Globalization has made the businesses to reach every corner of the world and the most of the companies spreading their business across countries and cultures. In doing this, some of them find it difficult to succeed and this essay focuses on the cultural affect in the process of communication, negotiation and decision-making in international business providing suitable examples at places and also explains the negotiation made by General Motors with AvtoVAZ, a Russian company.
Culture of a country represents a set of goals, values and assumptions that are learned from the elders, practised and then passed on to the next generations. (Deresky, H; 2006). This culture results in various codes of conducts and controls the behaviour of the individuals at times. (Hofstede, G; 1980). A manager who takes in charge of a branch different location other his/her home country, he will find a major or at least minor difference in the behaviour of the other employees in the firm. This is due to the national factors like economic, legal and political system and due to sociocultural factors like religion, language and education. In addition, in some places the third set of factors, namely, cultural factors like beliefs, values and attitudes affect the normal organisational process. (Deresky, H; 2006).
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Communication plays an important role in cross cultural management in places like motivation, interactions, leadership and negotiation. (Deresky, H; 2006). Communication, in the form of writing, listening, speaking or via an electronic media plays a major role in the manager's position. According to Mintzberg, managers spend fifty to ninety percent of their time in talking to people in the organisation. This shows how important communication is within an organisation. (Mintzberg, H; 1973). A manger who is able to communicate well breaking the cultural differences can succeed in leading a business in any country. (Deresky, H; 2006).
Managers communicate with their subordinates to coordinate activities, to motivate, and also to negotiate the future plans of the organisation. A general communication process encounters addition of small amount of unwanted information, known as noise. In cross-cultural communication process, some part of the information sent from the manager may not be understood by his/her subordinates and this defective communication is caused by the cultural difference between the sender and receiver. This type of noise is called the cultural noise. (Deresky, H; 2006).
The cultural variables that are responsible for the cross-cultural or intercultural communication are attitude, language, roles, social organisation, thought patterns, nonverbal communication and time. A deep understanding of these variables will help us to minimise the cultural noise in the communication process. (Deresky, H; 2006).
Attitude forms the basis for our behaviour and the way we communicate and the way we interpret the message received. Ethnocentric attitude forms the basic source of noise in the cross-cultural communication. Stereotyping is also responsible for noise in cross-cultural communication. Stereotyping is the process of assuming that every member has the same set of characteristics. This process is often considered as lazy and destructive to know about a person. A good manager should deal with every individual forming a unique relationship with him. (Deresky, H; 2006).
The perceptions of a manager is influenced by the values, approach or priorities if the organisation in which he is in. the organisations are based on their nation, tribe or religion or they may have majority of their employees from a certain region. (Deresky, H; 2006). Academy of Management or United Auto Workers are the examples of such organisations. ( Trianidis, H.C; 1977). Thought pattern is other important variable; the logical reasoning for a process varies from place to place and this affects the communication process. The manager cannot assume that others use the same logical reasoning pattern. For example when a Canadian's car was crashed by a Thai when he was in Thailand called the police and explained him that the Thai driver crossed the central double line and this was the reason for the accident. The police denied believing that it was the fault of the Thai driver and informed Canadian that the centre line was the reference for him to measure the distance of the spot of the accident. For the Canadian, the centre line meant that 'no crossing'. This shows the difference in reasoning between cultures. (Deresky, H; 2006).
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The role of the manager differs from society to society and this difference is due to the confusion who should make decision and who has responsibility to do something. (Deresky, H; 2006). Language is another main cause of noise in the cross-cultural communication. The basic problem in communication is the manager's disability to speak the local language, or a poor translation of thoughts in to local language, or the poor expression of the idioms. Communication problems even arise in countries which use the same language, for example, United States and Britain use English as their language and this problem arises due to the difference in usage of the same language. (Adler, N; 1991).
