). Sometimes “Hallo” (Hello) is used; in the South, people say “Grüss Gott.” It is customary for people to also shake hands upon departing from one another. In some German offices shaking hands is part of the daily ritual, so do not be surprised

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if a round of handshaking precedes a day’s work. When meeting a business contact for the first time it is advisable to exchange business cards. Although sincere smiles are welcomed, and people tend to be polite and hospitable to one another, physical and emotional expressions may be kept to a minimum upon initial introductions. Eye contact is generally expected during the course of the introduction and conversation. Germans are known for being direct, frank, and truthful about how they feel (Helmold et al. 2019a, 2019b). Superficial, small talk is rarely welcomed by German negotiators. During a conversation, visitors are often expected to express their opinions on topics such as the arts and international events; however, they should be discreet when political issues come up. When close friends greet each other, it is common to kiss both the left and right cheeks. However, this is considered inappropriate in a business setting. Germans will not always introduce themselves to strangers, especially if they know that you don’t speak their language. Not all Germans speak English and even if they do they might be not comfortable using it. Even if you don’t know very much German, most of them will appreciate you learning their language. Business entertaining usually takes place in restaurants. The Germans enjoy linking gastronomic pleasures with interesting conversation about potential business. Actual business, however, is not supposed to be conducted during lunch or dinner. Sharing a meal is intended to help establish a personal acquaintance, and is a time to enjoy good food, wine and discussion. There is an etiquette you are expected to follow, when dining out in Germany. The following highlights the most important elements of restaurant etiquette: Do not begin eating until the host starts or someone says “Guten Appetit” (have a nice meal). Do not rest your elbows on the table. Do not put your left hand in your lap when you eat. In fact both hands must be visible at all times. Indicate you have finished eating by laying your knife and fork parallel across the right side of your plate, with the fork over the knife. The most common toast with wine is “Zum Wohl!” and with beer is “Prost” (good health).

18.2

Negotiations in France

18.2.1 General Guidelines The Germans love the French and the way of French life, but do not take them seriously, as Frank (2004a) states. The French, on the other hand, do not love the Germans, but admire them (Frank, 2004a). France is not only the land of gourmet and joie de vivre, but also one of the key countries in Europe. France is one of the founding members and pillars of the European Union (EU) and is an important trading partner. France has a huge domestic market with 60 million inhabitants and is

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one of Germany’s most important international trading partners. Despite cultural rapprochement and commonalities, there are significant differences in the culture of negotiation. According to Frank, misunderstandings between Frenchmen (Gauls) and Germans (Teutons) are not enough, to make contract negotiations or takeovers fail (Frank, 2004a) apart from in the areas of apart from key figures and balance sheets.

18.2.2 Successful and Unsuccessful Strategies Figure 18.2 shows the successful and relevant strategies for negotiating with French business partners. The first obstacle to negotiation is usually the language. French people do not like to negotiate in another language (Frank, 2004a, 2004b). Although English is taught in school and university, French people have a hard time negotiating in English (Frank, 2004a, 2004b). In this context, the rule of success is to have some or all of the negotiations in French as a strategy of success. Usually a presentation in French is enough. Internal calls are led by the other side in French, so that one should allow the negotiating partner time to discuss. It is also advantageous to have a translator at the table who can explain circumstances in the national language, if necessary. It is also advisable to consult a French-speaking lawyer for legally demanding issues (Frank, 2004a). Frank describes that subtleties, double interpretations and often hidden messages (French: sens cache) play an important role in the French culture of negotiation, which are not immediately recognized (Frank, 2004a). Thus, it is possible that misunderstandings can occur. Also important are good manners, decent clothes and courtesy phrases. In addition, good table manners and etiquette are of central importance, since negotiations often take place while eating together. If you invite French business partners, a first-class service and very good food should be ensured. French people can spend up to more than four hours having dinner. French people are proud of their past and the achievements of the French Revolution. Addressing these achievements are ideal door openers or icebreakers to engage in conversation with the negotiating partner. Also sporting achievements in various areas such as football, handball or judo are a guarantee for a positive climate with French business partners. Elegance and eloquence, coupled with enthusiasm, are characteristics of French negotiation. However, one should be able to substantiate one’s reasoning in detail on the basis of key figures (English: Key Performance Indicators, KPI), as Frenchmen are very keen on detail. Critical strategy is not to be considered competitive or too fast in negotiations with an early direct entry. In this context, one should not act too technocratic and should apply his arguments in due course. As described at the beginning of the chapter, the French have respect for the economic success of Germany, but see comparisons as negative. Nor should France’s role as a colonial power or in the Algerian war be addressed in negotiations, but one should respond to the leading role of the great nation (French: La Grande Nation) in the world.

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France Succesful Strategies

Failing Strategies

Appraisal of the French innovations and system of liberty, brotherhood and equality

Direct start into negotiations

Numerics and numbers affinity. French like quantitative performance indicators

Negotiations in English

Formal compliance with hierarchies

Competitive negotiations (Pressure)

Understanding the networks and using French middlemen

Refusal of lunch or dinner (up to two to three hours possible)

Making sure that service in terms of meeting and eating is first class service

Reviling the international role of France in the world

Ice Breakers (Openers)

Ice Bergs (Barriers)

Interest in French culture, cusine and society

Economic inequalities with countries such as Germany

Knowledge of academic background and using people of the same background (grande ecole)

Historical conflicts: France – United Kingdom

Discussion about success in sports

The role of France during the colonial times in Asia or Africa

Fig. 18.2 Negotiation strategies in France. Source Author

18.3

Negotiations in Great Britain

18.3.1 General Guidelines Since the entry of Great Britain into the European Union (EU) in 1972, the country has experienced a continuous economic upswing and has expanded its trade with countries in Europe (IPB, 2018). There is now a lively exchange between the main continent of Europe and the United Kingdom. In addition, because of its history as a colonial power, Britain has ties to Commonwealth countries, which is also used by European countries and Germany (Meyering, 2018). Recently, Britain has decided to leave the EU (Brexit). Even after Britain’s decision to leave the EU, strong economic relations will continue. These economic relationships automatically lead to negotiations with companies and managers from the UK. The British style of negotiation is different from the German style of negotiation and has its pitfalls from a German point of view. Thus, some authors describe that typically German behaviour in the Englishman automatically arouses disgust.

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18.3.2 Successful and Unsuccessful Strategies When negotiating in the UK, certain rules should be respected as icebreakers that look like this (Marks, 2006). Figure 18.2 describes success and failure strategies as well as icebreakers and icebergs in UK negotiations. These are: 1. 2. 3. 4. 5. 6. 7. 8. 9.

Courtesy and adherence to labels Negotiations in the native language: the speech trap Distance and no body proximity Building relationships through “small talk” Fairness and sportsmanship Avoiding Exaggerations Liability Emotional negotiations Spontaneous Pragmatism.

Courtesy and Etiquettes British courtesy is recognized throughout the world and plays a crucial role in negotiations with British business partners (Marks, 2006). Meyering describes this politeness with a quote from Wiliam Horman, the famous director of the private school Eton in the 15th century (Meyering, 2018). First courtesy and good peripheral shapes make us human. This belief has not changed for many Britons to this day. To avoid being close to your counterpart, British like to express themselves indirectly. Criticism, negative opinions and doubts usually hold them back. If anything, they express negative through the flower or in a nice wrapper. For other things, on the other hand, they are very pragmatic and direct again. Thus, British give business cards at the beginning of the conversation without much form. Cards that they receive themselves are usually stashed away quickly, without this being considered rude. These rules of British courtesy should always be adhered to Meyering (2018). Negotiations in English: The Language Trap Even if British negotiating partners have good command of English, from the point of view of the other party’s partner, English is usually only the second language. The subjunctive is a very commonly used and acceptable grammatical form in the English language for expressing requests, suggestions, wishes, or disapprovals. Experts therefore recommend the use of courtesies in the subjunctive. Direct addresses should be avoided (you must, you should). It is particularly difficult to choose the correct salutation for female negotiators and business partners. Basically one should choose the “Ms”, as this approach is neutral. Married interlocutors can be addressed with “Mrs.”. Just as much care should be taken to choose the right geographical names in the British Isles. England is not the same as the UK, rather it is only the UK’s southern part (Meyering, 2018).

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Body Proximity and Small Talk British negotiators reject body proximity and close contact in business situations. Therefore, avoid unnecessary body contact. Brits also shake hands less frequently than continental Europeans, so greetings should be brief (Meyering, 2018). Even when you say goodbye, you do not shake hands in the UK. Of course you can confine yourself to the topic of weather during small talk. The location of the British Isles on the edge of the North Atlantic will provide you with plenty of conversation. But you do not reach the actual goal of casual chatter. Small talk helps build good and trusting relationships. because the British prefer to do business with people they trust. That’s why they do not just want to talk about trivial issues in small talk, but often show real interest in their conversation partner (Meyering, 2018). Fairness and Avoidance of Exaggerations Brits have a sportsmanship and a keen sense of when and how each party to a meeting or co-operation gets their money’s worth. Therefore, they consider all aspects of the matter in negotiations and weigh them carefully. They are really satisfied with the results achieved only if both sides clearly benefit from the solution. Negotiation results should therefore always be weighed and be in the mutual interest (Meyering, 2018). Britain is the motherland of irony and humour as Meyering describes (Meyering, 2018). Even the British do not always take the outside seriously. Rather, they make others laugh by making jokes about their own person. The inhabitants of the kingdom also like to overshadow their own achievements. Know-it-alls, show-offs and people who proudly point out their own achievements are absolutely unlikeable to the British. Anyone who really has power, money or academic merit does not need to brag in the motherland of understatement. Rather, they are valued for their modesty (Meyering, 2018). Reliability and Emotion Free Negotiations Harmonic and respectful relationships are a key part of life for the British. That’s why they do everything they can to maintain the dignity of their counterparts in every situation and treat them with decency. Anyone who violates this imperative in business life by falling out of the role, becoming angry or devaluing others and not allowing them to finish speaking, destroys the relationship profoundly. The following elements, which are insignificant for Germans can show commitment and respect in Great Britain and can be regarded as icebreakers (Meyering, 2018): • Send greeting cards for Christmas or birthdays— • Express thanks by greeting cards and not by e-mails • Open encounters with a positive, personal comment about the conversation partner’s clothes or the wonderful view from his office • Apologise for trifles • Thank sincerely and personally.

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Brits plan meetings and negotiations thoroughly. It is customary to mail all participants the agenda and the schedule of the talks in advance, so that each participant can prepare. The roles of the members of each negotiating team are also clearly defined. If all are at the same hierarchical level, they exchange opinions on an equal footing (Meyering, 2018). If there are differences in rank, the highest ranked leader conducts the call or appoints someone to take on the task. Often there is also a protocol or secretary (Meyering, 2018). It is also customary to record interim and discussion results as well as decisions on the further course of action in writing (Meyering, 2018). The negotiations always find the British friendly, but without showing emotions. Facial expression and body language influence them significantly. Anyone who exerts pressure in negotiations, pushes his opponent into the corner or tries to pull him over the table, damages the relationship with his contact so fundamentally that this can usually no longer be repaired because they violate the highest maxim of British business life: fairness. On the other hand, those who give in occasionally and are willing to compromise, behave the way Britons expect (Meyering, 2018). The British also always have alternatives in mind. Often, however, they only address these at the end of the negotiations and are vague until then. That can make them despite all politeness difficult conversation partners. As well as this British people take their time with decisions and then cling to them once they have met them. Renegotiations should generally be avoided in the UK (Meyering, 2018). Pragmatism and Avoidance of Jokes About Monarchy British companies often have steeper hierarchies than German ones. In addition, task areas are usually clearly separated from each other so that employees can usually only lead projects to success if they work in a very team-oriented manner and communicate efficiently. This also means that the British usually approach tasks very goal-oriented and pragmatically. Often they spontaneously make the decision that the situation demands. Also, the British are often far less structured and detail loving than many German colleagues. British pragmatism also shapes the view that workers and entrepreneurs on the island have about how perfect a solution must be. Britons weigh exactly whether 100% performance is worthwhile, or whether 80% is enough, (Meyering, 2018). Political issues and jokes about the royal family should be avoided in negotiations and business relations. Basically, the British should be considered very positive about the Royal family (Meyering, 2018) (Fig. 18.3).

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Great Britain Succesful Strategies

Failing Strategies

Politeness and etiquettes

Competitive and impatient negotiations

Formal and smart business dresses

Discourtesy and informal business dresses

Punctuality and compliance with tea time etc.

Non awareness of tea time

Greeting cards (Christmas cards) etc. after negotiations

Touching or being to close to the negotiation partner

Sports topics and betting

Sexism or jokes about monarchy

Ice Breakers (Openers)

Ice Bergs (Barriers)

Small talk, appraisals of dress and small compliments

Jokes about monarchy and queen

Interests in sports like criquet, rugby, golf, football or tennis

Defeats in football against Germany

Humour of british people

Falkland war and other military conflicts. Topics like Brexit

Fig. 18.3 Negotiation strategies in Great Britain. Source Author

18.4

Negotiations in Italy

18.4.1 General Guidelines Although Italy has been considered a euro crisis state in recent years, Italian goods and goods are enjoying ever-increasing popularity in the world (OECD, 2018). In the last two years, the country generated a high export surplus (OECD, 2018). Due to the increasing demand for Italian products from Japan and the People’s Republic of China, Italy has generated an export surplus of more than 50 billion euros in 2017 (OECD, 2018). In 2017, exports exceeded imports by just under € 42 billion. Italy thus has the third highest trade surplus in the European Union after Germany with more than 257 billion euros and the Netherlands with more than 60 billion euros. An important reason for this, according to the OECD, is the rising demand for “Made in Italy” from Asian countries (OECD, 2018). Exports to Japan grew by almost ten percent, those to China by more than six percent. The export hits include luxury items, food, vehicles and precision machinery. The EU Commission expects that the gross domestic product in Italy will continue to grow this year and over the next few years.

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The most important rule in negotiations in Italy is to look after a well-groomed appearance and the “good figure” (Italian: bella figura) (Kness-Bastaroli & Dahm, 2006). The regional characteristics of Italy are varied and numerous and varied as is the mentality of the people (Kness-Bastaroli & Dahm, 2006). There are such large differences between northern and southern Italy, that it is difficult to formulate general rules when dealing with business partners. Italians insist on meeting hierarchical levels, so this aspect must be taken into account. Negotiations must be conducted with the boss and decision maker (Italian: Padrone) (Frank, 2010a). Anyone who misses the “Padrone” or does not dress professionally is at a disadvantage in northern and southern Italy. Frank describes as potential strategies of failure (Frank, 2010a). The economic difference between the less developed Mezzogiorno in southern Italy and the affluent north is striking (Frank, 2010a). The reason for this is, among other things, the different historical development: while the feudal system still prevailed in the south, the north bordering on France, Switzerland and Austria was already economically advanced (Frank, 2010a). By contrast, in “polychronic” cultures which include South America and the Mediterranean cultures such as Italy, human relationships are more important than abstract schedules, multiple tasks are handled in parallel, interruptions are frequent, and flexibility is important (Frank, 2010a).

18.4.2 Successful and Unsuccessful Strategies Negotiations in Italy mean that they are prepared for long negotiations (Frank, 2010a). As in other polychronic societies, personal relationships and network building are central to business success in Italy. The formalization of relationships and a style of negotiation that is clear, unambiguous and systematic, in addition to punctuality, structure and clear role distributions are characteristic of negotiations in monochronous societies such Germany. In Italy, these patterns of negotiation do not help, as Italy belongs to the so-called “high context cultures”. In these cultural areas, as in other countries in Southern Europe or South America, signs of similarity and trust are of fundamental importance (Frank, 2010a). Therefore, building a good relationship should be worked on prior to the negotiations (Frank, 2010a). Although German punctuality is expected, Italians may not always appear on time. Also, deviating from an agenda is not uncommon (Frank, 2010a). Negotiations in Italy must be empathetic and also slightly emotional in order to convince the negotiator (Frank, 2010a). Impatience, lack of trust and an insufficient relationship with the decision maker are seen as strategies for failure (Frank, 2010a). As with other countries, cultural achievements or sporting achievements are icebreakers, and defeats in football should not be mentioned (Frank, 2010a). Figure 18.4 shows icebreakers, icebergs and successful negotiating strategies in Italy.

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Italy Succesful Strategies

Failing Strategies

Formal business dress for men and women (Bella Figura)

Arrogance and narrow minded behaviours

Awereness of hierarchies and decision makers (Italian: Padrone)

Urging decisions and competitive negotiations

Patience and endurance

Impatience and short-term oriented results or agreements

Mirroring behaviour. Rational emotional negotiations including signals of body language

Missing relationships

Flexible and dynamic negotiation execution

Missing trust

Ice Breakers (Openers)

Ice Bergs (Barriers)

Italy´s success in football and other sports

Absence in football World Cup of 2018 in Russia

Italy´s culture and innovations

Italy at the times of Mussolini

Italy´s beauty (regional variances)

Topics such as politics, religion or crime (Mafia)

Fig. 18.4 Negotiation strategies in Italy. Source Author

18.5

Negotiations in Spain

18.5.1 General Guidelines Spain is the fourth biggest economy in the Eurozone, dominated by services, with tourism the largest single business activity. Spain has had a constitutional monarchy since the death of General Francisco Franco in 1975, which ended 36 years of dictatorship. The King is head of state and of the military. He names the prime minister after parliament has given its approval. The Congress of Deputies and the Senate form the two houses of parliament. With a population of more than 47 million Spain is the fifth most populous nation of the European Union, about 80% are Roman Catholic. As in other European or Latin countries politics and religion should not be mentioned in negotiations. Spanish business people prefer to create a good relationship before starting a business deal, therefore, it is advisable to be open with any questions asked about your business or family life. Spaniards place great emphasis on trust and honesty, so this should be given serious consideration before arranging a first meeting (Mulligan, 2008; Katz, 2017). The way business is conducted in Spain is more relaxed compared to other Western European nations. Negotiators should be, as in

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other polychronic or Latin countries, prepared for rather time consuming and lengthy negotiations (Helmold et al. 2019a, 2019b). One should allow sufficient time in the business schedule for getting to know the negotiation opponent properly, before the start of negotiations. As in other Mediterranean countries social bonds must be built first, before the business negotiations can start properly. A sound relationship is an integral part of successful negotiations in Spain. In many cases, social bonds serve to guarantee agreements and may even replace written contracts (Katz, 2017). Often, written statements are not given as much importance as in, for instance, the UK or Germany (Katz, 2017). When preparing for business negotiations in a foreign country, it is good to bear in mind that the key to successful negotiation is to respect the culture, values and traditions of your prospective partners (Katz, 2017). Generally, Spaniards like to interact with people from abroad as they still believe in the superiority of products and services coming from abroad. One can expect the Spanish counterpart to be curious about the products or services which are offered.

18.5.2 Successful and Unsuccessful Strategies Figure 18.5 outlines the strategies for negotiations in Spain. When setting up a meeting, it is recommended to make appointments in advance and confirm them by letter, fax or email just before the arrival. This will avoid any confusion or misunderstanding and save time, if meetings have to be re-arranged. When arranging the initial meeting, it is advisable to choose a time around mid-morning. This will avoid any issues with siesta breaks, when the foreign business traveller is unfamiliar with the working practices of a particular business. Spain has the highest number of public holidays in Europe, with at least fourteen, mostly national, but also regional and local (Katz, 2017). If a public holiday falls on a Tuesday or a Thursday, many people take a four-day weekend, known as “hacer puente”. In addition, the majority of towns and villages have important annual fiestas and/or ferias that may last several days. So, it is advisable to check regional and local calendars, as well as the list of national holidays, before arranging meetings and making travel plans. In Spanish business culture, hierarchy and position are valued highly and it is advisable to arrange meetings between representatives of an equivalent position and professional status (Katz, 2017). Spanish business culture places great emphasis on authority within organisations and decisions will be made by the most senior manager present in a meeting. Senior managers tend to be far removed from more junior colleagues. Generally, subordinates are required to respect their managers and follow the instructions given to them. Spaniards tend to work well in teams with managers seeing themselves as team players, even though there is usually a “closed-door” approach to management. In Spain, decisions are usually not made during meetings, which tend to be mainly for discussion and the exchange of ideas. Furthermore, decision-making can be slow as various levels of management need to be consulted. Therefore, one should make sure that conducting negotiations is

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Spain Succesful Strategies

Failing Strategies

Punctuality and structured agenda, but variance and flexibility during negoƟaƟons

ConducƟng negoƟaƟons in English

Shaking hands

Direct and straight imposing of decision and urging decision making

Formal and professional dress code

Making giŌs

Treatment of all people with respect – hierarchies are social

Unsuitable dress code

ChaoƟc business negoƟaƟon style

InsisƟng on agenda and Ɵme

Ice Breakers (Openers)

Ice Bergs (Barriers)

Family topics

PoliƟcal topics such as separaƟon of Catalonia

Football and other sports

Awareness of rivalry in sports (Barcelona, Real Madrid, AtléƟco Madrid etc.)

Beauty and variety of Spain

Franco or criƟcising the monarchy

Fig. 18.5 Negotiation strategies in Spain. Source Author

taking place with the person who has decision-making authority within the company (Mulligan, 2008). The majority of Spaniards do not give their opinion at meetings. So, watching nonverbal clues is crucial for the success of negotiations (Helmold et al. 2019a, 2019b). One may find that a very effective way of gaining the acceptance of Spanish business associates is simply by conforming to their ways of doing things and trying to understand them. This will help to gain respect for their culture, which in turn will make Spanish counterparts respect the other negotiation side. Another element of Spanish culture that impacts significantly on the course of business meetings is the concept of time. Spanish people usually do not hurry. Spanish counterparts can be late for a meeting or do not meet a deadline on time. When dealing with the Spanish, extreme patience and respect for their culture is required for successful negotiations. Visitors to Spain should be aware that there are two quite distinct business cultures. On the one hand, there are the bigger and newer, or reformed, industries that have received large amounts of foreign investment and have adopted modern, international management techniques. There are also more traditional small to medium enterprises and family businesses that account for the majority of Spain’s GDP. The leading banks, which still constitute the business elite, are situated somewhere in the middle. It is always important to follow-up after the completion of a business deal to express thanks and to reinforce

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the personal relationships that have been created. Any action items should be followed up quickly, to ensure that the partnership does not lose momentum and establish a pattern of credibility and operational expectations. As the relationship develops, it is acceptable to invite your Spanish counterpart out to more informal social gatherings, such as at a restaurant or dinner party. The Spanish enjoy meals as a social activity and do not necessarily expect to discuss business at the table. If your intention is to use a meal or drinks invitation as an opportunity to talk about business matters, it is best to include that information in the invitation and avoid any misunderstanding. It is general practice to avoid any discussion of financial matters over dinner and concentrate on establishing the personal relationship, which will help in later discussions. Lunch, rather than dinner, is usually the best time for a ‘business’ meal, beginning between 1 pm and 2 pm. Depending on the circumstances, this could either be a casual meal at a local café or an extended lunch over the course of several hours in a fine restaurant. Family, sports (especially football) and the Spanish culture can be ice breaking topics. Nevertheless, one should be aware of regional or local rivalries like football clubs (FC Barcelona and Real Madrid). Topics such as politics, the intention of regions like Catalonia to separate or criticism about the monarchy should not be mentioned at all.

18.6

Negotiations in the Netherlands

18.6.1 General Guidelines The Netherlands or Holland (officially: Kingdom of the Netherlands) is famous as a seafaring nation and for its able merchants. The country plays an important role in the past and present of the European Union (EU) and, as a neighbour, is one of Germany’s most important trading partners. Dutch are born merchants with a very long and successful tradition. Their economy is heavily dependent on foreign trade and is known for stable industrial relations, moderate inflation, and a decent trade surplus. As the central country in the EU, the Netherlands is one of the most important trading centres in Europe (Frank, 2010b). German business people like to come to a negotiation with a well-organized and structured agenda and want to work through the checklist point by point. By contrast, the Dutch prefer open and flexible business negotiations. Dutch people communicate very informally and like to call their negotiating partners by their first name. English should be preferred to the German and other languages (Frank, 2010b).

18.6.2 Successful and Unsuccessful Strategies Business negotiations usually take place in meeting rooms. However, it may be that the dinner changes the venue and a restaurant is visited. It is part of the Dutch customs that the bill is paid separately (Let us go Dutch). This means that everyone

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Netherlands Succesful Strategies

Failing Strategies

Openness and addressing by first name

Arrogance of negotiation partners

Using first name and building a relationship

Titles and insisting on hierarchies

Respect to all hierarchical levels

Formalities and static negotiations

Involvement of all negotiation participants

Speaking German

Flexibility in negotiation

Politics and history of colonies

Ice Breakers (Openers)

Ice Bergs (Barriers)

Success in ice speed skating

Defeat in football World Cup 1974 against Germanay and non participation in World Cup 2018

Sportsmen such as J. Cruyff, show stars such as R. Carell

Jokes about monarchy

Artists (Rembrandt) and Dutch innovations in history

Drugs, which are legal in the Netherlands

Fig. 18.6 Negotiation strategies in the Netherlands. Source Author

pays for himself. If you are invited home by a business partner, this is a very friendly gesture and should, if possible, be accepted. The first impression counts, and this should be rather conservative regarding your clothes. Extreme fashion and eye-catching appearances, such as those often found in the city centre of Amsterdam, generally do not meet with any approval in Dutch business life. A conservative, elegant clothing style, similar to England, is more recommended here. Structures and hierarchies are almost invisible in the Netherlands, so it is advisable to respectfully and politely involve all negotiating members of the other side (Fig. 18.6).

18.7

Negotiations in Denmark

18.7.1 General Guidelines Although Germany and Denmark are neighbouring countries, there are striking differences between Danes and Germans. The Germans know Denmark more as a holiday region. Denmark is known to many as a holiday destination and is admired worldwide for its unique architecture. The country is also economically successful

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and an important trading partner of Germany. The most important German export goods to Denmark are machinery, food and feed, cars and motor vehicle parts. The most important German imported goods from Denmark are food and feed, machinery, agricultural products and hunting. According to OECD statistical data collection, Denmark is one of the 20 most important countries in the world in terms of imports and exports to and from Germany (OECD, 2018). At first sight, doing business in Denmark seems easy, especially as people communicate readily in a relaxed manner and are direct and friendly. Danish business partners get straight to the point, are often relaxed, quite informal and have a good sense of humour. However caution is needed here, since contracting is not so easy. Throughout Scandinavia communication is rather emotionless, calm and with an “understatement”. This is only partially true for the Danes, as they are considered spirited in comparison to Swedes and Norwegians and are often referred to as “the Italians of the north”. Nevertheless, extroverted rhetoric and exaggeration in Denmark are usually inappropriate. The body language of the Danes expresses this as well. In particular, one should refrain from touching the opponent’s arm when first shaking hands. It is also advisable to maintain sufficient distance from the business partner. Most Danes speak English very well in spoken and written form and many also in German. Although the correspondence can be started in German, a reference to the possibility of continuing correspondence in English also facilitates communication in most cases. At the beginning of negotiations, the Danish business partner is generally rather reserved. They understate their own achievements, which is partly the English culture of understatement and attach importance to punctuality.

