COMMERCIAL NEGOTIATION ACROSS BORDERS
Maybe you are a successful and accomplished deal maker in your own country but you struggle to be as successful internationally. You’ve done all the courses, you understand how to develop business and how to close deals but somehow, it doesn’t work very well once you’re dealing with countries other than you own. Your approach and style, which made you very successful in your own country, doesn’t seem to work that well anymore.
Very likely, the reason is to be found in cultural differences between your home country and the countries you are dealing with. In a world where business is becoming ever more global, the development of intercultural competence has become a strategic topic.
The following quote from a report published by The Economist Intelligence Unit in 2012 illustrates the very point.
“Misunderstandings rooted in cultural differences present the greatest obstacle to productive cross-border collaboration.”
Building on the academic work of Prof Emeritus Geert Hofstede, who is well known as the father of comparative research into culture and considered one of the top 20 most influential business thinkers by the Wall Street Journal in 2008, we have developed a system that will help you to be far more effective and successful in international B2B negotiations. We have modelled the typical sales process and defined 6 distinct steps.
- Establishing contact
- Establishing trust
- Identifying the needs
- Presenting the commercial proposal
- Negotiating the price
- Closing the deal
The good news is that you can apply the 6 steps in each and every country around the world. However, the order in which the steps follow each-other and the content of each step varies greatly from place to place. If you want to be successful, you need to understand your own cultural framework as well as understand your customer’s cultural framework.
Let’s first define what we actually mean by cultural framework. A loose but easily understandable definition is “the way things are done around here”, which we tend to call “our normal”. Prof Geert Hofstede, defines it as: “The collective programming of the human mind by which one group differs from another group”.
Building on Prof Hofstede’s definition, we must always keep in mind that culture is a group phenomenon and that it can only be observed by comparison with other groups. This is an important key to understanding the entire concept.
But….”aren’t we fundamentally all the same” is a commonly heard observation. Doesn’t everyone fundamentally hold the same values? Based on Prof Hofstede’s definition, culture is something that we learn. It is a value system that is taught to us by our peers.
Anthropologists have determined that this programming of the human mind happens in the first 6 to 12 years of our life. That’s when our societal norms are etched into our very being and they become so “normal” that we are not even aware of them. Until … we start to interact with people that have a different societal program, that have a different “normal”.
For most of us, our first innate reaction is that these others are “not normal”. The way they do things is “not normal”. The values they hold dear are “not normal”.
If you want to be successful, you need to be able to rise above this judgemental way of looking at others. You need to be able to think in terms of different, not in terms of normal or abnormal, right or wrong.
Prof Hofstede’s lifelong academic focus on the field of culture has resulted in a powerful tool that allows us to measure the differences between cultures. His 6D model of Cultural Dimensions is renowned worldwide and continues to be revalidated by many scholars.
Our work focuses on combining this academic framework with our decades of experience in international B2B negotiations. Our system is a very practical tool to help you in your day to day efforts to negotiate the best deals for your organization.
Before we dive deeper into our system, it is important that we agree on the definition of culture. Culture can be portrayed as an onion with different layers (see Figure 1). For our purpose, we do not concern ourselves with the symbols, the heroes or the rituals of culture. The 6D model is about the very core. It’s about the beliefs of a society. It’s about the things people feel emotional about. Those are so deeply embedded in us, so very much at the core of our being that usually, we are not conscious of them and only start to understand their existence once we compare our own to those of other cultures.
We all know that there is much more to negotiating a contract, to buying and selling, than just the rituals and procedures. Emotions play a big role and that is where, on top of each individual’s personality, national culture comes in.
Many international deals never materialise or go spectacularly wrong because the way we were taught to develop business, to negotiate and conclude a deal is almost always anchored in a specific cultural framework.
Let’s have a closer look at the 6 Dimensions of Culture as defined by Prof Hofstede (Description of dimensions based on www.geert-hofstede.com).
As you can observe from above table, these 6 dimensions really do represent core beliefs of a society and are profoundly emotional. The cultural profile of each country in the world can be represented by a score between 0 and 100 on each of these. The picture below shows an example of the difference in scores between the Netherlands, the US and Russia.
You can immediately see very substantial differences between each of the countries.
Russia’s attitude towards power & authority (PDI) is very different from the 2 others, it is also significantly less individualistic (IDV), it has a greater need for structure and system (UAI) and is significantly less indulgent than the 2 others.
The Netherlands stand out in terms of their very low score on MAS which means that relative to the others, they are more motivated by wellbeing than achievement and success.
