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1.0 Executive Summary

This report will discuss, and analysis on the cultural differences of Japanese organization (Osatech) and American organization (Videomart) that lead to an intercultural business negotiation and have affected the trust between these organizations. The cultural differences of Videomart and Osatech are undefined roles and responsibilities of the team members (language barrier), stereotyping, the perception of lawyers, the perception of time and goal conflict, the difference in negotiation behavior and lack of preparation before negotiation.

In the case of Videomart and Osatech, the team member responsibilities and roles are not clearly defined and performed well. It is crucial to have group members that know how to communicate correctly as this will determine the success of the team and helps the team to complete the projects successfully and enables the organization to achieve success and growth. Americans stereotyped the Japanese that the Japanese are spying on Videomart's engineering blueprint and linking the presumption to a previous incident reported in Silicon Valley. The first meeting was held to make each party gain more understanding about each other to work together in the future. Therefore, Osatech is interested in gain better understanding by doing an investigation to gain more clarity. The intent was upright and sincere to build a relationship between them and the Americans. Furthermore, the Japanese felt uncomfortable and unsure about the sincerity of the Americans in engaging business with them, due to the issue developed with constant reference of Videomart's lawyer during the negotiation. In making a deal, the Japanese tend to negotiate slowly, but Americans do it quickly. For the Americans, the goal is signing a contract and the time is money while on the other hand Asians such as Japanese spend much time on the negotiation process especially in the non-task sounding. Japanese try to avoid on-the-spot decisions and think about the decisions carefully.

Also, the rationale for the Japanese lack of interest in the presentation Videomart presenting is would likely relate to the difference of Osatech and Videomart negotiation behaviors such as trust issues, ambiguity, emphasis on values, in exchanging information, and self-perception concept. The information Americans provided in their presentation is not complete where they did not prove the information of the cost, explain the plans, launch dates, the product specification as well as for the working model, and engineering blueprints.

Moreover, this report elaborates the proposal to manage the negotiation that consists of the pre-negotiating stage, the strategy, and planning, the planning process, the negotiation framing, and followed by the alternative solutions.

2.0 Introduction

Cultural differences may affect business negotiations unexpectedly in which it arises as a matter of ignorance or blatant disrespect (Sebenius 2002). In dealing with and negotiating with the foreign market or cultures, leaders with a global mindset is required. A cliché that is usually being used in doing global expansion strategy which is "think global and act local", believe that leaders with a global mindset can implement the strategy to the business (Chan et al. 2018, 4). Therefore, having a global mindset can be useful for various global forces in international business to clear country and regional issues and could bridge the gap across cultural and political boundaries (Kedia and Mukherji 1999).

The goal of the strategy is to produce a positive-sum game through integrative negotiations. According to Cellich (1997) when both negotiators are from diverse cultural environments, it will be more difficult and complicated rather than when negotiators concern persons with similar backgrounds which means two people speak in the same language, it will create a relationship because there is a familiarity. Therefore, Trompenaars suggested to deeply understand the underlying assumption held by the group to negotiate successfully (Trompenaars 1996).

Many of the journals written about relationship stated that trust as central to any relationship (Lewicki, Saunders and Barry 2011). Trust can be repaired through several ways listed in Appendix 1. The differences such as language barriers, the absence of cultural sensitivity, and different governing variable contributed to the result. These differences have led both organizations into an unfortunate negotiation result. Cultural differences of Osatech (Japanese) and Videomart (American) thorough Hofstede cultural dimensions' theory is listed in Appendix 2 and the ten ways that culture can influence negotiation in Appendix 3. Section 3 elaborates more on how it affects the negotiation.

3.0 Analysis of the case: The cultural differences that led to disastrous negotiation result.

Figure 1: List of cultural differences that led to disastrous negotiation result.

3.1 Undefined roles and responsibilities of the team members (language barrier).

In this case, the team member responsibilities and roles are not clearly defined and performed well. Osatech's team consist of a general manager, two assistants, and an engineer who is also the translator. While Videomart's team consist of the President of Videomart, two vice-presidents (marketing and sales), and an engineer. The whole team did not understand the Japanese language yet still not bring a translator along with them. While in fact, in selecting team a negotiator's language skill is essential especially the note taker. Language skill is crucial in a business environment. Research demonstrates the significance of the companies 92.9% of the total sample, value conducting business negotiations in a foreign language (Holubekova and Fordosova 2017, 4).

Furthermore, without the existence of a translator create a barrier and gaps in the negotiation. International negotiations are hard to be conducted because people from different cultural backgrounds have different negotiating styles (Lituchy, 1997). Thus, Americans and Japanese may enter negotiation in different styles and reasons.

