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INTERNATIONAL BUSINESS
NEGOTIATIONS
(2nd Edition)
INTERNATIONAL BUSINESS AND MANAGEMENT SERIES
Series Editor: Pervez N. Ghauri
Published
CONTRACTOR & LORANGE
Alliances and Co-operative Strategies
GEMÜNDEN, RITTER & WALTER
Relationships and Networks in International Markets
HAVILA, FORSGREN & HÅKANSSON
Critical Perspectives on Internationalisation
MOROSINI
Managing Cultural Differences
NAUDE & TURNBULL
Network Dynamics in International Marketing
BUCKLEY & GHAURI
The Global Challenge for Multinational Enterprises
HÅKANSSON & JOHANSON
Business Network Learning
LI
Managing International Business Ventures in China
HYDER & ABRAHA
Strategic Alliances in Eastern and Central Europe
YANG
Intellectual Property and Doing Business in China
Forthcoming titles
OXELHEIM & GHAURI
European Union and the Race for Foreign Direct Investment in Europe
Other titles of interest
FATEMI
International Trade in the 21st Century
DUNNING
Globalization, Trade and Foreign Direct Investment
MONCARZ
International Trade and the New Economic Order
KREININ
Contemporary Issues in Commercial Policy
Related journals sample copies available on request
European Management Journal
International Business Review
International Journal of Research in Marketing
Long Range Planning
Scandinavian Journal of Management
INTERNATIONAL
BUSINESS NEGOTIATIONS
(2nd Edition)

EDITED BY

PERVEZ N. GHAURI
UMIST, Manchester, UK

JEAN-CLAUDE USUNIER
University of Lausanne, Lausanne, Switzerland

SERIES EDITOR

PERVEZ N. GHAURI

2003

Pergamon
An Imprint of Elsevier

Amsterdam – Boston – Heidelberg – London – New York – Oxford

Paris – San Diego – San Francisco – Singapore – Sydney – Tokyo
ELSEVIER Ltd
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© 2003 Elsevier Ltd. All rights reserved.
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First edition 1996
Second impression 1999
Third impression 2002
Second edition 2003
Library of Congress Cataloging in Publication Data
A catalog record from the Library of Congress has been applied for.
British Library Cataloguing in Publication Data
A catalogue record from the British Library has been applied for.
ISBN: 0-08-044292-7 (Hardbound)
ISBN: 0-08-044293-5 (Paperback)
∞ The paper used in this publication meets the requirements of ANSI/NISO Z39.48-1992 (Permanence of
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Printed in The Netherlands.
Contents

Series Editor’s Preface ix

Editor’s Preface xi
List of Tables and Figures xvii
The Contributors xix

Part I: Introduction
1. A Framework for International Business Negotiations 3
Pervez N. Ghauri
2. Vis-à-vis: International Business Negotiations 23
John L. Graham
3. Strategies and Tactics in International Business Negotiations 51
Ramond Saner
4. How National Culture, Organizational Culture and Personality
Impact Buyer-Seller Interactions 75
Sudhir H. Kalé

Part II: The Impact of Culture on International Business

Negotiations
5. Cultural Aspects of International Business Negotiations 97
Jean-Claude Usunier
6. Hofstede’s Dimensions of Culture and their Influence on
International Business Negotiations 137
Geert Hofstede and Jean-Claude Usunier
7. International Multilateral Negotiations and Social Networks 155
R. Bruce Money
vi Contents
8. The Role of Time in International Business Negotiations 171
Jean-Claude Usunier

9. The Role of Atmosphere in Negotiations 205

Pervez N. Ghauri

Part III: Negotiating Different Type of Projects

10. Negotiating Sales, Export Transactions and Agency Agreements 223

J. B. McCall

11. Negotiating Licensing Agreements 243

Vernon Parker

12. Bolter Turbines, Inc. Negotiation Simulation 275

John L. Graham

13. Negotiating Mergers and Acquisitions in the European Union 291

Viviane de Beaufort and Alain P. Lempereur

Part IV: Negotiating in Different Parts of the World

14. The IBM-Mexico Microcomputer Investment Negotiations 327

Stephen E. Weiss

15. Negotiating with Eastern and Central Europe 363

Pervez N. Ghauri

16. Business Negotiations between Japanese and Americans 393

John L. Graham and Yoshihiro Sano

17. Negotiating with the Chinese: A Process View 411

Pervez N. Ghauri and Tony Fang

Part V: General Guidelines

18. Ethical Aspects of International Business Negotiations 437

Jean-Claude Usunier

19. Some General Guidelines for Negotiating International Business 461

Pervez N. Ghauri and Jean-Claude Usunier
 Contents vii

References 481
Author Index 509
Subject Index 515
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Series Editor’s Preface

