Cultural Aspects of International Business Negotiations

30 June 2021

Cultural differences do have an impact on international business negotiations. When negotiating internationally, one needs cultural knowledge and skills in intercultural communication. Many agreements have to be negotiated, drafted, signed and finally implemented: sales contracts, licensing agreements, joint ventures and various kinds of partnerships, agency and distribution agreements, turnkey contracts, etc. Negotiation is not only based on legal and business matters, hard facts which are often emphasized as being the sole important facts, but also on the quality of human and social relations.

There are various kinds of “distances” between the potential partners: physical distance certainly, but also economic, educational and cultural distance, which tend to inflate the cost of negotiating internationally. Difficulties in interacting, negotiating, planning common ventures, working them out and achieving them together are deeply rooted in the cultural, human and social, background of business people.

 

What is Culture?

Culture is complex, multiple and hard to understand. Culture in today’s context is different from the traditional, more singular definition, used particularly in Western languages, where the word often implies refinement. Culture is the beliefs, values, mind-sets, and practices of a group of people. It includes the behaviour pattern and norms of that group—the rules, the assumptions, the perceptions, and the logic and reasoning that are specific to a group. In essence, each of us is raised in a belief system that influences our individual perspectives to such a large degree that we can’t always account for, or even comprehend, its influence.

Much of the problem in any cross-cultural interaction stems from our expectations. The challenge is that whenever we deal with people from another culture—whether in our own country or globally—we expect people to behave as we do and for the same reasons. Culture awareness most commonly refers to having an understanding of another culture’s values and perspective. When talking about culture, it’s important to understand that there really are no rights or wrongs. People’s value systems and reasoning are based on the teachings and experiences of their culture. Rights and wrongs then really become perceptions.

Political, economic, and social philosophies all impact the way people’s values are shaped. Our cultural base of reference—formed by our education, religion, or social structure—also impacts business interactions in critical ways. As we study cultures, it is very important to remember that all cultures are constantly evolving. When we say “cultural,” we don’t always just mean people from different countries. Every group of people has its own unique culture—that is, its own way of thinking, values, beliefs, and mind-sets.

 

How Cultural Differences Impact International Business Negotiations

Professionals err when thinking that, in today’s shrinking world, cultural differences are no longer significant. It’s a common mistake to assume that people think alike just because they dress alike; it’s also a mistake to assume that people think alike just because they are similar in their word choices in a business setting. Even in today’s global world, there are wide cultural differences, and these differences influence how people do business. Culture impacts many things in business, including

  • The pace of business;
  • Business protocol—how to physically and verbally meet and interact;
  • Decision making and negotiating;
  • Managing employees and projects;
  • Propensity for risk taking; and
  • Marketing, sales, and distribution.

There are still many people around the world who think that business is just about core business principles and making money. They assume that issues like culture don’t really matter. These issues do matter—in many ways. Even though people are focused on the bottom line, people do business with people they like, trust, and understand. Culture determines all of these key issues.

When you’re dealing with people from another culture, you may find that their business practices, communication, and management styles are different from those to which you are accustomed. Understanding the culture of the people with whom you are dealing is important to successful business interactions and to accomplishing business objectives.

Manners and customs refer to individual and collective traditional customs, fashion, manners, and habits. It is a kind of behavioural pattern observed in a specific socio-cultural area for a long time. Custom is formed from history, so it has a very strong social behavioural effect on its members. Custom is the foundation and complementary part of social morality and law, including national customs, holiday customs and traditional etiquette. Each country has its own customs and etiquette, which are not easily changed.

Ways of Thinking: thinking patterns refer to forms of reasoning and approaches to problem solution. Thinking patterns differ from culture to culture; a logical, reasonable argument in one culture may be considered as illogical and un-demonstrated in other culture. Negotiators have different ways of thinking, thus they have different thinking modes for negotiating.

To conduct business with people from other cultures, you must put aside preconceived notions and strive to learn about the culture of your counterpart.

In reality, understanding cultural differences is important whether you’re selling to ethnic markets in your own home country or selling to new markets in different countries. Culture also impacts you if you’re sourcing from different countries, because culture impacts communications.

Your understanding of culture will affect your ability to enter a local market, develop and maintain business relationships, negotiate successful deals, conduct sales, conduct marketing and advertising campaigns, and engage in manufacturing and distribution. Too often, people send the wrong signals or receive the wrong messages; as a result, people get tangled in the cultural web.

It’s critical to understand the history and politics of any country or region in which you work or with which you intend to deal. It is important to remember that each person considers his or her “sphere” or “world” the most important and that this attitude forms the basis of his or her individual perspective. We often forget that cultures are shaped by decades and centuries of experience and that ignoring cultural differences puts us at a disadvantage.

 

Handling and Reducing Cultural Differences

  1. Learn the other side’s culture

It is very important to know the commonest basic components of our counterparty’s culture. It’s a sign of respect and a way to build trust and credibility as well as advantage that can help us to choose the right strategies and tactics during the negotiation.

  1. Don’t stereotype

Making assumptions can create distrust and barriers that expose both your and the other side’s needs, positions and goals. The way we view other people tends to be reserved and cautious.

  1. Find ways to bridge the culture gap

Apart from adopting the other side’s culture to adjust to the situation and environment, we can also try to persuade the other side to use elements of our own culture.

  1. Establishing Cross-Cultural Awareness

The manifestations of cultural differences are displayed in four aspects: concepts of values, manners and customs, ways of thinking, and negotiation styles. If negotiators ignore cultural differences, it will bring some risks and trouble to the process and outcome of international business negotiations.

 

What are the Conclusions?

  • Being honest during negotiations, keeping your promises, and treating others as you would like to be treated all help you negotiate ethically.
  • Not understanding the culture of a person or group of people you are negotiating with can be a major mistake.
  • Try to learn as much as you can about the culture of others involved and be sure to clarify key points along the way.

 

Peter Ruggle – 360 Business Law 

 

 

 

 

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