IBM

CONFLICT IN INTERNATIONAL BUSINESS AND NEGOTIATIONS

CONFLICT
Conflict is Disagreement through which the parties involved perceive a threat to their needs, interests or concerns. Conflict is a state of discord caused by the actual or perceived opposition of needs, values and interests. Conflict tends to be accompanied by significant levels of misunderstanding that exaggerate the perceived disagreement considerably over actual disagreement.

CONFLICT TYPES
There are several types of conflicts. Conflict as a concept can help explain many aspects of social life, such as social disagreement, conflicts of interests, conflict of roles, fight for supremacy between individuals, groups, or organizations, family conflict, etc. In political terms, conflict can refer to wars, revolutions or other struggles Professional Conflict: Governmental and MNEs business negotiators may start with mutual mistrust due to historic animosity or to differences in their professional status. The MNE people may come armed with business and economic data that governmental officials dont fully understand,

CONFLICT TYPES
Conflict exists in different shades, segments and sizes. Intrapersonal conflict (though this usually just gets delegated out to psychology), Interpersonal conflict, Emotional conflict, Group conflict, Organizational conflict, Community conflict, Intra-state conflict (for example: civil wars, election campaigns), International conflict, Environmental resources conflict, Ideological conflict, Diplomatic conflict, Economic conflict, Military conflict, Religious conflict, Workplace conflict, etc are different types.

Importance of study of conflicts for MNEs

MNEs are committing billions of dollars in investment all over the world. They have export and import trades. Millions of people work in foreign countries in different MNEs. These are the stakes MNEs have political risk in the host country.

Costs of conflict on projects

The cost of conflict is composed of : Direct Cost : Fees of lawyers and other professionals; Productivity Cost: Value of lost time, diminished capacity and the opportunity cost of what those involved would otherwise be producing; Continuity Cost: Loss of ongoing relationships including the community they embody; Emotional Cost: The pain of focusing on and being held hostage by our emotions.

Causes of Organizational Conflicts

Structural factors cause organizational conflict. Structural factors normally impose rigidity while businesses need dynamic adjustment. Personnel who could not tend or mend the organization, but required to show targeted results see conflict between responsibility and authority. This is an organizational conflict.
Interdependence amongst organizational divisions departments is the order of the day and conflicts develop between departments because one department is either lethargic in its commitment or it is over-smart and others could not find home .

Causes of Organizational Conflicts

Goal Differences such as one person wants to push production and others want R&D to rise, leading to conflict. This is an organizational conflict. The parent organization and subsidiary may see different opportunities and conflict mutually. Authority relationships may lead the boss and employees beneath him/her do not see in the same inclination, especially when the boss claims boss is always right, conflict arises. This is an organizational conflict. Status Inconsistencies such as excessive/scanty power, power without sincerity, and too much politically charged atmosphere cause conflict. This is an organizational.

Causes of Organizational Conflicts

Inconsistencies in asset endowments cause conflict. May be it is class conflict the communists leaders project. Jurisdictional Ambiguities who will report/discipline who lead to conflict in issuing and receiving communications. This is a kind of intra-organization conflict.

Causes of Organizational Conflicts

Personal Factors like perversion, misunderstanding, selfishness, etc of people lead to conflict of opinions and hence actions. This happens at home / office / private or social or official gatherings. Personality clash where two equally placed persons or heads do not simply accept one another, leads to conflict. Perception differences where the sensitivity or understanding of people on certain phenomena differs, lead to conflict. Values and Ethics can cause conflicts. Differing commitment levels to, or interpretation of Values and Ethics of people may lead to conflict. Eventually means-ends tussle erupt. Communication barriers result in no communication, missile-like communication or misleading communication. Eventually somewhat long-term conflicts form.

CONFLICT RESOLUTION ACTIONS

Conflicts must be resolved at the earliest before they assume proportions. There are behavioural and administrative measures. The behavioural measures deal with organizational conflicts, while administrative measures address project related conflicts. Conflict resolution actions for organizational conflicts and project related conflicts are dealt in this section.

CONFLICT RESOLUTION ACTIONS

Avoidance: Avoid or postpone conflict by ignoring it, changing the subject, etc. Avoidance can be useful as a temporary measure to buy time or as an expedient means of dealing with very minor, non-recurring conflicts. In more severe cases, conflict avoidance can involve severing a relationship or leaving a group. If we avoid discussing the conflict at all, both parties may remain clueless about the real underlying issues and concerns, only to be dealing with them in the future Collaboration: Work together to find a mutually beneficial solution. While the Thomas Kilman grid views collaboration as the only win-win solution to conflict, collaboration can also be time-intensive and inappropriate