18.7.2 Successful and Unsuccessful Strategies In negotiations with German business partners Danes are rather reserved and emotionless. Danish love to understate, which is partly similar to the British culture of negotiation. Figure 18.3 summarizes key features in negotiations with Danish business partners. Danish business partners also value punctuality and a structured agenda in negotiations. The social principle is summed up in a brief formula: “Jante Lov,” which translates to “not believe that you are more than your neighbour.” In Denmark, for example, there is real equality between men and women. It is quite normal for male executives to take parental leave as well as female executives. A casual relationship, in which one addresses each other with “you” is usually established quickly between business partners The clothing style is also rather casual and during negotiations you can usually wear jeans and pullovers. Pure business lunches increasingly take place in company premises. Invitations to the private sphere of Danish business people are not uncommon in establishing a personal relationship and culminating in a successful negotiation. To avoid misunderstandings: the dinner is called “middag” in Danish. Misery and mockery of the monarchy and the popular queen are to be avoided and the Dane can no more than tolerate criticism of his “welfare system”, which works with high tax burdens.

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Denmark Succesful Strategies

Failing Strategies

Personal negotiation style (first name)

Distance and too formal negotiations

Acceptance of private invitations

Arrogance and disrespect

Unformal dress and unformal negotiations

Untruth and exaggerations

Equality between men and women

Competitive negotiation style

Lose and objective-oriented negotiation style

Too much focus on hierarchies

Ice Breakers (Openers)

Ice Bergs (Barriers)

Humour and friendliness

Jokes about Danish monarchy

Denish success in sports, e.g handball World Cup in 2019

Negative statements about expensive social system and taxes

Denmark as an open country with traditions

Criticism about high tax on alcohol

Fig. 18.7 Negotiation strategies in Denmark. Source Author

Otherwise, one can discuss with Danes about God and the world. The Danes negotiate directly and openly. They expect clear circumstances and representations, calculate very precisely and are well-prepared in negotiations. Whoever offers the best price and quality relationship, usually wins the order. It is important that offers and presentations are always clear (Fig. 18.7).

18.8

Negotiations in Switzerland

18.8.1 General Guidelines Swiss business people are usually very experienced in interacting with other cultures. The country’s population consists of a German Swiss majority, French Swiss and Italian Swiss minorities, a small minority of Romansch living in the Engadin valley, and others (Guo et al., 2015). The German, French, and Italian parts of the population all show influences from and share traits with their respective cultures. In spite of this mix, all of the Swiss share many cultural values and are very proud of their country. Although the culture is heterogeneous, the Swiss can be somewhat

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ethnocentric and its members treat outside influences with caution. This is especially true outside of international business centres such as Zurich or Geneva.

18.8.2 Successful and Unsuccessful Strategies Figure 18.8 illustrates successful and failing strategies for negotiations in Switzerland. Moreover, it outlines recommendations for ice breakers and ice bergs. The country’s official languages are German, French, Italian, and Romansch. However, pronunciation and vocabulary of the German variant are significantly different and may complicate the communication for someone who learned it as a foreign language. Most Swiss business people speak English well. Nevertheless, an interpreter may occasionally be useful to have. In order to avoid offending the other side, ask beforehand whether an interpreter should be present at a meeting. When communicating in English, speak in short, simple sentences and avoid using slang and jargon. Communication in the German part of the country is usually direct, though not as in-your-face as in Germany. German Swiss dislike vague statements and may openly share opinions and concerns with others. When communicating with them via letters or e-mail, do not waste time looking for messages “between the lines.“There may not be any. However, most Swiss businesspeople also know how to express themselves in a more indirect and diplomatic fashion. French and Italian Swiss usually prefer this style and are considerably higher-context than the German Swiss. The extent to which the Swiss use body language again varies. German Swiss use it sparingly and generally do not use a lot of non-verbal communication. They also make little physical contact. All of these are more extensive with French or Italian Swiss, although they may still appear more reserved than their French and Italian neighbours. The American OK sign, with thumb and index finger forming a circle, could be read as an obscene gesture in Switzerland. The thumbs-up gesture is positive as it signals approval. Eye contact should be frequent, almost to the point of staring, as this conveys sincerity and helps build trust. Names are usually given in the order of first name, family name. Use Mr./Ms. or Herr/Frau (German), Monsieur/Madame (French), or Signor/Signora (Italian), plus the family name. If a person has an academic title, you may use it instead, followed by the family name. To the Swiss, negotiating is usually a joint problem-solving process (Guo et al., 2015). While the buyer is in a superior position, both sides in a business deal own the responsibility to reach agreement. They may focus equally on near-term and long-term benefits. The primary negotiation style is cooperative, but people may be unwilling to agree with compromises unless it is their only option to keep the negotiation from getting stuck. Since the Swiss believe in the concept of win-win, they expect you to reciprocate their respect and trust. It is strongly advisable to avoid open confrontation and to remain calm, friendly, patient, and persistent. Should a dispute arise at any stage of a negotiation, you may be able to reach resolution by focusing on logical reasoning and facts while remaining open and constructive (Guo et al., 2015).

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Switzerland Succesful Strategies

Failing Strategies

Polite and collaborative negotiation style – Swiss people are consensus driven

Competitive negotiations

Understanding the Swiss political system

Insisting on hierarchies, ranks and titles

Hierarchies are flat

Impoliteness

Negotiations will be more detailed and time consuming

Pushing for quick results and superficial negotiations

Diversity of Switzerland

Unawareness of Swiss culture and history

Ice Breakers (Openers)

Ice Bergs (Barriers)

Ability to respond in German, French and Italian

Being unpunctual

Offering the first name (German: Duzen)

Direct negotiations

Swiss sports such as skiing

Calling Swiss German as neat

Fig. 18.8 Negotiation strategies in Switzerland. Source Author

18.9

Negotiations in Russia

18.9.1 General Guidelines Negotiations in Russia are usually conducted as part of a business dinner (Frank, 2004b). For a business dinner in Russia one is usually invited to a high level or luxury restaurant. An invitation at home is rare, but an extraordinary honour. In such cases a bouquet of flowers for the wife of the host is part of the welcome to the good practice. Alcohol abuse in earlier years is increasingly dwindling in Russia’s modern business life, but one should be wary of drinking habits during negotiations (Frank, 2004b). Older Russians love vodka and drink a lot of it. If one is not used to it, one should only keep up with toasts. In this very important ritual, the first toast always belongs to the host. After that, it is important to respond to the host in a separate toast and to highlight it or the overall situation positively. This creates a good climate for later negotiations. Russians like to conclude negotiations quickly. They are result-oriented and usually stick strictly to the agenda. Straight line negotiation does not mean that Russians are averse to small talk and private talk as it is important for them to establish a personal relationship with negotiating partners. One should be aware of

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taboo subjects such as crime, politics, religious topics and homosexuality. Most Russians are educated above average. Time needed for negotiations is “Factor 4”, which means that Russia typically needs four times more time to do the same business than the West.

18.9.2 Successful and Unsuccessful Strategies It helps to make a complex topic as transparent as possible, with use of powerpoint presentations as well as simple tools such as a flipchart or a blackboard. Define key words for negotiation in advance to avoid misunderstandings. In this context, a stringent agenda can also be useful “, says the sales manager of a German automotive supplier when summarizing his experience. In principle, the same rules apply in Russia as everywhere: “The simpler, the better” in the language and “the more vivid, the clearer” in the explanations. Tt makes sense to do a small favour to the Russian business partner without suspicion of wanting to bribe the other side,. This should be done out of sympathy, but not out of weakness or even out of an emergency situation. The talk should only be with the boss. In Russia there is a strong authority thinking, whether in politics or in the economy. This means that the managing director will not necessarily hand over his decision-making powers to subordinates and therefore, in the absence thereof, a decision cannot be taken. This is also the view of the project manager of a German automotive supplier about a planned cooperation in Russia: “You can only do business if you talk directly to the CEO”. And he is right. Executives who act as directors or general managers, in contrast to Germany, do not delegate decision-making powers to their subordinates and what the director general does not instruct, is not carried out. Nothing happens in his absence (Fig. 18.9).

18.10

Negotiations in the Ukraine

18.10.1 General Guidelines Previously a republic within the USSR, Ukraine became an independent nation in 1991. Its culture is somewhat pluralistic. The eastern part of the country and Kiev, the capital, host most of Ukraine’s Russian minority of about 17% of the total population and show strong influences of Russian language and culture. Numerous companies are run by Russians. In contrast, people in the western parts of the country may dislike Russian influences, strongly emphasizing Ukraine’s distinct identity. Owing to the country’s historic isolation, most business people and officials in Ukraine have little experience with other cultures except for neighbouring countries. There is a widespread lack of free market knowledge. It may be necessary to discuss and seek agreement over the definition of concepts such as fair play, good will, profit and loss, turnover, individual accountability, proprietary rights,

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Russia Succesful Strategies

Failing Strategies

Patience and endurance during negotiation process

Critique about Russia (social, political or ecosystem)

Openness, directness and balanced competitive Giving in too fast and not competing against and collaborative style of negotiations. Russians demands (time consuming) like openness and toughness in conflicts Awareness of and respect for hierarchies

Too competitive negotiations.

Russian calendar and holidays

Superficial negotiations

Relationship with decision maker and small gifts

Missing relationships with decision makers

Ice Breakers (Openers)

Ice Bergs (Barriers)

Russisan Literature, Arts etc.

Political conflicts , e.g. Crimea conflict

Vodka drinking and giving toasts

Communsim or absence of democratic strucutres in Russia

Russia and the patriotric war (World War II)

Critique about Russia, President Putin or the political system

Fig. 18.9 Negotiation strategies in Russia. Source Author

and so forth. Even when you do, many people may expect that things are done in the “Ukrainian way” (Katz, 2008).

18.10.2 Successful and Unsuccessful Strategies Figure 18.10 shows suitable and failing strategies in the Ukraine. Ukraine’s culture expects its members to have a sense of belonging to and conforming with their group (Katz, 2008). At the same time, it leaves a lot of room for individual preferences. Building lasting and trusting relationships is very important and can be vital for the success of your business interactions. Business relationships in Ukraine usually exist both at the individual and company level. Ukrainians may want to do business only with those they like and trust (Katz, 2008). However, if you introduce someone else from your company into an existing business relationship, that person may quickly be accepted as a valid business partner. The country’s official language, Ukrainian, is similar to but not identical with Russian. Communicating in Russian works well in eastern Ukraine and Kiev, but may not be appreciated in the West of the country (Katz, 2008). Not many business people speak English fluently.

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Ukraine Succesful Strategies

Failing Strategies

Choosing a local intermediary who can leverage existing relationships

Competitive negotiations

Negotiations in the country’s official language, Ukrainian, is similar to but not identical with Russian

Negotiations in Russian or English

Employing distributive and contingency bargaining style

Politics, religion or topics such as homosexuality

Negotiations can be very slow and protracted

Short-term oriented success

Hierarchichal and male dominated structures

Ignorance of structure and hierarchies

Ice Breakers (Openers)

Ice Bergs (Barriers)

Having dinner and drinks (Vodka) with negotiation partner

Topics such as poverty and crime

Business gifts

Crimea conflict and relationship with Russia

Ukrainian sports

Mentioning corruption

Fig. 18.10 Negotiation strategies in Ukraine. Source Author

In addition, Ukrainians may insist that they understand everything you said even when this is not really the case. It may therefore be necessary to have an interpreter. In Ukraine, the primary approach to negotiating is to employ distributive and contingency bargaining. The buyer is often in a strongly favourable position and may try to push the responsibility to reach agreement to the seller. Given the country’s relatively unstable political and economic situation, negotiators may focus mostly on the near-term benefits of the business deal. The primary negotiation style in the country is very competitive and people may become outright adversarial. Expect negotiations to be very slow and protracted. Especially during the early bargaining stages you may feel that you are making little progress; discussions often stay high level for quite some time until your counterparts eventually decide to get down to the details of the deal. Success requires extreme patience in this country. Deceptive techniques are frequent and Ukrainian negotiators may expect you to use them as well. This includes tactics such as telling lies and sending fake non-verbal messages, pretending to be disinterested in the whole deal or in single concessions, misrepresenting an item’s value, or making false demands and concessions. Ukrainians may play stupid or otherwise attempt to mislead you in order to obtain bargaining advantages (Katz, 2008).

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Negotiations in Latvia

18.11.1 General Guidelines Latvia is one of the three Baltic states together with Estonia and Lithuania at the eastern shore of the Baltic sea. The country has a population of 1.95 million people and is bordered by Russia, Belarus and Sweden. After a brief period of independence between the two World Wars, Latvia was annexed by the USSR in 1940. It re-established its independence in 1991 following the breakup of the Soviet Union. Although the last Russian troops left in 1994, the status of the Russian minority (some 26% of the population) remains of concern to Moscow. Latvia continues to revamp its economy for eventual integration into various Western European political and economic institutions. Latvia has been a member of the European Union since May 2004 and it joined the euro zone in 2014. Latvians consider the business meeting as a means to get to know your partner and to create and consolidate a relationship. They take meetings very seriously and spend time to prepare for them. Being in time, sticking to the agenda, raising important issues and coming with ideas and proposals will demonstrate that you are dedicated to the subject for discussion (CommisCeo Global, 2019).

18.11.2 Successful and Unsuccessful Strategies Latvians do not like long meetings (Ro, 2018). They are introvert and prefer to get to the point and finish as soon as possible. They like to speak their minds and will openly tell you if they find that you are unprepared or if they reject your proposal. Meetings often begin with a welcoming speech from the most senior Latvian at the meeting. If this occurs, the most senior person from your team should respond with a short speech. Latvian businesses are extremely hierarchical. Decisions are made at the top of the company and information flows downward like a funnel. It is important to make initial introductions as far up the hierarchy as possible. Unless you are the CEO, it may be impossible to meet with the actual decision maker for your first meeting. You and your company will have to be evaluated by lower level staff and, if you are deemed a good potential business partner, you will be invited to a subsequent meeting with the next highest level. It is common to continue meetings over lunch or dinner, although the conversation will tend to be socialrather than business-oriented. Use these occasions as a chance for you to get to know your Latvian colleagues and for them to get to know you as an individual. Latvian meetings are formal affairs. Latvians take business quite seriously and expect others to do the same. Appearing too relaxed or informal, even after a night’s drinking, could hurt your professional reputation. It generally takes several meetings to reach a decision. In most cases, decisions are still made at the top of the company, so unless you are meeting with the top echelon of the company, what you propose will have to make its way up the chain of command for approval.

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Since they do not want to appear foolish in public and are reserved, Latvians prefer not to speak up in meetings with people they do not know well. Therefore, if you are attempting to reach a consensus on a technical matter, you may wish to start with a lower echelon, having people of similar status speaking to each other. In such cases, it may be helpful to provide detailed written explanations, take your colleagues to lunch, and suggest reconvening in a few days. The meal may create a feeling of camaraderie and being able to review documents in private will allow your Latvian colleagues to discuss among themselves before meeting. Once you have convinced the technical staff of the benefits of your proposal, they will help you move up through the company’s chain of command. Latvians prefer to invite their guests to lunch or dinner at a restaurant, rather than to their homes but, after a few visits to Latvia when you have got to know each other better, a business relationship can develop into a friendship. At this point, an invitation to dinner at the home of the host might be forthcoming, so that they can introduce you to their family as a friend. You might also be invited to visit their “summer house” or to go fishing. Business negotiation is Latvia is tough. The host is not easily moved, once they have adopted a position. The main thing is to be specific and be ready to bluff, if necessary. Latvians do not express their emotions during negotiation, so it is best to adopt a similar approach and not show any sign of weakness. The time required for negotiation depends on the attitude of the partners and the nature of the sector. It usually takes longer to negotiate with the public sector than to do business with the private sector. It is important to be well-prepared and knowledgeable in the subject of your negotiations when presenting to your Latvian business partners. Like most people in former communist countries, Latvians resent being underrated and will react negatively to any arrogant or patronising behaviour. They expect to be treated as equal partners, are well educated and very hard working people. If you give them time and ask for their opinions, you may be surprised at their ideas and ability to innovate. Trust is very important to Latvians. Once they feel they can trust you, they may be prepared to introduce you to more Latvian companies who would work with you (Fig. 18.11). The following aspects are important in Latvian negotiations: • Latvians take a formal approach to business • Note however there are differences in style between older workers who maintain formality and the younger generation who willingly dispense with formality • Shake hands with everyone at a meeting, maintain steady eye contact while shaking hands • Shake hands at the beginning and end of meetings • Titles are important. If someone does not have a professional or academic title, use the honorific titles “Kungs” to address a man and “Kundze” to address a woman • People are generally introduced by both their first and surname • Wait until invited before moving to a first name basis • Business cards are exchanged after the initial introductions • To have one side of your card translated into Latvian is a nice touch.

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Latvia Succesful Strategies

Failing Strategies

Formal agenda and negotiations

Informal, unprepared or chaotic negotiations or business meetings

Understanding hierarchies and using intepreter who speaks Latvian

Avoidance of topics such as politics and national differences in Latvia

Business cards or documents should be in Latvian and English

Enthusiasm and loud negotiations

Not taking it personal if Latvians are direct or rude. "get-out-of-my-way" treatment

Unprofessionalism

Professional dress

Not being aware of hierarchies

Ice Breakers (Openers)

Ice Bergs (Barriers)

Mentioning Latvia as an important partner in Europe

Extroversion and loose comments in meetings

“hello” (labdien) and “thank you” (paldies) in Latvian

Russian occupation after World War II

Conservatism

Some topics should be avoided in meetings (e.g. homosexuality)

Fig. 18.11 Negotiation strategies in Latvia. Source Author

18.12

Negotiations in Armenia

18.12.1 General Guidelines Armenia became independent from the USSR in 1991. The country has about 3 million people. Based on the GDP Armenia is ranked 133rd in world (Wikipedia, 2019a, 2019b). After gaining independence Armenia “inherited” an absolutely unviable economy from the Soviet system and found itself in the heaviest situation of all countries of Transcaucasia. From the agrarian-industrial country with developed metal working, mechanical engineering, chemical, light, the foodprocessing industry Armenia turned into a small state which could not boast neither rich natural resources nor favourable geographical position or fertile soils. Without own oil and gas the landlocked Armenia was under economic blockade since because of the Nagorno-Karabakh conflict it was cut off from Azerbaijan and Turkey, and because of the Georgian-Abkhazian conflict—from Russia (the entire cargo transportation used to be carried out via the Abkhazian railway) (Smither, 2011). Armenia’s economy in 2017 experienced its highest growth rate in a decade. The “velvet revolution” and power transition do not appear to have disrupted the

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favourable macroeconomic trends that began in 2017, as GDP registered 8.3% growth year-on-year (y-o-y) in the first half of 2018 (Exportgov, 2017). Armenian culture tends to be high power distance, which is characterised by a strong hierarchal structures. Armenians are individualists and quite masculine (Smither, 2011). Armenians are hospitable. Foreigners should be aware that large meals and lengthy toasts might accompany many of their business and social contacts. It is also common to give gifts and to take visitors to historical sites. Armenians unacquainted with western business norms might view refusals of traditional Armenian hospitality, such as lengthy meals or all-day outings, as disrespectful. Corruption is a factor in the majority of state organizations in Armenia, including enforcement bodies such as the police, tax, and customs departments. Though foreigners are sometimes exempt from petty corruption, there may be cases where officials will delay a process, hinting that a good “tip”, or hiring a certain company to assist, may fix things immediately (Exportgov, 2017).

18.12.2 Successful and Unsuccessful Strategies The former Soviet Republic of Armenia has a few interesting details in its etiquette and negotiation practices as to how things are achieved in that country. For tourists and for those visiting the country on business it is always advisable to know these details before you arrive to save yourself or your hosts any possible embarrassment (Wikipedia, 2019a, 2019b). Because of the political issues, the business environment in Armenia is not very developed. People start to do business together based on connections, friendship and family—Armenians show great respect for foreigners and whenever possible they will help visitors to their country through hospitality and kindness. Many people will arrive into the city from the surrounding farms and sell the produce they grew themselves at the markets, it is not customary to haggle over the price as these people struggle to make a living. If you are on business in Armenia, business partners will invite you to their home or into a restaurant. From day one of the negotiations, you will be a part of lunches and dinners ordered and payed by the host. You should be aware that Armenian cuisine consists a lot of pork and beef. If you are a vegan or vegetarian, it is better to mention it. If you refuse to eat and drink your hosts will be deeply offended, so inform about any special requirements as soon as possible. At home, one will be offered coffee and tea and if you are having a lunch or dinner brandy, wine or vodka can be offered also. A very important tip is that if during the evening you are offered food you should never decline it and the same applies to drinks, even if you do not usually drink. In Armenia there is a toast before every drink. So it is better to participate this little ritual and, yes, if you don’t want to drink, then just don’t. Armenian people have a high level of hospitality, they are not pretending, it is just the part of their culture. If you are trying to build a successful relationship with the business partners, it is better to be more engaged. They will definitely appreciate it, knowing how different your cultures are.

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In Armenia people actually follow politics, they definitely will ask questions about the political situation in your country. The best practice is to keep up the conversation whilst at the same time trying not to ask questions about political situation in Armenia or historical facts. There are too many issues so the easiest way to avoid any misunderstanding is to avoid any questions (Fig. 18.12). Business conducted in Armenia is usually completed in a conservative manner, dark coloured suit and tie for the men and a high-quality business suit with a skirt of at least knee length for women, again in dark colours. Armenians place a high value on being well dressed and will not accept casual wear for business meetings. The Armenian host will introduce you first to the remainder of those at the meeting. One should arrive punctually for any scheduled meetings although it is customary for your host to keep you waiting. Interruptions during the meeting are the norm, so the negotiation partner should not be offended by this. Armenians are keen to know about sports, history, food or even the weather. Politics or religion are taboos (Smither, 2011). The business protocol is to allow the host to begin and end the conversation. Bargaining for a business deal is acceptable but one should be wary of saying “no”. The Armenian host can become sensitive to such directness and careful negotiation may be necessary. It is usual to give your host a small, wrapped gift. Office type gifts are considered to be the best choices such as pen sets or

Armenia Succesful Strategies

Failing Strategies

Patience and endurance during negotiation process. Armenians, however, like direct negotiations

Critique about Armenia (social, political or ecosystem)

Open but conservative negotiation style – an intermediary can help

Giving in too fast and not competing against demands (time consuming)

Awareness of and respect for hierarchies

Too competitive negotiations

Calendar and holidays

Superficial negotiations

Relationship with decision maker and small gifts

Missing relationships with decision makers

Ice Breakers (Openers)

Ice Bergs (Barriers)

Controlled emotional negotiation style

Topics such as homosexuality

Office type gifts such as pens

Turkey and genocide in Armenia

Dining together and acceptance of invitations

Personal gifts should avoided

Fig. 18.12 Negotiation strategies in Armenia. Source Author

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Poland Succesful Strategies

Failing Strategies

Patience and endurance during negotiation process

Critique about Poland and ist conservative governing party

Open but conservative negotiation style

Giving in too fast and not competing against demands (time consuming)

Awareness of and respect to hierarchies

Too competitive negotiations

Calendar and holidays

Superficial negotiations

Relationship with decision maker and small gifts

Missing relationships with decision makers

Ice Breakers (Openers)

Ice Bergs (Barriers)

Controlled emotional negotiation style

Topics like homosexuality

Polish victories in sports

Politics and religious topics

Dining together and acceptance of invitations

Personal gifts should be avoided

Fig. 18.13 Negotiation strategies in Poland. Source Author

paperweights. If you have branded materials of your company these are acceptable and good reminders of who you are to your hosts. You can also receive a bottle of an expensive brandy or wine as a welcome gift. This should not be taken as a sign of corruption just a way to see that the host is happy to see you. If you are given a gift you should not open it until you have departed from the meeting. Figure 18.13 outlines successful and failing strategies as well as icebreakers and icebergs for negotiations in Armenia.

18.13

Negotiations in Poland

18.13.1 General Guidelines Poland’s economy is the eighth largest economy in the EU and the largest among the newer members of the European Union. It is the 25th largest economy in the world. The imports and exports reached almost 400 billion euros in 2015 (Wikipedia, 2019b). Poland has a population of more than 38 million people (OECD, 2018). The country’s official language, Polish, is closely related to Czech. Many people also speak Russian. Younger business people often speak English at a

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conversational level. With others, including older people and most high-ranking managers, it can be useful to engage an interpreter. In order to avoid offending the other side, ask beforehand whether an interpreter should be present at a meeting. When communicating in English, speak in short, simple sentences and avoid using slang and jargon. It will help people with a limited command of English if you speak slowly, summarize key points, and pause frequently to allow for interpretation. People in this country usually speak softly (Katz, 2017).

18.13.2 Successful and Unsuccessful Strategies Although the pace of business is increasing, expect negotiations to be slow and protracted. Be patient, control your emotions, and accept that delays may occur. If your counterparts appear to be stalling the negotiation, assess carefully whether their slowing down the process indicates that they are evaluating alternatives or that they are not interested in doing business with you. More often than not, though, this behaviour indicates an attempt to create time pressure or ‘wear you down’ in order to obtain concessions. While businesspeople in the country may have learned the ground rules of international negotiations, their experience is usually limited. Most of them are not fond of bargaining and dislike haggling. However, Poles may be patient and persistent negotiators, and it can be difficult to obtain concessions from them. The bargaining stage of a negotiation can be extensive. Concessions never come easily, and prices rarely move by more than 20–30% between initial offers and final agreement (Katz, 2017). Poles often prefer a straightforward negotiation style. They use deceptive techniques, such as telling lies and sending fake non-verbal messages, pretending to be disinterested in the whole deal or in single concessions, misrepresenting an item’s value, or making false demands and concessions only infrequently (Katz, 2017). Companies are often very hierarchical, and people expect to work within clearly established lines of authority. Capturing and exchanging meeting summaries can be an effective way to verify understanding and commitments. Although Poles usually keep interim agreements, do not consider these final. Only a contract signed by both parties constitutes a binding agreement (Katz, 2017). Conservative attire is important when doing business here. Male business visitors should wear suits on most occasions. Punctuality is also valued in most social settings. It is best to be right on time for dinners, and to arrive at parties within five to 10 min of the agreed time.

18.14

Negotiations in Lithuania

18.14.1 General Guidelines Lithuania is situated in Northern Europe on the southern shore of the Baltic Sea and is the largest country of all three Baltic States the other two being Latvia and

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Estonia. Although Lithuania is the largest among Baltic States looking globally it is a small country. Lithuania has borders with Latvia, Belarus, Poland and Russia (Kaliningrad). The official language of Lithuania has been the Baltic language of Lithuania since, 1991 and this language is very closely to Latvian (CommisCeo Global, 2019). Lithuania is an independent and democratic republic and was the first Baltic country to declare its independence from the Soviet Union on 11th of March 1990. Later was followed by Estonia (30th March) and Latvia (4th May) to regain full independence from occupation (Taagepera, 1990). Since getting back independence, Lithuania has oriented its foreign policy to the West. It joined NATO (nato.int) and the European Union (Europa.eu) in 2004 to assure its security, economic stability, social sustainability, international integration in economic and political area and growth of stronger ties with other countries. This gain bought a lot of benefits and made it easier for foreign businesses to expand their activity into Lithuanian market. Doing international business in foreign country can be a big cultural challenge. How to meet and greet business person? What to say and what better to conceal? How to negotiate in different culture? What outfit is the best for business meeting? It is very important to understand etiquette, protocol, language and culture of partners with whom you would like to achieve a successful business.