The first edition of this book, published in 1996, was one of the most successful
books in this series. It was printed twice and was sold out very quickly. For a
couple of years we have been receiving messages from colleagues to publish a
second edition of the book. A decision was made an year ago and we asked for
some reviews from some colleagues in the field. They were all very enthusiastic
and recommended a second edition. These comments were forwarded to the
editors. We also received suggestions that the second edition should be
published as a paperback to make it more accessible for students.
Through these reviews we also realized that the book has been used in a
number of MBA and Master Courses and Modules in Europe, United States
and Canada. The editors have also received direct comments from colleagues
as how to improve the second edition. We thus believe that the second edition
has been compiled with these comments in mind. A number of new chapters
have been added while some dated chapters have been taken away. The
sequence of chapters is now more logical and deals with the topics more
thoroughly.
We understand that there are very few books dealing with this important
topic, while it is considered a most important field in international business
research and practice. We trust that this second volume will be at least equally
successful and will fill the gap in the market.
Pervez N. Ghauri
Series Editor
Editor’s Preface

Business negotiations are increasingly recognised as a full part of the

managerial process, highly relevant to the implementation of business
strategies. Traditionally, most of the business literature has focused on strategy
formulation on the one hand, and management systems and procedures on the
other. There is now more emphasis on “how to do” rather than simply “what to
do”, implying an increased emphasis on relationships with clients, agents and
partners as a key success factor in the implementation process. International
marketers are now more and more business negotiators, who constantly discuss
deals across borders with a variety of people, ranging from consumers to
intermediaries and even competitors.
The dramatic growth of international trade over the last five decades has
been not only in terms of volume but in complexity as well: service offerings
are now mixed with products, and technology often plays a central role as an
object of the exchange. Deals are not only made through discussions of a
bundle of physical attributes and a price; they are also drafted between
merchants and business people from different countries having different
objectives and cultural backgrounds. Establishing, maintaining and fostering
relationships are therefore of prime importance for the market transaction to
take place. It is more and more recognised that international trade is not only
a matter of price and product but also of people who manage a complex
relational process. Business negotiations occupy a prominent place in
international trade because any transaction is in some way negotiated even
though on a limited range of issues. Within the relational process some more
complex deals are worth consideration in more detail, not only sales
agreements but also the discussion of agency and distribution contracts in
foreign markets and the negotiation of joint ventures and licensing agree-
ments.
Given the considerable growth in alliances, partnerships and technology
deals across borders, finding the right partner(s) and developing an adequate
xii Editor’s Preface
framework for conducting the relationship with them are now considered key
success factors. Technology often plays a major role in such deals and this
could mislead people into believing that the whole negotiation process is
principally an engineers’ discussion based on rational and scientific facts. In
fact, technical complexity intermingles with human complexity to render such
negotiation processes difficult to manage. Complexity is probably one of the
main features of this kind of negotiation exercise: partners come from quite
diverse national and cultural backgrounds, do not share the same native
language, yet still have a major interest in dealing with each other.
A considerable amount of literature is available on negotiations, some of it
also on business negotiations but the field of international business negotiations
is quite neglected. Some studies on negotiations with different regions or
countries such as the Middle East, Japan and China are available. However,
there is no book on this topic that discusses international business negotiations
in a comprehensive manner.
As the body of literature has been growing in the field of international
business negotiations for the last fifteen years, we believe it is now appropriate
to give a comprehensive overview of the knowledge that has been developed.
Some twenty authors have contributed to this edited volume, some of them
coming from academia, some from business companies, while most of them
have been involved both in research and in the practice of negotiation at
international level. The reason for compiling this book is that we want our
readers to use it as a tool for increasing their knowledge and effectiveness in
negotiation; the path towards achieving this is threefold: (i) understanding the
process of international business negotiations; (ii) developing knowledge of the
issues at stake and the main variables; and (iii) developing skills for being a
successful international negotiator.
The second edition of the book is divided into five parts: (I) introduction and
general aspects of international negotiations; (II) culture and international
business negotiations; (III) the negotiation of specific kinds of agreements; (IV)
a regional approach to international business negotiations; (V) some general
guidelines of international business negotiations.
The first part is designed to cover the basics of international business
negotiations. Chapter 1 gives an overview of international business negotiations
and proposes a model that is used further in the text. A colourful illustration of
mismatches that arise in the interaction between the negotiators who come
from different countries and belong to different cultures is offered in Chapter