It is crucial to have group members that know how to communicate correctly as this will determine the success of the team and helps the team to complete the projects successfully and enables the organization to achieve success and growth (Luthra and Dahiya 2015). Having poor communication skill or language skills makes the team members hard to understand and translate their cognitive understanding into a distinctive negotiation. This will lead to conflicts and team will lack resolution skills to overcome the problem that occurred such as misunderstanding the culture, the decision-making process, the communication styles of the other team.  

In addition, according to the cultural context of one way to assess cross-cultural factors concerning communication by Edward Hall, the Japanese has a high context culture in which the information is not always be expressed while Americans have a low context culture that communicates straightforward and direct to the other organization. The difference in the context can lead to a conflict in a cross-cultural negotiation (Gudykunst 2003, 18) also, the difference in the context can lead to a conflict in a cross-cultural negotiation (McDaniel 2000).

During the presentation, the Japanese have been quiet while listening and nodding at each other at times. Negotiators from a traditional culture such as Japanese view silence or non-verbal gestures as a form of communication or respect for the person who has just spoken. These negotiators use the pause to analyze and to prepare an appropriate reply, but silence seems excruciating to Americans. American view Japanese silence as lack of understanding, or a cunning tactic to get the Americans to reveal themselves. American negotiators also are sometimes confused by Japanese delays in responding (Lewicki, Saunders and Barry 2011). Americans believe that individuals will be rewarded when they express their opinion their opinions openly and forcefully because it is an admirable trait (Hou 2013). This shows that the Japanese are skilled negotiators because by listening attentively, a negotiator can obtain valuable information about the other side and eventually gain more negotiating power and the Japanese spend more time listening and asking questions to understand the presentation well. Furthermore, it has been proving that good listener spends more than 50% of the time to listen and the rest of the time to ask questions to move closer to a negotiated agreement. A good listener can be seen from their body language such as nodding the head, taking notes, inspecting a sample, and moving the chair forward to indicate interest in what is being said (Van Hasselt, Romano and Vecchi 2008, 256).

To sum up, without the existence of a translator in Videomart's negotiating team lead to a failure in negotiation. Americans are culturally insensitive, misunderstand silence or non-verbal gestures and unwilling to address the communication gap. If only the Americans bring a translator, the way the translator convey the message would be more polite and formal.

3.2 Perception of risks and stereotyping

Americans stereotyped the Japanese that the Japanese are spying on Videomart's engineering blueprint and linking the presumption to a previous incident reported in Silicon Valley. The first meeting was held to make each party gain more understanding about each other to work together in the future. Therefore, Osatech is interested in gain better understanding by doing an investigation to gain more clarity. The intent was upright and sincere to build a relationship between them and the Americans. Unfortunately, to the Americans asking probing question led to further distrust and suspicious. Japan was using planned and treat a type of questions.  An efficient process of internal decision-making is crucial in preparing for the international negotiation (Thakur, Cooper and Heine 2013). Furthermore, questions are crucial in securing an information (Lewicki, Saunders and Barry 2011).

Japan has the highest score concerning uncertainty avoidance of Hofstede's study due to its landscape being prone to natural disasters, and the U.S scored below average (Singh, Zhao and Hu 2005, 137). This makes the Japanese more risk adverse and is more likely to prepare for any risks compared to the Americans. Therefore, the Japanese looking for detailed information everything about Videomart before signing the contract. On the other hand, the Americans are likely to be risk-takers in which they are more extroverted with new ideas, less anxious in taking any decision. This is related with the Americans' emphasis on short-term, Americans lengthy contracts and lawyers in negotiation that is made to protect their interest (Barnum and Wolniansky 1989). Americans incline to show internal locus of control characteristic which can lead to stereotyping while Japanese has an external locus of control (Spector et al. 2002, 462). Americans are frustrated when the Japanese took much time to finalize the agreement, and as a result, the Americans accused the Japanese of being spies.

Figure 2: Americans and Japanese negotiators behavior incompatibility

Source: (Kumar 1999)

3.3 Perception of lawyers in Japan

The Japanese felt uncomfortable and unsure about the sincerity of the Americans in engaging business with them, due to the issue developed with constant reference of Videomart's lawyer during the negotiation. As the intent of Japanese business negotiations is the interpersonal relationship determined before the negotiations (Graham 1983, 58), lawyers are often not brought into business negotiations because of Japanese view lawyers can block the relationship building process (Martin et al. 1999)

Japanese appreciates cooperation and friendship in a business relationship, and one of the reason is that high-trust can be found in the keiretsu-type configuration characterized by hierarchically structured and market relations (Adler 2001, 219). According to Martin et al. (1999), referral to the lawyers represents a threat of potential litigation since both countries are in the first stage of the negotiation process and it makes Japanese view Videomart's approach as a negative approach due to the lawyer is not developing added value to the negotiation. As a result, the Japanese show withdrawal symptoms. Japan value community in return for faithfulness in a relationship while the U.S often not depends on others. Therefore, the business agreement in the US is usually established based on legalistic grounds ("Compare Countries - Hofstede Insights" 2018). As a result, the difference between Japanese and Americans basic assumption on the relationship and the interpretation of lawyers will lead to a stalemate.

