Cross-Cultural Sales and Negotiations

BOĞAZİÇİ ÜNİVERSİTESİ

NAC and BSL NEGOTIATION

INTT 452 Sales and Negotiation ,Final examinaiton

İlham SAGUEB 2001400251

5/31/2015

[Type the abstract of the document here. The abstract is typically a short summary of the contents of the document. Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.]

İLHAM SAGUEB INTT 452 31.05.2015

Assumption :

Country A which NAC is manufacturing is CHINA

Country B which BSL is registered is GERMANY

1-)Culture including verbal and nonverbal sets of behaviors,

norms, values is a pattern which is learned by sharing same

places and transmitted to new generations in a very same

way. Before negotiation process starts, both parties should be

aware of the importance of cultural diffences and similarities

of each other which will play an essential role in the process

and progress of negotiation. Because of the fact that people

are shaped, most of the time unconsciously, by the societies

and social environments which they are living in, their

understandings from the same picture or problem could be

varied related with their backgrounds. As it is stated in

Cultures and Organizations: Software of the Mind:

2


‘’The human ability to feel fear, anger, love, joy, sadness, and shame; the need to associate with others and to play and exercise oneself; and the facility to observe the environment and to talk about with other humans all belong to this level of mental programming. However, what one does with these feelings, how one expresses fear, joy,

observations, and so on, is modified by culture.’’ 1

In the case, there are two different countries, Germany

and China, which have different cultural norms, behaviors

and values that need to be taken into consideration in the

negotiation process.

CHINEESE GROUP ( NAC)

Chinese culture is the one which needs to be underlined

as high context culture. It means that messages are

transmitted by several ways including verbal and nonverbal

communication mediums. So regarding this information,

reading in lines will be very important while negotiation for

the other group members. In addition, as is stated in Geert

1 Minkov, Hofstede, Hofstede, Cultures and Organizations: Software of the Mind (New York: McGraw-Hill, 2010) 6.

3


Hofstede’s websites, in Chinese culture while power distance

is playing an fundamental role (high), individualism seems not

important (low).2 It clearly means that there is an authority

figure in the group members and there is nothing wrong with

it so while taking decision and solving issues, other party

(BSL) should take this information into consideration. On the

other hand, being collectivist ,not being an individualist, gives

others a clue that while dealing with Chinese company it

should be kept in mind that they define themselves as a

group which means they have something in common and

they prefer to work cooperative tasks. Clearly, goal of the

group whose interest is extremely above of personal goals. So

it can be clearly said for NAC, most probably they are kind of

a group likes to work cooperatively for the common interest

and gives importance to authority. Masculinity is another

2 Hofstede, Geert. "What about China?" China. Web. 29 May 2015.

4


characteristic of the Chinese group that means the group

wants to achieve the goal ,which is their interest, at the end

of the negotiation. In addition to be goal oriented, there is a

gender discrimination which allows them to assign different

roles to group members related with their genders.

Uncertainty avoidance is another characteristic that Chinese

group does not have. The definition of the dimension is given

in Understanding Interpersonal Communication as:

‘’ Those cultures that resist change and have high levels of anxiety

associated with change are said to have a high degree of uncertainty

avoidance. Because cultures with high degree of uncertainty avoidance desire

predictability, they need specific laws to guide behavior and personal

conduct.’’3

With not having uncertainty avoidance as a

characteristic, Chinese can go through a situation which is

risky and unpredictable.

3 West, Turner, Understanding Interpersonal Communication: Making Choice in Changing Times (Boston: Lynn Uhl, 2009) 92.

5


On the other hand, people in the group are long-term

oriented which is about truth depending on time and context.

Being long-term oriented and searching for truth over time

also a philosophy called Confucian for Chinese. For this

culture, over time acquiring knowledge, hard work which

necessitate being patient is very important and valuable.

