International trade is exchange of capital, goods, and services across international

borders or territories.[1] In most countries, it represents a significant share of gross

domestic product (GDP). While international trade has been present throughout much of
history (see Silk Road, Amber Road), its economic, social, and political importance has
been on the rise in recent centuries. Industrialization, advanced transportation,
globalization, multinational corporations, and outsourcing are all having a major impact
on the international trade system. Increasing international trade is crucial to the
continuance of globalization. International trade is a major source of economic revenue
for any nation that is considered a world power. Without international trade, nations
would be limited to the goods and services produced within their own borders.

International trade is in principle not different from domestic trade as the motivation and
the behavior of parties involved in a trade does not change fundamentally depending on
whether trade is across a border or not. The main difference is that international trade is
typically more costly than domestic trade. The reason is that a border typically imposes
additional costs such as tariffs, time costs due to border delays and costs associated with
country differences such as language, the legal system or a different culture.

International trade uses a variety of currencies, the most important of which are held as
foreign reserves by governments and central banks. Here the percentage of global
cummulative reserves held for each currency between 1995 and 2005 are shown: the US
dollar is the most sought-after currency, with the Euro in strong demand as well.

Another difference between domestic and international trade is that factors of production
such as capital and labor are typically more mobile within a country than across
countries. Thus international trade is mostly restricted to trade in goods and services, and
only to a lesser extent to trade in capital, labor or other factors of production. Then trade
in good and services can serve as a substitute for trade in factors of production. Instead of
importing the factor of production a country can import goods that make intensive use of
the factor of production and are thus embodying the respective factor. An example is the
import of labor-intensive goods by the United States from China. Instead of importing
Chinese labor the United States is importing goods from China that were produced with
Chinese labor. International trade is also a branch of economics, which, together with
international finance, forms the larger branch of international economics.

Models
Several different models have been proposed to predict patterns of trade and to analyze
the effects of trade policies such as tariffs.

Ricardian model

Main article: Ricardian model

The Panama Canal is important for international sea trade between the Atlantic Ocean
and the Pacific Ocean.

The Ricardian model focuses on comparative advantage and is perhaps the most
important concept in international trade theory. In a Ricardian model, countries specialize
in producing what they produce best. Unlike other models, the Ricardian framework
predicts that countries will fully specialize instead of producing a broad array of goods.
Also, the Ricardian model does not directly consider factor endowments, such as the
relative amounts of labor and capital within a country.

Assumptions of the Ricardian model (1) Labor is the only primary input to production
(labor is considered to be the ultimate source of value). (2) Constant Marginal Product of
Labor (MPL) (Labor productivity is constant, constant returns to scale, and simple
technology. (3) Limited amount of labor in the economy (4) Labor is perfectly mobile
among sectors but not internationally. (5) Perfect competition (price-takers).

The Ricardian model measures in the short-run, therefore technology differs

internationally. This supports the fact that countries follow their comparative advantage
and allows for specialization.

Heckscher-Ohlin model

Main article: Heckscher-Ohlin model

The Heckscher-Ohlin model was produced as an alternative to the Ricardian model of

basic comparative advantage. Despite its greater complexity it did not prove much more
accurate in its predictions. However from a theoretical point of view it did provide an
elegant solution by incorporating the neoclassical price mechanism into international
trade theory.

The theory argues that the pattern of international trade is determined by differences in
factor endowments. It predicts that countries will export those goods that make intensive
use of locally abundant factors and will import goods that make intensive use of factors
that are locally scarce. Empirical problems with the H-O model, known as the Leontief
paradox, were exposed in empirical tests by Wassily Leontief who found that the United
States tended to export labor intensive goods despite having a capital abundance.

Core assumptions of the H-O model: (1) Labor and capital flow freely between sectors
(2) The production of shoes is labor intensive and computers is capital intensive (3) The
amount of labor and capital in two countries differ (difference in endowments) (4) free
trade (5) technology is the same across countries (long-term) (6) Tastes are the same.

Specific factors model

Global Competitiveness Index (2006-2007): competitiveness is an important determinant

for the well-being of states in an international trade environment.

In this model, labour mobility between industries is possible while capital is immobile
between industries in the short-run. Thus, this model can be interpreted as a 'short run'
version of the Heckscher-Ohlin model. The specific factors name refers to the given that
in the short-run, specific factors of production such as physical capital are not easily
transferable between industries. The theory suggests that if there is an increase in the
price of a good, the owners of the factor of production specific to that good will profit in
real terms. Additionally, owners of opposing specific factors of production (i.e. labour
and capital) are likely to have opposing agendas when lobbying for controls over
immigration of labour. Conversely, both owners of capital and labour profit in real terms
from an increase in the capital endowment. This model is ideal for particular industries.
This model is ideal for understanding income distribution but awkward for discussing the
pattern of trade.

New Trade Theory

Main article: New Trade Theory

New Trade theory tries to explain several facts about trade, which the two main models
above have difficulty with. These include the fact that most trade is between countries
with similar factor endowment and productivity levels, and the large amount of
multinational production(i.e.foreign direct investment) which exists. In one example of
this framework, the economy exhibits monopolistic competition and increasing returns to
scale.

Gravity model

Main article: Gravity model of trade

The Gravity model of trade presents a more empirical analysis of trading patterns rather
than the more theoretical models discussed above. The gravity model, in its basic form,
predicts trade based on the distance between countries and the interaction of the
countries' economic sizes. The model mimics the Newtonian law of gravity which also
considers distance and physical size between two objects. The model has been proven to
be empirically strong through econometric analysis. Other factors such as income level,
diplomatic relationships between countries, and trade policies are also included in
expanded versions of the model.

Regulation of international trade

Traditionally trade was regulated through bilateral treaties between two nations. For
centuries under the belief in Mercantilism most nations had high tariffs and many
restrictions on international trade. In the 19th century, especially in the United Kingdom,
a belief in free trade became paramount.[citation needed] This belief became the dominant
thinking among western nations since then. In the years since the Second World War,
controversial multilateral treaties like the General Agreement on Tariffs and Trade
(GATT) and World Trade Organization have attempted to create a globally regulated
trade structure. These trade agreements have often resulted in protest and discontent with
claims of unfair trade that is not mutually beneficial.

Free trade is usually most strongly supported by the most economically powerful nations,
though they often engage in selective protectionism for those industries which are
strategically important such as the protective tariffs applied to agriculture by the United
States and Europe.[citation needed] The Netherlands and the United Kingdom were both strong
advocates of free trade when they were economically dominant, today the United States,
the United Kingdom, Australia and Japan are its greatest proponents. However, many
other countries (such as India, China and Russia) are increasingly becoming advocates of
free trade as they become more economically powerful themselves. As tariff levels fall
there is also an increasing willingness to negotiate non tariff measures, including foreign
direct investment, procurement and trade facilitation.[citation needed] The latter looks at the
transaction cost associated with meeting trade and customs procedures.

Traditionally agricultural interests are usually in favour of free trade while manufacturing
sectors often support protectionism.[citation needed]This has changed somewhat in recent years,
however. In fact, agricultural lobbies, particularly in the United States, Europe and Japan,
are chiefly responsible for particular rules in the major international trade treaties which
allow for more protectionist measures in agriculture than for most other goods and
services.

During recessions there is often strong domestic pressure to increase tariffs to protect
domestic industries. This occurred around the world during the Great Depression. Many
economists have attempted to portray tariffs as the underlining reason behind the collapse
in world trade that many believe seriously deepened the depression.

The regulation of international trade is done through the World Trade Organization at the
global level, and through several other regional arrangements such as MERCOSUR in
South America, the North American Free Trade Agreement (NAFTA) between the
United States, Canada and Mexico, and the European Union between 27 independent
states. The 2005 Buenos Aires talks on the planned establishment of the Free Trade Area
of the Americas (FTAA) failed largely because of opposition from the populations of
Latin American nations. Similar agreements such as the Multilateral Agreement on
Investment (MAI) have also failed in recent years.

