Analysis & Discussion and Recommendation

1 THE INFLUENCE OF CULTURE ON BUSINESS NEGOTIATIONS BETWEEN VIETNAMESE AND JAPANESE COMPANIES Subject: STRM059 -DUMVT – Business Research Project Student name: NGUYEN THI THANH TRA ID: 16401222 Module Tutor: Dr. Holger Siemons Word count: May , 2017 2 ABSTRACT TABLE OF CONTENTS 1. Introduction ................................ ................................ ................................ ................. 3 1.1. Research objectives ................................ ................................ ............................ 3 1.2. Research questions ................................ ................................ ............................. 3 2. Literature review ................................ ................................ ................................ ......... 3 2.1. Culture ................................ ................................ ................................ ................... 3 2.1.1. What is culture ................................ ................................ .............................. 3 2.1.2. Strength and challenges of diversity ................................ ......................... 4 2.2. Negotiation definition ................................ ................................ .......................... 5 2.3. Negotiation styles ................................ ................................ ................................ 5 2.4. Required skills in international negotiation ................................ ..................... 7 2.5. Difference between homogeneous and heterogeneous culture ................... 8 2.6. Company overview ................................ ................................ .............................. 9 2.6.1. Vietnamese companies ................................ ................................ ................ 9 2.6.2. Japanese companies ................................ ................................ .................. 10 2.7. Past and current negotiations ................................ ................................ .......... 10 2.8. Negotiation process ................................ ................................ .......................... 10 3. Brief overview of research ................................ ................................ ...................... 11 4. Data analysis and discussion ................................ ................................ ................. 12 5. Conclusion and recommendation ................................ ................................ .......... 12 5.1. Conclusion ................................ ................................ ................................ .......... 12 5.2. Recommendation ................................ ................................ ............................... 12 APPENDIX ................................ ................................ ................................ ........................ 13 REFERENCES ................................ ................................ ................................ .................. 13 3 1. Introduction 1.1. Research objectives The purpose of the thesis is to analyze the correlation of cultural elements and business negotiation to acknowledge the way culture impacts negotiation in an internationa l business situation between Vietnamese and Japanese comp anies. This purpose can be separated into three sub -purposes: To identify the culturally social setting in each country in question ; To u nderstand the negotiation styles of the two countries ; To understand the way each country negotiating with each other based on the analysis of c ultural factors and negotiation styles . 1.2. Research questions W ith the aim of making a more accurate and precise direction for the report, the below questions are designed to identify and analyze the problem : How does cultural element impact the negotiation style of companies of Vietnamese and Japanese origi n? How do Vietnamese and Japanese deal with the issue s in the business negotiation with each other? Though this research aims to provide a deeper understa nding for Vie tnamese towards building and maintain business relationship with Japanese , it will show by taking cultur al influence into consideration on analyzing business negotiation from both Vietnamese and Japanese points of views. 2. Literature review 2.1. Culture 2.1.1. What is culture Culture is a complicated term to define and there is not only one particular concept of it. In 1952, t he American anthropologists, Kroeber and Kluck hohn after studying a variety of definitions and concepts of culture sorted out a list of over 164 varied concepts of culture . Then they proposed a compendious definition about culture: “Culture consists of pat terns, explicit and implicit, of and for behavior acquired and transmitted by symbols, constituting the distinctive achievements of human groups, including their embodiment in artifacts; the essential core of 4 culture consists of traditional (i.e. historica lly derived and selected) ideas and especially their attached values; culture system may, on the one hand, be considered as products of actions, on the other, as conditioning elements of future action” (Kroeber & Kluckhohn, 1 952) There is one more recognized and noticeable definition is from Matsumoto in 1996, who expressed culture as “the set of attitudes, values, beliefs, and behaviors shared by a group of people, but different for each individual, communicated from one generatio n to the next” . Culture under Matsumoto‟s perspective is the value that is shared among a group. W ith the view from this thesis, the two nations will be classified as a single group, in which each individual share a common set of attitudes, values, beliefs . Thomas (1996) also shared the same idea with Matsumoto o n culture. He defines culture as “a universal 'orientation system, which is typical for a society”. The membership can be displayed within the social environment through the action and perception of each member. According to Hostede‟s (1997), culture is considered as “the collective programming of the mind which distinguishes the members of the group or category of people from another”. It means that people in the same society will learn and share cu lture with others in the same group. Hall (1959) not only agreed with this idea but also added that culture reflects how human learn. 2.1.2. Strength a nd c hallenges of diversity Strength Cultural diversity brings benefits to both labors and enterprises. Different culture can contribute to productivity increase by providing various strategies to address company‟s issues (David Ingram, 2013). Diversity can also enhance marketing opportunities, creative capability and organization image (Esty et al.