Because of the fact that Chinese group’s indulgency level

is low, the group member are not the ones who give

importance to personal desires, happiness ,freedom of

speech. At this point ,if BSL members know about this they

can get an idea that business is the most important thing for

NAC.

6


GERMAN GROUP (BSL)

Germany is considered as a low context culture which is

more direct, explicit. So there is no reading line for the group,

they are transmitting the message in a clear, understandable

and more verbal ways.

For the Germany, power distance is low and it means

each person has the right to speak and express himself. When

it is needed to apply power distance in to business with

German, following sentence by Geert Hofstede should be

taken into consideration:

‘’ Co-determination rights are comparatively extensive and have to be taken into account by the management. A direct and participative communication and meeting style is common, control is disliked and leadership is challenged to show expertise and best accepted when it’s based on it.’’4

German society is individualist one which values every

opinion, approach because of the fact that individual rights

4 Hofstede, Geert. "What about Germany?" Germany. Web. 29 May 2015.

7


are vital for the society. With parallel to these, their

expectation from the members is fulfillment of the duties.

Basically, for the business group, it can be said that as a group

working for a task is important for them as long as each group

member awares and fulfills his responsibilities.

German society as Chinese, is masculine society which

likes to compete and at the end get the desired outcome.

When masculinity and individualism combined, it can be said

that personal achievement, success is valued.

Germany has high uncertainty avoidance which means

society as general does not like to face with something

unfamiliar, not predictable. As it is stated by Gert Hofstede:

‘’ In line with the philosophical heritage of Kant, Hegel and Fichte there is a strong preference for deductive rather than inductive approaches, be it in thinking, presenting or planning: the systematic overview has to be given in order to proceed. This is also reflected by the law system. Details are equally important to create certainty that a certain topic or project is well-thought-out. In combination with their low Power Distance, where the certainty for own

8


decisions is not covered by the larger responsibility of the boss, Germans prefer to compensate for their higher uncertainty by strongly relying on expertise.’’5

Like China, Germany is also long-term oriented country

which is patient to get desired result.

Not being indulged is another characteristic that China

and Germany shared. ’’ Restrained societies do not put much

emphasis on leisure time and control the gratification of their

desires. ‘’ is stated by Hofstede.6

POSSIBLE PROBLEMS&MISUNDERSTANDING BETWEEN

GROUPS

When two groups is compared with each other in terms

of cultural characteristics that they have, it is possible to say

that there will be some times that both group can understand

the other one in a wrong way. In this sense, it is better to

make ‘’possible problems and misunderstanding list’’ to

create solutions beforehand.5 Hofstede, Geert. "What about Germany?" Germany. Web. 29 May 2015.6 Hofstede, Geert. "What about Germany?" Germany. Web. 29 May 2015

9


Possible Problems and Misunderstanding:

Because of the fact that Chinese people are more

indirect, it may create for BSL to read in lines, body

languages and getting the real meaning of the

conversation which is essential for the negotiations.

Power distance differs in NAC and BSL. So Chinese

should take into consideration that each member of the

group in BSL has right to speak regardless of their

position and BSL should be aware of the fact that

authority figures in NAC is important and decision is

made by the authority. Also because Chinese gives

importance on positions and levels, for example,

director of international sales of BSL should not speak

directly to senior vice president of NAC.

Chinese group is collectivist one who cares interest of

the group instead of their personal achievements. This

10


may create a problem because if BSL offers something

related with personal gain, it will not be accepted by

NAC.

They both have same level of masculinity which seems

good at first sight but both of them committed their

interest may create a problem if there is a conflict of

interest.

German group is much more planned, systematic, on

time to avoid uncertainty while for NAC uncertainty can

be taken place. So when NAC asks for something risky

may create a problem for BSL

Both groups have long-term orientation so they will have

patience during the negotiation process to have desired

outcomes. So at this point if there is not any conflict of

interest between NAC and BSL, both parties will get their

desired outcomes. But if there is a conflict of interest,

11


negotiation may stick because of the commitment of

desired outcome.

