First of all we will know what was the meaning of Negotiation Styles. The negotiation styles are nothing but the way of culture,behavior,skills of th people of different organizations. The negotiation styles are different for different people in different regions the negotiation styles of the people vary from one region to another region. In a international business organization If we go to another country and if we make decisions on our own we may able to give a bad decision in that country because the decision taken by our own was not more reliable than the decision of the people of that country hence the negotiation styles plays a key role in making in a better decision in international business organization. For example let us compare the negotiation styles of two countries in a international business organization.
An England clothes manufacturer Peter England has found by researching that the the manufacturing of formals would save them up to 80 % on their cost of production of the same items produced in India.The company decided to send the England negotiators to india to make an agreement to make a best deal with Indians
The planning and production manager hired me to give a advice to give a advice to his team to make a best deal with the Indians.
I made a PEST and SWOT analysis of India’s macro and micro environments. This analysis shows me that Indian culture has unequal distribution of wealth and power. A personal relationship with Indians would help the team to run negotiation process easily and profitably.
1.1 Client’s Description:
My client of peter England is a clothes manufacturer who was one of the famous manufacturer in manufacturing the formal clothes.
1.2 Client’s Description of Problem:
The client has has arised a problem for me tthat “Our planning and production department had a research and found that if Peter England outsources the production of formal clothes in India to a third partywe can save upto 80% of the current costs of production of the this items. These savings include with the human resources cost and equipment maintenance, insurance of plant production and material, employees, transport etc.
A negotiators team to be sent to India to make a discussion and negotiate on the cost of production of formal wears. It was necessary for the team of negotiators to fully understand the Indian culture. since the production margin of peter England in manufacturing the formal wear was been saved. The margin of the production of the product depends on the negotiators and the skills bring up by them.
1.3 What the Client requires of Me:
The manager of the planning and production , Mc Farland approached me and asked me to give a suggestion to the team of negotiators to increase the margin of production of the product making a deal with the negotiators of India.The client also asked me to give a detailed information about the cultural differences between the England and India.He also asked me about the detailed description of the negotiation styles in India and how it is carried on the culture of India.So that it would help the team of negotiators in achieving their targets.
1.0 Overview of the situation
The client had made a research and had had decided that he had a potential to save up to 80 % in manufacturing the formal clothes of his company Peter England. However the potential of savings in manufacturing the product depends on the team of negotiators who are being sent ot India. It is very important that they understand the Indian culture and market to get the best possible results.They should understand the values, interests, goals, ethical principles and assumptions of the Indian culture.Hence the success of the project depends up on the team of negotiators who must understand the ethics,culture of the Indians an their ability to compete with them for the best.
The team of negotiators should have a SWOT analysis to understand the depth. I is also essential for the team to to have a PEST analysis in terms of its political, economic, social and technological issues and conditions in the Indian environment.
2.0 Analysis of the situation
According to Moran and Stripp (1991), negotiation takes place when two or more parties have both common and conflicting interests and interact with one another for the purpose of reaching a mutually beneficial agreement.
3.1 PEST analysis:
PEST is the acronyms for Political, Economic, Social and Technological. This analytical tool is used by companies to analyse the overall environment or the macro environment of a country and industry before entering into business with them.
The political environment of India is quite safe. It is the policy of Indian government to facilitate western companies to invest and outsource their operation to India.
The negotiators must have an in depth knowledge of Indian laws and regulation regarding foreign investors.
India’s economic condition is also good. It is rapidly becoming the hub for investment from western world in south Asia. Indian Rupee has gained strength in the recent times which shows that the market is growing and gaining strength. Also the difference between the US dollar and Indian rupee will enable the client to pay handsomely to the manufacturers in India and yet keep their costs low because 1 US dollar is worth 50 Indian Rupees (approximately). This would help in getting the loyalty of India manufacturers.
The Indians are highly inspired and influenced by the Americans. The Indian society is quite acceptable of western cultures. There is also a tendency of psychological inferiority on part of the Indians as the Indian sub continent has been ruled by the westerners (British) for a hundred years. The negotiators might like to take advantage of these facts and talk the Indian team into their required results. However, they need to remember that in order to make best use of their visit, the team must get in friendly terms with the Indians. This can only be achieved through socialising outside office hours. These social events might include going to restaurants, bars, clubs etc together.
Also, the negotiators should be able to see beyond the role of Indian negotiators and should be able to find out the hidden interests and priorities of their counterparts.
Indian is on its way to becoming the main technology hub of the east. High quality and latest technology of all sorts is available in India. Any machinery required for the production plant can be obtained from India or otherwise can be imported from China at low cost.
3.2 SWOT analysis
SWOT is an acronym for strengths, weakness, opportunities and threats. Here, SWOT analysis is used to analyse the micro environment in India.
