Business development essay help: Australian retail chain – Culture and business negotiation

Introduction:

The aim of this report is to understand and elaborate the meaning of high-context and low-context cultures. This understanding can then be used to apply in the case of my organization (a multi-national Australian retail chain). The report elaborates on how the Australian company can make its negotiation more effective, especially in high-context cultures.

Literature Review:

A better understanding of cultural barriers and their implications to business negotiations can be achieved by considering the concepts of high- and low-context cultures. A high-context culture is one in which communication relies heavily on non-verbal and subtle situational cues and body language. Countries in South-East Asia, like Japan, China, Vietnam, South Korea etc have high-context cultures (Stephen P.Robbins, Timothy A. Judge, 2012).

A low-context culture is one that relies heavily on words to convey meaning in communication. Countries like Australia, United States of America, Germany, and United Kingdom etc have predominantly low-context cultures (Stephen P.Robbins, Timothy A. Judge, 2012).

Business Negotiation is a process in which two or more parties exchange goods or services and attempt to agree on the exchange rate for them. Negotiations are generally more difficult in a high-context culture. What is being not said may sometimes be more important than what is being said in high-context cultures; this makes the situation tricky.

On the other hand negotiations become much easier in low-context cultures because of the inherent explicitness of the spoken word. Subtle cues like body language and formal designations take a backseat in such cultures (Stephen P.Robbins, Timothy A. Judge, 2012).

Communication in high-context cultures requires more trust on the part of both the negotiating parties. So the negotiation process is prolonged because considerable time and energy is required to be invested for building trust first.

Oral agreements have a place of significance in negotiations in high-context cultures. Factors like age of the negotiating party; his or her rank in the organization etc have an important influence on the course of negotiations in high-context cultures.

High-context cultures value indirectness in approach while low-context cultures value directness in approach. Oral agreements do not have any significance in low-context cultures. The enforceable agreements are conveyed in detail in the form of written texts which are signed by both the parties.

Negotiators in low-context cultures are expected to be precise in conveying the intended meaning of any suggestion or proposal.

Management Implications:

My organization is a multi-national Australian retailer headquartered in Sydney. The company has its retail operations in around 60 countries of the globe. Some of these countries have high-context cultures while others have low-context ones.

Negotiations in such varied cultural contexts require different styles. The two general bargaining or negotiation styles are: Distributive bargaining and integrative bargaining. In distributive negotiation it is assumed that the negotiation process is a zero-sum game i.e. one party’s gain will mean loss for the other. So the focus of distributive negotiation is to negotiate for extracting as much of the pie as possible.

The integrative negotiation style is one that assumes that the negotiation process is a positive sum game i.e. the outcome will create win-win situation for both the parties of the negotiation.

High-context cultures are more inclined to have the distributive negotiation mindset. Low-context cultures on the other hand are more inclined towards an integrative negotiation mindset. Information therefore flows more freely in a negotiation in a low-context culture than in a negotiation in a high-context one (Stephen P.Robbins, Timothy A. Judge, 2012).

Distributive negotiation moves with a non-cooperative mindset. The outcome of such a negotiation process is usually less efficient than the outcome from cooperative integrative negotiation style.

Since everything is not explicitly mentioned in a high-context culture it becomes difficult to identify the attitude of the counterparty in the negotiation process. Knowledge of culture therefore becomes of critical importance in a high-context culture.

Knowledge and understanding of culture helps in understanding the non-verbal symbols and cues in high-context negotiations. This understanding of the local culture becomes particularly important for a person coming from a company in high-context culture like my Australian organization.

 A typical negotiation process has the following stages: Preparation and planning; definition of ground rules; clarification and justification; bargaining & problem solving and closure & implementation (Samovar, Larry A and Richard E Porter, 2004).

The preparation & planning stage acquires prime importance in a negotiation in high-context culture. It is at this stage that all the information about the culture of a country can be gained. Information on those involved in the negotiation process can be gathered so as to have a better insight into their motivations and expectations.

In the absence of adequate preparation and planning, a negotiator can make the blunder of being too explicit in a high-context environment or being too implicit in a low-context environment.

Many companies have suffered because of inadequate understanding of a foreign culture or market. Some understanding of native language can come of great help to negotiators. This lessens the communication problems that come across in a negotiation process. Communication problems are compounded in a high-context culture. Negotiators have to rely on the services of a translator, who translates only the spoken words but fails to communicate the unspoken words.

Many companies have therefore made it mandatory for their managers to learn the language of the native country. One such company is Germany based Siemens. Ernst Behrens, the head of Chinese operations of Siemens learnt to speak the very difficult Mandarin fluently. He did this so that he can be more effective in his myriads of negotiations with local suppliers, customers and employees (Samovar, Larry A and Richard E Porter, 2004).

However managers of many Western countries are not as adept as Mr Behrens of Siemens in learning an entirely different language like Mandarin. To compensate for this lack of understanding of language, such managers have to rely on non-verbal symbols like body language. The problem with relying too much on non-verbal symbols is that they vary according to cultures. Therefore such managers need to have a very deep understanding of the culture of the host country. Such knowledge can be of critical importance in a high-context negotiation situation. Body language and facial expressions are of significance in high-context cultures (Guffey, Mary Ellen,2009).

When negotiating with a person from a high-context culture, some steps can be taken to minimize misperceptions, misinterpretations and misevaluations. While negotiating with persons from a different culture, differences should be assumed until similarity is proven. People from different cultures can have significant differences. It is always wise to take cognizance of these differences and accept them; ignoring these differences can lead to disastrous outcomes from the negotiation process. The probability of making errors in judgment is minimized when differences are assumed rather than similarities.