Figure 2: Country comparison: The United States in comparison with Japan

Source: ("Compare Countries - Hofstede Insights" 2018).

3.4 Perceptions of time and goal conflict

The problem arises when the Americans keep on saying that "should the Japanese party forgo the business opportunity with them, it will result in doing their own company a great disservice" while presenting their presentation.

In making a deal, the Japanese tend to negotiate slowly, but Americans do it quickly. For the Americans, the goal is signing a contract and the time is money while on the other hand Asians such as Japanese spend much time on the negotiation process especially in the non-task sounding. Japanese try to avoid on-the-spot decisions and think about the decisions carefully (Adachi 2010, 22). Sometimes, the difference between Japan and Americans regarding time sensitivity could lead to a misunderstanding as Japanese view pre-negotiation is a must while Americans think another way. Survey results show that U. S have 14.6% of low sensitivity to time and Japan 9.1% of low sensitivity to time (Salacuse 1999).

A collectivist culture negotiator such as Japan uses indirect communication, and a negotiator from an individualist culture such as the US uses direct communication (Brett and Okumura 1998, 498). As Americans value directness in communication, they tend to give a clear response or answer to questions and proposals. Also as they are more direct, being persuasive is considered acceptable (Brett and Okumura 1998). While in a culture that values indirect communication such as Japan, the reaction is showed through interpreting comments, body gestures or other signs and it makes Japanese view business relationship conducted based on "gentlemen's agreement" (Prestwitch 2007). Other than that, Japanese shows disapproval in a way that foreign negotiators believe that their proposals were still under considerations while in fact, it's rejected by the Japanese. As a result, when Videomart's presentation a little bit pushy and forthright, Japanese perceived it as unacceptable as the relationship is more important for Japanese rather than contract.

The perspective of American and Japanese is different regarding the goal in a negotiation. The “West” like the U.S. consider goal is about signing a contract, in contrast, the “East” assume signing a contract is the beginning of the negotiation and business relationship is the goal. For “East” country like Japan, the essence of negotiation is a relationship, not the contract. According to Reardon and Spekman (1994), Americans usually operate as if today is the last day of their lives, and it can be seen at the second meeting itself in the presentation by the Americans, it looks like Americans was in a rush to finish the presentation quickly and get the contract signed by the Japanese as soon as possible. For example, Japanese view negotiation as an opportunity for information sharing, in contrast, Americans view it as a competitive process of offers and counteroffers (Singh 2008, 210). Competitive mindset could trigger negative emotions (Lewicki, Saunders and Barry 2011, 160) that could be lead to a negotiation impasse (Lewicki, Saunders and Barry 2011, 161). Asians tend to give more time and effort to pre-negotiation, in contrast, Americans like to rush through the first phase in deal-making because for Americans, signing a contract is a closing deal; for many Asians signing a contract might more appropriately be called opening a relationship (Salacuse 1999).

Asians especially Japanese concerned with harmony, long-term interest and did not like to negotiate (Benoliel 2014). In contrast, Americans focus too much on short-term gains instead of thinking about long-term which is a pitfall in global negotiation (Barnum and Wolniansky 1989). The tactic "take it or leave it" might work in the US; however, Japanese perceived it as disrespectful and genuine (Kumar 1999). Japanese tend to keep the engagement small and low-risk and view this situation as an opportunity for Americans to prove themselves as the right business relationship require time to build. Japanese also believe that the primary strength of the agreement is about Osatech commitment on the agreement rather than what lies in the written document. To overcome this issue, Osatech needs to explain carefully and document confidentiality agreements. Give the Japanese more time to think, don't be so pushy. Also, it is better for the US to use a local attorney that function as a notary rather than the western one because a lawsuit is rare in Japan and having one could destroy the relationship for good (Katz 2007).

3.5 Difference in negotiation behaviors

The rationale for the Japanese lack of interest in the presentation Videomart presenting is would likely relate to the difference of Osatech and Videomart negotiation behaviors such as trust issues, ambiguity, emphasis on values, in exchanging information, and self-perception concept.