The Indian society is open and friendly towards the westerners. The government has made laws to support foreign investors The negotiators being westerners will have a psychological edge over their Indian counterparts. Beauty Expressed Inc. will be able to pay attractive amounts to the Indian manufacturers and yet keep their cost low due to the difference in the two currencies. Also India is famous for its high quality fabric and low cost productions.
The Indian culture is very different from the US culture and therefore their negotiating styles and ways are much different from each other and work on entirely different variables from each other. For example, in the Indian culture, it is more important to secure a good relationship with the other partyeven if you have to losesomething. Whereas, in the US culture, getting the most out of the deal is more important than keeping the other party happy.
The client would be able to save huge amounts due to the availability of low cost labour in India.
There can be potential delivery issues as deadlines are considered flexible in the Indian culture where as they are considered absolute in the US culture. In addition to this, the US negotiators might not be able to achieve their targets if they fail to understand the variables working behind the attitudes of Indian negotiators.
3.3 Overall Analysis:
In order to understand the Indian culture so that the appropriate negotiation style and technique can be adopted, we would use Hofstede’s Five Cultural Dimensions. Hofstede calculated the cultural dimensions of many countries which can be accessed on his website in the form of graphs. We will use these to analyse the Indian culture.
1. Power Distance Index Hofstede’s Power distance Index measures the extent to which the less powerful members of organizations and institutions accept and expect that power is distributed unequally.(www.clearlycultural.com)
As the figure 1 shows that PDI for India is 77 against a world average of 56.5 (Fig 2) and that of US which is only 40. This indicates a high level of discrimination in Indian society with regard to power and wealth.
Individualism means the degree to which individuals are integrated into groups. (www.clearlycultural.com). Figure 1 one shows that the IDV for India is at 55 against that of US at 91 and a world average at 50. This shows that the Indian culture is inclined more towards collectivism rather than individualism.
Masculinityrefers to the distribution of roles between the genders in a culture. (www.clearlycultural.com)India has Masculinity as the third highest ranking Hofstede Dimension at 56, with the world average just slightly lower at 51(Fig 2)
4. Uncertainty Avoidance Index
Uncertainty avoidance deals with a society’s tolerance for uncertainty and ambiguity. (www.clearlycultural.com) UAI for India is 40(Fig 1) as compared to a world average of 65 (Fig 2). This shows that the Indian culture is open to new and unknown vistas. (Greet Hofstede Cultural dimensions, 2009)
5. Long-term Orientation
Long-term Orientation deals with Virtue regardless of Truth. Values associated with Long Term Orientation are thrift and perseverance. India’s Long Term Orientation (LTO) Dimension ranks 61 against that of USA at 29 (Fig 1) in the graph, while the worlds average is at 48(Fig 2). This huge difference must be note as it shows how differently the two cultures operate. The Indians would concentrate more on building a long term relationship while doing business with another party whereas, the Americans would focus just on getting the job at hand done. The LTO score indicates that the culture is perseverant and parsimonious. ( http://www.geert-hofstede.com/)
4.0 Solutions and Recommendations
A thorough analysis of the Indian culture, its comparison with the American culture and its SWOT and PEST analyses reveal that the Indian market is very suitable for outsourcing the manufacturing of T-shirts and trousers. In order to achieve their target, the team of negotiators must keep in mind the following.
- Choose the appropriate strategy by developing a personal relationship with their Indian counterparts. As we have seen that the Indians are more prone to concentrate on building a long term relationship, the negotiators should try to cash this attribute and ask for their required targets.
- Project the correct personal and organisational images.
- Study and understand the basic cultural differences and intelligently use this information.
- Ask the most relevant questions. These might be outside the business area but will help in making the process of negotiation smooth.
- Offer and request the appropriate types of concessions at the right time. Here the tendency of the Indian culture to develop long term relations again plays a vital role. Indian manufacturers can be very loyal and giving if they are promised a long term partnership ie, the negotiators should capitalise on the long term orientation of the Indian culture.
- Remain focused on their targets but show flexibility in order to achieve them. This would ensure a smooth and fruitful negotiation.
- The team should try to impress and keep in hand the leader of the Indian negotiation team. This means that they should capitalise on the tendency of the Indian culture to respect and accept difference in power.
- Beauty Expressed Inc.’s team should focus on a people oriented negotiation rather than a task oriented discussion. They should give more importance to the team lead of the Indian team.
- The negotiators should not adopt a sequential style of negotiation in fact they should adopt the holistic style of negotiation and deal with the problem as a whole. This implies that they should not try splitting the problem into parts.
- The negotiators should try to use a collaborative style and create a win-win situation. This would not only help them achieve their goals but would also help them create a long term relation with their Indian counterparts.
5.0 Forecasts and Outcomes
The project of outsourcing manufacturing of T-shirts and trousers to an Indian company is feasible. However, the positive outcome of this project depends entirely on the success of negotiation between the team from Beauty Expressed Inc. and their Indian counterparts. This is possible if the team follows the above mentioned recommendations and be sensitive to Indian culture, its demands, dimensions and variables upon which it works.