18.14.2 Successful and Unsuccessful Strategies Doing successful business in Lithuania one needs to know business culture and etiquette. Business partners should know main points and essential areas in advance as interactions with Lithuanian business persons are more likely to succeed when you know something about their culture’s differences in values and expectations. The negotiation communication task requires knowledge about the company and industry, about the culture, about communication preferences. When doing business in Lithuania it is important to know norms, how to meet and greet, how to communicate, built relationships, behave in business meetings. Business relations with personal contact is very important in destination country. In Lithuania businessman will be self-assured in taking part in business with the company, if that company has been introduced to them by someone they know and trust. Many businessmen are close to each other and know each other very well, so good recommendations can open the way for potential business partners. When the connection with the possible Lithuanian partner has been made, you need to prepare for making visits to Lithuania for strengthening business relations. Personal relationships are very important and play a big role in final business decisions when doing business with Lithuanians. It is important to move business relations to personal friendship and after that, Lithuanians more readily discuss and negotiate about the business. Visits to Lithuania, phone calls, emails all help to build trust and consolidate the friendship. Communication in business, in negotiations should be mutual and interaction is crucial as both sides in negotiations looking for win-win outcome (Peleckis et al., 2012).

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Lithuanians prefer face-to-face meetings as in negotiations by the telephone that person whose arguments are much more significant usually wins, but this is invalid when meeting face-to-face, as final conclusions are made based on what we see, rather than just relying on your hearing (Peleckis et al., 2015). Business meeting planning is very important for Lithuanian businessmen. When discussing a the meeting, it is a good idea to give several dates, so that business partners in Lithuania can have an option to choose the best date. Also the meeting invitation should include topics which want to discuss, the purpose for the meeting, what people want to see in meeting and in negotiations. In order to that, decisions go faster and smoother, it is advisable to ask senior management, directors and CEO to take part in discussions. Meeting between companies should be undertaken by similar status people. It is wise for Lithuanian business partners to provide a list of persons, who will attend the meeting and their short biographical information, status/titles, in order to gain in advance a small view of the people who they will negotiate with. It is important to arrange the meeting date, time and place in advance, as Lithuanian businessmen likes to have time to prepare for the meeting and negotiation strategy. The best option is details to discuss and to arrange all meeting detail by email or other written form, but not by telephone or just in words. If it is not possible to attend the meeting one needs to inform in advance as Lithuanian partners like clear and flawless organization. In this case the meeting can be postponed or cancelled. If a meeting is to be held and potential partners are travelling to Lithuania informing the Lithuanian partner and confirming the meeting is recommended. Cancelation of the meeting at short notice is seen as non-professional and can create a poor image of foreign business partners. Punctuality is highly valued by Lithuanian businessmen, so it is better not to make them to wait. If foreign partners suspect, that they will be late for meeting, they should call and inform that due to some reasons they won’t arrive to meeting place on time, but preferably it is recommended to arrive on time or even a little earlier than the arranged meeting time. Once both sides meet each other for a business meeting in Lithuania it is common to shake hands in greeting with all participants at the beginning of the meeting and at the end before leaving. Lithuanians appreciate eye contact while shaking hands and smile through the process. On greeting partners should exchange their business cards. Lithuanian businessmen having cards written in Lithuanian and English. As a sign of respect it is nice to learn a few host country words. This gesture will strengthen the friendship. For example, in Lithuanian language “Labas rytas” means “Good morning”, “Laba diena” means “Good day”, “Ačiū” means “Thank you”, “Prašau” means “Please”, “Viso gero” means “Goodbye”. One other important feature for business meetings and negotiation is the use of language. Lithuanians are polyglots. They usually speak English, Russian, Polish, German, French as a second language. For Lithuanian businessmen it is usually not difficult to hold the meeting in a foreign language with the most common business language being English. It is important for both sides to decide before meeting what language the negotiations will be held in. If the situation arises that the host and foreign partners can’t to talk in a common language, it is necessary to inform the

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host partner whether you will come to the meeting with translator or whether the host company needs to arrange one. Lithuanian business partners will if necessary, usually find a professional interpreter with industry specific knowledge so that the negotiation process will go smoothly. In Lithuania, culture and workplace is very hierarchical. Businesses also maintain a strong hierarchical structure and mostly men are in higher business positions. In Lithuania the “chair” position of the business meeting usually belongs to the senior member. This person will rule the whole process of the meeting and foreign partners need to show respect to people of authority. This individual will open the meeting and introduce all members in order of the rank. Foreign partners should inform Lithuanian businessmen in advance of the rank, and status of individuals taking part in negotiations, so that both sides will have members of the same authority in the meeting room (Pipiriene & Maciukeviciene, 2011). Usually in business meetings and negotiations those participating are senior staff members with high status in the company. Junior members participate less in negotiations but may talk directly with associates and communicate with seniors if they wish to ask some questions. It is crucial for foreign partners, not to violate this level of etiquette. The status of participants of the meeting is indicated by their academic or honorific title together with the surname. For example, “Ponas” (Mr.), “Ponia” (Mrs.), “Panelė” (Ms.) or by academic title such as Professor or Doctor. It is not appropriate to address someone by their first name while doing business in Lithuania, until the host determines that it is proper to do so. For foreign partners is good practice to let Lithuanians know their titles and status. Business meetings are highly structured and follow a formal agenda. Seating positions of participants in the meeting room are set in advance usually with similar rank persons sitting next to each other. Lithuanians always expect, that both sides are well prepared for a meeting and relevant information is known by everyone. Presentations should be clear, brief, informative and should support one’s own position. After the presentation expect questions and discussion. It is important to avoid any interruptions while someone is speaking, because this behaviour is seen as a rude behaviour. Lithuanians usually speak direct, easy, calm, openly and expect the same from business partners. Yelling, showing high temper, emotions and using a lot of gestures are not appropriate in negotiations. Lithuanians will not hurry in making a deal and will time as long as necessary, even if this is not favourable to foreign business partners. Lithuanians need to think and see if the deal represents their own best interest before approving (Thompson, 2015). Lithuanian businessmen pay great attention to appropriate dress code for negotiations. In formal meetings Lithuanian men wear suit and women wear formal dress or suit. Usually women use formal hairstyles and use light day makeup. The dress code sometimes can change, depending in what business industry is involved in the negotiation but it is important to dress tidy, clean and properly. Foreign business partners should pay attention to dress code too and look decent and professional in meetings. For Lithuanians it is usual to give a small gift when business meetings or negotiations finish. Usually gifts are not very expensive, but it is a nice act for

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future business partners. As a gift Lithuanians partners can give souvenirs related with Lithuania, such as souvenirs from amber, box of chocolate made in Lithuania, photo book about Lithuania or it can be souvenirs with company logo. So, it is good to have a small gift for Lithuanian business partners to give in return. After the official end of business meeting Lithuanians usually invite participants for dinner in a restaurant. It is best not to decline this invitation as dinner time is a great opportunity to develop relationships with negotiation partners and with the company itself in an unofficial environment. At the dinner it is common to summarize the main points of the meeting and to raise a glass of alcohol drink with future business partners. Conversation combines not only talking about business, but also more neutral topics. Foreign business partners can ask about Lithuania, its traditions, about basketball, and about the personal hobbies and interests of Lithuanians. However, it is necessary to avoid themes about personal life, politics and religion. Also, criticism about Lithuania is not appropriate. Lithuanians try to show respect to other cultures, are very friendly and will be interested in the partner’s country and. Dinner at the restaurant helps to create a friendly atmosphere and strengthens the partnership. Lithuanians as hosts will always pay for dinner and will make a pleasant gesture for partners (Fig. 18.14).

Lithuania Succesful Strategies

Failing Strategies

Confirmation of every meeting in advance – time and place

Not well prepared for business meeting

Punctuality is important and it is as a sign of quality and respect

Non-punctually is seen as disrespect of business partners and non professionalism

Business place is very hierarchical and meeting is highly structured and formal

Yelling is not acceptable in business meetings or negotiations, as it will create a negative image

Face-to-face meeting leads to deeper trust and better business success

Interrupting is not tolerable in official context

Handshake is the only one acceptable touch in business meetings

Not appropriate to be informal in business meetings and negotiations

Ice Breakers (Openers)

Ice Bergs (Barriers)

Knowing some Lithuanian historical facts, traditions, customs

Avoid criticism of Lithuania, its culture or its people

Native language as sign of respect: „Good day“ (Laba diena), „Thank you“ (Aēiƻ), „Please“ (Prašau)

Russian occupation after World War II and forced massive deportation to Siberia

Sports, especially basketball, as basketball is called second religion of Lithuania

Political, religion, personal topics should be avoided in business conversations

Fig. 18.14 Negotiation strategies in Lithuania. Source Author

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References CommisCeo Global (2019). Latvia. Facts about Latvia. Retrieved January 28, 2019. https://www. commisceo-global.com/resources/country-guides/latvia-guide. Exportgov. (2017). Armenia. Armenia Country Commercial Guide. Retrieved January 28, 2019. https://www.export.gov/article?id=Armenia-business-customs. Frank, S. (2004a). Verhandeln in Frankreich. La Belle et la Bete. Published December 4, 2004. In Manager-Magazin. Accessed January 19, 2019. http://www.manager-magazin.de/unternehmen/ karriere/a-331957.html. Frank, S. (2004b). Verhandeln in Russland. Vielen Dank. Wir essen auch mit Messer und Gabel. In Manager-Magazin. Accessed June 6, 2018. http://www.manager-magazin.de/unternehmen/ karriere/a-320837.html. Frank, S. (2010a). Weltspitze. Wie man in Italien Erfolg haben kann. In Handelsblatt. Accessed June 11, 2018. http://www.handelsblatt.com/unternehmen/management/weltspitze-woraufman-in-holland-achten-muss/3656566.html. Frank, S. (2010b). Weltspitze. Worauf man in Holland achten muss. In Handelsblatt. Accessed June 11, 2018. https://www.handelsblatt.com/unternehmen/management/weltspitze-wie-man-in-italienerfolg-haben-kann-seite-2/3639484-2.html?ticket=ST-5338244-mV6BvUb4nKCdtfMvyojz-ap2. Guo, G., et al. (2015). Negotiating in global markets. Australia, Denmark, Ireland, Singapore, Sweden, Switzerland. Negotiating in Top Global Markets A Manual for Establishing International Business Connections. Cross-Cultural Connections. Retrieved January 28, 2019. http://monicakunzdesign.com/images/portfolio/print/Manual.pdf. Helmold, M., Dathe, T., & Hummel, F. (2019a). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer. Helmold, M., Dathe, T., & Hummel, F. (2019b). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler. Katz, L. (2008). The negotiator’s reference guide to 50 countries around the world. Retrieved January 28, 2019. Charleston: Booksurge Publishing. Katz, L. (2017). The Negotiator’s reference guide to 50 countries around the world. Retrieved January 28, 2019. Charleston: Booksurge Publishing. Kness-Bastaroli, Th., & Dahm, K. H. (2006). Handelsblatt. In Italien auf die Bella Figura achten. Retrieved June 22, 2018. https://www.handelsblatt.com/unternehmen/mittelstand/ verhandlungspraxis-in-italien-auf-die-bella-figura-achten/2717452.html. Marks, M. (2006). Verhandlungen in Großbritannien. Bei der „teatime“ ist das Geschäft tabu. In Handelsblatt Online. Retrieved January 19, 2019. https://www.handelsblatt.com/unternehmen/ mittelstand/verhandlungen-in-grossbritannien-bei-der-teatime-ist-das-geschaeft-tabu-seite-6/ 2698386-6.html. Meyering, G. (2018). Business-Knigge für Großbritannien. 9 Verhandlungstipps für Einkäufer. In Technik und Einkauf. https://www.technik-einkauf.de/ratgeber/business-knigge-grossbritannienim-mutterland-des-understatement-9-verhandlungstipps-einkaeufer/. Mulligan, M. (2008). Business etiquette in Spain: Land of the long—And filling—Meetings. In Financial Times. Retrieved January 27, 2019. https://www.ft.com/content/b06413da-ac6211dd-bf71-000077b07658. OECD. (2018). Die OECD in Zahlen und Fakten. Die wichtigsten Volkswirtschaften nach dem Bruttoinlandsprodukt. Retrieved June 17, 2018. http://www.oecd.org/berlin/statistiken/. Peleckis, K., Peleckienė, V., & Mažeikienė, A. (2012). Verslo derybos ir dalykiniai pokalbiai: komunikacija derėjimosi procese (Business negotiations and business meetings: Communication in bargaining process) (Vol. 13, No. 2, pp. 176–185). Verslas: Teorija ir Praktika (Business: Theory and Practice). Peleckis, K., Plecekienė, V., & Peleckis, K. (2015). Nonverbal communication in business negotiations and business meetings. International Letters of Social and Humanistic Sciences, 62, 62–72.

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Pipirienė, V., & Maciukevičienė, L. (2011). Komunikacija ir derybos – esminė tarptautinio verslo plėtotės prielaida (Communication and negotiations as an essential prerequisite for the development of international business) (Vol. 12, No. 3, pp. 296–302). Verslas: Teorija ir Praktika (Business: Theory and Practice). Ro, C. (2018). Latvia. Europe’s nation of introverts. Retrieved January 28, 2019. http://www.bbc. com/travel/story/20180611-latvia-europes-nation-of-introverts. Schulz, U. (2017). Verhandeln und Auseinandersetzen Die deutsche und die schwedische Art auf einen Nenner zu kommen. Accessed March 20, 2018. http://www.schwedenkammer.de/ fileadmin/user_upload/3_Business_interkulturell/SA2_12_verhandeln_und_auseinandersetzen. pdf. Smither, J. (2011). Negotiation practices and etiquette in Armenia. Retrieved. https://europetravel. knoji.com/negotiation-practices-and-etiquette-in-armenia/. Taagepera, R., (1990). The Baltic states. Electoral Studies, 9(4), 303–311 Thompson, L. L. (2015). The mind and heart of the negotiator (6th ed.). Wikipedia. (2019a). Armenia. Retrieved January 28, 2019. https://en.wikipedia.org/wiki/Armenia Wikipedia. (2019b). Polen. Retrieved February 9, 2019. https://de.wikipedia.org/wiki/Wirtschaft_ Polens.

Negotiations in the Americas

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Marc Helmold, Nisha Becker, Juanira Gonzalez and Maria del Pillar Herrera

19.1

Negotiations in the USA

19.1.1 General Guidelines The USA is the largest economy in the world, followed by China, Japan and Germany (OECD, 2018). American bargaining often seems loose in tone, but hard in the very essence (Helmold, Dathe, & Hummel, 2019). Americans conduct negotiations differently than Europeans or Asians, often very directly and extremely competitively, but with a lot of humour (Frank, 2016). Americans see negotiations as a game in which bluff, tactical pressure and tricks are standard and allowed. Companies dealing with Americans have to know these tactics so that they can respond in a suitable way (Helmold et al., 2019). At the same time, American negotiators usually believe that a final negotiation and an agreement should be the result of the negotiation meeting (making the deal). This two-way style of negotiations often puts negotiators from other regions like Europe, Asia or Arab in a disadvantageous position, as they often do not know or appreciate the various communication techniques in American negotiations (Frank, 2016). Figure 19.1 displays elements which are advantageous (successful strategies) and disadvantageous (unsuccessful strategies) in negotiations with Americans (Frank, 2016). M. Helmold (&)
N. Becker
J. Gonzalez
M. del Pillar Herrera Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] N. Becker e-mail: [email protected] J. Gonzalez e-mail: [email protected] M. del Pillar Herrera e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_19

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U.S.A. Succesful Strategies

Failing Strategies

Introduction and clear explanation of roles and responsibilities

Forgetting explanation of roles and responsibilities

Open and direct communication. Enthusiasm and positive reflection when describing proposals or positions

Sarcasim and irony in negotiations

Clarity in showing milestones and budget objectives

Statements about sex, gender or background

Personal approach. Using the first name

Sports topics in other countries

Interests and no open refusal to any proposals

Stressing of young history of the U.S.A.

Ice Breakers (Openers)

Ice Bergs (Barriers)

Knowledge about American sports like American football, baseball, basketball or ice hockey

Missing respect towards minorities

Enthusiam about the „American Way of Life“

Defeat in Vietnam war

Respect towards diversity and variety

Sexistic jokes

Fig. 19.1 Negotiation strategies in the USA. Source Author

Americans like punctuality for appointments like many other countries. Punctuality is not just an ornament, but a sign of professionalism. They prefer (even though negotiations are competitive) a friendly but direct tone. Even though the dress code is not as formal as in Great Britain or Japan, it is important to ensure the correctness in clothes. The commandment “time is money” is important, so that business communication must be direct- and objective-oriented (Frank, 2016). American managers focus on fast, short-term and easy-to-enforce successes. If you want to sell well, you cannot overshadow the usually tight time of your American counterpart. After a brief presentation of the names and responsibilities, one should harmonize the negotiation structure with a few key points with the other side of the negotiation. The rule here is that not more than 10 points should be discussed.

19.1.2 Successful and Unsuccessful Strategies Frank recommends a tactic of “short and simple negotiation” (keep it short and simple), which is goal-oriented and based on facts. Effectiveness is the prime objective of negotiations in the USA, so that despite disagreements, the negotiation structure or agenda must be completed within the given time corridor. Deviation

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from the agenda is regarded as unprofessional and disadvantageous (unsuccessful strategy). Politics, religion, skin colour or minorities are absolute taboo topics (Helmold et al., 2019). Political correctness in the business world is much more pronounced than in Germany or other countries. One should be very careful with jokes. The language of the Americans is direct to demanding, but never rude. Foreign managers should definitely adopt this way, as it is considered a sign of strength (Frank, 2016). Also, international managers who studied in England should not emphasize the English accent too much, as Americans do not like the comparison with Brits and Americans. In concrete business negotiations, American managers place a high value on efficiency: precise schedules and agendas have a high priority here. For the international negotiator, Americans often seem loud, direct and overenthusiastic (Brooks, 2016). This enthusiasm should be shared and underpinned by attributes in language like “wonderful, great or perfect”. Enthusiasm, perhaps exaggerated by German or other country´s standards, does not harm the outcome of the own negotiation. On the contrary, it shows the extent to which the other negotiators are involved. Doing business always has to be fun too. Americans don’t just love neutral humour. They also love the ability to laugh at themselves. (Frank, 2016). Negotiations strategies in the USA should therefore, after a brief presentation, take place openly and directly on the basis of a structured agenda. Transparent and brief presentation of points and benefits of milestones or budget targets should be justified by facts and figures. Negotiation opponents should be addressed by the first name and enthusiasm helps the negotiation side to create a good and harmonious atmosphere. Taboo subjects are gender, nationality or skin colour, and one should be careful with physical touches or jokes. Political correctness is also important. Sports topics like talking about American football, basketball, baseball or ice hockey are very popular and are very good ice breakers before or after negotiations. Many national sports leagues are called world series. It is recommended to have knowledge about local teams of the negotiation opponents. Americans have, on the other hand, usually very limited knowledge about international sports events, e.g. the football world cup (Americans call football soccer). Political topics can be raised as part of global economies, but certain topics should be avoided. Even though Americans talk about global economics and politics, it is advisable not to mention topics like the Vietnam War defeat.

19.2

Negotiations in the Canada

19.2.1 General Guidelines The stereotype of the “polite Canadian” may be cliché, but it does have some basis in reality. Canada is a nation with fairly strong conventions of social etiquettes, properly obeying and understanding these rules which are an important way to “fit in” to broader Canadian society.

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In general, Canadians are mostly friendly, unpretentious people who value honesty, sensitivity, empathy and humility in their relationships with friends and strangers, as well as respect for the privacy and individualism of others. While obviously many Canadians fail at honouring these lofty principles, such values nevertheless provide the essence of “good manners” in mainstream Canadian society (Katz 2017a, 2017b). Canada is usually considered a mostly egalitarian country in the tradition of other Western democracies, meaning respect for hierarchy is not considered a particularly important value in daily life. Most Canadians are strong individualists of one form or another and will dislike changing their behaviour or personality too much to please others. Such aggressive conformity may actually be scorned by others as phony or weak. Aside from those who make outspoken political opinions a large part of their personality, politics is generally considered a mostly private matter in Canada. Politics in Canada is quite polarized between right and left, consisting of political parties (and voters) who believe very different things about basic government principles and programs such as raising taxes, spending taxes, foreign policy (especially Israel), criminal justice, gun ownership, poverty, welfare, immigration, drug legalization, euthanasia, homosexuality, transgenderism, and prostitution, among others. Sexually explicit conversation can actually be illegal in Canada in some contexts, making it the most sensitive social taboo of all. Canadian businesspeople are conservative in manner, speech and dress. Business customs are similar to those in the USA or the UK, but etiquette is very important. Excessive body contact, gestures in greeting or loud conversation generally are frowned upon. Canada is officially bilingual in French and English.

19.2.2 Successful and Unsuccessful Strategies In contrast to the USA, the negotiation style in Canada is more formal. Etiquette is crucial for a successful negotiation outcome. Figure 19.2 displays successful and failing strategies. Negotiations are usually carried out in two languages, English and French. In the province of Québec, there are very stringent French language requirements for all commercial endeavours (Katz, 2017a, 2017b). For Canadians, it is considered especially rude to speak in a foreign language other than English or French in the presence of other people who do not understand what is being said. Popular ice-breaking topics include winter sports like ice hockey. Generally speaking, Canadians tend to be self-confident and open to discuss general topics. Topics on conflicts between French and English Canada and comparisons with the USA should be strongly avoided. The dress code in Canada is a conservative, well-dressed appearance, which is very important. Canadians are very weather aware and dress accordingly. It is good to follow the weather to avoid amused glances. For meetings, punctuality is a priority. For an evening social event, it is acceptable to arrive 15 min late, but not later than 30 min. Business cards should have both French and English translations. Business lunches are usually short with lighter types of food and no alcohol. If one is invited out for drinks by your

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Canada Succesful Strategies

Failing Strategies

Agenda, punctuality and clarity

Unorganised and unstructured negotiations

Etiquettes and formalities are very important

Personalised negotiations

English and French ability in Negotiations. Contracts should contain both languages

Sexistic or political jokes

Compliance with formal dress code

Mentioning conflict between English and French speaking parts of Canada

Facts based and detailed negotiations

Purely English negotiations

Ice Breakers (Openers)

Ice Bergs (Barriers)

Winter sports like ice hockey

Comparison with the U.S.A.

Speaking French and English

Sexism and political jokes

Enthusiam about Canada´s nature

Not respecting privacy

Fig. 19.2 Negotiation strategies in Canada. Source Author

Canadian counterpart, it is wise to attend unless you have a very good reason for not being able to come. Refusals may be considered as rude or insulting; plus it is a good way of developing a more personal relationship.

19.3

Negotiations in Mexico

19.3.1 General Guidelines Though the country’s culture is quite homogeneous overall, business cultures differ somewhat between the North and the South. People in the North tend to be more business-focused and often have a high sense of urgency. This may be more relaxed in Southern Mexico, where the stereotypical mañana attitude (English: tomorrow) of conducting business at a leisurely pace can still be found. Though this is gradually changing, machismo attitudes remain strong in this country. Women may be considered inferior, and they still have a hard time attaining positions of similar income and authority as men (Katz 2017a, 2017b). Mexicans are not famous for their punctuality, but it is better to always be on time and be aware that even when the meeting has a set schedule, it might be lengthened. When writing dates on

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documents, try to use words or the format DD/MM/YY to avoid confusions. Politeness, good manners and respect go a long way, as well as the use of titles, address people using “licenciado”, “ingeniero”, or when the title is unknown, use “Mr./Mrs.” followed by their last name (Osorio, 2011).

19.3.2 Successful and Unsuccessful Strategies While the country’s official language is Spanish, it is notably different from the Spanish spoken in Spain. Many business people speak English too. Mexicans usually prefer and are more familiar with American English. Since it is different from British English to the point where misunderstandings may happen easily, familiarize yourself with the differences upfront if necessary. In any case, being able to speak Spanish is a clear advantage. With high-ranking managers, it may otherwise be useful to engage an interpreter. While discussions may get very lively, Mexicans generally dislike loud and boisterous behaviours. They may show their emotions openly. However, it is crucial that people never lose the temper or show impatience in negotiations. Successful strategies contain also the making small gifts and a relaxed attitude towards time and negotiation outcomes. Mexicans dislike competitive negotiations; therefore, it is recommended to be flexible and open during the negotiation process (Katz 2017a, 2017b). Mexicans do business with whom they like at a personal level, and sometimes they close a deal based on the person they are doing the negotiation with more than the company they represent, so developing a solid relationship is an important factor to succeed. As mentioned before, Mexicans are polite and for them giving a forceful “no” seems rude or impolite, so they might use sentences like “I will think about it”, “let me study it”, “we will see” instead (De Leon, 2003). What you wear matters, they have this saying “como te ven, te tartan” meaning that you will be treated according to how you present yourself. It also recommended to go for a formal business attire in order to be on the safe side (Doing Business in Mexico: Understanding Mexican Business Culture & Etiquette, N.D.) (Fig. 19.3).

19.4

Negotiations in Brazil

19.4.1 General Guidelines Brazil (Portuguese: República Federativa do Brasil) is the largest country and economy in South America. Brazil has more than 208 million inhabitants. Brazil is the eighth-largest economy in the world (OECD, 2018). In addition to Haiti, it is the only country in South America where Portuguese is spoken. Brazil, according to Hall’s understanding of culture, is a polychromatic society like Italy or Spain (Hall, 1966). Brazilians are therefore used to doing several things at the same time, but this can mean in negotiations that each individual process takes longer and is

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Mexico Succesful Strategies

Failing Strategies

Choosing a local intermediary who can leverage Starting negotiations without intermediary and existing relationships to make the initial contact relationship Using intepreter with Spanish and American English

English negotiations

Understanding and following the hierarchical structures

Competitive negotiations

Flexible negotiation style, agenda can be changed or modified

Sticking on positions

Close proximity. Being close in negotiations without touching

Too far distance of negotiators

Ice Breakers (Openers)

Ice Bergs (Barriers)

Personal relationships

Being too formal

Exchange of gifts

Wars and defeats against the U.S.A.

