Brazzil
Business
June 2003
From the very start it was apparent to negotiators for an American wine distribution company that representatives of the Brazilian winery across the table wanted far more than the United States company was willing to give.
The Brazilians had tried to maneuver the distributors into buying their wine at a higher price, in larger quantity and over a longer term than the Americans could accept. They also wanted far more spent on promoting their product in the United States.
"But what really surprised us was that they wanted to get down to business right away," said American negotiator Atul Chadha, a senior manager with IBM in San Jose, California. "We knew Brazilians like to establish relationships before talking contract, but they knew that Americans like to take care of business first."
"We knew the Americans had gotten a talk on the way Brazilians like to negotiate," said Sandro Marcelo Grof, a manager with the Brazilian textile firm, TEKA. "So they seemed to want to take more time at the start. Our side acted more like Americans. Our roles changed because we each knew the other's usual approach."
"I began to worry that if their side acted like Americans and we acted like Brazilians, we wouldn't get anything done," said Kim Smith, business development manager for Hertz Corp. in Burlingame, California.
The negotiations were actually part of an exercise designed by international business professors from the Centro Universitário de Jaraguá do Sul, known as UNERJ, and California State University, Hayward. Twenty-five Cal State Hayward graduate students in the Transnational Executive MBA program, known as TEMBA, met with a similar number of MBA students from UNERJ for a Saturday morning session at the Parthenon Hotel in the city of Jaraguá do Sul in southern Brazil.
Role Reversal
"If you put that many Brazilian and American executives in a room and tell them to negotiate a business contract, the last thing you might expect is that each side would adopt the bargaining style of the other country," said Martin Desmaras, professor of international business at UNERJ. "Brazilian and American negotiating styles can be quite different. Each side can be so confident in its own approach that it doesn't realize there is a competitive advantage, as well as personal reward, in looking at negotiations from the other side."
"What can happen when executives from different business cultures meet head-on is that neither side is prepared for the other," said Shyam Kamath, an international business professor and director of the Cal State Hayward TEMBA program. "Each side can end up thinking that the other is stalling, unfriendly, too aggressive, or not committed to the process."
Desmaras and Kamath said that when Brazilian and American executives are briefed on what to expect from their counterparts in negotiations, the results can be surprising. The key, they said, is to understand the differences. For example, Brazilians generally prefer to establish personal relationships at the start of negotiations while Americans prefer less initial "small talk." Profitability is often a priority for Americans in business talks, while gains in power or status can be more important to Brazilians.
"Americans also tend to want negotiations at a faster pace," Desmaras said. "And they like to take issues point by point. Brazilians prefer to let business negotiations take time to develop and may not be so focused on details early in the game.
"Brazilians also tend to consider a signed contract as something that can be revisited and revised often. A contract in China is the beginning of a negotiation. In America, a contract is binding once it is signed. In Brazil, it is somewhere in between."
Cultural Tendencies in Negotiations
The two professors arranged the mock bargaining sessions in December 2002 and May 2003, when TEMBA participants were in Jaraguá do Sul to take classes on the Mercosur South American common market, cross-cultural negotiations, and management taught by leading Brazilian professors. The negotiation exercise was a required element.
Before beginning the negotiations, each side heard separate presentations from Desmaras on negotiating tendencies prevalent in the business culture of the other. Neither side knew the specifics in the others' briefing.
The Brazilians represented the fictional "Garibaldi Winery," which was seeking an American partner in order to introduce its product into the United States. The confidential briefings given to each team instructed the negotiators to protect their own company's assets while getting the other side to take more of the risk.
"I was surprised at the Brazilian team we faced," said American negotiator Nabil Al-Hussieni during the joint de-briefing held after the exercise with all the participants. "We knew better than to push them into a decision at the start, but they came in with their price offer right away."
Al-Hussieni is the transportation department manager for Office Depot in Santa Rosa, CA.
