INTERNATIONAL BUSINESS

NEGOTIATION
COURSE OBJECTIVE
1. GENERAL OBJECTIVES
Students master the types of negotiations in international
business, the negotiation process, the business negotiation
techniques. Besides that, the learners can apply the above
knowledge to plan and implement an international
business independently, or in groups.
 COURSE OBJECTIVE
2. SPECIFIC OBJECTIVES
- Knowledge: Students have basic and comprehensive theoretical
knowledge about negotiation styles in international business,
negotiation processes, and negotiation techniques in the business.
- Skills: Students have the ability to apply the above knowledge to plan
and execute negotiations in international business.
- Regarding the degree of autonomy, and self-responsibility:
S tudents have the necessa r y c r e a t i v e c a p a c i t y t o p e r f o r m
independently or in groups the work of an international business
negotiator, and at the same time taking personal responsibility for
themselves. He is responsible to the group for the results of that work.
LEARNING CONTENT
Chapter 1: A framework for international business
negotiation
Chapter 2: Vis-à-vis: International Business
Negotiations and cross-cultural communication
Chapter 3: Principled negotiation
Chapter 4: Process in international business
negotiation
Chapter 5: Negotiating different types of projects
Chapter 6: Negotiation in different parts of the world
Allocation of credit hours for activities

• Class hours: 45
• Allocation of credit hours for activities:
– Theory: 50%
– Exercises, group activities, simulations,
discussion in class: 50%
• Assessment:
– Class participation , Chapter Exercises, Q&A and
attendance, Quizzes, simulations, presentation
and Mid-term paper 40%, in there:
+ Class participation, presentation 30%
+ Chapter Exercises, Q&A, attendance 30%
+ Mid-term 40%
– Final test 60%
• By practicing in a variety of settings
• By feedback: sharing your experiences
• By analysis: descriptive
Our focus =>skill building and learning by doing
Doing negotiation in different substantive context
sharpen our ability to recognize untested assumption,
alternative explanations
Increase our sensitivity to what works, what doesn’t
work and why.
• Lecture provided by lecturer.
• Ghauri, P. N., Ott, F.U. & Rammal,. H.J.
(Eds.). (2020). International business
negotiations: Theory and Practice.
Edward Elgard Publishing
• Khan, A.M., & Ebner Noam (2019). The
Palgrave Handbook of Cross-Cultural
Business Negotiation. Springer
International Publisher, Palgrave
Macmillan.
• Danielle Costa Morais, Liping Fang
(2022). Group Decision and Negotiation:
Methodological and Issues. Springer
International Publisher.
 Chapter 1
A FRAMEWORK FOR INTERNATIONAL
BUSINESS NEGOTIATION

“The goal is not the deal, The goal is to

get a good deal”
Chapter 1: A framework for international
business negotiation
Chapter 2: Vis-à-vis: International Business
Negotiations and cross-cultural communication
Chapter 3: Principled negotiation
Chapter 4: Process in international business
negotiation
Chapter 5: Negotiating different types of projects
Chapter 6: Negotiation in different parts of the
world
• Understand the basics of negotiation in
International business
• Aware strategies and tactics in International
business negotiation
• Understand a framework for International
business negotiation
v A Case Study of Successful Dispute Resolution
1.1. What is International business negotiation? Types
1.2. Negotiation principles
1.3. Strategies and Tactics in International business
negotiation
1.4. Negotiators
1.5. Dos and Don’t in Negotiation
1.6. A framework for International business
negotiation:
May 2012, Apple CEO Tim Cook and Samsung
CEO Gee-Sung Choi met with a judge in the U.S.
District Court of Northern California
April 2011, Apple had filed a lawsuit accusing
Samsung of copying the “look and feel” of the
iPhone when the Korean company created its
Galaxy line of phones.
Samsung countersued Apple for not paying
royalties for using its wireless transmission
technology.
The two companies have repeatedly accused each
other of copying the appearance and functions of
their smartphones and tablet devices.
Earlier in May, the companies showed some willingness to
compromise in an effort to avoid going to court: at the
California court’s suggestion, they cut the number of disputed
patents in half.
But even as the CEOs sat down at the table for
their mediation, which was urged by the court, Apple filed a
motion asking the presiding judge to bar the sale of
Samsung’s Galaxy Tab 10.1 on the grounds that the tablet was
designed to “mirror” Apple’s second-generation iPad.
Both sides had said they hoped to avoid a legal
battle.
Yet the two-day mediated talks between the CEOs
in late May ended in impasse, with both sides
refusing to back down from their arguments.
The suit later went to trial twice, with Apple
ultimately winning more than $409 million.
• Dispute resolution technique between business negotiators is far
less likely to succeed when the parties are grudging participants
than when they are actively engaged in finding a solution.
• When negotiators feel they have spent significant time and energy
in a case, they may feel they have invested too much to quit.
• The longer they spend fighting each other, the more contentious
and uncooperative they are likely to become.
The lesson?
When a business dispute arises, do your best
to negotiate or mediate a solution before
taking it to the courts.
The definition of negotiation is very simple, while
its scope is wide. Every wish or need may cause a
negotiation. Once people exchange their ideas to
adjust their relation, or they exchange views to
reach agreements, they are negotiating.
Gerafd I Niernberg, The Art of Negotiating
Various definitions have been given; but researchers have not
agreed on a common one. A few are quoted for your reference:
1. Negotiation is a basic means of getting what you want from
others. It is back-and-forth communication designed to reach an
agreement when you and the other side have some interests that
are shared and others that are opposed (Fisher, Ury & Patton,
1981).
2. Negotiation is a discussion intended to produce an agreement; a
treaty with another respecting sale or purchase; a transaction of
business between nations; the mutual interaction of governments
by diplomatic agents, in making treaties, smoothing differences, etc.
3. Negotiation is an activity that all managers and professionals
engage in. It’s necessary to negotiate at every stage of a project
or business transaction, in order to reach an agreement.

4. Negotiation is a basic, generic human activity---a process

that is often used in labor-management relation, in business
deals like mergers and sales, in international affairs, and in our
everyday activities.
Negotiation
->the action and the process
of reaching an agreement by
means of exchanging ideas
with the intention of
dispelling conflicts and
enhancing relationship to
satisfy each other’s needs.

Zhuge, Liang Disputes With The

Southern Scholars
(1) Every negotiation involves two or more parties.
(2) The objective of a negotiation must be definite.
(3) Negotiation must be conducted on an equal basis.
(4) A consensus must be built on the basis of mutual concession.
(5) Negotiation involves exchange of ideas, communication,
persuasion, compromise and suchlike.
What is business negotiation?
Business negotiation
->a process of conferring in which the participants of
business activities communicate, discuss, and adjust
their views, settle differences and finally reach a
mutually acceptable agreement in order to close a deal
or achieve a proposed financial goal.
(1)The objective of business negotiation is to
obtain financial interest
(2)The core of business negotiation is price
(3)Its principle is equality and mutual benefit
(4)Items of contract should keep strictly accurate
and rigorous
International Business Negotiation
-> the business negotiation that takes place
between the interest groups from different
countries or regions.
• Integrative approach is opposite to distributive (also called competitive or win-
lose approach) approach.

