Culture is defined as a particular system of values which define the relative values and norms that are shaped among a group of people and that when taken together constitute a design for living (Hofstede, 2001). This study tackles the issue of if and how culture affects the processes involved in conducting business negotiations between different countries posses different cultures. The paper will look at the possible factors that attribute to such differences and how such factors could be remedied in the attainment of corporate goals. The research would then look at specific examples which could deem be useful in the analysis of their corporate transactions and how their relative culture affects such procedures.
Probably one of the most challenging things that a businessman may have is to do business beyond the country’s territorial bounds (Zadorozhna, 2006). The idea of conducting business affairs in an international manner has long been taken into consideration for many years now. In the light of globalization, the sheer importance of adapting into various cultures, local customs, varying means of doing business heeded into the need of levelling off to other cultures in the world (Tanner, 2003).
The corporate game basically depends on how well corporate people would be able to adapt through this multi-cultural set-up (Tanner, 2003). Through this adaptation process, businessmen could strike out better deals which could make the company gain a wider perspective not to mention a broader business scope.
Significance of Business Negotiations
Negotiations have been economically significant since the inception of the barter system (Hofstede, 2001). Negotiations have been a part of psychological abilities of individuals that certain literatures define in various ways although there is no universal agreement regarding a model definition for the word (Hasek, 2006). Negotiations have not been seen as an enjoyable activity since the beginning.
Objective skills, patience tranquil and a good knowledge about party with whom the proposed negotiation is to be made are just some of the common characteristics of effective negotiators ought to have. Effective negotiators always try to have the entire knowledge about the background of the country in which he is going to negotiate when in the global arena (Aguilera, 2007). Political structure and form of government of the country in which he is negotiating should be set aside in order to become effective. It is very important for a negotiator to understand that cultural dimensions play an important role in the process of negotiations (Asrani, 2004). He would keep himself updated with the customs of the country where he proposes to do business. Assumptions can be made on existence of “contexts” which is often associated with culture (Buttery, 2000).
The Cross-Cultural Factors
According to the literature by Salacuse, there are six primary factors which are frequent to all cross-cultural business negotiations (Salacuse, 1991). These factors then do not necessarily apply to everything and distinguishes international business negotiations from domestic negotiations. The first one is the fact that cross-cultural negotiations deals with varying laws, policies and political authorities in more than one territory, although these laws and policies may be at times contradictory (Merchant, 2002). For instance, there was an incident in the early 1980s where U.S. companies operating in European continent were held up between the American embargo on business operations to the Soviet Union for their Trans-Siberian pipeline, and E.U.’s urging for the reconsideration to stick to the original corporate supply mandate (Calingo, 2002). Cross-cultural business deals must contain initiatives to tackle such inconsistencies. These measures usually consist of settlement clauses, specifications of the governing laws, and tax havens (Salacuse, 1991).
The distinct factor which can be considered in this study is the presence of national currencies that is unique to a particular country in which business operations are being made (Diemers, 2000). Diverse currencies induce two problems for business negotiations. The real cost of the prices or payments set in the negotiation process may differ, resulting in unanticipated losses or gains given that the comparative value of dissimilar currencies vary through time (Diemers, 2000). Running the influx of domestic and foreign currencies across national boundaries is yet another dilemma. So business negotiations frequently depend upon the eagerness of governments to provide the currency (McGinnis, 2005). Sudden changes in such financial policies can have striking effects on international business negotiations.
A third element inherent to cross-cultural corporate negotiations is the contribution of governments. National administrative offices overseas could be at times detrimental because Americans are not common to such practices. Business practices can significantly be affected by these government processes depending on the norms in the country. Sovereign immunity also can bring in legal problems into business deals. This rationale is explained by the both entities’ nature. Governments usually consider several factors and do not actually go for profits, which on the other hand, is the main goal of business organizations.
Fourth, cross-cultural business deals are defenceless to drastic and sudden changes in their situations. Much impact on international businesses is implicated by instances such as war, changes in administrative, or currency devaluation. These have greater implications as compared to the contact that common domestic changes have on overall ventures. Such hazards “require that international business negotiator to have a breadth of knowledge and social insight that would not ordinarily be necessary in negotiating a U.S. business arrangement (Asrani, 2004)”. International business negotiations are then protected against these factors by the hiring of political risk analysts whose main job is to assess the risk situations which permit for agreement cancellation under specific considerations.
Multinational business negotiators also encounter a wide array of ideologies. Different countries have a specific viewpoint on the nature of corporate ventures. Efficient negotiators will be alert on such differences in ideology. They would then provide their suggestions in such manner acceptable to the other party, or at least ideologically neutral.