BSL and NAC have low level of indulgency level which

draws a picture that for both parties business is really

important and they can sacrifice everything to achieve

the goal.

2-) What my company, NAC, should know about at first sight

is cultural differences between China and Germany to avoid

any misunderstanding because BSL shipment company has

global reputation and for us face(xinyu: 信誉) is an essential

element as connections (Guanxi : 关系 ) and BSL has both of

them. Having strong connections all over the world will be fit

for our strategies about global market penetration.

So as a first step, as a group we need to clarify our

strengths and weakness as well as BLS’S.

12

http://www.mdbg.net/chindict/chindict.php?page=worddict&wdrst=0&wdqb=guanxi

http://www.mdbg.net/chindict/chindict.php?page=worddict&wdrst=0&wdqb=reputation


BATNA’s of NAC

We have government support which is vital for the

country like China which is ruled by restrict rules.

There are a lot international shipment firms in the

market, not just BSL.

We are an engineering company invested a lot on

advanced technology

Our company promises to growth with its high R&D

spending which will attract BSL because if we agreed

upon, business relationship will be long-term.

We have a team which speaks really good German and it

shows our commitment.

BSL generally works for military so they desire to work

with international firms to not be fragile.

13


BSL has cost disadvantage compare to other foreign

firms.

Our team members are really qualified in their specialties

so if there is related questions no doubt it will be

crystallized by them.

Our team members’ position show how committed we

are.

BSL invested a lot and return on investment is low

because of the dependency on politics and war.

BATNA’S of BSL

It is a global market leader has a good connections and

reputation.

It has modernized assets, invested on technologies

which can save time.

It also has government support.

14


It has Ro Ro ships specifically designed for the rolling

stock, wheeled and tracked vehicles and is particularly

suited for automobiles, SUVs and pick-up trucks.

First of all as NAC, we think that our Batna is much more

stronger than BSL because in international market there are a

lot of competitors for BSL that serves at lower prices so we

think that use price disadvantage of BSL to get concession

about first three negotiable points. It means that the strategy

of my team is going to be collaborative (win-win) but my

company’s interest is to get first three negotiable points. As a

team, we think that put an emphasis about most of the

markets that we are planning to penetrate are price sensitive

and instead of working with other shipment companies and

penetrate easily in these markets with price advantage, we

are in a progress with BSL even if in the cost of paying more;

15


so if we are sacrificing money, they need to concede some

other things to make this negotiation win-win.

On the other hand as a group, we talked why we want to

work with BSL and how additional benefits that we can get in

addition to our interest. First of all we decided about strategy

which will be collaborative because we want to have a long-

term business relationship with BSL. To build this relationship

and also get the desired outcome we need to know who BSL

is. For this we had decided to follow some steps to plan our

negotiation as follows:

We did research about BSL and we know about company

and their corporate structure.

Our objective is to penetrate international markets and

BSL’s is to work with international companies to ship

their goods internationally to get rid of fragile

16


atmosphere which is because of working with military.

So working together will create an ideal outcome for

both parties.

We prepared information about the volume of each

goods that needs to be shipped and we got the

information about the volume of Ro Ro’s.

We decided that we will collaborate to get our interest.

We had an agenda actually from the previous meeting

covering all our interest.

First negotiation was held in Europe and there are

some similarities between we and BSL for example, their

team also included qualified high level managers and their

organizational behavior is similar to NAC so the process of

negotiation and the procedures can be understandable for

17


both corporate companies. At the end of the first meeting,

there are four points stayed unclear and negotiable. We

want to state all points separately and discuss about them.

the number of BSL Ro Ro ships dedicated to

transporting NAC vehicles should be small, say four at

most, given the desire to not commit to a high volume

agreement initially;

What we want here is to start with 3 or maximum 4 Ro

Ro’s to penetrate. The reason behind this is not only

manufacturing capacity but also cultural norms. In China

face& guanxi (network) are so important and if we loose our

face in internationally, we will not be as respectable as

before. So this is that we cannot concede at all. We want

maximum 4 Ro Ro’s.