Relaxed attitude towards time, the Mexican way and food

Conflicts between Mexico and native people

Fig. 19.3 Negotiation strategies in Mexico. Source Author

counteracted by a systematic agenda. Negotiators in negotiations in Brazil therefore have to be prepared for their partners to jump into the issues and also take things that are completely off the agenda and then just as quickly drop them again (Anson, 2013). German business partners, as a society of a monochronic culture based on systematics, punctuality and structure, often see the Brazilian approach as unstructured with a lack of systematics (Anson, 2013). Similarly, many managers see this cultural difference as a low ability for stringent action or as a low interest in the subject matter. From a Brazilian point of view, however, this has some advantages, since you cannot focus on one point and a controversy, the negotiating climate becomes clouded. Brazilian business partners are much more relationship-oriented than subject-oriented (Anson, 2013). Little happens on the basis of a “right”, a “duty” or a written agreement. A personal “commitment”, on the other hand, motivates one to give one’s best for the other. This in turn may, depending on the situation, mean that you have to comply with formal obligations or even act against (Helmold et al., 2019). Individuals who find it difficult to enter into a personal relationship are considered outsiders in Brazilian society (Anson, 2013). This is especially true if they give them the sense of a small shoot (in Portuguese: Jeitinho), with the help of which relaxed situations can be relaxed and resolved (Anson, 2013).

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The proverbial Brazilian enthusiasm in negotiations easily leads to situations in which the ambition exceeds what is actually possible. Especially when a positive and emotional mood is created, Brazilian partners like to give relationship-oriented commitments more than objective-oriented. Deadlines or promises can be understood here as an intention by which the Brazilian negotiating partner understands the urgency (Anson, 2013). On the one hand, it takes some experience to determine when a statement is predominantly relationship-oriented and when it is literally meant. On the other hand, Germans often lack the behavioural repertoire to deal with predominantly relationship-oriented statements (Anson, 2013). The following aspects must be taken into account during negotiations in Brazil: Respect for the decision-maker: strong hierarchical structures Emotional bargaining is part of the cultural understanding of Brazilians Relationship building and patience Understanding of delays on the other side Involve translators (Portuguese) Accept invitations to restaurants and clubs.

19.4.2 Successful and Unsuccessful Strategies Brazilian companies are clearly structured hierarchically. The middle management level is rare. Start negotiations high as possible in the hierarchy as. Ultimate decision-making power lies usually only with the managing director (Anson, 2013). Contrary to German bargaining, haggling over prices, numbers or other aspects is part of daily life in Brazil (Anson, 2013). Therefore, it is important to set ones bid higher, so as not to offend the counterpart from Brazil (Anson, 2013). Patience and perseverance are central in this context, as most of the time no concrete statements are made in the negotiations (Anson, 2013). A “yes” in Brazil means a maximum of “maybe” or “probably”. A “no” does not exist and is considered rude (Anson, 2013). Urgent behaviour is perceived as aggressive (Katz, 2011). Firstly, a good relationship should be established, and it is also advisable to have a friendly attitude and to be interested in the person their attitudes, values and needs (Anson, 2013). The salutation is usually “Senhor” (in men) and “Dona” (in women) plus first name, and then one is also quickly at the “Duzen” arrived (Anson, 2013) In view of the turbulent traffic situations in large cities such as Rio and Sao Paulo, but also because Brazilians simply have a different way of dealing with time, delays of up to one hour are not uncommon and are tolerated. Many business people speak English, yet it is better to negotiate in Portuguese. Technical documents and operating manuals should generally be translated into Portuguese; Brazilians are very hospitable; invitations usually take place in clubs or restaurants; joint meals are used to maintain relationships; shops are discussed after coffee (Anson, 2013)—Brazilians are sports enthusiasts, so topics such as football, Pele, or volleyball are ideal icebreakers. The carnival enjoys a high reputation in the world, especially as subjects

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for invitations in restaurants or clubs (Anson, 2013). Unfortunately, Brazil also has negative sides such as crime, slums and poverty. These issues should not be discussed with business partners; after all, Brazil is the eighth-largest global economy (OECD, 2018). Even painful defeats can tip the mood, especially the defeat by Germany at the World Cup in Brazil in 2014 (1:7 defeat). Figure 19.4 shows successful and failing strategies for success in negotiations in Brazil.

19.5

Negotiations in Peru

19.5.1 General Guidelines Peru is classified as upper middle income by the World Bank and is the 39th largest in the world by total GDP. The Peruvian economy, which is the seventh-largest in Latin America, has experienced a structural change in the past three decades. Currently, the services sector is the main contributor to the country’s GDP, with nearly 60 per cent of GDP stemming from this sector. Telecommunications and financial services are the main branches of the services sector; together they account for nearly 40 per cent of GDP. However, the country still has a long way to go

Brazil Succesful Strategies

Failing Strategies

Professional and smart business dress style

Pushing for quick results

Set up of relationships by understanding the hierarchies

Complaints when negotiation partners are unpunctual or changing venue or agenda

Understaninf of frequent breaks and delays

Non-compliance with hierarchies

Involving Portuguese speaking middleman

Unawareness of processes and decision-making

Endurance and patience

Negotiations in English

Ice Breakers (Openers)

Ice Bergs (Barriers)

Success in Football and idols like Pele

7:1 defeat in football at home world cup against Germany

Acceptance of invitation to restaurant, bar or club

Poverty and slums

Brazil´s carneval

Discrimination of native Brazilian indians

Fig. 19.4 Negotiation strategies in Brazil. Source Author

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towards modernization and competitiveness of its service sectors. Industry, which represents around 35 per cent of GDP, has undergone a process of modernization, which has translated into increased employment in the country’s primary industrial areas (Focused Economics, 2019). Business people and officials in Peru usually have only limited exposure to other cultures except for neighbouring countries (Katz, 2017b). The main language in Peru is Spanish; however, especially in the main cities, many people also speak English. In business situations, the main language will be Spanish, unless both parts decide to negotiate in English. According to Ogliastri and Salcedo (2008), Peru characterized as having a very strong culture and ethnic diversity. The country hosts two important cultures; the first one, of Hispanic European origin and the second one of Andean origin, with the first one usually dominating the power groups. Besides these differences, the negotiation culture in Peru is very similar to that found in most Latin-American countries. Since Peru is a country where socioeconomic levels, social classes, levels of education and therefore lifestyles are very different among each person, these should be considered during a negotiation to analyse the other part’s reactions. Since people’s lifestyles and interpersonal skills may be related to each other, this is a factor that should be taken into account when negotiating with Peruvians (Paredes, 2011). Another important aspect that should be taken into account when negotiating in Peru is that it is a centralized country where hierarchy is well defined and where the negotiations can start with people in technical positions, but the final decision is mostly taken by the person with the highest position in the project or the company. Lima, the capital city, concentrates 80% of the commerce, and this is why most negotiations take place in this city with people from high positions sometimes accompanied by technicians or specialists. Also, in Peruvian culture the expression of feelings during negotiation, both those of warmth and affection as well as those of anger or hostility, is accepted as normal and a sign of personal authenticity. During negotiations, emotions can be used to convince or impact the counterpart (Ogliastri & Salcedo, 2008). Peruvians are very kind and because of this they like to give presents and receive them. Tt is very common for Peruvians to arrive even 30 min after the invitation time for social meetings such as lunch, dinners or parties (CCL, 2015). Paredes (2011) concluded that in Peru the greater the responsibility involved in the occupational level, the greater the negotiating ability for managing conflicts within the organization of a person will be. Additionally, it is said that there is a difference in the level of commitment during the negotiation depending on the position level, where executives have a higher commitment, since most of the time they are the decision-makers. During negotiations, Peruvians are patient and sensitive and do not tend to say directly no. In Peru, women and men are treated in the same way in business situations. Peruvians have their own lexicon (CCL, 2015).

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19.5.2 Successful and Unsuccessful Strategies Figure 19.5 outlines suitable and unsuccessful negotiation strategies in Peru. Ogliastri and Salcedo (2008) affirm that in the Peruvian culture people see negotiations as a situation where mostly one part must win and the other must lose. Because of this, Peruvians will use their cunning and possible tricks “to mislead their enemy”, thus showing their power or may seek to give them the impression that they are flexible or that they may accept the other part’s deal. Another characteristic of the Peruvian culture is haggling of prices or money amounts. Normally begin by offering very high prices, so that during the negotiation they can go down, this bargaining to an amount that they would consider fair. This behaviour can sometimes generate anger in some people who are negotiating for the first time in the country. Peruvians tend to be informed about their counterpart before even meeting for the first time. In Peru, people prefer to have amicable relationships during negotiations; cordiality and courtesy are expressed, because they want to resolve conflicts in a friendly atmosphere. At the beginning of the negotiations, they act reserved, flexible, cautious and observe carefully their counterpart, and they do not prepare a speech or agenda, because the focus is to “make a new friend”.

Peru Succesful Strategies

Failing Strategies

Negotiations should take place in Spanish or Quecha (local language)

Following a strict agenda, urging for results

Intermediary and middleman is important to create relationship

Negotiations in English only

Being open to create a friend relationship with the counterpart.

Not accepting presents or invitations

Being open to bargain

Trying to control the time

Being flexible with time

No respecting hierarchy

Ice Breakers (Openers)

Ice Bergs (Barriers)

Peru´s beauty, football, family, places to visit in Peru, and local food

Gift knives or odd numbered things: Be careful with your gifts! Knives are interpreted as cutting the relationship and odd numbered things are ill-luck

Eye contact and space. Kisses on the cheek and speaking very closely are normal

Politics, religion, terrorists, and a person's ancestry

Small gifts, acceptance of invitations

Saying that Chile is a better country or that the Pisco (Peruvian liquor) is not from Peru.

Fig. 19.5 Negotiation strategies in Peru. Source Author

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Peruvians are very flexible with the time, whereby not being punctual is accepted, but punctuality is appreciated. They are also flexible about the duration of negotiations. They may talk about different topics at the same time, instead of following an agenda or going point by point, sometimes using this passage of time as a resource on their favour (Ogliastri & Salcedo, 2008). Hofstede (1983) in his article about the Latin-American cultures indicates that Peru has a tolerant culture of uncertainty and high risk. It is common during negotiations that Peruvians may risk giving into their counterpart and even committing to something they may not be able to deliver, showing themselves hard at the beginning of the negotiations and flexible at the end. From abroad, it is recommended to make negotiation appointments in Peru, at least 15 days in advance, and it is best to have an agent or representative to coordinate and follow up the case, if possible. Meetings can start with breakfast in hotels from 8:00 a.m. to 9:30 a.m. Also, appointments are typically from 9:30 a.m. to 12:00 p.m., and it is common to end with a lunch in which various topics are discussed. It is also very well accepted to make appointments in the afternoon, from 3:30 p.m. to 6:00 p.m. In Peru, usually lunch hours are from 1:00 p.m. to 3:00 pm. and dinners from 9:30 p.m. to 11:00 p.m. (CCL, 2015). During a negotiation, Peruvians can show selflessness or dominance and use a higher or lower tone of voice, depending on the situation. Another tactic is to appear serene and calm, which sometimes despairs their negotiating counterparts. The degree of commitment they adopt is related to the degree of friendship that has been established with the counterpart. However, Peruvians sometimes tend to talk too much about the same point, and as a consequence, the main ideas might not be precise or clear. This can make the counterpart angry creating a possible conflict. The Peruvian negotiation culture often oscillates between agreements of words and written agreements. In general, when people fear not being able to comply, they resort to word commitments. Conversely, they look for meticulous agreements when they are not sure of their counterpart. Peru has a culture of great collaboration and smoothness, with negotiators who seek to reach an agreement most of the time (Ogliastri & Salcedo, 2008). Profile of the average Peruvian businessman is as follows according to (CCL, 2015): Accepts new experiences and knowledge that may favour and improve their performance at work The higher the degree of instruction of the Peruvian executive, the greater the capacity to accept and join changes Is individualistic, but everyday works more as a team Has respect for the hierarchy within the company Worries about the total quality Is culturally open, thus achieving an easy interrelation, and has no religious antagonism, facilitating communication and friend relationships Does not rush to give answers Sees the short term more than the long term Is collaborative and helpful.

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Some important elements of restaurant etiquette can be described as follows: One should not start eating until the person with the highest job position or the host says that everybody can start eating “Pueden servirse” and “Buen provecho” (have a nice meal) The person who did the invitation must pay for the meal In a business lunch or dinner, do not order something too expensive One should not rest your elbows on the table One should not put left hand in the lap when eating. In fact both hands must be visible at all times One should indicate having finished eating by laying your knife and fork parallel over your dish The most common toast is just saying “salud” (good health). In Peru, as in most parts of South America before any kind of negotiation, a friendly connection should be first established. That is why in the case of the Peruvian culture, negotiations mostly do not follow a specific protocol, unless is a negotiation between a company (local or international) and the government. In this scenario, rules and protocols must be taken into account. However, negotiating with the Peruvian government tends to take much more time and makes negotiators mad because of the lack of updated information and is often full of norms and other legal procedures (Ogliastri & Salcedo, 2008). When Peruvian government negotiates with international companies, three types of regulations are established; the first regulations include laws and norms about property limits, employment restrictions, local content restrictions, level of tariffs, import tariffs, import licences, technology transfers, innovation investments and other licence limitations; the second regulation is added to the first regulation when a company gets “investment incentives”, such as no tax holidays and/or tax exoneration; and the third regulation is when a person with a very high position or a tittle in the public sector gives an international company some kind of tax benefits (Schwalb, 1993). According to Schwalb (1993), the power level in a negotiation between an international company and the Peruvian government will vary depending on the number of local competitors in the industry the international company may have. If the international company is the only one or the one which has the higher financial resources and the knowledge in the industry or of a specific project, their negotiation power with the government will be higher than the local companies that may offer the same product or service. The Peruvian government will recognize a higher international investment as beneficial for the country growth. When negotiating with public companies or public organizations, Peruvian law establishes that international companies must have an agent or a local representative. It is very common for negotiations to take a long time, especially with complex business or agreements (CIAI, 2018). Schwalb (1993) has shown that the higher percentage of exports from an international company, the higher their negotiation power with the government and the lower their level of regulation. On the other hand, as financial

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benefits may be higher for the international company, the government regulation will also be higher. Summarizing, there are some key recommendations. Firstly, it is necessary to meet the Peruvian negotiators personally and create a friendly relationship, before negotiating. Before negotiations with Peruvians, you should be prepared and have the points and objectives clear; this may impress the counterpart in the case of an informal and talkative person. There is a high dependence on bargaining as a negotiating principle, a certain facility for friendly interpersonal relations and emotional expressions, as well as high uncertainty about future conditions, which makes compliance with what has been agreed risky and induces little preparation for negotiations. People should not stereotype or prejudge any Peruvian, since there is variety especially depending on their city of origin or mainly their background. In Peru, the characteristics of a culture do not predict any particular individual.

References Anson, B. (2013). How to negotiate with a Brazilian. The Brazil Business. October 10, 2013. Retrieved June 22, 2018. http://thebrazilbusiness.com/article/how-to-negotiate-with-a-brazilian. Cámara de Comercio de Lima [CCL]. (2015). Guía de Negocios e Inversión en el Perú 2014/2015 [Investment Business Guide in Peru 2014/2015]. Investment guide from the Commerce Chamber of Lima and EY. Retrieved from: https://www.camaralima.org.pe/vipcam1/Sistemas/ guia-camara-de-comercio/guia-camara-de-comercio.pdf. Cámara Industrial Argentina de la Indumentaria [CIAI]. (2018). Etiquetas Culturales y de Negocios: Perú. [Cultural and Business Labels: Peru]. Argentine Industrial Chamber of Clothing. Retrieved from: http://www.ciaindumentaria.com.ar/plataforma/etiquetas-culturalesy-de-negocios-peru/. De Leon, J. M. (2003). Perfil cultural y comportamiento en los negocios en Mexico. Retrieved January 2, 2019. http://www.iberomex.com/articulos/comportamientoennegocios.htm. Focused Economics. (2019). Economic data about Peru. https://www.focus-economics.com/ countries/peru. Frank, S. (2016). Wie Sie in den USA Erfolg haben. Business Traveller. Retrieved June 9, 2018. https://sergey-frank.com/images/artikel-download/Business%20Traveller_USA.pdf. Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler. Hofstede, G. (1983). The cultural relativity of organizational practices and theories. Journal of International Business Studies. Katz, L. (2011). The negotiator’s reference guide to 50 countries around the world. Booksurge Publishing. Retrieved January 28, 2019. https://instruction2.mtsac.edu/rjagodka/BUSM_51_ Project/Negotiating/Brazil.pdf. Katz, L. (2017a). The negotiator’s reference guide to 50 countries around the world. Booksurge Publishing. Retrieved January 28, 2019. http://www.leadershipcrossroads.com/mat/cou/Mexico.pdf. Katz, L. (2017b). The negotiator’s reference guide to 50 countries around the world. Booksurge Publishing. Retrieved January 28, 2019. http://www.leadershipcrossroads.com/mat/cou/Peru.pdf. OECD. (2018). Die OECD in Zahlen und Fakten. Die wichtigsten Volkswirtschaften nach dem Bruttoinlandsprodukt. Retrieved June 17, 2018. http://www.oecd.org/berlin/statistiken/. Ogliastri, E., & Salcedo, G. (2008). La Cultura Negociadora en el Perú un estudio exploratorio [The Negotiating Culture in Peru an exploratory study]. Journal of Economics, Finance and Administrative Science, 13. Universidad Esan.

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Osorio, M. (2011). Guía de etiqueta para hacer negocios en México. Retrieved February 13, 2019. https://mba.americaeconomia.com/articulos/reportajes/guia-de-tiqueta-para-hacer-negocios-enmexico. Paredes, M. (2011). Las habilidades interpersonales para la negociación según el estilo de vida y el nivel ocupacional en empresas productores del Perú [Interpersonal skills for negotiation according to lifestyle and occupational level in Peruvian manufacturing companies]. Revista IIPSI. Facultad de Psicología. Universidad Nacional Mayor de San Marcos, 14, 109–136. Schwalb, M. (1993). Relaciones de negociación entre empresas multinacionales y los gobiernos anfitriones: El caso peruano [Negotiating relations between multinational companies and host governments: The Peruvian case]. Centro de Investigación de la Universidad del Pacífico.

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20.1

Negotiations in Japan

20.1.1 General Rules Business dealings in Japan are much stricter and more formal than in Germany. Western business travellers are not expected to behave like Japanese, but there are some basic rules to follow. Some Western behaviours, such as direct criticism, may offend the Japanese counterpart. By observing some important rules, such as handing over business cards, one should show respect for the Japanese hosts, while at the same time being a bit shy, especially when Japanese business people have little experience with foreigners. It is not about memorizing rules and applying them schematically. Rather, foreign people should respond to the counterpart in a polite manner. Generally speaking: be friendly, polite and reserved and watch with open eyes and ears. All these factors are important, more so than in Germany. If your Japanese business partners have been abroad for a long time or spent a lot of time with foreign guests, you will find that the conversation is less complicated than you would have thought. Japan is very attentive to a well-groomed appearance. Especially in business life, suit and tie for the man or costume or trouser suit for the woman are indispensable. Only in summer, can you leave the tie in the suitcase for “(Super) Cool Biz” time. Also pay attention to well-kept shoes and impeccable socks. Lacing boots can often be a hindrance. In many companies, shoes are M. Helmold (&)
T. Dathe
A. Chan Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] T. Dathe e-mail: [email protected] A. Chan e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_20

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removed from the entrance and replaced with slippers at the entrance. If you are dining in a traditional restaurant, you will need to remove your shoes before entering, including when entering traditional hotels (ryokan), or doctors’ surgeries. Even in front of changing rooms in the department store, you often have to take off your shoes and slip into slippers, and in the toilet you’ll find special slippers that must be exchanged for the normal slippers at the toilet entrance in a room designed with tatami mats. In addition to punctual arrival, one should give the host a small guest gift such as gifts from Germany, which have a high reputation in Japan. Traditionally, one bows in Japan as a form of welcome. Rest your hands on your thighs and with your upper body form a bodyline. For women, the hands are placed over each other in front of the body. There are different levels of bowing: the greater the politeness you want to show towards your opponent, the deeper you bow. For foreigners, the rules are less strict, it is sufficient if you indicate a bow with a clear nod. You will also see Japanese greeting hands, especially when dealing with foreigners, but this is not the rule. If you are unsure, wait for the behaviour of your counterpart. Choosing the right salutation is a science of its own in Japan. The standard salutation is a -san attached to the last name. One level more polite, and used by default in emails, is the suffix -sama. Note, however: if you talk to outsiders about your own family or your own company, no courtesies are used for those in your own group. The following points must be taken into account in the greeting: punctuality— idea—exchange of business cards—no physical proximity—native speaker as a translator—small party favour. Japanese business practices and negotiations are better understood by considering the Bushido codex (Japanese: 武士道, meaning: the way of the warrior) (Winkels & Schlütermann, 2013). Bushido is a code of conduct and ethics that is still used in business life (Winkels & Schlütermann, 2013). The roots of Bushido come from the Japanese Middle Ages. Principles come from Shinto, Buddhism and Confucianism (Winkels & Schlütermann, 2013). An essential part of the Bushido was the seven most important rules of a samurai: 1. 2. 3. 4. 5. 6. 7.

Gi: The right decision from the peace of mind Yu: Courage, bravery and heroism Jin: The compassion, the love and the goodwill Rei: The courtesy and the right behaviour Makoto: The perfect sincerity Meiyo: Glory and honour Chugi: Conscientiousness, loyalty.

Many companies have therefore integrated the seven principles into their own corporate culture. Panasonic has anchored seven principles in its ethical principles that corporate employees must adhere to worldwide (Panasonic, 2018). In addition

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to the code of ethics in business, consensus orientation through mutual rapprochement is one of the key competences for negotiations in Japan. Often viewed as inefficient by Europeans, German executives are in the grip of negotiations (Winkels & Schlütermann, 2013).

20.1.2 Successful and Failing Strategies There are some successful strategies and pitfalls or failing strategies with Japanese negotiating partners. A punctual start is the key for any successful negotiation. Japanese business partners will mostly travel the night before to have a punctual business negotiation. The introduction phase including the introduction, exchanging of business cards and the explanation of responsibility is a ritual that can take up to 30 min. Important in this context are business cards that show bilingual title, function and name. In some cases, it is advisable to have an interpreter from this stage onwards. Figure 20.1 shows the successful and failing strategies for negotiating with Japanese business partners. Although Japanese business partners prefer structured and systematic negotiations, business partners should be given time and breaks to understand suggestions and arguments and discuss them in the local language within their group. Despite their responsibilities, Japanese decisions are

Japan Succesful Strategies

Failing Strategies

Japanese Greeting (Japanese: Goshoukai or aisatsu) and introduction

Competitive negotiations and face loss

Understanding of time, to give negotiator time to make decision

Purely English negotiations

Translation or execution of negotiations in Japanese

Expectation of decisions in negotiation or pushing for a decision such as YES or NO

Time allowance to understand negotíation proposals and visualisation of difficult elements

Questions about family and private issues

Subsequent dinner and bar or Karaoke bar

Invitation to home or to private environment

Ice Breakers (Openers)

Ice Bergs (Barriers)

Technology leadership

China´s rising role in Asia

Respect of the Japanese culture

Japan‘s role in World War II

Events, Japanese dinner and Karaoke

Overpacing in decision making

Fig. 20.1 Negotiation strategies in Japan. Source Author

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always consensual and usually require lengthy and extensive consultations. Decisions should not be expected out of these discussions. Other successful strategies include the mention of Japanese technology leadership in the world and the respect for Millennium-old Japanese culture and art. However, physical proximity and loss of face should be avoided. Japanese work for a long time and, if necessary, on weekends, but family issues and personal relationships are not present in negotiations.

20.2

Negotiations in the PR China

20.2.1 General Guidelines The concepts 关系 Guānxì and 面子 Miànzi are central for an understanding of the Chinese business culture. 面子 Miànzi means literally “the face” and in a broader sense, the status. When a Chinese person asks others to give him 面子 Miànzi, what he means by that is not to turn him down so that he can uphold his dignity or status in the society. Losing face is agonizing and or forgiveness takes long to come if you caused someone to lose his 面子 Miànzi. The higher the social status someone has, the more 面子 Miànzi he can ask for. 面子 Miànzi comes from different sources, e.g. from formal power, friendship or special qualifications.

20.2.2 Successful and Unsuccessful Strategies In negotiation practice, it is expected that the most important personalities will be granted the best possible conditions as shown in Fig. 20.2. The Chinese negotiator usually requires another kind of “volume rebate” for the contract package shortly before the conclusion—as recognition of the 面子 Miànzi of the negotiation partners, so that it is advisable to distribute the “candies” accordingly over the course of the discussion. Furthermore, it is important to find out the status of the individuals in the negotiation team and distribute particular respect towards the person with the highest status (who is most likely to be the decision-maker). Disagreement could be understood as an act of missing respect; therefore, any signs of rejection should be avoided, and the common benefits should be repeatedly emphasized. Due to such circumstances, it is important to always try to understand the real meaning behind the spoken words. The word 关系 Guānxì means network or knowing the right people in the right places. Those who have a great 面子 Miànzi in a useful network can often achieve things that are impossible to others. In some critical situations, good relations with the authorities may produce miracles. In order to expand the networks efficiently, it is a common practice to mix contacts from different areas of life in China. Those who provide their influential 关系 Guānxì to others share their important resources.

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PR China Succesful Strategies

Failing Strategies

Get to know each other through middlemen and Refusal of business dinners and private invitations previous meetings and dinners Say positive words about the opposite side after Too strong focus on technical issues greetings and introduction, e.g. through skillful use of metaphors Negotiation in Chinese with the translation Negotiation in English support of the local staff Allow time for the translation while visualing the entire situation

Expectation of final decisions during the negotiation

Identification of the roles and responsibilities of Directly contradicting the decision makers, which the negotiation partner inevitably leads to losing face

Ice Breakers (Openers)

Ice Bergs (Barriers)

China's rising role in the global economy, respect for historical achievements

Property infringements and pirated copies in China,

Exchange of culinary experiences, especially with Chinese cuisine

Mentioning human rights violations or mentioning air pollution and other environmental issues

Showing pictures of the family and telling funny stories in private life

Rushing to press for the decision

Fig. 20.2 Negotiation strategies in the PR China. Source Author

Such an act of true friendship deserves recognition. Business lunches are often held in China to initiate new 关系 Guānxì. Overall, the culinary culture plays an important role in Chinese culture. The famous saying 民以食为天 mín yĭ shí wéi tiān, meaning “food is heaven for the people”, makes clear the importance of culinary delights for the population. There are numerous popular television programs featuring culinary specialties in China, e.g. the television series 舌尖 上 的 中国 shé jiān shàng de Zhōngguó (“China on the tip of the tongue”). When it comes to business dinners, the primary purpose of course goes far beyond culinary delights. A lavish culinary array brings the host 面子 Miànzi, improves the development of 关系 Guānxì and thus the business potential. Details of the event, e.g. the location, the number and quality of the food, the number of participants, the seating arrangement, etc. are often indications for the status of the business partner to the host. Chinese restaurants are very loud to most Europeans. For the Chinese, eating together is a happy event, and this joy should be expressed aloud. Challenging each other of drinking alcoholic beverages at banquets is a common practice and with increasing alcohol consumption, the emotional bonds are believed to grow. Refusal of alcoholic drinks is allowed and can be excused with health reasons or driving, etc. However, the latest anti-corruption campaign in China has drastically reduced alcohol consumption on official or business occasions.