The USA stands out with the very low score on LTO which means they are more normative and more short-term oriented than the 2 others.
It is important to understand that the country values on the 6 cultural dimensions are average values for a country or region. They by no means imply that the behaviour of each and every person in that country can be understood by looking at these values. The score is just the average value of a large sample of people and within the sample, there is substantial variation.
We analyse how each of the steps of the sales process works in groups of countries or clusters that show similar patterns of behaviour. Each Culture Cluster is a group of countries that has similar scores on the main dimensions of the Hofstede 6D model. (Culture Clusters is a concept developed by Huib Wursten) (see appendix 1 for a detailed explanation of model). There are 6 Culture Clusters and we have identified each of them with a mental image or mind-set depicting their fundamental style of negotiation.
- The Competitors
- The Organizers
- The Connected
- The Diplomats
- The Reciprocators
- The Marathonians
Building on our earlier example of the Netherlands, Russia and the United States, we will take a glimpse at the 3 different mind-sets that these countries belong to.
Keywords: competition, autonomy, decentralisation, risk taking, results, ambition
The USA is an example of a competitor mind-set. The key to understanding the first method is that it’s all about the individual. Globally, the USA (91), Australia (90) and the UK (89) occupy the top 3 places on individualism index which is why the method typically is very well applicable in Anglo-Saxon societies. In his book, Prof Hofstede speculates that it may not be a coincidence that English is the only language in which the word ‘I’ is always written with a capital letter. (Cultures and Organizations, Software of the Mind). No other language seems to attribute such importance to this word.
In our vocabulary, we characterise “The Competitor” as very individualistic (high IDV), not impressed by hierarchy (low PDI), motivated by success (high MAS), comfortable with uncertainty (low UAI), always prepared to play a match or have a fight (High MAS) and usually expecting short terms results.
Doing business and making a profit is “natural”. Competition is good for society as a whole, risk taking is part of everyday life, people are proud to be ambitious and each person is responsible for him or herself, only the result counts, failure is nothing to be afraid of but to be regarded as the cost of learning on the path to success.
If for some cultures, negotiation is an exercise in diplomacy, for “The Competitors”, it’s a match. For them, it is exciting, allows them to constantly measure themselves and improve their self-esteem even if sometimes they hit the deck. Losing a match is just a part of the game, just a normal part of life. If and when they lose a match, they take it in good spirit and will probably go and have beer with their adversary at the nearest pub.
Keywords: consensus, cooperation, decentralisation, risk taking, wellbeing, reliability, social ethics
The Netherlands fit squarely in this group and so do all Scandinavian countries. They are defined by very low scores on the MAS dimension. They build highly connected networks of people and are constantly looking for harmony between its members as well as harmony with the environment.
We characterize people in this group as individualistic (high IDV), not impressed by hierarchy (low PDI) or in other words, very egalitarian, very connected with their peers, eager to establish consensus (very low MAS), quite comfortable with uncertainty (low UAI) and fairly long term oriented. They have sympathy for the underdog and tend to be suspicious of ‘Winners’. In general, quality of life is very important for them and thus some of the values that drive them are quite the opposite of those of “The Competitors”.
“The Connected” strive towards the formation of partnerships that result in a WIN-WIN situation for all. If you come from a society where competition is the norm, where winning (or defeating your counterpart) is the only thing that counts, this must be a very strange concept. However, the true goal of “The Connected” is to have partners rather than suppliers. Provided they are confident that you are willing and able to behave in the same manor, they will remain loyal to you as their partner, even in difficult times.
It is important not to confuse the concept of consensus and WIN-WIN with the concept of compromise.
A compromise typically is an expedient and mutually acceptable solution which partially satisfies both parties. There are no winners or losers but it typically breeds dissatisfaction for all parties involved.
The quest for consensus and WIN-WIN, requires that both parties work WITH each-other to find a solution which most satisfies the needs and concerns of each party. Because this process takes more time and effort, we take about BUILDING consensus versus AGREEING on a compromise. Consensus therefore is a stronger base for long-term relationships than compromise is.
Keywords: hierarchy, loyalty, centralisation, procedures, indirect communication
Russia is a good example of this mind-set. Many of the interactions in Reciprocator societies are based on exchanging or reciprocating favours, on helping each other out.
In our vocabulary, we characterise these groups of people as collectivist (low IDV), very much hierarchical (high PDI), disliking open conflicts (low to medium MAS) and having a major problem with uncertainty (high UAI). Honour is a key factor in their behaviour.
