Tuesday, May 22, 2001

Negotiation Lesson Maker

When I set out to formulate my response to this week’s challenge, I had in mind an international negotiation that I was asked to bring in for my former company. However, it was a negotiation at which I failed miserably. As I tried to clearly recreate the circumstances and my maneuvers, I came across more and more interesting research material such that I felt compelled to recap the work here as my official response to this assignment.

To set the stage, this particular negotiation involved trying to collect on several million dollars in past due invoices owed to the company I was working for by a Saudi Arabian distributor. In several years of successful and ever-larger business dealings with this particular distributor, my company had made a decision to ship a $2 million dollar order on open account as opposed to the typical letter of credit or prepayment basis. A slowing market situation and a company need to book revenue even given the higher collectible risk, drove the decision.

At any rate, the goods were shipped on a Net 30 day basis from the date of arrival in Dubai in the United Arab Emirates. After 120 days, the $2 million was 90 days past due and repeated generic promises of payment had come and gone. As a relatively new member of the team, I was handed a book entitled “The Arab Mind” and a plane ticket to Dubai with the idea that I would meet the distributor and reach a payment agreement.

In retrospect, I might just as easily been handed a mission impossible tape! However, I choreographed what I could by attempting to create a strategy in advance.

First, I asked to meet with the mid-level business team to understand the exact condition of the local market the goods were supposedly meant for sale into. Secondly, I asked for a meeting with the son of the owner to discuss general relationship potentials. Lastly, I asked for a meeting with the father and proprietor to recap my findings and secure a workout plan.

I carefully requested neutral meeting places for each of these meetings and made sure to allow two to three times the clock time I thought necessary so that I would not have to worry about timing. I even decided to arrive in country two days ahead of time to assure I’d be rested and at the last moment even opted to go to the meetings without my watch so I wouldn’t be tempted to watch the clock. I reminded myself to utilize the interpreter but to focus on the key individual and to seek a holistic versus my own preferred sequential range of possible solutions.

Sadly, my best-laid and intended plans simply weren’t built upon a solid enough foundation to successfully meet what those several days of negotiations dealt me! I had the silly idea of being the “master of my destiny” while my Arab counterparts deferred to Allah’s will to the point of “paying us very soon, Allah willing.”

Through the course of the several days the discussions required, I came to learn first hand how the Arab language reflects both a “stylistic elaborateness and a stylistic exaggeration.” For instance, in Arabic, the US translation for “thank you” equates to “May Allah increase your well being.” And the well wish, phrased as “speedy recovery” translates to “May there be upon you nothing but health if Allah wills.” Only some time later did I learn that in the Arabic culture, “the general rule is that every phrase of courtesy must be returned by a more elaborate phrase, with interest as it were.” My mother’s admonition to “say something nice or say nothing at all” did little to prepare me for the Arabic language requirements; requirements expected of even a non-Arabic speaking bill collector.

I also came to learn of the Arab habit of polarization though it was not until later that I understood what had happened. Arabs are prone to see things as either black or white, good or bad with little room for an in-between position. (This much I had read on my flight over.) However, I mistakenly thought that this would work in my favor as there was in my mind, no in-between about this case; we were owed the money and prior promises of payment had not been adhered to.) What I’ve since come to understand is that by not having a gray space to go to as an in-between position, I was required to place my customer in either the good guy space or the bad guy space. Since I wanted to somehow continue to do business with this distributor in the future and they wanted to continue with us, neither they nor I could put them in a bad guy box and so by default, the Arabs continued to hold themselves fully in the good guy position.

Years later, after the incident had been resolved and business resumed, though at a lesser level, it was explained to me by the distributor’s interpreter himself upon leaving that company that the particular Arab distributor I was doing business with prided himself in coming from a centuries long line of merchant traders (negotiators) and hence a former farm boy from Ohio was nowhere near being considered a match to his honor no matter what the business card said or what the business case might conclude.

All of this set me to pondering other Arab related negotiations and what I might have learned to be better prepared for the future.

First I wish I’d have known former President Richard Nixon’s words “an adversary is not necessarily an enemy.” Perhaps that would have helped be better understand the Arab habit of polarization. It also may have led to a strategic decision to have someone else negotiate on our behalf as a dis-interested Arabic speaking party, though that may have damaged the relationship even further.

Next, I wish I’d know of Steven Cohen’s advice in The Deals People Make that “if in an Arab soukh (market) you give a merchant his or her first asking price, you’ve ruined their day” such is the love of a negotiation. According to Cohen, “you’re supposed to be outraged by the price they are asking, and they are supposed to be outraged by the first price you’re offering.”

This has to be countered however with David Evans words in a paper entitled Is Iraq or the US more boxed in? “despite our president’s [Clinton] self-indulgent shooting from the lip about Saddam being strategically worse off” what happened in reality is that Saddam earned the opportunity to prove the Arabic definition of courage; the ability to “stand physical pain or emotional strain with such self-control that no sound or facial expression betrays the trial one is undergoing.” This would have been good learning in any Arabic negotiation.

Or has pointed out in a summary by Tanya Glaser of Louis Kriesberg’s The Negotiation of Agreements, “external conditions are often dominant factors in the failure or success of negotiations.” This was clearly the case as I subsequently learned that the real reason we were not being paid the $2 million owed was that most of the product had yet to sell through in the market. To admit that product purchased had not sold as anticipated would have been an insult to the Arab’s honor as a smart businessman and thus a detail that didn’t surface as a reason for his non “timely” payment to us.

