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After each group has presented its culture, both teams will conclude by pointing out areas where, due to differences in the two cultures of negotiation, misunderstanding, frustration, and conflicts might occur.
1.Why can negotiations between industrialized and developing countries be particularly sensitive? Why might the two sides be skeptical toward each other?
2.What can be done by both sides to overcome this skepticism?
3.In gauging the balance of power, what advantages does each side have? How would you exploit the advantages of each side? How could each side use their advantages? What is the possible danger of pushing your advantage too far?
Acme Water Pumps, Ltd. is a major English manufacturer of irrigation equipment whose primary market is Europe, but which is attempting to penetrate the African market. They see a potentially enormous market for their almost maintenance-free J27 water pump. This pump was developed in light of maintenance problems in Africa. The pump is based on a limited number of moving parts, which reduces the need for maintenance and the possibility of breakdowns. They have sent a brochure to the Nigerian Ministry of Agriculture, which has studied the design and shown an interest. The Nigerian Ministry invited the Acme representatives to demonstrate the pump and were openly impressed by both its simplicity and its effectiveness. The ministry extended another invitation to discuss contract matters, which is the basis of this case.
The major items to be negotiated are:
1. Cost of the pump figured on CIF or FOB.
a. CIF (Cost, insurance, freight, where the seller is responsible for all of these expenses) or FOB (Free on board, where the buyer pays all costs from the moment the goods cross over the ship's rail)
b. Delivered at the Frontier, where the seller's obligations are met when the goods arrive at the frontier/border or Delivered Duty Paid, where the seller must deliver to the buyer's door and pay all of the duties.
2. Credit terms. A common credit term is 30 days, 1 percent, which means that the Nigerians will receive a 1 percent discount if they pay within 30 days of the billing
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date. With this system, however, there is no guarantee that they will pay. For that,
the British would need an irrevocable documentary credit.
3.Installation of the pumps. Installation of the pumps will involve an expense for Acme. Naturally, the more pumps ordered, the lower the installation fee per pump. At a certain level of purchase, the installation should be free.
4.A service contract and the training of Nigerian nationals to man the service center.
The Nigerians are interested in a service center being established which would eventually be manned by Nigerians. This would result in jobs and training and reduce service costs.
5.The possibility of a subsidiary jointly owned by Acme and a Nigerian partner. The Nigerians would want a joint venture that would result in jobs, training, technology transfer, and profits.
1. PRE-NEGOTIATION: Each side will prepare for the negotiations by discussing their negotiation strategy and filling out the Negotiations Worksheet and the Position Presentation Worksheet (Appendices 1 and 2, “Negotiating in English”, Эмерель Н.И.,
Григорьева Е.Ю.)
2. SOCIALIZING: Spend five minutes exchanging business cards and talking about
common interests.
3. SITTING DOWN AT THE NEGOTIATING TABLE: The Nigerian team leader, Mr. John
Abiola, Deputy Secretary for the Ministry of Agriculture, will place the English on the appropriate side of the table with their head of delegation in the middle, surrounded by his subordinates. While still standing, the head of the Nigerian team will introduce the team's members, their name and title. Then the head of the English team, David Smythe, Head of Overseas Sales will do the same.
The Nigerian Team:
Mr. Christian Onoh, Chief Engineer for Irrigation Projects
Mr. Stephen Agu, Chief Purchaser
Mr. Paul Nwankwo, Comptroller
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The English Team:
Mr. Richard Bromhead, Product Manager for the J27 water pump Mr. lan Barnard, Area Representative for Africa
Mr. Robert Cooper, Head of Production
4. OPENING STATEMENTS: The head of each team will make a statement. John Ahiola will welcome the English team and then David Smythe will thank the Nigerian head for the invitation. Both will express a desire for a lasting mutually beneficial relationship and emphasize the enormous agricultural potential to be developed in Nigeria through irrigation projects. This also means that the Nigerian villages would enjoy the advantages of having easy access to water.
Opening statement suggestions:
We would like to welcome you to…
We are glad that you could come and hope that you will enjoy your stay here.
We will do our best to make you feel at home, and if there is anything you need or want, please let us know.
We look forward to getting to know you better both as business partners and socially.
We wish to thank you for inviting us to…
Thank you for inviting us to…
5. OPENING THE NEGOTIATIONS: The head of the Nigerian team will suggest which item to begin with stating: "I suggest that we begin with ..."
1.Cost of pumps
2.Coverage of shipping costs (GIF or FOB)
3.Credit terms
4.Installation of pumps
6.A jointly owned subsidiary
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6. CONTINUED NEGOTIATIONS: Negotiations will continue until one or both of the sides feel a need for a break, either to discuss business separately, contact someone at the Ministry, or simply to get some fresh air. In the latter case the two teams can socialize outside of the negotiating room, but remember, this is also part of the negotiation process and relevant information can be subtly exchanged. Periodically throughout the negotiations, particularly when some form of agreement is reached, each team should sum up their understanding of the agreement to avoid misunderstanding.
7. FINAL AGREEMENT: If a final agreement is reached, it will be summarized and then written up in the form of a contract.
8. ANALYSIS OF THE NEGOTIATIONS: Make a presentation where the two teams present the contract arrived at and where each team presents its strategy, its goals, and how successful the team members feel they were in attaining their goals in the contract.
LANGUAGE MASTERY EXERCISE
WRITTEN EXERCISE
If you arrive at an agreement, write up a final contract as a joint assignment of both teams.
CASE 3
CASE SUMMARY
This case involves both selling a product and negotiating a sales contract between a German producer of hydraulic cranes and an Italian shipping company. Remember, in such cases, a major part of negotiating is convincing the other party that they need your product. Germany has an excellent reputation for producing quality goods, and German salespeople often emphasize the technological quality of their products when selling. However, there is a modern trend in sales that emphasizes a customer orientation, which means that a salesperson should focus on the customer's needs and show how his or her
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product meets these needs. Thus, a product-oriented salesperson misses the point in presenting only the technological advantages of the product, while forgetting that the product must perform in a given situation to meet the customer's needs. An understanding of these needs, and a tailoring of the sales presentation to show how the product satisfies these needs, is important. In this case, there are considerations such as delivery, service, training, and credit terms. Your job as salesperson is to analyze your customer's needs and show how the total package best meets these needs.
CULTURAL BACKGROUND
Perhaps one major difference between the German and Italian considerations would be an emphasis on the technological qualities of the product from the German side and the Italian shipping company's concern with delivery schedules, training, service, and credit terms. The German culture prizes technological advancement and emphasizes this in sales promotion. Naturally, the quality of the machines is important; however, Bertoni's concerns go beyond pure quality concerns. Two groups will be selected by the teacher to present an analysis of the two cultures of negotiations in this case – Germany and Italy – along the lines discussed in Chapter Cultural Awareness in International Negotiations on cross-cultural negotiations, such as (1) differing concepts of time, (2) the purpose of negotiations—deal versus relationship establishment, (3) approaches to decision making, and (4) the value and importance of protocol, ceremony, and so forth. After each group has presented its culture, both teams will conclude by pointing out areas where, due to differences in the two cultures of negotiation, misunderstanding, frustration, and conflicts might occur.
QUESTIONS FOR DISCUSSION
1.When selling a product in your culture, what is of greater importance – a product orientation where you emphasize the quality of the product or a customer orientation where you emphasize how the product will benefit the customer and meet his or her needs?
2.How would you present Hydra Tech's product? Each group will discuss this and then several groups will be asked to make a brief presentation of Hydra Tech's cranes to a Bertoni representative. Afterward, the class will evaluate the presentations on the basis of how convincing they were and the language they used.