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José Manuel Garaña Corces

International Negotiation Patterns

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José Manuel Garaña Corces

International Negotiation Patterns

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Noviembre 2013

© ESIC EDITORIAL Avda. de Valdenigrales, s/n. 28223 Pozuelo de Alarcón (Madrid) Tel. 91 452 41 00 - Fax 91 352 85 34 www.esic.es © José Manuel Garaña Corces ISBN: 978-84-7356-971-2 Depósito Legal: M-31539-2013 Portada: ESIC Fotocomposición y Fotomecánica: Nueva Maqueta Doña Mencía, 39 28011 Madrid Imprime: Gráficas Dehon La Morera, 23-25 28850 Torrejón de Ardoz (Madrid) Impreso en España Queda prohibida toda reproducción de la obra o partes de la misma por cualquier medio sin la preceptiva autorización previa.

I N D E X

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GENERAL OVERVIEW ...................................................................................

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11. NEGOTIATION PROCESS. INTRODUCTION....................................................

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12. INTERNATIONAL NEGOTIATION. THE NEGOTIATION PLAYGROUND ......................

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13. BUSINESS NEGOTIATION. THE INTERNATIONAL SCOPE ..................................

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14. INTERNATIONAL NEGOTIATION. CULTURAL ASPECTS ......................................

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15. INTERNATIONAL NEGOTIATION. STYLES OF NEGOTIATION ...............................

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16. THE HARVARD SCHOOL. SEVEN STRUCTURAL STEPS IN INTERNATIONAL NEGOTIATION.

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17. STEPS IN THE INTERNATIONAL NEGOTIATION PROCESS ..................................

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18. BATNA. BEST ALTERNATIVE TO A NEGOTIATED AGREEMENT .........................

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19. NEGOTIATION STYLES LINKED TO CULTURAL ASPECTS ...................................

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10. INTERNATIONAL NEGOTIATION. PREPARING INTERVIEWS AND FIRST MEETING ......

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11. SUCCESS FACTORS IN INTERNATIONAL NEGOTIATION ....................................

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12. THE SUCCESSFUL INTERNATIONAL NEGOTIATOR. PERSONAL CHARACTERISTICS ....

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13. OTHER INTERESTING FACTORS ................................................................

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14. PRACTICAL CASE .................................................................................

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BIBLIOGRAPHY ..........................................................................................

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José Manuel Garaña Corces [email protected] Founder and International Sales Manager at SPAIN INTERNATIONAL PRODUCTS. Company dedicated to the commercialization and distribution of products and Spanish services in Germany, UK, Scandinavia, China, Argentina, Peru, Chile and USA. Previously and for 16 years (1994-2010) Member of the Commercial and Marketing Department at BERGÉ Group (Automotive, Infrastructure, Logistics and Financial Services). During the last 10 years (2000-2010) General Manager, Sales and Marketing in the International Area of the Company. • Master in International Affairs at UCLA (University of California Los Angeles). • International Negotiation Program (INP) at Harvard University. Bilingual in English, in additional is Professor of Business Strategy, Sales and Marketing in MBA programs as well as training «In Company» courses in ESIC, CEU, EOI. In addition he teaches Business Strategy at American Universities like UCLA and California - Irvine. Second year PhD student working on a doctoral thesis on Internationalization at the URJC Madrid («Universidad Rey Juan Carlos»).

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General Overview International Negotiation is just a spillover effect of the International trading situation we are living. The business world will never be the same. Traditionally, even outstanding professionals used to work in just one company in one country. We can assure than nowadays, professionals will work in at least two companies in two different countries betting that in the coming years the new professionals will work in at least three companies in three different countries, regions or continents. We are not competing anymore just with the university colleague sitting next to us or with our high school mate we used to talk to. We have to get conscious that, at the same time, someone in Germany, Korea, South Africa, Brazil, Indonesia, China, India or Australia is starting to fight for a future common position in a reputed Company somewhere around the world. Stop thinking locally, stop living locally, and stop breathing locally because if so, you probably have not realized that the world will never be the same. Trust on this…NEVER! Objectives – To understand the position and importance of international negotiation in the process of international trade activity. – Highlight the importance of understanding that trading habits are a reflection of the customs and culture of a country. – Explain that the International Negotiation is governed by a structured and logical sequence. – Identify the different International Negotiation techniques related to the culture of several key markets. – Illustrate practically the main situations an executive may face in actual practice. – Summarize the behavioral habits that define trading habits around specific markets. – Show the most effective solutions to common problems that may arise in the process of negotiation based on real commercial practice.

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International Negotiation Patterns

1. Negotiation process. Introduction 1.1. What is Negotiation / what is not Negotiation? Negotiation means a process in which both sides have something to offer or that may be of interest to another. This premise is essential since the existence of a mutual interest is the basis for the existence of a real process of negotiation. The search for an optimal result will be the base for the success of the process in which both parties show their main arguments to achieve the best result at the end. On the other hand, if one of the parties manage the overall arguments and finds nothing in the other to serve their interests, it is virtually impossible to establish a negotiating process and in the absence of counterparties that are useful for a party, we would talk instead of imposition or domain. And this, I repeat, is a common mistake. For that, in a process of negotiation the interest has to be mutual. Both sides need to find in the other a valid source of interesting benefits and / or commercially profitable. If a party seeks in the other just a necessity and also cannot find something useful and interesting to get from, THERE ARE NOT DEAL but imposition and domination. Many students ask me about starting positions in situations with suppliers, customers, subordinates, partners ... where actually the process of exchange of benefits does not exist or is virtually zero because there is nothing to offer in return. The only solution (if any) is to make choices where, at first, it seems that there are not exist... this, it can also be done.

1.1.1. Asymmetry of the Starting Positions The difference in starting positions, once is has been defined a real mutual interest, is the difference between what we offer and what we could get. This premise will determine the beginning of the process but also characterize the authentic professional of the negotiation. This is what Aristotle defined as the asymmetry of the starting positions. It is virtually impossible according to the Aristotelian theory, that a total balance between offer and demand exist. Therefore, a party usually starts always in a position of superiority. This is where the professional negotiator asserts his condition for achieving the balance at the end of the process over to his side. Throughout the paper we will see how we can achieve it. The starting position and business objectives that each side could get from the opponent throughout the negotiation process should be clearly known at the beginning of it.

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International Negotiation Patterns EXHIBIT 1 NORMAL STARTING POINT IN A NEGOTIATION PROCESS

EXHIBIT 2 NORMAL ENDING POINT IN A NEGOTIATION PROCESS

Source: Own development based On William Ury (2009).

1.1.2. Expectations There is an extremely important point defined as the expectation of achievement. This means the spectrum of possibilities for the achievement of all the objectives or the different objectives to be obtained. At the beginning of the process, we should analyze some achievement ranges that can be matched at the end and for that, get conscious about if you have gotten the entire, the main or as much as possible of them. Here is the hidden secret and largely unknown by many professionals of negotiation. Just as important as the knowledge of what, where and how is the starting position analysis, depending on the initial strength of each party, EXHIBIT 3 NORMAL STARTING POINT IN A NEGOTIATION PROCESS

Source: Own development.

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International Negotiation Patterns realistically knowing what you can get, is to know if the negotiation has been a success or a failure. Many strategies among soccer teams, when signing players, are based on this principle.

1.1.3. Cost Opportunity and Time Finally, the last major component to tackling the negotiation process is defined by the time and the opportunity cost. No matter the size of the company, the reference in the market or the number of business benefits you can provide, we should always seek to contribute to a benefit for necessary, innovative and/or special. Even if we have less to offer, it has to be perceived as valuable and outstanding. It is not the number of things but the sum of the value of what we are giving and receiving compared to our starting position what will determine the success at the end of the process. • The time It is one of the key factors that may turns the balance to our side when we are negotiating. There is always a time constraint that we must control. Knowing how to handle and play with. Time is one of the cores values on which we must build our strategy. It will always be an element of pressure (either for us or against us) and knowing how to handle and communicate in the way that it serves to our interests, will be crucial in any negotiating process. EXHIBIT 4 NORMAL STARTING POINT IN A NEGOTIATION PROCESS

Source: Own development.

1.1.4. Key Concepts involved in the definition of negotiation There are certain concepts that make up the essence of negotiation and are deeply involved in its definition. We will develop them in subsequent chapters and they will be always present in the different phases of the negotiation process. These are mainly: the PREVIOUS INFORMATION, CLEAR GOALS,

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International Negotiation Patterns PRECISE KNOWLEDGE OF THE DATA, ORDERED SEQUENCE OF THE PROCESS («to give by getting back») and THE ABILITY TO ANALIZE THE RESULTS AND THE FINAL FOLLOW-UP.