18


For the worst case scenario we can offer BSL high volume

in an extended period of time.

The number of destination seaports that NAC’s

vehicles will be shipped should be three, at least

during the first few years of the agreement;

This is because it is not possible for us to penetrate more

than 3 identified countries, Turkey, Spain, and Germany

because at the same time all our goods are absorbed in the

local market and we need to not withdraw local market while

penetrating. So at least 5 years that we need to analize the

markets and produce desired products for the market. Just

for 3 markets we canalized 200 employees. So we need to

start negotiation with 8 years.

Our aim is to penetrate also Asia and West Coast

Germany so if we and BSL decided to work together and both

19


parties satisfied from the service they get, we can work

together for those destinations. This can be used as a

concession to make them persuade.

Logistics support services provided by BSL should be

limited. Any discussion about including ongoing rail

and highway transportation from the destination

seaport should be subject to another negotiated

contract;

We are planning to get agreed on at least 5 years

working with BSL as a shipment company and because of the

fact that on a local basis shipment companies’

competitiveness are high that’s why they can cost less and we

can enter market with a reasonable prices, we prefer to work

with another companies in terms of rail and highway

transportation.

20


In the worst case scenario, it can be offered to get agreed

on another contract including rail and highway

transportation.

In those three points, NAC as a team will use the strategy

of framing and instead of putting advantages of working

together, we will underline what will be lost if we will not

work together. For example, as a country like China, working

with a firm who had government support, good german

language skills, promises to growth, strong in local market will

be underlined as ‘’ if we cannot work together, you will miss

all these opportunities.’’

The shipping cost should be at the low end of the $40

to $60 per cubic meter range. If absolutely necessary

and if BSL agrees substantially to demands on Items 1,

21


2 and 3 above, NAC might consider slightly higher

shipping costs.

This point is essential mostly for BSL because it needs to

get back the results of its investment as money so we as a

team use to get our interest and make some concessions

about the price. This session is designed to make concessions

mutually.

Our plan is to get first three points as it is stated and we

assume BSL will desire to know about price. So we desire to

postpone to talk about price as long as possible to better off

but if they insist to know and our interest is just be gotten by

giving concession on prices we will do it in the range of $40 to

$60 or slightly more depending on the situation .

22


3- ) Both companies agreed upon following closes as is it

stated:

-NAC’s ocean shipment will be handled by BSL for 6 years

- Destinations is clarified as Turkey, Germany and Spain for 6

years and if the parties act properly related with all the

agreed closes, parties will make another contract including

other destinations.

- 4 ships will be served for NAC for 6 years and allocation of

destinations will be done by NAC monthly.

- First two years BSL is going to handle NAC’s needs for rail

and highway transportations at the destination’s local prices

range.

-Agreed upon the price is fixed at 55$ for ocean shipments

but for local transportations price will be determined by the

market range.

23


Signiture (NAC) Signiture (BSL)

31.05.2015

P.S

This contract is assumed to be signed by CEOs of both

companies.

References

24


Minkov, Hofstede, Hofstede, Cultures and Organizations: Software of the Mind (New York: McGraw-Hill, 2010) 6. Hofstede, Geert. "What about China?" China. Web. 29 May 2015. West, Turner, Understanding Interpersonal Communication: Making Choice in Changing Times (Boston: Lynn Uhl, 2009) 92. Hofstede, Geert. "What about Germany?" Germany. Web. 29 May 2015. Hofstede, Geert. "What about Germany?" Germany. Web. 29 May 2015. Hofstede, Geert. "What about Germany?" Germany. Web. 29 May 2015

25

Cross-Cultural Sales and Negotiations

Documents

Transcript of Cross-Cultural Sales and Negotiations