Crosscultural negotiation

Table of contents

Cross-Cultural Negotiating

1. Introduction
1.1 Why Cross-Cultural?
1.2 The Importance of knowing other cultures

2. The Japanese Management Style

3. The negotiation process
3.1 Group consensus in decision-making
3.1.1 Nemawashi
3.1.2 Ringi
3.2 Exchanging business cards
3.3 Contracts and lawyers
3.4 Negotiation teams
3.5 Gathering information

4. DaimlerChrysler AG and Mitsubishi – an example for a successful negotiation between Germans and Japanese?
4.1 Managing an international company

5. Conclusion

Bibliography

Ehrenwörtliche Erklärung

Cross-Cultural Negotiating

The Alliance of DaimlerChrysler and Mitsubishi Motors Corporation

1. Introduction

„Mitsubishi is certainly an interesting partner concerning busses and trucks, but he is already married,” said Rolf Eckrodt of DaimlerChrysler AG about the discussion on buying shares of Mitsubishi Motors Corp. (MMC)^[1]. In 1999 the Swedish utility truck manufacturer Volvo entered into an alliance with MMC by acquiring 3.3 percent of the shares. DaimlerChrysler AG – seeking for a Japanese partner in the field of busses and trucks – considers buying Volvo’s outstanding 3.3 percent stake in MMC. The problem at this point is that Volvo has already established a long-term relationship with MMC which is the basis on that future success rests.

In the following, I will explain the problems which might arise in the negotiating process between the German-American company DaimlerChrysler AG and the Japanese corporation Mitsubishi. There are various differences between the Western and the Japanese society which have great influence on the negotiating process. The Germans have to pay attention to these differences, for instance, the strong hierarchical system, the group consensus in decision-making and the deference to seniors in Japan. Offending against certain rules of the Japanese society might harm the relationship between the counterparts in a negotiation.

1.1 Why Cross-Cultural?

In recent years economic activity has become increasingly globalized. The world leading enterprises have been faced with raising competition among themselves. To cope with these circumstances, many companies act globally. They set up branches overseas to be closer to the consumers, or - to reduce the costs of production - many German companies move the assembly of their goods to other countries where taxes and personnel costs are lower. One will not find a single piece of a Mercedes Benz that says “Made in Germany”: It is “Made by DaimlerChrysler AG” which reflects the global-sourcing of the corporation.

Referring to the joint venture of DaimlerChrysler AG and MMC, the German automotive and commercial vehicles manufacturer wants to strengthen its market share both in Japan and in the Asian markets via its new alliance with MMC. Together they want to develop new products, create new markets and drive down costs through increased synergies and economies of scale.

1.2 The Importance of knowing other cultures

The basic requirements for a successful formation of a contract and establishing a long-term relationship abroad are knowing the other side’s culture, the differences in managerial styles and the differences in negotiating, just to mention a few. Overcoming language barriers might be the least problem in international negotiations but it is not to be neglected. Not only is time required for translation, but important differences in the meaning of words can exist. Inadequate interpretation services can disrupt negotiations because the perspectives of both sides cannot be presented adequately. Besides helping in interpretation, bilingual members of a negotiation team familiar with the culture of the other party can also interpret facial expressions and body language.

“Culture influences negotiation through its effects on communication. Intercultural differences may cause misperceptions and misunderstandings. Failure to appreciate the cultural patterns of opponents is detrimental to the quality of the decision-making process.”^[2]

2. The Japanese Management Style

There is no denying the fact that not anybody in Japan thinks or acts alike and, when one asks people about their own experience, everyone has a different story. Generalizations are therefore dangerous. On the other hand, an awareness of certain facts and trends helps in the initial stages of negotiation.^[3]

