WHAT IS THE IMPACT OF CULTURE ON NEGOTIATION BEHAVIOR AT INTERNATIONAL LEVEL
SUBMITTED TO:
SUBMITTED BY: DEEPIKA JAIN MBA IV SEM
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INDEX
S.No. Topic Page No. 1. Introducing the concept of Sales Management 3 2. Personal Selling 3 3. Role of Interpersonal selling in International Marketing 4 4. Managing the Sales force 4 5. Four Sales channel 5 6. Designing and recruiting Sales force 6 7. Selecting Sales and Marketing Personnel 8 8. Motivating Sales Personnel 9 9. Developing cultural awareness 10 10. Impact of culture or negotiation behavior at international level 11 3
PERSONAL SELLING & SALES MANAGEMENT
Introducing the Concept Sales Management Sales management is a business discipline which is focused on the practical application of sales techniques and the management of a firm's sales operations. Birth of Sales Management: After the Industrial revolution and with the increase in volumes of production, i.e production on mass scale not only for local consumption but also to cater to the demand at national and global levels sales management came into existence. Sales mgt is responsible for the sale of products of a company and to add profit to the business operation. Sales force should be hardworking, result oriented, well educated and competent to handle changing situations. Definition : The process of planning, directing and controlling of personal selling, including recruiting, selecting, equipping, assigning, supervising, paying and motivating the sales force- American Marketing Association Thus sales management means, the task which includes analysis, planning, organizing, directing and controlling of the companys sales effort.
Personal Selling Personal selling occurs where an individual salesperson sells a product, service or solution to a client. Salespeople match the benefits of their offering to the specific needs of a client. Definition : A form of person to person communication in which a salesperson works with prospective buyer and attempts to influence purchase in the direction of his or her companys products or services Some important aspects of Personal selling: It provides human touch to business transaction. It promotes long term business relationship. It enhances customer confidence It helps in understanding the pulse of the customer. It helps in customizing the product Helps in convincing the customer about the product.
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The Role of Interpersonal Selling in International Marketing The salesperson is a companys most direct tie to the customer The sales representative is the final link in the culmination of a companys marketing and sales efforts In relationship-based cultures such as China, it is critical to build long-term alliances through personal selling With the cultural differences, designing, building, training, motivating, and compensating an international sales group is a challenge
Managing the Sales Force The key to any successful sales management lies on the people working in sales. Companies spend considerable amount of money on training and development of sales force. Sales force management of any company lies on three parameters they are- Organisation: The key to sales force is the right level of aggregation against product lines and geographical area. (separated product line) Strength and Qualification: Sales force strength and qualification significantly affect the ability to provide competitive service level and economies of sales force. Compensation and Incentive system: compensation and incentives have a significant impact on the moral of the sales force and help in retaining successful sales people. Based on analyses of current and potential customers, the selling environment, competition, and the firms resources and capabilities, decisions must be made regarding: the numbers characteristics and a assignments of sales personnel Distribution strategies will often vary from country to country: some markets may require a direct sales force, whereas others may not the hard sell that may work in some countries can be inappropriate in others Selling in information-oriented cultures such as Germany may also allow for greater use of expatriates Relationship-oriented countries such as Japan will require the most complete local knowledge (natives) Many advanced operations research tools developed in the U.S. can be adapted to foreign markets
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Many things can differ across cultures: the length of sales cycles the kinds of customer relationships and the types of interactions with customers
Example of a hierarchy in Sales Department
Four Sales Channels Over-the-counter selling: personal selling conducted in retail and some wholesale locations in which customers come to the seller place of business Field selling: sales presentations made at prospective customers homes or businesses on a face-to-face basis Telemarketing: promotional presentation involving the use of the telephone on an outbound basis by salespeople or on an inbound basis by customers who initiate calls to obtain information and place orders Inside selling: performing the functions of field selling but avoiding travel-related expenses by relying on phone, mail, and electronic commerce to provide sales and product service for customers on a continuing basis Sales Director (1) Divisional Manager (2) Zonal Manager (10) Regional Manager (25) Territory Business Manager (50) Territory Business Executive (50) 6
Designing and Recruiting Sales force 3 Ways to Design Sales Force 1. Expatriates 2. Local Nationals 3. Third Country Nationals Advantages/Disadvantages of all 3: 1. Expatriates: When products are highly technical, or when selling requires an extensive background of information and applications, an expatriate sales force is the best choice Advantages Used most when products are highly technical or requires a lot of information in order to sell Familiar with headquarters policies, procedures Opinions/Ideas are valued more by home office Disadvantages High cost Cultural and legal barriers Difficult to recruit many highly skilled will not re-locate overseas Other type of Expatriates Virtual Expatriates Created by the internet and other advanced types of communications, where they manage operations in other countries, but do not move to that country.