• Integrative approach (also called a cooperative or win-win approach) →

“Everybody wins”.
• The most distributive feature is that it operates under a zero
sum game
• the gain made by one person is loss incurred by the other
person.
• Each person involved in the negotiation defines ultimate point
where the settlement will be made.
• The sellers goal is to negotiate as high a price as possible; the
Buyers intention is to negotiate as low a price as possible
• Win –Lose Situation
• Parties cooperate to achieve maximize benefits by
integrating their interests
• Both parties involved in negotiation process jointly
look at the problem, try to search for alternatives
and try to evaluate them and reach a mutually
acceptable decision or solution.
• Win-Win Situation
Negotiation principles
1. Equality principle
2. Cooperation principle
3. Flexibility principle
4. Positions-subjected-to-interests principle
5. Depersonalizing principle (Separating the
people from the problem)
6. Using objective criterion
Strategies and Tactics in International business negotiation
NEGOTIATORS

They are:
- Businessmen from other countries
- Businessmen and Government agency
Dos and Don’t in Negotiation
• Determine goals. Decide on your objectives. Know your
bottom line.
• Anticipate the desires of your opponent. Think collegially –
envision the person as your partner in the deal.
• Analyze the assets. What do both of you bring to the table?
• Evaluate options. That means for both of you.
• Stay calm, no matter what. You’ll keep the emotional
advantage. Focus on issues, not personalities.
• If you have a history with the other party, analyze your
track record and precedents with the person. What
issues have impacted the two of you?
• Assess the power you bring into the discussion, and that
of the other person.
• Try to put the other person’s needs first.
• Keep in mind plan B. Know your options for a fallback
position.
• Document the deal – get it in writing immediately.
• Never bargain with someone using the word,
“between”.
• Don’t signal the person that you’re done
negotiating by using the phrase, “I think we’re
close.”
• Don’t get into a bidding war.
 The don’ts
• If you need time to think, don’t establish at the
beginning that you’re the final decision-maker.
• Don’t be afraid to ask what you want – be specific
about what you want and don’t want.
• Don’t negotiate with a person who doesn’t have
authority to sign off on a deal.
• Don’t do all the talking.
• Don’t ignore the person’s body language. Know the
green lights.
• Don’t ignore the person’s body language.
Know the green lights.
• Don’t argue, but discuss items in which there
are disagreements.
• Steer clear of form contracts.
• Don’t forget to prepare.
Sources: Ghauri, P. and Usunier, J-C. 2003, International Business Negotiation,
1. Pre-negotiation

2. Face-to-face
negotiation

3. Post negotiation
1. Describe briefly a negotiation process.
2. Which stage is the most important in a
negotiation process?
3. What factors we need to concentrate in a
negotiation process?
1. High-context and Low-context Culture Styles
2. Key to successful email, text negotiation
3. Principled negotiation
4. Steps in international business negotiation
5. Negotiating different types of projects
6. Negotiation in different parts of the world
 CHAPTER 2
VIS-À-VIS: INTERNATIONAL
BUSINESS NEGOTIATION
AND CROSS-CULTURAL
COMMUNICATION
Chapter 1: A framework for international business
negotiation
Chapter 2: Vis-à-vis: International Business
Negotiations and cross-cultural communication
Chapter 3: Principled negotiation
Chapter 4: Process in international business
negotiation
Chapter 5: Negotiating different types of projects
Chapter 6: Negotiation in different parts of the wolrd
• Identify issues that may arise when negotiating
international business

• Be aware of diverse cultural differences in values and

communication styles

• Identify some of the things that managers need to do to

successfully negotiate international business in different
cultural contexts
• 2.1 A Case study
• 2.2 A hierarchy of problems
• 2.3 Managerial Implication
• What kind of cultural misunderstandings between those
business partners?
• Please read and sumarize the cases:
- The Russian Kiss (Moscow)
- Marlin Fishing in Brazil
- Glimpses in an Aisatsu (Tokyo)
- The Importance of Culture (New Jersey)
A hierarchy of problems
(1) Language
(2) Nonverbal behaviors
(3) Values
(4) Thinking and decision-making processes.
(1) Language
(2) Nonverbal behaviors
(3) Values
(4) Thinking and decision-making processes.
High context culture vs low context
culture
1 It is cold today. / Could you shut the window
please?
2 Absolutely right! / That is possible.
3 I think before I speak. / I always say what I
think.
4 I earn 6000 Euros a week. / I earn enough to
keep my family happy.
5 We will find a way. / It is all in the contract.
• Communications have multiple meanings
interpreted by reading the situation
• Asian and Arabic languages are among the
most high context in the world
• The words provide most of the meaning
• Most northern European languages
including German, English, and the
Scandinavian languages are low context
Don’t speak into side conversations in native
languages. Why?
 Can see it as impolite, and, quite naturally,
likely to attribute something sinister to the
content of the foreign talk — they’re
plotting or telling secrets or . . .
This is MISTAKE
• The verbal bargaining behaviors used by
the negotiators during the simulations
proved to be surprisingly similar across
cultures.

• Negotiations in all ten cultures studied

were comprised primarily of information-
exchange tactics questions and self-
disclosures.
• Provide simultaneous translation of a foreign
language
• Require greater linguistic skills than speaking
a language or translating written documents
• Insure the accuracy and common
understanding of agreements
• Use the most common words with most common
meanings
• Select words with few alternative meanings
• Follow rules of grammar strictly
• Speak with clear breaks between words
• Avoid “sports” words or words borrowed
from literature
• Avoid words that represent pictures
• Mimic the cultural flavor of nonnative
speaker’s language
• Summarize
• Test your communication success
(1)Language
(2)Nonverbal behaviors
(3)Values
(4)Thinking and decision-making processes.
• Communicating through body movements
• Facial expressions
• Body posture
• Eye contact establishes the nature of a
relationship.
• Facial expressions are the
key characteristics of non
verbal communication. Your
facial expression can
communicate happiness,
sadness, anger or fear.
l Posture and how you carry yourself tells a lot about
you. How you walk, sit, stand or hold your head not
only indicates your current mood, but also your
personality in general.
• the branch of knowledge that deals with the
amount of space that people feel it necessary
to set between themselves and others.
• The use space to communicate
• The personal bubble of space - nine inches
to over twenty inches
• North Americans prefer more distance
than from Latin and Arab cultures
• Basic human interaction
• In greeting - shake hands, embrace, or
kiss
• Latin European and Latin American
cultures-more touching than Germanic,
Anglo, or Scandinavian cultures
• Attribution - process by which we interpret the
meaning and intent of spoken words or
nonverbal exchanges
• Attribution errors
(1)Language
(2)Nonverbal behaviors
(3)Values
(4)Thinking and decision-making processes.
• Objectivity
• Competitiveness
• Equity
• and Punctuality
• Make decisions based upon the bottom line,
on cold, hard facts.
• We don’t play favorites.
• Economics and performance count,
not people.
Business is business.
• But nepotism is high in Chinese or Hispanic
cultures.
• Mexico, Spain, Philippines,… are the same
• That is mention the competitiveness and the
fairness between the two sides (seller and
buyer) when negotiating
• The implications of almost experimental
economics are completely consistent with our
own field work, the comments of other
authors, and the adage that in Japan the buyer
is “kinger”.
• .
• By nature, Americans have little
understanding of the Japanese practice of
giving complete deference to the needs
and wishes of buyers. That’s not the way
things work in America
• Win – win game
• “Just make them wait”

• Strategic reversal of the time pressure

(1)Language
(2)Nonverbal behaviors
(3)Values
(4)Thinking and decision-making processes.
• Westerners
• Asian
• When faced with a complex negotiation task,
most Westerners divide the large task up into
a series of smaller tasks.
• Issues such as prices, delivery, warranty and
service contracts may be settled one issue at a
time, with the final agreement being the sum
of the sequence of smaller agreements.
• All the issues can be discussed at once, in no
apparent order
• Concessions are made on all issues at the end
of the discussion
 QUESTION