Risks in international trade

The risks that exist in international trade can be divided into two major groups

Economic risks

 Risk of insolvency of the buyer,

 Risk of protracted default - the failure of the buyer to pay the amount due within
six months after the due date
 Risk of non-acceptance
 Surrendering economic sovereignty
 Risk of exchange rate
 Susceptibility to changing standards & regulations within other countries

Political risks

 Risk of cancellation or non-renewal of export or import licenses

 War risks
 Risk of expropriation or confiscation of the importer's company
 Risk of the imposition of an import ban after the shipment of the goods
 Transfer risk - imposition of exchange controls by the importer's country or
foreign currency shortages
 Surrendering political sovereignty
 Influence of political parties in importer's company
 Relations with other countries

comparative advantage and international trade

Comparative advantage exists when a country has a margin of superiority in the
production of a good or service i.e. where the opportunity cost of production is lower. 

The basic theory of comparative advantage was developed by David Ricardo

Ricardo's theory of comparative advantage was further developed by Heckscher, Ohlin

and Samuelson who argued that countries have different factor endowments of labour,
land and capital inputs. Countries will specialise in and export those products which
use intensively the factors of production which they are most endowed.
If each country specialises in those goods and services where they have an advantage,
then total output and economic welfare can be increased (under certain assumptions). 
This is true even if one nation has an absolute advantage over another country.

Worked example of comparative advantage

Consider the data in the following table:

Pre-Specialisation CD Players Personal Computers

UK 2,000 500
Japan 4,000 2,000
Total Output 6,000 2,500

To identify which country should specialise in a particular product we need to analyse

the internal opportunity cost for each country. For example, were the UK to shift more
resources into higher output of personal computers, the opportunity cost of each extra
PC is four CD players. For Japan the same decision has an opportunity cost of two CD
players. Therefore, Japan has a comparative advantage in PCs.

Were Japan to reallocate resources to CD players, the opportunity cost of one extra CD
player is 1/2 of a PC. For the UK the opportunity cost is 1/4 of the PC. Thus the UK has
the comparative advantage in CD players.

Specialisation and potential gains from trade

After Specialisation CD Players Personal Computers

UK 4,000 0
Japan 2.400
2,800
Total Output 6,400 2,800

Output of both products has increased - representing a gain in economic welfare. Total
output of CD players has increased by 2000 units and total output of personal computers
has expanded by 500 units.

Allocating the gains from trade

For mutually beneficial trade to take place, the two nations have to agree an acceptable
rate of exchange of one product for another. To work this out, consider the internal
opportunity cost ratios for each country. 

Without trade, the UK has to give up four CD players for each PC produced.
A terms of trade (or rate of exchange) of 3 CD players for each PC produced would be
an improvement for the UK In the case of Japan (specialising in producing personal
computers) for each

After trade (3 CD's for 1

CD Players Personal Computers
PC)
UK 2,200 600
Japan 4,200 2,200
Total Output 6,400 2,800

compare with the original production matrix

Pre-Specialisation CD Players Personal Computers

UK 2,000 500
Japan 4,000 2,000
Total Output 6,000 2,500

After trade has taken place, total output of goods available to consumers in both
countries has grown. UK's consumption of CD players has increased by 200 and they
have an extra 100 PCs. For Japan, they have an extra 200 CD players and 200 PCs.

Assumptions underlying the concept of comparative advantage

 Perfect occupational mobility of factors of production - resources used in one

industry can be switched into another without any loss of efficiency
 Constant returns to scale (i.e. doubling the inputs in each country  leads to a
doubling of total output)
 No externalities arising from production and/or consumption
 Transportation costs are ignored

If businesses exploit increasing returns to scale (i.e. economies of scale) when they
specialise, the potential gains from trade are much greater. The idea that specialisation
should lead to increasing returns is associated with economists such as Paul Romer and
Paul Ormerod

What determines comparative advantage?

Comparative advantage is a dynamic concept. It can and does change over time. Some
businesses find they have enjoyed a comparative advantage in one product for several
years only to face increasing competition as rival producers from other countries enter
their markets. 

For a country, the following factors are important in determining the relative costs of
production:
  The quantity and quality of factors of production available (e.g. the size and
efficiency of the available labour force and the productivity of the existing stock
of capital inputs). If an economy can improve the quality of its labour force and
increase the stock of capital available it can expand the productive potential in
industries in which it has an advantage.
 Investment in research & development (important in industries where patents
give some firms significant market advantage)

 Movements in the exchange rate. An appreciation of the exchange rate can

cause exports from a country to increase in price. This makes them less
competitive in international markets.

 Long-term rates of inflation compared to other countries. For example if

average inflation in Country X is 4% whilst in Country B it is 8% over a number
of years, the goods and services produced by Country X will become relatively
more expensive over time. This worsens their competitiveness and causes a
switch in comparative advantage.

 Import controls such as tariffs and quotas that can be used to create an
artificial comparative advantage for a country's domestic producers- although
most countries agree to abide by international trade agreements. 

 Non-price competitiveness of producers (e.g. product design, reliability, quality

of after-sales support)

Dimensions of Success in International Business Negotiations:

Abstract

The success of international business relationships depends on effective business

negotiations. Negotiators need to be well prepared. Understanding how to achieve
international business negotiation outcomes and the factors relevant to the process will
allow negotiators to be more successful.

Based on theories of negotiation with a cultural focus, this study focuses on the
dimensions of negotiating outcomes and process as perceived by Thai and International
business negotiators related to past cross-cultural international business negotiations.
From a review of negotiation practices a questionnaire focusing on positive retrospective
negotiation experiences was developed and sent to executives working in Thailand. The
results indicate that the important outcomes for successful cross-cultural negotiators are
future-oriented prospects and performance. An information focus and a relationship
orientation are the dominant keys to success identified by both Thai and International
negotiators. Tactics and protocol are much less emphasized in successful experiences.
International business negotiators significantly emphasize a specific time orientation
more than their Thai counterparts.

Keywords: International business, negotiators, negotiating process, negotiating outcomes,

future-oriented prospects, relationship orientation, executives in Thailand.

1. Introduction

International executives attempt to negotiate for an optimal solution: minimizing conflicts

and maximizing gains. Martin et al. (1999) found that a clear negotiation strategy was the
most important factor for successful international business relationships.

In international business negotiations, cultural differences are inevitable between

negotiators from different countries. Cultural values can influence international business
negotiations in significant and unexpected ways from the first to the last stage of a
negotiation. The diversity of values of partners results in different approaches used in the
negotiation process and variable expected outcomes. Successful international business
negotiation is not guaranteed by following practical negotiation tips. In fact, it would be
more useful for negotiators if the most critical success factors of international business
negotiations in a particular culture could be identified in advance.

Negotiating with executives from different cultures requires an understanding and

adaptability to these differences. Special approaches for particular cultures may be
needed. An international business negotiation within the Thai culture, in particular, would
require a unique emphasis from other cultures to achieve positive results in negotiations.

Thailand is one of the most economically successful countries in Southeast Asia.

Currently, various modes of international business transactions have been strongly
promoted by the Thai government in order to increase international competitiveness. Thai
entrepreneurs with international business potential are attempting to enter potential
international markets. Simultaneously, inward foreign direct investment has also been
promoted, using tax advantages and other incentives to motivate foreign investors to
develop joint ventures or 100% owned operations in Thailand.

As international business opportunities open, negotiations also increase. Most Thai

business negotiators have used a trial-and-error approach in negotiations. International
negotiators tend to be more skillful as a result of learning through experience.
Inexperienced business negotiators who want to be internationally effective have to learn
more about the cultural aspect of business negotiations. Lack of preparation definitely
impedes the development of an appropriate negotiation approach. To facilitate better
international business negotiations for both Thai executives who negotiate internationally
and foreign investors who operate in Thailand, the analysis of effective negotiation in this
context is emphasized. The types of outcomes relevant to successful international
business negotiations are also identified.
Theories of international negotiation with a focus on cross-cultural practice are presented.
This provides the background to understand the cultural features of the negotiation
process. This paper will assess the perceptions of success in international business
negotiations and related elements of the negotiation process in a cross-cultural context.
The study was conducted with Thai and International negotiators working in Thailand.
The participants responded to past experience in successful international business
negotiations, and what elements of the negotiation process they emphasize to achieve
positive outcomes.