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2. Local Nationals: The historical preference for expatriate managers and salespeople from the home country is giving way to a preference for local nationals. This preference is because they can transcend both cultural and legal barriers. They cost less to maintain than a staff of expatriates in some places Advantages Most knowledgeable about culture, legal environments, business structure, distribution networks Disadvantages Home office does not see as the experts in the field Seen as not being familiar with home office procedures, policies Not the experts on the products Difficult to recruit most skilled and knowledgeable 8
Recruiting the best may mean taking away from another company or competitor this goes against some cultural believes where loyalty is important 3. Third-Country Nationals: The internationalization of business has created a pool of third-country nationals (TCNs), expatriates from their own countries working for a foreign company in a third country The TCNs are a group whose nationality has little to do with where they work or for whom American companies often seek TCNs from other English-speaking countries to avoid the double taxation costs of their American managers Advantages If recruited within same area most are familiar with culture, language, how to conduct business Disadvantages Host country does not see individual as one of their own Many of the same disadvantages to a smaller scale with the expatriate.
Selecting sales and marketing personnel In addition to descriptions for each marketing position, a transnational management position can require special skills and attitudes: Maturity is a prime requisite for expatriate and third-country personnel International personnel require a kind of emotional stability not demanded in domestic sales positions Managers or salespeople operating in foreign countries need considerable breadth of knowledge of many subjects both on and off the job. The ability to speak one or more other languages is always preferable The marketer who expects to be effective in the international marketplace needs to have a positive outlook on an international assignment An international salesperson must have a high level of flexibility, whether working in a foreign country or at home Cultural empathy is clearly a part of the basic orientation, because anyone who is antagonistic or confused about the environment is unlikely to be effective Finally, international sales and marketing personnel must be energetic and enjoy travel
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Motivating Sales personnel Motivation is complicated because the firm is dealing with different cultures, sources, and philosophies National differences must always be considered in motivating the marketing force A manager must be extremely sensitive to the personal behavior patterns of employees due to cultural differences I ndividual incentives that work effectively in the United States can fail completely in other cultures.
Designing Compensation Systems Expatriates Things to consider Countries with high taxes, prefer larger expense accounts, fringe benefits (things that are non-taxable) Where the company is multi-national, sales personnel will compare compensation plans from home country to re- assigned country
Sales Force Compensation Plans Can both Motivate Salespeople and Direct Their Activities.
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Global Sales force Among multinational companies about half describe their sales compensation plans as global in nature and the other half as local Compensation plans of American companies vary substantially around the globe, reflecting the economic, legal, and cultural differences
Developing Cultural Awareness People with cultural skills can: Communicaterespect and convey verbally and nonverbally a positive regard and sincere interest in people and their culture. Tolerate ambiguity and cope with cultural differences and the frustration that frequently develops when things are different and circumstances change. Display empathy by understanding other peoples needs and differences from their point of view Remain nonjudgmental about the behavior of others, particularly with reference to their own value standards. Recognize and control the SRC, that is, recognize their own culture and values as an influence on their perceptions, evaluations, and judgment in a situation. Laugh things offa good sense of humor helps when frustration levels rise and things do not work as planned. 11
IMPACT OF CULTURE OR NEGOTIATION BEHAVIOR AT INTERNATIONAL LEVEL Looking broadly across the several cultures, two important lessons stand out: Regional generalizations very often are not correct. For example, Japanese and Korean negotiation styles are quite similar in some ways, but in other ways, they could not be more different. Japan is an exceptional place: On almost every dimension of negotiation style considered, the Japanese are on or near the end of the scale (high). Cultural differences cause four kinds of problems in international business negotiations at the levels of: 1. Language 2. Nonverbal behaviors 3. Values 4. Thinking and decision-making processes Differences in Language and Nonverbal Behaviors The variation across cultures is greater when comparing linguistic aspects of language and nonverbal behaviors than when the verbal content of negotiations is considered The language advantages of the Japanese executive in the description of the aisatsu that opened the chapter were quite clear. However, the most common complaint heard from American managers regards foreign clients and partners breaking into side conversations in their native languages This perception is a frequent American mistake. The usual purpose of such side conversations is to straighten out a translation problem Anthropologist Ray L. Birdwhistell demonstrated that less than 35% of the message in conversations is conveyed by the spoken word while the other 65% is communicated nonverbally. Albert Mehrabian, a UCLA psychologist, also parsed where meaning comes from in face-to-face interactions. He reports: 7% of the meaning is derived from the words spoken 38% from paralinguistic channels, that is, tone of voice, loudness, and other aspects of how things are said 55% from facial expressions Of course, some might quibble with the exact percentages (and many have), but our work also supports the notion that nonverbal behaviors are crucial how things are said is often more important than what is said. Difference in values Four are held strongly and deeply by most Americans seem to frequently cause misunderstandings and bad feelings in international business negotiations: 12
