Starting out right: negotiation lessons for domestic and cross-cultural business alliances - includes examples of development of overseas business relations by Cummins Engine Company Ltd. and Midwest Chemical - includes bibliography

Business Horizons, Jan-Feb, 1994 by Kathleen Kelley Reardon, Robert E. Spekman

Donne's observation, "No man is an island ..." is more true today than ever before. There are no islands where people remain untouched by the actions of others. Daily we witness leaders of nations form political alliances to respond to such matters as pollution, destruction of endangered animals, world hunger, and relationships threatened by differences of philosophy, ethnicity, or religion. There is no room for isolationism in a world where even the air we breathe is affected by the choices of people thousands of miles away.

Just as nations are linked by issues of peace and well-being, so too are their businesses linked by issues of economy. Drobnick (1991) identified six world economy trends that gathered strength in the late 1980s and are shaping the economic environment of the 1990s:

1. the evolution of American-Soviet relations from conflict to cooperation;

2. the collapse of communism in the Soviet Union and eastern Europe;

3. the reversal of America's "locomotive" role in the world economy;

4. the ascendancy of Japan as the world's banker.,

5. the economic integration of Europe; and

6. the economic integration of North America.

These changes require that organizations consider partners outside their own geographical boundaries. Going it alone is difficult at best. It means that business must have the ability to do all things well. As Kenichi Ohmae (1990) argues, "With enough time, money, and luck you can expand brands and build up distribution yourself--you can do everything yourself. But all three are in short supply."

The answer to this problem is intercompany alliances. In many cases these alliances are cross-cultural and do not resemble the hostile takeovers of the 1980s. Many firms have learned the hard way that hostile acquisition of companies often reduces them to the bare bones when all is said and done. Employees who made the company worth seizing leave or become demoralized workhorses rather than inspired, devoted members of a team with a shared vision. Replacements of those who leave or are escorted out are often unfamiliar with the culture of the company and the larger geographic culture of which it is a part. What remains is a ravaged, malfunctioning operation longing for, but incapable of achieving, its former success.

To work, "alliances" must be as the term "allies" suggests--collaboration between two parties for the betterment of both. The reciprocal meaning of "allies" has been lost to most crosscultural alliances. Most organizations view their cross-cultural alliances as quick and inexpensive ways to get a foothold in the global marketplace. Sounds good, but the truth is that this cheap, quick-fix, one-sided, self-serving "philosophy" is putting most strategic alliances in the dumper.

The purpose of this article is to explore what it takes from the outset to achieve successful cross-cultural intercompany alliances. Our major premise is that most alliances fail because of poor relationship planning at the outset. Firms enamored by the prospect of a relationship of convenience with few strings fail to face the one inexorable fact about all relationships: there is no such thing as a long-term, no-strings, convenient, one-sided relationship. All require planning, negotiation of differences, establishment of trust and respect, and commitment to mutual benefit. Without these ingredients the relationship has little promise after the initial infatuation wears off.

Unfortunately there is a tendency to treat interpersonal communication aspects of business as the "soft side," something that will work out eventually if the numbers are right. But experience has shown just the opposite. Rosabeth Moss Kanter (1989) argues that communication is important to achieving synergy between partners. It is harder to derive the benefits of cooperation and easier for rivalries to escalate when there is no relationship history to draw upon. Tandy broke off a relationship with U.K.-based Apricot Computers when it became apparent the firms had not communicated how their marketing strategies would be combined. Conflict surfaced shortly after the venture was formed.

The key to effective alliances is skillful management of relations from the initial handshake onward. In cross-cultural alliances the challenge is greater because each party brings to the table different cultural schemata through which they interpret events. The French, for example, pride themselves on reasoned discussion. They dislike being rushed into decisions, preferring instead to examine various options in decisions. Negotiations are likely to be in French unless they occur outside France. Punctuality is expected. They tend to be formal in their negotiations and do not move quickly to expressions of goodwill until the relationship has existed for some time. General Electric adapted its corporate style to the French in the early stages of its jet engine partnership.

In Japan business often goes to the party respected the most. Recognizing who is deserving of such respect takes more time than most Westerners are inclined to give with pleasure. Moreover, the Japanese consult with all parties involved before they make decisions. If a delivery date is specified, they are likely to check with the managers responsible for ensuring that it can be met before they will agree to it. They spend considerable amounts of time asking detailed questions about financial, market, manufacturing, and structural issues relevant to the negotiation, as well as questions that some outsiders would perceive as irrelevant. The Japanese also tend to spend time becoming acquainted with the potential partner before developing the framework for a partnership.