Most successful Japanese companies have a clear philosophy which every employee shows great respect to. The employees are very proud of the company’s philosophy. Being involved in the company’s matters makes them feel being respected. Japanese employees are most satisfied with their work and are highly motivated when they know that they are part of the company and when they have the feeling of being respected. Here are some examples for guidelines in Japanese companies: fairness, harmony and cooperation, struggle for betterment, courtesy and humility, adjustment and assimilation and gratitude.^[4]

As with Japanese society, Japanese corporations are rigidly organized and extremely hierarchical. Employees especially show great respect to superiors and seniors. Senior persons are deferred to and they are the ones to whom any question should be addressed. As opposed to the West where ability generally is the main factor on which careers are based regardless of a person’s age. In Germany or in the United States, a junior staff member might be delighted to move into the limelight and happily steps forward to show his or her skills in front of superiors. This generally is not the case in Japan, where a junior person is unlikely to step forward unless specifically instructed to do so. In negotiating with Japanese corporations, it is important to keep this structure in mind.

Business relationships in Japan are characterized by a well-structured hierarchy and a strong emphasis on nurturing personal contacts. Generally, they are built up over long periods of time or are based on common roots such as birthplace, school or college. Also, an unusually strong emphasis is placed on social activities to strengthen ties. It is not surprising, therefore, that those looking in from the outside may see the Japanese business world as comparatively hard to break into. In fact, there are many different kinds of business relationships, but most share two features: They have been built up slowly and carefully, and much time is spent in keeping them up to date.^[5]

3. The negotiation process

3.1 Group consensus in decision-making

As already mentioned above harmony is very important in Japanese corporations. It can be best maintained with a group consensus in decision-making. While German corporations need about twenty percent of the time in a negotiation for the decision-making, the Japanese need about eighty percent of the time to find a consensus. The decision-making process in Japan is called Nemawashi.^[6]

3.1.1 Nemawashi

Literally , Nemawashi is the thorough, careful and patient preparation of transplanting a tree. A western negotiating team should not be irritated by the long preparation time a Japanese team requires. However, Nemawashi is indispensable for a success in the negotiation. It ensures a creative problem-solving and the finding of better solutions before the official meeting. Through the group consensus in decision-making the long preparation time is well compensated by a quick implementation of the decisions and later the staff concerned will easier accept the results. This process will be hidden from the counterparts of a Japanese negotiation team. It is more an unofficial process which has the effect that the actual negotiation process proceeds harmonious.

The official form of the decision-making process in Japan is called the Ringi.

3.1.2 Ringi

Once again, the Japanese management tries to involve the staff that is concerned in the procedure in order to achieve general acceptance and reduce the danger of a decision being manipulated by certain individuals. The Ringi system of decision-making needs to be explained as there is no such equivalent in western negotiating.

The middle management drafts a formal paper with the proposal how a certain problem can be solved. This paper – the ringisho – is passed to every staff member that is connected to the problem and each of them is asked to supplement the ringisho with comments or further proposals. The decision finally will be made by top management based on the comments from all people involved in the process.

The hierarchical aspect of the Japanese decision-making process inevitably means that it takes time for new information to permeate all levels in any negotiating process. People at all levels of a company need to be consulted whenever new information is brought to light, and if new approvals are needed each time, the process can be laborious. This explains some of the frustrations arising from the amount of time required when a change needs to be made. The advantage of this kind of democratic decision-making, on the other hand, is the easy and more efficient implementation of the change afterwards.

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^[1] Die Welt : Daimler und Volvo ringen um Mitsubishi-LKW, 01-04-04

^[2] Richard Mead, International Management: Cross-Cultural Dimensions, Cambridge, Massachusetts 1994, p. 267

^[3] http://www.jetro.go.jp/it/e/pub/negotiating1994/1.html

^[4] Andreas Kronschachner, Strategien japanischer Unternehmen, Stuttgart 1996, pp. 310

^[5] http://www.jetro.go.jp/it/e/pub/negotiating1994/2.html

^[6] Andreas Kronschachner, Strategien japanischer Unternehmen, Stuttgart 1996, pp. 321