• How National Culture,

Organizational Culture and
Personality Impact Buyer-Seller
Interactions ?
• Culture has a profound impact on how people
in the marketplace perceive and behave.
• The level of aggregation of this construct,
however, has always been
somewhat problematic.
• In the realm of international marketing,
culture has been typically visualized at the
national level.
 Value Can vary across

s
subcultures

Are a society’s ideas

Allow for contingency
about what is good or
management
bad, right or wrong

Determine how
individuals will probably Help managers anticipate
respond in any given likely cultural effects
circumstances

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 • Low: Sweden, New Zealand,
Switzerland
Assertiveness
• High: Greece, Austria,
Germany

• Low: Russia, Argentina,

Performance Greece
Orientation • High: New Zealand, Honk Kong,
Singapore
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 • Low: Russia, Argentina,
Future Poland
Orientation • High: Netherlands,
Switzerland, Singapore

• Low: Germany, Spain,

Humane France
Orientation • High: Malaysia, Ireland,
Philippines

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 Power Distance
Uncertainty Avoidance
The level of acceptance by a
The extent to which people in
society of the unequal
a society feel threatened by
distribution of power in
ambiguous situations
institutions

Individualism Collectivism
The tendency of people to The desire for tight social
look after themselves and frameworks, emotional
their immediate families only dependence on belonging to
and to neglect the needs of “the organization,” and a
society strong belief in group decisions

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• Power Distance Index (high versus low).
• Individualism Versus Collectivism.
• Masculinity Versus Femininity.
• Uncertainty Avoidance Index (high versus low).
• Long- Versus Short-Term Orientation.
• Indulgence Versus Restraint.
• This refers to the degree of inequality that exists – and is
accepted – between people with and without power.
• This refers to the strength of the ties that
people have to others within their community.
• A high IDV score indicates weak interpersonal
connection among those who are not part of a
core "family." Here, people take less
responsibility for others' actions and
outcomes.
• This refers to the distribution of roles
between men and women.
• This dimension describes how well
people can cope with anxiety.
• This dimension was originally described as
"Pragmatic Versus Normative (PRA)." It refers to
the time horizon people in a society display.
Countries with a long-term orientation tend to be
pragmatic, modest, and more thrifty. In short-
term oriented countries, people tend to place
more emphasis on principles, consistency and
truth, and are typically religious and nationalistic.
• Hofstede's sixth dimension, discovered and
described together with Michael Minkov, is
also relatively new, and is therefore
accompanied by less data.
 Power Distance
High Orientation Toward Authority
Low

MAL ARA MEX IND FRA ITA JPN SPA ARG US GER UK DEN ISR AUT

Uncertainty Avoidance
High Desire for Stability
Low

GRE JPN FRA KOR ARA GER AUL CAN US UK IND DEN SIN

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 Individualism
Individualism
Collectivism

AUL US UK CAN FRA GER SPA JPN MEX ITA KOR SIN

Masculinity
Assertive/Materialistic Relational

JPN MEX GER UK US ARA FRA KOR POR CHC DEN SWE

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Long-term/Short-term Orientation
High
Low

CHI HK JPN TAI VIE BRA IND US CAN UK E/W AFR

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 Obligation
High Low

Universalistic Particularistic

US GER SWE UK ITA FRA JPN SPA SIN

Emotional Orientation in Relationship

High Neutral Affective Low

JPN UK GER SWE USA FRA SPA ITA CHI

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 Privacy in Relationship
High Low

UK US FRA GER ITA JPN SWE SPA CHI

Source of Power and Status

High Low

US UK SWE GER FRA ITA SPA JPN CHI

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• Time—differences in temporal values
• Change—control and pace of change
• Material Factors—physical goods and status symbols versus
aesthetics and the spiritual realism
• Individualism—“me/I” versus “we”

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• Over 70 percent of Korean homes have high-speed Internet
service.
• Sweden has refused to allow airline passenger information
(e.g., meal preferences) to be transmitted to the United
States.
• About 75 percent of the world’s Internet market lives outside
the United States.

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 Comparative Management in Focus

Japan Germany
• Preference for rules and
order, privacy
• “Wa”—peace and harmony
• A mix of authoritarian and • Dislike of inefficiency and
humanism in the workplace tardiness
• Emphasis on participative
management, consensus,
• Assertive, but not
and duty aggressive
• Open expression and conflict
discouraged
• Organizations are
centralized but still favor
consensus decision making

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 Comparative Management in Focus

South Korea Latin America

• Respect for family, authority,
formality, class
• Are demonstrative, friendly, • Not homogenous, but
aggressive, hard-working common similarities
• Connections vital for business; • “Being-oriented”
compared with
most contracts are oral “doing-oriented”
• Honest criticism is rare • Work and private lives
are more closely
integrated
• Very important to
maintain harmony
and save face

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 Managers can gather
considerable information on
Managers can develop cultural
cultural variables from current
profiles of various countries.
research, personal observation,
and discussion with people.

It is difficult to pull together

Managers can use these profiles
descriptive cultural profiles in
to anticipate drastic differences
other countries unless one has
that may be encountered in a
lived there and been intricately
given country.
involved with those people.

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Developing Management Styles and Ways of Doing Business: Saudi Arabia

Paternalism,
Tribalism
nepotism

Close Person-orientation,
friendships Theory Y

Honor, Conflict avoidance,

shame positive reinforcement

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 Developing Management Styles and Ways of Doing Business:
Chinese Family Business

• Small, family businesses predominate

• “Guanxi” connections
• People are put ahead of business
• Organizations do not include “middle
management”

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• Employees are hoping to rise to higher levels and
increase their power within the company.
• Employees accept that their supervisor and other
company officials have much more power than
they do
• Employees prefer to gain power within the
company individually rather than as a group.
• Employees are uncomfortable with the fact that
they don't have enough power.
• Because it helps the market rid itself of
cultural prejudices.
• Because working effectively with others is
not possible without cultural norms.
• Because businesses must be effective in
the global market.
• Because different cultures must be
equally represented within any
organization.
• 1. External vs. internal emphasis: Emphasis on
satifying customers, clients or whatever as
opposed to focusing on internal organizational
activities such as committee meetings and
reports.
• 2. Task vs. social focus: Focus on organizational
“work” versus concern for personal and social
needs of people.
• 3. Society vs. risk: Relative openess to adopting
new and different programs
• and procedures
• 4. Conformity vs. individuality: Extent to which
organizations tolerate orencourage their members to be
distinctive and idiosyncratic in work and social life.
• 5. Individual vs. group rewards: Whether rewards are
distributed to all members of a work unit or in repsonse to
individual contributions.
• 6. Individual vs. collective decision-making: Whether
decision-making reflects the inputs of one individual or
the entire group.
• 7. Centralized vs. decentralized decision-making: Whether
decisions are made by those in key positions or by those
affected by the decision.
• 8. Ad hockery vs. planning: Whether ad-hoc
response or elaborate plans are created in the
face of changing circumstances.
• 9. Stability vs. innovation: Relative tendency to
search for novel and distinctive goods, services,
and procedures.
• 10. Cooperation vs. competition: Whether peers
are considered as competitors for scarce
resources or trusted colleagues in a common
cause.
• 11. Basis for commitment: Whether financial rewards, prestige, interesting/
challenging work, opportunity for self- fulfillment/expression or satisfying
personal relations constitutes the individual’s involvement with the company.
• 12. Simple vs. complex organization: Refers to tendency of organizations to
develop elaborate procedures and structures.
• 13. Informal vs. formalized procedures: Whether extensive, detailed rules
and procedures and elaborate forms and written documents are needed to
justify actions.
• 14. High vs. low loyalty: Extent to which members place their organization
above competing groups such as family and professional colleagues.
• 15. Ignorance vs. knowledge of organizational expectations: Degree to which
individual members know what they are expected to do and how their
efforts contribute to the accomplishment of organizational objectives.
• The most popular way to depict personality
is the Myers-Briggs Type Indicator (MBTI)
"Perception involves all the ways of becoming aware of
things, people, happenings, or ideas. Judgment involves
all the ways of coming to conclusions about what has
been perceived. If people differ systematically in what
they perceive and in how they reach conclusions, then it
is only reasonable for them to differ correspondingly in
their interests, reactions, values, motivations, and skills."
Identify your personality factors and explain.
• S to N: That's Not Data!
• S stands for Sensing: An S gathers facts
and data
N refers to iNtuition: An N focuses on
intuition and the big picture
Thinking
• Thinkers decide based primarily on logic, and
when they do so, they consider a decision to be
made. They tend to see the world in black and
white and dislike fuzziness.
• Perhaps because people are so variable, they
focus on tangible things, seeking truth and use
of clear rules.
• At work, they are task-oriented, seek to create
clear value. Interacting with them tends to brief
and business-like.
• They may be seen as cold and heartless by
Feelers.