Certain cultures have more of a tendency than others to place family members in key positons. For “The Reciprocators”, this is absolutely common practice. For individualist cultures this is difficult to accept however, they do the same inside family companies where it is considered normal to ensure generational transitions.
In this collectivist world which seeks to avoid and control uncertainty, it is entirely logical for a business leader to surround him or herself with people he or she knows and trusts, can control and for whom he or she, in their collectivist world, is responsible in any case.
So the first lesson is that ‘pure prospection’ as you may know it in individualistic societies simply doesn’t work. Trying to do so is considered inappropriate or even indecent. One doesn’t do business with strangers but rather with friends or friends of friends or someone who knows someone who knows a friend. For someone from an individualist country, getting your mind around this can be a real challenge and require continuous effort. It may even feel wrong to you to develop business like this as it may clash with your values. People from many individualist countries pride themselves on the strict separation between their business activities and their personal life. They tend to feel strongly that it is ethically correct to do so and may even think that this gives them the moral high ground. Most people in the world live in collectivist societies (see Figure 2) and don’t see it that way at all. They can’t understand how you could possibly build trust in a business relationship if you don’t know one-another personally or at the very minimum, were recommended by a trusted friend.
Most of the publications on commercial strategy and negotiation as well as most courses taught at business schools are anchored in one specific cultural framework which usually is that of our “Competitors”. Having briefly glimpsed at 3 of the 6 mindsets, it is our hope that you will start to see the limitations of looking at the world from one cultural perspective only, and appreciate the importance of national culture in many aspects of business.
About the authors
Marc Jacobs, holds a Bachelor’s Degree in Engineering from KIH De Nayer (Belgium) and a SLOAN MSc. in Leadership and Strategy from London Business School. He was cofounder, General Manager and Managing Director of LuxPET SA and Vice President Sales & Marketing Europe for Plastipak.
Jean-Pierre Coene, is an entrepreneur and international sales executive with more than 25 years of experience in international commercial negotiation. He is author of the “Négociation Internationale, l’entretien de vente en B2B”.
A second, revised edition (in English) of his book will be published in 2016 and will be co-written by Marc Jacobs.
Both authors are Associate Partners of ITIM International, a specialist consultancy in the field of culture and are certified by The Hofstede Centre.
Description of the dimensions of the 6D model
D1: Power Distance Index (PDI) or attitude towards power and authority
This dimension expresses the degree to which the less powerful members of a society accept and expect that power is distributed unequally. The fundamental issue here is how a society handles inequalities among people. People in societies exhibiting a large degree of Power Distance accept a hierarchical order in which everybody has a place and which needs no further justification. In societies with low Power Distance, people strive to equalise the distribution of power and demand justification for inequalities of power.
D2: Individualism vs. Collectivism (IDV) or attitude towards groups
The high side of this dimension, called individualism, can be defined as a preference for a loosely-knit social framework in which individuals are expected to take care of only themselves and their immediate families. Its opposite, collectivism, represents a preference for a tightly-knit framework in society in which individuals can expect their relatives or members of a particular in-group to look after them in exchange for unquestioning loyalty. A society’s position on this dimension is reflected in whether people’s self-image is defined in terms of “I” or “we.”
D3: Masculinity versus femininity (MAS) or source of motivation
The Masculinity side of this dimension represents a preference in society for achievement, heroism, assertiveness and material rewards for success. Society at large is more competitive. Its opposite, femininity, stands for a preference for cooperation, modesty, caring for the weak and quality of life. Society at large is more consensus-oriented. In the business context Masculinity versus Femininity is sometimes also related to as “tough versus tender” cultures.
D4: Uncertainty avoidance or attitude towards uncertainty
The Uncertainty Avoidance dimension expresses the degree to which the members of a society feel uncomfortable with uncertainty and ambiguity. The fundamental issue here is how a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? Countries exhibiting strong UAI maintain rigid codes of belief and behaviour and are intolerant of unorthodox behaviour and ideas. Weak UAI societies maintain a more relaxed attitude in which practice counts more than principles.
D5: Long Term Orientation vs. short term, normative orientation (LTO) or attitude towards time and tradition
Societies who score low on this dimension, prefer to maintain time-honoured traditions and norms while viewing societal change with suspicion. Those with a culture which scores high, on the other hand, take a more pragmatic approach: they encourage thrift and efforts in modern education as a way to prepare for the future.
D6: Indulgence vs. restraint (IND) or attitude towards gratification
Indulgence stands for a society that allows relatively free gratification of basic and natural human drives related to enjoying life and having fun. Restraint stands for a society that suppresses gratification of needs and regulates it by means of strict social norms.