1.2. Definitions of negotiation Finally we include some definitions of negotiation that include globally the main concepts defined as necessary throughout the chapter. They also define certain elements that are essential in shaping the excellence of a correct International Negotiation Process: «Negotiation describes any communication process between individuals that is intended to reach a compromise or agreement to the satisfaction of both parties. Negotiation involves examining the facts of a situation, exposing both the common and opposing interests of the parties involved, and bargaining to resolve as many issues as possible.» JOSÉ M. GARAÑA, 2013 «Every negotiation is a process of communication between two parties, whose aim is to reach an agreement from different needs and approaches. They are going to explore positions to reach a mutually acceptable situation in a way that enables them to create, maintain or develop a relationship. When negotiating parties are in different countries, we talk about international negotiation.» OLEGARIO LLAMAZARES, 2004 «Negotiation involves two or more parties with competing or conflicting interests or needs, working towards an agreement on how they will cooperate.» TILLETT, 2009

2. International Negotiation. The Negotiation Playground To get used to move inside different International Markets makes critical to know, control and handle, the International Negotiation Playground. The Cultural aspects such as information, experience and knowledge are essential. The same way is to clearly have defined the main objective and have it clearly marked and separated from the secondary ones. All International Negotiators should know the playground in which they are going to move around and hopefully… succeed.

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International Negotiation Patterns The Negotiation Playground. Achieve a goal

Define a objective

So when you want to get something. You have to get prepared.

You have to know and dominate the International Scenario you are going to face. You have essential and critical elements to achieve your goals. • First, we do need to have as much reliable info as possible at the beginning of the Negotiation process.

Reliable Information allows the best position to get the goals. • Second, we do need to face every step of the process ordered and structured.

The order will allow you to control the whole Negotiation process.

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International Negotiation Patterns • Third, because we do need to be adaptable and flexible.

Being adaptable to every country and culture situation. • And Fourth, because we do need to acquiere KNOWLEDGE and EXPERIENCE.

It is critical to get knowledge about cultural routines. • Here you are the basic structure of the Negotiation Process.

Source: Adapted from Ury, W. (2002).

3. Business Negotiation. The International Scope The globalization of the economy has meant an increasing closeness not only between governments of countries to eliminate barriers to international trade and investment, but also between firms and economic agents that manage business relationships. Besides the traditional import-export operations there are a number of agreements such as the establishment of joint ventures, licensing, process of outsourcing, project financing, etc., which require the executives and managers involved in these agreements to acquire the essential skills for negotiating in an international environment.

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International Negotiation Patterns The success of a negotiation consists mostly in the understanding of the needs of the other party in order to get him or her persuaded to do something that really also fits our interests. Then, both parties will feel satisfied with the outcome at the end. Regarding commercial activities (neither political, institutional nor military negotiation will be tackled in this paper). We can observe several and different Negotiation between the parties. It may be an international sales operation of an agreement with a Intermediary (i.e. agent or distributor) or the final shape of a strategic alliance (joint-venture, transfer of technology, reciprocal distribution agreements). According to the objectives and following Olegario Llamazares (2004) we can split the different commercial negotiation processes into the following types: EXHIBIT 5

Source: Llamazares, O. and Churruca, A. (2004).

3.1. International Negotiation. Origin Transportation, communication, financial transferences and market unifications have changed the traditional concept of market borders. Internet has erased the meaning of time and the transport liberalization (cost, alliances and air/road unifications) has increased the personal still necessary contact. The business contact turns international for three main reasons: cost saving, product availability and perhaps the MOST IMPORTANT, the intercultural increasing knowledge due to foreign experiences. To get the first two issues conquered 10 years ago, you had to deal with people living in the closest big city or main region inside your country. In front of that, today, the incredible

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International Negotiation Patterns communication revolution (focused on intercultural knowledge and personal/ professional exchanges) breaks the world traditional concept. In other words, we have evolved again; another step in our human evolution process formed by both our personal needs and our historical expansion desire of knowledge and new experiences. THE WORLD HAS DRAMATICALLY STARTED TO CHANGE AGAIN. Wake up and move with it or get ready to get moved.

3.2. International Negotiation. Concepts We are going to explore a little bit further the main reasons that made possible this GLOBALIZATION concept burst. Why do we add the word «International»? Because the economy has suffered an EXPONENTIAL DEVELOPMENT due to: • Access to Information. • Exponential Development and Application of Technology. • Liberalisation and Cheaper Transportation availability. • Liberalization of Markets. • The breaking down of boundaries. • New economic conditions. • Easier legislative rules. All those things allow the human evolution letting us to keep on walking in order to expand our concept of group. Coming from the above, THREE concepts arise (real «breakthrough») in the XXI century that have changed dramatically our concept of group: SOCIAL AND CULTURAL • Exchange of new ways of living as a person and as a group. Exchanges of experiences and new forms of expression. POLITICAL AND REGULATIONS • Cooperation transfer of sovereignty, state enforcement, supra and International regulations. ECONOMIC • «Internationalization of the Economy».

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International Negotiation Patterns EXHIBIT 6 THE NEGOTIATION INTERNATIONAL EVOLUTION. ECONOMIC VISION

Source: Hopman (2012).

3.3. Business Negotiation. International vs. National 1. International Negotiation is more subject to sudden uncontrollable changes in the structure of the country. • Events such as government changes, revolutions, wars, natural disasters, etc., have an impact on international negotiations. • In addition, we must consider the acceptance of the product in the destination country and the general attitude towards the country where the company comes from. • When we talk about International Negotiation, the legal, fiscal and economic playground may be different from the one currently running in our country. • In contrast, both parties negotiating locally normally know the legal issues and also both of them feel more comfortable and are get used to negotiate on it. 2. The differences in the economic environment are also very significant. • There are countries with per capita income above 20,000 euros (Norway, Switzerland) and others with less than 2,000 (Nigeria, Egypt). • You can also undermine the economic gap between the population of the same country (Mexico, Russia). 3. The business environment also determines the International Negotiation. Mainly in three aspects: A) The Initial Contact. • On the first contact, the negotiators must decide what type of company wish to target: if you try to tackle the final customer, a broker or a partner. • The choice will be marked, among other factors, by geography, business concentration of the country and how the market access works.

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International Negotiation Patterns B) The Adaptations of the Proposals. • We will have to trade on the currency used in the country and use their units of measure. • Settle down the payment conditions and establishing deadlines for payment and delivery in accordance with market conditions. • The above will be open to negotiation, although the foreign negotiator normally adapt his/her proposals to the business practices of each country. C) The Conditions (manners, habits…) of the Negotiation. • It depends on the idiosyncrasies of the countries. To be discussed later in Chapter 8th.

4. International Negotiation. Cultural aspects Culture (from the Latin «Cultus - human spirit growing and development») is the social factory that covers the various forms and expressions of a consolidated society. The Dutch anthropologist Geert Hofstede defines culture as: «Software of the Mind» «Culture is the collective programming of the mind which distinguishes the members of one group from another.» As a whole, there is a modeling program. On one side A VERY STRONG predisposition and on the other, weaknesses that hurt us. Therefore, according to Maria Alicia Haydar: «Human beings do not see things as they are but as they have experienced.» Along with this, Glenn Fisher (2003) claims against the concept that says: «After all, people are pretty similar everywhere: NO!» • Is Spain similar to Portugal? • Does Spain looks to Latin America? • All of Latin America is the same? • Etc. When the company begins to consider international operations, begins its immersion into DIFFERENT CULTURAL ENVIRONMENTS. Then we must adapt: – Customs. – Habits. – Beliefs. – Language. This is psychologically costly and we must be prepared to make a significant emotional investment.

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International Negotiation Patterns Cultural Aspects of a International Negotiation that must be know and get adapted to

• Critical elements inside a Negotiation process. Most of the time, our ETHNOCENTRISM makes everything seem strange beyond our borders. But this is a UNIVERSAL PROBLEM. We are also ‘rare’ for others. Therefore, we must: 1. Being COMPREHENSIVE. And realize that the other act, eat, and think differently. Because we do it too. 2. And we must be TOLERANT about the differences as we are tolerated by the others too.

4.1. Basics of Cross-Cultural Communication «It is not the LANGUAGE, is the way in which communication is established.» JAVIER MARISCAL, 2007 Communications have multiple meanings interpreted by reading the situation.

4.1.1. Verbal communication styles • Anglo-Saxon. Regular tone with an orderly sequence. Exchanging messages in between • Mediterranean. Lawless. One speaks, the other listens... and talk in between. • Oriental. Listen, pause, reflection and possibly answer.

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International Negotiation Patterns EXHIBIT 7

Source: Galtung (2005).

4.1.2. Tone of Voice Anglo-Saxon. Piping, harmonic. Mediterranean. Musical, arrogant and even aggressive. Oriental. Monotone and slow. The conclusion we can draw are that we must: MEET THE CONTRARY, ADAPT TO HIM, UNDERSTAND THE SITUATION GLOBALLY, BEHAVE SERENE, AND GENERATE EMPATHY.

4.1.3. Nuances from Indirect Communication They are unmanageable and sometimes unpredictable: – Gestures. – Indications with the hands. – Movements. – Glances. – Tics. Even being difficult to manage, before starting the negotiation, we must get deepest into the knowledge of the CLUES: – NOT gesticulate too much. – NOT Robotize our movements or gestures or expressions.