1995). New culture can bring on new ideas and p erspectives for each individual to acquire as well as learning about global environment hence both employees and companies‟ integration capability will be remarkably boosted. Challenges Cultural diversity raised var ious challenges in workplace as well as in international negotiation. Handling diversity is not simply acknowledging the distinction from people. It includes appreciating the imbalance, fighting with discrimination and encouraging comprehensiveness. Compan ies are faced wit h discrimination and prejudice as well as negative feedback against the enterprise 5 (Devoe, 1999). Negative behaviors may become obstacles to the organization since they can make harm to business relations and loss in work pro ductivity. (Es ty et al. 1995). 2.2. Negotiation definition Negotiation exists in everybody‟s daily activities. Negotiation is an essential part not only in daily interactions but also in business transactions of any companies and countries. According to Pruitt (1981), negotiation is “a form of decision making in which two or more parties talks with one another in an effort to resolve their opposing interests” Anjan Dasgupta (2005) stated that negotiation is “the process of communicating back and forth for the purpose of reaching a joint agreement about differing needs or ideas” . He also focused on the persuasion practice rather than using power to tackle the problems . Faure and Gunnar (1993) shared a little bit different view about negotiation, which is a settlement to resolve a n argument to make advantages to ourselves a s much as possible to achieve a mutual agreement. Faure and Sjöstedt (1993) also added in that “negotiation is a joint decision -making process through which negotiat ing parties accommodate their conflicting interests into a mutually acceptable settlement”. The indication is that all parties need to be in agreement with the approved process for the best result. P.H. Gulliver (1979) also extended the concept as a discu ssion among arguing parties, with or without a facilitator by another party, they strive for reaching an outcome which gain the agreement on t he disputing problems of them. This final decision is both agreed and acceptable to all parties after an influenci ng and persuading process or both already experienced impact s from other references. It usually shows a part of original requirement and anticipation and there are some added terms and conditions created after the discussion. Gulliver‟s definition not only combines all the above concepts but also includes other crucial perspectives. For instance, negotiations consist of influencing and persuading factors as well as discussion and learning in the proceedings and structure. 2.3. Neg otiation styles Salacuse (2004) defines that negotiation style is how participants from different culture interact in negotiations. According to Straker‟s study in 2006, 6 negotiation style can be classified into three groups: competitive, collaborative and concession styles, which are described in deta il by Horst (2007) as follows. The competitive style is considered as asserting, putting pressure on the other negotiator or stating the value that maxim izing the own position. This style is regularly referred as “win -lose” situation. In the collaborative style, both parties try to resolve the issues by creating fair values and gain the agreement that are acceptable and maxim izing the benefits and objectives of all parties, which leads to “win -win” setting in negotiation . The last style is concession style or usually known as yielding style , in which one party puts down their position and highly emphasize the importance of the other party to achieve their goals. This style is known as lose -win approach. In our practical setting, negotiators can be flexible to use or combine these styles in the negotiation process to obtain their objectives. Besides the study from Straker, the TKI model developed by Kenneth W . Thomas and Ralph H. Kilmann (1988) was also designed to identify the styles of resolving the conflict and in negotiation. This study helps individual in being more aware of their persona lity as well as their negotiation styles. The researchers review the styles on the theory about the interest of oneself needs and the concern for others. In TKI model, five particular styles of negotiation are defined as below. The competing style: people of this style are determined and unaccommodating. This person only concerns his own needs without caring for the other party. In this style, one person uses whatever power and pressure on the other side to win the situation and get their goals. The second style is the accommodating one. The person belonging to this style is unassertive a nd collaborative. In negotiation, the individual ignores his own demand and position to meet the needs and expectation of the other party. The next style is avoiding 7 style, which is unassertive and uncollaborated . The negotiator does not make any attempt to face with the problem or to have a discussion with other parties.

