Meaning of Negotiation styles

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Terms of reference

My name is Thomas Oven. I am a free business consultant providing consultancy of management to organizations who were willing to expand their operations .I am an expertise is in cross cultural negotiation issues, why they arise and what could be done to diffuse or make the best of them.

Client's Description:

My client of peter England is a clothes manufacturer who was one of the famous manufacturer in manufacturing the formal clothes.

Client's Description of Problem:

The client has has arised a problem for me tthat "Our planning and production department had a research and found that if Peter England outsources the production of formal clothes in India to a third partywe can save upto 80% of the current costs of production of the this items. These savings include with the human resources cost and equipment maintenance, insurance of plant production and material, employees, transport etc.

A negotiators team to be sent to India to make a discussion and negotiate on the cost of production of formal wears. It was necessary for the team of negotiators to fully understand the Indian culture. since the production margin of peter England in manufacturing the formal wear was been saved. The margin of the production of the product depends on the negotiators and the skills bring up by them.

What the Client requires of Me:

The manager of the planning and production , Mc Farland approached me and asked me to give a suggestion to the team of negotiators to increase the margin of production of the product making a deal with the negotiators of India.he client also asked me to give a detailed information about the cultural differences between the England and India.He also asked me about the detailed description of the negotiation styles in India and how it is carried on the culture of India.

Overview of the situation

The client has done research and has a potential to save up to 75% of its cost of production on T-shirts and trousers if their production is outsourced to India. However, the actual saving depends entirely on the skills of negotiators who are being sent to India to make the final decision. It is very important that they understand the Indian culture and market to get the best possible results. The negotiators need to understand the values, interests, goals, ethical principles and assumptions of the Indian culture. The success of the project depends upon the ability of the team to deal with the competing principles and values of Indian culture.

A SWOT analysis of the situation is necessary for the team to fully understand the depth of waters it is entering. It is also important to do a PEST analysis to understand the Indian environment in terms of its political, economic, social and technological issues and conditions.

Analysis of the situation

According to Moran and Stripp (1991), negotiation takes place when two or more parties have both common and conflicting interests and interact with one another for the purpose of reaching a mutually beneficial agreement.

PEST analysis:

        PEST is the acronyms for Political, Economic, Social and Technological. This analytical tool is used by companies to analyse the overall environment or the macro environment of a country and industry before entering into business with them.

Political

The politics and the state-polity relations play a fundamential role in shaping the design, implementation and impact of national assessment systems.

India is a country of both diversity and continuity. It is a creative blend of cultures, religions, races and languages. The nation's identity and social structure remain protected by a rich cultural history that dates back at least 5,000 years, making India one of the oldest civilizations in the world. The country is the largest democracy country in the world with political consensus on reforms and stable democratic environment in over 50 years of independence. With its consistent growth performance and abundant highly skilled manpower provides enormous opportunities for investments. One of the fundamental components of Indian culture is an understanding of the traditions and ways of communicating with others that form the basis of India's society. Understanding the comparative strengths and the internal dynamics of the India is essential for conducting business in the country and for policymakers.

Economic

        India's Economy has grown by more than 9% for three years running, and has seen a decade of 7%+ growth. This has reduced poverty by 10%, but with 60% of India's 1.1 billion population living off agriculture and with droughts and floods increasing, poverty. alleviation is still a major challenge.

        Growth in the manufacturing sector has also complemented the country's excellent growth momentum. The growth rate of the manufacturing sector rose steadily from 8.98% in 2005, to 12% in 2006. The storage and communication sector also registered a significant growth rate of 16.64% in the same year.

Social

        The Indians are highly inspired and influenced by the Americans. Indians are usually very friendly and polite. They prefer to do business with others who treat them with deference and genuinely like them, and it is important to demonstrate similar behaviors yourself.

        These factors do not affect anybody's determination to reach business goals, though, and your counterparts will patiently and persistently pursue their objectives. It is in your best interest to do the same.

        Meetings start with some small talk intended to establish personal rapport. This may include some personal questions about your family and allows participants to become personally acquainted. It is important to be patient and let the Indian side set the pace. People enjoy some friendly humor, but avoid appearing sarcastic or cynical.

        The primary purpose of the first meeting is to get to know each other. Business may be discussed, but do not try to hurry along with your agenda. It is unrealistic to expect initial meetings to lead to straight decisions.

The negotiators might like to take advantage of these facts and talk the Indian team into their required ,the team must get in friendly terms with the Indians. This can only be achieved through socialising outside office hours. These social events might include going to restaurants, bars, clubs etc together.

Technology

Indian is on its way to becoming the main technology hub of the east. High quality and latest technology of all sorts is available in India.

        Presentation materials should be attractive, with good and clear visuals. Indians are often impressed with technical expertise. Having your English-language handout materials translated to Hindi or nother Indian language is usually not required.

        Technology leads to greater social economic division. Laborers are viewed as commodities and expendable. Technology leads to alienation because it can create jobs that require no specialist knowledge.

SWOT analysis

SWOT had came for a abbreviation strengths, weakness, opportunities and threats. This analytical tool is used by companies to analyse the overall environment or the macro environment of a country and industry before entering into business with them.

Strengths

The Indian society is open and friendly towards the westerners. The government has made laws to support foreign investors

        The firm said although a comparison of India with the rest of Asia may show that valuations on the basis of price to book value are higher in India, the premium can be justified. "First, India continues to show earnings growth. Second, book value is not being eroded because of losses or foreign exchange write down. Third, the cost of funds is still below the return on equity," it said. "India is operating under "normal" circumstances, unlike most other Asian economies.