Feeling
• Feelers decide based primarily through social
considerations, listening to their heart and
considering the feelings of others.
• They see life as a human existence and material
things as being subservient to this. They value
harmony and use tact in their interactions with
others.
• At work, they are sociable and people-oriented
and make many decisions based on values
(more than value).
• They may be seen as unreliable and emotional
by Thinkers.
With thinkers:
• Be brief and concise.
• Be logical; don’t ramble with no apparent purpose.
• Be intellectually critical and objective.
• Be calm and reasonable.
• Don’t assume that feelings are unimportant; they may
have a different value.
• Present feelings and emotions as additional facts to be
weighed in a decision.
With feelers:
• Introduce yourself and get to know the person; full
acceptance may take a considerable amount of time.
• Be personable and friendly.
• Demonstrate empathy by showing areas of agreement first.
• Show how the idea will affect people and what people’s
reaction would be.
• Be aware that how you communicate is as important as
what you’re communicating.
• Let them talk about personal impact; accept decisions that
may not be based on facts.
• Planned and organised.
• Feel supported by structure,
guidelines and standardised
methods.
• Dislike surprises and last
minute changes.
• May gain satisfaction from
ticking off completed tasks
on a list.
• No plan
• Flexible and adaptable.
• Enjoy freedom and variety.
• Enjoy surprises and last
minute changes.
• International business negotiations have
much potential pitfalls
• But an appreciation of cultural differences can
lead to even better international commercial
transactions
• International business negotiations need the
large number of skillful international
negotiators.
• These are the managers who have lived in
foreign countries and speak foreign languages.
• If they live in some different countries, they
can understand some different cultures.
• National culture can be used as an important
entry criterion along with such traditional
criteria as:
- population
- per capita income
- the existence of infrastructure,
- etc….
with which to evaluate the attractiveness of
various national markets
• Thus, if a firm has to choose between two
markets with comparable levels of market
potential, economic well-being, competition,
and infrastructural facilities, it should first
choose one with the smaller “cultural
• distance”.
• If a firm is operating in a group of culturally homogeneous
countries which have a national culture different from its
own (such as a British trading company in West Africa), it
can consciously design its organizational culture to better
reflect the national culture of its markets.

• This will enhance the skills of the firm’s boundary personnel

in dealing with buyers who share a different national
culture.

• Coca Cola in Japan has adopted the collective orientation of

Japanese society
• A cosmopolitan salesperson needs to possess a “flexible
personality” (Simurda , 1988).

• It has been suggested that the key attributes desired in a

salesperson in a cross-cultural selling situation include:
- openness and sensitivity to others,
- cultural appreciation
- awareness, ability to relate across cultures
- awareness of one’s own culturally derived values
- and a certain degree of resilience to bounce back after
setbacks (Noer 1975)
• 7 steps, read textbook, P.91
• Successful negotiators:
– Have good language
– Build cross-cultural communication skills
– Understand nonverbal communication
– Avoid attribution errors
• Discuss the situation of Ford how they
improved the negotiation capacity of sales
staff uses to develop competence in
employees who interact with the Japanese to
increase the car number export to Japan.
• 1. What are the problems in international business
negotiation?

• 2. What psychological and cultural factors can affect

international business negotiation?

• 3. Why can personal characteristics influence international

business negotiations?

• 4. What are the management implications of studying the

influence of culture and individual personality on
international business negotiations?
 Chapter 3
Principled Negotiation
Chapter 1: A framework for international business
negotiation
Chapter 2: Vis-à-vis: International Business
Negotiations and cross-cultural communication
Chapter 3: Principled negotiation
Chapter 4: Process in international business negotiation
Chapter 5: Negotiating different types of projects
Chapter 6: Negotiation in different parts of the world
• Explain and implement certain basic
negotiation principles
• Aware of and able to identify BATNA and
boundaries in each international business
negotiation
• Identify Fujitsu negotiations
3.1. The problems
3.2. The method
3.3. BATNA
3.4. Negotiation Fujitsu
• Distributive negotiation: A negotiation in which
the parties compete over the distribution of a fix
sum of value. Win-lose situation
• Integrative negotiation: A negotiation in which
the parties cooperate to achieve the maximum
benefits by integrating their interests into an
agreement. These deals are about creating value
and claiming it. Win-win situation.
• Positional negotiation
• Principled negotiation seeks a winning
outcome for parties by bargaining over the
interests of both parties, not on the positions.
 Positional Bargaining
Principled Negotiation
Soft Hard

Participants Friends Adversaries Problem-solvers

Relationship Soft on the people and Hard on the people and Soft on the people,
problem problem Hard on the problem

Position Changes position easily Dug into position Focus on interests,

not positions
Resolution Search for answer that they Search for answer that you Invent options for mutual gain
will accept will accept

Criteria Yield to pressure Apply pressure Insist on using objective criteria.

Yield to principle, not pressure

(1) Substance/
(2) Relationship 1 2 2
1 1 2
 Vietnam white rice
Vietnam white rice long grain, 5% broken
long grain, 5% broken 8,000 MT
9,000 MT USD365/MT
USD375/MT DDP Rottedam port,
FOB Cat Lai port, Incoterms 2010
Incoterms 2010

Seller Buyer
• People: Separate the people from the problem
• Interests: Focus on interests, not positions
• Options: Generate a variety of possibilities
before deciding what to do
• Criteria: Insist that the result be based on
some objective standard.
• Separate the PEOPLE from the Problem
• Focus on INTERESTS, not Positions
• Invent OPTIONS for Mutual Gain
• Insist on Using Objective CRITERIA
 Don’t negotiate over positions
• Unwise agreements
• Inefficient
• Endangers a long term
relationship
• Being a nice person is no
help
• Focus on interests and
negotiate in a principled way.
Separate people from problem
• Negotiators are people
first
• Two basic interests: the
substance and the
relationship
• Positional bargaining
puts the two in conflict
• Deal with relationship as
a separate consideration
 Manage your perceptions
• Put yourself in their shoes
• Don’t deduce their motives from your
fears
• Don’t blame them for your problem
• Discuss each perceptions
• Give them a stake by getting them to
participate
• Make your proposals consistent with
their values
 Control your emotions
• Be aware and identify your own
emotions
• Same for them
• Talk about emotions explicitly
• Allow them to vent interfering
emotions
– Anger and fear, common
• Do not react to emotional outbursts
• Use symbolic gestures
 Concentrate on communication
• Listen actively and
acknowledge