He does not join in tackling the issues until a better point of time or the simplest action is to withdraw from the conflict. Another style is the collaborating style. This person in negotiation is contrary to avoiding one. He will have hig h assertiveness and cooperation. The collaborating style includes the effort to interact with other parties to reach out some approaches that fulfill the expectations from both sides. They try to work in depth on the problem to identif y each implication and find a solution which meets all the concern. The final style in the TKI model is the compromising style. The style is a combination of assertive and cooperative characteristic. The main intention is to achieve some beneficial and agreeable alternatives that satisfy the other negotiators to some extent. This individual will keep the intermediate attitudes and point of view that can be demonstrated between competing and accommodating style. People of this style will go more straight into the problem than avoiding style but do not dig into it like in the collaborating one. Compromising can be understood as making concession and quickly finding a middle area 2.4. Required skills in internationa l negotiation Musial (2001) stated that negotiation skills are crucial for all levels; especially it is essential for all managerial level s. However, the ability to negotiate effectively needs a combination of communication , problem analysis and active listening skills to gain an e xpected outcome. Communication skills Comm unic ation includes both verbal and non -verbal interaction. According to Bywaters (1999), actions and words are at the same importance level on negotiating. Negotiators must have a capability of clear communication to the other party in the negotiation process. The goals and perspectives may be misunderstood if one side does not perform his idea clearly. During the procedure, a successful dealer must have the ability to stress his desired result together wi th his rationale. Problem solving skills Micheal et al (2005) stated that with the problem solving skills, all parties should discuss together to reach out an agreement that is acceptable, which is better for both sides than no agreement is set up. The problem solving method focuses on both negot iators‟ underlying concerns, encourage all parties to 8 establish and develop their business relationship even if they are in dispute rather than making a contradictory decision. One should explore the best way to take advantage and fairly allocate the benefits of the agreement. Active listening skills Negotiators should own the skill to listen actively to the other side during the discussion, wh ich means that one not only has the capability to understand the verbal interaction but also the body language. It is crucial to listen to the other negotiators to find out a zone to compromise in the debate. An effective listener will spend more time for the other negotiator‟s concerns rathe r than wasting a lot of time standing in his point, thus he can successfully reach an alternative to satisfy both parties. 2.5. Difference between homogeneous and heterogeneous culture Homogeneous culture A variety of countries across the world are popular with comparatively homogeneous community. A homogeneous culture is the one that people shared the same meanings and customs, there is little difference in beliefs. In homogeneous society, people hold the way of thinking and behaving in common.

The level of consensus is overwhelming and the power of core values is made up in the company of a n upper power who own homogeneousness of beliefs. In these cultures, different groups within the countries may keep their own values but they still refer to t he supreme to orient and control the organization and may get into difficulty in reforming the situation. The value may not be shared widespread but the culture leaders and decision makers are still consistent and are accepted to have domination right. After a long time, the most influential party validates their beliefs and core values, which will be then reflected in the whole social and political environment. Taking South Africa as an example, the white ethnic minority manages the government as well as the social regulations and consequently mak es up the law system with many restrictions namely as the race discrim ination. In homogeneous culture, the core principles and values shown in the political policy, economy situat ion and business environment belong to the group who dominate and institutionalize th e society. In these countries, an integration of beliefs and values direct the attitudes and behaviors. Some specific examples of countries with homogeneous culture are Ch ina, Japan or Saudi Arabia. Societies are reflected by a set of behaviors with particular meanings. Moreover, these 9 meanings are also applied in the environment of the econom y. These values have long -lasting lifespan and subsequently have a significant influence the operation of business in a country. In a society with cultural homogeneity, the way of thinking and acting is represented in the legal and economic structure and will be difficult in changing or revising. Heterogeneous cultures A heterogeneous cultural society is the one in which various communit y association have specified and different values and notions. In this culture, the society is made up from various shared meanings and understandings. Many known concepts are popular with these organizations but totally unrelated in other‟s understandings. A variety of beliefs coexisting in the same community make up a specific characteristic of heterogeneous culture. In both homogenous and heterogeneous culture, a dominant set of value are still in existence but the difference is that in homogenous culture, only one or some value settings are acceptable. And in heter ogeneous society, there can be a variety core values and beliefs so there is much greater diversification. The influence of heterogeneity was also mentioned in Time magazine by an article related to the immigration group to the United States. This viewpoin t concentrated on the diversity of origin that shape s the heterogeneity. Greenwald (1985) in another article stated that: „W hat country is this?