2. International Business Negotiations: Definition and Process

In this section, perspectives on international business negotiation are reviewed. An

international business negotiation is defined as the deliberate interaction of two or more
social units (at least one of them a business entity), originating from different nations,
that are attempting to define or redefine their interdependence in a business matter. This
includes company-company, company-government, and solely interpersonal interactions
over business matters such as sales, licensing, joint ventures, and acquisitions (Weiss,
1993:270).

Generally, the process of negotiation consists of three different negotiation stages

including the pre-, actual negotiation, and post- stages (Ghauri 1996:7). The effective
flow of the negotiation process can determine the success of a negotiation.

The pre-negotiation stage, which involves the preparation and planning, is the most
important step in negotiation (Ghauri 1996:14). It sets the foundation for the process
negotiating (Lewicki et al. 1994). It consists of interactions, such as building trust and
relationships, and the task-related behaviors which focus on the preferences related to
various alternatives (Graham & Sano 1989, Simintiras & Thomas 1998). In brief, the first
stage of negotiation emphasizes getting to know each other, identifying the issues, and
preparing for the negotiation process.

The negotiation stage involves a face-to-face interaction, methods of persuasion, and the
use of tactics. At this stage negotiators explore the differences in preferences and
expectations related to developing an agreement.

The post-negotiation stage relates to concessions, compromises, evaluating the

agreement, and following-up.

These stages are often done concurrently. The negotiation process is a dynamic process,
involving a variety of factors related to potential negotiation outcomes.

International business negotiations are typically more complicated and difficult to assess
than the negotiations taking place between negotiators from the same culture. This is
because the values of the negotiators are different. Negotiators have unique perspectives
on negotiations leading to different styles. Other external influences such as international
law, exchange rates, and economic growth also increase the complexity of negotiations.
International business negotiators need to understand each other’s values so that they can
adapt their negotiating approaches to emerging situations.

3. Negotiation Outcomes and Performance

The cultural aspects related to outcomes are considered in this section. A negotiation
outcome is the result of the interaction with the partners (Thompson 1998:10). Usunier
(1996) identified five outcome orientations that vary among different cultures. These
include partnership, contract, profit, winning, and the time expectations of the
negotiation. Specific cultures prefer a certain outcome orientation. For example, Chinese,
Korean, and Japanese negotiators look for a relationship and an integrative approach
rather than a distributive solution whereas American negotiators emphasized contracts
and are concerned less with a win-win settlement (Paik & Tung 1999, Zhao 2000).
Americans consider a signed contract as a definitive set of requirements that strictly binds
the two sides and determines their interaction. Japanese and Chinese negotiators often
consider a relationship as the appropriate result of the process, not a signed contract
(Salacuse 1998:225-226). A distributive orientation culture such as the US or UK usually
emphasizes winning over the other party as the best result. Different cultures focus on
specific outcomes to define the success of international business negotiations.

Negotiation performance is an evaluated outcome, usually based on a continuum of

success to failure. Generally, in a successful negotiation a negotiator obtains something
of greater value in exchange for something of a lower relative value (Buttery & Leung
1998:379). One possible outcome is a mutual settlement. Negotiations may end in an
impasse, in which there is no settlement. Partners also compare their relevant outcomes
(Buttery & Leung 1998:380). Who gains or loses affects the perception of the
negotiator’s success.

Successful negotiation does not end with the attainment of an agreement (Ertel 1999).
Along with the completion of a contract, and the settlement of substantive issues,
negotiators also consider the intangible aspects of negotiated outcomes, including overall
satisfaction, status of the relationship, and the level of commitment (Savage et al. 1989).
Negotiators may achieve a good deal but fail to sustain the relationship or develop
positive feelings with their counterpart. In such a case, the negotiation can be considered
successful if the agreement is the first priority. Conversely, it can be viewed as a failure if
maintaining a good relationship is the higher priority.

The negotiator’s perceptions about specific negotiation outcomes are diverse. These
depend on goals which can be affected by culture. If the characteristics of the negotiation
outcomes are identified by a particular cultural perspective, it will influence the
negotiation process.

4. Culture and Negotiations

Negotiation theories with an emphasis on culture are assessed in this analysis Culture
consists of patterns, explicit and implicit, of behavior acquired and transmitted by
symbols including their embodiment in artifacts. The essential core of culture consists of
traditional (i.e. historically derived and selected) ideas and values. Cultural systems may
be considered as products of action, or as conditioning further action (Kroeber &
Kluckhohn 1952:181).

Culture provides the context for negotiation because it takes place within the framework
of a culture’s institutions and is influenced by its norms and values. Culture is a key
factor affecting negotiation processes and outcomes (Brett et al., 1998). According to
Salacuse (1998), negotiation practices differ from culture to culture. Culture provides the
"negotiating style" – the way persons from different cultures conduct themselves in
negotiating activities. Culture determines the way people perceive and approach the
negotiating process. They have specific perspectives on power, time, risk,
communication, and complexity. Individualist negotiators tend to engage in coercive or
competitive behavior, and arguments whereas collectivist negotiators emphasize
relationships and problem solving (Heydenfeldt, 2000).

The specific theories which identify the impacts of culture on the international business
negotiation process are synthesized and compared. Most of these studies have only
focused on one aspect of the process. Table 1 presents a synthesis of these impacts
specified in previous studies.

Table 1 Cultural Values on International Business Negotiation Process

International Business
Impact of Cultures
Negotiation Process

 Thai, Chinese, and Japanese negotiators value

Goal long-term relationships. Western negotiators aim
at signing a contract.

 The degree of formality in a negotiation can vary

Protocol from culture to culture. Thais value etiquette and
respectful manners. English and German
negotiators are very formal and highly concerned
with proper protocol.

 Thais tend to speak softly and use almost no

Communication gestures, and prefer indirect language. Americans
are direct and prefer a straightforward
presentation with a minimum of game playing.
  Americans are sensitive to time. They view it as a
Time limited resource that must not be wasted. Japanese
regard time as long duration, spending time to
learn counterparts. Thais have a very relaxed
attitude to time and scheduling

 Japanese prefer predictable situations, being strict

Risk propensity to the rules. Thais are more flexible to the rules,
and accepting changes.

 In decision making, a more collective culture

Groups versus individuals places emphasis on group priority. An individual-
oriented culture is more independent and
assertive. Thai culture is group-oriented, but
hierarchical; decisions are made by the top
managers. Japanese negotiators rely on consensus.

 Thais generally respect contracts, but personal

Nature of agreements commitment has more value. Germans are detail-
oriented and prefer specific provisions.

Sources: Gesteland 2002, Brett 2001, Hendon 2001, Lewicki et al. 1999, Martin et al.
1999, Salacuse 1998, Wise 1997, Usunier 1996, and Weiss 1994.

As presented in Table 1, the cultural differences consistently influence international

business negotiations. This indicates that even though some universal characteristics of
international business negotiation are generally recognized, negotiators from specific
cultures view negotiations as a particular style. They emphasize different priorities of
goals, the negotiation process, and expected outcomes. Understanding the influence of
culture in negotiation reduces confusion and misinterpretations in the process.
Negotiators need to be aware of such cultural differences and become well prepared for
them.