CONFLICT RESOLUTION ACTIONS

Competition: Assert ones viewpoint at the potential expense of another. It can be useful when achieving ones objectives outweighs ones concern for the relationship. Competing is a style in which ones own needs are advocated over the needs of others. It relies on an aggressive style of communication, low regard for future relationships, and the exercise of coercive power Accommodation: Surrender ones own needs and wishes to accommodate the other party. Accommodating, also known as smoothing, is the opposite of competing. Persons using this style yield their needs to those of others, trying to be diplomatic. They tend to allow the needs of the group to overwhelm their own, which may not ever be stated, as preserving the relationship is seen as most important. If we accommodate, the relationship may proceed smoothly, but we may build up frustrations that our needs are going unmet

Enhanced Due Diligence

Conflict risk and impact assessment must be made a part of standard due diligence procedures. By assessing the two-way relationship between a project and the context in which it is developed, project financiers will be in a better position to understand the nature of conflict risk that may affect. Due diligence may be enhanced in several ways. These are placed under 3 heads, namely, Country Assessment , Human Rights and No-go Criteria.

 a. Comprehensive Country Assessment: A comprehensive Country Assessment will solve most of the conflicts related to project implementation by MNEs. The Country Assessment should cover the following, apart others. (i) Governance issues: Is the country an autocracy or democracy? If the country a democracy, has there been any violence been associated with election or political party activities or problems related to the credibility of election results in the last five years? Where is the country ranked on corruption indexes? Has there been political instability in the past three years? Does the country prevent freedom of expression? (ii) Economic issues: Has there been a recent economic crisis or decline? What is the countrys ranking on the Human Poverty Index? Is one identifiable group (e.g. ethnic, cultural) at a serious economic disadvantage over another?

(iii) Socio-cultural issues: How large is the countrys population and growth rate, and is there a significant urban/rural divide? Are there different ethnonationalist groups spread unevenly in different regions? Have large populations relocated to or within the country or region due to violence? (iv) Security issues: What is annual government military expenditure high as a percentage of GDP? Does the government have difficulty in controlling state security forces, including military, police, intelligence and militia groups, or the activities of private security companies? Are state opposition groups armed? Has there been a history of violent conflict, and is there currently violence in the country? Are there any incidences of group violence in a neighbouring country?

b. Human Rights Compliance Assessment (HRCA): Effective Human Rights Compliance Assessment is most needed to address the issue of conflicts in the implementation of overseas projects. HRCA on-line diagnostic tool is available which is designed to promote better corporate performance by companies by helping them to detect potential human rights violations caused by the effect of their operations on employees, local residents and all other stakeholders c.No-go Criteria: In some countries, the probability of conflict risk affecting a particular project may be so high that from the conflict-sensitive perspective it would be unwise for an investment to proceed. Due diligence screening should alert project financiers and insurers to this possibility. Wherever a project is located in an area where human rights abuses are currently, or have been, committed in the recent past, financiers should consider avoiding the project.

ROLE OF NEGOTIATIONS IN INTERNATIONAL BUSINESS

Negotiation is a dialogue intended to resolve disputes, to produce an agreement upon courses of action, to bargain for individual or collective advantage, or to craft outcomes to satisfy various interests. It is the primary method of alternative dispute resolution

ROLE OF NEGOTIATIONS IN INTERNATIONAL BUSINESS

Negotiation is an interaction of influences which include the process of resolving disputes, agreeing upon courses of action, bargaining for individual or collective advantage, or crafting outcomes to satisfy various interests. Negotiation is thus a form of alternative dispute resolution. In a successful negotiation, everyone wins. Basic elements of Negotiation: Negotiation involves three basic elements: process, behavior and substance. The process refers to how the parties negotiate: the context of the negotiations, the parties to the negotiations, the tactics used by the parties, and the sequence and stages in which all of these play out. The behavior refers to the relationships among these parties, the cordiality of communication between them and the styles they adopt. The substance refers to what the parties negotiate over: the agenda, the issues (positions and - more helpfully - interests), the options, and the agreement(s) reached at the end.

Negotiation Process in International Business

Stages in Negotiation:A ten-stage negotiation process that uniquely combines that puts together the best of many other approaches to negotiation is given below. Stage Action Prepare Know what you want. Understand them. Open Put your case. Hear theirs. Argue Support your case. Expose theirs. Explore Seek understanding and possibility. Signal Indicate your readiness to work together. Package Assemble potential trades. Close Reach final agreement. Sustain Make sure what is agreed happens. Renegotiate When sustenance gets struck, renegotiate Terminate Stop negotiation, once and for alli.