The negotiation style in a high context culture should be to emphasize description rather than interpretation or evaluation. So, all issues of critical importance should be clearly explained in a high-context environment. Any doubts should be clarified. If possible the details of all agreements should be put in written words and signed by both the parties.

In a negotiation process with counterparty from a high-context culture it becomes even more important to emphasize description. The counterparty may not put everything in words. The responsibility of the other party is therefore increased to clarify every point of negotiation (Sparks, D. B ,1993).

Much more empathy needs to be exercised in a negotiation taking place in a high-context culture. Empathy is putting oneself in the position of the counterparty of negotiation to get an insight into his perspective.

The five most popular styles of negotiation are : accommodating, collaborating, avoiding, competing and compromising. An accommodating style of negotiation is one which is considerate to the needs of the counterparty. The accommodative style takes special notice of the emotions and the non-verbal responses of the counterparties. While negotiating in high-context cultures the accommodative style of negotiation can be effective  (Churchman, David. 1993).

The collaborating style of negotiation is one in which a cooperative approach is pursued. The counterpart to the negotiation is seen as a potential collaborator rather than as an adversary. Such style of negotiation can be very effective in negotiations over complex issues. A collaborative approach can be effective in both high-context and low-context cultural environments.

The avoiding style of negotiation is one in which negotiators avoid taking up the core issues of negotiations and prefer to beat around the bush. This kind of negotiation style is not advisable in high-context cultures or low-context ones.

In competing style of negotiation one strives only to maximize one’s personal interests in the negotiation. The competing style  responds to the demands of counterparty by raising its demands. Such a negotiation style is aggressive in approach. It can work or fail in both high-context and low-context cultures. Its success depends on many other factors besides cultural ones (Churchman, David. 1993).

Compromising style of negotiation is one in which negotiators have a very flexible attitude. They are not interested solely in maximizing their profits but are also sensitive to the interests of the other parties. The compromising style of negotiation is one of the most effective styles. However, too much flexibility can result in giving out too much sometimes.

Recommendations:

In a high-context culture it is recommended that the Australian retail organization should adopt a composite style which is accommodative, collaborating and comprising. Such a composite result will be in the interests of the organization as it can bring positive outcomes in maximum number of negotiations.

It is also recommended that the company should publish cultural guides or primers for the different national markets in which it operates. It should distribute these cultural primers to managers and executives who take up negotiations on the part of the company. They will get a better understanding of the culture of the counterparties by going through these cultural guides.

It is also recommended that the company should conduct periodic training sessions for its key negotiators and managers. This will go a long way in upgrading the negotiation skills of key personnel.

Negotiation is both a science and an art. In a high-context culture the art element of the negotiation process becomes even more important. So, experienced and seasoned negotiators should be sent as negotiators for the organization in high-context culture nations. In low-context cultures everything is stated explicitly by both the parties. So, even less experienced negotiators can handle such negotiations for the organization.

At the start of every negotiation ground rules should be clearly explained to the counterparty irrespective of the cultural context. A transparent approach to negotiation is always advisable for a large corporation. Whatever relevant information the other party needs, it should be provided freely.

Negotiators should adopt their styles depending on the nature of the problem or issue. If the issue is of strategic or long term importance then too much flexibility can hurt the strategic interests of the company. However if the issue at hand is of tactical or short term importance then a flexible approach can make things work much more smoothly (Guffey, Mary Ellen,2009).

Conclusion:

Different styles of negotiation are required for high-context and low-context cultures. Negotiation becomes a much more complicated process in high-context cultures because everything is not stated clearly and explicitly. The non-verbal or the unspoken may be more important than the spoken. The critical factors of success in a high-context culture are:

i)                    A good understanding of the culture. This enables in understanding better the non-verbal cues like body language and facial expressions. Without understanding the foreign culture, success in negotiations in high-context cultures can prove to be elusive. Cultural understanding is the most important critical factor of success for negotiations in high-context cultures.

ii)                  A composite style of negotiation, which is accommodative, collaborating and comprising. Such a style is effective in establishing trust by overcoming cultural barriers. A style that is rigid or competing can be ineffective in high-context cultures as it can lower the already low trust-deficit.

iii)                It is to be understood that high-context cultures suffer from an inherent trust deficit. This is the major reason why many things are not spoken explicitly and are only implied. So one of the first steps while negotiating in a high-context culture is to establish an environment of trust. This is likely to make the other party comfortable and more forthcoming in its approach.

iv)                Any area of critical importance in a high-context negotiation should be clearly stated. Areas where agreements are binding should be put in written text and signed by both the parties. Litigations arising from negotiations are more common in high-context cultures because many things are not put in written form. By putting everything clearly and explicitly in written form, potential litigations can be avoided.

The success in negotiations can drive the success and growth of the entire organization (Shell, R.G., 2006). So negotiations are extremely important for the Australian retail chain as it is planning to embark on a rapid expansion spree. Many of the markets in which it is going to enter have high-context cultures. Through effective negotiations the company can gain for itself the right partners, franchisees, suppliers and employees. Therefore it is imperative for the organization to train its key personnel in the art and science of negotiating in a high-context culture. Negotiations can be really tricky in such cultures.

A company by adopting the right negotiation style can multiply its revenues, save costs and forge the right strategic alliances. The importance of negotiations can therefore not be understated. And the importance of right negotiation style depending on the cultural context is critical.

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