To analyze the cultural diversity, Hofstede (1991) proposed five cultural dimensions to
assess the values which characterize specific patterns. The first dimension is social
inequality or power distance, which is the extent to which the less powerful members of
institutions and organizations within a culture and accept that power is distributed
unequally. It signifies the dependent relationships of members. In a large power distance
culture decisions are made at the top, formality and protocol are preferred. The second
dimension relates to the relationship between the individual and the group. It pertains to
societies in which the ties between individuals are either loose (individualism) or
cohesive (collectivism). Negotiators from collectivist cultures tend to have a collective
decision making process and large negotiation teams. The concepts of masculinity and
femininity also relate to negotiation style. A masculine culture emphasizes assertiveness
and competition. Negotiators from a high masculinity culture are task-oriented. A
feminine culture emphasizes nurturing behaviors, a concern for relationship and mutual
benefits. Negotiators belonging to feminine cultures tend to be indirect, cooperative, and
display harmonious relationships. The next cultural dimension is managing uncertainty. It
refers to the extent to which the members of a culture feel threatened by uncertain or
unknown situations. Negotiators from a high uncertainty avoidance culture seek more
information, require more clarification and explanation of issues. The last dimension
relates to the differences between the short-term and long-term orientation. Partners with
short-term orientation expect quick results and can be influenced by time pressure.
Counterparts with long-time orientation adapt traditions to a modern context and value
the necessity to establish a relationship. Hofstede’s dimensions consider national culture
as a static but consistent paradigm. At the interpersonal level such as in negotiation this
paradigm is the context for dialogue in which the national culture acts of each partners
sets as a filter (Jensen, 2004).

Table 2 presents the index scores of each dimension of Thai culture on a comparative
basis from Hofstede’s work (1991). The values most relevant to negotiation based on
previous research are synthesized in practical terms.

Table 2 Thai Cultural Dimensions and Negotiation

Cultural Score Thai Culture

Dimensions

Social inequality  A negotiation team is led by a senior who are

64 respected by younger members. Decisions
(Power distance) are made at the top. A formal process and
protocol are important.

 Compared with Westerners, Thais are more

Individualism 20 group-oriented. They maintain harmony and
avoid direct confrontation.

 Thai culture is more feminine, emphasizing

Masculinity 34 feelings and relationships, saving and giving
face. They prefer compromise to resolve
conflict.

 Thais are moderately comfortable in dealing

Uncertainty 64 with uncertainty. They are tolerant of
avoidance deviation. Changes and adjustments are
acceptable. Trust reduces uncertainty.

Long-term  Thai culture is more long-term oriented than

56 Western cultures. A negotiation will last for
 as long as it takes to establish a relationship.
Orientation It is not deadline oriented.

Source: Hofstede 1991; Elashmawi & Harris 1998; Hendon et al. 1999; Hodgetts &
Luthans 2003.

According to this analysis, Thai culture is relatively hierarchical. The seniority of

negotiators is respected. Thai culture is more group-oriented and caring. A long-term
orientation is preferable. Uncertainty is also accepted, signifying a reasonable flexibility
of the culture. From this perspective, Thai negotiators may perceive and conduct an
international business negotiation from a very specific frame of reference, which will be
substantially different from negotiators in other cultures.

Regarding the recognition of cultural differences, experience doesn’t seem to help much.
Misunderstandings based on value differences still play an important role in negotiations
even between professional diplomats (Hofstede & Hofstede 2005: 322). Similarly, there
are many cultural barriers and risks in partnerships which take place despite the
experience of the partners (Hofstede & Hofstede 2005: 347). The Western commitment
to universally applied rules means a contract is binding regardless of circumstances but
for people from interdependent high-context cultures changing circumstances necessitate
adapting to situations (Nisbett, 2003: 66).

Negotiations also reflect other levels of culture such as professional or community

(Gullerstrup, 2004, 10). While the national culture might be relatively static in a situation
like negotiation other levels of culture for example the professional values might change
quickly in response to the context (Gullerstrup, 2004, 10)

Based on the evidence of the theoretical and practical synthesis of culture based on
Hofstede’s cultural values in international business negotiations, this study focuses on
determining the cultural value that influence Thai and international negotiation styles, the
successful outcomes and the negotiation process used. This would provide a better cross-
cultural understanding and useful guidelines for both partners concerning the negotiation
process in the Thai context and how it relates to success.

5. Methodology

Data collection was conducted through mailed and distributed surveys. A questionnaire
requesting the respondent to retrospectively consider the perceived success of a past
negotiation experience was developed (see Appendix A). It focused on the negotiator’s
understanding of the factors associated with negotiation behaviors and what outcomes
defined success.

The questionnaire had three sections. The first included the perceived outcomes defining
negotiation success. It consisted of 9 items. Respondents rated each statement on a scale
from 1 (extremely disagree) to 5 (extremely agree). The second section considered the
perceived process factors associated with negotiation success. It contained 61 items,
asking the respondents to rate the importance each question on a scale from 1 (extremely
unimportant) to 5 (extremely important). The third contained questions about the personal
profile of the respondents.

One thousand questionnaires were mailed including a cover letter on university letterhead
to executives in Thailand including, Thai and international businesses. Businesses were
taken randomly from several industries: agriculture, industry, construction,
transportation, communication, and finance. One hundred and twenty five usable
questionnaires were returned, a 12.5% the response rate. Even though an intensive
follow-up of nonrespondents were made, the response rate was still low. Generally, there
is a reluctance for Asian managers to reply to surveys particularly about sensitive
business issues such as strategy, marketing or negotiation. This low response can be
attributed to two main reasons. Asian managers hesitate to disclose sensitive business
information because of fear of competitors or government intervention (Hallward-
Driemeir 2001). The second reason relates to culture. Asian cultures tend to be high
context, collectivist, and sensitive to losing face (Tseng et al. 2003). Responding to
survey questions often assumes a direct, individualistic, and open approach which is not
compatible for Asian executives. While this might create a response bias in this research,
it might also an advantage because the focus this study is on success. Executives may be
confident enough in their past performance to respond to specific questions about
successful negotiation.

However, when comparing the general profiles (industry, nationality, size of the firm,
etc.) of the nonrespondents with the respondents, they were quite similar. Because the
focus of the survey was on successful negotiation experience, this response rate may be
acceptable, but caution is necessary in interpreting the results. The sample was
sufficiently large for statistical analysis. The reliability of the questionnaire was
acceptable with a Cronbach’s alpha of 0.89.

6. Negotiator Profiles

Table 3 presents the profile of the Thai and International negotiators. The respondents
include sixty three Thais (50.4%), and sixty two International respondents (49.6%). The
international business negotiators are from various countries (see Appendix B) which can
be grouped as Asian (14.5%), European (46.8%) and English speaking (38.7%).

Overall, the majority of the respondents are male, top executives of private firms, with an
average age of 45. They are experienced in negotiating with Asians, Europeans, and
North Americans. Most respondents are engaged in buying-selling negotiations.

62% of the Thai negotiators are involved in short duration negotiations (less than 1
week), but only 38% of the International negotiators are involved in such negotiations.
International negotiators are more involved in long-term negotiation. The responsibility
of Thai and International executives is also different. Most International negotiators
(61%) have major responsibility whereas most Thai negotiators (92%) have only minor
responsibility.

Table 3 Summary of the Respondent Profiles

% of Respondents

Characteristics Thai International Total

(n=63) (n=62) (n=125)

Gender

Male 48% 52% 84.7%

Female 78% 22% 15.3%

Age Average age 45

years

Up to 40 41% 59% 36.4%

41 – 55 57% 43% 56.2%

More than 55 67% 33% 7.4%

Table 3 Summary of the Respondent Profiles (Continued)

% of Respondents

Characteristics Thai International Total

(n=63) (n=62) (n=125)

Title

President/General 49% 51% 56.9%

Manager/CEO/MD

Vice President/Associate or Asst. VP 47% 53% 13.8%

Division Manager 67% 33% 12.2%

Department Manager/Associate or 69% 31% 10.5%

Asst. Division or Dept. Manager

Professional/ Specialist/ Technical 29% 71% 6.5%

and others

Negotiation experiences

In Asia 47% 53% 91.1%

In Europe 50% 50% 79.7%

In North America 48% 52% 62.6%

In Other regions 42% 58% 37.4%

Length of negotiation Average of 12

days

Less than 1 week 62% 38% 53.0%

1-4 weeks 44% 56% 21.7%

More than 1 month 38% 62% 25.2%

Degree of responsibility

Major responsibility 39% 61% 77.3%

Minor to intermediate responsibility 92% 8% 22.7%

Type of negotiation engaged

Buying-selling 49% 51% 71.2%

Joint Venture 49% 51% 38.1%

Strategic Alliance 44% 56% 41.5%

Merger & Acquisition 48% 52% 21.2%

Contract 47% 53% 56.8%

7. Results and Discussion

To reduce the number of variables in the analysis as well as to identify the critical success
outcomes and indicators of the negotiation process, factor analysis was conducted. Based
on this analysis, comparisons between the Thai and International negotiators were
conducted using one-way analysis of variance to identify any significant differences in
their perceptions concerning success and the relevant process factors. Cluster analysis
was also conducted separately within the sample of Thai and International negotiators in
order to ensure the homogeneity within each group. The results of the cluster analysis
indicate no dominant cluster within the Thai or the International respondents, suggesting
that these are consistent and unique samples.

