International

business
negotiations: cultural
and economic
consideration
By shrishti khandelia &
Manaya narang
 International negotiation is the process of
reaching agreements or resolving disputes
between par ties from different countries or
cultural backgrounds. It is crucial for
successful business relations and requires

International cultural competence and sensitivity. The

complexities of international negotiation
extend beyond commercial operations,

business requiring a thorough understanding of cultural

differences, var ying legal systems, and
economic factors. Working with legal
negotiation professionals focusing on international
business law can provide valuable guidance
during the negotiating process. Economic
factors also play a significant role in making
informed decisions and creating powerful
negotiating strategies.
Cultural awareness in
international business
awareness
Cultural awareness is crucial in international
business negotiations, as it goes beyond
language and etiquette. It involves
understanding the values, beliefs, and
attitudes of negotiating partners, which can
significantly impact the outcome. A lack of
cultural awareness can lead to
misunderstandings, missed opportunities, and
missed opportunities. On the other hand, a
deep understanding of the cultural context
can build trust, foster relationships, and
facilitate successful negotiations. It helps
negotiators anticipate reactions and tailor
their strategies accordingly.
 Impact of culture on
international
business negotiation
Communication styles vary across cultures, with some preferring
indirect or direct communication, while others prefer direct and explicit
communication. Understanding these differences helps negotiators
convey their messages effectively and avoid misunderstandings.
Different cultures have varying decision-making processes, negotiation
styles, and time orientations. Hierarchical structures favor consensus-
building, while negotiation styles range from competitive to cooperative.
Time orientation also influences priorities, with some prioritizing
patience over short-term goals.
Cultural attitudes towards conflict also influence negotiation
approaches. Some cultures view conflict as detrimental, while others see
it as natural and constructive. Understanding these attitudes helps
negotiators manage disagreements effectively.
Cultural intelligence (CQ) is the ability to work effectively across
cultures, involving awareness, knowledge, and adaptability in navigating
cultural complexities. Culturally intelligent negotiators can bridge
cultural differences, build trust, and achieve mutually beneficial
outcomes in international business negotiations.
Negotiation styles
across different
cultures
Negot iation styles var y across c ulture s, w it h c o mpetit ive styles
being pre valent in indiv idualistic culture s, w here asser tiveness, self-
intere st , and c ompetitio n are valued. In the Unit ed St ates,
c ompetitive tac tic s are co mmo n, w hile c o oper at ive/integr ative
styles emphasize c ollabo ratio n and w in-w in o utc omes.

High- c ontext c ulture s use implic it c ommunic at ion, re lying o n no n-

ver bal c ues and c ontext, while low - c ontext c ulture s pre f er explic it,
str aightf or ward co mmunic ation.

Hier arc hic al styles are pre valent in cult ure s w ith high po wer
dist anc e, where authority is c onc ent r ated in a few indiv iduals o r
senior exec utives. Negotiators may seek c onsensus, enc our age
input , and emphasize equality in the negot iat ion process.
E mot ionally expre ssive styles are c ommon in so me c ulture s, w here
nego tiation styles are valued, displaying ent husiasm, passio n, and
empathy to establish r appo r t and build tr ust.
 • The Micro so ft -No kia Dea l

Micr o so ft m ad e th e su rp r isin g an n ou n cem en t th at it was p ur chasin g

Fin n ish m o b ile h an dset m ak er No k ia fo r $7 .2 b illio n , a m erg er aim ed at
b u ild ing Micr o so ft’s m ob ile an d sm artp ho n e off ering s. Th e m erg er faced

Case study :
e v e n m o re co m p lex ity af ter th e in k dr ied on the co n tr act—n am ely, th e
c h a llen g es o f integ r atin g em p loy ees fr o m d iff er en t cu ltur es. In ter natio nal
b u sin ess n eg o tiatio n case stu dies su ch as th is on e un d ersco r e the
d iff icu lties th at co m p an ies face wh en attem ptin g to neg o tiate two d iff er ent

highlighting
id e n tities.

• Apple’s Apo lo g y in China

cultural
Wh e n Ap p le CEO Tim oth y D. Co ok ap olo gized to App le cu sto m er s in
Ch in a f o r p ro b lem s ar isin g f r om Ap p le’s war ran ty p olicy, h e p r om ised to
r ec tify th e issu e. I n a n eg o tiatio n r esear ch stu d y, Pro fesso r William W.

aspect
Ma d d ux o f I NSEAD an d h is colleag u es com par ed reactio n s to ap olo gies in
th e Un ited States an d in Jap an . Th ey disco ver ed th at in “co llectiv ist
c u ltu r es” such as Chin a an d Jap an , ap o lo g ies can b e p articular ly effectiv e
in r ep air in g b r o ken tr ust, r eg ard less o f wh eth er th e p erso n ap o lo g izin g is
to b lam e. Th is m ay b e esp ecially tr u e in a
c r o ss-cu ltur al b usin ess neg o tiation su ch as th is o n e.
Economic consideration : internatio
nal business negotiation

Exchange rates, which represent the value of one currency relative to another, can affect the cost
of goods and services, profitability, and financial risks associated with international
transactions. Negotiations may be influenced by concerns about currency volatility and its
potential impact on pricing, payment terms, and currency hedging strategies.
Economic stability, which includes factors like inflation, GDP growth, unemployment rates,
fiscal policy, and monetary policy, can influence business confidence, investment decisions, and
the overall business environment.
Differences in regulatory frameworks across countries can create barriers to trade and
investment, affecting negotiation terms and the feasibility of business deals.
Market size and growth, which refer to the total demand for goods and services in a particular
market, can also influence negotiations. Access to large and growing markets can be a key
consideration in negotiations, driving investment decisions, market entry strategies, and
partnership opportunities.
Case study :
highlighting
economic aspect
In 2 01 3, C ypr us's eco nomy w as o n t he br ink of c ollapse w hen
law maker s re jec ted a 10 billio n euro int er natio nal bailout pac kage.
C ypr us' banks had suf f ere d signif ic ant losses in its dealings w it h
Gre ece, leading to the c lo sure of their banks t o pre vent a r un on the
nation's f inanc ial institutio ns. T he Int er national Monetar y Fund
( IMF) , the E uropean C entr al Bank ( E C B) , and the E uropean
C ommission par tnere d to off er a bailo ut pac kage, w hich re quire d
C ypr us to prov ide a substantial po r tion of t he f unds through a one-
time t ax on ord inar y C yprio t bank depo sitor s . However, protests led
to the parliament re jecting the plan. C ypr us w as lef t w ith thre e
options: sell its soul to Russia, def ault and possibly quit the euro, or
patch together a new deal wit h the euro z one. T he f ir s t option, a
bailout f rom Russia in exchange f or energ y indust r y r ights fo r
C ypr us's off sho re natur al gas re ser ves, wo uld have tur ned C ypr us
back on modernity. T he seco nd option, leav ing its banks hanging,
c ould have c ollapsed. C yprus's third best hope w as t o re negot iate its
deal w ith Europe, ultimately agre eing to a modif ied Euro pean
bailout. T he go vernment c onf isc at ed 9.9% of the asset s of anyone
holding mo re than $ 13 6,000 in a C ypr us bank . T his c ase highlight s
the impor tanc e of explo ring possible agre ement s o n multiple f ro nt s
in inter national negotiations, as sometimes t he best deal may be
bet ter than no deal at all.
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