Watch That First Step: Cultural Flubs Can Kill Deals Before They Start

By David James

There David Jamesis so much international business going on these days that we seldom give much thought to the pitfalls of negotiations with prospective business partners or customers.

Yet the road to riches in Asia is littered with aborted projects and canceled ventures that got off to a shaky start because businesspeople from different countries and cultures misinterpreted or failed to accommodate the practices of the other party.

The most critical phase for an international venture is the first negotiation. A few years ago an American executive I know flew to Tokyo to land a contract with a Japanese company. He told his boss that he’d be back in a week with the contract in hand.

On Monday, his first day in Tokyo, his Japanese counterpart invited him to play golf. They played, and the American won the game by a couple of strokes. The next day, the American expected to have a business meeting, but his counterpart wanted to play golf again. They did, and the American won again. When his host suggested another game the next day, the American blurted out in frustration, “But when are we going to start doing business?” His host, taken aback, responded, “But we have been doing business!”

Since the American didn’t realize what was going on, he probably didn’t make the best business use of those golf outings. At the very least, he could have tried to lose on the second day (although his host, not wanting a guest to lose face, might have made it difficult for him to do so). As it turned out, they started meetings on the third day and a contract was signed on Saturday, but the American was in such a hurry to conclude the contract within the week that he conceded a number of points as his self-imposed deadline approached.

The story illustrates conflicting culture-based business practices that can cripple a deal before it has even started.

First, the two had different objectives in mind. The Japanese executive didn’t care much about signing a contract. His culture is strongly collective, in which life in general depends on close relationships, beginning with one’s immediate family. In business, a contract is merely a guideline pertaining to one small transaction of a larger relationship between the parties. What he wanted was to get to know the American, to determine whether this was someone on whom he could depend in the future, and to build a relationship that would lead to not just one contract but many.

The American’s primary objective was to get a signature on that contract. His culture is strongly individualistic, one that emphasizes self-reliance and individual accomplishment. He had promised that he would return home with a signed contract for this transaction, not with some vague understanding for unknown deals that might or might not ever come to pass.

Some Deal Makers Take Advantage of Cultural Ignorance. . .

Second, the two executives had very different concepts of time. For the Japanese executive, time is important but it takes a back seat to getting things right. For him, the relationship needed to get off to a good start. This would take as much time as needed. Then, in discussing the terms of the contract, everything had to be fully understood. This too would take as much time as needed. For the American, time is a precious commodity, not to be wasted on golf or nit-picking the terms of a standard contract that was, comprehensible only to lawyers. The bottom line for him was that the contract needed to be signed by the end of the week.

Some international businesspeople take advantage of the cultural ignorance of their counterparts. There are plenty of stories about Asians dragging out business negotiations with an American counterpart until the American concedes points in frustration. Similarly, there are stories about Americans insisting on negotiating schedules that pressure Asians into premature decisions. But negotiating points that are won by this sort of gamesmanship are Pyrrhic victories. They sacrifice long-term success for short-term gain.

For an Asian, plans for the first business negotiation might require suggesting that the negotiating schedule build in more time for social events and longer negotiating sessions. For a Westerner, it might require developing proposals for a more extensive relationship between their two companies.

A party to an international business negotiation, long before its first negotiating session with someone from another culture or country, needs to develop a negotiating plan that will minimize potential conflicts and augment the chances of reaching an agreement – and a business relationship – that will stand the tests of time.

This excerpt is reprinted, with permission, from The Executive Guide to Asia-Pacific Communications

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