7.1. Negotiation outcomes of international business negotiations

The factor analysis in Table 4 presents the four factors identified as the outcomes of
successful international business negotiations. These are future-oriented, balanced results,
performance, and self gain. The extracted factors account for 62.78 percent of the total
variance. Each factor had factor loadings higher than .50. Because of the sample size, any
items with loadings below .50 were discarded (Hair et al. 1998:112).

Table 4 Factor Analysis: Negotiation Outcomes

Negotiation Outcomes Loadings Eigenvalue Cumulative Mean

%

1. Future-oriented prospects 1.842 20.468 4.31

1. Future agreements between

parties .836

 Potential future relationship is

strengthened. .794

 Joint mutual gains

.547

2. Balanced results
1.395 35.967 3.49

1. Efficiency of the result: cost-

effective outcomes .677

 Outcome parity: each party gains

equally (50-50) .644

3. Performance
1.283 50.222 4.27

1. Complete transaction, i.e. an

agreement is signed .819

 Level of performance afterward:

results achieved .617

3. Self gain
1.130 62.775 3.17
 1. Self monetary gain or increased
financial return .879

As shown in Table 4, the future-oriented prospects are the most important negotiation
outcome with a mean of 4.31, followed by performance at 4.27. Based on this evidence,
negotiators emphasize expected potential outcomes more than current performance. Even
though a balanced result is a preferred outcome, negotiators rated this lower than future
prospects or performance. Self gain is the least important aspect of negotiation outcome.
Negotiators realize that international business is generally ongoing, requires a long-term
perspective and the development of trust. Focusing on individual returns allows only a
short-term advantage. This will reduce trust and undermine the future potential of the
partnership.

7.2. Comparing the perceptions of Thai and International negotiators on outcomes

Comparing Thai and the International business negotiators, there is a significant

difference only for self gain (p < 0.05). In Table 5, the analysis indicates that the Thai
negotiators regard self gain as an indicator of success significantly more than their
International peers. The majority of executives are engaged in buying-selling negotiation,
but Thai executives are more involved in short-term negotiations (less than 1 week) than
the International negotiators. They also had less responsibility. This combination
reinforces self gain as a key indicator of negotiation success.

There are no significant differences in other outcomes between the Thai and International
executives which tend to be long-term. Most of the executives in the study are
experienced. They understand that a long-term orientation should be considered. This
indicates an interesting cross-cultural convergence of negotiation styles with an emphasis
on long-term results.

Table 5 Comparison of the Perceived Outcomes of International Business

Negotiations

Thai P
International
Negotiators Negotiators Value
Negotiation Outcomes
Mean Std. Mean Std.
Deviation Deviation

1. Future-oriented prospects
4.34 .51 4.27 .49 .442
 Balanced results
3.56 .66 3.43 .76 .310

 Performance
4.33 .55 4.19 .56 .170

 Self gain
3.43 1.24 2.90 1.24 .021*

Note: * Significant at the 0.05 level

7.3. Negotiation process factors

Based on their past successful experience in international business negotiation,

negotiators identified relevant process factors. Table 6 presents the analysis which
identified ten factors. The information focus (3.97) and relationship orientation (3.95) are
highly emphasized. Other factors including consensus, transparent objectives, time
orientation, limited offers, and logical coherence of the positions are only moderately
important for success. The focus on the differences between the parties is minimal in
successful negotiations. Tactics (2.74) and protocol (2.55) are the lowest rated. These
factors account for 51.74 percent of the total variance in the process of negotiation.

Table 6 Factor Analysis: Negotiation Process

Negotiation Process Loadings Eigenvalue Cumulative Mean

% Scores

1. Logical coherence 4.002 6.561 3.49

1. There is a logical
coherence of position. .711

2. The conduct of a
negotiation is logical. .672

 Positions or stances are

made explicit. .570

 Each stage in a negotiation

moves quickly. .557
 2. Consensus
3.713 12.649 3.77

1. The consensus between

parties exists. .654

 Specific obligations are

assigned to each concerned .605
party.

 Harmony between parties

remains. .535

2. Protocol
3.649 18.631 2.55

1. Negotiation follows an
agenda strictly. .697

 A negotiating team
consists of several members. .646

 Negotiation protocol is
followed through strictly. .638

 Negotiation process is
formal. .603

2. Tactics
3.334 24.096 2.74

1. Delaying tactics are

used. .701

 Conflict approach,
concentrating on conflict .648
areas, is used.

 Confrontation tactics,
opposing angrily to the other, .531
are used.

 Bargaining tactics are

used. .530
 The use of silence
.509

2. Information focus
3.327 29.550 3.97

1. Negotiators gather
information as much as .679
possible.

 Ask questions during the

negotiation to gather .675
information.

 Ask for expert opinions to

obtain information. .588

 Concerned documents are

prepared. .551

 Negotiators spend some

time reviewing the negotiation .526
afterward.

2. Relationship
Orientation 3.167 34.742 3.95

1. The use of compromise

.682

 Friendly approach is used.

.659

 There is a development of
personal relationship prior to .573
the negotiation.

2. Clear Objectives
2.963 39.599 3.74

1. Business focus during

the negotiation .596

 The objectives of
negotiations are made clear to .525
self and the other.

 Personal feelings are used.

-.524

 Positions are consistent.

.511

2. Limited offers
2.690 44.009 3.53

1. Lower and upper limits

are defined as a range. .588

Table 6 Factor Analysis: Negotiation Process (Continued)

Negotiation Process Loadings Eigenvalue Cumulative Mean

% Scores

2. Time Orientation
2.688 48.416 3.59

1. Short-term implications
of the issues are in .644
focus.

 Long-term implications of
the issues are in focus. .636

2. Focus on the
Differences 2.030 51.743 3.36

1. Attentions of
negotiators are paid to .656
the contrast or
differences.

Based on the negotiation stages, there are three factors involved in the pre-negotiation
stage. These factors include the information focus, clear objectives, and limited offers.
The information focus includes all types and sources of information. The more
information available, the more negotiators can prepare for an initial position. Clear
objectives combines the business focus, persistent position, and avoiding personal
feelings. Negotiators recognize that clear objectives help develop the process on a mutual
basis. A limited offer provides boundaries which specify how much can be offered and
counter-offered. This makes it easier for partners to assess alternatives relevant to their
objectives.

In the negotiating stage, the process factors include relationship orientation, time
emphasis, logical coherence, focus on the differences, tactics, and protocol. The
relationship orientation is important to successful negotiations because reduces stress.
This approach is more flexible.

Time orientation, both short-term and long-term, is considered in successful negotiations.

Time is considered a resource. It should be used effectively to contribute to an expected
outcome. Negotiators are concerned with future-oriented prospects and emphasize
balanced results. This takes time to emerge. Negotiators have different perspectives of
time appropriate to the negotiation situation they encounter.

Logical coherence implies a rational approach which can reduce the degree of uncertainty
in the process. In an international business negotiation, differences in values make it
more difficult for partners to understand each other. Being consistent, logical, and
understandable would facilitate the mutual understanding needed for success.

Focusing on the differences helps negotiators understand the positions being considered
and to realize the potential mutual opportunities available. However, protocol (agenda
and formality) and tactics (delaying, conflicting, or bargaining) are less relevant to a
successful outcome. This is likely because formality reduces flexibility. The use of tactics
is competitive which is likely to reduce cooperation between the partners.

