Businesses nowadays routinely migrate towards areas of the world that offer greater profit potential. Knowing how to successfully negotiate is an absolute must. whether you are under the comfortable umbrella of an established brand or driving a start-up, how you play your business card matters a great deal.
On 10 May the events hall at Geneva’s Chamber of Commerce, Industry and Services (CCIG) on Boulevard du Théâtre was full and buzz-ing with what sounded like important conversations. Words like “relationship-oriented cultures” and “concession trading” were being tossed about with something resembling passion. One image kept popping up in the maze: the cover of Professor Claude Cellich’s new book: “Practical Solutions to Global Business Negotiations ” (co-written with Subhash Jain) – the event was celebrating the launch of its second edition.
For an hour and a half, Claude Cellich, who teaches cross-cultural business negotiation at International University of Geneva (IUG), guided those present from country to country and culture to culture wittily pointing out the “dos and don’ts” of negotiating your way to successful deals and, what is most important, relationships. The book’s launch was part of the IUG’s community outreach programme, which comprises a series of lectures open to the public, held throughout the year in collaboration with different organisations such as the Organization of Women in International Trade (OWIT), the Geneva Communicators Network (GCN) and Geneva’s Chamber of Commerce. For those who didn’t save the date, Swiss Style asked Cellich to elaborate on the art of negotiation in 1000 words.
The new game
Today’s globalised system requires business executives having to deal with counterparts from a wide range of different economic, cultural and political environments. These new partners entering the international arena are providing new business opportunities as well as increasing risks. When it comes to negotiating business deals, it is essential that each party be sensitive to each other’s culture, negotiating style and local context. For example, values that are important to one group of individuals may be of little value to another. These cultural differences deeply affect negotiation outcomes. Failing to master these differences can lead to insurmountable situations.
There are numerous risks negotiators face when working across cultures. One of them is to stereotype the other party. Other major mistakes common to most negotiations are: having insufficient time to prepare, inadequate knowledge of the other side’s goals and concerns, failing to create value, having too few alternatives and options to offer, lack of detailed information on competition, giving too much importance to price and accepting proposals that are not fully understood.
The most crucial element of any negotiation, particularly complex ones, is the planning and preparatory phase. Being prepared is probably the best investment a negotiator can make before entering into negotiations. Preparation is demanding and time-consuming. Experienced negotiators suggest that excellent preparation makes the difference between success and failure. During preparation, negotiators define the issues to be discussed, discover the other party’s underlying interests, know how to counter competitive threats, develop their reservation limits, design appropriate strategies and tactics and propose the agenda and meeting site.
To prepare well, negotiators should follow a process. Following the preparation stage, interaction with the other party is conducted and concludes with implementing the agreement. The sequence here is key: addressing the people first, then discussing the process and talking about the problems at the end.
Who, whom, whose
As negotiations are about two or more parties interacting with each other to satisfy their respective interests, it is essential that each party adopt a cooperative style and a long-term vision. Establishing a working relationship with each other is the base for initiating negotiations. In many parts of the world, if there is no relationship between the parties, there is simply no negotiation. In addition, having a healthy relationship contributes to a smoother implementation and is conducive to repeat business. In relationship-oriented cultures, establishing trust, showing respect for the other culture and understanding its rationale are fundamental to developing a business relationship. For instance, a North American executive will be negotiating a contract, while the Asian counterpart is developing a personal relationship. Similarly, a South American negotiator may consider a risk-taking deal but will not risk a relationship. In cases when the parties cannot reach agreement, the parties should at least save the relationship.
Although economic gains are the main goal of most negotiations, non-economic ones should be considered particularly in the international market place. Concessions are at the heart of negotiations and consist of both tangible and non-tangible gains. Often, non-tangibles can prove to be more valuable than tangible ones. For example, a firm may value the opportunity of doing business with a well-known reputable enterprise as the benefits can be numerous. It can provide entry into new markets, access the latest technology and have the opportunity to seek repeat business or be referred to other parties.
Trading concessions calls for careful planning. Successful negotiators enter the discussions with a list of potential concessions to be traded, their respective priorities and which issues are negotiable and non-negotiable. When negotiating in relationship-oriented cultures, it is advisable to plan more concessions than in task-oriented cultures as the exchange of concessions is considered a significant part of negotiations. To optimise concession trading, it is critical to exchange low-value items for high-value ones. For this to happen, both sides must be willing to share information leading to identifying their respective underlying needs. Concessions need to be classified into hard and soft value benefits. For example, hard items include price, cost, delivery dates, penalties, financial terms, quality standards, and so forth. Soft value concessions are subject to different interpretation because of the perception given by negotiators. For example, soft value items include extended warranty, free training, longer contracts, free samples, flexible payment terms, trust, reputation, referrals, the prestige to be associated with a reputable firm, among others. In relationship-oriented cultures, non-tangible concessions are highly appreciated and play a significant role in reaching agreement.
Sustainable profits do not come from a single transaction but from repeat business from satisfied counterparts. As it is expensive to find new business opportunities, executives have to give priority to retaining existing partners by agreeing to terms and conditions that satisfy both sides. Due to increasing global competition, negotiating agreements that are mutually beneficial are critical to success in the marketplace. By applying best practices, negotiators can look forward to deals that are not only viable but resist the threats of competition in the long term.
Skilled negotiators know when and how to apply various negotiating strategies and tactics while being culturally sensitive and making timely decisions. With intense competition, greater outsourcing and the impact of electronic commerce, it becomes vital that negotiators reach outcomes that are doable, profitable and sustainable. Success in the global arena is increasingly determined on the basis of the firm’s adaptability, flexibility, quick response, clear communication and delivery capacity. Experienced negotiators realise that it is not the contract alone that keeps business going but the strength of the relationship.
This approach somehow differs from the traditional negotiation model where competitive strategies and tactics are meant to benefit one party at the expense of the other. This is best illustrated by the fact that negotiators have access to over one hundred competitive tactics but only twenty cooperative ones. As business opportunities are shifting from developed economies to emerging markets, the traditional model needs to be adapted to the new realities. This calls for negotiators to be more flexible by adopting best practices when nego- tiating anywhere in the world but even more so in relationship-oriented cultures.
Negotiators committed to reach lasting agreements apply best practices. These best practices include the following:
• Preparing a strategy based on clear objectives
• Developing options and alternatives
• Understanding the other party’s reservation limits and underlying interests
• Planning concessions in advance and classifying into tangibles and non-tangibles
• Preparing valid arguments to counter objections
• Identifying one’s strengths and weaknesses, vis-a-vis competition
• Being culturally sensitive, patient and a good listener
• Adopting a creative problem-solving attitude
• Having a plan to conclude and an implementation mindset
• Avoiding being overconfident
The city key
The Geneva Chamber of Commerce, Industry and Services (CCIG) aims at improving Geneva’s economic environment by servicing local businesses’ information and facilitation needs. The monthly Midis de la Chambre, or chamber luncheons are amongst the events the chamber organises where entrepreneurs and executives come to network and talk business.
The chamber’s annual highlight is the Economic Seminar attended by more than 800 entrepreneurs, business leaders, managers and politicians, followed by the CCIG Prize awarded to a Geneva-based business for a particular contribution to the town’s economic growth and reputation.
For more info visit www.ccig.ch.
Practical Solutions to Global Business Negotiations by Claude Cellich and Subhash Jain is out on Business Expert Press. For more information about this book and other similar titles, visit www.businessexpertpress.com.
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Article by Claude Cellich