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To cite this document: Robert Gulbro, Paul Herbig, (1995),"Differences in cross-cultural negotiation behavior betweenindustrial
product and consumer product firms", Journal of Business & Industrial Marketing, Vol. 10 Iss: 3 pp. 18 - 28
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Differences in cross-cultural
negotiation behavior between
industrial product and consumer
product firms
Robert Gulbro and Paul Herbig
Introduction
When two people communicate, they rarely talk about precisely the same
subject, for effective meaning is flavored by each persons own cognitive
world and cultural conditioning. When negotiating internationally, this
translates into anticipating culturally related ideas that are most likely to be
understood by a person of a given culture. Discussions are frequently
impeded because the two sides seem to be pursuing different paths of logic;
in any cross-cultural context, the potential for misunderstanding and talking
past each other is great (Kramer and Herbig, 1991).
Cultural differences
18
JOURNAL OF BUSINESS & INDUSTRIAL MARKETING VOL. 10 NO. 3 1995 pp. 18-28 MCB UNIVERSITY PRESS. 0855 8624
Barriers to
successful
agreement
19
(Fisher, 1980). No one can usually avoid bringing along his or her cultural
assumptions, images and prejudices or other attitudinal baggage into any
negotiating situation. The way one succeeds in cross-cultural negotiations is
by fully understanding others, using that understanding to ones own
advantage to realize what each party wants from the negotiations, and to turn
the negotiations into a win-win situation for both sides (Herbig and Kramer,
1992a).
Domestically, the study of negotiation tends to encompass business
relationships between parties, tactics, bargaining strategies, contingency
positions, etc. However, in a cross-cultural context, besides the usual rules of
negotiation, one has to be wary of fine nuances in relationships and practices
and how they are perceived and executed by members of the other culture.
The two business negotiators are separated from each other not only by
physical features, a totally different language and business etiquette, but also
by a different way to perceive the world, to define business goals, to express
thinking and feeling, to show or hide motivation and interests (Herbig and
Kramer, 1992b).
National traits
Recent studies
20
The classical view of the negotiation process undergoes four stages: non-task,
task, persuasion and agreement (Graham, 1986). The first stage, non-task
sounding, includes all those activities which might be described as
establishing a rapport or getting to know one another, but does not include
information related to the business of the meeting. A fundamental
difference between Americans and Japanese is that the Japanese rely much
more heavily on personal relationships in business and spend a
disproportionately higher amount of time on the rapport (non-task) stage then
do Americans (Graham, 1984). This creates conflict between firms from
these two cultures and heightens the probability of failure.
The second stage, task, concerns the information exchanged regarding the
parties needs and preferences of the parties. For the Japanese firm, this
exchange of information is the main part of the negotiation. Questions and
clarifications abound with the Japanese attempting to obtain a complete
understanding, which, to them, is essential to the ultimate success of the
negotiations. Whereupon to the typical American firm, information, although
important, should have been satisfied prior to the conduct of the negotiations.
Various persuasive
tactics
21
Probably as long as marketing has been studied, scholars have debated the
merits of conducting separate disciplines for both industrial product markets
and consumer product markets. Fern and Brown (1984) discussed this
dichotomy in considerable detail and drew the conclusion that there is no
significant difference between industrial marketing and consumer marketing
and that it is a mistake to differentiate between them. Cooke (1986), in the
inaugural issue of this journal, drew the opposite conclusion and indicated
that it is not feasible to say that industrial marketing and consumer
marketing are the same. Many scholars have weighed in on one side of the
debate or the other. It is not our intent to enter into this debate. It is, though,
our intent to examine this dichotomy, not from the perspective of should it
even be compared (our basic assumption must be that, like Cooke,
substantial differences do exist), but to postulate and test differences in
negotiating behavior between industrial product firms and consumer product
firms. Others (e.g. Day and Herbig, 1990; Herbig et al., 1994) have
compared this dichotomy in various subsegments of the marketing discipline
(innovation, forecasting).
Review differences
between industrial
and consumer
product markets
The basic differences between the two segments have been well
documented. However, in our pursuit of a priori differences and hypotheses,
it is necessary to review them. Without going into elaborate detail (which is
not necessary for a journal on the subject), these are (industrial versus
consumer):
This is far from an exhaustive list but should provide a solid starting point.
Another point to consider in discussing this dichotomy and its relationship to
negotiations is that, although consumer product firms by definition market to
the mass consumer market, negotiations are typically not entered into with
their primary market, the consumer. Rather, negotiations, and by
extrapolation, cross-cultural negotiations, will usually be with suppliers or
22
The data
Data for this study was collected by mail survey. One thousand surveys were
sent; 200 to each of five geographically dispersed states within the US, State
industrial directories were obtained from the international trade section of
each states economic development group. Survey participants were selected
randomly. Surveys were addressed to the CEO/President or the designated
international official (if provided in the directory) for the firm. A cover letter
with university letterhead was utilized to provide legitimacy. This letter
23
asked the recipients to guide the survey to the most relevant respondent
within the company. One-hundred-and-seventy-five responses were
received, of which 161 were usable, for a response rate of slightly above
16%. Many of the unusable responses indicated they had not yet entered into
exporting and so had no cross-cultural negotiating experience (but most
wished us well). The number of respondents was substantial and provided us
with the capability to do the analyses. The recipients were asked numerous
questions about their latest cross-cultural negotiation. Organizational
characteristics and recipient demographics (age, experience, language) were
also queried. 2 analysis was used to analyze differences across
organizations for each question. Subsequent analysis used t-tests and
M(ANOVA) statistical tests to assess mean differences. Table I shows
respondent profiles.