• Speak to be understood

• Speak about you, not them

• Speak for a purpose

 Start before problems arise
• Build a working relationship immediately

• Focus on the problem, not them

 Focus on interests not positions

• Reconcile interests

• Identify their interests

• Talk openly about interests

 Reconcile Interests
• Interests define the
problem
• Behind positions lie
interests
• Interest categories
– Compatible
– Shared
– Conflicting
 Identify their interests
• Ask “Why?”
• Ask “Why not?”
– What are their other choices?
• Multiple interests
– Recall our earlier class
discussions of this
• Interests: the power of basic
human needs
• Making lists
 Talk openly about interests
• Show concern for their interests
• Put their problem ahead of your
answer
• Make your interests come alive
• Look ahead, not behind
• Be concrete but flexible
• Hard on problem, soft on
people
Invent options for mutual gain
• Diagnosing the problem
• Solving the problem
 Diagnosis before prescription

• Be the Problem Doctor:

– Problems of premature solutions
– Searching for the single answer
– Fixed pie? Are you sure?
– Solving their problem is my
problem.
 Prescription methods

• Separate inventing
from deciding
• Broaden your options
• Look for mutual gains
• Make their decision
easy
– Before brainstorming
– During brainstorming
– After brainstorming
– Helping them brainstorm
1.
2.
Invent Options First Decide which is best
3.
4.
5.
• Look for help from a variety of experts
• Invent agreements of different strengths
• Change the scope of a proposed agreement
• Multiply options: the Circle Chart exercise
(next)
Circle Chart for Inventing Options

Step II: Analysis Step III: Approaches

Sort symptoms into groups Possible strategies

Possible causes Theoretical fixes

What’s missing Broad ideas about what to do

Barriers to solving

Step I: Problem Step IV: Action Ideas

What’s wrong? What specific steps
Symptoms? Goals
Reality vs Desired Future Verify
 Look for mutual gains
• Identify shared interests
• Merge differing interests
– What is the difference?
– Different beliefs?
– What is their value of time?
– Different forecasts about the
future?
– Risk aversion differences?
• What are their preferences?
 Make their decision easy
• Whose shoes?

• What decision?

• When threatening is not

enough
 Insist on using objective criteria

• Deciding based on strength of will

• Case for objective criteria
• Developing objective criteria
• Negotiating with objective criteria
• Joint search for objective criteria
• Reason and be open to reason
• Never yield to pressure
 Deciding based on strength of will
• Too costly
– Substance
– Relationships
• Someone has to back
down
– No one wants to do
that, loss of face
– Leads to irrational
choices
• Principled negotiations
– Smarter
• Finding data, information that help inform a better
decisions for both parties
– Efficient
• No time wasted in testing each other’s will
– Less hostility
• No need to get angry if we looking for objective data
– Protects the relationship
• Mutual hunt for an objective basis
 Developing objective criteria
Fair standards Fair procedures
– Market value – Coin flips
– Precedent – Cut and choose
– Scientific judgments – Veil of ignorance choices –
– Professional standards not knowing your part
– Efficiency – Taking turns
– Costs – Drawing lots
– Court decisions – Letting a third party decide
– Equal treatment – Choosing the last best offer

Criteria need to be independent of each side’s will

Legitimate and practical
 Negotiating with objective criteria

• Frame each issue as the joint search for objective measures of

value, facts, etc.

• Reason and be open to reason as to what to accept as

appropriate standards

• Never yield to pressure, only to principle.

 The joint search for objective criteria
• What is fair to both sides?

• What is your theory about

what is fair?

• Agree first on principles.

 Reason and be open to reason
• Keep an open mind

• Possibility of multiple criteria of fairness

– What objective basis is there to decide?
– Splitting the difference or compromising
 Never yield to pressure
• Pressure to yield takes many
forms
– Bribes
– Threats
– Stubbornness
• Question the process, look for
objective criteria
• This is why you have a
BATNA!!!!
 Yes, but . . .
• What if they
• are more powerful?
• won’t negotiate?
• won’t negotiate fairly?
• Protect yourself from making a bad decision.
– The problem of being too accommodating
– The problem of being too inflexible
– Know your BATNA: all offers are measured against it.
• Make the most of your assets
– Better BATNA = More Power
– Develop your assets into a BATNA
• Invent a list of actions you could take if the
negotiation fails
• Improve the ideas and convert to practical
alternatives
• Tentatively select the alternative that seems best
 What if they won’t negotiate?
• You can concentrate on
interest / merits not
positions.
– Everything we have
looked at so far
• If they don’t respond,
focus on what they
might do. Negotiation
jujitsu.
• Set your upper and lower limits
 Highest (most that I want)
Bargaining zone

Lowest (less I will accept)

 $1600
Bargaining zone

WIN!!

$1300
 $1500
Bargaining zone

WIN!!

$1150
1. develop a list of actions;
2. improve some of the more promising ideas;
3. select, tentatively, the one option that seems
best.
WHAT WILL YOU DO IF YOU CAN’T GET
THE MINIMUM THAT YOU WANT?

Best Alternative To a Negotiated

Agreement
 Highest (most that I want)
Bargaining zone

Lowest (less I will accept)

