The role of cultural difference in international negotiation

This article has been written with the help of Alistair White a consultant at The Gap Partnership

International negotiators are increasingly conducting business across borders and continents. To what extent should they incorporate the differences created by diversity in national cultures into their pre-negotiation planning?

The Japanese automobile manufacturer, Yokohama Motors, has decided to enter the compact car market and has designed a radically new small car, the Flexi, aimed principally at the European market. Yokohama Motors has numerous manufacturing sites around Europe and no final decision has yet been taken as to where the new model will be produced. The current favourite is the manufacturing facility in southern Spain which could be easily expanded and is the leading European plant in terms of technology and efficiency.

A new line to produce the Flexi could be installed with comparative ease although it would represent a significant investment over the next 3 years. There are other alternatives, notably a recently acquired site in Slovakia, which is technologically nowhere near as advanced but which benefits from a much lower overhead structure. The installation of a new line here would necessitate a similar investment as neither plant has an existing line that could manufacture such a small car but would represent a greater risk as the Slovakian plant has little experience with technologically advanced manufacturing processes. The other, more radical, alternative is to contract the manufacture out to Ronco, a US manufacturer with whom Yokohama Motors Japan has a strategic alliance and which has a plant in Mexico which is already well geared-up for the manufacture of small cars.

The personalities involved in the decision

Yamada Taro, the Yokohama-based executive who has been responsible for the Flexi project since its inception.

Dieter Fiedler, German by birth and President of Yokohama Motors Europe.

Ignacio Gonzalez, formerly head of the manufacturing plant in southern Spain but now president of European manufacturing.

They have agreed to meet at Yokohama Motors’s European head office in Paris to discuss the problem.

The dimensions of cultural diversity

So far so good – we now understand a little better what “culture” is and what role the element of national cultural identity plays in our overall cultural makeup. But what are the differences that exist between nations? In as much as we can make generalisations about national identities, what factors can we identify that make a Kuwaiti Kuwaiti, a Chinese Chinese or a Uruguayan Uruguayan?

What we will attempt to do is to identify the most significant elements of mentality that are liable to shift across nations and continents. By reading around the subject, we can pinpoint certain identifiable axes along which values and assumptions tend to shift. If, having identified these axes, we can extrapolate the behavioural manifestations prompted by cultural variations then we, as negotiators, will be in a better position to predict and anticipate how others will conduct themselves in differing situations.

There have been numerous attempts to identify and describe the key drivers of cultural – and thereby behavioural – difference. For the purposes of this article I will highlight 2 models which offer an insight into the underlying attitudinal differences that create cultural variation. The first model (see Figure 2) stems from the research and writings of Richard D Lewis as presented in his book “When Cultures Collide”. He identifies 3 basic types of cultural orientation:

Linear Active
Multi-Active
Reactive

In Linear-Active cultures life tends to be highly organised and taskoriented. Activities are scheduled and done in sequential fashion with one task usually completed before another is begun. Deadlines and punctuality are important and non-adherence to these creates friction. Decisions are made on the basis of logic, facts and data rather than sentiment or intuition. The individual is generally more important than the greater group. There is an underlying belief in a single, absolute truth (a sense of absolute right and wrong). Behaviourally, Linear-Actives tend to be procedural, unemotional, private, introverted, quiet and undemonstrative.

Multi-Active cultures are much more flexible and will change plans readily to adapt to changing circumstances. The Multi- Active regards reality as more important than imposed deadlines. Similarly, Multi-Actives will conduct numerous tasks or transactions simultaneously, shifting their concentration as circumstance demands. Decisions are not just made on logic and there is a less prevalent belief in an absolute sense of right and wrong. Other factors, such as personal relationships will influence decision-making. Behaviourally they are talkative, gregarious, extrovert, emotional, flexible and impatient. 

Reactive, or listening, cultures are not initiators. They prefer to observe circumstances quietly, and sometimes at length, before committing to a course of action. They view decisions very much in the context of the long-term or bigger picture. The needs of the individual are generally subservient to the needs of a greater group – society, company or family. Reactives prefer to understand fully the position of their counterparty before expressing their opinion. Behaviourally they are introverted, patient, silent, respectful of others, accommodating and cautious.

Obviously we are all, to some extent, hybrids of these three major cultural types rather than definitively one type or the other. Figure 2 above is reproduced from Richard D Lewis’ book and gives an illustration of where different nations are positioned on the triangle that connects the three different cultural poles.

Naturally, cross-cultural dissonance and misunderstandings tend to arise most typically in negotiations between two parties from cultures relatively distant from each other on the above diagram. The most common and evident cultural clashes occur between Linear-Actives and Multi-Actives as Reactives tend to respond and adapt to the particular style they encounter rather than seek to impose their own cultural style.