Results
Significant
differences
t-test and 2 analysis were used to determine significant differences in crosscultural negotiating behavior between industrial product firms and consumer
firms. Significant differences were as follows:
No.
Type of business
Manufacturing
Services
140
20
87.5
12.5
Customer type
Industrial
Consumer
106
54
66.0
33.0
53
82
53
65
34
Years in business
New (1-10)
Mid (11-20)
Older (20-50)
Mature (50+)
24
38
70
29
Size of company
Small (<$50M)
Large (>$50M)
87
64
Respondent profiles
Age
Years business experience
Years experience in current industry
Years negotiating experience
% speak another language
% US citizen
Means
34.0
42.0
22.0
47
25
19
15
34.6
87
Cross-cultural
negotiating
behaviour
Greater cultural
sensitivity
Five stages
Hypothesis 1
Industrial product firms had more members on their negotiating team (2.3
versus 1.4, t = 3.785, p < 0.001) than did consumer product firms. Industrial
product firms tended to have a longer overall period of time involved in a
cross-cultural negotiation (3.3 months versus 1.25 months, t = 3.663,
p < 0.001) than did consumer product firms. Industrial product firms tended
to spend more time in prenegotiating briefings (3.6 days compared to two
days, t = 2.5, p < 0.016) than did consumer product firms acknowledged. No
significant differences were found for either being the buyer or seller or the
number of negotiations opportunities involved in either buying or selling.
Nonetheless, substantial differences exist between the two groups in their
cross-cultural negotiating behaviors; H1 is confirmed.
Hypothesis 2
The second hypothesis indicates greater cultural sensitivity should exist for
consumer product firms. This should be seen in the use of country and
cultural brokers and briefers. No differences were observed in the usage of
country or technical experts between the two groups. Surprisingly, industrial
product firms used disproportionately more translators than did consumer
product firms (2 = 13.4, p < 0.001); no differences in usage of bicultural
brokers were found between the two groups. Industrial product firms also
used cultural experts (2 = 5.0, p< 0.008) and business experts (2 = 11.5, p
< 0.001) in their briefing process to a much greater extent than did consumer
product firms. Explanation for both the Industrial product firms greater use
of translators and country experts than consumer product firms could result
from one of two possible scenarios: either the consumer product firms had
ready available talent within the firm (i.e. language fluency and country
proficiency with their current staff) and did not need to go outside for such
expertise or that complacency and overconfidence existed per their
consumer behavior expertise. Let us hope it would be the first and not the
second. Thus, H2 must be disconfirmed. The results would seem to indicate
the consumer product firms do not exhibit the greater cultural sensitivity
postulated.
Hypothesis 3
Table II shows a comparison in the negotiating process behavior of industrial
product firms versus consumer product firms. Note that five stages exist
instead of the four which Graham discussed; the authors subdivided one of
the stages to result in what they felt were more accurate depictions of the
negotiation phenomena. Three significant differences were found. Industrial
product firms, as predicted, spend significantly greater time (proportionally)
25
Own
Mean values
The other side
Establishing rapport
15.9/19.3
14.9/9.8*
Positioning
15.3/17.1
16.0/15.0
27.0/30.3
19.1/17.6
Compromise
22.5/16.7*
11.3/10.0
14.7/21.2*
14.5/18.2
Note:
Values represent respondent perceptions of time spent on each activity during the cross-cultural
negotiation process
Key:
/ denotes mean % score for industrial product firms/ consumer product firms
* significant at p < 0.05 level
during the compromise stage than did consumer product firms. On the other
hand, consumer product firms, as also surmised, tend to spend a higher
proportion of the negotiating process itself in the agreement, review and
revision stage. The third significant difference was in the two groups
perception of the time the other side spent on establishing rapport, with
industrial product firms perceiving that a significantly greater amount
(proportionally) was being spent by the other side, compared to the amount
perceived by consumer product firms. This too may well be related to the
greater cultural sensitivity of consumer product firms and the other side may
believe less time may be necessary upfront when dealing with consumer
product firms as compared to what may be required for rapport and
establishing the necessary baselines with industrial product firms. While the
time spent in the non-task stage was not significantly higher for consumer
product firms than industrial product firms, the number was greater and in
the correct direction postulated. Thus, H3 is confirmed.
Greater likelihood of
success
Hypothesis 4
H4 suspects that, based on the consumer product firms greater
understanding of cultural differences, consumer product firms should have a
greater likelihood of success than industrial product firms in a cross-cultural
negotiation. Table III shows the analysis comparing negotiation success or
failure to industrial product versus consumer product firms. Surprisingly, the
Success
Failure
Total
107
Industrial
85
22
Consumer
32
22
54
117
44
161
Total
Note:
27
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28