A. Trust Issues. It is crucial for the Japanese to deal with people they know, trust and respect. Japanese view the concept of the face or 'giving face' is essential to develop a relationship. The concept of the face means genuinely praising the group and showing great respect will be favorably noted (Katz 2007).

B. Ambiguity. Japanese has a strong aversion to ambiguity when the Japanese are asking detailed questions as it shows that they do not like ambiguous situations. Japanese tend to require large amounts of information to make a decision. A survey has shown that from all the countries covered in the survey Japanese is the most risk-averse and Americans tend to be risk-averse (Salacuse 1999). The differences between such behaviors could hinder the progress of the discussion that could be led to issues and conflict.

C. Values. Different culture has different values that expose the differences between culture, occupations, classes, and religions. According to Schwartz Model that consists of various elements, Japanese and Americans have different values of orientation in which Japanese tend to be collectivist, and Americans tend to be more individualist. A study reveals that egocentric biases are stronger in cultures that are individualistic (US), in which the self is served by paying attention to one's positive attributes to stand out and be better than others. While on the other hand, it is lower in collectivist cultures (Japan) where the self is served by focusing on one's negative characteristics, to blend in with others (Lewicki, Saunders and Barry 2011).

D. Information Exchange. Information exchange is essential in making an accurate judgment and to reach an integrative agreement. Whenever the information is low, an organization will establish the wrong solutions because the alternatives to overcome the problem are less explored. Exchanging information could help the organizations to learn the interest of the other party. However, different culture may trade information differently as for Americans negotiators tend to avoid distributive tactics however it does not go the same way for Japanese (Adair, Okumura and Brett 2001).

As a result, differences in negotiation behaviors such as trust issues, ambiguity, emphasis on values, in exchanging information, and self-perception concept lead to an impasse. It can be seen that the Japanese are focusing on building a relationship through an integrative approach while Americans want to sign the contract through distributive negotiation. The negotiation failed as a proof that both organizations had surpassed each of their resistance points and no agreement could be made outside the Zone of Possible Agreement (ZOPA). Also, internal factors like differences in negotiators' preferences and external factors like market forces play an essential role in defining ZOPAs for negotiations (Watkins and Passow 1996).

3.6 Insufficient preparation before negotiation

The information Americans provided in their presentation is not complete where they did not prove the information of the cost, explain the plans, launch dates, the product specification as well as for the working model, and engineering blueprints.

Japanese view information-gathering stage is the most crucial phase. Exchanging information and asking persistent questions is a must to understand the agreement. For example, Japanese view negotiation as an opportunity for information sharing, in contrast, Americans view it as a competitive process of offers and counteroffers (Singh 2008, 210). Asians tend to give more time and effort to pre-negotiation, in contrast, Americans like to rush through the first phase in deal-making because for Americans, signing a contract is a closing deal; for many Asians signing a contract might more appropriately be called opening a relationship (Salacuse 1999).

The Japanese ask many questions covering a wide range of issues especially in the category of detailed product specification in which Americans forget to include. The Americans were shocked because of the nature of the questions and decided to call a recess to think about it. Americans are willing to give more information only if the agreement is confirmed. While in fact, there should be a two-way process of negotiation or principle of equal partners in which everyone deserves and valuable to be heard. U.S main concern is only to present their case and then to counter objections made by the other side which could be lead to a monologue, rather than to real discussions.

 In Japanese cultural values asking questions to gather information is essential (Hooper, Pesantez and Rizvi 2005). It can be seen that Americans did not prepare well for the negotiation as they miss the required information made by the Japanese.

4.0 Proposal to manage the negotiation

A study shows that Japanese view themselves as creating more compromises and concessions than the Americans (Gelfand et al. 2001). However, Americans have lost their trust in Japan ever since the problem arises in the 1980s (Kotkinn 1987). To achieve success in the negotiation, Americans, and Japanese need to acknowledge the other party's culturally preferred way of communication such as direct communication or indirect communication (Adair, Okumura and Brett 2001).

Despite all the reason in the past, Videomart should change their mindset as they want to engage in a business and not all Japanese are evil. For example, Wade-Benzoni, Okumura, Brett, Moore, Tenbrunsel, and Bazerman, (2002) found that Japanese frequently put forth more cooperative solutions in negotiations compare to the American counterpart. The main reason the behavior decision perspective dominated negotiation research in the 1980s and 1990s is that this perspective made it explicitly clear what was needed to improve negotiations behavior such as individual differences (Bazerman et al. 2000).

4.1 The Pre-Negotiating Stage

During the Pre-Negotiation Stage, few things should be done, and it is listed in Appendix 4.