In the post-negotiation stage, consensus is the only relevant factor. Consensus

corresponds to the relationship orientation. Negotiators develop an understanding through
mutual agreement. This will support the implementation of the agreement over time.

7.4. Comparing the process factors of Thai and International business negotiators

Based on a one-way analysis of variance, Thai and International business negotiators are
significantly different in their assessments of six factors: logical coherence, consensus,
protocol, information focus, limited offers, and time orientation (p < 0.05). Table 7
presents the analysis of these factors which are relatively high for both Thai and
International business negotiators. The exception is protocol which is low.

Both Thai and International business negotiators consider the relationship orientation,
transparent objectives, and a focus on the differences similarly. Tactics are rated low, but
not significantly different. Comparing each process factor, the Thai negotiators
considered all the factors more important than the International negotiators, except for the
time orientation.

Table 7 Comparison of Negotiation Process Factors

 Thai P
International
Negotiators Negotiators Value
Process Factors
Mean Std. Mean Std.
Deviation Deviation

1. Logical coherence
3.67 .55 3.27 .611 .000*

 Consensus
3.88 .55 3.65 .54 .025*

 Protocol
2.70 .71 2.37 .76 .014*

 Tactics
2.85 .71 2.62 .69 .072

 Information focus
4.01 .55 3.84 .60 .032*

 Relationship orientation
3.98 .63 3.87 .60 .309

 Transparent objectives
3.76 .41 3.72 .55 .668

 Limited offers
3.67 .79 3.36 .78 .032*

 Time orientation
3.42 .61 3.78 .61 .002*

 Focus on the differences

3.42 .84 3.30 .83 .426

Note: * Significant at the 0.05 level

  

7.4.1. Significant differences

From the analysis of variance, there are six significant process factors that differentiate
Thai and the International negotiators.

Logical coherence: Thai negotiators identify logical coherence as a critical process factor
(3.67), but International negotiators emphasize it significantly less (3.27). Logical
coherence limits the uncertainty in the process. In an international business negotiation, it
is more difficult to gain mutual understanding. If the process is more consistent, Thai
negotiators expect that they can establish the clarity of the partner’s position in the
process and negotiate to obtain the preferred outcome. International negotiators give less
regard to this factor. They use information to clarify the positions involved. Uncertainty
can be reduced through good information, and maintaining a logical and consistent
position.

Consensus: Consensus and harmony are more critical process factors in successful
negotiations for Thai negotiators (3.88) than the International negotiators (3.65). Thai
negotiators belong to a collectivist culture, where group concerns take first priority. Most
of the international negotiators are from more individualistic cultures. Thai negotiators
prefer consensus between the partners before making a final decision. This creates an
atmosphere which facilitates relationships, a highly valued by Thai partners.

Protocol: Protocol is an interesting issue. Thai and International business negotiators

consider protocol of limited value for the success of international business negotiations.
However, Thai negotiators still significantly emphasize protocol more (2.70). Protocol
includes formality face, respect, and status which are important in a large power distance
culture like Thailand. Another reason is that protocol helps reduce the unfamiliar or
unexpected issues during the negotiations. In spite of this, protocol and agenda reduce the
flexibility of the interactions between parties. Negotiators often encounter issues that are
not anticipated and require immediate response. Formality will hinder the negotiators
adjustment to changing situations.

Information focus: Thai and International negotiators perceive information as a key to

successful negotiations. Negotiators make choices based on the details they have about
the other partner, issues, and context. Even though both business negotiators rated this
factor high, Thai negotiators (4.01) significantly emphasize the information focus more
than International negotiators (3.84). Related to this, Thai negotiators emphasize several
informal contacts and meetings prior to the final decision-making stage as well as using
references from expert opinions when negotiating.

Limited offers: Thai business negotiators (3.67) significantly consider limits on the range
of possible offers more important than International negotiators (3.36). Thai negotiators
prefer some degree of certainty but with potential flexibility. By defining a range of
acceptable choices, negotiators make better decisions. International negotiators regard
this factor as only moderately important. They prefer a fixed offer to a range of choices.
They expect the outcomes to be closer to what they identified in the beginning of the
negotiation process.
Time orientation: There is a significant difference in time orientation between Thai and
International business negotiators. International negotiators (3.78) are concerned with
time significantly more than Thai negotiators (3.42). They recognize that both the short-
term and long-term issues are important to successful negotiations. Thai business
negotiators give less emphasis to this factor. Considering the profile of executives in this
study, the experience of Thai executives is typically in short duration buying-selling
negotiations. The International executives are more experienced in longer negotiations.
The Thai culture has a low sensitivity to time. It is a less crucial matter to Thai business
negotiators. In contrast, International negotiators consider that time must be used
productively as quickly as possible.

Cultural differences affect the process of negotiation much more than outcomes. This
suggests a major divergence in the styles of Thai and International negotiators related to
this process.

7.4.2. Similarities

Despite, this divergence, there are the similarities between Thai and the International
negotiators. The findings on the process which are not significantly different between
Thai and International negotiators include four factors.

Tactics: Both groups considered tactics are not very important to successful negotiations.
Tactics like delaying, or confronting negatively affect relationships which is the most
important aspect of successful negotiations.

Relationship orientation: Based on the success orientation, Thai and International

business negotiators recognize the role of relationships in negotiation success. Using
local representatives to develop connections with partners, or friendly informal meetings
facilitate the relationship orientation.

Transparent objectives: Thai and International business negotiators consider transparent

objectives are important to successful negotiations. Clear objectives provide negotiators a
framework for facilitating cooperation between parties. Successful negotiations depend
on the greater understanding of the partner’s objectives.

Focus on the differences: Thai and International negotiators rated the focus on
differences moderately important to successful negotiations. This is because when their
differences are identified, the possibility to balance the interests of the negotiators
increases. However, it is necessary to integrate these differences through relationship
building or they can become a source of conflict which limits the positive results of the
negotiation.

These similarities also indicate a convergence in negotiation styles between Thai and
International partners related to relationship, objectives, and a mutual perspective. These
are consistent with the international style of negotiation based on an integrative or
collaborative approach.
8. Conclusions and Implications

Based on a review of the cultural aspects of negotiation theory and how culture
influences practice, this study has explored the past successful experiences of
international negotiators in terms of the negotiation outcome and the relevant process
factors. The findings indicate that the success outcomes included monetary and non-
monetary results. Both Thai and the International negotiators are more concerned with
potential business relationships in the future than current gains. In addition, the balanced
results and self gain are less emphasized in success. This implies negotiators will try to
create and sustain relationships with their partners, but not necessarily on a win-win
basis. Negotiation provides opportunities to work collaboratively but not to gain at the
other partner’s disadvantage.

Regarding the negotiation process, the process factors important to successful

negotiations are different in each stage of the negotiation. This indicates that each stage
varies in importance to a positive result. Negotiators have to be well prepared from the
beginning, collecting information from possible sources, clarifying their objectives, and
setting their limits. During the negotiation, the relationship orientation is most important.
An appropriate emphasis on time should be considered. At the end of the negotiation,
consensus is the most important consideration.

Because they emphasize specific cultural values, Thai and the International negotiators
have different points of view on the outcomes and the process factors

In this context, Thai culture has a high degree of collectivism and affiliation, Thai
business negotiators significantly value harmony and consensus with the partners in the
negotiation. This would also strengthen the relationship and facilitate the process. A
friendly approach is recommended when negotiating with Thai business negotiators. A
logical approach that is consistent, explicit, and reasonable including a range of options
also facilitates the process. This will provide a degree of flexibility that is appreciated by
the Thai partner. Time is not critical for Thai negotiators.

International negotiators are more concerned with time. Most of the International
negotiators in this study are from developed countries where time is considered valuable.
The short-term orientation reflects the concern of International negotiators that time be
used efficiently, and not wasted. In the long term, they are looking for effective and
acceptable partnerships in terms of results.