2. Chapter 3 discusses a variety of strategies employed by negotiators in the
international business arena. These introductory chapters are followed by a
discussion of how national culture, organisational culture and personality
 Editor’s Preface xiii
impact buyer-seller interactions; it sets in perspective the respective roles of
country, corporate and individual variables in shaping negotiation behaviour at
the international level (Chapter 4).
Culture is a major determinant of strategies and tactics in international
business negotiation, because negotiations involve communication, time, and
power and these variables differ across cultures. The second part deals with
various aspects of culture that have an impact on the negotiation of business at
international level, starting with a chapter that gives an overview of these
influences (Chapter 5). Chapter 6 presents the most widely used framework for
describing national cultures, Hofstede’s four dimensions of culture, and
discusses their influence on international business negotiations. A discussion of
multilateral negotiations is presented in Chapter 7. This chapter builds further
on national, organisational and individual cultural aspects of negotiations and
looks at the effects of social networks on negotiation outcomes. The two
following chapters are dedicated to issues that have a quite significant cross-
cultural variance: issues in cross-cultural communication and what they mean
for international negotiators, how people view time and deal with it in business
negotiations which are suffused with time-loaded aspects such as dates,
planning, scheduling etc. (Chapter 8), and the role of atmosphere in
negotiations (Chapter 9).
The third part is orientated towards the content of the deals being negotiated.
The first two chapters present the agreements to be discussed by the parties:
international sales and export transactions and licensing agreements and
international alliances. An interactive way of simulating negotiations to learn
more about them is offered in Chapter 12. Chapter 13 deals with mergers and
acquisitions in the European Union, and shows how cooperative negotiation
works as an asset for the future venture.
The fourth part of the book has a more regional focus, looking at how
negotiations should be managed with people from various important areas,
though it also builds on cultural factors as well as content-oriented aspects of
international business negotiations. We could not be exhaustive here and
decided to concentrate on major countries and areas that make up a quite
significant part of world trade. The first chapter of this section is illustrative and
shows the kind of mismatch that may occur in international business
negotiations, when business people coming from various countries interact
with each other. Chapter 14 deals with the IBM-Mexico microcomputer
investment negotiations, a case in complex negotiations involving a large
multinational company and a host government in a Latin American country.
Chapter 15 explores the specifics of the negotiation in Eastern and Central
Europe, where the political and economic environment has been subject to
xiv Editor’s Preface
tremendous changes over the last five years. The following two chapters are
dedicated to North-South business negotiations, emphasizing the interaction
between Asians and Westerners (Chapter 16) and presenting an in-depth
analysis of Chinese negotiation behaviour (Chapter 17).
The fifth and final part of the book is rather normative in its nature. It
presents some ethical issues involved in international business negotiations
(Chapter 18) and provides some general guidelines in Chapter 19. This last
chapter synthesises the lessons from previous chapters and provides some
general rules that can be followed while negotiating internationally.
This is not a general book on negotiation. It focuses on its international
business aspects and should therefore be read with cross-border business deals
constantly in mind. References can be found at the end of the book; they lead
to more general approaches to business negotiations. The first two parts should
be read by all with an interest in the subject, since they deal with basic aspects
of international business negotiation. For the third and fourth parts, it is up to
readers to decide which kind of agreements and which areas of the world they
wish to focus on. In the second edition, we have replaced a number of chapters
with some new ones, keeping in mind three issues: to provide more recent and
up-to-date studies; to provide more practical examples and illustrations; and
finally, to create more coherence in the book.
Over the last five years, we have used the book in our courses and have
noticed ourselves, and through feedback from our students, the weaknesses and
strengths of the book. Before compiling the second edition, we asked a number
of our colleagues who used/read the book and they provided us with many
constructive remarks. At this stage, Elsevier also sent the first edition to three
anonymous reviewers, also asking whether there is a need for a second edition.
The remarks we received were most encouraging and helpful and have been
extremely useful in putting the second edition together. We are thankful to all
the colleagues and reviewers who contributed in this process. For colleagues
who are going to use the book in their courses or training programmes, we
suggest they look at the following hyperlinks: “http://kellogg.nwu.edu/drrc/” of
Kellogg’s School of Business. There are a number of exercises and material on
this site that can be very useful. The CD Rom can be bought and it is quite
cheap to use the games/simulations.
In this edition, most chapters have both a conceptual content and illustrative
examples. This is designed to help readers who have not been personally
involved in such situations understand how the concepts described operate in
practice. For those readers who have professional experience of international
business negotiations, the book can also be used to re-read situations, that is, to
provide them with insights on why a particular negotiation developed in a
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