Preparation: Negotiation requires through preparation to present ones side as well as to counter, if need be, opposing views from any side. Complete knowledge of the MNE, full details of the current proposal, the win-win results, success stories of earlier ventures of similar types, the core issues, etc need to be fully conversant. A rehearsal would do well with mock teams. What one wants, what one can give, what others might expect, can that be accommodated, etc need to be well analyzed from different perspectives ii Open the discussion: This is the love all opening of the match on the discussion table. Always offer to let the other party speak first. The other party may have overestimated what you are going to ask for and may actually offer more than what you were going to request.

iii Argument: When the going is tough, the tough gets going. Arguments in favour of ones view points and against that of others are needed. Arguments must be crisp, focused and functional. Always respect and listen to what your opponent has to say. This is important even if he or she does not extend the same courtesy to you.

iv Exploration: Normally the 80:20 Principle works. 80 % of areas agreed in about 20% of negotiation process. The balance 20% really needs 80% of deliberations. Explorations in all wards needed. Creativity and innovation is needed. Change the problem setting. Look from a different perspective. Meantime try to convince the other side that the solutions suggested are fine enough. May be a sub-team to work on new avenues may be though off. Or both sides agree to meet again after a recess to come with fresh thinking, mutual accommodation, shifting distant things near and near things to a distant. The areas of agreement must be enhanced after passage of deliberation. Exploration must be for agreement, not disagreement. Signal: After the exploration, make the fresh offer. First signal your readiness to resume deliberation from where it was left. Invite the other side with same, if not more, readiness to resumption of talks and early settlement. Certain urgencies may be cited, if appropriate, while at the same time telling that let all issues be threadbare discussed despite the time factor

V Assemble: Categorize the areas of agreement reached. As this is done, tell that what is left out is better concurred with so that sense of fulfillment results. International negotiations may take much longer and may include provisions unheard of in the home country, such as a negotiated tax rate. Close: A final accord is arrived at. Thank the participants for their time, ideas, flexibility, innovative thrusts, benign accommodation of other persons views, maturity shown in the wake troubling issues, sacrifices made and above all good comradeship shown. viii. Sustain: The agreement must be implemented. Members must dedicate themselves for truthful implementation of the accord. Negotiations are seldom a oneway street. Companies agree to many performance requirements aimed at helping host countries reach economic and non economic objectives, such as a favorable balance of payments, growth and high employment. These must be fulfilled sooner than later. ix. Renegotiate: It happens, that even when a project is on stream, the changed political guards may press for a renegotiation, when they solidly prove national interests are better served with a fresh look. Of course, damage to national culture might happen. In the early years of foreign investments in emerging economies the MNEs were given many concessions.

Termination of Negotiations
: Termination is an admission of failure. The negotiators are prone to publicly blame others to save face. This had happened in such high profile trade negotiations under the WTO banner in Doha.

Pragmatist cultures Vs. Idealistic cultures: Negotiators from pragmatist cultures attempt to separate the issues into small categories (getting closure on items in a linear fashion), while negotiators from idealistic cultures view negotiations more holistically. High trust Vs Low trust cultures: Negotiators from cultures with high trust are less prone to want to cover every possible contingency in a contract than are negotiators from cultures with low trust. Mono-chronic cultures Vs. Poly-chronic cultures: Negotiators from mono-chronic cultures will want to give their undivided attention to one issue at a time. However, negotiators from poly-chronic cultures feel uncomfortable if they do not simultaneously take care of other business affairs. Punctuality stressing culture Vs. Easy going culture: Negotiators from cultures that place a high importance on punctuality and schedules are more prone to set deadlines and then make concessions at the last minute to meet the schedules than are negotiators from cultures that place less importance on punctuality and schedules.

b. Language Factors and Negotiation The choice of language, use of interpreters, etc have influence on business negotiation. English the Universal language is better: Because English is understood worldwide, people may understand quite well most of what is said in English. At the same time they can eavesdrop on confidential comments and form responses while remarks are being translated into their language. Intangibles are often the key factors in many negotiations. It is important to communicate very carefully. Subtle verbal and body language can make a difference in how your negotiation progresses. Spend more time listening than talking and make direct eye contact. Use the word and instead of but. This helps to send the signal that you are interested in the other party and are seeking common ground. Some of the intangibles are dealt below.

Communications: Communications must be careful about using the phone, e-mail, and other non-visual communication vehicles. A lack of facial expressions, vocal intonation, and other cues can result in a negotiation breakdown. Constantly reiterate your interest in the other sides concerns and your determination to find a mutually satisfactory resolution. Personalities: Personalities must be conscious of aspects of your personality such of your own needs and interpersonal style as well as the other persons personality; these factors will play a key role and understanding yourself will be an important factor relevant to reaching a solution. Your own personality and style: How much you trust the person; how free with your emotions; how much you want to conceal or reveal and such other factors

Physical space: Sometimes where the negotiation takes place can be important; are we negotiating in a space we are uncomfortable and other is comfortable? Past interaction: If there is a history of conflict resolution with this person, think about how this history might affect the upcoming negotiation. Time pressure: Think about whether time pressure will affect the negotiation and whether you need to try to change this variable. Subjective utilities: Be aware that people place very different values on elements of a negotiation. For example, in negotiating for a job, you may place a high value on location and relatively lower on salary; it is important to be aware of your subjective utilities and try to

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