4.2. The Context of the Communication The context of communication is the set of information that surrounds an event and is closely linked to that event. Communicate through body movements, facial expressions, body posture…

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International Negotiation Patterns Is related to the use of space to communicate or the personal bubble of space –nine inches to over twenty inches–. North Americans prefer more distance than from Latin and Arab cultures. It also refers to basic human interaction. I.E. In greeting –shake hands, embrace, or kiss–. European and Latin American cultures are more used to physical contact than Germanic, Anglo-Saxon, or Scandinavian cultures. According to Edward T. Hall, (1993) there are two types of cultures according to NONVERBAL communication: • High context cultures. Much of the information is BUILT by the issuer, by his gestures, nuances and meanings: Spain, France, and Latin America. • Low Context Cultures. The bulk of the information is transmitted as explicit code. There are no nuances or double interpretations. The sense of the conversation is based directly on the words: Switzerland, Holland, Germany, UK, and USA. In multinational companies, the low context dominates (USA, Britain, and Germany). Generates less confusion and has been extended by the business schools. See the different cultures according to their context in figure named EX 3.1. EXHIBIT 8 EX 3.1 HIGH CONTEXT AND LOW CONTEXT COUNTRIES

Source: Fischer (2000).

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International Negotiation Patterns EXHIBIT 9 DIFFERENCES IN COMMUNICATION STYLES

Source: Fischer (2000).

4.3. Time concept in International Negotiation A large part of the business concepts round around the concept of time. Budgets, goals, presentations, «just in time», etc. However, the use of time is not uniform across cultures Arrange quotes, settle meetings, develop projects, negotiate agreements, etc., are affected by the nationality of the participants and the way they consider the «time concept» in their cultures. Talking about the use of «time», R.T. Hall (2007) defines two types of «time concept» in the preparation and execution of business tasks: • Monocronich or sequentially. Punctuality, work is based only on the current task. Planning. Rationality and causality. Quantitative criteria. • Policronich or Synchronous. Elasticity and operational. Many task at the same time. Qualitative assessments. Plans in the short term. Agility. EXHIBIT 10

Source: Hall, R.T. (1998).

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International Negotiation Patterns

4.4. International Negotiation Intellectual Styles Different cultures think differently. No differences are supported by opinions. They evoke differences in the mental process used. According to J. Galtung (2005) we can differentiate the following different styles: a) Saxon. Empirical mentality. Based on the obvious facts and data. FLEES FROM THEORY ABSTRACT. b) Nipponese. Modesty. All thought is provisional and can be changed. Judge is categorically understood as PRESUMPTION. c) Teutonic. The purity of rationing. The reality is constructed from logical hammering. With frequent use of abstract terms d) Gallic and Hispanic. Esthetics and creative. More elegant speech than logical reasoning. They BELIEVE THE TRUTH, even if it is above the data. Mauricio Alice (2010), points that the relationship between culture and negotiation are analyzed from the perspective of the dominant values: • Individualism, Collectivism and Egalitarianism depending on Hierarchy intercultural customs. Thus, individualistic cultures emphasize self-interest, while collectivist cultures emphasize the interests of all. These polarities are added to the above noted analysis of high and low context.

4.4.1. Individualism vs. Collectivism Individualism vs. Collectivism differentiate cultures that put the individual needs above the collective. In individualistic cultures, the norms promote interdependence of individuals by emphasizing social obligations. Members of individualistic and collectivist cultures differ in many ways. Confrontational behaviors and motivation can come from this cultural value. Consequently, resistance to confront directly in a negotiation can lead to the emphasis on cooperation in collectivist cultures. • The reflection of the social and cultural idiosyncrasies of a country is extrapolated to the way they negotiate. EXHIBIT 11 INTERNATIONAL NEGOTIATION. INTELLECTUAL STYLES

Source: Marcué, F. (1998).

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International Negotiation Patterns EXHIBIT 12 INDIVIDUALIST CULTURES VS. COLLECTIVIST CULTURES

Source: Marcué, F. (1998).

4.5. Practical Application The practical application of what we have described could be summarized in the following figure according to what we have in our market in order to adapt it to the destiny market.

We have to clearly identify our MAIN and MOST IMPORTANT COMPETITIVE ADVANTAGE: • Normally it is an extrapolation of our National differential advantage. • In the international market we should make strong what it is also strong in the domestic one. • – PRICE. • – CAPACITY OF PRODUCTION. • – QUALITY, DESIGN.

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International Negotiation Patterns • – TECHNOLOGY, FUNCTIONALITY. • – INNOVATION, SERVICE, AFTER SALE POLICY. • What makes the difference is to understand the cultural, economic, consumer tastes and be able to ADAPT them to be even more competitive or eliminate what is not accepted or represent a competitive disadvantage. • We must know how to bring these advantages to the negotiation table. • The product (or service) is the King. BLINDLY TRUST IN YOUR ADVANTAGE and PUT IT TOGETHER with OTHER SERVICES REQUIRED FOR NOT FAILING: • – Logistic. • – Legal regulations, healthy requirements, etc. • – Labelling. • – Hiring Specific Policies.

4.5.1. Spain International Organics (a Practical Example) Spain International Organics is a Company based in Spain and dedicated to the Ecologic and organic Industry. Trying to expand its activities to Sweden, it must keep the following International Negotiation Strategy described, starting by the adaptation of the products and, at the same time, maintaining the differential advantages they have in the local markets: EXHIBIT 13 SPAIN ORGANIC PRODUCTS BUSINESS CASE

Source: Own development.

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International Negotiation Patterns EXHIBIT 14 SPAIN ORGANIC PRODUCTS BUSINESS CASE

Source: Own development.

5. International Negotiation. Styles of Negotiation In the International negotiation process, the PRIMARY OBJECTIVE is to build Commercial relations beyond than sporadic sales. Customer DOES NOT BUY the characteristics of a product but rather ONLY THE BENEFIT THAT THEY CAN PROVIDE HIM WITH. Along with this, once we are inside an International Negotiation process, we have to again, clearly identify, and really get conscious about the relationship we want to build or keep with the other party. Despite what we have said at the beginning of the chapter, we have to differentiate between an «ONGOING RELATIONSHIP» from a typical «ONE SHOT RELATIONSHIP». The same exactly happens with the cultural aspects we have seen in chapter 3. Depending on the profile, and country education, probably we will face different types of negotiators according to their country identity. For this, it is important to concrete the Style of Negotiation that we will develop in our strategy during the process and, at the same time, get identified the one our opponent spreads during it.

5.1. Cooperative vs. Competitive attitudes Competitive attitude, defined by practical questions. What it is important is to reach the goals. Cooperative attitude, defined under the consensus, harmony and equal relationships.

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International Negotiation Patterns Proper Negotiation attitude, Split in to levels: – The core of the Negotiation objectives (being hard and pressing as much as possible). – People who are involved in the negotiation (education, respect and friendly). We can relate these attitudes with figure number 20 and make the parallelism with the individualist vs. the collectivist cultures. As much as individual as more competitive will be. As much collectivist more cooperative attitude.

5.2. The famous «Win/Win» attitude vs. de Win/lose one Almost all negotiators with extensive international experience would agree that the most appropriate approach for a commercial negotiation is the win-win. That is, both sides realize that the other has to get something back in exchange for the concessions made during the negotiation process. Negotiation takes place through proposals and counterproposals which aims to reach a fair and positive attitude for both parties. In that way, both will feel satisfied when the deal is closed and also creates a climate of trust that opens the door to future potential business. However, getting down to earth, many negotiations correspond more with a win-lose situation. From this perspective, any concession that is obtained is considered a weakness that strengthens the negotiating strategy of the other party. In this approach the goal of negotiation is to reach an agreement that can satisfy the needs of the counterparty but to maintain at all costs the starting positions. The one that changes less will be the winner. While the win-lose approach can be beneficial to close a first agreement –specially for the part that has more power–, sooner or later the loser will find an advantage that will use to aggressively recover what he lost before. This creates a climate of confrontation that can lead into a lose/lose relationship and a disrupt of the business relationship. So ideally, we must try to keep a Win/Win attitude that seeks to maintain a stable and lasting relationship. We reiterate that we must not forget the difference between the intention of building a relationship of continuity or simply a business relationship timely and specific. Both concepts determine much, as we noticed the style of trading.

5.2.1. The current reality of a relationship WIN/WIN We must point out, however, that in today’s world of trading is no longer used practically this differentiation between WIN/WIN or WIN/LOOSE. We have moved into a more real nomenclature which can be defined as follows:

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International Negotiation Patterns POSITION 1

Win – Win

Traditional Focus

POSITION 2

WIN- win

both wins but Party nº 1 has a dominant position

POSITION 3

win- WIN

Both wins but Party nº 2 has a dominant position

POSITION 4

Win-lose

Traditional Focus.

5.2.2. WIN/WIN Main Characteristics According to the writers J. Manteklow and A. Carlson, sometimes you can feel that someone is continually taking advantage of you. Do you seem to have to fight your corner aggressively, or ally with others, to win the resources you need? Or do you struggle to get what you want from people whose help you need, but over whom you have little direct authority? If so, you may need to brush up your win-win negotiation skills. Effective negotiation helps you to resolve situations where what you want conflicts with what someone else wants. The aim of win-win negotiation is to find a solution that is acceptable to both parties, and leaves both parties feeling that they’ve won, in some way, after the event. There are different styles of negotiation, depending on circumstances. Where you do not expect to deal with people ever again and you do not need their goodwill, then it may be appropriate to «play hardball», seeking to win a negotiation while the other person loses out. Many people go through this when they buy or sell a house – this is why house-buying can be such a confrontational and unpleasant experience. Similarly, where there is a great deal at stake in a negotiation, then it may be appropriate to prepare in detail and legitimate «gamesmanship» to gain advantage. Anyone who has been involved with large sales negotiations will be familiar with this. Neither of these approaches is usually much good for resolving disputes with people with whom you have an ongoing relationship: If one person plays hardball, then this disadvantages the other person – this may, quite fairly, lead to reprisal later. Similarly, using tricks and manipulation during a negotiation can undermine trust and damage teamwork. While a manipulative person may not get caught out if negotiation is infrequent, this is not the case when people work together routinely. Here, honesty and openness are almost always the best policies.