The similarity of perceptions on outcomes and process of the international executives

suggests a convergence of negotiation styles or a more universal approach to international
negotiation. This convergence is particularly confirmed related to the outcomes. For the
most part, Thai and the International negotiators value similar successful outcomes,
except for self gain. Concerning the process there is also a limited convergence between
the styles of Thai and International negotiators on factors consistent with the integrative
approach.
Cultural differences have a major influence on many of the process factors. This suggests
that a greater awareness of how culture relates to the negotiation process would enhance
the success of the negotiation. At the same time there also seems to be an international
standard of negotiation that is compatible for both Thai and International executives.
Negotiators will need to consider global and local cues to determine how the negotiation
process will develop.

9. Limitations

The study investigated the retrospective perceptions of the preferred negotiation

outcomes and process factors based on successful negotiation experiences. The outcomes
and process factors are perceived, as determined by experienced negotiators. There may
be a positive halo effect also the results are not based on actual negotiating behaviors.
Negotiators may have emphasized their perceptions instead of their actual experiences in
rating the key factors. It is possible that perceptions and actual behavior are different.

Another issue is the generalizability of the research results. There are two major causes of
this limitation. First, because of the low response rate from both groups, it is possible that
a sampling bias may be present related to success. This bias may affect the comparison of
results between Thai and International negotiators. Second, the reliance on Thailand as
the context of the study somewhat limits the generalizability of the results. The
development of the research in other international contexts would improve the
generalizability of this approach.

The last issue is that the study simplifies the negotiation structure. Only the negotiation
process factors which most directly influence the outcomes of negotiations are
emphasized in this study. Other indirect factors such as contextual factors (economic,
political, legal, social, etc.) were excluded.

Cross Cultural Negotiation

he impact of international business in domestic markets compels us to ask a question:

"How can we survive in this global playing field, and what can we do to run our
businesses more effectively?" Nowadays, businesses of all sizes search for suppliers and
customers on a global level. International competition, foreign clients and suppliers may
become a danger, but they may also create huge opportunities to develop our business.
The increasingly global business environment requires managers to approach the
negotiation process from the global business person's point of view. This approach
includes aspects which are usually unimportant in domestic negotiations. Some of the
components of a cross cultural negotiation process are more complex and difficult, but
will increase our success in avoiding barriers and failures in the international business
arena.

When doing business internationally, we need to consider (Salacuse, 1991):

 1. The negotiating environment
2. Cultural and sub-cultural differences
3. Ideological differences
4. Foreign bureaucracy
5. Foreign laws and governments
6. Financial insecurity due to international monetary factors
7. Political instability and economic changes

If we consider the fact that negotiating with our fellow citizen is not an easy task due to
many individual differences, it would be reasonable to suggest that negotiating with
foreigners may be even more difficult. The way we perceive and create our own reality
may be completely different to our counterpart's way of thinking, behaving and feeling.
Unfortunately, knowledge of any foreign language is not enough to face and solve the
problem. Language is a cluster of codes used in communication which, if not shared
effectively, can act as a barrier to establish credibility and trust. We need more effective
tools, and the most important is knowledge of all factors that can influence the
proceedings. Nations tend to have a national character that influences the type of goals
and process the society pursues in negotiations. This is why specifying and understanding
cultural differences is vital in order to perform successfully in inter-cultural
communication (Schuster-Copeland 1996, 33). As we better understand that our partners
may see things differently, we will be less likely to make negative assumptions and more
likely to make progress when negotiating.

Factors influencing cross-cultural negotiations

Negotiating Goal and Basic Concept: How is the negotiation being seen? Is mutual
satisfaction the real purpose of the meeting? Do we have to compete? Do they want to
win? Different cultures stress different aspects of negotiation. The goal of business
negotiation may be a substantive outcome (Americans) or a long-lasting relationship
(Japanese).

Protocol: There are as many kinds of business etiquette as there are nations in the world.
Protocol factors that should be considered are dress codes, number of negotiators,
entertainment, degree of formality, gift giving, meeting and greeting, etc.

Communications: Verbal and non-verbal communication is a key factor of persuasion.

The way we express our needs and feelings using body language and tone of voice can
determine the way the other side perceives us, and in fact positively or negatively
contributes to our credibility.Another aspect of communication relevant to negotiation is
the direct or indirect approach to exchanging information. Is the meaning of what is said
exactly in the words themselves? Does "...it's impossible" really mean impossible or just
difficult to realise? Always use questions to identify the other side's needs, otherwise
assumptions may result in you never finding common interests.

Risk-Taking Propensity - Uncertainty Avoidance: There is always risk involved in

negotiations. The final outcome is unknown when the negotiations commence. The most
common dilemma is related to personal relations between counterparts: Should we trust
them? Will they trust us? Certain cultures are more risk averse than others, e.g. Japan
(Hofstede 1980). It means that less innovative and creative alternatives are available to
pursue during the negotiation, unless there is a strong trust-based relationship between
the counterparts.

View of Time: In some cultures time is money and something to be used wisely.
Punctuality and agenda may be an important aspect of negotiation. In countries such as
China or Japan, being late would be taken as an insult. Consider investing more time in
the negotiating process in Japan. The main goal when negotiating with an oriental
counterpart is to establish a firm relationship, which takes time. Another dimension of
time relevant to negotiation is the focus on past, present or future. Sometimes the past or
the distant future may be seen as part of the present, especially in Latin American
countries .

Decision-Making System: The way members of the other negotiating team reach a
decision may give us a hint: who we shall focus on providing our presentation. When
negotiating with a team, it's crucial to identify who is the leader and who has the
authority to make a decision.

Form of Agreement: In most cultures,only written agreements stamp a deal. It seems to

be the best way to secure our interests in case of any unexpected circumstances. The
'deal' may be the contract itself or the relationship between the parties, like in China,
where a contract is likely to be in the form of general principles. In this case, if any
unexpected circumstances arise, parties prefer to focus on the relationship than the
contract to solve the problem.

Power Distance: This refers to the acceptance of authority differences between people.
Cultures with low power distance postulate equality among people, and focus more on
earned status than ascribed status. Negotiators from countries like Britain, Germany and
Austria tend to be comfortable with shared authority and democratic structures. When we
face a high power distance culture, be prepared for hierarchical structures and clear
authority figures.

Personal Style: Our individual attitude towards the other side and biases which we
sometimes establish all determine our assumptions that may lead the negotiation process
towards win-win or win-lose solutions. Do we feel more comfortable using a formal or
informal approach to communication? In some cultures, like America, an informal style
may help to create friendly relationships and accelerate the problem solving solution. In
China, by comparison, an informal approach is proper only when the relationship is firm
and sealed with trust.

Coping with Culture

Negotiating in the international environment is a huge challenge for any negotiator. How
do we cope with the cultural differences? What approach is more efficient and proper
when dealing with Japanese, Americans or Germans? There are some very helpful
guidelines we can apply (Salacuse, 1991):

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. Of course, it's impossible to learn another culture in detail
when we learn at short notice that a foreign delegation is visiting in two weeks'
time. The best we can do is to try to identify principal influences that the foreign
culture may have on making the deal.

2. 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. We usually expect people to take advantage of a situation,
and during the negotiations the other side probably thinks the same way,
especially when there is a lack of trust between counterparts. In stead of
generalising, we should make an effort to treat everyone as individuals. Find the
other side's values and beliefs independently of values and beliefs characteristic of
the culture or group being represented by your counterpart.

3. 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. In some situations it is also possible to use a combination of both
cultures, for example, regarding joint venture businesses. Another possible
solution is to adopt a third culture, which can be a strong base for personal
relationships. When there is a difficulty in finding common ground, focusing on
common professional cultures may be the initiation of business relations.

Negotiation Across Cultural Boundaries

It is said that over two-thirds of the effectiveness of negotiation is determined by non

verbal communication. Body language can therefore frequently provide valuable insight
into a person's feelings and attitudes. Gestures and facial expressions can communicate
diverse emotions and attitudes. They are, however, often misleading due to the marked
cultural differences in the use and interpretation of nonverbal cues.