Through these changes, it will help bring back their reputation as an ethically operated organization. According to Adair, Okumura, and Brett (2001), this is what the Japanese are looking for in a business relationship. Unlike relationship that can be built within the six months, language barriers can be a huge challenge to overcome in such a short time. Knowing this condition, Videomart should have brought translator that deeply understand both culture to cope with the issues instead of a lawyer as Japanese view lawyers can block the relationship building process (Martin et al. 1999). An evaluation can be done through the dual concern model listed in Appendix 5. From the case, Osatech has a high concern on self-interests and Videomart has tried their best in making the business deal. As a result, Videomart should adopt collaboration (problem-solving) approach. Collaboration means looking for the middle ground of concern ("Dual Concern Theory" 2018).

4.2 Strategy and Planning

According to Gifford (1989), Business negotiations will fail without a robust strategy and planning. However, no single negotiation strategy works best in all negotiation. Also, Videomart's lawyer should be able to know when to use various of approaches and tactic because usually lawyer changes their tactic every meeting and use various of tactics such as aggressive tactics and problem-solving (Gifford 1989). Knowing what to do and understand each other common ground would help the relationship between the two organizations. During the preparations stage, it will be beneficial for both organizations to understand each of the cultural perspectives the Japanese could raise its bet in market share when Americans sell the software through a license agreement.

4.3 The Planning Process – Construct relationship and share information to build trust.

Comprehensive preparation and continuous planning is the primary element of successful negotiation. Negotiators should put 80% of their effort in the preparation stage. According to Benoliel (2014) in the planning process, while analyzing the negotiation context, there are few things that negotiator should know such as know the situation, themselves, the opponent, opportunities, and constraints. Furthermore, negotiators should be able to recognize the political, legal, cultural context in which negotiations take place, also the purpose of the negotiation and the nature of the conflict. Videomart and Osatech also should analyze the components and structure such as the issues to be negotiated, the organization's position, and their best alternatives to a negotiated agreement (BATNA). If Videomart did all the process such as preparing the detailed information, for example, the launch dates, future plan, non-proprietary blueprints and working model, Osatech would perceive this as Videomart being sincere to them that can be lead to increase of trust and interest in doing the business together. Information is vital in every negotiation because once all available information is gathered, negotiators can develop a rough of the idea of the Zone of potential agreement (ZOPA) (Benoliel 2014).

4.4 Framing the negotiation – Recognition of Both Parties interest, preferences, and needs.

An integrative agreement could be achieved when both sides understand each other interests well (Katz and Pattarini 2008). Videomart main objective is to get the license agreement, but when Osatech expresses their interest, it can be seen that both organizations have a common ground that is to achieve integrative negotiations or win-win solutions. A study shows that Americans were much more individualistic and focused on self-interest compare to the Japanese and when two individualistic, self-interest negotiators meet it can achieve high goals (Huber & Neale 1987). While in fact, the Japanese are more collectivistic. In this case, Americans interests are more to process interests as they are more direct (Brett and Okumura 1998, 498). While Japanese interest are substantive and process interest as they think information is essential (Salacuse 1999) and they value long-term relationship (Benoliel 2013). Being a seller, Americans should provide all the information needed by the Japanese to satisfies and reduce Osatech's hesitance due to their perceived risks. A seller must fulfill or meet consumer needs (Sgroi 2014,162).

4.5 Establish Alternative Solutions

In achieving an integrative negotiation, Videomart and Osatech should use aspiration frames. In using the aspirations frames, the negotiators usually discuss many issues during the deliberations in which both organizations have the tendency to satisfies wide set of needs and interests in negotiation. Not focusing on the outcome itself just like Americans did, but instead of ensuring that the needs and interests of both parties are met. By knowing the interests, Americans could give what Japanese needed which is information. After knowing each other interests and the interests are being said through aspiration framework, an in-depth understanding of each culture both parties will have a better relationship and could have a long-term relationship. As a result, both organization achieved integrative negotiation and the interest of both organizations are fulfilled. Furthermore, another alternative solution to understand the cultural differences to avoid mistrust and to increase the possibility of working together as a business partner is listed in Appendix 6.

5.0 Conclusion

Culture what drives the differences between Videomart and Osatech. The goal of both organizations, Videomart and Osatech, are diverse. It requires a deep understanding of cultural differences such as undefined roles and responsibilities of the team members (language barrier), stereotyping, the perception of lawyers, the perception of time and goal conflict, the difference in negotiation behavior, lack of preparation before negotiation. Besides, preparation is a vital process in negotiation to combine all the factual findings.

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