5.2.2.1. Preparing for a successful negotiation Depending on the scale of the disagreement, some preparation may be appropriate for conducting a successful negotiation. For small disagreements, excessive preparation can be counter-productive because it takes time that is better used elsewhere. It can also be seen as manipulative because, just as it strengthens your position, it can weaken the other person’s.

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International Negotiation Patterns However, if you need to resolve a major disagreement, then make sure you prepare thoroughly. Think through the following points before you start negotiating: • Goals: what do you want to get out of the negotiation? What do you think the other person wants? • Trades: What do you and the other person have that you can trade? What do you each have that the other wants? What are you each comfortable giving away? • Alternatives: if you don’t reach agreement with the other person, what alternatives do you have? Are these good or bad? How much does it matter if you do not reach agreement? Does failure to reach an agreement cut you out of future opportunities? And what alternatives might the other person have? • Relationships: what is the history of the relationship? Could or should this history impact the negotiation? Will there be any hidden issues that may influence the negotiation? How will you handle these? • Expected outcomes: what outcome will people be expecting from this negotiation? What has the outcome been in the past, and what precedents have been set? • The consequences: what are the consequences for you of winning or losing this negotiation? What are the consequences for the other person? • Power: who has what power in the relationship? Who controls resources? Who stands to lose the most if agreement isn’t reached? What power does the other person have to deliver what you hope for? • Possible solutions: based on all of the considerations, what possible compromises might there be?

5.2.2.2. Style is Critical For a negotiation to be ‘win-win’, both parties should feel positive about the negotiation once it’s over. This helps people keep good working relationships afterwards. This governs the style of the negotiation-histrionics and displays of emotion are clearly inappropriate because they undermine the rational basis of the negotiation and because they bring a manipulative aspect to them. Despite this, emotion can be an important subject of discussion because people’s emotional needs must fairly be met. If emotion is not discussed where it needs to be, then the agreement reached can be unsatisfactory and temporary. Be as detached as possible when discussing your own emotions-perhaps discuss them as if they belong to someone else.

5.2.2.3. Negotiating successfully The negotiation itself is a careful exploration of your position and the other person’s position, with the goal of finding a mutually acceptable compromise that gives you both as much of what you want as possible. People’s positions are

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International Negotiation Patterns rarely as fundamentally opposed as they may initially appear – the other person may have very different goals from the ones you expect! In an ideal situation, you will find that the other person wants what you are prepared to trade, and that you are prepared to give what the other person wants. If this is not the case and one person must give way, then it is fair for this person to try to negotiate some form of compensation for doing so – the scale of this compensation will often depend on the many of the factors we discussed above. Ultimately, both sides should feel comfortable with the final solution if the agreement is to be considered win-win. Only consider win-lose negotiation if you don’t need to have an ongoing relationship with the other party as, having lost, they are unlikely to want to work with you again. Equally, you should expect that if they need to fulfill some part of a deal in which you have «won», they may be uncooperative and legalistic about the way they do this.

6. The Harvard School. Seven structural steps in International Negotiation Regarding International Negotiation optimal structure we must reference the Harvard School in Massachusetts. This School split and defines 7 chapters as the ideal scenario in which we should walk through to establish concrete and preserve a solid International Relationship. Our International negotiation aim will be always focused on these elements in order to help this relationship happens: a) Communication. b) Relations. c) Interest. d) Options. e) Legitimacy. f ) Alternatives. g) Commitments. EXHIBIT 15 SEVEN ELEMENTS OF NEGOTIATION

Source: Own development.

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International Negotiation Patterns The same happens with the structure the founders of the Harvard School (William Ury and Roger Fisher) recommend to have always in mind. They explain them as follows: 1. People. Just separate the professionals (the Negotiators) from the issue the negotiation is about. Summarizing, «separate people from the problem». 2. Interest. To be concentrated on interest never in positions (before, during and after). 3. Options. To generate as much options as possible in order to have as much success as possible after the negotiation process. 4. Measurement criteria. To establish and use objective patterns to really measure the results of the negotiation process and the corresponding follow up about what both parties have agreed. 5. Reciprocity: do not make any concessions for free, you must always have something back in return (mentioned before) 6. Flexibility: Flexibility is an essential aspect of any negotiation process, since the balance of power fluctuates as the negotiation progress. 7. Agreements based on objectives: the concessions made shall be conditioned on compliance with targets (i.e. a discount on price if you reach a certain volume of purchase). To implement a negotiation win-win type there must be an exchange of information between the parties as a basis for collaboration. If this is difficult to achieve in a local negotiation is even more in international negotiation in which the other party may have habits and business practices quite different.

7. Steps in the International Negotiation Process The International Negotiation Process is defined by 6 different steps that are structured in logic order and linked one to each other. The sequence of the process will be based on each step and to get the next step conquered we have to consolidate the previous one.

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International Negotiation Patterns EXHIBIT 16

Source: Kremenyuk, V. (2002).

The time, dedication and effort to be devoted to each of the stages will be different in every negotiation. Generally, the first two stages take place at home, while the remaining is held abroad.

7.1. Step 1: Preparation In this step we have to really guess if the negotiation is possible or not and identify the resources or advantages each party is able to exchange. At the same time is the right moment to deeply know the other party before we start the process. According to these things we have to choose and send the proper team, fix an agenda with objectives, and time limits for discussion. Summarizing, you have to get ready for a possible (or not) long negotiation period (you have to be able to handle the «time» as a useful tool) and get use to the environment. Finally and depending on all the things mentioned you will build your strategy.

7.1.1. Differences in cultures in key negotiating processes (examples) • Communication styles - (direct or indirect). • Sensitivity to time - (low or high). • Forms of agreement - (specific or broad). • Team organization - (a team or one leader).

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International Negotiation Patterns EXHIBIT 17 PREFERENCES FOR BROAD AGREEMENTS

Source: Fischer (2000).

7.2. Step 2: Building the Relationship In this second step we will focus on the main aspects of the other party (person, group) BUT «OUT OF THE BUSINESS». We will try to get and look for partners more than opponents. It is the time while we are negotiating to get as much knowledge of the other as possible through social and interpersonal exchange. The importance and duration of this step vary according to the different culture.

7.3. Step 3: Exchanging information and the FIRST OFFER Now it’s time to sincerely exchange information. ALWAYS BASED ON THE «TRADE OFF PROCESS» –gives and receives in the same proportion–. Some negotiators hide information which is wrong. You can hide your best offer at the beginning (normally you should). But to hide the best we can offer is totally different from hiding information. Just the opposite, many cultures consider this as a really bad point that will penalize the overall process. Finally, never, ever, make the first offer unless you can avoid it.

7.4. Step 4: Persuasion It is the heart of the negotiation process attempting to get the other side to agree to a position. There are numerous tactics used.

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International Negotiation Patterns

7.4.1. Verbal and nonverbal negotiation tactics • Promise/Threat. • Recommendation/Warning. • Reward/Punishment. • Normative appeal. • Commitment/Self disclosure. • Question/Command. • Just say «No»/interrupting.

7.4.2. «Dirty tricks» in International Negotiation Dirty tricks are negotiation tactics that pressure opponents to accept unfair or undesirable agreements or concessions. • Deliberate deception - point out what is happening. • Stalling - do not reveal when you plan to leave. • Escalating authority - clarify decision making authority. • Good guy, bad buy routine - do not make any concessions. • You are wealthy and we are poor - ignore the ploy. • Old friends - keep a psychological distance.

7.5. Step 5 and 6: Concessions and Agreement These steps conclude the process reaching to a desirable final agreement. Both of them sign the contract that must be agreeable to all sides. The final concessions require that each side relax some of its demands.

7.5.1. Styles of concession • Sequential approach. • – Each side reciprocates concessions. • Holistic approach. • – Concession making begins after all issues are discussed. There is another very clear and useful chart explaining the process from the Author Olegario llamazares (2004) described in Figure 18th.

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International Negotiation Patterns EXHIBIT 18

Source: Llamazares, O. and Churruca, A. (2004).