"After we got into negotiating, we started with a higher price, the U.S. team came in lower, and we totally disagreed," said Daniel Schultz Machado, who works in the export division of Brazilian apparel manufacturer Cia. Hering and has made several business trips to the United States. "But our goals included expanding into the U.S. market and getting a long-term partnership. We ended up reducing our margin and got the longer contract we wanted.
"We even got agreement that both companies would put their names on the wine label. We ended up building a relationship."
"By the time the team I was on was through with its negotiations we had an agreement on price, volume and duration of the contract," said TEMBA team member Claudia Halene, until recently a lead account manager at Alom Technologies Corp. in Fremont, CA. "We agreed to talk about issues such as co-branding and legal issues later. A handshake was good enough at this point."
"An important thing I noted was that since the talks were in English, our team was talking too fast and in sentences that were too long," said TEMBA negotiator Esma Erisen, until recently a senior sales engineer and technical manager for Nortel Networks in Brentwood, CA. "This gave our side an advantage, but it's important that both sides understand each other."
When the teams took a brief break in the negotiations to discuss their positions separately, Erisen urged her group to speak slower and in shorter sentences when they rejoined the talks.
"This is important to keep in mind," Desmaras said. "Sometimes the natural reaction if you believe you are not being understood is to just talk louder."
In the general wrap-up session after the event, Desmaras also warned the Brazilian students to not misjudge the American propensity for self-criticism.
"Self-criticism is one of the great American virtues," Desmaras said. "There is a cultural tendency in Americans that you learn from your mistakes, get up and move on. Their risk-taking is a consequence of their confidence, and Brazilians should not take self-criticism as a sign of weakness, especially in negotiations."
Negotiations On A Global Scale
The mock negotiations coincided with the visit to Brazil of United States Treasury Secretary John Snow, who announced that America wants to proceed rapidly with trade negotiations that could open the door for increased imports of Brazilian agricultural products, such as orange juice and sugar.
"We are open for negotiations," Snow said during a factory visit to São Paulo, the country's financial and industrial center. "Everything is on the table. So we're anxious to get those discussions under way."
Snow said the United States wants to form a Free Trade Area of the Americas that would stretch from Alaska to Argentina, but Brazilian officials said the trade obstacles for key agricultural products must be eased first. There are political ramifications for President George Bush in California and Florida, the nation's top orange producers.
Talks between these government trade ministers can follow many of the same approaches the Brazilian and American students learned in their negotiations, said Zinovy Radovilsky, an international business professor at Cal State Hayward and a TEMBA faculty member who made the trip to Brazil.
"While understanding another country's cultural approaches to doing business is not the only consideration to make in conducting negotiations, it certainly gives the negotiators a better chance for success," said Radovilsky. "That's why it is so valuable for executives to apply what they've learned in exercises like this."
"I think there is potential for increasing partnerships between Brazilian and American firms," Radovilsky said. "In Brazil, our students visited companies where they saw modern manufacturing organizations, where businesses are producing products of good quality, with high cost-efficiency in clean manufacturing environments."
Radovilsky is on the faculty team that works with teams of TEMBA participants on consulting projects with leading Brazilian firms in the region. During their trip in May, TEMBA participants visited two of their clients who have commissioned them for three projects.
Kyly, a manufacturer of clothes for infants and children, has commissioned a TEMBA team to help it enter the American market. Rohden, which exports 100 percent of the pine doors it manufactures, has commissioned two TEMBA teams to investigate the potential and entry strategy for their doors into the German and French markets.
International visits and the consulting projects are required elements of the TEMBA program. Participants must successfully apply the knowledge gained in the program to their consulting projects and to the negotiation exercises.
For more information on the TEMBA experience in Brazil, go to: http://www.csuhayward.edu/alumni_friends/public_affairs/brazil/brazil1.html
For the Cal State Hayward Web site on the Transnational Executive MBA Program, go to: http://www.tembaglobal.com/
Kim Huggett is director of public affairs for California State University, Hayward and accompanied the TEMBA delegation on its recent trip to Santa Catarina. He is a former reporter for The Sacramento Union newspaper in California. He can be contacted at khuggett@csuhayward.edu