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Although many contracts are closed at the dining table, one does not have to fall with the door into the house. It is better to open the conversations with “small talks”. The outcome of the business may depend on the mood of the conversation. Therefore, the topics need to be carefully chosen. It is advisable to refrain from addressing issues that put the country in an unfavourable light, especially if you are not sufficiently informed about the background. Critical comments on the country or the culture by an outsider may easily cause irritation or even hostile reactions from the Chinese. The Chinese are very proud of their long history and appreciate it when a foreigner shows interest. Knowledge of the geography, the history or even only the skills to handle the chopsticks help to leave a positive impression. There are also a number of other “safe” topics, e.g. culinary experience, funny stories from family life or other Asia-related topics like Fengshui, Kungfu, etc. which will contribute to the positive mood at the event. Due to the cultural differences, negotiating with Chinese business partners may turn into a real challenge of patience for Europeans. The information seems imprecise or ambiguous and the communication style of the business partners is perceived as “beating around the bush”. To achieve success in the negotiation, however, there is no way around a lot of patience and a cool head.

20.3

Negotiations in India

20.3.1 General Guidelines Indians are strongly guided by their respective religions and their shared values. Respect for elders and hierarchy are core values that permeate all aspects of Indian society. Indians also place huge importance on family and community. And as in many Asian cultures, the concept of saving face, avoiding blame or any type of shameful situation influences the decision-making processes and affects business dealings in India. Indian business people tend to be generalists rather than specialists. This makes business partners appear to be sovereign, flexible and optimistic. The hierarchical nature of the Indian caste society demands that the superior be regarded as the highest authority. The supervisor makes all decisions and takes full responsibility. Employees usually refuse to take responsibility, and they do what they are told. In the Indian caste system, there are the following boxes: 1. 2. 3. 4.

Brahmins: Priests and teachers Kshatriyas: Warrior Vaishyas: Traders, artisans, farmers and Shudras: Servant, agricultural worker.

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There are also aspects that are untypical in our Western culture and therefore may seem very strange. Indians, even in business, are very relational. People spend a lot of time in conversations and getting to know each other. Talking about friends and family is common practice and an important factor in having a good business relationship. Indians see contracts as flexible and will try to renegotiate existing contracts and agreements periodically.

20.3.2 Successful and Unsuccessful Strategies Negotiations in India are personal, so an attempt should be made in the early run to establish a personal and good relationship with the negotiating partner. Final decisions are always made in accordance with family, social group or company affiliation. The ability to establish networks is often considered more important than competence or experience. In addition, it is not recommended to close agreements too quickly or too hastily make concessions, as Indian businessmen like to haggle. Patience is important and planning should be pursued in the long term, since the Indian conception of time is often not consistent with the Western society concept of time (Indian Stretch Time). The Indian word “Kal” means “one day away” and stands for a non-ending process. Many Indians are devout Hindu and visit a temple daily. Negotiating partners are often asked to visit their own temple, which one should do enthusiastically and inquisitively. It may also make sense to inform oneself in Germany about typical sports such as cricket in order to impress their opponents. Issues such as education can be a good door opener. Meanwhile, many families send their children to university in European countries. Therefore, certificates from German educational institutions are considered very important. Politics or addressing poverty can be icebergs and therefore should not be mentioned. India has had a long conflict with its neighbour Pakistan, and this fact should not be discussed. In addition to politics, sex or even current attacks by tourists are absolute taboo subjects in a very conservative society. Indians tend to value their personal space and are generally not prone to making much physical contact. However, it is not uncommon for Indian men to engage in friendly back-patting. This is a sign of friendship and a positive signal for your working relationship. Indians are generally expressive and use body language to convey messages that are not always verbal. Showing the soles of your feet or your shoes, or pointing your feet towards anyone, is considered highly disrespectful and insulting in India, as is stepping on or over papers, books, religious offerings on the ground—and especially people. It is rude to touch anyone’s head. Pointing with fingers is also disrespectful. If one must point, it is recommended to use the thumb, with the rest of your fingers curled into a fist, palm facing upward (Fig. 20.3).

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India Succesful Strategies

Failing Strategies

Involvement of a known mediator

Urging decisions and impatience

Personal contact and relationship to negotiation partner

Lack of respect for superiors or disapproval of superiors or hierarchical structure

Clear negotiations according to hierarchical structure (caste system in India)

Missing mediator and middleman

Patience and endurance. Negotiations can take weeks and months

Competitive negotiation style

Explanation of the interim results. Negotiations appear bureaucratic

Missing information on opposite side

Ice Breakers (Openers)

Ice Bergs (Barriers)

Haggling with negotiating partners (emotional but friendly haggling)

Mentioning conflict with Pakistan

Achievements of the Indian economy as an industrial nation

Criticism about India and situation of poverty

Personal gifts and appraisal of Mahatma Ghandi, sports such as cricket

Wearing leather (devout Hindus worship cows as sacred)

Fig. 20.3 Negotiation strategies in India. Source Author

20.4

Negotiations in Indonesia

20.4.1 General Guidelines Indonesia belongs to the top 20 rankings of the largest economies in the world. It is a country located off the coast of mainland Southeast Asia in the Indian and Pacific Oceans. It is an archipelago that lies across the Equator and spans a distance equivalent to one-eighth of Earth’s circumference. Its islands can be grouped into the Greater Sunda Islands of Sumatra (Sumatera), Java (Jawa), the southern extent of Borneo (Kalimantan) and Celebes (Sulawesi); the Lesser Sunda Islands (Nusa Tenggara) of Bali and a chain of islands that runs eastward through Timor; and the Moluccas (Maluku) between Celebes and the island of New Guinea and the western extent of New Guinea (generally known as Papua). The capital, Jakarta, is located near the north-western coast of Java. In the early twenty-first century, Indonesia was the most populous country in Southeast Asia and the fourth most populous in the world. Indonesia was formerly known as the Dutch East Indies (or Netherlands East Indies). Although Indonesia did not become the country’s official name until the time of independence, the name was used as early as 1884 by a German geographer; it is thought to derive from the Greek indos, meaning “India”, and nesos,

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Table 20.1 Ranking of ethnic groups of Indonesian population

1 2 3 4 5 6 7 8 9 10 Source Author

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Javanese

40.2%

Sundanese Batak Madurese Betawi Minangkabau Buginese Malay Bantenese Banjarese

15.5% 3.65 3.0% 2.9% 2.7% 2.7% 2.3% 2.0% 1.7%

meaning “island”. After a period of occupation by the Japanese (1942–1945) during the Second World War, Indonesia declared its independence from the Netherlands in 1945. Its struggle for independence, however, continued until 1949, when the Dutch officially recognized Indonesian sovereignty. Indonesia has a diverse ethnic population who live on more than 13 islands with an estimated population of 237.6 million people spread across the islands. The largest group in Indonesia are the Javanese with around 40%. Although a small minority in this pluralistic country, many Indonesian business people are Chinese and may have strong family connections back to China (Table 20.1). The majority of Indonesians are Muslims with 88%, followed by 7% Protestant Christians, 3% Catholic Christians, 2% Hindu, 1% Buddhist and Confucianist. Showing any signs of disrespect for the religion could have negative consequences in negotiations. This does not only apply to Indonesia, but also to other countries as outlined by several authors. Business people and government officials in Indonesia usually have little experience with negotiation partners from other countries except for neighbouring countries. When negotiating business in Indonesia, business people might execute negotiations in “their special way”. Pace might be regarded as slow and interactions might be very time consuming. Relationships are necessary for negotiations in Indonesia and must be built up persistently. Relationships are based on familiarity, respect and personal trust, which can take a long time to establish. Business relationships in this country exist between people, not necessarily between companies.

20.4.2 Successful and Unsuccessful Strategies The official language is Bahasa Indonesia, a modified form of Malay. Younger business people may speak English fluently. In contrast, more senior and older people, including executives and managers, do not speak English very well. In all negotiations, it is therefore suitable to have an interpreter. As in other Asian countries, the audience will listen carefully and appear a little shy. When negotiating,

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Indonesia Succesful Strategies

Failing Strategies

Using a middleman with senior status

Competitive negotiations and face loss

Understanding hierarchies and respect to senior Using incorrect hand always for gestures or greeting people (left hand is unclean) Building and keeping good relationships

Improper dress code

Indirectness and using metaphors

Not being aware of etiquette and religious rituals

Relaxed and timely negotiations

Pushing for results without relationship

Ice Breakers (Openers)

Ice Bergs (Barriers)

Beauty of Indonesia

Greetings with left hand (toilet hand) or pointing at somebody

Respect for diversity

Japanese occupation

Etiquette and small gifts

History as a Dutch colony

Fig. 20.4 Negotiation strategies in Indonesia. Source Author

people in Indonesia often take a holistic approach and raise issues in a flexible and non-structured way. Katz highlights that the negotiators from strongly monochronic cultures, such as Germany, the UK or the USA, will find this negotiation way irritating and confusing (Fig. 20.4).

20.5

Negotiations in South Korea

20.5.1 General Guidelines South Korea is the fourth largest economy in Asia (following China, Japan and India) and the 11th largest in the world (OECD, 2018). Koreans hold firm to Confucian traditions, which emphasize respect for education, authorities and those who are older. Although modern Koreans may not adhere to Confucian principles as rigidly, these principles continue to underpin many customs and business practices. Considering the Confucian influence, Koreans intuitively establish hierarchical relationships based upon factors such as age, position, status and educational background. Questions about age, marital status or educational background are quite

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common in Asian cultures. Given the importance and value that Confucianism places on relationships, beyond their family, many Koreans are loyal to others associated with their own company, university, school, hometown or place of worship. Koreans are comfortable doing business with people to whom they feel personally connected and have a relationship. Keeping this in mind, local middlemen and intermediaries on senior levels can be very helpful in establishing business connections with South Korean companies.

20.5.2 Successful and Unsuccessful Strategies Figure 20.5 shows successful and unsuccessful strategies for negotiations in South Korea. The strategies for negotiations in Korea are similar to Chinese or Japanese strategies. In contrast to Japanese or Chinese negotiations, Korean business partners appear very often unprepared, opinion changing and chaotic in negotiations. South Korea’s culture is generally group-oriented. Asserting individual preferences may be seen as less important than having a sense of belonging to a group, conforming to its norms and maintaining harmony among its members. However, Koreans are more individualistic than their Asian neighbours (Kubek & Bielle, 2018). Building

South Korea Succesful Strategies

Failing Strategies

Get to know each other through middlemen and Refusal of business dinners and private invitations previous meetings and dinners Say positive words about the opposite side after Too strong focus on technical issues greetings and introduction, e.g. through skillful use of metaphors Negotiation in Korean with the translation Negotiation in English, time limitations support of the local staff Allow time for the translation while visualing the entire situation

Expectation of final decisions during the negotiation

Chaotic negotiation style and changing of minds Directly contradicting the decision makers, which inevitably leads to losing face

Ice Breakers (Openers)

Ice Bergs (Barriers)

Respect of the Korean culture and gifts to host or family members

Korea history with Japan

Events, Korean dinner and Karaoke

Overpacing in decision making

Family and groups are important: Show familiy pictures and telling funny stories in private life

Rushing to press for the decision

Fig. 20.5 Negotiation strategies in South Korea. Source Author

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lasting and trusting personal relationships is very important in business negotiations. While members of other cultures may expect this to happen gradually over the course of a business engagement, many Koreans expect to establish strong bonds prior to closing any deals. Consequently, it is recommended to proceed with serious business discussions only after having established a good relationship with the negotiation partners. This may require significant time in restaurants, meetings and other places. A middleman will help in this aspect. Relationships are based on familiarity, respect and personal trust. Modesty is also very important. Business relationships in this country exist between individuals or groups of people, not between companies. In spite of the group orientation of the culture and in contrast to Japan or China, it is possible to have personal discussions with Korean business partners. In negotiations, it is important to give time for translations. In Korean culture, “saving face” is very essential. Harmony must be maintained at all cost, and emotional restraint is held in high esteem. Causing embarrassment to another person may cause a loss of face for all parties involved and can be disastrous for business negotiations. Reputation and social standing strongly depend on a person’s ability to control emotions and remain friendly at all times. If one company side has to raise an unpleasant topic with a person, it should be done privately. Causing embarrassment or loss of composure, even unintentionally, can seriously harm business negotiations. Moreover, companies should refrain from criticizing competitors. Leveraging relationships is an important element when negotiating in South Korea. Nevertheless, South Koreans often employ distributive and contingency bargaining. While the buyer is often in a strongly favourable position, both sides are expected to take care of each other. Ultimately, they are partners in a mutual dependency that is bound by their relationship. They may focus equally on near-term and long-term benefits. Although the primary negotiation style is competitive, South Koreans nevertheless value long-term relationships and look for win-win solutions. Summarizing, it is important to build long-term relationships through an insider of senior level and to have patience throughout the negotiation process in South Korea. Small gifts will therefore help to establish a positive attitude on the other negotiation side. Icebergs and barriers can be the over-pacing and pushing for decisions as well as mentioning the role of the occupant Japan in the Second World War.

20.6

Negotiations in Vietnam

20.6.1 General Guidelines The socialist-oriented market economy in Vietnam is the 35th largest economy in the world as stated by the OECD (2018). More than 86% of the country’s population are Khins (Viets), and more than 85% are Buddhists. Nevertheless, this

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country’s pluralistic culture includes many other ethnic and religious groups. Under Chinese rule from around 111 BC to 983 BC, Vietnam developed a core set of cultural values that were strongly influenced by Confucianism and are still largely upheld today. Foreign business people with knowledge about doing business in China will find it easier to conduct business in this Vietnam. Even though both countries have similarities, it is important for foreigners to understand that Vietnam has its own characteristics. While most Vietnamese business people and officials have only limited exposure to other cultures, some are savvy in doing international business. Nevertheless, be aware that people may expect things to be done “their way”, and let them set the pace initially until you have had a chance to determine how the interaction can be most effective. In addition, companies have to understand that government and local authorities have a severe influence on foreign business activities (OECD, 2018).

20.6.2 Successful and Unsuccessful Strategies Relationships and respect are important. Vietnam’s culture is strongly group-oriented. Individual preferences are considered far less relevant than having a sense of belonging to a group, conforming to its norms and maintaining harmony among its members. Building lasting and trusting personal relationships is critically important. While members of other cultures may expect this to happen gradually over the course of a business engagement, many Vietnamese expect to establish strong bonds prior to closing any deals and to continue developing them into true friendships as the business partnership continues. Consequently, proceed with serious business discussions only after your counterparts have become comfortable with you, and keep in touch on a regular basis during negotiations and beyond. Since the Vietnamese orientation towards time is also different from most western countries, it is very important to remain patient and emphasize frequently the long-term benefits as well as your commitment to the business relationship you are seeking to build. The official language of the country is Vietnamese. It is heavily influenced by the Chinese language but not similar enough to allow mutual communication. Many business people speak English, though often not well. It is strongly recommended to use an intermediary on the senior level, who knows the customs and the decision-maker. In addition, an interpreter should be involved too. When communicating in English, foreigners should speak in short, simple sentences. At times, people talking among themselves can appear emotional, but this can be misleading. To the contrary, emotional restraint is held in high esteem. At restaurants, especially those used for business lunches and dinners, negotiators must keep conversations at a quiet and unemotional level. Loud and competitive behaviour is perceived as a lack of self-control and will result in a negative outcome in Asian countries. The Vietnamese generally converse while standing around three feet apart. However, it is also not unusual to encounter situations where a counterpart may seem to ignore

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one’s personal space altogether. In Vietnam, the primary approach to negotiating is to employ distributive and contingency bargaining. Vietnamese negotiators are aiming at strong relationships and long-term commitments from their business partners. Vietnamese will focus mostly on long-term benefits. Although the primary negotiation style is competitive the Vietnamese nevertheless value long-term relationships. Vietnamese negotiators may at times appear highly competitive or outright adversarial, fiercely bargaining for seemingly small gains. However, even when negotiating in a fairly direct and aggressive fashion, they ultimately maintain a long-term perspective and remain willing to compromise for the sake of the relationship. Keeping relationships intact throughout the negotiation is crucial. It is best to remain calm, friendly, patient and persistent, never taking anything personally. It can be expected that negotiations are slow and protracted. Relationship building, information gathering, bargaining and decision-making may all take considerable time. Vietnamese are usually pursuing multiple actions and goals in parallel. When negotiating, they often take a holistic approach and may jump back and forth between topics rather than addressing them in sequential order. In multi-item negotiations, people may bargain and haggle over several aspects in parallel. It is not unusual for them to re-open a discussion over items that had already been agreed upon. In addition, they may take phone calls or interrupt meetings at critical points in a negotiation. While they may be doing some of this on purpose in order to confuse the other side, there are usually no bad intentions. Negotiators from strongly monochronic cultures, such as Germany, the UK or the USA, may nonetheless find this style highly confusing and irritating. In any case, do not show irritation or anger when encountering this behaviour. Instead, keep track of the bargaining progress at all times, often emphasizing areas where agreement already exists. If your counterparts appear to be stalling the negotiation, assess carefully whether they are slowing down the process indicates that they are evaluating alternatives or that they are not interested in doing business with you. While such behaviour could represent attempts to create time pressure in order to obtain concessions, the slow decision process in the country is far more likely causing the lack of progress. People from fast-paced cultures often underestimate how much time this takes and make the mistake of trying to “speed things up”, which is usually counterproductive. Again, patience and persistence are vitally important. Most Vietnamese business people are shrewd negotiators who should not be underestimated. Bargaining and haggling are aspects of everyday life, and people may use a wide array of negotiation techniques competently (Fig. 20.6).

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Vietnam Succesful Strategies

Failing Strategies

Establishing a relationship through intermediary Refusal of business dinners and private invitations and previous meetings and dinners Positive words about the opposite side after greetings and introduction, e.g. through skillful use of metaphors Negotiation in Vietnamese with the translation support of the local staff

Too strong focus on technical issues

Allow time for the translation while visualing the entire situation

Expectation of final decisions during the negotiation

Negotiation in English

Identification of the roles and responsibilities of Directly contradicting the decision makers, which the negotiation partner inevitably leads to losing face

Ice Breakers (Openers)

Ice Bergs (Barriers)

Vietnam's rising role in the global economy, respect for historical achievements

Property infringements and pirated copies

Exchange of culinary experiences, especially with Chinese cuisine

Comparison of Vietnam with China

Showing pictures of the family and telling funny stories in private life

Rushing to press for the decision

Fig. 20.6 Negotiation strategies in Vietnam. Source Author

20.7

Negotiations in Australia

20.7.1 General Guidelines In spite of its geographic location, business people and officials in Australia are usually experienced in interacting and doing business with visitors from other cultures. Though their business focus is mostly on. Asia, Australians share more of their values and practices with Americans, Canadians or the British than they do with any Asian group. The country’s culture is quite homogeneous. While trust matters, business relationships are often only moderately important in this country. Their existence may not be a necessary precondition for initial interactions. Your counterparts’ expectation could be to get to know you better as you do business together. Mateship is an important concept in

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Australia. Being called mate is a term of endearment among friends and can extend to business relationships as well. However, business can also be conducted on a continuous basis between parties who have never established such a personal relationship. In any case, it is helpful to let people see your personal side, as Australians often mistrust people who are “all business”. Business relationships in this country exist between companies as well as between individuals. If your company replaces you with someone else over the course of a negotiation, it will usually not be difficult for your replacement to take things over from where you left them. Likewise, if you introduce someone else from your company into an existing business relationship, that person may quickly be accepted as a valid business partner. This does not mean that Australians do not care about who they are dealing with. Personal integrity and dependability are important if you want to win their trust.

20.7.2 Successful and Unsuccessful Strategies Australian English is usually easy to understand for native English speakers, though it may represent a bit more of a challenge for others, especially since locals tend to speak quickly and often use colloquialisms. Brevity is considered a virtue, so avoid using complicated or flowery language. In discussions, Australians may use different styles and there are few rules. When someone is teasing you, this could actually be a sign that the relationship is going well, so try not to be offended. If you feel compelled to tease back, do so in an affable manner. Some people may show both positive and negative emotions openly, while others could believe that they have no place in business. Though conversations are usually animated, they can include moments of silence, which may not mean much. Australians generally converse standing around two to three feet apart. Communication can be extremely direct. Australians do not find it difficult to say “no”. Without any bad intentions, they can be frank to the point of bluntness, which sometimes feels rude to people from other cultures. At the same time, Australians respect people who have strong opinions, no matter whether they agree with them or not. However, be careful not to appear condescending when expressing such opinions. Australians rarely communicate “between the lines”, so it is usually best to take what they say quite literally. Try to be equally clear in your own communication. Lastly, keep in mind that in spite of their preference for directness, most Australians also try to be polite and friendly. For that reason, a clear expectation can sometimes come disguised as a

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nice request. Gestures and body language can be lively, but not overly so. Australians may make some physical contact, such as backslap as a sign of friendship, but there is usually not a lot of it. The thumbs-up sign can be taken as a rude gesture in Australia if combined with an upward movement of the arm. Eye contact should be somewhat infrequent. While looking the other in the eye may convey sincerity, do not stare at people as this will likely make them uncomfortable. In Australia, negotiating often means engaging in a friendly debate aimed at reaching a mutually agreeable solution. Buyer and seller in a business deal are equal partners who both own the responsibility to reach agreement. They may focus equally on near-term and long-term benefits. The primary negotiation style is cooperative, and people may be open to compromising if viewed helpful in order to move the negotiation forward. Since Australians believe in the concept of win-win, they expect you to reciprocate their respect and trust. While the negotiation exchange could include conflicts, both sides should keep a positive attitude and show willingness to work with the other in an effort to reach agreement. Should a dispute arise at any stage of a negotiation, you may be able to reach resolution by taking the other side’s concerns seriously and showing willingness to compromise if needed. Australian negotiators believe in information sharing as a way to build trust. This does not mean they will readily reveal everything you might want to know during your negotiation. However, negotiations can become difficult if one side appears to be hiding information from the other. Negotiations can vary in speed, with larger organizations tending to take longer. Information gathering and bargaining usually move smoothly. Decision-making can be rather slow but is usually faster than in most Asian countries. Be careful not to appear pushy during the process since this will often work against you. Although Australians may employ some bargaining and haggling tactics, they are not overly fond of either. Prices rarely move by more than 20–30% between initial offer and final agreement. Substantial concessions could raise Australians’ suspicion of being “ripped off”. The profitability of a business deal may be valued higher than gains in market share or access to new markets. Company policy is usually strictly followed, particularly in larger organizations, so be careful not to demand concessions that go against it. While business dinners are common, there may be little or no discussion of actual business aspects. Australians often prefer to keep business and pleasure separate. Social events do not require strict punctuality. While it is best to arrive at dinners close to the agreed time, being late to a party by 15 min or more is acceptable. Gift giving in business settings is rare. It is best not to bring a gift to an initial meeting in order to avoid raising suspicions about your motives (Fig. 20.7).

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Australia Succesful Strategies

Failing Strategies

Structured agenda and punctuality

Chaotic and untsructured meetings

Formal business dress

Not being aware of etiquette

Setting up a relationship over time is important (mateship)

Informal business dress

Negotiations can be flexible and dynamic, sometimes competitive in an Australian way

Not understanding hierarchies and structures

Involvement of decision maker

Not involving decision maker directly or indirectly

Ice Breakers (Openers)

Ice Bergs (Barriers)

Australia‘s beauty

To emphasise a British accent

Australian way of life

Criticising the Queen

Accepting drink or dinner in evening, when asked

Talking badly about young history of Australia, including Aborigines

Fig. 20.7 Negotiation strategies in Australia. Source Author

References OECD. (2018). Die OECD in Zahlen und Fakten. Die wichtigsten Volkswirtschaften nach dem Bruttoinlandsprodukt. Retrieved June 17, 2018. http://www.oecd.org/berlin/statistiken/. Panasonic. (2018). Panasonic Verhaltensregeln. Panasonic code of conduct. Retrieved June 11, 2018. https://www.panasonic.com/global/corporate/management/code-of-conduct/pdf/code-ofconduct/06_coc2008German.pdf. Winkels, U, & Schlütermann, Y. (2013). Verhandeln mit Japanern: Das japanische Businessverhalten besser verstehen und nutzen. Wiesbaden: Springer.

Negotiations in Arabic Countries and the Middle East

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Marc Helmold, Warda Samara, Ayat Abusini and Roshan Nelson

21.1

Negotiations in Saudi Arabia

21.1.1 General Guidelines Basic Rules Visitors to Islamic countries sometimes move in modern and cosmopolitan societies, but also encounter rigid moral concepts and systems closed to strangers (Krachtowil, 2018). Successful business women and women politicians can face women wrapped in full-body veils who cannot leave their homes without male protectors (Krachtowil, 2018). In many Arab countries, such as Saudi Arabia, tolerant religious practice is strong conflict with fundamentalist beliefs. Negotiations in Arabic are strongly influenced by these ideas and are therefore shaped differently than in Western cultures (Krachtowil, 2018). For example, alcohol is strictly prohibited for Muslims in heavily religious countries such as Saudi Arabia or Dubai (Krachtowil, 2018). The family is seen as a pillar within the Arab relationship level and is above all other levels, so that a far-reaching network can be very useful (Thiel, 2018). Similarly, the position of women usually has a subordinate role, which may affect negotiations (Thiel, 2018). M. Helmold (&)
W. Samara
A. Abusini
R. Nelson Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] W. Samara e-mail: [email protected] A. Abusini e-mail: [email protected] R. Nelson e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_21

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21.1.2 Successful and Unsuccessful Strategies The following strategies should be taken into account when doing business with partners in Saudi Arabia and Arab countries. Maintaining the relationship level with decision-makers and personalized business relationships are important aspects in this environment. The usage of middlemen will help to create a relationship and to understand the culture. Arabic time management including delays and time consuming negotiations are quite normal when doing business with negotiators in this country. Patience and endurance will help to achieve a good result. The Arab culture is a strong relationship-oriented culture (Krachtowil, 2018). Often the education, qualification or competence is secondary to the relationship of the decision-maker, so that the preparation must lead to a thorough analysis of the relationship relationships (Krachtowil, 2018). A long-term successful business relationship with Arab partners requires a solid relationship that must be built up over several years (Krachtowil, 2018). Figure 21.1 summarizes the recommendations for successful negotiations in Saudi Arabia.