8. BATNA. Best Alternative to a Negotiated Agreement (Harvard International Negotiation Course) In negotiation, BATNA refers to your best alternative to a negotiated agreement, or the best outcome you can expect if you fail to reach agreement at the bargaining table with your counterpart. Articles explore the concept of one’s BATNA as well as how to effectively identify your BATNA in negotiations and how to use this knowledge effectively in any type of negotiation, whether in business, international, or personal negotiations. Adapted from «Taking BATNA to the Next Level» by Guhan Subramanian (professor, Harvard Business). –Harvard Business Review–. If your current negotiation reaches an impasse, what’s your best outside option? Most seasoned negotiators understand the value of evaluating their BATNA, or best alternative to a negotiated agreement, a concept that Roger Fisher, William Ury, and Bruce Patton introduced in their seminal book, Getting to Yes: Negotiating Agreement Without Giving In (Penguin, 1991, second edition). Even those who don’t know the term probably think through their BATNA instinctively as they prepare for a negotiation. An awareness of your BATNA –particularly if it’s a strong one– can give you the confidence you need to walk away from a subpar agreement. Although BATNA is a commonsense concept in the negotiation world, achieving «best practice» in this arena is not easy. Here are three strategies to help you take the BATNA concept to the next level and gain a critical advantage in upcoming deals. 1. Translate your BATNA to the current deal. Here’s a classic illustration of the BATNA concept: while haggling over a rug in a bazaar, you’re aware that you can purchase an identical rug at a nearby stall for $100.Assuming that you want only one rug, you won’t pay more than $100 in the negotiation at hand. Such clear-cut BATNAs tend to exist more in theory than in reality.

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International Negotiation Patterns In truth, your best alternative to agreement is rarely, if ever, apples-to-apples comparable with the deal at hand. The implication? When negotiating, take time out for an explicit translation process to ensure that you aren’t giving up a good deal in hand for a BATNA in the bush. Recently, for example, as the renewal deadline for his homeowner’s insurance policy approached, Larry decided to do a «market check» to compare prices. His existing insurer –let’s call it Acme– had been raising its rates by 7% to 10% annually for the past three years, and Larry wasn’t sure he was getting the best deal. He then found a carrier that offered a policy for 30% less than Acme’s renewal rate. Delighted, Larry came very close to switching to the new insurer. But after doing some digging (and receiving some self-interested guidance from Acme), Larry identified important coverage’s and term definitions buried deep in the legalese of the two policies. After going through a translation process to make the prices comparable, Larry realized that Acme, his current insurer, was offering him a better deal. The lesson: Rather than assuming that the deal on the table matches your BATNA point by point, translate your BATNA to fully understand what it means for the current negotiation. 2. Assess their BATNA with care. It may seem an obvious step, but even the most sophisticated negotiators often fail to think through the other party’s BATNA as carefully and objectively as they think through their own. Although you can’t assess someone else’s BATNA as precisely as you can your own, asking «What will he do without a deal?» provides valuable insight. Consider the case of a Mississippi farmer in the early 1990s. The state legislature had just legalized riverboat gambling, and the farmer owned land along the Mississippi River that was very attractive for the development of hotels, restaurants, and other businesses. Sure enough, an entrepreneur approached the farmer about buying his land. Before meeting to negotiate a purchase price, the farmer hired a professor of agriculture to estimate the land’s value. After conducting soil tests and estimating cash flows, the professor concluded that the land was worth approximately $3 million. As the negotiation began, the farmer kept quiet and let the entrepreneur frame the discussion. His opening offer: $7 million. Though ecstatic, the farmer kept his composure and made a counteroffer of $9.5 million. Eventually they reached a deal of $8.5 million. You might view this tale as a success story for the farmer; after all, he got $8.5 million when he was only expecting $3 million. But what if the farmer had considered the entrepreneur’s perspective, perhaps retaining an expert in the gaming industry to assess the land? He might have learned just how profitable casinos can be and that the benefit to the entrepreneur of securing the optimal location rather than a second-best BATNA was worth much more than $8.5 million. 3. Think through two-level BATNAs. In most business negotiations, you face two counterparts: the individual across the table and the organization he represents. This means you’re facing two BATNAs as well. Sophisticated deal makers think through both BATNAs –the organization’s and the individual’s.

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International Negotiation Patterns In one real-world case, a vacation resort was seeking to have certain equipment installed on its property. The equipment manufacturer sent Frank, the CEO’s newly hired lieutenant, to negotiate this major contract. The resulting deal was extremely successful for both sides. A few years later, the manufacturer held its annual meeting of top managers at the resort to show off its installations and celebrate the deal. The two organizations held a panel discussion to reflect on the dynamics of their negotiation. At one point, the moderator asked Frank to reveal his BATNA. He responded with a textbook analysis: «Our BATNA was to look around for some other major contract in which to powerfully demonstrate our capability.» When pressed, he continued, «Well, my BATNA, as a new hire, was probably to look around for another job if I didn’t get the deal.» Most meaningful negotiations occur between organizations, not individuals –yet individuals, not organizations, negotiate deals. Thus, it’s crucial to consider the incentives of the individual across the table: How is she compensated? How long has she worked for the company? What are her long-term aspirations? Only by examining both pieces of the BATNA will you gain a complete picture of the other side’s walk-away alternatives. 4. Track BATNAs in multiparty negotiations. Negotiations between just two sides can be tough enough to manage. Add more parties to the mix, and things get a lot more complicated. Yet multiparty talks are common: think of department heads dividing up scarce resources, family members debating the future of a business, or a group of consumers launching a class-action lawsuit. One of the issues that makes multiparty negotiations more complex than two-party talks, according to Massachusetts Institute of Technology professor Lawrence Susskind and Harvard Law School professor Robert Mnookin, is the fluctuating nature of each party’s best alternative to a negotiated agreement (BATNA). By preparing for this complication, you will be well positioned to thrive in your next round of multiparty negotiations. As in a two-party negotiation, you should enter multiparty talks with a solid idea of your BATNA –that is, what you will do if a deal fails to materialize. Knowledge of your BATNA can help you stand firm in the face of offers that fall short of your goals. Suppose that Mark, an unemployed marketing professional, is preparing to meet with his three siblings to discuss the future of their marginally profitable family business. Mark’s preference is to dissolve the business and use his share of the assets to start a consulting firm. However, he knows that one or two of his siblings would prefer to keep the business running as is or sell it. If the negotiation doesn’t work out as he would like, Mark decides that his BATNA is to move to a city across the country where a colleague has offered him a job. You should also attempt to analyze the BATNAs of the other parties at the table. Roughly calculating the minimum you can offer someone to secure a commitment will help you immensely. Mark, for instance, expects that his sister Leah, who has been involved in the business, will demand a large share of the pie in exchange for agreeing to dissolve it. He estimates that she will ask for 50% of the assets but be willing to settle for about 40% and accept a position with a client. In negotiations among a large number of parties, determining each party’s BATNA can be a daunting, even impossible, undertaking. At the very least, try to

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International Negotiation Patterns foresee how parties may align and estimate the BATNA of each possible coalition. Once discussions begin, parties’ BATNAs will begin to fluctuate, according to Susskind and Mnookin. For instance, imagine that Mark persuades his sister Jaclyn and brother Tom that the business should be dissolved. At this point, because Leah is outnumbered, her BATNA becomes a virtual nonissue. Yet to preserve their relationship with her and each other, her siblings become focused on dividing up the assets in a way that satisfies them all. A payoff matrix –a spreadsheet that lists the names of the parties in rows, the issues to be discussed in columns, and the parties’ priorities on those issues in the boxes that are formed– will help you keep track of shifting BATNAs in addition to parties’ preferences. 5. Anticipate hidden hazards of BATNA research. Question: I was recently put in charge of negotiations with a supplier involved in one of our company’s products. Given what I’ve learned in school and in negotiation books, I did my homework: I started exploring options with other suppliers to gain power and reduce risk in case the current negotiations with my preferred vendor go sour. I invested quite a bit of time (and money!) creating those options, but in the end I was not interested in pursuing them, and I let them go. Now I can’t help but wonder: Was it a mistake to do so much research? Answer: Negotiators often spend time and energy pursuing alternatives to the current deal to gain more power at the bargaining table. In classic negotiation texts and research, you’ll find the same advice: bargainers would be wise to invest resources in strengthening their best alternative to a negotiated agreement (BATNA), or their fallback alternative, in the event that the parties fail to reach an agreement. Investing in outside alternatives enhances power by giving you other opportunities if the current negotiation cannot or will not provide the outcome you desire. Thus, outside alternatives often entail sunk costs, or irrevocable investments that keep open the possibility of pursuing other specific courses of action in the future. In a situation such as yours, investments in outside alternatives may enhance your leverage in the negotiation. So far, so good, right? Well, there’s more to the story. In addition to helping you enhance your power, these investments in strengthening your BATNA can have other, potentially unintended consequences. Your realization that investments you made and discarded represent irrecoverable costs may affect your behavior in the current negotiation in ways you don’t expect. Specifically, research I conducted shows that the extent to which decision makers invest directly in outside options influences how entitled they feel in the current negotiation. When you decided to forgot options that you invested time and money in creating, you may feel as though you wasted resources. This perceived loss creates a desire for a counterbalancing gain. Thus, it is likely to trigger a sense of entitlement: the feeling that you deserve a favorable outcome in the current negotiation. Our research shows that the costlier a negotiator’s investment in developing a strong BATNA is, the stronger those feelings of entitlement will be. We found that this sense of entitlement causes the negotiator to have high aspirations in the current relationship, and these aspirations fuel opportunistic behavior.