 Bargaining zone

ZOPA

Buyer’s Seller’s Buyer’s Seller’s

lowest target lowest target highest target highest target
• The typical attack has three parts;
– Aggressively asserting their own position
– Attack your ideas!
– Attack you!
• You should
– Look behind attack for motivating interests.
– Treat their position as one possible option.
– Don’t defend your ideas
• Invite criticism and advice
– Re-frame attacks on you as attacks on the
problem
– Use more questions, make fewer statements
 What if they won’t negotiate fairly?
– Deliberate deception – Questionable intentions of the
• Unless you have good reason to
other side
trust someone, don’t trust them. • Make your doubts public
• Check facts, assertions, etc. • Negotiate assurances in the
agreement
– Unclear authority – Creating purposely stressful
• Making you think they have situations
power to decide • Acknowledge the stressors
• Asking you to concede but and ask for some adjustments
claiming they don’t have power – Personal attacks
• Before you begin, ask how much • Recognize it and call it to their
authority they have to make the attention
decisions. – Threats
• Recognize and call attention
to it. Treat as pressure.
Qu
es t
ion
s?
• Two large-scale, complex business entities are profiled. Students
are asked to enter into and reach contractual agreement for an
international business negotiation. The negotiation involves the
transportation of vehicles manufactured in Japan to Hawaii,
Alaska, and the United States west coast. The specific elements
of the negotiated contract include the number of automobiles
and thus vessels to be used under the agreement as well as the
identification of the destination ports.
• Also, the logistical support provided by the United
States transportation enterprise will be negotiated.
Finally, the shipping costs will be determined.
Students are required to formulate their negotiation
strategies based upon the facts presented in the
case and the national cultural considerations that
influence the business decision making process in
Japan and the United States.
• a research paper presenting the influence of
national cultural considerations in the
business decision making process;
• a written contract, signed by all
representatives, presenting the agreements
reached by the two business entities during
the two negotiation sessions.
• This case study presents the operations of
Nippon Automobile Corporation (NAC),a
Japanese vehicle manufacturer, and US Shipping
Lines, Inc. (USSL), a United States transportation
enterprise. These two business entities have
entered into negotiations to discuss the
possibility of transporting vehicles from Japan to
Hawaii, Alaska and the west coast of the United
States.
• The first round of negotiations took place in an
undisclosed major city in Europe. This negotiation
round was kept out of the public eye so as not to
arouse interest on the part of either NAC’s or USSL’s
competitors. NAC representatives at the first round of
negotiations included:
• Team Leader: Senior Vice President, Product Placement
• Team Members: Assistant Vice President, World-wide
Logistics; Director, North American Markets; Director,
Vehicle Engineering; Senior Engineer, Vehicle
Engineering
• Team Leader: Senior Vice President, Product
Placement
• Team Members: Assistant Vice President,
World-wide logistics; Director, North American
Market; Director, Vehicle Engineering; Senior
Engineer, Vehicle Engineering
• The Senior Vice President reports directly to the President who, in turn, reports
directly to the CEO who is also the Chairman of the Board of Directors. At the
present time, the Assistant Vice President has responsibility for developing the
firm’s global strategy. The Director, North American Markets reports to the
Assistant Vice President and has specific responsibility to develop the United
States vehicle market for NAC. The Director, Vehicle Engineering report to the
Vice President for Vehicle Engineering and has been brief thoroughly and is
very knowledgeable about US consumer preferences with respect to the
vehicles that they consider for purchase decisions. The Senior Engineer is the
technical adviser to the Director for Vehicle Engineering. All members of the
negotiation team are fluent in English based on their graduate education in US
educational institutions. They have been selected for their positions and the
negotiation team, in part, for their English language skills. This, in itself, is most
unusual but represents NAC’s commitment to be a global leader in the industry
• Team Leader: Senior Vice President, Ocean
Shipping
• Team Members: Assistant Vice President,
Pacific Shipping; Director, West Coast Port
Facilities; Director, International Sales; Director,
Finance; Corporate Lawyer.
• The Senior Vice President reports directly to the President of the Ocean Shipping
subsidiary who, in turn, reports directly to the CEO of USSL who is also the Chairman of
the Board of Directors. The Assistant Vice President has responsibility for developing
the Pacific Maritime transportation strategy. The Director, West Coast Facilities reports
to the Assistant Vice President, World-wide Port Facilities. The Director, Finance
reports to the Vice President, Finance of the Ocean Shipping subsidiary and has earned
a bachelor’s degree in accounting and a MBA specializing in finance. Additionally, the
Director, Finance, a certified public accountant, is rumored to be in consideration for
the Vice President, Finance position when the incumbent retires next year. The
Corporate Lawyer has slightly more than twenty years experience as in-house counsel
for USSL. All members of the negotiation team have neither traveled to Japan nor done
business with Japanese companies previously. They are not conversant in the Japanese
language. They have been selected for their position and the negotiation team, in part,
based on their years of service working for USSL and its subsidiaries and
recommendations form their immediate supervisors.
 QUESTIONS FOR REVIEW
1.What are distributive and
integrative negotiation?
2.What are positional and principled
negotiation?
3.How is the method of principled
negotiation?
4.Can you explain about BATNA?
 Chapter 4
PROCESS IN INTERNATIONAL
BUSINESS NEGOTIATION
Chapter 1: A framework for international business
negotiation
Chapter 2: Vis-à-vis: International Business
Negotiations and cross-cultural communication
Chapter 3: Principled negotiation
Chapter 4: Process in international business negotiation
Chapter 5: Negotiating different types of projects
Chapter 6: Negotiation in different parts of the world
• Understand the stages and steps in the
negotiation process
• Able to prepare in advance for international
business negotiations
• Able to negotiate directly in international
business
• Know and do the necessary tasks after
negotiating in international business
4.1. Pre- negotiation
4.2. Face to face negotiation
4.3. Post negotiation
• The process of international business
negotiation presented here is divided into
three different stages:
- Pre- negotiation
- Face to face
- Post negotiation
1. Pre-negotiation

2. Face-to-face
negotiation

3. Post negotiation
Sources: Ghauri, P. and Usunier, J-C. 2003, International Business Negotiation,
• Set your objectives (precisely what you want
to achieve)
• Seek our precedence
• Create series of tradables
• Set your limits
• Collect information
• Set your objectives (precisely what you want
to achieve)
• Seek our precedence
• Create series of tradables
• Set your limits
• Collect information
 Top objectives

Setting Target objectives

objectives

Bottom objectives
• Set your objectives (precisely what you want
to achieve)
• Seek our precedence
• Create series of tradables
• Set your limits
• Collect information
• Rice price
• Set your objectives (precisely what you want
to achieve)
• Seek our precedence
• Create series of tradables
• Set your limits
• Collect information
 Time

Money Specification
• Set your objectives (precisely what you want
to achieve)
• Seek our precedence
• Create series of tradables
• Set your limits
• Collect information
• Set your upper and lower limits
1. develop a list of actions;
2. improve some of the more promising ideas;
3. select, tentatively, the one option that seems
best.
• Develop a series of “What if” scenarios?
What if? Our response would be?
They want the services for $30?

They will compare our price to our

competitor
• Set your objectives (precisely what you want
to achieve)
• Seek our precedence
• Create series of tradables
• Set your limits
• Collect information
• The parties gather as much relevant
information as possible on each other

• Information of the operating environment: the

involvement of other third parties, influencers,
competitors and the infrastructure, exchange
rate,…
• Trust and confidence can establish by inviting
individuals from the other side to visit your
office/country
The pre-negotiation stage is often more
important than the formal negotiations in an
international business relationship.
• They compare the alternatives available,
make check lists and assign arguments for
and against these alternatives.

• They also decide on possible points of

concession and their extent.
• Parties try to foresee and take precautions
against predictable events.

• Ex: Remittance of funds, taxes and import

duties and work permits

• Have some options, some solutions,

• The parties should evaluate the alternatives
presented by the other party and select
those.

• The best way is to determine criteria for

judging the alternatives and then rank order
each alternative.
• Host welcome;
• Agenda;
• Eye contact or lack of eye contact;
• Interruption;
• Silent periods;
• Listening skills;
• Patience;
• Understanding cultural differences;
• Building relationship;
• Business cards;
• Familiarity issues;
• Gift giving;
• Gift giving;
• Age;
• Gender;
• Introductions;
• Small talk prior to business discussion;
• Assigning a company representative to interact directly with an
opposing company representative;
• Written agreement after the first negotiation session;
• Sequential attention to issues and resultant decisions vs all
issue presented then decisions made;
• Opening comment
• Closing statements; and
• Next host’s formal invitation.
• At this stage, all the terms have been agreed
upon.
• The contract is being drawn up and is ready to
be signed: Read the contract carefully
• Writing the contract and the language used can
be a negotiation process.
• Discussion should be summarized after
negotiation.
 STEP 1: PREPARATION

STEP 2: BUILDING THE

RELATIONSHIP

STEP 3: EXCHANGING
INFORMATION/FIRST OFFER

STEP 4: PERSUASION

STEP 5: CONCESSIONS

STEP 6: AGREEMENT
Includes 3 steps:
• Step 1: Preparation
• Step 2: Building the relationship
• Step 3: Exchanging information/first
offer
• Is the negotiation possible?
• Know what your company wants
• Know the other side
• Send the proper team
• Agenda
• Prepare for a long negotiation
• Environment
• Strategy
No focus on business
Partners get to know each other
Social and interpersonal exchange
Duration and importance vary by
culture
• Task-related information is exchanged
• First offer
 Raw cashew nut Raw cashew nut
1,000 MT 1,200 MT
USD 1,950/MT USD 1,900/MT
CIF Dar Es Salam port, FOB Cat Lai port,
Incoterms 2010 Incoterms 2010