Objectivityreflects the importance of objectivity in the American culture Americans make decisions based upon the bottom line and on cold, hard facts. Americans dont play favorites. Economics and performance count, not people. Business is business. Such statements well reflect American notions of the importance of objectivity. The single most successful book on the topic of negotiation, Getting to Yes,
is highly recommended for both American and foreign readers. The latter will learn not only about negotiations but, perhaps more important, about how Americans think about negotiations. The authors are quite emphatic about separating the people from the problem, and they state, Every negotiator has two kinds of interests: in the substance and in the relationship. This advice is probably quite worthwhile in the United States or perhaps in Germany, but in most places in the world such advice is nonsense. In most places in the world, particularly in collectivistic, high-context cultures, personalities and substance are not separate issues and cannot be made so. Competitiveness and Equalityvalues of each participating cultural group are roughly reflected in the economic outcomes Simulated negotiations can be viewed as a kind of experimental economics wherein the values of each participating cultural group are roughly reflected in the economic outcomes. The simple simulation used in this part of work represents the essence of commercial negotiationsit has both competitive and cooperative aspects. At least 40 businesspeople from each culture played the same buyer-seller game, negotiating over the prices of three products. Depending on the agreement reached, the negotiation pie could be made larger through cooperation (as high as $10,400 in joint profits) before it was divided between the buyer and seller.
The Japanese were the champions at making the pie big. Their joint profits in the simulation were the highest (at $9,590) among the 21 cultural groups involved. The Chinese in Hong Kong and the British businesspeople also behaved cooperatively in our negotiation game. The Czechs and the Germans behaved more competitively. The American pie was more average sized (at $9,030), but at least it was divided relatively equitably (51.8 percent of the profits went to the buyers). Conversely, the Japanese, and particularly the South Korean, Mexican businesspeople split their pies in strange (perhaps even unfair) ways, with buyers making higher percentages of the profits (53.8 percent, 55.0 percent, and 56.7 percent, respectively). The implications of these simulated business negotiations are completely consistent with the comments of other authors and the adage that in Japan (and apparently in Korea and Meixco as well) the buyer is kinger. Americans have little understanding of the Japanese practice of granting complete deference to the needs and wishes of buyers. That is not the way things work in America. American sellers tend to treat American buyers more as equals, and the egalitarian values of American society support this behavior. The American emphasis on competition and individualism represented in these findings is quite consistent with the work of Geert Hofstede, [14] which indicated that Americans scored the highest among all the cultural groups on the individualism (versus collectivism) scale. Moreover, values for individualism/collectivism have been shown to directly influence negotiation behaviors in several other countries.
Finally, not only do Japanese buyers achieve higher results than American buyers, but compared with American sellers ($4,350), Japanese sellers also get more of the commercial pie ($4,430) as well. Interestingly, when shown these results, Americans in executive seminars still often prefer the American sellers role. In other words, even though the American sellers make lower profits than the Japanese, many American managers apparently prefer lower profits if those profits are yielded from a more equal split of the joint profits. 13
Timepassage of time is viewed differently across cultures and how these differences most often hurt Americans Differences in Thinking and Decision-Making Processes When faced with a complex negotiation task, most Westerners divide the large task up into a series of smaller tasks. Issues such as prices, delivery, warranty, and service contracts may be settled one issue at a time, with the final agreement being the sum or the sequence of smaller agreements In Asia, however, a different approach is more often taken wherein all the issues are discussed at once, in no apparent order, and concessions are made on all issues at the end of the discussion American bargainers should anticipate such a holistic approach and be prepared to discuss all issues simultaneously and in an apparently haphazard order. Important signals of progress can be the following: Higher-level foreigners being included in the discussions. Questions beginning to focus on specific areas of the deal. A softening of attitudes and positions on some of the issuesLet us take some time to study this issue. At the negotiation table, increased talk among themselves in their own language, which may often mean theyre trying to decide something. Increased bargaining and use of the lower-level, informal, and other channels of communication.