Saudi Arabia Succesful Strategies

Failing Strategies

Maintenance of relationships at decision maker levels

Competitive and direct negotiations

Personalised negotiations

Negotiations with experts who do not know the culture and background

Use of respected and influencing middlemen who know culture, people and rituals

Impatience and pushing quickly for results

Network with authorities in economy and politics

Unawareness of hierarchies

Indirect negotiation style, using metaphors

Negotiations without decision maker

Ice Breakers (Openers)

Ice Bergs (Barriers)

Topics such as family

Topics about political enemies such as Israel, Iran or Qatar

Gifts, but not alcohol

Disrespect of religion and rituals

Acceptance of Arabian time management

Role of women in Saudi Arabia

Fig. 21.1 Negotiation strategies in Saudi Arabia. Source Author

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Personalized Business Relationships In the Arab world, a business motto is “family and friends first, business is personal” (Krachtowil, 2018). It is therefore crucial to establish and sustainably maintain a solid relationship with the Arab business partner as recommended to all authors (Krachtowil, 2018; Thiel, 2018). Several meetings and maintaining relationships during the fiscal year are important in negotiations and business in Saudi Arabia. First and foremost is the personal meeting with the Arab business partner, after which contact by telephone, fax or email should be kept consistent. Continuity in business contacts is a key success factor in the Arab world. A solid relationship comes before the business. Although the national language is Arabic, the majority of business partners can speak English. In order to make social contacts that are very important for business success, you should at least master the formal politeness phrases. It is very helpful to learn idioms and other everyday phrases and to weave them into the conversation. An attempt to speak Arabic by the contact will be very rewarding. As the most traditional country in the Arabian Peninsula, Islamic bids are strictly observed in Saudi Arabia. This is also required by foreigners. Violations can end up in court. Therefore, a strict distinction is made between women and men, that is, no reciprocal greetings are approved, and normally there is no dialogue between the sexes (Hünniger, 2018). Respect, honour and reputation are very sensitive and elementary topics for Arabs. Strangers should not touch these guiding principles, as their violation can lead to a social outlawing of the person concerned. Common Central European manners, such as a compliment to the wife or daughter of the contact, are not common and are better refrained from. Presence, Relationships and Networking Presence and regular business travel are imperative to maintain contacts and the network (Krachtowil, 2018). One to two business trips a year to the destination country are not enough to show interest in long-term and sustainable business relationships in the Arab world. Presence on the ground is a competitiondetermining success factor, which experience has shown to be underestimated by Western partners (Krachtowil, 2018). In a collective society where family, clan and tribal affiliation determine access to resources, it is crucial to build local networks (Krachtowil, 2018). Only in this way can you be successful in business and negotiations over the long term. Use of Middlemen Middlemen with influential contacts help with negotiations and business dealings. It is usually beneficial to be introduced to a respected and influential person. The right recommendation can be crucial for a business deal. There should be no fear of contact with “clientele systems” or “nepotism”, as these are part of the business culture in the Arab world (Krachtowil, 2018). Gifts also help in the initiation of business and negotiations (Hünniger, 2018).

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Time Management In the Arab world, the clocks sometimes tick differently; people and relationships are in front of exactly kept schedules. Patience is therefore indicated; the business partner is already coming, “God willing” (Inscha ‘Allaah). Paradox, but fact: Conversely, German punctuality is expected. It is generally advisable to plan a lot of time in advance. Too tight, “clocked” schedules have little chance of success. “You have the clock, we have the time” is not in vain an Arabic proverb. Short-term, flexible scheduling is more effective in the Arab world than long-term planning. Time is an important investment in your business success. By the way, the sentence “I have no time” is extremely rude in the Arab world and can be considered as an insult. Look for other, indirect formulations. Always give your Arab business associate the time to spend time with him. Family commitments are always accepted as an “apology” and are not considered unprofessional. But often after a long time of waiting, Arab business partners cannot go fast enough to get a project on the rails. Then everything has to be done immediately and with some adventurous deadlines. Here, too, it says: being flexible and being prepared pays off (Hünniger, 2018). Awareness of Cultural Characteristics The Arabian business culture is traditionally characterized by trade and mobility. “Buying and selling” is a matter of person to person. First you “sell” your personality, then the product. Business relationships are based on personal relationships; the factual level is subordinate. It is important to first get to know each other on a personal level and to convince yourself. In the Arab world, professional life is therefore often associated with private life. There is no strict separation between work and private life. It is beneficial to spend a lot of free time with Arab business partners to strengthen the relationship level. Sporting and cultural events are ideal here. That also means Small Talk is Big Talk! Give your Arab business associate the feeling that he is more important than the deal. People from less relevant cultures are very interested in good results and business deals. But they see no way to achieve a good result in disturbed social relationships. Leave your personality first! And then your first-class product. Compliance with Religious Principles Insufficient knowledge of Islam in business life permeates all areas of human life; it is not just a religion but a social order and economic factor and thus also affects business life. Therefore, find out about the basics of Islam and the resulting regulations for Muslims, such as the ban on alcohol and pork. The good Black Forest ham is just as little as a gift, like the Frankish box bag (unless your Arab business partner expresses the corresponding desire.) Taboo, but fact: Not all Muslims also follow the rules of Islam). Respect possibly practised gender segregation. Maintain the greatest possible body distance to the opposite-sex business partner, especially if signalled accordingly. Give Arab women, especially from a traditional religious environment, a hand only when asked to do so (react rather than act). Inquire with your business partner always after the health of the family and not directly after the

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wife. Respect for Islam enables a confidence-building climate for Muslim business partners. Avoid discussions about religion (Islam–Christianity). They usually lead to nothing and can seriously burden the good relationship. Emphasize similarities. Atheism usually encounters incomprehension among devout Muslims and does not throw them into a trust-building light. Restraint is appropriate in this regard. Incidentally, in the Arab world there are also Arab Christians (Egypt, Syria, Lebanon or Iraq). Hierarchical Structures Social advancement is usually still linked to belonging to a particular family. It is therefore important to know the “right”, i.e. to know influential families. In clientelistic societies, this is crucial for the competition. Find out about the important families (English: Leading Families) of the destination country. Western business partners must therefore pay attention to internal rivalries between families, clans and tribes. Investing in these networks is a fundamental part of the negotiation strategy in this context. Helpful here can be an expert and middleman, who uses social events in the target country for the initiation of contact and care (Hünniger, 2018). The care and strategy of the network can be a decisive advantage in negotiations, so it is advisable to develop and expand the network by one or more experts within the network. Indirect Negotiation Style and Usage of Metaphors In Arab countries, one should apply an indirect style of negotiation characterized by paraphrase. Direct demands or competitive negotiations usually have a negative effect on the negotiating partner and are considered extremely rude (Hünniger, 2018). In addition, one should not refuse a counterpart a concern by a direct “No”, as this is also considered rude. A “no” would hurt the opponent and cause a disruption on the relationship level. In the Arab world, communication takes place indirectly, using terms, metaphors or comparisons. Nonverbal signals also play a major role in communication. A generalized but often true rule of thumb is that if a diplomatic Arab says “yes,” he means “maybe,” if he says “maybe,” he means “no,” and if he says “no,” he is undiplomatic. In collective societies, it is crucial to save face. Honour and loyalty must always be protected even in the case of controversy. However, the young generation of Arab business people increasingly do adopt a direct negotiation style. Awareness of Taboos In order to keep the relationship level as trouble-free as possible, it is advisable, especially at the beginning of business relations, to avoid politically or religiously sensitive issues. Among the politically sensitive issues include Israel (or a pro-Israeli attitude), the Iraq war, the colonial era, and in the Arab Gulf states, the Arab–Iranian sea border conflict. Do not underestimate this factor in your business relationships with the Arab world. Your Arab partner could “engage” you in a politically explosive conversation. Restraint or rhetorically skilful expression is usually appropriate in controversial view. In addition, it is advisable to find out

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about the most important political, historical and cultural data and personalities of the target country. A German business partner, who knows who “Umm Koulthoum”, will be well received by his Arab negotiating partners. Umm Kulthum was an Egyptian singer and musician. Her fame in the Arab world is comparable to that of Maria Callas and the Beatles in the Western world (Hünniger, 2018).

21.1.3 Main Features of Islam The term Islam means voluntary surrender to God, so Muslim refers to a person who “devotes themselves to God,” who “professes Islam.” The poet Goethe put it this way: “If Islam is submission to God’s will, in Islam we live and die”. The word Allah is composed of: al (Arabic article) and illah (Arab deity). So Allah means “God the one and only God”. The concept of God in Islam states that God works not only in the extraordinary, in the miraculous, in his great deeds, but above all in the everyday (Hünniger, 2018). The Prophet Muhammad was born in Mecca in 570 BC. He was married to the wealthy merchant widow Khadidja; they had two sons and four daughters. 622 BC is the year of relocation to Yathrib, the later Medina, i.e. the year of hijra (emigration) and the beginning of the Islamic era. There are five pillars in the practice of Islam. A distinction is made between the duties that man owes God and the duties to his fellow human beings and the community. The five basic religious duties (the pillars: arkan) refer to both mandatory areas (Hünniger, 2018; Thiel, 2018). Table 21.1 describes the five pillars of Islam: The testimony of faith—shahada Anyone who consciously and sincerely pronounces the Creed before witnesses may consider himself a Muslim. The Shahada: “I testify that there is no deity other than God (Allah) and that Muhammad is the Messenger of God” (Hünniger, 2018). The Ritual Mandatory Salad Prayer expresses the inner attitude of humble devotion and trust in divine mercy. It is a symbol of brotherhood and solidarity, as the faithful gather together for prayer. The prayer can be done at home, at work, at school and anywhere. On Friday, the prayer will take place in the mosque. It is prayed five times a day. The orientation, including the prayer niche in the mosque, is oriented towards Mecca. The place of prayer must be clean; the praying person needs a clean surface. The ritual purification of the body is a precondition.

Table 21.1 Pillars of the Islam

Pillar

Description of the basic duty

Pillar 1 The testimony of faith Pillar 2 The ritual obligation prayer Pillar 3 Fasting Pillar 4 The mandatory tax Pillar 5 The pilgrimage to Mecca Source Hünniger (2018)

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Fasting in the month of Ramadan—hem Ramadan is the ninth month of the Islamic (lunar) calendar. It lasts 29 or 30 days. According to the European calendar, Ramadan starts about eleven days earlier each year than in the previous year. During the period of brightness, all adult Muslims, powerful and healthy in their senses, abstain from food, drink, stimulants, and sexual intercourse. Ramadan ends with a three-day festival of fasting (Hünniger, 2018). The compulsory levy—zakat In addition to the voluntary alms, there is the compulsory levy. Zakat is derived from the Arabic zaka—purify. The compulsory levy is an act of cleaning greed. It is an expression of gratitude to God for the opportunity to live in prosperity. The wealthy have the duty to let the poorer people to their property. Poor have a right to a portion of the possessions of the better off. As a rule, the collection and distribution take place without state control (Hünniger, 2018). The pilgrimage to Mecca—Hajj Mecca, but especially the Kaaba itself, forms the religious centre of the Islamic world. For all adult Muslims, the Hajj is a religious duty. The participants must be “responsible”, mentally and physically healthy, and financially able to participate and not by other reasons, such as war, be hindered. The umra (small trip) is an individual action that is not tied to specific times. The Hajj begins on the first day after the month.

21.2

Negotiations in Palestine

21.2.1 General Guidelines Negotiations in Palestine can be extremely unpredictable because they can be full of surprises due to political and economic swings. Therefore, punctuality and structural agenda are very important, at the very least. Palestine as a state located in the Middle East has similar negotiation habits to other countries in the region which are mainly collectivism, hospitality and honour (Feghali, 1997). On the other hand, Palestinian managers’ methods and communication ways differ from those in other Arab countries since they have to deal directly and frequently with their neighbour country Israel which has different norms and habits in negotiations which are normally attached to political situation at a certain level. Hence, open results are likely to be the results. Palestinian negotiators have to adapt and change their way of negotiations in order to take account of the new circumstances (Erekat, 2008).

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21.2.2 Successful and Unsuccessful Strategies Figure 21.2 outlines successful and failing strategies, additionally openers (icebreakers) and barriers (ice bergs) which will be explained as general recommendations for negotiations in Palestine. Starting with any correspondence before and during the negotiations, it must be formal, with strict preservation of the titles recognized. Also show the official nature which includes using official letters with logos and stamps. Emails are not considered as an official or professional document. Palestinian negotiators are very strict on having an agenda with enough time available in advance to be ready for the negotiations especially under circumstances where many challenges and difficulties could occur any time. All negotiations’ parties are consulted regarding suitable dates before confirming the final dates. Unfortunately, Palestinian managers who take part in negotiations must always address the risks that are connected to the political and security situation and that affect challenge the implementation of the project. Therefore, plan B and plan C have always to be on the table. As in most other countries, meetings etiquette that may differ from one company to another but common things for negotiations exist too; logistics are very important, e.g. meeting’s hospitality and tables’ arrangement have to be in specific

Palestine Succesful Strategies

Failing Strategies

Punctuality for appointments and in negotiations

Unpunctuality, bad preparation and being late

Following agenda and structure

Not following the agenda timeline

Understanding culture and history of Palestine and Palestinians

No respect for culture

Understanding political and security circumstances including relationship with Israel

Asking about very obvious obstacles caused by political and security circumstances

Emphasising the willingness of the palestenians to rebuild their state

Mixing political and commercial topics

Ice Breakers (Openers)

Ice Bergs (Barriers)

Making small fun about traditional procedures

Political talks, political parties positions

Show enough confidence and positive and attitude to overcome any upcoming risks.

Personal matters specially with the opposite gender

Arafat and other Palestinean leaders

Topics such as terrorist attacks in Munich 1972

Fig. 21.2 Negotiation strategies in Palestine. Source Author

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way according to the hierarchy and the purpose of the negotiations; dress code is casual always. One thing that can differ between organizations is the inclusion or not remarkable smart women which show confidence and etiquette. Being a negotiator differs between public and private organizations, whereby public organizations are normally ruled with public policies and rules that make the negotiation options less, whereas private organizations have more scope to negotiate (Samara, 2018). Collectivism, hospitality and honour are the main keys to understand the business cultural differences between different areas; some areas are known to be “born with business mentality”. For example, Hebron City where collectivism is a very strong in the culture because the business is normally owned by the family. Therefore, business issues can turn into personal issues. The following highlights the most important elements of business eating etiquette: Do not begin eating until the host starts or someone announced that eating can begin Do not start eating before higher people in the hierarchy, e.g. if the minister is the highest position in the presence, you should wait for him to start, unless he says that he/she does not mind Do not talk while eating, especially about serious business topics Indicate you have finished eating by ordering your coffee or excusing people to go for a cigarette. Use of language could be tricky and misleading or manipulating; items have to be clear in the written agreement. Therefore, lawyers must be involved in the negotiations process. Successful strategies include being punctual to any meeting and to have general background about the cultural and political backgrounds of the region. Understanding the specifics and characteristics of the Arab and Palestinian culture will help to build a trustful relationship with negotiators from Palestine. It also helps to understand the obstacles that might be associated with the political circumstances of Palestine and the neighbouring country Israel. Icebreakers can be regarded as showing a positive attitude and confidence in negotiations. Finding joint solutions, elaborated with the negotiation partners in Palestine, will help to overcome any problems and risks. Palestinians also like to personalize negotiations, especially mentioning issues like family, country, friends, environment, etc. Relationship Between Palestine and Israel Israel and Palestine have been growing next to each other since 1948. However, the Israeli economy is more developed than the Palestinian economy. Industry in Israel is advanced and competing on an international level (OECD, 2018a, 2018b). In Palestine, the economy is still not as mature as in Israel for many reasons mainly because Israel mostly controls all Palestinian borders and makes a lot of barriers to make the industry in this region and to dominate all resources for economic and political reasons.

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However, even in the middle of the Palestinian–Israeli conflict, there is still much economic cooperation, business and trading deals between both parties that need B2B negotiations. Traders focus on their mutual business’s interest; therefore, cultural, religious and political conflicts are fading for business deals. Although the Palestinian traders are aware that they are in a weaker position in the negotiations because of the Israeli policies that control the economic interaction between the two sides, especially with regard to exports, imports, customs and control over the Palestinian borders, they still have their tactics to negotiate especially when they have good experience with the Israeli companies. Palestinian negotiators need to understand how to make balance in the negotiation process as there are many Israeli companies depending on Palestinian production especially in the agricultural filed. How business achievements and making profit are still the main factors that bring both parties together for B2B (business to business). Thinking about negotiations in Palestine and Israel will always lead us to the political negotiation that occurs between the two parties for decades. Despite this fact, the business negotiations between businesses in both parties are important for both parties’ economies. Negotiations Between Palestine and Israel Companies It is recommended in business negotiations between Palestine and Israel’s companies to make use of the support of a mediator to help both parties negotiate, to mediate between the two cultures and to achieve agreement. Both parties will show willingness to accept the mediator. The mediator suggests a neutral place, and both parties have to confirm the place. Normally, direct negotiations can be held in a suggested place in Palestine or Israel. A translator can be very important. Mainly, they agree in Arabic or Hebrew unless there is a language barrier when a translator is then hired. Full knowledge in details of the members of the negotiating delegates are important for any negotiation. Catching the right time that fitting the political situation in the whole region can also be important. The range of the agreement is not flexible because both parties have to stick with national, religious or historical limitations. Range of agreements to be negotiated is more flexible depending on the business itself. Both parties are kind of obligated to go for negotiations so the whole over situation is not comfortable especially that the whole negotiation process has to be official and no space for any personal interaction. Both parties have a desire to make achievements for their business and profits as well. Personal relationships more likely to be built. Threatening, blackmailing or deceiving can be used as a tool to make pressure, but it is less likely to use such tools. The differences between political negotiations and business negotiations in Palestine and Israel are simply not limited. The conclusions are that political agreements, if there are any, normally fail or work for a very short time. On the contrary, many business deals between Palestinians and Israelis end with achievements, benefits and profits. Two main considerations seem to be essential in order to get involved in negotiations in Palestine or Israel. These are, firstly, the understanding of the culture and, secondly, understanding the political situation and constraints of both countries (Lautmann, 2016).

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Negotiations in Israel

21.3.1 General Guidelines Israel is surrounded by Arab and Muslim countries, which significantly influence the society. In addition, there is the political conflict with the Palestinians, which has been ongoing for decades (Helmold, Dathe, & Hummel, 2019). Business culture in Israel is very diverse with many ethnic groups (Jewish Orthodox, Jewish, Christians and Arabs). However, Israelis are generally direct, assertive, motivated and extremely ambitious in negotiations (Wittes, 2005). Their schedules are busy, and business is usually informal and fast-paced. Israelis are also known as aggressive negotiators, though they often like to mix business with pleasure. The top five industries in Israel are technology, tourism, mining, manufacturing and transportation. Israel’s technology industry has been well publicized internationally and is growing faster than any other industry in the Middle East. According to the Israel Ministry of Foreign Affairs, high-tech industries (as a whole) are growing at roughly 8% per year, while approximately five per cent of the nation’s gross domestic product is spent on high-tech industries (OECD, 2018a, 2018b). This is the highest among all countries in the Organization for Economic Cooperation and Development (OECD, 2018a, 2018b). The management style in Israel is generally collaborative but direct. Hierarchies are defined but not always strongly enforced. Everybody is given the opportunity to express his opinion and contribute to the decision-making process in business negotiations. Solutions and results are more important than formalities and hierarchies (Lautmann, 2016). Personal connections are of the utmost importance in Israel. Colleagues and business partners take time to get to know each other, socialize and spend time together outside the office. Meetings are often relationship-oriented, and Israelis often treat their business partners more like friends than clients (Lautmann, 2016). The expert, about Israel business culture, Lautmann, compares Israeli business behaviour and negotiations with the entrepreneurial business culture in China and describes the following attributes as characteristic for Israeli business culture (Lautmann, 2016): I: Informal S: Straightforward R: Risk-taking A: Ambition E: Entrepreneurial L: Loud I: Improvisational.

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21.3.2 Successful and Unsuccessful Strategies In order to do business in Israel, it is preferable and recommended to take advantage of local contacts who can help with introductions into the local business networks (concept of “protexia”) (Lautmann, 2016). It is better to avoid doing business by email or by telephone and to meet physically instead. When working with religious people, it is important to be aware that they can be unavailable on the Sabbath (sundown on Friday until Saturday evening). Most of the Jewish holidays are in September or October, thus, one should avoid these periods to set up business meetings. For Muslim people, working hours are shortened during Ramadan. Time is important in Israel, but Israelis are relaxed about deadlines and appointments. It is quite common for people to arrive to a meeting 15 or 20 min late, especially at a senior level (Niblis, 2018). However, it is recommended to always be on time and inform in case of any delay. Israelis are used to having busy agendas and like to schedule several meetings in a day. Meetings are often organized with short notice. As meetings are often unstructured and do not follow a pre-arranged agenda, flexibility is key to conducting successful business in the country. Shaking hands is the common way of greeting in Israel. Handshakes should be given with the right hand, as the left hand is considered unclean (particularly by Arab Israelis). Personal space is smaller in Israel than in most Western countries, and Israelis may put a hand on the shoulder or the arm of their counterparts during conversation. It is recommended not to react abruptly to such an “invasion” of personal space, as this may offend your partner. Religious people avoid physical contact and merely have direct eye contact. When meeting a partner for the first time, formal titles should be used. Although many Israelis are not sensitive to their titles, it would be polite to use them until the counterpart invites you to use first names. If a person has no title, the terms Mr. or Ms. followed by the surname must be used. Companies typically send gifts to their customers at holiday times. Israelis may appreciate gifts as part of a business relationship, especially gifts from foreign partners’ home countries. Israeli business dress code is relatively relaxed, following mainly a smart casual style (i.e. open-collared long sleeve shirts and trousers for men; dresses or blouses and trousers for women). Foreigners are expected to have a higher dressing standard, especially in the first stages of a business relationship. Thus, it is recommendable to attend the first meeting in a suit and tie (or a formal blouse and skirt, as the case may be). Exchange of business cards in not an established practice in Israel, even though it is increasing. Business card should be given at the start of the meeting and the contact’s card should be requested in return. Take some time to examine the card before putting it in a cardholder. The atmosphere of Israeli business meetings is fairly relaxed, as meetings can be very informal. Usually, the meetings start with casual conversation and get to the negotiation phase gradually: before going into business details. It is preferable to take some time to get to know your counterparts and create a personal connection with them.

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Israelis are very keen negotiators, so bargaining is always necessary. Initial offers can often be unreasonable, as they are just a starting point for negotiations. Making some concessions is important. Many Israelis will take the lead in negotiations, but they should not be given full control. It is recommended to provide the other party with a clearly defined agenda about the purpose of the negotiations and to explain the advantages of concluding the contract. In general, Israelis are direct and state their opinions, so it is better to do the same: trust will be more easily granted to people they feel are honest and direct, so using subtleties should be avoided at all times. Israelis speak loudly and quickly, which sometimes gives the impression that they are in a rush or frustrated. Business meetings can often be interrupted by phone calls or people entering the room. For business meals, most restaurants in Israel are kosher, but it is always better to double-check the restaurant in case of very religious partners. Religious Israelis will not mix meats and dairy products at a meal, just as Muslims will not eat pork (Nishlis, 2018) (Fig. 21.3).

Israel Succesful Strategies

Failing Strategies

Creating relationships before actual start of negotiation is important

Indirect negotiations: Israelis prefer a direct negotiation style including interruptions

Awareness of traditions, religion and culture in companies and businesses

Combining business with politics or religion

Relaxed attitude and flexible agenda

No appointments for Friday or Saturday. Friday and Saturday are Jewish Sabbath days

Casual and informal business and negotiation style

Acceptance of personal space of Israelis. After relationships have been established, Israelis might come closer compared to other cultures

Chaotic and flexible negotiation style

Too formal negotiations and insisting on European negotiation formalities

Ice Breakers (Openers)

Ice Bergs (Barriers)

Praising the Jewish state

Unawareness of Holocaust

Highlighting technology and innovations in Israel

Excessivefavouring of Arab countries

Being flexible on time (polychronic)

Criticising the occupation of Palestinian regions

Fig. 21.3 Negotiation strategies in Israel. Source Author

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Negotiations in the Jordan

21.4.1 General Guidelines Jordan, officially Hashemite Kingdom of Jordan (Arabic: ‫ ﺍﻷﺭﺩﻥ‬Al-ʾUrdunn), is an Arab country in Western Asia on the East Bank of the Jordan River. Jordan is bordered by Saudi Arabia, Syria, Israel and Palestine (West Bank). Jordan’s economy is among the smallest in the Middle East, with insufficient supplies of water, oil and other natural resources, underlying the government’s heavy reliance on foreign assistance. Jordan’s economy is relatively well diversified. Trade and finance combined account for nearly one-third of GDP; transportation and communication, public utilities and construction account for one-fifth, and mining and manufacturing constitute nearly another fifth. Despite plans to expand the private sector, the state remains the dominant force in Jordan’s economy (Wikipedia, 2019). One of Jordan’s most pressing socioeconomic challenges has been managing the influx of 650,000 UN-registered refugees, more than 80% of whom live in Jordan’s urban areas. Jordan’s own official census estimated the refugee number at 1.3 million as of early 2016 (Theodora, 2018). Jordan joined the World Trade Organization (WTO) in 2000, signed the Association Agreement with the European Union effective May 2002 and concluded a Free Trade Agreement (FTA) with the USA. The FTA targets progressive dismantling tariff and nontariff barriers between Jordan and the USA. This agreement covers Qualified Industrial Zones (QIZ), in operation since 1996. General behaviour in Jordan follows Arab norms. Foreign negotiators should be prepared for great politeness and hospitality. People must be aware that by gracefully accepting invitations, they are showing honour to the host. Jordanians like to pay compliments so feel free to reciprocate. Business cards with Arabic translation will impress the business person. Business relationships take time to develop. Jordan’s business negotiations might take time to reach a deal. As in all business dealings, it is a good idea to reiterate next steps by each party before leaving. Company decision-makers should stay in touch with Jordanian business contacts (Expatarrivals, 2019). The Wadi Araba peace agreement is a perfect example of Jordanian negotiation in the Middle East. Jordan and Israel have made substantial gains towards normalizing relations since signing their peace treaty at Wadi Araba on 26 October 1994. Recently, in October 2018, the King’s termination of peace treaty annexes and a final decision on the fate of the Jordanian lands of Baqoura and Ghumar leased to Israel will require careful consideration by the Jordanian government in light of its impact on tense relations with Israel. It is now clear that the King has made such a decision after weighing all options and reactions. This is a major move by the King at a time of difficult regional circumstances, as he himself told a group of Jordanian political figures. He added that Jordan’s priority is to protect its interests and that Jordan will implement its full sovereignty over its lands. Politically, Jordanian negotiations are challenging due to the high level of uncertainty in the region, and the consequences may impact the peace process. The decision-making in Jordan tends to be centralized and

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dominated by the most powerful head of a given group of people who holds the final call on any decision or potential change. For instance, the Jordanian legislation initiated by members of the lower house must make its way through the government-appointed upper house and cabinet as well as survive the King’s veto. Since parliamentarians are unable to provide legislative outcomes for their constituents, they concentrate on more tangible goals—the predominant one being the redistribution of state resources through clientelistic channels. It is also noticeable that the electoral law is in a constant change which may reduce the negotiations held by the lower house. Jordan can be described best as a man standing on an active volcano; the country is characterized by uncertainty generated by the political instability in the region, refuges and economic pressure. Jordan faces an unprecedented level of pressure on its natural resources and infrastructure due to the increasing refugee population from the Civil War in neighbouring Syria. This pressure has highlighted the acute deficiencies of the domestic economy, specifically successive governments’ inability to bring unemployment down to single digits and reduce government spending to sustainable levels. The business environment is shaped by many private Jordanian companies which are family-owned, based on hierarchy and therefore the top executives are the core of attention and decision-making. The senior or middle management reaches decisions after several discussions and validations with all relevant internal and external stakeholders. Once a decision is concluded, it is communicated down to subordinates for rollout. Employees do not debate the decisions that have been made. Nowadays, large-scale companies such as banks, telecoms and airlines are more open and tend to involve the operational management in the decision-making. It is recommended that the negotiation is initiated by the key players (e.g. executives and senior management) to ensure a safe entry and favourable outcomes. Change looks challenging and might be rejected by the majority. Foreign companies who are operating and managing their business in Jordan should be aware of the resistance. Otherwise it could turn the decision process into an endless loop and distract the company of achieving its objectives. Entrepreneurship and start-ups have started to change the Jordanian business orientation. According to the World Bank data in 2017, Jordan has more than 200 innovation start-ups. Potentially, the innovative entrepreneurs such as ArabiaWeather, Jamalon and Souq.Com which was acquired by Amazon.Com in 2017 will increase the bargaining power of the Jordanian companies and attract more investment compared to the typical existing competitors. Jordanian companies tend to take a long time to build up a relationship, seeking information before and during the negotiation process, and changes are always anticipated. Deadline in a constant negotiation is a starting point of any business deal and defines the cost and the resources allocated to a given project may take place in Jordan. Deadlines and timescales are fluid. Patience is the key to successful intercultural management when working in Jordan. Essentially a relationship-driven culture, building relationship with Jordanian government or companies comes first and takes priority over any timelines. Avoid rushing the relationship building process or you may risk any future business dealings. Usually

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agree upon deadline features in Jordanian negotiation and how that may affect the rest of the organization. Although Jordan is impacted by the Arab culture, Jordanians have adopted a set of Western quality and standards. In fact, the Jordanian calibre is a major source of manpower in the Gulf Council Countries in the fields of engineering, medicine and information technology and education. Documentation and written communication are key factors to consider even for a minor issues or business conversations. Referencing is also an important aspect of legal coverage. Jordanians are skilled negotiators and consider everything to be negotiable. Using high-pressure sales tactics, flowery acceptances, which may only mean “perhaps”, rather than a firm commitment is something foreign company may expect to face when they decide to push the negotiation.