Seller Buyer
• More complex than domestic negotiations
• Differences in national cultures and differences
in political, legal, and economic systems often
separate potential business partners
Includes 2 steps:
Step 4: Persuasion
Step 5: Consessions
• Heart of the negotiation process
• Attempting to get other side to agree to a
position
• Numerous tactics used
• Promise
• Threat
• Recommendation
• Warning
• Reward
• Punishment
• Normative appeal
• Commitment
• Self disclosure
• Question
• Command
• No
• Interrupting
Dirty tricks are negotiation tactics that
pressure opponents to accept unfair or
undesirable agreements or concessions
• Deliberate deception - point out what is
happening
• Stalling - do not reveal when you plan to
leave
• Escalating authority - clarify decision
making authority
• Good guy, bad buy routine - do not make any
concessions
• You are wealthy and we are poor - ignore the
ploy
• Old friends - keep a psychological distance
• An open mind
• Discussing both conflicting issues and those of
common interest.
• An initial discussion on items of common
interest can create an atmosphere of
cooperation between parties.
• The choice of strategy depends upon the
customer or supplier
• Concession making: requires that each side
relax some of its demands
• Sequential approach
– Each side reciprocates concessions
• Holistic approach
– Concession making begins after all
issues are discussed
 Competitive
◦ The negotiation as a win-lose game
 Problem solving
◦ Search for possible win-win situations
• Cultural norms and values may predispose
some negotiators to one approach
• Most experts recommend a problem solving
negotiation strategy
• Tolerance of ambiguous situations
• Flexibility and creativity
• Humor
• Stamina
• Empathy
• Curiosity
• Bilingual
• Communication styles—direct or
indirect
• Sensitivity to time—low or high
• Forms of agreement—specific or broad
• Team organization—a team or one leader
• Includes 1 step: step 6
• Final agreement: The signed contract,
agreeable to all sides
1. Describe briefly a negotiation process.
2. Which stage is the most important in a
negotiation process?
You are negotiating terms with a supplier of a critical
component in your manufacturing process. You receive 100
units monthly. You project needing 150 units for the next 6
months and perhaps as many as 200 units ongoing after that.
You’ve been satisfied with the supplier’s quality, however
there have been two occasions where late deliveries have
forced overtime to meet customer commitments. An out of
state vendor has offered you a 20% discount for the 200 units
per month for a one year contract. Analyze the power factors,
set up your negotiation strategy, walk through a scenario
with your partners (observers).
#1: Make multiple offers simultaneously.
#2: Include a matching right.
#3: Try a contingent agreement.
#4: Negotiate damages upfront.
#5: Search for post-settlement settlements.
You have been analyzing your cash flow for the next thirty
days and realize you will be significantly short in meeting
your financial commitments. One account you owe equals
your shortfall by itself, and the check must be mailed
tomorrow. Two other accounts combined also equal your
shortfall, and both checks need to be mailed the day after
tomorrow. You cannot afford to create a poor credit history
because of a pending loan approval with all three accounts
being critical credit references. Analyze the power factors,
set up your negotiation strategy, walk through a scenario
with your partners (observers).
Chapter 1: A framework for international business
negotiation
Chapter 2: Vis-à-vis: International Business
Negotiations and cross-cultural communication
Chapter 3: Principled negotiation
Chapter 4: Process in international business negotiation
Chapter 5: Negotiating different types of projects
Chapter 6: Negotiation in different parts of the world
• Apply the knowledge of previous chapters to
situations of negotiating specific international
business contracts
• Have good skills to negotiate international
business contracts
5.1. Negotiating Sales, Export Transactions,
and Agency Agreement

5.2. Negotiating Licensing Agreements

• Exports – Imports
• Foreign Direct Investments
• Licensing
• Franchising
• Agency
• Turnkey project
• PPP
• …
• Definition: People of different nationalities
and people from different countries often sign
business contracts.
• This issue must be resolved according to general principles of
private international law:
• Regarding formal conditions, the law of the place where the
contract is signed applies.-
• Regarding the capacity of the parties, it is based on the law of
each party's country.
• If the contract has consequences for property rights, it is based
on the law of the place where the property is located. .
• Finally, for content issues, especially for difficulties in agreeing
on the court that will arbitrate the dispute. That is the principle
of autonomy of will
Definition:
An international contract for the sale
or export of goods is a contract for the
sale or export of goods in which the
goods being bought and sold move
across the border of a country or
territory. Borders can be geographical
territorial borders or legal borders that
do not move territorially.
According to the provisions of the current
Commercial Law, international purchases and
sales of goods must be carried out on the basis
of a written contract or other form with
equivalent legal value
 EXPORT SALES DISTRIBUTORSHIP/
AGREEMENT AGENCY
AGREEMENTS
Signed contracts thousands few
every day
Objective profit profit in the
future
Price can be sale off relationship
 EXPORT SALES DISTRIBUTORSHIP/
AGREEMENT AGENCY
AGREEMENTS

Issues to be contract scope, delivery, exclusivity, extent of

terms of payment, territory, supplier
negotiated performance, support, terms of
specification, service payment, commission
and arbitration to simple and commitment to
reduction in price or the relationship in
minor revision in terms terms of investing in it
Setting price: Sellers will normally
know their costs and will have
established a minimum price below
which they are not prepared to go
while buyers will have determined
a maximum amount over which
Playing the strong negotiator can be overdone.
If a negotiator is compelled to withdraw from
a position of extreme firmness in the face of
an opponent’s pressure, the loss of image will
be carried over to other issues and subsequent
negotiations.
A buyer or seller has to strike a balance
between firmness and credibility. If on the
other hand they have got themselves into an
attack/defend spiral, then to escape this
dilemma they have to signal a willingness to
move from initial stances they have taken up.
The negotiation agenda can itself be negotiated and
can be used to strengthen the position of one or
other of the parties.
For example, if the sellers have discovered in pre-
negotiation contact that the potential buyer puts
a premium on performance guarantees and wants
to use this leverage on performance to draw out a
better price, then they can ask to have performance
guarantees put ahead of price on the agenda and
put up strong resistance when guarantees come up
for discussion.
The language used at this juncture will,
certainly for Europeans and Americans, be
forthright and uncompromising.
If the other’s language is strong and simple,
there is a presumption that the commitment is
considerable. The less ambiguity there is in their
statements, the greater can the other’s
commitment be taken to be.
Playing the strong negotiator can be overdone.
If a negotiator is compelled to withdraw from a position of
extreme firmness in the face of an opponent’s pressure, the loss
of image will be carried over to other issues and subsequent
negotiations.
A buyer or seller has to strike a balance between firmness and
credibility.
Identifying Common Ground
When movement has been initiated, the negotiators can test the
assumptions they have made concerning the commitment of the
other side to the issues on which they appear to be adamant and
can ensure that the commitment to the issues that matter most to
themselves is maintained.
Sales Agreements with Governments and
Government Sponsored Agencies

