Cultural Diversity Between American and Japanese Firms

Introduction

In today’s business world, many companies are seeking an opportunity to do business with other firms from different countries because of international expansion, generating more revenue, reducing costs, and investment opportunity. Negotiation has played a vital role when each company is dealing with the business. Moreover, Khatiwoda and Manandhar (2016) suggested that it is an inevitable variable when there are cross-cultural transactions. According to the case study, the executive team of American company sets up to have a business negotiation with Japanese executive counterparts. The American company will face some challenges in negotiation with the Japanese company because of cultural variation, language and communication. People’s thinking, communication and behaviour are influenced by culture. Therefore, cultural differences have been recognised as a critical factor in cross-cultural negotiation (Sawyer and Guetzkow, 1965). In order to have a successful and effective negotiation, negotiators must have knowledge about the negotiation process and its importance in international business that would lead to a win-win situation in both parties. This essay will examine not only challenges and understanding cultural diversity between American and Japanese firm but also and strategies that American company uses to close the business deal potentially.

Challenges

1. Tylor (cited by Spencer-Oatey and Franklin, 2012, p.1) stated that Culture is the morals, knowledge, belief, art, laws and customs shared by all members in a respective social group which distinguishes the behaviour and formats the world in different conception. Hofstede (2018) claimed that national could not be changed, but it should be understood and respected. Culture differences are one of the biggest challenges for American executives in the negotiation process. Consequently, American negotiators should understand Japanese cultures before having the business negotiation through Hofstede theory because it can help avoid misunderstanding and enhance negotiating successful outcomes. Regarding Hofstede’s theoretical framework (1994), the theory describes cultural differences in five dimensions which are Power distance, Individualism and Collectivism, Masculinity and Femininity, Uncertainty avoidance and Long-term and Short-term orientation. Sanderson suggested that Hofstede’s theory is widely used and accepted in international or intercultural studies, but there are some limitations such as rapid changes in internationalisation and contingent culture. This paragraph will focus only four dimensions and compare cultural dimensions between Japan. As can be seen from Figure 1, power distance measures the degree and acceptance of the power in the organisation (Zhang and Zhou, 2008). Japan has a high rate of power distance which means that hierarchy is significant in the organisation. Subordinates need to follow their manager’s orders and behave respectfully. On the other hand, The US power distance score is low because Americans employees can directly communicate with their managers and superiors are easily accessible and coach their subordinates rather than ordering. When American negotiation team is dealing business with Japanese side, they must select their team members based on status-related factor (Metcalf and Bird, 2004). It is imperative to send negotiation managers who have the same or higher rank to meet with Japanese executives. Moreover, American executives have to greet the most senior managers before greeting others by shaking hands and bowing. Japan is collectivism that workers tend to work as a group and look after each other. A relationship is more vital than a task. While the USA is in the individualism culture. American workers are concerned about themselves and their own families. The same value standard need to apply for everyone and task prevails over the relationship. They strive to achieve outcomes for their benefits (Trompenaars cited by Metcalf and Bird, 2004). For the first meeting, Japanese executives expect the American team to establish a friendly and trust atmosphere for building a strong relationship. The USA people usually make a contract when doing business. Nevertheless, Japanese are conducted business based on mutual trust and personal relationship. Furthermore, the Japanese side takes time to agree to do business with American firms because they must get to know and trust the American before they will be a partner. Next, there is a very high masculinity in Japanese society which indicate that society will be driven by competition, achievement and success (Hofstede Insight, n.d.). As Stambolska’s claim (2012), there are significant differences between men and women working in the same position. It is rare to see women working in the managerial level while The USA side has a higher score in promoting gender equality. Japanese businesspeople are not familiar to do the business with women having high status. They usually think that businesswomen have a low power to handle tasks comparing to businesspeople (Stedham and Yamamura, 2002). The last dimension is uncertainty avoidance expresss the degree to which people feel uncomfortable with uncertain or ambiguous situations. Japan is one of the most uncertainty avoiding countries in the world which confronts natural disasters such as earthquakes, tsunami and typhoon (Hofstede Insight, n.d.). They always are prepared for unpredictable situations. In Japanese corporates, they put an effort and time to think about risk factors and feasibilities which will be worked out before any project start. Additionally, they have many cultures and traditions taken very seriously. Whereas, American people have a low rate of uncertainty avoidance and are considered as risk takers. They may feel comfortable with unfamiliar situation. When it comes to the negotiation with Japanese executives, American must take into account of receiving business card tradition. According to Jacobs (2017), business cards are called meishi and shown as a sign of respect. American side cannot start a business without exchanging the business cards because exchanging itself mean the beginning of the relationship. When American executives receive business cards, it is necessary to keep them well in cardholders which is considered as social respect.

Figure 1. Hofstede Cultural dimensions between Japan and United States

2. Another challenge for American executives is that language and communication which also play a crucial role in cross-cultural negotiation. Japan’s official language is Japanese so most local businesspeople, even younger ones rarely either speak or understand English well. It is easier for them to understand written text than spoken English. Therefore, American negotiators should bring written proposals and critical point summary to Japanese counterparts for better understanding (Katz, 2006). Most Americans usually use interpreters during the negotiation which should inform the Japanese company beforehand because some Japanese executives feel reluctant to speak openly due to a strongly relationship-oriented culture and think that an interpreter is an outsider (ibid). However, American firm must keep in mind that interpreters may not fully speak or understand in English. Interpreters may tell American side what they think you want to hear rather than Japanese side says. Thus, having someone from American company as the translator would be better seeing that Japanese side will feel comfortable to speak directly. This will eventually get the right information and reduce misinterpretation. Moreover, it is good to speak in a short and simple sentence with the Japanese to give them a space for discussions.