When Pepsi introduced its product in Germany with the slogan "Come Alive with Pepsi", it came to know the literal translation of this slogan in German meant " Come out of grave" and as result Pepsi removed its slogan. This forms the best example of communication blunder in international business. Another good example, when U.S airline launched its Boeing 747 service it found that meagre number of passengers used its "rendezvous lounges" and they found the reason is that Portuguese refers "rendezvous" as a room for prostitution. (Ricks, D.A; 1991).
International managers either need to understand the local language or need a good interpreter. Even at times, direct translation results in confusion, for example in Asia 'yes' by particular person means that he is listening and still did not agree to the context of the conversation. (Deresky, H; 2006).
The behaviour of communicating without the use of words is called non verbal communication. Studies show that this form of communication holds 65 to 90 percent of interpreted communication. (Daft, R.L; 1989). This non verbal communication can be categorized in to four types, namely; kinesic behaviour, proxemics, paralanguage and object language. The kinesic behaviour refers to the communication by posture, gestures, eye contacts, facial expressions and other forms of body movements. (Deresky, H; 2006). Proxemics is the influence of the proximity and the space on communication, space here includes personal and office space. Paralanguage refers to the act of how something is said rather than the content. This includes tone, inflection of voice, laughing, etc. A manager who is aware of the international culture learns how to interpret the minor and important differences in paralanguage. The object language refers to how to communicate through materials like office designs, cars, clothing, etc. (Deresky, H; 2006).
In order to have effective cross cultural communication a good development of cultural sensitivity, careful encoding, careful decoding, selective transmission and appropriate follow up actions. (Deresky, H; 2006).
As a part of the cultural sensitivity, managers must know about the receiver and the message must be encoded in such a way that it is best understood by the receiver. The manager must know in what way the person will interpret to the message, the cultural background of the communication, whether it is in societal, economic or organisational context. In addition, the manager must know the kind of behaviour and transactions the receiver is used to. As a part of careful encoding, the meaning must be converted in to symbols using words, pictures or gestures which are appropriate to the receiver. The language training has been proved less valuable and the manager should avoid idioms and phrases not only to those do not know English but also to those know little English. (Deresky, H; 2006).
As a part of the selective transmission, careful choice of the medium is used depending on the factors like nature of message, the context, importance of the message, etc. Some of the media used are email, telephone calls, teleconferencing, letters, reports and videoconferencing or the simplest mode of face-to face. The feedback from the receiver forms the important factor for good intercultural communication. (Deresky, H; 2006). This feedback must be obtained through the face-to face interaction, as the best way to sense how the message is interpreted. For good communication, feedback, manager must follow certain actions on what has been discussed. this can either be an agreement or contract. (Deresky, H; 2006).
Research shows certain characters that managers must posses for cross-cultural communication and they are; respect, interaction, empathy, orientation to knowledge, tolerance for ambiguity, interaction management and other-oriented role behaviour. (Ruben, R.B; 1985).
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Managers negotiate with many people to make plans for strategies and for continuing the business operations. This negotiation process includes five stages, namely, preparation, building relationship, exchanging related information, persuasion and concessions and agreement. Preparation is an added advantage when the manager knows about the background and context of his counterpart to avoid the problems caused by the difference in culture, language and other factors. (Deresky, H; 2006).
Before meeting a person with whom the negotiation is to be made, the managers must try to find the kind of demands that will be made, the composition of the opposite team, authority they possess. (Fisher, R; 1981). Relationship building is the process of getting used to the person by exchanging contact details well before the business discussions. This is widely use in many parts of the world, especially in United States of America. The next stage in negotiation is exchanging task-related information, where both sides of the negotiation present their views and plans followed by a Q-A session and then by discussion about the alternatives. The fourth stage is persuasion, where both sides bargain and try to dominate their opinions suppressing that of the other side. The final stage is concession and agreement and the tactics varies between cultures. (Deresky, H; 2006). The cultural values define how well these contracts will be honoured, for Americans, the contracts are serious issue and the Russians consider it as less important, the Japanese consider the contracts as waste of money and time and wish to work with good understanding. (Fisher, G; 1980).