Lastly, cross-cultural differences are vital aspect in international business ventures. The existence of varying cultures which entail a difference in business approach adds up to the language barriers. Certain information has various connotations in different cultures. For example, Japanese and American businessmen have an unlike analysis of the purpose of negotiations. The written contract is simply an expression of that relationship for the Japanese see the objective of negotiations as to create a long term professional relationship between different business partners. Unlike the Japanese, Americans view business negotiations as a way to produce a formal contract which creates specific responsibilities and liabilities. Americans see it as a tendency to renege while the Japanese view it as a reasonable enthusiasm to adapt a contract and to echo changes in the party’s corporate relationship. American persistence on loyalty to the original terms of the contract during business negotiations may be viewed as a sign of doubt by the Japanese.
Recognition of Cultural Differences
Worldwide needs create strong pressure for a global strategy. This needs exist when the demands and preferences of consumers in various nations towards a product are the same. Global integration is facilitated when product offerings that cater to various purposes need small modifications in different markets. Here, the role of culture plays a significant part.
Cultural contexts characterize most of the elusive aspects of international business in several forms (Asrani, 2004). And it is relatively easy to forget how far such cultural deviations among nations actually could exist in an age where available technologies have created a “global village” (Buttery, 2000). Although, the fact that people everywhere eat at McDonald’s, wear bikinis, and drive a Mercedes doesn’t necessarily mean that we are beginning to be the same. Each nation is still unique for justifications based on history, culture, and demography (Asrani, 2004). Business therefore must be able to adapt to such differences in doing their business operations while at the same time acknowledging the differences in information.
Organizations are at a losing end in the international corporate game of executives ignore the importance of adapting to local customs of a country (Blodgett). The ability to penetrate the markets and earns profits in the process would depend on the companies’ skill in understanding and adapting towards cross-cultural considerations especially those that involve diverse workforce environments. This can be explained by the presence of varying traditions, customs, and norms that significantly affect corporate performance (Chakrabarti, 2005).
Business variety has become a significant issue abroad and the combination of this corporate variety along many different dimensions has become very significant(Herciu, 2006). Such differences can be explained by the inclusion of demographics or any other factors. As an example, a working cluster that consists five white male U. S. executives have a comparatively low percentage of diversity (Asrani, 2004). If this situation is substituted by a youthful white lady manager, the work cluster would then become more varied. Likewise, if another associate is replaced by an older Asian American manager, variety further enlarges. The group becomes even more diversified when a third member is substituted by a Japanese manager.
Japanese and American Cultural Dimensions
In considering out a particular culture to which business strictly conforms to the local culture, Japan could easily be set apart from the rest (Licht, 2001). The second largest economy in the world has a distinct business negotiation customs which is heavily affected by its local customs and beliefs (Licht, 2001). For instance, the Japanese corporate world puts heavy emphasis on the process and minor details that goes along with every deal. After which, the relationships that is established between partner companies then will not stop on the conference room. The Japanese also values much getting to know their business associates beyond the conference room (Royer, 2002). Here the culture of hospitality as well as the tradition of corporate longevity is observed.
The Japanese business decisions, if one would look at it from an outsider perspective, went under changes through time (Søndergaard, 2003). Contemporary times have already cost the Japanese to make adjustments. These adaptations are seen in the business making decisions that the locals employ during business negotiations (Hofstede, 2001). What used to be a relaxed way of deciding and going through reports and proposals evolved into quick decision schemes. However, these quick decisions made are implemented without sacrificing efficiency which makes it a very imminent advantage for the Japanese over the other rising business entities in its region (Hofstede, 2001).
The average age of an American executive is gradually increasing after the baby boom generation coupled with health and medical care innovations contributing a significant number (HERRIG, 2005). Normally, Americans resort to having fun, being surrounded by people who knows how to have humour and prefers a relaxed environment. Jokes are usually welcome but however, ethnic and religious humour should be avoided in certain situations concerning business (Pribush, 2003).
Roughly all corporate procedures are done in English in the United States. A large percentage of the American corporate population can only speak one language: English. Proximity to Mexico and Central America and the increasing number of Hispanic immigrants make Spanish another frequent language, although English will still remain as the standard for business negotiations (Speedy, 2002). With the ease for the local Americans to speak their native language, most of them may not be sensitive to the difficulties of other individuals to cope up and speak the language.
Attire tends to vary in the U.S and in most places, people wear business suits. However, restrictions towards attire usual may not matter much in several offices in the United States. It is a norm though in other areas locally for the managers to abide certain corporate dress codes which is usually formal. It is already a benchmark for females to wear dresses or corporate business suits.