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International Negotiation Patterns Your sunk costs –and not simply the leverage provided by the outside options you created– may lead you to exploit your counterpart in ways that could damage your relationship going forward. So, for instance, you may find yourself lying or misrepresenting information to your counterpart in an attempt to improve your outcomes. You may feel entitled to use aggressive strategies to reach a better deal for yourself. Without your realizing it, the foregone alternatives are influencing your behavior. Since you likely are interested in maintaining a good relationship with the supplier in your current negotiation, you should consider the effect that the forgone options in which you invested might have on your expectations and behaviors as you negotiate. Namely, your prior investments may compromise your ethical standards. By remaining vigilant about negotiating in good faith and reciprocating goodwill, you should be able to emerge from the shadow cast by sunk costs.

9. Negotiation styles linked to cultural aspects AMERICANS The American businessmen generally prefer to handle negotiations themselves assuming the global responsibility for decisions in trading. They Manifest preference for informality and equality in human relationships and indifference to the distinctions of social levels. They often think that the person in the foreign negotiating team with the best English-speaking ability is represented as the most intelligent and influential. This leads them to focus on the wrong person. They tend to focus on the persuasion stage. They believe that the first two stages of the negotiation process are less important than persuasion. They tend to spend little time in secondary tasks, preferring the discussion of the arguments during the persuasion stage. They have competitive vision in negotiating and expect a definitive result, which will determine a winner and a loser. Sometimes negotiation processes are presented as a competition against an opponent that an area of cooperation. For Americans, the contract looks mandatory, it is an explicitly written agreement and it is expected to be completed in all circumstances, hence, the expression «a deal is a deal». (It’s a deal). They blindly believe in the agreements. They value determination, persistence and competition characterized their inflexible negotiating style. They like to keep an ordered agenda. They are aggressive and articulated (consistent). The confrontations and disagreements are expected as part of the negotiations. They are prone to exaggeration. They frequently interrupt. They also tend to use names. Privacy and personal space are very important.

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International Negotiation Patterns JAPANESE The Japanese style is based on «ningensei», conversation, they impulse relaxing behavior and interpersonal relationships within the negotiation. The «ningensei» term can be translated as «priority to humanity». Relationships are crucial. One of the major differences between Japanese and other styles of trading is the status of connection. On the interpersonal level, the status is determined by age, sex, education, or occupation, while business relationships depends on the size and prestige of the company, industry structure, and particularly the role (buyer or seller) of the participants and their position in the Company. They feel uncomfortable if status distinctions do not exist or are not clear. Negotiating under interpersonal equality is not established. They prefer long-term relationships. And therefore the negotiations are done slowly and carefully. Two implications of this issue are: (1) The Japanese negotiator spends more efforts on negotiating preliminary rituals. (2) The structure and agreed business presentation reflect the importance of a long term commitment that benefits both parties. Although short-term benefits are also important, are secondary compared to long-term perspective. The negotiation typically involves formal greeting, showing hospitality and mutual interest about common issues. This serves to establish a harmonious relationship between the two sides, which is very important. They value to maintain superficial harmony, avoid saying «no» directly and use other ways to express their refusal avoiding a concrete negative answer. Business relationships are initially established through appropriate connections. If a party does not know the other, third parties can arrange an initial meeting. The business cards are exchanged before bowing, normally shaking hands after. Rarely use the name, but the surname-san. The consensus is crucial. They do not like to interrupt. They feel comfortable with period of silence, which the foreigner should learn to translate. They like to be well informed when they approach a negotiation process. Privacy and personal space are not crucial. All negotiators should win. They are very attentive to nonverbal communication. A bow is the traditional greeting, the less the better. It’s nice for them when a guest knows its protocol. The handshake is common, but the grip should look weak. It is impolite to have direct eye contact or too long. The personal side of business is very important. Style is as important as the content (the substance). Gifts are deeply installed in their negotiation culture.

BRAZILIANS Knowledge of how Brazilians behave in meetings and negotiations will help reduce the risk of being offended or becoming frustrated. The pace and punctuality

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International Negotiation Patterns in Brazil is slower than in the U.S. or the U.K. The prevalent tendencies of Brazilians in negotiations are: Brazilians value personal relationships and prefer to establish them before business negotiations take place. It is wise to create a personal connection before jumping straight into the business negotiations. Punctuality varies by region with the business center São Paulo being considered as having the fastest pace. Regardless, expect the pace to be slow leading up to negotiations. Communications are difficult especially when trying to get in touch with decision makers. Picking up the phone and calling as many times as it takes to talk to the person can often be the most effective strategy compared to email or leaving messages and waiting to be called back. Brazilians tend to be indirect and not as objective as other cultures. Emotions, such as satisfaction and disappoint are readily expressed. Brazilians rarely say no directly. They’re diplomatic and non-confrontational. A «no” usually comes in the form of a maybe, possibly in the future, or potentially which, all really mean no. Brazil is a civil law country and therefore there are laws for just about everything. Proper vetting of legal matters is recommended for applicable laws of the business proposal. Negotiations can be difficult with language and culture barriers. Once the legwork has been done it is key to not blow the deal at the negotiation table. Start high with prices as a little compromise is general practice towards the end of negotiations. Private offices are uncommon in Brazil even for senior level executives. Interruptions should be expected as well as a colleague popping their head in to relay information or a seemingly unimportant phone call. It’s common to start off the meeting with small talk before discussing the details. Specific information, even minimally relevant, may be reviewed over and over again which, can be exacerbated by with the language barrier. Hierarchy is fundamental in Brazil usually leaving it up to one person to make the final decision. Contracts and documents are not usually signed immediately after a deal has been closed. A handshake and affirmation is sufficient until the paperwork is handled at a later date. Bring and share business cards generously. Mask frustration and disappoint. Don’t leave right after the meeting unless it has been made clear that time is tight. Accepting any post negotiation invitations if possible. The right historical and cultural research can go a long way to improving negotiations with Brazilians. The greater the knowledge of the people means the greater the chances of success. Keep an eye out for dead ends and make sure to develop the personal relationships with Brazilian counterparts as much as possible. Personal references down the road are invaluable business resources in Brazil.

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International Negotiation Patterns RUSSIANS Negotiating is a very serious business for a Russian because just about everything requires negotiation. I suspect, again, that there’s something genetic in this and that most Russians are simply born to negotiate. That may help to explain why negotiation is still a rather conservative business. There is a lot of theatre in any negotiation –and Russians are a truly artistic bunch (not for nothing have Russian culture and arts had a major impact on world culture). Not for nothing is the premier theatre in Moscow –and Russia– called the Bolshoi, or Big Theatre. This means that you need to be aware of several factors which will help set the stage in the Russian negotiating theatre. Understanding against whom you are negotiating is a critical part of the negotiator’s brief –and this requires attention to the relationship factor. There are two concepts, which I have found to be the keys to determining who holds the cards in any particular negotiation. Who does what to whom and who stands behind whom? In short –who is really calling the shots? These concepts indicate that interrelationships and networks of obligations, formal, and informal are vital parts of the structure of the Russian political economy. They also show that the results of any negotiation have to be approved by the real power –so your task as negotiator is to be sure of who that real power actually is. Sometimes, what seem to be very small negotiations can be referred to a power that is very, very high up in the Russian political and economic systems? Finding out where power lies in any given situation is a key task. This requires an ability to understand something of the make up of Russian society. Russians immediately understand who is who in their own society. It is more than a question of pecking order (junior versus senior). To an outsider thinking of the old USSR as a socialist and classless system, finding that today’s Russia has become stratified can be quite a shock. While Russians may not immediately understand relationships in a delegation of foreigners, they will expect the foreigners to understand relationships on the Russian side. Failure by a foreign delegation to understand, to be aware of, or to properly acknowledge the presence of a key Russian decision maker is one of those mistakes which can come back to haunt you. Bear in mind, too, that the company you keep in Russia, and the company you are seen to keep, can influence the way Russians look at you. If you associate with one group of business people, for example, you may find yourselves unable to associate with other business groups because their relations are, shall we say, frictional. It’s easy to understand, incidentally, why business and politics share a similar «family» approach in today’s Russia. Those in the political circle need to be trusted absolutely, as do those in the business circle. The leading politician and the leading businessman (or, very exceptionally, woman) have to provide examples of successful behavior to those below them and, often, to support the pyramid of supporters who are beholden to them in one way or another, not the least financially.

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International Negotiation Patterns LATIN AMERICA (Summarizing: Just keep calm and get used to their rhythm. Is your problem. You are the foreigner). The pre-established roles influence the negotiation culture in Latin American contexts. Responsibility to others is generally considered more important than schedules and task accomplishment. Their negotiation approach relates to the polychronic orientation to time and patterns of high-context communication and communitarianism, described earlier. Literacy reports that a common term for conflict in Central America is «entangled» or «caught in a net». Explains the way conflict is part of an intimate net of relations in Guatemala and elsewhere in Central America. Thus, negotiation is done within networks, relationships are emphasized, and open ruptures are avoided. In Central America, people think about and respond to conflict holistically. In contrast to the natural (American) inclination to «make a list, they prefer to break a story down into parts such as issues and concerns» with his Central American experience, where people tended to respond to requests for naming issues to be negotiated with «yet another story». They preferred a storied, holistic approach to conflict and negotiation, rather than a linear, analytical one. When Central Americans needed help with negotiations, they tended to look to insider partials rather than outsider neutrals, preferring the trust and confidence of established relationships and cultural insight to other credentials or expertise. They referred to the concept of «trust» to explain this preference. «Trust» means «trustworthiness», that «they know us» and «we know them» and they will «keep our confidences». SAUDI ARABIANS They like to develop friendly relations business nearby. They never openly reject a request. The tradition requires always to give an affirmative answer that does not necessarily mean that the request is to be accomplished, but a simple statement of intent and a sign of goodwill. Just to be considered their friends and for that, do business, Arabic need to feel sure knowing who and what the other part is: origin, family, ancestors, studies, careers. However, he is willing to correspond with the same or even more information. They tend to be susceptible to the criticism made directly and it can be taken as a personal insult. Criticism should be sweetened, made up in private. It should never be made in a public context. It is always helpful to be presented or introduced by a third party who is well considered by the one we want to get in contact with. Punctuality is not a high priority. They religious beliefs locate the causes in God wishes. For that, they do not pay excessive attention in controlling neither the negotiation process nor the environment. It is seen as a sign of arrogance and even blasphemous. There is a frequent use of the expression Insh’Allah (God willing), equivalent to «hopefully».