The managers must understand the position of the other side to effectively manage the negotiation. Managers should know whether the goals of the component are corporate or national, whether these goals are represented by principles or only with specific details. Managers must be aware of the composition of the team, powers allotted to each member and about the preparation of the team. (Deresky, H; 2006). According to research by Tse, Francis and Walls, the nature of the relationship between those working on common goal must be addressed carefully in the negotiation process. (Tse, D.K; 1994). In particular, when negotiation is made between countries like America or any individual focused country and China or any other group-focussed country. A manager must know about the parties in the upcoming meeting, must prepare to adjust and control the situation, and must be innovative to manage intercultural negotiations. Research conducted by Huthwaite Research Group shows that the successful negotiators consider a number of options and choose the best and pay good attention. (Husted, B.W; 1994).
In modern day business negotiations, Web and e-commerce play an additional important role in negotiation process. This can increase the likelihood of the agreement, decrease the cost of negotiations and increase the chance of optimal outcomes. (Deresky, H; 2006).
The best example for the negotiation is the joint venture of between General Motors and a Russian automobile maker AvtoVAZ. This negotiation has taken a number of twists over the years and issues like market strategy, scope, timing, financing and structure went on for a long debate. In the case of market strategy, GM wanted to know about the market for the Opel T3000 and wanted to produce only the model called Niva as a result of this JV so that it will reduce the expenditure of GM by $100 million. In 1998, during the financial crisis, both of these companies wanted to sign the JV and to export 33% of the Chevrolet Nisa produced in Russia, so that they make good profit. It took till summer of 1999 to make the JV to make the Opel Astras and Chevrolet Niva but this was not confirmed by the GM and Opel division of GM forced it to postpone the JV until 2004 so that Russia recovers from recession. When AvtoVAZ opposed this and threatened GM that it will Niva by its own, both the companies came to an agreement to launch the JV in 2003. (Deresky, H; 2006).
In the case of financing, GM considered $250 million investment in a risky market in a risky country like Russia was huge and demanded for a third party investment. Then came the European Bank for Construction and Development agreeing to invest $93 million. When the total investment of $332 million was ready, still GM insisted that this is not sufficient to start a business from scrap which includes buying land, building plants and then manufacturing, then AvtoVAZ came forward to donate the land and plant. Regarding structure, AvtoVAZ made an agreement to buy the cement by paying 10 times what GM paid in Germany and AvtoVAZ demanded GM to pay 25% more for its parts. Hearing this, GM advised this would curtail the JV and so AvtoVAZ backed-off. In the progress of negotiation, AvtoVAZ announced to produce a hatchback under its Lada brand just for the show of its operations. (Deresky, H; 200).
Decision making is another important attribute for successful operation of business across cultures. Negotiation is formed by small and large decisions. These decisions include how to react, concede when, what to agree or disagree. Thus negotiation can be called as combination of implicit and explicit decisions. The speed and the manner of making decisions affect the process of negotiation. In addition to negotiation, the process of decision making is used by managers in several occasions in daily life including at operational level. It is important for the managers to understand the role of culture in decision making. The influence of culture on the decisions made by executives can be understood by knowing about the variables involved various stages of decision-making process.
The stages involved are defining the problem, analysing the data, considering alternative solutions, deciding the best solution and implementing the final decision. The cultural variable mainly influencing the decision is whether the country follows the objective approach or subjective approach. The other variable is risk tolerance, also influences decision making. Research proves that people from Germany, Austria have less risk tolerance whereas those from America have high risk tolerance. (Deresky, H; 2006). Another important variable is manager's perception about the outcomes. Some managers feel that they have control over the events whereas do not feel so and consider their decisions have no value at times. The ability of managers to try new ways also forms the other variable influencing the decision process. The managers from Europe make decision based on the past experiences and those from America think about the future and look for new ideas to achieve the goals. (Deresky, H; 2006).
To conclude, culture varies between countries and this affects the business operations across the globe. The effective usage of communication, negotiation and decision-making skills by a manager can make the business thrive at any part of the globe. Several companies which failed to do this have ended in closure of their business and some who made effective usage of these factors have been successful in their operations.