The Japanese is also particular when it comes to adding the element of personal touch when it comes to business negotiations. First, the in setting up appointments, the proposal must be carried out by hand and not advisably through any other means (Pribush, 2003). This can be seen as a sign of sincerity for the part of the Japanese rather than just reading out letters. This is then guided by a strict sense of punctuality wherein the Japanese would see it ethical to arrive at least five minutes before the actual appointment. Punctuality is actually considered as an unspoken law in Japan and can be observed anywhere on the country (Hu, 2005).
Japan still also has a very conservative outlook in doing business which is quite ironic in this modern age. Although it is very customary for them to bow upon meeting someone, the Japanese have also adapted shaking hands (Hu, 2005). However, shaking hands could be the closest physical contact that the potential foreign business partner would get (Herciu, 2006).
Dimensions of Individualism and Collectivism in the US and Japan
The Japanese also has a high value on respect for someone’s personal space. This idea could be drawn out from the idea of Zen where space is considered sacred (Kumiko Aoki, 2006). It is also part of the Japanese customs to give out gifts as a sign of gratitude although this practice is often considered to overlap with bribe if the gift is too large or expensive. Above all, the Japanese value the significance to getting to know their business partners painstakingly in order to ensure a harmonious relationship towards business (Kumiko Aoki, 2006). Corporate ways and personal lives work in unison for the Japanese. This as a sign of the incorporation of trust and gratitude with could be considered as a significant virtue of any Asian economy. The ability to also adapt with the influx of foreign business partners could be said to work for the Japanese to their advantage (Kumiko Aoki, 2006).
The American business culture emphasizes individual initiative and attainment. Furthermore, Americans also know how to separate being laid back from being competitive been it at the office or their personal lives (Speedy, 2002). Ideas of the cost of losing time or opportunity cost are viewed as a serious in the American industry culture (Moon, 2006). Wealth and profit is a significant priority and a subject that will be utilized to win most arguments while position, procedure, and patriotism provide a lesser function. The fact then results to the existence of a consolidated way of life, so it is restricted to a lot of foreign thought (Sornes, 2001). Generalized ideas then are encouraged in the workplace as a prerequisite for higher thinking. Analysts then rely on such information and norms as to how the company could address such discrepancies in the workplace while remaining faithful towards the company objective (Sornes, 2001).
Business corporations in Japan also possess their specific cultural variation situations. At the same time, the country has a specific profile of an aging labour force that has a comparatively low number of women in higher positions(Herciu, 2006). Conventional corporate structural paths for females include a slow path after graduation and years in clerical jobs and usually quit upon marriage. Foreign companies in this Asian country such as American corporations are one of the significant factors that contribute to the variance in the organizational structures in the Japanese corporate world for females and other marginalized sectors (Herciu, 2006). Several American companies in Japan like Motorola and IBM initiated a move to lure women back in the labour force by adjusting their maternity requirements and the assurance of a job (Herciu, 2006). This move was done in order to address the decline of women in the labour force and to further stimulate such involvement. This move has been deemed successful for both companies in the following years. The relatively conventional trend in human resource planning came in as an attack to the traditional norm of the Japanese corporate structure (Hasek, 2006). Nowadays, several other Japanese firms already created similar programs that will further increase women involvement in male-dominated corporations to increase diversity (Hasek, 2006). Furthermore, corporations in Japan also have comparatively low variations in the nationality of the workforce. Still, higher positions are still dominated by the Japanese.
For the part of the particular considerations as stated by Geert Hofstede, it is a norm in Japan to work in groups whereas each member is expected to perform specific tasks with minimal supervision (Hofstede, 2001). Free-riders are not tolerated in the former’s organizational culture. This can be attributed to the Japanese belief that knowledge and capability to handle such virtues are a significant factor in the accomplishment of organizational goals. The Japanese also beheld the respect for their superiors and subdues according to what is expected of them (Kumiko Aoki, 2006). The structure revolves around a risk-aversion principle until it is necessary or if the situation calls for such idea.
The Concept of Power Distance in Japan and United States
Impartiality is strongly respected in the United States but it is less significant in Japan (Drnevich, 2004). The American notion of equality then attacks a loophole in the Japanese corporate norms by having a higher efficiency and effectiveness of the work. The Americans does not pay much attention to the hierarchal structures in within the organization though respect is still maintained (Drnevich, 2004). The Japanese on the other hand, still believes otherwise (Yumi, 1997). This can be reflected through the latter’s norm of finding out the position in the organization of the person they are negotiating with. This practice can be seen as a practical virtue of the Japanese not to waste time. They act as if decisions could easily be made by the person they are dealing with.
