Cultural Dimensions in Business Negotiations

Unit 7: Cultural Dimensions Impacting Negotiations

Power Distance has been defined as the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally.
It suggests that a society’s level of inequality is endorsed by the followers as much as by the leaders.
Refers to the acceptance of authority differences between people; thus, protocol, formality, and hierarchy are considered important.
In high-power distance cultures (Japan, Korea, or Russia), the CEO is involved in the negotiations and is the final decision-maker.
Western Europeans and North Americans are informal and downplay status by using first names, dressing casually, etc.
In Asia, honors, titles, and status are extremely important. Bows substitute handshakes.
Negotiators from low-power distance cultures may be frustrated when those from high-power distance countries seek approval from supervisors. Conversely, the latter may feel pressured by the pace imposed by the others.

Individualism, on the one side, versus its opposite, Collectivism, is the degree to which people in a society are integrated into groups.
Individualistic cultures tend to put tasks before relationships, tolerate open conflict, and place the needs of the individual over those of the group. They expect the other party to have the authority to make decisions unilaterally.
Managers from a collectivistic culture (i.e., China) value solidarity, loyalty, and strong interdependence among individuals, and the members define themselves in terms of the groups they belong to.
Collectivistic managers show more concern for the needs of the other party by focusing on group goals and feel irritated when individualistic counterparts promote their own positions and ideas during negotiations.
A critical error for both types is not understanding the other’s main interest (individual or collective).

Uncertainty Avoidance is not the same as risk avoidance; it deals with a society’s tolerance for ambiguity. It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations.
High uncertainty avoidance cultures have formal bureaucratic negotiation rules and trust only family and friends. Low-uncertainty avoidance cultures prefer to work informally with flexibility.
Negotiators from high-risk avoidance are likely to seek specific commitments in terms of volume, timing, and requirements.
Those coming from low-uncertainty are likely to be comfortable with rough estimates of volume and timing and with constantly changing requirements.
For example, discussions on delays in new product availability might cause great concern or be seen as opportunities to improvise creatively.

Masculinity, versus its opposite, Femininity, refers to the distribution of values between the genders.
The masculine pole is somewhat assertive, competitive, independent, and task-oriented, resulting in a win-lose situation. Conflict is resolved by fighting rather than compromising. The person with the most competitive behavior is likely to gain the most.
Feminine cultures value cooperation, modesty, empathy, and social relations, resulting in a collaborative or compromising style to assure the best mutually accepting solution to obtain a win-win situation.
Individuals from masculine countries are more likely to focus on the specifics of the agreement and not so much on the overall impact on the other party.
Negotiators from feminine cultures are more likely to be concerned with longer-range effects. Details can be worked out later.