Weakness

The Indian culture is very different from the US culture and therefore their negotiating styles and ways are much different from each other and work on entirely different variables from each other. For example, in the Indian culture, it is more important to secure a good relationship with the other party even if you have to lose something. Whereas, in the US culture, getting the most out of the deal is more important than keeping the other party happy.

Opportunities

The client would be able to save huge amounts due to the availability of low cost labour in India.

Threats

There can be potential delivery issues as deadlines are considered flexible in the Indian culture where as they are considered absolute in the US culture. In addition to this, the US negotiators might not be able to achieve their targets if they fail to understand the variables working behind the attitudes of Indian negotiators.

Threats

There can be potential delivery issues as deadlines are considered flexible in the Indian culture where as they are considered absolute in the US culture. In addition to this, the US negotiators might not be able to achieve their targets if they fail to understand the variables working behind the attitudes of Indian negotiators.

Overall Analysis:

In order to understand the Indian culture so that the appropriate negotiation style and technique can be adopted, we would use Hofstede's Five Cultural Dimensions. Hofstede calculated the cultural dimensions of many countries which can be accessed on his website in the form of graphs. We will use these to analyse the Indian culture.

Power Distance Index

Hofstede's Power distance Index measures the extent to which the less powerful members of organizations and institutions accept and expect that power is distributed unequally.(www.clearlycultural.com )As the shows that PDI for India is 68.3 against a world average of 53.2 and that of Uk which is only 40. This indicates a high level of discrimination in Indian society with regard to power and wealth.

Masculinity

Masculinity refers to the distribution of roles between the genders in a culture. (www.clearlycultural.com)India has Masculinity as the third highest ranking Hofstede Dimension at 56, with the world average just slightly lower at 47.

Uncertainty Avoidance Index

Uncertainty avoidance deals with a hoe the society tolerates on ambiguity. (www.clearlycultural.com) UAI for India is 40 as compared to a world average of 65 . This shows that the Indian culture is open to new and unknown vistas. (Greet Hofstede Cultural dimensions, 2009)

Long-term Orientation

Long-term Orientation deals with Virtue regardless of Truth. Values associated with Long Term Orientation are thrift and perseverance. India's Long Term Orientation (LTO) Dimension ranks 61 against that of USA at 29 in the graph, while the worlds average is at 48. This huge difference must be note as it shows how differently the two cultures operate. The Indians would concentrate more on building a long term relationship while doing business with another party whereas, the Americans would focus just on getting the job at hand done. The LTO score indicates that the culture is perseverant and parsimonious. ( http://www.geert-hofstede.com/)

Solutions and Recommendations

A thorough analysis of the Indian culture, its comparison with the American culture and its SWOT and PEST analyses reveal that the Indian market is very suitable for outsourcing the manufacturing of T-shirts and trousers. In order to achieve their target, the team of negotiators must keep in mind the following.

  1. Choose the appropriate strategy by developing a personal relationship with their Indian counterparts. As we have seen that the Indians are more prone to concentrate on building a long term relationship, the negotiators should try to cash this attribute and ask for their required targets.
  2. Project the correct personal and organisational images.
  3. Study and understand the basic cultural differences and intelligently use this information.
  4. Ask the most relevant questions. These might be outside the business area but will help in making the process of negotiation smooth.
  5. Offer and request the appropriate types of concessions at the right time. Here the tendency of the Indian culture to develop long term relations again plays a vital role. Indian manufacturers can be very loyal and giving if they are promised a long term partnership ie, the negotiators should capitalise on the long term orientation of the Indian culture.
  6. Remain focused on their targets but show flexibility in order to achieve them. This would ensure a smooth and fruitful negotiation.
  7. The team should try to impress and keep in hand the leader of the Indian negotiation team. This means that they should capitalise on the tendency of the Indian culture to respect and accept difference in power.
  8. Beauty Expressed Inc.'s team should focus on a people oriented negotiation rather than a task oriented discussion. They should give more importance to the team lead of the Indian team.
  9. The negotiators should not adopt a sequential style of negotiation in fact they should adopt the holistic style of negotiation and deal with the problem as a whole. This implies that they should not try splitting the problem into parts.
  10. The negotiators should try to use a collaborative style and create a win-win situation. This would not only help them achieve their goals but would also help them create a long term relation with their Indian counterparts.

Forecasts and Outcomes

The project of outsourcing manufacturing of T-shirts and trousers to an Indian company is feasible. However, the positive outcome of this project depends entirely on the success of negotiation between the team from Beauty Expressed Inc. and their Indian counterparts. This is possible if the team follows the above mentioned recommendations and be sensitive to Indian culture, its demands, dimensions and variables upon which it works.

References

  1. Robert T. Moran, William G. Stripp (1991), Dynamics of Successful International Business Negotiations, Gulf Pub Co.
  2. Hofstede's cultural dimensions http://www.geert-hofstede.com/hofstede_dimensions.php?culture1=95&culture2=42#compare (Accessed on 3-12-2009)
  3. Fundamentals of International Negotiation http://www.hhl.de/fileadmin/LS/micro/Download/smolinski_internat_negotiation.pdf (Accessed on 3-12-2009)
  4. Making Sense of Cross Cultural Communication http://www.clearlycultural.com/geert-hofstede-cultural-dimensions/power-distance-index/ (Accessed on 3-12-2009)

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