Negotiation Theory and Skills –Negotiating Successfully with the Chinese

04/20/23

Associate Professor Alan KirtleyUniversity of Washington School of LawSeattle, Washington U.S.A.kirtley@uw.edu

Doing Business in China

Panel 1 – Trade and Investment Patterns between Mexico and China

Panel 2 – Mexico and China in the WTO Panel 3 – Negotiating Successfully with the

Chinese Panel 4 – Chinese Structures and

Government Procedures Panel 5 – Resolution of Conflicts

Negotiation Theory and StrategyTonight’ focus is on:Applying the knowledge you now have of the legal theory of international commerce and investment into actionTo develop a strategy as a Mexican lawyer for negotiating with the Chinese

Program Outline

Discussion of negotiation theory Summary of the literature on cross-cultural

negotiations with the Chinese Sharing personal experiences of negotiation with

the Chinese Fraser “Francisco” Mendel Donsheng “Don Diego” Zang

Panel discussion, with audience participation, on how Mexicans can negotiate successfully with the Chinese

Exercise

Take hold of someone’s right hand You will get a point every time the other

person’s hand touches the desk The goal is to get the most points you can No talking is permitted Do not look around the room to see what

others are doing You have 10 seconds

Negotiation Strategies

Different negotiation strategies are available: Competitive Interest-based

Competitive Strategy

Assumption 1:

The parties bring the same goals, interests and values to the negotiation

Assumption 2:

Negotiation is a competitive process

There is a winner and a loser

Mindset: Every dollar gained is an equivalent dollar loss to the other negotiator, and vice versa

Competitive Strategy

Competitive Negotiators: Demand that their wants be met Take and defend positions Seek to maximize their share of the “pie” Tend to rely on power tactics

Competitive Strategy

Problems with the Competitive Strategy A compromise might be reached but value is

left on the table Excessive competition can lead to impasse,

when a good deal for both was available Difficult to establish a relationship of trust Competitive strategy may be counter

productive in certain cultural contexts

Interest-Based Theory of Negotiation GETTING TO YES

First published in 1981 Author Roger Fisher Harvard Law Professor Translated in numerous languages SI’ DE ACUERDO! COMO NEGOCIAR SIN

CEDER (1985) Made “Win-Win” part of everyday lexicon

Interest-Based Theory of Negotiation GETTING TO YES Interest-based rather than competitive

approach to negotiation More culturally compatible with the Chinese

negotiators

Interest-Based Theory of NegotiationGoal is to be a SMART negotiator who:Focuses on the parties’ interestsLooks for available trade-offs Creates the best deal available for both sides

Interests

Options

Legitimacy(Objective Criteria)

Communications Relationship

Alternatives(BATNA)

Commitments

Sputnik Diagram

Strategies and Tactics for Interest-based Bargaining First Principle of GETTING TO YESSeparate the People from the Problem:

Negotiation is not a battle of egos Instead, it is working together to solve a problem

in the most elegant manner available

Separate the People from the Problem Interest-based Bargaining requires:A positive working relationship between the partiesTrustGood communicationsWe will see how important that is when negotiating with the Chinese

Strategies and Tactics for Interest-based Bargaining Second Principle of GETTING TO YES:

Focus on Interests and not positions

Focus on Interests not Positions Position

What someone demands Interests

The many reasons why someone wants something

Focus on Interests not Positions Orange Example

50% satisfaction if Mom cuts the orange in ½ 100% satisfaction if kids gets entire portion of

orange they wanted

Focus on Interests not Positions Focus on understanding the underlying

interests of: Your client The other party

Avoid the Fixed Sum Assumption: Gains require being oppositional stance A $ to you mean a $ less for me

Focus on Interests not Positions Be aware of important underlying interests of

a personal nature: Respect, recognition, approval, acceptance,

security, safety, power, control, autonomy, trust, understanding, order, privacy, comfort, self-esteem, stability

Again, important when negotiating with the Chinese

Focus on Interests not Positions Key to Interest-based Negotiation:You must be indifferent to the gains of the other side so long as you too are making gains

Strategies and Tactics for Interest-based Bargaining Third Principle of GETTING TO YES:

Invent Options for Mutual Gain

Strategies and Tactics for Interest-based Bargaining Once the parties have communicated their

interests Process is inventing various options to solve

an issue or problem The negotiation becomes finding the option

that best meets both parties’ interests

Strategies and Tactics for Interest-based Bargaining Fourth Principle of GETTING TO YES:

Insist on objective criteria

Insist of Objective Criteria

Evaluate options based on available objective criteria Market Real estate comparables Court decisions or arbitral awards

Avoid customary distributive/power tactics Persuade by arguing a particular set of criteria is

“objective” and the more appropriate standard Final differences can be bridged by splitting the

difference

Strategies and Tactics for Interest-based Bargaining Fifth Principle of GETTING TO YES:Know your BATNA

Best

Alternative

To a

Negotiated

Agreement

Know your BATNA

BATNA: What alternative(s) are available to you if you

leave the negotiation that your opponent cannot control

Know your BATNA Predict your opponent’s BATNA Negotiator should not make an agreement

unless it is better than his or her BATNA

Interests

Options

Legitimacy(Objective Criteria)

Communications Relationship

Alternatives(BATNA)

Commitments

Sputnik Diagram

Cross-Cultural Negotiations

Approach to cultural differencesIt useful to consider cultural differences among negotiatorsRecognize that culture may affect a negotiator’s values, strategy, style and tacticsExpect your negotiation counterpart to make cultural assumptions about you

Dealing with Group DifferencesApproach to cultural differences At the same time negotiators should be wary

of stereotyping Expect variations among individuals within

any specific group or culture Recognize that professional subcultures,

such as of lawyers, may be as or more important than membership in a particular group or national culture

Dealing with Group DifferencesTake away lessons: Learn as much as you can about possible

cultural differences But let the other negotiator teach you who

they are and how they negotiate

Literature on Chinese Negotiators Lewis, Richard D., WHEN CULTURES COLLIDE:

MANAGING SUCCESSFULLY ACROSS CULTURES, (Nicholas Brealey Pub. 2000)

Goh, Bee Chen, “Typical Errors of Westerners,” Chap 34, THE NEGOTIATOR’S FIELDBOOK, (Amer. Bar Ass’n, Section of Disp. Resol. 2006)

Honeyman,Christopher, et. Al., EDUCATING NEGOTIATORS FOR A CONNECTED WORLD (DRI Press 2013)

Griffin, Trenholme and W. Russell Daggatt, THE GLOBAL NEGOTIATOR (Harper Business, 1990)

Cultural Differences in Negotiation

Western EasternIndividualistic Collectivism

Egalitarianism Hierarchy

Low-Context High-Context

Deal making Relationship building

Direct Communication In-direct Communication

Literature on Chinese Negotiators A informal social gathering is expected

before negotiations begin to foster relationships

Exchanges of business cards and gift giving is customary

Negotiation sessions themselves are expected to be formal

Seating will be hierarchical

Literature on Chinese Negotiators Expect the senior representative to say little

other than initial pleasantries to the senior’s counterpart

Chinese use the negotiation sessions principally to gather information

Real decisions will be made outside of the negotiations

The pace will be slow and repetitious

Literature on Chinese Negotiators Chinese will be courteous, humble and self-

effacing They will expect respect and similar behavior

by their counterparts They will be non-confrontational and will not

display strong emotions or anger A strategy of interest-based bargaining is

favored over adversarial, power-based negotiations

Literature on Chinese Negotiators Chinese will rarely say “No,” instead they will

hint at difficulties “Yes” may mean they understand your

request, but not necessarily that they agree to it

Literature on Chinese Negotiators Chinese are looking to establish a

relationship of mutual trust over the long run, and place less emphasis on the immediate deal

For the Chinese the positive relationship provides the basis for resolving conflicts that occur in future and for further business dealings

Literature on Chinese Negotiators The contract itself is viewed more as

providing a structuring for the relationship, rather than creating binding legal obligations

The Chinese will expect continual communication over the life of the transaction in order to maintain the relationship

Regular in-person meetings should be planned

Cultural Differences in Negotiation Remember the Chinese negotiators you are

facing may or may not follow these stereotypical negotiation characteristics

Questions for the Panel

Do Mexican negotiators favor the Competitive or Interest-Based Strategy?

Do the described characteristics of Chinese negotiators match-up with your experiences?

Is there a “typical” Mexican cultural approach to negotiation? How does it compare to the Chinese approach?

In what ways will Mexicans have to vary from their typical approach to negotiate successfully with the Chinese?

Associate Professor Alan Kirtley

University of Washington School of Law

Seattle, Washington U.S.A.

kirtley@uw.edu