‟ Many bemused Americans might ask that question as they go about their work and play. ... Americans are increas ingly finding that entire businesses have acquired a foreignborn flavor.” Joel Garreau (1981) also characterized the fe atures of hetero geneous culture. He noted that North America has various areas that can be represented in nine different cultures. The developed countries are more likely in the list of heterogeneous culture than other nations. Some countries owning heterogenous cultural society can be listed as Australia or Canada. On considering the level of cultural diversit y in countries with hete rogeneity, one would anticipate that the political and economic structures would also perform the diversity, and relatively include greater variations in the systems. 2.6. Company overview 2.6.1. Vietnamese companies Vietnamese companies are local companies that often have commercial activities with Japan. The business can be importing goods or products from 10 Japan to provide the domestic market, exporting the commodity to Japanese mar ket or using the service from Japanese companies. 2.6.2. Japanese companies Japanese companies can be understood as companies invested and operated by Japanese members. These companies are manufacturing or service companies, locating either in Japan or Vietnam and oft en have trading business with Vietnamese companies. 2.7. Past and current negotiations 2.8. Negotiation process Graham (1984) said that negotiations include four main stages: buidling relationship, exchanging information about the negotiating issues, compromising and persuading, and finally reaching an agreement. Meanwhile, according to Weiss (1993), the process consists of pre -negotiation, negotiation and application of the post -negotiation in the end. To be specific, the negotiation process can be de scribed in the below chart: The first step in the negotiation process is gathering all information about the arguing issue and the other negotiator. Information is a competitive Gather ing background information Assess ing negotiation tactics Creat ing the negotiation plan Engag ing in negotiation Closing the negotiation Contracting the agreement Enforc ing what is agreed happen 11 advantage and can bring significant benefits to negotiators. The benefits can be understanding clearly our goals and interests to the topic or the capability to identify and analyze the other parties strengths and wekanesses and the objectives that they strive for. The importance of information was stated b y Cohen ( 1980) as: “it would give you a big advantage if you could learn what the other side really wants, their limit, and their deadline”. After understanding clearly about ourselves and the other negotiators, we should assessing the negotiation tactics to achie ve our goals. The appropriate negotiation style will be applied after analyzing the negotiating problems and the characteristics of the other parties. Designing a detailed negotiation plan will be essential step before negotiation. W ith the strategy in det ails, many scenarios are proposed to react to the response of the other party. W hether both negotiators work collaboratively or be opposed each other, all engaging in the negotiation with the objective of reaching an agreement.

Focusing on the wishes of the others can accelerate the chance to obtain a better deal through considerable flexibility (Gunia, 2011). People should also consider the situation in which an agreement is not achieved, which is called BATNA. One without a str ong BATNA may have difficulty in negotiating with the others who owns radical alternatives to the agreement, as they will debate assertively and force you take an inadequate result just due to your alternative shortage ( Lewicki et al., 2010 ). After reachi ng an agreement, all parties need to record their outcome and get the confirmation on it. The implementation of action plan should be followed by both sides after the discusion meeting. 3. Brief overview of research Structure This section will study the influence of cultural factor s on negotiation between Vietnamese and Japanese companies. This section will begin with a discussion about the research design and then is followed by the limitations and challenges of the research. The next part will outline data collection procedures and brief of explanation of open and closed questions in the questionnaire. Research methodology Based on the research questions and the materials available, p articular methods can be applied to study the impact of culture. Quan titative methods, 12 such as the research carried out by Hofstede (2010) to get the data to design the model for cultural dimensions, may involve an large amount of data gathered from a lot of different sources for a long time. Therefore, “ quantitative resear ch cannot deal with the social and cu ltural construction of its own “variables” ” (Silverman, 2008). On the other side, according to Eriksson and Kovalainen, 2008 , qualitative measures can access the practice of social structure as generated and interpreted by cultural meanings. From the nature of the issue and with the purpose of deeper studying about the impact of cultural factors in a negotiation setting, a qualit ative research method has been chosen for this thesis, as it proves to be the most appropriate to respond to the problem. Limitations and challenges The thesis is restricted to the comparison of the two cultural settings and their influence on the business negotiati on. The participants are limited to the staff in Vietnamese local companies. An enormous benefit here is that the information collected is compatible with the research in question and its purpose.

However, the most challenging step is tha t it will take much time and effort to gather the data as well as it may get into many difficulties to approach the reliable sources. But when the sources are accessed, the act of collecting the information will become easier. Data collection The data col lection will include primary as well as secondary data. The primary d ata is collected by a survey aiming to the sale managers at Vietnamese local companies that often have commercial activities with Japan . The questionnaire is designed in English to avoid any misunderstandings in the result of the survey. The secondary data will consist of remarkable sources. The significant one is from academic articles and books, in which there are an abundance of theori es, concepts and information for Vietnamese and Japanese culture and negotiation styles. Besides, the research also uses data from online databases and articles as well as trustworthy websites to analyze the influence between two countries. 4. Data analysis and discussion 5. Conclusion and recommendation 5.1. Conclusion 5.2. Recommendation 13 APPENDIX REFERENCES