21.4.2 Successful and Unsuccessful Strategies Figure 21.4 shows negotiation strategies, failures, icebreakers and icebergs in Jordan. As a basic rule, it is recommended, as in other Arabic countries, to take advantage of an intermediaries and middleman who know customs, rules and decision-makers (Theodora, 2018). One should never cross-leg in front of a person because crossing a leg over your knee or sticking your feet straight out in front of

Jordan Successful Strategies

Failing Strategies

Patience and endurance – flexible agenda

Competitive negotiations

Building relationship and putting an itermediary in place who knows customs

Not crossing legs in front of somebody. Sometines showing the shoe soles is an insult

Professional dress code, knees and elbows to be covered

Quick and hurried negotiations

Wearing a hijab as female not necessary, but a scarf when visiting a mosque or ancient places

Talking about politics, religion or monarchy

When setting up a meeting, foreigners should be aware and respectful of the five daily prayer times

Unawareness of hierarchies

Ice Breakers (Openers)

Ice Bergs (Barriers)

Praising decision maker – first impression lasts forever.

Showing affection and emotions

Talking about personal and family accomplishment

Drinking to socialise

Flexible time management

Criticising country or customs

Fig. 21.4 Negotiation strategies in Jordan. Source Author

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you will expose the soles of your shoes to another person, which is a very serious insult in Arabic countries. As in most predominantly Muslim countries, visitors should always be respectful of local traditions, prayer times and rituals. Prayers are supposed to be five times a day. In conversations, it is not recommended to talk about politics, religion or the King. It is stressed to avoid derogatory humour or sarcasm. It is best to dress formally and conservatively for business in Jordan, in suit and tie or equivalent. Women should aim to abide by normal Arab standards of modesty, so avoid low necklines or dresses that come above the knees. Do not be led astray by locals who dress less formally. Conservative attire is still respected. Treat the opposite gender with respect but not familiarity. A man meeting a woman for the first time should wait for her to extend her hand in greeting and vice versa. Personal relationships are central to doing business. Business is still conducted on a very personal level in Jordan. Jordanians will try to determine if the negotiation partner is a respectable, honourable person with whom they would like to have a business relationship. It is normal to greet and shake hands with everyone in the meeting room when entering. Standing up and shaking hands the greeter is a sign of respect and goodwill to start. Arriving on time is always advisable but not too early. Prepare yourself for critical questions and a round of constant validation. Jordanians are mostly direct and do not mind showing how they feel about you even if that contains some critique. You should always aim to be on time for meetings, while being prepared for the fact that your counterpart may be late. It is not advisable to arrive too early. Meetings could be cancelled, postponed, interrupted or include other people which needs to be perceived calmly. In some Jordanian companies, you have an important discussion with senior management without a prior appointment as open doors policy may apply. As a foreigner, ask your Jordanian colleague, when meeting for the first time how he/she wants to be addressed. Jordanians hold many higher educational degrees and tend to label themselves with official educational titles such as Eng. Or Dr. “Your Excellency” is a common word for ministers, ambassadors and other high officials. In open companies, it is common to call Jordanians by their first or last names.

21.5

Negotiations in Iran

21.5.1 General Guidelines Despite political disputes with the USA concerning the Iranian nuclear programme and sanctions from the Western countries (especially the USA), Iran is an important economic power. Based on the gross domestic product (GDP), Iran is in the top 30 countries in the world with significant import and purchasing needs in industrial sectors like transportation, machinery, tourism or aerospace. Islamic religion in Iran (Shiites with a minority of Sunnis) plays a major role in society and in Iranian politics. Similarly, religious precepts must be taken into account when conducting business in the country.

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Negotiations tend to be extremely long and scattered as Iranians like to give the impression that negotiation is more a question of friendship than business. The essential aspect of any business is the price. Bargaining is very intense and is considered the key point, as in the negotiation process itself both parties find satisfaction, rather than in the agreement. It is common for Iranian negotiators to change their minds at the last minute, despite appearing to have reached an agreement. You have to be patient and persevere, because for them, the time factor is not as important as in the Western area. Iranians are not Arabs because they do not belong to the group of Indo-Semitic language (Aryan) and therefore should not be identified with them. They are very proud of their history and the ancient Persian Empire (Achaemenid, Parthian and Sassanid dynasties) that since the fifth century BC achieved great splendour. Once returned from Iran, you should keep in contact with them and show interest in their family and the news from the country as they have a very ceremonial culture and value highly the personal relationship (Valle, 2016). A very good explanation of the Iranian business culture and negotiations is the word “taro” (Persian: ‫( )ﺗﻌﺎﺭﻑ‬Valle, 2016). This Persian word with Arabic roots defines the country’s complex art of etiquette, in which the true meaning of what is said is not in the words, but somewhere beyond them. It’s a subtle dance of communication, where participants step back and forth over and over, never taking over the stage. In the world of taarof, politeness holds the place of honour. In its name, people refuse when they want to accept, say what is not meant, express what is not felt, invite when it is not intended and replace bad news with false hope. By doing so, they try to say what they “wished it were”—without ever admitting that it isn’t (Valle, 2016; Slackman, 2006).

21.5.2 Successful and Unsuccessful Strategies Figure 21.5 outlines successful and unsuccessful strategies for negotiations in Iran. Westerners hoping to build productive relationships will need to respect and incorporate a tribal-collectivist perspective within their business mindset. A general principle to remember is that throughout the Middle East and in this case Iran, capitalism is combined with faith and culture. Knowing the customs, traditions, laws and tribal characteristics of the region is central towards building trust. Communication between Iranians is high-context; communication is allusive and indirect not only in the choice of words utilized, but in the dependence of the interpretation of the message inside the context where is transmitted: nonverbal clues, staging and setting of the act of communication, and the choice of the bearer of the message. Nonverbal communication in Iranian interaction is extremely wide and complex. It includes aspects of proxemics, hand and body gestures, eye contact. The concatenation of these gestures clearly indicates intimacy between the two persons, or their perception of each one’s hierarchal inferiority or superiority. Iranian social protocol places great importance on seating; placing a guest near a door is indicative of his low rank or a low degree of welcome. Honoured guests are

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Iran Succesful Strategies

Failing Strategies

Religion plays a major role in negotiations. Women have to cover their hair

Ignoring the religious rules and principles

Patience and long-term negotiations

Avoidance of personal space

Relaxed attitude on time and punctuality

Unawareness of hierarchies

Understanding the hierachy and using middleman

Competitive negotiations

Indirect and Metaphor characterised negotiation style – applying “taarof“

Women negotiating on their own. Women have to cover their hair

Ice Breakers (Openers)

Ice Bergs (Barriers)

Handshakes and personal contact with men to show relationship

Disobedience of rituals and religious rules (talking to women, alcohol etc.)

Small gifts

Criticism of the regime and talking about politics

Famliy topics to create personal relationship

Roles of women in Iran

Fig. 21.5 Negotiation strategies in Iran. Source Author

usually seated to the right of the host. Head and hand gestures in Iranian culture differ somewhat from most Western models. For example, raising the head (a half nod) has a meaning of disagreement or dissatisfaction, while lowering the head is an expression of affirmation; a Western style thumbs up in Iran is an obscene gesture; holding one’s head down and placing the hand on the heart with a slight bow is a sign of acknowledgement of the other party’s social pre-eminence. Iranians, however, do not expect foreigners to copy Iranian etiquette. The high sensitivity to hierarchy among Iranians is the source of two important ramifications in the relations between Iranians and non-Iranians: when interacting with foreigners. Iranians expect their contacts to accept and respect their hierarchies and to deal with them accordingly. Handshakes, though regarded as important, usually do not possess the same firmness as handclasps of many Europeans or Americans. Western people usually shake hands only the first time they want to introduce themselves to someone. Most Iranians shake hands every time they meet you and every time they leave you. This applies whether they meet on the street, in an office, at a conference, at a restaurant or at home. The customs and behaviour in Iran is to shake hands on meeting, chat a bit and shake hands again on leaving, even though they meet ten times a day. If sitting, the etiquette requires both to stand up before shaking hands.

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Standing up is also required when an esteemed person enters a room. Touching, long handshakes, grasped elbows and even two males walking hand in hand are common place in Iran. A considerable number of Iranians touch other people of the same sex to show relationship. They hold hands and hug each other. A full-body embrace accompanied by hugging should not be initiated until you are sure that the Iranian is a close friend. If the Iranian initiates it, participate and consider yourself honoured and/or accepted. On the contrary, contact between people of the opposite sex in public is considered close to obscene. A man welcomes women usually only verbally, not by giving a handshake. In fact, any physical contact between men and a woman in Iran, and even more between unmarried couples, is officially forbidden in public. Small talk and ritual greetings are normal. Middle Easterners often greet each other with a number of ritual phrases and fixed responses. Ancient custom governs these interactions. Sometimes to a Western eye profuse greetings and inquiries about health seems like a loss of time, but for Iranians, this is important to establish friendly relations. However, it is considered insulting to ask about a Muslim’s wife or another female family member (Valle, 2016). Eye contact during negotiations in Iran is very important. Distance in talking with one another (body space) may be much closer with Middle East people than with Westerners. Hospitality and giving a warm reception to strangers goes back to the culture of the desert. Many Middle Eastern people continue the custom of showing courtesy and consideration to strangers. Demonstrating friendliness, generosity and hospitality become expressions of personal honour, even sacred duties. Avoid pointing your finger or a pen at anyone while speaking, or indeed pointing at anyone with your finger. This is considered a threat, and only animals are treated in this manner. Men should not wear shorts, and women should not be found wearing short sleeves or sleeveless dresses. Appointments are necessary and should be made four to six weeks in advance. It is a good idea to avoid scheduling meetings during Ramzan (Ramadan) as the need to fast would preclude your business colleagues from offering you hospitality. Written materials and documents should be available in both Farsi and English. In this context, it is also recommended to use a middleman, who understands language, culture and rituals. The middleman should be of a senior level and should know industry, decision-makers and authorities. It takes time for Iranians to become warm towards foreign business people. Until then, they may appear somewhat stiff and formal. Iranians are deliberate negotiators who can drive a hard bargain. Iranians often use time as a negotiating tactic, especially if they know that the other side has a deadline. Companies are hierarchical. Decisions are made at the top of the company, either by one person or a small council. Business dress is formal and conservative. Ties are not worn by Iranians, but if they know you are a foreigner, it would not be seen as a negative. The working week is Saturday to Thursday. Ministries are closed on Thursday.

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Negotiations in UAE

21.6.1 General Guidelines United Arab Emirates has the most diversified economy in the Middle East countries. Most of the Gulf countries’ economy depends on oil and gas exports, while UAE depends on tourism, trading and other logistic businesses through Dubai, the most populous city in UAE and one of the biggest international maritime and aviation trade hubs. More than 80% of the UAE’s population is expats, so the chances of negotiating business deals in a meeting with expats are high as compared to local Emiratis. Expats hold the key decision-making positions or advisor positions in almost all companies in UAE. Indians and people from other South Asian countries form the majority of these expats’ population. During business meetings, English is the official language, since UAE has this vast majority of expat population and one could expect to see people from more than five countries in a single meeting. During these meetings, unlike in the European countries, people in the Middle East show a genuine interest in the personal and professional life of their counterparts. Before starting the meeting, people will get to know each other, their backgrounds, culture and about their home country, etc. The general idea is to become friends rather than just business partners, and this relationship can often outweigh the commercial ties. One should keep in mind that the meetings should not be arranged on public holidays or on weekends, and remember that in UAE, Friday is holiday and Sunday is the first day of the week and a working day. As compared to European countries, taking business decisions in UAE happens at a slower pace. Usually, Western companies get frustrated and discouraged because of this and give up on the deal they are making. In the UAE market, “Patience is a virtue” is not only just a saying, it is the way of doing business. Also do not get offended or frustrated if a local Emirati is late for the meeting or a change in appointment occurs at the last minute; it is not uncommon for local Arabs to come late and show a relaxed approach. However, the Arabs and other expats from South Asian countries expect the Westerners to be punctual.

21.6.2 Successful and Unsuccessful Strategies When negotiating in UAE, it is important to achieve trust of your partner by showing an interest in their well-being, family, native place and their culture. In business meetings, it is expected to follow a formal and professional dress code even though the local Emiratis prefer to wear traditional outfits. Do not wear shorts, t-shirts or any type of open clothes. The locals have a relaxed approach towards meetings, and they are often late, but others should not show the same relaxed attitude, after all the Europeans are known for their punctuality. Most of the time, negotiations take place in an office room or meeting room in a company. Both

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parties will sit down and have an official discussion on the deal. In formal business meetings, it is advisable to give respect to the decision-maker by addressing him/her as Sir or Madam. In business negotiations, people provide solid facts and examples to back up proposals and exaggerate as much as they can to win the deal. Exaggerating the facts is a common practice in UAE. Contacts and business relations with medium to large firms are an advantage, and they should be used wisely while negotiating. Exaggeration in this matter is also acceptable. One should keep in mind that Dubai—the most luxurious city in the Middle East—is hosting the “Expo 2020” event which is supposed to be one of the biggest events in the year 2020 and the government is providing a lot of funds for the infrastructure of this event. Almost every firm in Dubai is related or promoting the event in one way or the other. So, during business meetings, people will discuss how they are contributing to this event, and it is advisable that everyone in the meeting should have a sound knowledge about the event and its vast economic possibilities in the UAE market. Negotiations are taken very seriously in UAE, and people emphasize more on the payment terms, and if the participants cannot guarantee or agree on a satisfactory payment term, then there is a possibility for the negotiation to fail. In European Union, the domestic B2B customers are given an average payment term of 30 ± 5 days from the invoice date to pay invoices. When we consider UAE market, the average payment term is 120 days. In the construction field, it goes up to 335 days! So, considering the current economic situation in UAE, it is recommended that while negotiating a deal, the participants should give much importance to the payment terms and in most cases, it is the deciding factor. A lot of haggling on payment terms can be found in business meetings rather than on the proposed price. Currently, the UAE market is experiencing a lack of cash flow due to some international troubles with Qatar, which is one of the biggest trade partners of UAE. Factors such as implementation of value-added tax and a dip in the crude oil price diminished the cash flow in UAE economy, while the strengthening of US dollar has brought down the external competitiveness of UAE’s tourism industry (Maceda, 2011). When undertaking business negotiations in UAE, there are certain points that one should be aware of in order to achieve the desired outcome. Expect a lot of competition from your competitors, and the bargaining power of customers is very high in almost all industries. Unlike in European countries, in the UAE verbal agreements and promises made in business meetings can change over the day so it is always better to get agreement in writing from the concerned person as soon as possible. This document can be used as a guideline for renegotiation if the decision taken during the meeting changes. Companies in UAE follow a hierarchical approach. Decision-making is done by the top management, i.e. top-down. Decision-making is often a slow process when compared to European nations. To avoid this, people use high-pressure tactics which may yield good results in some cases if done properly and backfires if you do not know what you are doing. The final decision made is carried out as soon as possible, but it can change depending on some internal and external factors in a firm. This will create tension

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between both parties especially if one is from a European country. The only way to resolve this issue is to calmly discuss the matter and arrive at a solution by both parties; in some cases, this can be used as an advantage to renegotiate and gain power over the other. There are certain unethical practices that also take place in UAE such as “Bribing”. As mentioned above, the majority of the population in UAE are expats and they work there to make money and go back to their home country. So, some expats and even locals try to get bribes. Even though bribing is against the law in UAE, it happens most of the time and everybody knows it. After all it depends on the individual to decide whether he/she should give bribe or not to achieve a certain goal. However, one should keep in mind that their competitor in the market may try to bribe the concerned personal also. The top management in most of the companies has even approved this activity to get deals or favourable decisions. Before having an official meeting, one should talk with concerning personal in a firm via phone and get to know their motives. People give subtle hints during this time if they want a bribe or not. It is recommended to ask the influential individual in the decision-making process, whether they take bribe or not in a subtle way and one should be very careful in this matter because there is a possibility of this backfiring. Figure 21.6 displays negotiation strategies in the UAE.

UAE Succesful Strategies

Failing Strategies

Showing interest in others wellbeing and try to have a personal relationship

Rude behaviour and not trying to connect with people

Give better payment terms than your competitors

Arguing about the payment terms

Try to offer discounts and small gifts to the management

Not respecting the hierarchies

Exaggerate the facts a little bit

Do not give fake promises

Punctuality and compliance with schedule

Overreacting when others are not punctual

Ice Breakers (Openers)

Ice Bergs (Barriers)

Mentioning private background and showing an interest in others life.

Negative attitude towards Arab culture

Discuss Sports – Football for Emiratis and Cricket for south Asian expats.

Do not mention current economic crisis and lack of cash flow

Dubai EXPO-2020 and its cultural and economic impact in UAE.

Alcohol consumption during or before meetings.

Fig. 21.6 Negotiation strategies in the UAE. Source Author

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Negotiations in Turkey

21.7.1 General Guidelines The founder of the Turkish Republic and its first President was Mustafa Kemal Atatürk. Emerging as a military hero at the Dardanelles in 1915, he became the charismatic leader of the Turkish national liberation struggle in 1919 (Tektasli & Heidinger, 2012). He put an end to the antiquated Ottoman dynasty whose reign had lasted more than six centuries and created the Republic of Turkey in 1923, establishing a new government truly representative of the nation’s will. Under Atatürk’s Leadership, Turkey then undertook the modern world’s swiftest and most extensive language reform. In 1928, Atatürk decided that the Arabic script, which had been used by the Turks for a thousand years, should be replaced with the Latin alphabet. Atatürk launched many reforms to give Turkish women equal rights and opportunities. The new Civil Code, adopted in 1926, abolished polygamy and recognized the equal rights of women in divorce, custody and inheritance (Tektasli & Heidinger, 2012). The entire educational system from the grade school to the university became coeducational.

Turkey Succesful Strategies

Failing Strategies

Punctiality as a foreigner, even though Turkish negotiation partners are late

Avoidance of competitive negotiation strategies and pressure on Turkish negotiation partners

Choosing relaxed area such as a restaurant for negotiations

Meeting should not be scheduled during Ramadan or during the holiday season in summer

Involving intepreter and expert in Turkish rituals Turks who are not Muslims may drink alcohol, but as and cultures the consumption of alcohol is prohibited by the Islamic faith, one should wait for the host first Relationships are necessary for negotiations in Politics and recent developments in Turkey Turkey Mentioning the conflict between Turks and Kurds Business is taken very seriously in Turkey and meetings will have formal protocols and agenda that should be respected

Ice Breakers (Openers)

Ice Bergs (Barriers)

Praising Turkey´s leader Atatürk

Criticising Atatürk

Exchanging small gifts

Political issues or criticism against the Turkish president Erdogan or other politicians

Admiration of the Ottoman empire

Mentioning the brutality of the Ottoman empire and genocide in Armenia

Fig. 21.7 Negotiation strategies in Turkey. Source Author

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Turkish society is highly influenced by Islam (Tektasli & Heidinger, 2012). Appointments and meetings should therefore be scheduled around each of the five daily prayer times. One should avoid having any appointments during Ramadan or during July and August, since these are the most common annual holiday periods for Turkish business people (McPherson & Smart, 2014).

21.7.2 Successful and Unsuccessful Strategies Figure 21.7 illustrates successful and failing strategies for negotiations with Turkish negotiation partners. Turkish business culture is built on trust and familiarity; it is important to take the time to establish personal relationships with your Turkish contacts in order to succeed in business there. You will be judged on your personal characteristics but also on the mutual business benefits of your proposal. It is normal practice to address professionals by their occupational title alone, such as Doctor or Lawyer, alternatively you should address people using “Mr” or “Mrs” along with their first name, or “bey” (Mr) or “hanim” (Mrs) in Turkish. Business entertaining usually occurs in restaurants. For Turks, the meal is a time to relax and engage in some good conversation and build the relationship on a more personal basis (Tektasli & Heidinger, 2012). They are proud of their cuisine, so wherever possible try to emphasize your appreciation of the food. It is a good idea to be familiar with Turkish business etiquette before doing business with the Turks. Meetings are important for Turkish business people. It is a good idea for meetings to be scheduled one to two weeks in advance to avoid Turkish holidays (McPherson & Smart, 2014). It is recommended to provide details about the people who will be coming to the meeting, including their positions, titles and responsibilities. Although Turks are not vey punctual, they expect foreign visitors to be on time. The meeting may start later than scheduled, but be patient. Politics and comments about the current situation or the conflict between Kurds and Turks should be avoided (McPherson & Smart, 2014). Meetings are relatively informal and unstructured and may be lengthy. It is normal practice for Turkish people to be involved in a number of different tasks at one time, so the meeting may be interrupted several times. Icebreakers can be some knowledge about the Ottoman Empire and the innovations of Atatürk. Small gifts from the home country will help to build up a good relationship with the negotiation opponent (McPherson & Smart, 2014).

References Erekat, S. (2008). Life is negotiations. Nablus: Al Najah University. Expatarrivals. (2019). Jordan customs and business etiquettes. Retrieved January 29, 2019. http:// www.expatarrivals.com/middle-east/jordan/doing-business-jordan. Feghali, E. (1997). Arab cultural communication patterns. Beirut: International Journal of Intercultural Relations.

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Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler. Hünniger. (2018). A.H. Sängerin Umm Kulthum. Die Araberin, für die Gaddafi sogar seinen Staatsstreich verschob. In Welt Online. Published June 08, 2018. Retrieved June 26, 2018. https://www.welt.de/kultur/kino/article177151680/So-ewig-wie-die-Pyramiden-die-SaengerinUmm-Kulthum.html. Krachtowil, G. (2018). Business. Etiquette Arabische Welt. Die 10 Lieblingsfehler im Umgang mit arabischen Geschäftspartnern. Dr. Gabi Kratochwil, CrossCultures Frechen. Retrieved January 2, 2019. https://www.osnabrueck.ihk24.de/blob/osihk24/international/Downloads/1201512/ fbde074b93ba16d5240c23fb1a167fe4/Business-Etikette-Arabische-Welt-data.pdf. Lautmann, O. (2016). Israeli business culture: Building effective business relationships with Israelis (2nd ed.) (Israel guide, Etiquette, Business, Middle East). Osnat Lautmann Verlag. Maceda, C. (2011). Bargaining 101: Negotiating tips in the UAE. In Gulf News (Newspaper). McPherson, C., & Smart, C. (2014). Turkey—culture smart! The essential guide to customs and culture (2nd ed.). London: Kuperard. Nishlis, I. (2018). The dos and don’ts dos in Israel business culture. Legal marketing. http:// legalmarketing.co.il/blog/the-dos-and-donts-of-doing-business-in-israel/. OECD. (2018a). Die OECD in Zahlen und Fakten. Die wichtigsten Volkswirtschaften nach dem Bruttoinlandsprodukt. Retrieved June 17, 2018. http://www.oecd.org/berlin/statistiken/. OECD. (2018b). Economic survey of Israel. Retrieved January 25, 2019. http://www.oecd.org/ israel/economic-survey-israel.htm. Samara, W. (2018). Performance measurement towards excellence in the German Public Organizations. Berlin. Slackman, M. (2006). Iranian 101: A lesson for Americans. The fine art of hiding what you mean to say. The New York Times. Retrieved January 25, 2019. https://www.nytimes.com/2006/08/ 06/weekinreview/06slackman.html. Tektasli, Y., & Heidinger, P. (2012). Business Guide Türkei (German ed.). IfAD - Institut für Außenwirtschaft GmbH. Thiel, S. (2018). Kulturschock Islam. Alltagskultur, Traditionen, Verhaltensregeln. Bielefeld: Verlag Peter Rump. Theodora. (2018). Jordan economic facts. Jordan Economy 2018. Retrieved January 29, 2019. https://theodora.com/wfbcurrent/jordan/jordan_economy.html. Valle, J. (2016). The Persian art of etiquettes. Retrieved January 25, 2019. http://www.bbc.com/ travel/story/20161104-the-persian-art-of-etiquette. Wikipedia. (2019). Jordan. Retrieved January 29, 2019. https://en.wikipedia.org/wiki/ Jordan#Economy. Wittes, T. C. (2005). How Israelis and Palestinians negotiate: A cross-cultural analysis of the Oslo peace process (cross-cultural negotiation books). Washington, D.C.: United States Institute of Peace Press.