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Additionally, Bennet (2003) claimed that successful cross-cultural negotiation is not only about understanding in other’s language, but also the communication style. The meaning of words can be the same or varied in different cultures. It is a significant aspect of communication to comprehend cultural connotation in international negotiation between high and low context cultures. Regarding Hall’s framework (1976), different cultures in communication are divided into two categories which are high context and low context. This intercultural communication refers to indirect and direct communication. In a high-context culture, nonverbal communication including gestures, facial expression, eye movement and voice tone is important (Neese, 2016). The verbal message is indirect, and relationship is built slowly. Japan is considered a high-context culture while the United States is examined as a low-context culture because nonverbal elements are not significant, and they rely on explicit communication. For example, Japanese executives speak quietly with gentle tones and have a polite manner. They do not show their anger or any other negative emotions. Katz (2006) mentioned that American should not make physical contact with Japanese except for handshakes.  Another good example is that when Japanese businesspeople say “yes”, it does not mean they agree with Americans. They just acknowledge what Americans say. Moreover, Japanese try to not use the word “no” since they avoid having conflicts and maintain the good relationship. Every culture has its path of dealing business. Therefore, both language and communication style are essential factors that American executives need to have deep understanding to influence business negotiations.

Strategies

In order to have win-win situations between Japanese and American team which both sides are satisfied with their business agreement, American negotiators should focus not only on presenting their needs but also showing an understanding of their Japanese negotiation style by following negotiation process as a strategy. The American team will succeed in negotiation depending on how well their planning and preparation are. According to Figure.2, Deresky (2011) has divided the negotiation process into five stages which are preparation, relationship building, exchange of task-related information, persuasion and concession and agreement, respectively. American executive team also needs to concern Japanese culture because it is related in each negotiation stage. For the first step, American side must decide whether having outsource or their interpreter. As mentioned, Japanese executives will feel comfortable to have interpreter from the American team not the outsider. American negotiation team members are selected by position and gender which Japanese side prefer people who have a high status in the company and most are men. American side must indicate whom Japanese will be meeting, provide details on titles, positions, and responsibilities of attendees ahead of time (Katz, 2006). Rathi (2014) stated that Japanese’s pace of negotiation is slow. Relationship building, information gathering, negotiating and decision making take considerable time. While American negotiation style may take less time than Japanese because Speed matters and time is money. Building relationships is a second step which Japanese executives give importance. Before initiating business negotiation, it is significant to start creating a good relationship with the Japanese team by having small talk about families, hobbies and common interests. Moreover, the giving of gifts to the Japanese team for the first-time meeting helps build a good business relationship. The next negotiation stage is the exchange of task-related information. The American side has to take time to gather information and several details before bargaining because Japanese are very detail-oriented. American should not make exaggerated claims to impress Japanese representatives because they will investigate the claims before giving responses (ibid). This could ruin a trust that has been built. The fourth negotiation process is persuasion. According to Fisher and Ury (1981), the first step in bargaining is to identify interests involved in an issued area by using integrative bargaining or interest-based bargaining to create the win-win solution. This strategy mainly concentrates on developing mutual agreement based on the interests from both sides (Spangler, 2003). After interests are identified, both Japanese and American team need to work cooperatively to find what option is the best for both of them. Japanese negotiation style is often very formal while American negotiators are tough and aggressive. Therefore, American may avoid using aggressive tactics. On the other hand, the Japanese prefer the use of tactical questions which allow them to ask many questions due to their decision-making process for everyone in the team to be convinced. Besides, the Japanese usually use a non-verbal expression by using avoidance strategies which is the use of silence or wait and see.  Concessions and agreement are the last steps for the negotiation process. American negotiators should be aware of various concession and which concession strategy will be used in negotiation. Japanese approach for decision-making power is  decentralised which means that all relevant executives’ suggestions must be considered (Koldau, 1996). This might take more time to exchange information and persuasion. Therefore, the long length of Japanese decision making will make impatient American negotiator frustrated (ibid). The soft strategy is the granting of concessions which enhances trust and facilitates negotiations (Osgood, 1959). The reason why American need to use this strategy because the Japanese think that the goal of a signed contract is a shared agreement, not a victory. Even though a written contract is an agreement that both parties to sign, Japanese businesspeople are not accustomed to it and think that verbal contracts are still robust and if any circumstances change, they are always open to re-negotiation. Therefore, American negotiators should be aware of cross-cultural negotiation with the Japanese firm and follow the negotiation process to generate successful negotiating outcome.    

Figure 2. Negotiation process (Deresky, 2011, pp.164).

Conclusion

In order to succeed in negotiation with the Japanese executive team, the American negotiators must understand cultural differences, language and communication of Japanese company. If the American are well prepared and have deep understanding by using Hofstede’s theory and Hall’s framework as guidelines and negotiation process as the strategy, they will be able to overcome challenging process successfully and generate win-win negotiation.

References

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