Despite galloping privatisation of the public sector, there will always

remain a substantial government market for suppliers. Negotiations
with government departments go through a similar process to that
described above but they are played out to a different set of rules
and assumptions.
Example:
Importing rubber products from
Thailand is entitled to 0% tax
incentives by the government because
- Being in ASEAN - The government
negotiates to get preferential
treatment
Negotiating international sales agreements in
the private and public sectors : reading table
10.1 in your textbook, pages 234 – 236
• The relationship is more likely to be
characterised by unequal rather than by equal
power.
• The parties are committed to a cooperative
arrangement which takes the form of fulfilling a
negotiated role in the channel.
• The arrangement is regulated by the
distributorship agreement.
• Concern: 1. the supplier’s target; 2. the
commission
• It exists either on a voluntary basis or as a
result of conflict resolution
• Agency agreements similarly depend on
relationships
 The agent has power The suppliers has power
Where alternative A supplier’s or principal’s
intermediaries are in short hand will be strengthened
supply if his product is covered by
patent, trademark or
copyright.
Distributor or agent has a High commission or
special relationship with rewards
key customers
 DISTRIBUTORS ARE INTEREST IN AGENTS ARE INTEREST IN
- price - the area covered
- discounts - exclusivity
- payment terms - products handled
- the stocks to be carried - duration of agreement
- exclusivity in a defined area, - conditions of termination and the law
- how far the supplier will assist in under which it will be interpreted
advertising - his own remuneration by way of
- may be terminated commission
- arbitration in - the basis of its calculation
the event of unresolved conflict - the terms of its payment
- any other duties and expenses to which he
will be committed.
• Case: Valerie J Toups' company, the owner of
the cartoon Sad Puppy, signed a contract to
use the image copyright of the Corgi dog, the
main character of the cartoon, with Matthew
K Jordan company to produce T-shirts and sell
them. widely in the world market
• Objective: Copyright licensing of the image of
the Corgi dog in the cartoon Sad Puppy
Main content:
• Goods
• Price  Financial Issues
• Time
• Conditions to use
• Payment method
• Penalty
• Win – Win game
• Obligations
• Penalty
• Indemnify
• Play rol two parties in international business
contract to negotiate:
• 1. list the steps both parties doing in the
negotiation
• 2. set BATNA, limits
• 3. Determine the cultures effecting the
negotiation success
• 1. What are main terms in Sales/ Export/
Import Agreement?
• 2. How to be successful in international
distributorship/ agency Agreement
negotiation?
• 3. Give examples licensing agreements
CHAPTER 6
Chapter 1: A framework for international business
negotiation
Chapter 2: Vis-à-vis: International Business
Negotiations and cross-cultural communication
Chapter 3: Principled negotiation
Chapter 4: Process in international business negotiation
Chapter 5: Negotiating different types of projects
Chapter 6: Negotiation in different parts of the world
• Reviews the economic transition in East and
Central Europe, we would discuss entry of
foreign firms into these markets.
• The second section presents key factors
influencing market entry.
• The next section is devoted to the negotiation
• 6.1. Negotiating with East and
Central Europe
• 6.2. Business Negotiation between
Japanese and Americans
• The importance of East and Central Europe,
with a population of 430 million people.
• Eastern Europe has huge raw material
production and reserves including metal ores,
coal, oil, gas and agricultural products, while
Western Europe has the technology (Buckley
& Ghauri 1994)
• However, the situation in many of the countries is
uncertain, complex and difficult to predict and is
considered an enormous challenge for companies
planning to invest in these markets.
• Issues such as trade barriers, development of banking and
loan systems, pricing mechanisms, property and contract
law all need immediate attention.
• Privatization is considered a solution to achieve market
economies and growth, but there is no easy way to
achieve privatization in Eastern Europe
• An important issue for negotiation is whether the potential partner
for a common venture is a state-owned company or not.
• Taking over a state-owned company implies that negotiation will
take place directly with public authorities.
• As emphasized by Djarova (1999, p.14), “There is one particular
risk involved in joint venture deals with Eastern European
companies that are still state property.
• Sooner or later the company will be privatized, which will reflect
on the joint venture. It will change the owner, which might give
rise to conflicting interests.
• Difficult to dismantle existing power structure from earlier years;
• No clear priorities;
• Black markets;
• Political instability;
• Obscure legislative systems;
• Unlimited, however partly unsolvent demand;
• Extremely high inflation;
• Lack of infrastructure;
• Ineffective Banking and Monetary system.
• All these problems are critical, but cannot be solved simultaneously
and immediately.
 Factors Influencing Market Entry

• Communism meant collective property of production means.

In most countries, except Poland, a large part of agriculture
was state owned and managed.
• The same was true for foreign trade that was the monopoly of
sectoral agencies. Administered trade was the rule in the
Comecon where both production and trade were centrally
organised.
“

• There exists a new set of problems and situations to be

handled in these markets.
• These countries are quickly moving towards market economy,
starting from a situation where people have little or even no
idea of what is a
• contract, a price, delivery times.
• However, the introduction of market mechanisms and
marketing knowledge is a long-term process.
• There are some fundamental differences between marketing to
the West and the East.
• In Eastern Europe, despite the fact that most countries have
democratically elected governments and that there is a high
degree of privatization, government still plays a major role in
the business sector.
• This role is even greater when a foreign company is involved.
• The most important difference between the West and Eastern
Europe is the fact that there exists at least two or three
generation gaps in terms of productivity and infrastructure.
 Entry Strategies: A Long Term
Commitment
• To be successful in these markets the companies should
demonstrate long-term commitment and seriousness.
• We have already discussed that there are some differences in
the development and commitment levels of different
countries of Eastern Europe and it is not advisable to treat all
countries in the same manner.
• The companies thus have to have innovative approaches
 Entry Strategies: A Long Term
Commitment
• When entering these countries, a company should consider the
following step-by-step approach (Cavusgil et al. 2002):
• (1) Checking Priorities
• (2) Checking Regulations
• (3) Checking the local Agent/Partner: Is it difficult to check the
validity of the claims made by the local partner or agent? If the
claims are valid, how can they be evaluated?
• (4) Checking the Competition: It is very important to establish
who your competitors are. Local government or another foreign
company. It is important to check the potential competitors and
what your position would be in the long-term. Would you have
the same competitive advantage in five years from now?
 Entry Strategies: A Long Term
Commitment

• (5) Check the Financial Implications: Check to see

whether you would be forced to participate in Counter-Purchasing
or bartering. This should be controlled/checked at an early stage in
order to avoid surprises. In this case, you should also check the
financial position of your counterparts to determine whether they
would be able to fulfil their financial obligations.
 Entry Strategies: A Long Term
Commitment

• (6) Negotiations: It is very important to determine

whether the objectives of both parties are complementary. If
you can see that the other party has totally different
objectives, then you should analyse that situation and
determine whether it is acceptable to you. In this case, you
should also evaluate whether you would be able to achieve
your objectives and commit yourself accordingly. This issue
is also discussed separately.
• (7) Implementation: It is very important to carry out the
project wholeheartedly and think in the long term. The
potentials and opportunities should be evaluated at every
step or implementation and matched with the company’s
objectives.
 Business Negotiation between
Japanese and Americans
• The most difficult aspect of international business
negotiations is the actual conduct of the face-to-face meeting
• Differences in the expectations held by parties from different
cultures are one of the major difficulties in any cross-cultural
business negotiation.
• In both countries, business negotiations
proceed through four stages:
• (i) non-task sounding;
• (ii) task-related exchange of information;
• (iii) persuasion; and
• (iv) concessions and agreement.
• Giving information
• Getting information
• Persuasion
• Concessions and Agreement
• 1. What are characteristics of Japaneses,
Americans, East Europeans?
• 2. How to be success in international business
negotiation with Mazda (Japan company in
auto industry)?