It is therefore important to understand and recognise differences in the use of non-verbal

cues, so that the body language of customers, especially those from other cultural
backgrounds as your own, is not the cause of costly misinterpretation.
Areas of Misunderstanding:
Broadly speaking, body language can be divided into the following categories:

Facial expressions

Eye contact

Touch

Use of space

Gestures

Sounds and other actions

Facial Expressions and Eye Contact

If we, for example, compare African, Arabian or Asian women with American women,
we shall quickly establish that there are many cultural variations, and that the only
behaviour that has the same universal meaning seems to be the smile!

Cultural Similarities
 : Smile Eye Contact
Arabian Y  
Asian Y  
European Y Y
American Y Y
Japanese Y  
South African Y Y

Many Asians, Africans and Orientals will look down and avoid direct eye contact as a
sign of respect, while for Europeans and North Americans lack of eye contact is often an
indication of lack of attention, and could be regarded as impolite.

Personal Space
An individual's need for personal space varies from culture to culture. In the Middle East,
people of the same sex stand much closer to each other than North Americans and
Europeans, while people of the opposite sex stand much further apart.
Japanese men stand four or five feet apart when having a discussion Europeans and North
Americans would probably regard having a conversation at this distance rather odd.

Touch
Touching is significantly influenced by someone's background and culture. Some
cultures, such as Arabs, may touch once or not at all, while North Americans could touch
each other between two and four times an hour, according to some researchers. People
from the United Kingdom, certain parts of Northern Europe and Asia touch far less, while
in France and Italy people tend to touch far more frequently.

It is obvious that touch is a sensitive issue and, to be on the safe side, avoid touching
during negotiation as far as possible.

Beckoning with the Fingers

In many regions of the world, to ask someone to approach you by beckoning with the
upright forefinger is distinctly rude, as is the defiant gesture of disapproval indicated by
the raising of a digit finger from a clasped fist on an extended arm. (The latter gesture is
known to be, and usually intended to be, rude in almost any society).

Crossed Legs
There is a lesser gesture that could bemore offensive than expected, namely when the
foot on the upper crossed leg is pointed directly and frequently in the direction of people
from especially the Middle East. The foot, when 'bounced on the knee' in the general
direction of people from Islamic countries, can cause discomfort, perhaps even distaste,
since it may symbolise, in body language terms, an accusing or threatening weapon. The
solution is not to cross the legs when in such company and to take care in which direction
the foot is pointed.

If you also keep your arms crossed over your chest and lean back in your chair besides
just keeping your legs crossed, you could be demonstrating distaste or defensiveness.

Other Gestures
Gestures such as a clenched fist or pointing the index finger often reflect an aggressive or
frustrated attitude. Negotiators should avoid using these gestures.

Other gestures to avoid are 'thumbs up' and 'okay' signs. These have positive connotations
in the UK and America, but in Iran and Spain the 'thumbs up' sign is considered obscene,
while the 'okay' sign has a similar meaning in Greece, parts of Eastern Europe and Latin
America. It could also mean 'worthless' or 'zero' in France.
Moving the head from side to side could indicate agreement in Asia, whereas elsewhere
in the world a similar shaking of the head means the opposite.

Sounds and other Irritators

Audible signs of nervousness such as clearing the throat, sighing or making 'phew' noises
are easily recognisable. Cigarette smoking, jingling coins in the pocket, fidgeting in the
chair, beads of perspiration or wringing hands are other signs of growing nervousness.
More subtle indicators are pinching or picking at flesh or fingernails, tugging at the ears
or clothes when seated, covering the mouth when speaking or simply not looking at the
person being addressed. Some of these gestures can also imply suspicion. This is
compounded if the negotiator edges away (or leans back) or if the feet or body is turned
sideways towards the exit. More subtle indications are sideways glances, rubbing of the
eyes, touching and rubbing of the nose or buttoning the coat while drawing away.

A lack of cooperation can be manifested through a stiffened back, or the authoritarian

stance of hands grasped behind the back. Hands on the lapels of jackets will also send the
same message.

Negotiators may be frustrated by any uncooperative behaviour. The frustration may

materialise itself by audible sounds, taking short breaths or by clenching the hands tightly
or making fist-like gestures. As this frustration increases, other more visible gestures may
follow such as pointing the index finger, running hands through hair and rubbing of the
neck. If negotiators are more self-controlled, they may hold their arms behind their backs,
grip their wrists, or lock their ankles while sitting.

Other Areas of Misunderstanding:

Apart from nonverbal communication, other cultures could also be irritated by other
habits and actions of negotiators such as the lack of attention to time and timing, to
interpersonal relationships, dress, silence and the use of certain words and phrases.

Time
The inability of customers to keep to time is probably one of the most significant
irritations in cross-cultural negotiation. Those cultures that are less aware of exactness in
time and timing, often cannot understand the preoccupation of Americans and others with
time, and vice versa. South Americans and Africans may claim that the inability to be on
time is only the unavoidable and unforeseen occurrence of other duties - such as those
involving family or friends - or unexpected duties placed on them by members of ruling
families that draw them away from agreed meetings with Westerners.

Westerners normally have no concept of the absolute duty that some cultures have
towards family situations that are, in general, far greater than those undertaken, or
expected in the Western society. "My brother telephoned and asked to see me, so I had to
go to him: I am sorry I had to miss our meeting" is typical of the remark an Arab, African
or Spaniard would make. They seem to believe that the situation involving a family
member would be understood, and they often fail to comprehend that such a reason
would not be good enough for most Westerners. The Westerner would have been far less
bothered if a phone call, rearranging the meeting, had been received. 'Time' is therefore a
major area of culture clash. Precise habits are often regarded by some cultures as strange
because it disregards the importance of the right 'psychological timing' in negotiation.
Westerners will often plough ahead with unpopular subjects simply because the clock and
agenda indicate that they should.

Interpersonal Relationships
Western negotiators are often hopelessly unaware of the personal relationships and
general local under currents that dominate decision making in some countries and
cultures. They are therefore well advised to be patient. But they should always be ready
to act very quickly once a decision to proceed has been taken. This can occur quite
without warning. As a rough guide, 95% of time spent in Japanese business activity will
be spent discussing, collecting information, and waiting, followed by a 5% period of
intense work against impossible deadlines.

Rude Words
Many Westerners will notice that some officials, such as traffic police or those at
immigration or customs posts, appear rude in their demands: "Give passport now" and "I
want documents" without the adoption of 'please' and 'thank you'. To many Westerners
this is inexcusably rude English and quick offence is taken. They therefore fail to
recognise that the local may not have a command of English above that of functional
necessity.

Use of First Names

Most cultures will easily sense when personal relationships have developed to such a
point that the use of first names may be adopted as natural and normal. They may know,
for example, that such a point may be reached earlier with the Americans, later with the
French, and somewhere in between these two nationalities for Britons and other
nationalities. Some cultures, though, seldom use first names, even amongst friends (e.g.
Japanese), and it could be important to make sure of the customs related to the use of first
names before negotiation commences.

Dress
As a general rule a business visitor to a foreign country should dress well. Men should
dress in a good suit and tie in most foreign countries. Be patient, be punctual, expect to
wait, and do not be overly demonstrative in personality or mannerism. Businesswomen in
Islamic countries should take care to dress with slightly lower hemlines than in the West
and with the shoulders and arms covered down to the wrist.

Overt Emotions
Public loss of temper could, in many cases, end all further discussion or association. A
person who has been seen to lose his temper will, in many countries, be regarded with
suspicion and this behaviour must be changed if the project is to go forward. The whole
process of developing trust and a close and personal relationship will then have to start
from the very beginning.

Most Westerners find silence embarrassing and will seek to fill a gap in conversation.
Many cultures are wholly unembarrassed by silence and are content with being in
another's company. Speech is not always essential on such occasions, and there can be
long periods of silence, intermingled with periods of gossip and story telling. Many
cultures are aware of, and are perhaps amused by, the stress that silence can cause in
Westerners, and it is not unknown for negotiators deliberately to create an embarrassing
period of silence when bargaining perhaps to encourage a concession from the other side.
The solution is to be ready to fall silent, and to remain silent.