Ten crucial cultural values can be identified between the Japanese and American business cultures. The Japanese focuses on work harmony primarily because of Japan’s geography (Kumiko Aoki, 2006). The Japanese archipelago is surrounded by an ocean which greatly highlights its isolation. The population density also contributes to this fact whereas the country has one of the highest in the world. This creates a natural tendency of the Japanese to be accustomed to interacting with various personalities. Lastly, the Japanese society revolves around a uniform structure (Yumi, 1997). Leaving such virtue aside is least in the priorities of Japanese businessmen even in doing business negotiations, explained much by the heavy influence of society. Conflict then is avoided through the faithfulness to such corporate agendas.
Company size entails its capability to define the relationships when it comes to power. In Japan, the local corporate population spends more time on their position in terms of relative power. Toleration of equality in power between internal and external negotiations can be a bit uneasy in general.
Being strict to time and necessary constraints varies from country to country (Hu, 2005). For example, the typical American outlook on the subject can be summarized into being immediate while on the other hand, a Japanese manager would concentrate more on the longer range of plans. Such variations in concept create varying perspectives between CEOs in the United States and Japan during business negotiations (Yumi, 1997). Usually, American CEOs would attempt to increase the company’s profitability stance in the contract during negotiations. On the other hand, their Japanese counterparts would prioritize the long-term feasibility of company interests because of the rationale of harmony (Denis, 1996). The Japanese puts here the heavy emphasis on possible repeating of transactions so as to save time in business negotiations and because of the belief that they are landmark negotiators for the company (Evans). Under such set-up, the Japanese cuts time and effort on business negotiations. In the long run, such relationships created would be useful for the accomplishment of company objectives. The objective of having profits is not necessarily sacrificed in the process, but instead is geared towards the assurance of profits itself in the future (Pirouz, 2004). Most Asian businesses follow such principle purposely driven by the culture to save time and effort and banking more of the benefits (KIM, 2003).
The parity of individuals in the United States is highly regarded by the locals. Equality in the workplace is assured by American law, though some biases still do exist. The corporate structures still are dominated with patriarchal notions in terms of salary and job descriptions.
However still, the United States is credited for the various mixes of cultures that affect heavily its outlook on more liberal corporate policies and thereby encouraging a more productive environment. This causes the nation’s swift progress and efficiency turnout as compared to other nations. Various nationalities can be found working ion various distributed positions regardless of demography though this may vary from each separate company.
The Japanese corporate world also pays high value on respect for age and rank within the organization. Each member of the organization is seen as a vital part of the company (Licht, 2001). This Japanese custom is the primary rationale why when in dealing business it is regarded important that the foreign business partner would take into consideration getting close not only to one individual but to the entire group as a whole (Moon, 2006). The Japanese consider that nothing really is an expense but rather, everything is an important investment. This belief is influenced by the Confucian beliefs that have a heavy influence on the entire culture. The local businessmen always look into the long-term effect of any decision and pay much attention on the virtues of patience (Kumiko Aoki, 2006).
On the other hand, a strong corporate seniority is also a trademark in the Japanese corporate world. With the teachings of Bushido putting emphasis on respect and nationalism, this is accepted as a norm that foreigners should be able to adapt to (Kumiko Aoki, 2006). For example, in the boardroom, the highest ranking officer will enter first and will sit anywhere he chooses, mostly on the seat farthest from the door, the line-up will then be according to rank. Foreigners also find it difficult to communicate with their Japanese because of the language barrier. This however, is addressed through the contemporary adjustments both parties do in order to adjust (Pribush, 2003).
American businessmen view their Japanese counterparts’ principle on emphasizing on the quality of time during business negotiations (Licht, 2001). The latter see this not as an expense for the company but rather as a vital investment for the better quality of transactions in the future. The former thinks that such criterion for business relationships is unnecessary (Licht, 2001). Japanese businessmen see American fierceness in business negotiations as inappropriate for business and are seen as unreasonable (Royer, 2002).
It can be concluded here that the significance of culture in the accomplishment of business transactions cannot be undermined. The existence of the barriers in the consideration for cross-cultural negotiations is a minor factor in the success of the business venture. For instance, the manager’s knowledge of the local culture, and customs could well be said as a better measurement for success. Through the examples given as well as the comparison of the American and Japanese ways of conducting business, it can be said that cultural considerations really affect the manner or decision making perspectives of each country. Whereas, it can also be said that through such cultural knowledge, a businessman could say that the international business isn’t such a stranger at all.
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