My personal lesson learned in this case has been that in all negotiations, “tactics alone rarely determine the success or failure of negotiations. Effective strategy can compensate for difficult background conditions but strategic choices probably play the largest part in determining whether or not negotiations conclude with agreements.” Further, as Kriesberg writes, “the key to effective strategy is matching the choice of issues, parties and inducements to the background conditions” so as to keep negotiations running smoothly, speedily and successfully.

Sources:*

J. Johnston. “The Deals People Make.” Boston Globe. September 2, 1996
www.negotiationskills.com

L. Kriesberg. “The Negotiation of Agreements.” 1998. Summary by T. Glaser
crc@colorado.edu

D. Evans. “Is Iraq or the US, More Boxed In?.” September 10, 1996

R. Patai. “The Arab Mind.” Macmillan Publishing Company. 1983

P. Cateora, J. Graham. "International Marketing." Irwin McGraw-Hill. 1999.

Monday, May 07, 2001

Trapped in the Past

In an article entitled “Trapped in the Past” author Jim Rogers underscores what our text points out regarding the need for looking at all sorts of data and then looking again first hand!

Roger’s opening hypothesis, which he shares in the article, was his long held belief that “India might give China a run for its money as the next great economic superpower.”

He details the research that supports this including:

India’s population stands at more than 1 billion people
In India, “for the past seven years, gross domestic product has risen 6% to 7% annually”
India’s participation in the Information Technology industry has risen from an export value of $50 million to $6.3 billion in the past 7 years
India is home of some of the world’s “most fertile soil” making the area for “ideal for agriculture”
The Himalayas, the Taj Mahal, and the Kovalam beach resorts make for a potentially strong “tourism industry.”

Of course, he weighs in with the less favorable research as well:

Roughly 50% of India’s population is illiterate
400 million of India’s population live on less than $1 per day
India’s “archaic laws obstruct the creation of farms larger than 18 acres thereby locking in much of the potential of that rich soil
The Indian government subsidies “amounted to 14% of GDP” to back up the government’s strong belief in self-reliance and their subsidization of nearly every form of required industry.
24 languages spoken by more than 1 million people each with at least 1,600 dialects

Faced with plans to invest in India’s high-tech industries and believing that the positives would outweigh the negatives, Rogers decided to travel to India for some first hand research of his own before making any such investments.

What Rogers found, as he traveled the country, was that in spite of India’s high-tech superpower reputation:

He had trouble placing a phone call from most anywhere.
The “country’s crumbling freeways are a tangle of traffic jams.”
He “often had trouble finding running water.”
What’s more “power shortages result in frequent brownouts and black outs.” (Yes, I know it sounds like California but in India it’s estimated that) such “shortages reduce India’s GDP by 2.5% annually.”

Lastly, Rogers recounts how ENRON, the Texas-based energy MNC, has spent most of its time since it entered India in 1992 “fighting the government, trying to get paid” for work the Indian government had previously encouraged.

What’s more, he then uncovered that since 1991, “India has managed to attract a total of only $23.7 billion in foreign direct investment [while] China attracts that much in less than six months.

As you might have guessed by now, Rogers’s conclusion was to decide against investing in India’s high-tech business at this time. Instead, and surprising to himself, he decided to buy shares in Indian Hotels, a company poised to take advantage of the increasing travel mobility of India’s 250 million plus middle class citizens by buying up inexpensive, quality hotels throughout the country.

All of which brought to mind a minor but similar experience I enjoyed many years ago while working for a fellow in Dayton, Ohio. (You knew I’d get in a personal story, right? J)

The fellow I was working for at the time decided he wanted to retire (at a relatively young age) to North Carolina. His main motivators were weather, a low cost of living, and a belief that he could duplicate his electronics superstore concept (a fairly novel idea back in the early 1980’s) in the “less competitive” but still supportive North Carolina he perceived.

To that end, I scoped out basic demographic data on each of the major cities in North Carolina. With that data in hand, he suggested a field trip to see first hand what a recommended plan of action might be. Accordingly, an associate and myself were sent on a mission to discover the ideal location for his retirement retail electronics operation.

After a week of touring the state from end to end, taking photos, doing interviews, compiling dealer lists from local phone books and countless miles of windshield time, we returned to Dayton late on a Sunday night with our conclusion firmly in mind.

At Monday morning’s debriefing, our boss asked what we had found to serve as the best electronics retail business opportunity in all of North Carolina. With a perfectly straight face, we both recommended that he forget about the electronics store idea and open a chain of bars instead. (Yes, you heard right.) J

You see, at the end of every evening, after such exhaustive (I can assure you!) work my associate and I always had difficulty in finding an establishment of relaxation that might serve a little alcohol. What we had discovered was that the South’s concept of private, membership-only clubs as the only viable way to enjoy a little beverage was standing between us with all that road dust and a more relaxing few hours. Along the way, we also learned that the state and local governments were slowly waking up to reducing their alcohol related restrictions.

Of course, we had also seriously looked at the electronic retail business as was our mission and our conclusion in that regard was that the seeds had already been sown in North Carolina. Between the existing independents and the chain operations which had just started to eye the market we had concluded that North Carolina was well on its way to emerging as a truly competitive electronics retail market. Further, our employer would have to contend with these unexpected forces if he continued with the idea of retailing in North Carolina.

Needless to say, we made quite a stir. However, we did remain gainfully employed and our employer decided against the move to North Carolina and to this day still operates his electronic related (but now non-retail) business in Dayton, Ohio.

You see, there is research and then there is research!



Sources:


Worth, May, 2001 p 36-40.Title: Trapped in the Past
Author: Jim Rogers


P. Cateora, J. Graham. "International Marketing." Irwin McGraw-Hill. 1999.