Negotiations in Africa

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22.1

Negotiations in Morocco

22.1.1 General Guidelines Introduction for Business Culture Morocco opens interesting economic prospects for companies looking for growth. The country guarantees a high level of quality of services and skills of its human resources. Geographical proximity and cultural exchange with Europe are two other assets that make the kingdom the preferred destination of outsource and nearshoring activities. It is almost crucial to at least know, or be familiar, with the basics when traveling to a new country. The same applies when doing business in an unfamiliar place. In today’s world, successful business is now more about understanding and nurturing a strong relationship with international and multicultural customers and clients. Understanding intercultural and cross-cultural differences in communication can be quite a challenge, but it is essential when forming these business relationships. There are many things to consider when familiarizing yourself with a countries business etiquette and protocol. Negotiating tactics, business culture, manners, customs, and entertainment are all important characteristics to understand before becoming involved in a business interaction. Here you will find a series of information and key things to remember before doing business etiquette in Morocco (Butler, 2014). Many business customs have been greatly influenced by the French, M. Helmold (&)
Y. Hammadi
V. Panwar Campus Studies, IUBH Internationale Hochschule, Rolandufer 13, 10179 Berlin, Germany e-mail: [email protected] Y. Hammadi e-mail: [email protected] V. Panwar e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Helmold et al. (eds.), Successful International Negotiations, Management for Professionals, https://doi.org/10.1007/978-3-030-33483-3_22

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and French is the prominent language of business. Relationship is essential for Moroccans who value doing business with those they know and respect. Therefore, it is recommended to spend time concentrating on a personal relationship before the business is conducted. Relationships are important according to the saying: “Who you know is more important than what you know” (Butler, 2014). The focus should be on connecting with a large network and establishing a number of contacts who may assist you in working your way through the organization (Butler, 2014).

22.1.2 Successful and Unsuccessful Strategies Business Etiquettes and Protocols The history of this country is marked by the French colonial regime that lasted for more than 40 years, French people are often perceived and accused of being arrogant and giving the impression of superiority, which make Moroccan people too sensitive to those traits of characters and easily develop a defensive line against people with such attitude. To avoid this common misunderstanding, it would be very useful to learn few Arabic words, like SALAMO ALAYKOM which mean peach on you, or CHOUKRAN that means thank you. Moreover, it is very important to show and to adopt a friendly and smiling posture; this attitude let the other parties know more about the implicit gesture matter a lot. It is important to observe everyone’s role and know how to respect the age and social status of your interlocutors. In order to do business, Moroccan people need to establish a trust-based relationship, which comes after spending time concentrating on personal relationship before business is conducted (Butler, 2014). Respect for Local Value and Believes Morocco has, since the declaration of his Majesty King Mohammed VI in 2011, been a constitutional monarchy, ruled by a Sunni Muslim dynasty which has been present in the country for centuries. According to the constitution, the King is determined as the religious leader and commander of the faithful (“Emir El Moominine”), believed to be a descendant of Muhammad the Prophet. Islam is the state religion in the constitution, and more than 99% of the population are considered to be Muslims. While the majority of the population are Sunni Muslims, other religious groups such as Christians and Jews are also present in the country; however, they represent less than one percent of the population. Religion plays an important role in the daily life of Moroccans, being present in personal, political, and economic matters. However, the Moroccan Islam is characterized as a tolerant form of the religion and the country is perceived as more liberal than many other Muslim countries. The most evident religious acts in Morocco are the daily prayers that take place five times a day, and which can easily be heard by the many calls for prayers coming from the Moroccan Mosques. Friday is determined as the Muslim holy day, and some shops and markets will close earlier this day. In addition to Fridays, the month of Ramadan is considered to be the most important holy holiday in Islam.

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During Ramadan, many restaurants and cafés close early. Even though non-Muslims are not expected to follow this tradition, individuals should pay respect to the religious act and avoid breaking the fast in public. While Morocco is considered among the most liberal and tolerant countries of the region, some business leaders, in spite of their very Westernized appearances, may be religiously conservative. As such, when meeting Moroccans, it is to avoid ordering alcohol over a business meal unless the local representative orders first or offers it. Although Moroccans tend to be very punctual, unanticipated delays are casually attributed to the will of God. Business Dress, Language, and Greetings Appearance has a very huge importance in Moroccans culture. Moreover, Moroccan people have a reputation to judge people on appearance. It is very important to get dressed well and has a good presentation. The dressing code is usually the same for different kinds of business meetings, and it should be formal and conservative. Men should wear dark-collared business suits. Women should wear elegant business suits, dresses, or pantsuits, but be careful to cover up appropriately. For women, skirts and dresses should cover the knee and sleeves should cover most of the arm. Avoid wearing expensive accessories. The daily spoken language is known as Darija, a form with both Berber and French mix. In addition to Arabic and Berber, French language and culture are also strongly noticeable in Morocco, reflecting the former French. It is mostly used among the business societies and higher education institutions, as well as by the middle class and upper class. Although French is the most widely used European language, Spanish language is also present in the country, especially in the northern part. Even though English is still far behind in regard to number of speakers, the language is rapidly becoming more noticeable, especially among the younger generations and in business and tourist matters. You should greet both men and women at a business meeting that you do not know with a handshake, when both leaving and exiting. Always use your right hand. Kissing on cheeks is reserved for close friends and family friends. It is considered polite to talk about family members and ask if they are well. Time Management Make business appointments as far in advance as possible. Due to Moroccan commitment to their religion, it is wise to take into consideration some specific time period during which it is recommended to avoid scheduling meeting or doing business especially during Ramadan a holy month for Muslim countries where people do not drink or eat; also, it is advisable to not schedule meetings on Friday between 11:15 am and 3 pm where many companies and governmental services and administration could be closed for prayer. Even if people arrive to meetings on time, they should be prepared to wait (it is hard to keep a tight schedule since Moroccans live in such a relationship-driven culture). It is important to have a flexible time schedule because of the country tradition of hospitality. At meals, taste

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everything, but you will not have to finish your plate because the meals are hearty. Tea is the tradition local drink and symbolizes hospitality and conviviality value of the Moroccan culture, and also, because it is an opening ritual to any discussion or dialogue. Finally, in a situation of negotiation some important elements to know before attending a business meeting with Moroccans are given as follows: • Companies are hierarchical. The highest-ranked person makes decisions, but only after obtaining a group consensus. Decisions are reached after great deliberation. • If the government is involved, discussions will take even longer since the ministers of several departments must often give approval. Moroccans are looking for long-term business relationships. • Do not criticize anyone publicly. It is important that you do not cause your Moroccan business associates to lose face. • Moroccans are non-confrontational. They may agree in meetings rather than cause you to lose face. • Expect a fair amount of haggling. Moroccans seldom see an offer as final. • Decisions are made slowly. Do not try to rush the process, as it would be interpreted as an insult. The society is extremely bureaucratic. Most decisions require several layers of approval. • It may take several visits to accomplish simple tasks. • Do not use high-pressure tactics as they will work against you. Moroccans can be deliberate and forceful negotiators. Speaking Some Basic Words The history of this country is marked by the French colonial regime that lasted for more than 40 years, French people are often accused of being arrogant and giving the impression of superiority, which make Moroccan people too sensitive to those traits of characters and easily develop a defensive line against people with such attitude. To gain the respect of Moroccan people, it would be very useful to learn few Arabic words, like SALAMO ALAYKOM which means peace for you, or CHOUKRAN that means thank you. Business Cards In the case of business card are excepted to be exchanged, it is wise to make sure that information is written in French or Arabic on the second side of the business card (Fig. 22.1).

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Morocco Succesful Strategies

Failing Strategies

Awareness of structural hierarchy of the local organization which is more offen a tall hierarchy, indentification the higher and the most influenctial member

Not showing enough interest to the higher authotiry or showing clear and direct disagreement on what they say

Being open and respectful for local traditions and habits

Trying to stick to a pre defined time schedule and not having flexible deadlines

Meeting and work event are more often Unawareness of hierarchies and decision making followed by a buffet which includes good quality process food and drinks from the very rich Morroccan culinary culture Observe everyone's roles and know how to respect the age and social status of your contacts

Being too introvert and not responding kindly to people who are generally more extrovert and can engage talks about personal topics

Ice Breakers (Openers)

Ice Bergs (Barriers)

Ability to speak French which is the official language of the country that almost everyone speaks

Engaging dicussion on religion aspect or polical matters

Praise of the local culture and cuisine (Food and artisans)

Not understanding the cultural differences of the local people

Fig. 22.1 Negotiation strategies in Morocco. Source Author

22.2

Negotiations in Egypt

22.2.1 General Guidelines Egypt (the official name of Egypt is Arab Republic of Egypt) has a population of 97 million people and is the most populous country in the Arab world. The majority live alongside the Nile and Nile delta, which fan out North of the capital Cairo (Today Translations, 2019). The official language is Arabic. Egyptian business people appreciate a thorough presentation of information, so that companies are recommended to make sure to have appropriate research and documentation to support any business objectives in negotiations (Katz, 2017a). Documents, presentations, and contracts should include two dates: the Gregorian (Western) and the Hijrah (Arabic) date. It is useful to have an Egyptian agent to do business (Katz, 2017a). Figure 22.3 outlines suitable and unsuitable negotiation strategies in Egypt.

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22.2.2 Successful and Unsuccessful Strategies Like in other Arabic countries, it is recommended to take advantage of a local intermediary person, who can speed up through the knowledge of the culture, authorities, and negotiation rituals in the business process (Katz, 2017a). Business will not proceed until there is set up a good relationship with the negotiation opponent. The social side of the deal goes hand in hand with the work-related one. Regarding negotiating techniques, foreign negotiators should like in other Arabic countries not use high-pressure tactics or competitive negotiations. The negotiation pace in Egypt is much slower than in the majority of European countries, so expecting immediate results are not expectable (Katz, 2017a). Business is not conducted on Fridays, as this is the holy day for Muslims in the world. Most people do not work on Thursdays either, so that no meetings should be set up on these days in Egypt (Katz, 2017a). Arabic countries have also other religious periods like the Ramadan which are important in the Muslim world (Helmold, Dathe, & Hummel, 2019). Before setting a meeting, business partners should check their ability. Since there are plenty of greeting styles in Egypt, it is safest to wait for your counterpart to initiate the greeting, especially at a first meeting (Katz, 2017a). It is advisable to have an Egyptian intermediary on a senior level to explain the major points of your business in Arabic. Many educated Egyptians speak multiple languages, but they appreciate brevity and, therefore, would prefer Arabic (Katz, 2017a). Welcome topics of conversation include Egyptian achievements, both ancient and modern, the positive reputation of Egyptian leaders, Egyptian cotton, sports. Topics like politics and Israel should be avoided. Regarding dress code, visitors are expected to follow Egyptian discretion standards. Despite the country’s hot temperatures, most of the body must remain covered. Punctuality in Egypt is not considered the main priority. Negotiation counterpart might arrive late for a meeting, but foreigners are expected to be punctual (Katz, 2017a). Business cards should be printed in English on one side and in Arabic on the other (Katz, 2017a). Welcome presents are welcome and should be handed over with the right hand (the left hand is unclean) (Katz, 2017a). Pointing at somebody or showing the shoe soles to somebody (crossed and stretched legs) is considered extremely rude in Egypt (Katz, 2017a) (Fig. 22.2).

22.3

Negotiations in South Africa

22.3.1 General Guidelines South Africa was characterized by the apartheid, which ended in the 1990s with the election of Nelson Mandela as president (Schlemmer & Giliomee, 1989). Businesspeople and officials in South Africa, especially outside of Johannesburg, Cape Town, and Pretoria, usually have only limited exposure to other cultures (Katz, 2017b). When negotiating business in South Africa, Katz indicates that people

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Egypt Succesful Strategies

Failing Strategies

Awareness of structural hierarchy

Competitive negotiations

Understanding local traditions and habits

Trying to stick to a pre-defined time schedule and not having flexible deadlines

Using intermediary and flexible negotiations (time, agenda, negotiation structure)

Unawareness of hierarchies. Disrespecting senior people and decision makers

Respecting cultural and religious issues such as 5 times prayer etc.

Being too introvert and not responding kindly to people who are generally more extrovert and can engage in talks about personal topics

Ice Breakers (Openers)

Ice Bergs (Barriers)

Ability to speak French which is the official language of the country that almost everyone speaks

Engaging dicussion on religion aspects (e.g. Israel) or polical matters

Praise of the local culture and cuisine (Food and artisanat)

Not understanding the cultural differences of the local people

Praise of the local culture and cuisine (Food and artisans)

Alcohol or any issues not respecting culture, traditions or religious feelings

Fig. 22.2 Negotiation strategies in Egypt. Source Author

might negotiate in their special way. However, some of younger generations may have greater international experience and can be quite open-minded. South Africa deserves its nickname as “The Rainbow Culture” as it is indeed one of the most multicultural nations on earth. Its culture is quite heterogeneous. The majority of the population are Black people (almost 80%), representing many different tribes such as the Zulu and Xhosa (Katz, 2017b). In addition, 13% are Afrikaners (whites of Dutch origin) and eighth percent are of British descent. Other important minorities include several Asian groups. There are also vast differences in business styles between urban and rural areas in South Africa. This great diversity makes preparing for specific business interactions difficult. Business practices in the country sometimes deviate from the general guidelines provided in this section. Always expect the unexpected when doing business here. Negotiation styles are, therefore on the one hand in some aspects, similar to other practices of African countries; on the other hand, there is a strong European influence which can be regarded as similar to Dutch or British negotiation styles (Helmold et al., 2019).

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22.3.2 Successful and Unsuccessful Strategies Long-Term Relationships Building lasting and trusting relationships are most important for the people in South Africa (Katz 2017a, 2017b). However, they are usually not a necessary precondition for initial business interactions. Afrikaners and Black South Africans may take relationship building even more seriously and often expect to establish strong bonds prior to closing any deals (Katz, 2017b). Although people in the country may emphasize near-term results over long-range objectives, they are generally more interested in building long-term relationships than in quick deals. The elements in terms of creating a good and sustainable relationship can be summarized as follows: South Africans are transactional but like to set up long-standing personal relationships before conducting business. If a company is not known in South Africa, a more formal introduction may help to gain access to decision-makers. Networking and relationship building are crucial for long-term business success. Although the country leans toward egalitarianism, businesspeople respect senior executives and those who have attained their position through hardwork and perseverance. There are major differences in communication styles depending upon the individual’s cultural heritage. For the most part, South Africans want to maintain harmonious working relationships, so they avoid confrontations in negotiations. South Africans often use metaphors and sports analogies to demonstrate significant negotiation point. Most South Africans, regardless of ethnicity, prefer face-to-face meetings to more impersonal communication mediums such as email, letter, or telephone. Business Negotiations Since South Africans may initially be cautious when dealing with foreigners, gaining their trust and establishing goodwill are going to take time. It is very important for you to emphasize frequently the long-term benefits and your commitment to the business relationship you are seeking to build. Business relationships in this country exist both at the individual and at the company level. Most South Africans want to do business only with those they like and trust (Katz, 2017b). Conventions and rules regarding race and color can be very strict. It is usually best to follow the lead of your host concerning these matters. Though Whites, particularly Afrikaners, sometimes retain a paternal or caretaker attitude toward Blacks, you will rarely hear openly racist comments. When dealing with Black businesspeople, try to show understanding and sensitivity toward the fact that this group long represented an oppressed majority. In addition, remember that South African Blacks felt betrayed by most of the Western world at some point.

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In South Africa’s business culture, the respect a person enjoys may depend strongly on his or her education. People of British descent highly respect status and rank, while others may be more impressed with personal knowledge and accomplishments. Admired personal traits include sincerity and dependability (Katz, 2017b). While English is widely spoken, it is only one of eleven official languages of the country. Most white South Africans are bilingual, speaking English and Afrikaans, which is closely related to Dutch. Blacks speak their own native tongues and may have a working knowledge of Afrikaans and/or English. Businesspeople in this country usually speak in a controlled fashion, only occasionally raising their voices to make a point (Katz, 2017b). It is imperative to develop mutual trust before negotiating. Women are not yet often in senior-level positions. If a company sends a woman, she must expect to encounter some condescending behavior and to be tested in ways that a male colleague would not. South Africans strive for consensus and compromise outcomes, so that mutual benefits must be considered in the negotiation. Contracts should be as detailed as possible; haggling over price should be avoided. Decision-making may be concentrated at the top of the company, and decisions are often made after consultation with subordinates, so the process can be slow and protracted. At restaurants, especially those used for business lunches and dinners, keep conversations at a quiet level. Being loud could be regarded as bad manners. Interrupting others is often considered rude. Periods of silence do not necessarily convey a negative message. Afrikaners and British South Africans rarely show their emotions openly, but Blacks may be less restrained. People generally converse while standing around two to three feet apart, possibly closer among Blacks. While most South Africans avoid confrontation, levels of directness can vary greatly. Afrikaners are often much more direct and can be quite blunt. They do not find it difficult to say “no” if they dislike a request or proposal. Afrikaners value straightforwardness and honesty much more highly than tact or diplomacy. They generally dislike vague statements and openly share opinions, concerns, and feelings with others. British South Africans are often somewhat vague and can be hard to read. While you may occasionally get a direct “no,” evasive responses like “I’ll get back to you” could indicate a lack of interest in what you have to offer. Black South Africans, on the other hand, can be more indirect than the other groups. Instead of “no,” you may receive seemingly ambiguous answers, such as “I am not sure,” “we will think about it,” or “this will require further investigation.” Each of these could mean “no,” as does a “yes” that sounds hesitant or weak. Alternatively, a respondent could deliberately ignore your question. With Blacks, extended silence likely communicates a negative message. Gestures are usually subtle, especially among British South Africans. Physical contact is rare among Whites but can be frequent among Blacks. However, never touch someone’s head, not even that of a child. Do not use your fingers to point at others. Instead, point with your head.

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Eye contact should be frequent as this conveys sincerity. However, make it less frequent with a superior and do not stare at people. Attitudes and styles—negotiation approaches in South Africa may depend on your counterparts’ cultural background. With Afrikaners, the primary approach to negotiating is often to employ distributive and contingency bargaining. They can be quite competitive and may be unwilling to agree with compromises unless it is their only option to keep the negotiation from getting stuck (Katz, 2017b). Appointments are necessary and should be made as far in advance as possible. It may be difficult to arrange meetings with senior-level managers on short notice, although you may be able to do so with lower-level managers. It is often difficult to schedule meetings from mid-December to mid-January or the two weeks surrounding Easter, as these are prime vacation times. Personal relationships are important. The initial meeting is often used to establish a personal rapport and to determine if you are trustworthy. After a meeting, send a letter summarizing what was decided and the next steps. Business Dress and Meetings Even though business dresses are becoming more informal in many enterprises in South Africa, it is recommended for the first meeting to dress more conservatively. Men should wear dark-colored conservative business suits, and women should wear elegant business suits or dresses. South Africans regard negotiating as a joint problem-solving process (Katz, 2017b). The latter are often willing to compromise as necessary to reach agreement, while Blacks may be inclined to leverage relationships as a way to resolve disagreements. They may also focus more on the longer-term benefits of the business deal than the other groups. With all of the groups, the buyer is in a superior position but both sides in a business deal own the responsibility to reach agreement. South Africans believe in the concept of win–win and will expect you to reciprocate their respect and trust. It is strongly advisable to avoid open confrontation and to remain respectful and cooperative. Should a dispute arise at any stage of a negotiation, you may be able to reach resolution through give-and-take compromising and appeals to your counterparts’ fairness if you are negotiating with British South Africans. With the other groups, it can be best to leverage personal relationships and emphasize common interests and long-term benefits. Patience and creativity will pay strong dividends. Sharing of information—South African negotiators could spend considerable time gathering information and discussing details before the bargaining stage of a negotiation begins. Most of them believe in information sharing as a way to build trust. This does not mean that they will readily reveal everything you might want to know during your negotiation. However, negotiations can become very difficult if one side appears to be hiding information from the other. Negotiation in South Africa may take long time. Traditional companies may be very slow, spending considerable time gathering information, bargaining, and making

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South Africa Succesful Strategies

Failing Strategies

Building lasting and trusting relationships is important to most people

Confrontational negotiations

Collaborative and unemotional negotiations

Immediate start of negotiations without relationship building

Using an intepreter who understands Africans or the native African dialects

Purely English negotiations

Smart and professional business dress

Short-term objectives and motives

Understanding the hierarchies in companies and building relationship with decision maker

Unawareness of decision makers

Ice Breakers (Openers)

Ice Bergs (Barriers)

Diversity and ethnic groups. Beauty of the country.

Apartheid regime

Nelson Mandela and his reputation in the world (Nobel peace price winner)

Increased levels of crime in South Africa

South African sports such as rugby, cricket and football

Disrespectful behaviour

Fig. 22.3 Negotiation strategies in South Africa. Source Author

decisions. Attempts to accelerate the process may be counterproductive, so it recommended to be patient. Business lunches and dinners, as well as other evening entertainment, are frequent and help in building relationships and growing your network. Business may or may not be discussed during these events. Wait to see whether your counterparts bring it up. Social events do not require strict punctuality. While it is best to arrive at dinners close to the agreed time, being late to a party by 15–30 min is perfectly acceptable. Gift-giving in business settings is rare. It is best not to bring a gift to an initial meeting in order to avoid raising suspicions about your motives (Katz, 2017a, 2017b). Only in the event of being invited to a private home, it is suitable to bring a gift for the host (wine, chocolate, or flowers) (Helmold et al., 2019) (Fig. 22.3).

22.4

Negotiations in Cameroon

22.4.1 General Guidelines Cameroon is a lower-middle-income country with a population of about 24 (2017) million. Situated on the Atlantic Ocean, it shares its borders with Chad, the Central

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African Republic (CAR), Equatorial Guinea, Gabon, and Nigeria. Two of its regions (bordering southern Nigeria) are Anglophone, while the rest of the country is Francophone. Cameroon’s ruling party, the Cameroon People’s Democratic Movement (CPDM), has long dominated the country’s political landscape, occupying 148 of 180 seats in the National Assembly and 81 of 100 in the Senate. In November 2018, disputed election results returned President Paul Biya to office. Africa’s second-longest serving president, Biya, has held power since 1982 (World Bank, 2019). Cameroon is endowed with rich natural resources, including oil and gas, minerals, high-value species of timber, and agricultural products, such as coffee, cotton, cocoa, maize, and cassava (World Bank, 2019). The west African state of Cameroon is located between the nations of Nigeria and Equatorial Guinea. It has a population of around 18.5 million, and 230 languages are used across the country (Global Affairs Canada, 2019). The ethnic makeup of the country is widespread among many African groups or tribes with less than 1% of the population originating from outside the continent. 20% of Cameroonians are Muslim, double that number Christian, and the remaining 40% are of various indigenous religious beliefs. Cameroon suffers from weak governance, hindering its development, and the ability to attract investment. It ranks 153rd out of 180 countries in the 2017 Transparency International Corruption Perceptions Index and 163rd out of 190 economies in the World Bank’s Doing Business 2018 report (World Bank, 2019). English and French are both the official languages used a relic of the country’s colonial past up until its independence in the middle of the twentieth century. The government wants to remain with using both languages and promotes bilingualism among its people although in reality very few speak both. The majority of the population particularly outside the major cities speak neither of the official languages keeping to use their traditional or tribal ones although Kamtok or Pidgin English is more widely spoken. The etiquette and customs can vary between Francophile or Anglophile areas—both areas the men will shake hands, while in the mainly Francophile south close friends will embrace and touch cheeks. Men will lower their head and avert their eyes when greeting a superior, both in age and ranking or position. Some males of the Muslim population will not shake hands with women. Elders are always the first to be greeted. Introductions and greetings are not to be rushed; it is considered impolite if you do not ask about the person’s family or other areas of interest when meeting them.

22.4.2 Successful and Unsuccessful Strategies The expected etiquette, when invited into the home of a Cameroonian, is to bring fruit, whiskey, or wine for your host. Exceptions to the alcohol are for Muslim families or people are not allowed to drink alcohol, therefore fruit varieties or sweets should be considered as suitable gift. A gift of sweets (candy) or school materials for children are not compulsory but always well received. Always offer gifts with both hands or the right only, and never offer them from just the left hand; the gifts may not be opened upon being received as this can be considered to be

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Cameroon Succesful Strategies

Failing Strategies

Flexible and open agenda at start of negoƟaƟons

ImpaƟence and compeƟƟve negoƟaƟons

Using a middleman of senior posiƟon who is familiar with environment

Unawareness of tribe, family and group origins

RelaƟonships beyond organisaƟon are important: family, tribe, friends, groups

Insuĸcient respect and appreciaƟon of status, posiƟon and hierarchy

Using an interpreter who understands local dialect

Arrogance and strict adherence to agenda and protocol

Bringing giŌs of value and high quality

Missing giŌs can be understood as disrepect

Ice Breakers (Openers)

Ice Bergs (Barriers)

Openness and interest in Cameroon and Africa

CriƟcism about poliƟcal system, ruling party or president

Football and sports

MenƟoning the colonial system.

Relaxed aƫtude towards Ɵme and protocol

Disrespecƞul behaviour or stressing corrupƟon index

Fig. 22.4 Negotiation strategies in Cameroon. Source Author

impolite. Business meetings can be held in very public places and even have many separate meetings being held at the same time. They can have people joining mid-way through a meeting and interrupting proceedings; this is not considered disrespectful; and the meeting will reconvene once the interruption has ended. Although a business meeting may appear casual in its surroundings, you should not remove the jacket of your suit until invited to do so. The rules of etiquette in business meetings require that you do not turn your back on your seniors even if it is only to reply to someone behind you. Despite the formalities of a business meeting, your conversation may be interrupted, if Cameroonians believe they know what you are about to say. They will interrupt you to agree with you, disagree, or even abruptly change the subject, and these practices are not considered to be of poor etiquette (Fig. 22.4).

References Butler, B. (2014). How to master business etiquette in Morocco. Retrieved January 19, 2019. https://www.careeraddict.com/master-business-etiquette-in-morocco. Global Affairs Canada. (2019). Business in Cameroon. Retrieved January 23, 2019. https://www. international.gc.ca/cil-cai/country_insights-apercus_pays/ci-ic_cm.aspx?lang=eng.

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Helmold, M., Dathe, T., & Hummel, F. (2019). Erfolgreiche Verhandlungen. Best-in-Class Empfehlungen für den Verhandlungsdurchbruch. Wiesbaden: Springer Gabler. IB_Morocco_17.v02. Negotiations in Morocco. Retrieved January 29, 2019. Available online at http://www.ib.no/269-1734684910/IB_Morocco_17.v02.pdf. Katz, L. (2017a). Negotiating international business. Charleston: Booksurge Publishing. Retrieved February 2, 2019. http://www.leadershipcrossroads.com/mat/cou/Egypt.pdf. Katz, L (2017b). Negotiating international business. Charleston: Booksurge Publishing. Retrieved February 2, 2019. http://www.leadershipcrossroads.com/mat/cou/South%20Africa.pdf. Schlemmer, H., & Giliomee, L. (1989). Negotiating South Africa’s future (1st ed.). Chennai: Southern Book Publishers. Today Translations. (2019). Business in Egypt. Retrieved January 26, 2019. https://www. todaytranslations.com/doing-business-in-egypt. World Bank. (2019). Overview of Cameroon. Economic factors. Retrieved January 25, 2019. https://www.worldbank.org/en/country/cameroon/overview.