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International Negotiation Patterns They pay much attention to components and human factors when they have to make decisions or analyze issues. They tend to make the negotiations as much open as possible and based on the long term. They do not mind investing all the time they consider necessary for building a personal relationship of mutual trust that is essential to doing business. In the professional field and work, the interaction between men and women is now accepted fairly smoothly on some levels and in some areas of negotiation. Although they prefer not to meet women in the negotiation process. In social environments interaction is deeply limited and regulated. An excessive behavior of familiarity and trust with a woman, can ruin the business and personal effort. Privacy in public is strictly banned, even between spouses. It is important to demonstrate excellent hospitality and generosity to guests and expect equal treatment from the other party. GERMANS They value procedures, order, sequentially and logic structure in the negotiation process. The procedures have to be matched as a «must». They provide many details during the whole process and they expect the same in return. The presentations follow a logical presentation of ideas. Privacy and personal space are very important. You must try to always follow the correct rules related to German behavior. We must show respect for the status because they are very polite. The influence of power and money is not so important (as it is with Americans). The title, position in the Company, educational level and professional career are very important and should be used. Openness, honesty and being direct is quite valuable. CHINESE Chinese negotiators are recognized for making empathy in verbal and nonverbal. When you sit with them at the negotiating table, they always come accompanied. One of them will reinforce verbal empathy and the other the nonverbal one. For this, we should act in the same terms. Never go alone. The persistence and tolerance are one of the most recognized characteristics. They do not get the price lower and they don’t change their position easily. The end of the negotiation signing a contract is just only the beginning of the relationship which is really what it is important. Do not waste your time addressing your Chinese counterparts with business or economics issues, surely you will not have enough knowledge and they will probable ignore the conversation and/or will change the subject. We recommend: To talk about weather, the atmosphere of the region, family or personal aspects in general. And after creating an atmosphere of trust, then go to the point. Put yourself in the other’s shoes. Be tolerant. Develop empathy. Gifts and presents are really appreciated in their negotiation culture. At the moment of giving them, it should be done with solemnity. If you receive something in return NEVER open it in public. They find so difficult to separate the person

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International Negotiation Patterns from the problem. It is quite normal to meet several different negotiators during the process because they change them as a regular tactic. They like to invite third parties during the negotiation process for having their opinions and for gaining time too. They try to speak Chinese using translators to get advantage from that. In Chinese culture they always traded, which is a red flag because they can probably leave many things in the air all the time. They are very punctual to get to their appointments. They are little expressive. Very attentive to business and personal details, even if you are not realizing it. They have excellent listening skills so think deeply before you speak or act. They always keep a cool head. They like the game and they feel extremely comfortable during the whole process because, as we said, it is absolutely embedded in their culture. Their PERSISTENCE IS ABSOLUTELY INCREDIBLE!

10. International Negotiation. Preparing interviews and First Meeting One of the most important points when we face an International Negotiation is to know how to properly prepare the interviews and how to behave at the first meeting because, as a general rule, it is the most important and it will mark the future evolution of the negotiating process. Olegario Llamazares (2004) cites the following as the most relevant in both cases:

10.1. How to behave in the «First Meeting» • Be on time, even if the country visited is characterized for flexibility in appointments. • Observe the greeting and introduction tradition regarding the country in which you are going to negotiate. • Use the names correctly and the titles too. • Try to say a few words in the language of your interlocutor. • Take care about your personal appearance. It is preferable to dress conservative. • Be polite. Respect the rules of courtesy but not falling into servility. • Maintain a formal attitude. Avoid jokes and pranks. • Check the tone. Do not laugh out loud. • Be optimistic. Use positive arguments. • Avoid negative expressions or submission. • Show empathy. Put yourself in the other party.

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International Negotiation Patterns At the beginning of the meeting time will be dedicated to discuss superficial topics such as travel, stay in the country, weather, traffic, etc., (what in English is called «little talk»). It is better to wait until the other party begins the business conversation and leaving him the initiative at the beginning. In the first part of the negotiation process you have to try to meet the needs of the other party through what is called «active listening»: In active listening means that the other party has the initiative most of the time. Is estimated as correct 60-30-10 rule: 60% of the time the other party speaks, 30% you do and 10% for times of silence. It is important to pay attention to gestures and postures in response to our questions, especially in cultures of «high context». For that, it is better to ask open questions (why, how? What is your opinion?) To closed (how much, where? Does you...?). Avoid questions that involve a commitment for the partner or that involve any type of confidential information. In this sense avoid speaking about, profit margins, customers, suppliers, internal company organization, levels of responsibility, compensation, etc. Many of the negotiations fail because the negotiators, in the first contact, they have not made the effort to capture properly the needs of the other party. The first phase of the encounter ends with a presentation of the company in order to achieve a favorable position during the negotiation. The arguments must be based on the client’s motivation. Commercial or technical characteristics of the proposal is to be performed, adapt to customer needs by exposing advantages that the negotiator is able to prove. The argument continues as a sequence: features-benefits-tests. The number of arguments used must be limited as otherwise they lose effectiveness. The International negotiations must take into account that the attributes or most important competitive advantages of products, differ from one country to another. In some of them it may be the quality or warranty, while in some others the premium design, brand, or country of origin are determinant. You need to keep these preferences to adapt the arguments to each market in which we are going to negotiate. One way to improve the presentation of a proposal is to distinguish between explanations and justifications. First you must set the content and then, justify it. If you mix both, the argument turns weak and the counterparty will promptly ask for concessions.

10.2. How to get and manage an International Agenda • Analyze the list of companies you have. Start by those that offer greater possibilities (size, product range, geographical location, etc.). • Personalize the communication: the managing director if it is a small or medium size Company or a managerial position (purchasing manager, production manager) if it is a large company. Try to get the name of those people.

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International Negotiation Patterns • In Europe and the United States, telephone contact is useful, especially first time in the morning. • If you use the e-mail put a suggestive title to «subject» to let the receivers get interested in opening the message. Do not attach files, most people do not open them for fear of the virus. • Provide a brief description of the company: what do you do and what would it be the products that you offer. • Provide the address of your website that has to be in English. • Highlight your international experience and your main competitive advantages. • Justify the reason why do you want to get into in that market. • Try to arrange interviews with 3 or 4 weeks in advance. • No more than two interviews set daily, except in urban areas with good communications. When traveling to the country is easier, then you will be able to fix another visit. • Reconfirm the interviews two or three days before. • Set some free periods of time. Once you are there another interviews can be set (not planned before).

11. Success Factors in International Negotiation According to Olegario llamazares (2004), these are the most relevant issues to take in consideration: Whatever the type of business is, you are going to perform it on a foreign market and the other party negotiation style identification is important in order to maintain a pattern of behavior that are not comparable to all countries and cultures. Besides to the innate conditions and professional experience of each executive, these tips will help us to negotiate effectively in an international context. Flexibility and resistance to schedules International negotiation requires long and tiring trips in which you work during weekends, holidays or anything else. This is the reason why many negotiations must be concluded within a period of time but also because the necessity to adjust both you and the other party time disposal to get it adapted to differences in schedules, holiday periods or local holidays. Plan your trip Most of the times, the success of a business is based on the preparation: previous contact with potential customers is requested, organize a schedule of interviews, find transportation combinations, hotels availability, bring the necessary documentation, etc.

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International Negotiation Patterns Have a special negotiating strategy Once you have got in contact with the other party, and before sitting down to negotiate, you have to develop a negotiation strategy structured in stages. You must have and set out the objectives pursued along with the arguments that will be used to get them and the possible concessions you are able to do. Accept the idea of being foreigner At the time you are in a foreign country is not necessary to give up the habits of the country of origin, or try to imitate local customs. Neither one should behave inferiority in more developed countries, nor superiority in poor ones. The ideal is to find the balance with the counterparty. Know the customs and social practices of the countries we visit It should not be assumed that what is considered acceptable in one culture has to be also accepted in another. One way to gain acceptance in international business is to learn some of the language and customs of the country in where you are going to negotiate. You have to be very respectful of protocol standards: greetings, introductions, behavior during meals, gifts, etc. Adapting to the rhythm For Westerners, in most of the world they will need to slow down the rhythm of their business routines, regardless of whether the delays are due to bureaucratic reasons (Eastern Europe) and the hierarchical system of decisionmaking (China, Japan). By contrast, in other countries like the U.S. or the UK, it is normal to go faster. Use negotiating skills that are common to all countries In all countries is positive to use certain skills that are so close to reliable communications technics such as present yourself and your proposal enthusiastically, listen carefully to the interlocutor, observe their gestures, reacting moderately to what is proposed, perform conditional proposals, etc. Have an entrepreneurial attitude The negotiations taking place in far countries require people with initiative that are used to survive by themselves in new situations. You also have to be creative to find solutions perhaps taking some risks. Create and maintain personal relationships The ability to create and maintain personal contact with people from other cultures is essential in the world of international business. For that, we will need to dedicate enough time to social activities. On the other side, in the first meetings we must avoid personal comments on political, religious, lifestyles, racial issues, etc., that may cause a confrontation with the other party.

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International Negotiation Patterns Summarize all the information obtained It is advisable to develop a summary of the meeting and also create some reports about how the negotiation was just after each meeting. Keep in mind that negotiating with several people on the same day and in different languages is very unusual and we can forget some critical information.

12. The successful International Negotiator: Personal Characteristics Following, we detail some characteristics, very important inside the INSIGHT of an International Professional Negotiator. • To demonstrate huge tolerance within ambiguous situations. • Flexibility and creativity. • Humor. • Empathy. • Curiosity. • Ability to handle yourself in different languages. • Successful negotiator: • – Understand the negotiation steps. • – Build cross-cultural communication skills. • – Understand nonverbal communication. • – Avoid attribution errors.

12.1. Types of Negotiator Factual Negotiator Features • Knows all facts related to the issues. • Asks factual questions. • Ensures that no fact is left out. • Provides information. Problem Tendency to leave emotional issues aside while focusing on details and make the other party hostile.

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International Negotiation Patterns Relational Negotiator Features • Establishes relationships with the other party. • Builds trust. • Is sensitive to the other party’s emotional issues. • Perceives the position of the other party. Problem Propensity to concentrate on building relationships and lose sight of the reason for negotiation. Intuitive Negotiator Features • Able to proffer unexpected solution. • Able to separate key issues from others. • Visualizes implications of proposal. • Accurately guesses the progress of negotiation. • Sees the picture. Problem This may be dangerous because of wildness and lack of discipline. Logical Negotiator Features • Sets rules of negotiation. • Develops an agenda. • Argues logically. • Adapts position to meet changing situation. Problem Likely to see the process as being more important that content or outcome.

THE LEAD NEGOTIATOR «This coordinates all the other roles and decides appropriate strategy to apply».

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International Negotiation Patterns EXHIBIT 19

Source: Faure, G. (1993).

13. Other interesting factors 13.1. Interpreters • Provide simultaneous translation of a foreign language. • Require greater linguistic skills than speaking a language or translating written documents. • Insure the accuracy and common understanding of agreements.

13.2. Communication with non-native Speakers • Use the most common words with most common meanings. • Select words with few alternative meanings. • Follow rules of grammar strictly. • Speak with clear breaks between words. • Avoid «sports» words or words borrowed from literature. • Avoid words that represent pictures. • Mimic the cultural flavour of non-native speaker’s language. • Summarize. • Test your communication success.

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14. Volkswagen in China (a practical case) VW’s Long-Term Negotiation Thinking pays off in China Reveals how Volkswagen, the first Western auto manufacturer to enter China, has managed to build a leading position in the Chinese car market and the key business negotiation factors behind Volkswagen’s success in China for many years.

Volkswagen (VW), the first overseas carmaker in China, is the only foreign manufacturer to have been making a profit in China over the past ten years. It all began in October 1984, when VW signed a joint venture agreement with China. One of the country’s first major joint venture agreements, it involved several government authorities, including the Ministry of Foreign Trade and Cooperation (MOFTEC, now MoCom), the State Planning Commission, the State Economic Commission, the Ministry of Finance, the Bank of China (BOC), the Municipal Government of Shanghai, and the China National Automobile Industry Corporation (CNAIC). A manufacturing facility was built in Shanghai, and VW’s partners were Shanghai Tractor and Automobile Corporation (STAC), with a twenty-five percent share, as well as the BOC, Shanghai Trust and Consultant Company, and the CNAIC, which together had a twenty-five percent share.

In the beginning Being first into China has proved lucrative for VW. In 1986, its first plant had a capacity of 30,000 vehicles; in 2003, there were two plants turning out 400,000 vehicles. Again in 1986, national car sales were less than 30,000; in 2002 they were 720,000, of which VW had a fifty-three percent share. The company has achieved market leadership through product quality, reputation, and pricing; indeed, every Chinese knows VW. In terms of the potential of China as a car market, it is still early days. Since its entry into the WTO, the prices of imported cars have decreased significantly, but no other carmaker has yet been able to whittle away VW’s competitive edge. In addition, plans are afoot to import VW’s lower priced Skoda to China, to position the maker in the cheaper segments of the market. VW was approached by the China National Technical Import Corporation in 1977, and in 1978 a Chinese delegation visited VW headquarters in Wolfsburg, Germany. The first VW delegation went to Beijing in 1979. So there were six years of negotiations, involving at least seven parties on the Chinese side, and major contracts were negotiated, including a joint venture contract, a technology transfer agreement, articles of association, supply agreements, and a planning agreement. According to Heinz Bendlin, one of the original VW negotiators with China, even in the early days the Chinese behaved courteously. He has commented as follows:

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International Negotiation Patterns «I learned in China that foreigners tend to have a typical mode of behavior. They want to achieve results quickly, get answers to all their queries, and immediately come up with solutions to problems. But in China one has to be patient and be prepared to spend considerable time solving problems step by step, or ibu ibu, as the Chinese say. Setting deadlines or showing impatience leads to disadvantages in negotiations.» «The Chinese like to negotiate in rather large groups. Fairly frequently, three or four VW people negotiated with ten to twenty Chinese. However, typically only one would speak while the others took notes. They were all very disciplined.» «There were times when they would cultivate a friendship, seemingly to manipulate situations. Our Chinese partners also frequently asked us to explain matters several times.» This was not a sign of insufficient professional knowledge on their part, but just a tactic, as are the meticulously organized extras during negotiations, such as banquets, toasts, and sightseeing.» «We should listen carefully to the Chinese. Never try to convince them by saying that only your products or plans are outstanding. Instead, explain the facts and figures as often as they require; explain why you believe yours is the best offer; and explain why you are asking for certain payments.» «Do not show that opinions are divided on a given topic within your team, and avoid discussions in front of them. They cannot understand such behavior and will interpret this as a sign that you lack clarity about your concept.» «Try to take advantage of the Chinese way: Have a disciplined team, prepare carefully, speak as a team with one voice, and try to solve your problems during the breaks, or even ask for a break to avoid showing disharmony within your team on matters you are negotiating.» Commentary THE DECALOGUE: Looking back on its successful negotiating style with the Chinese, VW suggests ten points as the keys to its success: 11. Have a small team and don’t change the team members. 12. Show up as a team. 13. Remain patient and never negotiate under pressure of a deadline. 14. Explain facts and figures and your ideas as often as you are asked to do so. 15. Convince your partners through facts and figures that yours is the best offer. 16. Do not become nervous when the Chinese use the mass media to influence their position in negotiations. 17. Do not seek quick results, since they could be bad results –especially in China. 18. Be consistent and coherent. 19. Measure and monitor every single step of the negotiation process. 10. The Business starts once you have started.

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Bibliography HOPMANN, P. T. (1996): The negotiation process and the resolution of international conflicts. Columbia, SC: University of South Carolina Press. VILARIÑO, E. (2009): Teoría de la Negociación Internacional. Andavira Editora. ICEX (2011): Aspectos Clave de la Negociación Internacional. ICEX Publicaciones. EGAÑA, J. E. (2012): Procesos de Negociación Internacional. Editorial Académica Española. LLAMAZARES, O. and CHURRUCA, A. (2002): Negociación Internacional. Estrategias y Casos. Ediciones Pirámide. FISHER, G. (1980): International Negotiation. A Cross-Cultural Perspective. Intercultural Press, Inc. KREMENYUK, V. A. (2002): International negotiation: Analysis, approaches, issues. San Francisco, California: Jossey-Bass. ZARTMAN, I. W. (1982): The practical negotiator. Yale University Press. BERCOVITCH, J. & HOUSTON, A. (1996): The study of international mediation: theoretical issues and empirical evidence. Resolving international conflicts: The theory and practice of mediation. Harvard University. URY, W. (1993): Getting past no: Negotiating your way from confrontation to cooperation. ÁVILA MARCÚE, F. (1998): Tácticas para la negociación internacional las diferencias culturales. Felipe Avila Marcué, 1ª ed., México DF: Trillas. BOEHM, B.; EGYED, A.; KWAN, J.; PORT, D.; SHAH, A. & MADACHY, R. (1998): Using the WinWin spiral model: a case study. Computer, 31(7), 33-44. MADDUX, R. (1995): Successful negotiation effective «win-win» strategies and tactics. Crisp Learning. FAURE, G. O. (1993): Negotiation concepts across cultures: Implementing nonverbal tools. Negotiation Journal, 9(4), 355-359.

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