In the past century, there has been a rapid growth and development in the internet and communication technology sector of different nation’s economies and this has turned the world into a global village. It has however been an uphill task to some organizations / nations especially those that belong to different geographical locations to embrace this new concept and entrench it in their day to day operations. One of the reasons that have been pinpointed as being a barrier is the cultural differences between the different nations and communities; whereas some nations / communities are liberal, there are those that are conservatives and they rarely allow professionals / investors from other regions to set up businesses in their region. This in most cases leads to endless negotiations and meetings between “foreign investors” and the government or regional representatives for them to be allowed to set up “shop” in the region.
Purpose of the Paper
Based on the above introduction, it is wise to state that the purpose of this paper will be to analyzing case negotiationsfocusing on issues related to managing cultural conflict in relation to setting up business in a foreign land. The paper will discuss the different challenges that BWA Company, an American company encountered in its quest to invest in Indonesia, it will also discuss ways that the management of the company used to overcome this challenges. This is referred to as “discovering the Indonesian way”. The importance of understanding the culture of the people an investor wishes to invest with will also be discussed in the cause of study. It will however mostly focus on the cultural practice of Indonesia, this is because of case analysis is focused in Indonesia. The paper will close by giving a summary of the important points that would have been mentioned and discussed in the course of the study.
Analyzing Case Negotiations – The BWA Company
The BWA Company is an American Construction Company that wanted to set up a construction project in Indonesia; however due the different styles of doing business between the two nations, there was some delay. This delay did not only affect the company’s performance but it also affected its clients and other parties were part and parcel of the project. There are three main obstacles that the BWA Company encountered; the negation style of the two parties, the bargaining positions and the different levels of authority that the company had to go through.
Negotiation Style: In the modern world, different nations depending on their geographical locations have different business negotiating styles. In the case of the BWA Company it based business approach on the western style. This meant that all its business negotiations were based on strict binding terms and conditions contracts and the breach of the contract or any the clauses on the contract attracted great fines and penalties. As for the case of the Indonesian model of doing business, most contracts are based on “culture”, this means that the personal relationship between the parties involved in business determines a lot if the business will be a success or failure. The reason for this has been pointed out to be weakness in the administration law and governance.
Bargaining Power: In any business, the more control one partner has over the other determines which party calls the shots. Whereas the BWA Company believed in the power of the contract (legal), this did not work in its favor since the other party believed in a more mutual understanding contract as compared to situations where the stipulated terms have to be adhered to. This caused a major delay since the parties had to go to the court of law of solve this dispute.
Levels of Authority: When investing in a new location, it is important for the new party to get familiar with the environment and all the administrative “staircases” that the investors have to climb before they are allowed to set up a project. Being a new company in Indonesia, the BWA Company was not familiar with the working conditions of Indonesia. The BWA Company had contract to do business in Indonesia, however the manager (Jared) opted to use their business partner as an associate, this did not work because the associate did not have the formal authority to be involved in a deal of such magnitude. This threw the situation in disarray.
In the above case, there are a few issues that come in picture in relation to managing cultural diversity in business. According Cascio, one of the main things that affect business associates that come from different cultural back grounds is communication breakdown (Cascio, 1995). This can be witnessed in the case of the BWA Company Vs the Indonesian authority. The first scenario is the misinterpretation of clauses in the contract that the relevant parties signed before the commencement of business. Whereas the BWA Company assumed that by signing the contract, it will have authority indicated in the contract; the Indonesian authorities interpreted it from a different perspective. This caused tension and friction and eventually the delay in commencement of the project. It is for this delay that the company, clients and suppliers incurred losses in billions of dollars.
Apart from communication as one the main factors that affect good business rapport between businesses that come from different cultural background, Morris has stated that cultural ethics is one obstacle (Morris, 2006). In the case of BWA Company, the business ethics of Indonesian and western business society are very different and this caused a great effect.
The western world business ethics code states that once a contract has been signed, then it must be followed to the end; however in the case of Indonesia contracts can be changed and modified at any time depending on changes that may occur in the business world, the personal relationship between the parties involved may also swing the course of business. According to Sameer, other factors that affect businesses are religion of the community; Indonesia is mostly a Muslim community and most offices have “mashola” or prayer rooms where employs are allowed to recite prayers at least five times a day. This mostly affects the beliefs and practices of the people and how they will treat investors from non Muslim regions (Sameer, 2006). Others are personal traits of the managers and all the parties involved in the business deals.
Language and communication as factor have been mentioned earlier on in the paper, it is however important to language of the locals can also be a hindrance to the development in a region. In the case of BWA Company and the Indonesian authority, language barrier especially on the investors’ side was a big hindrance. It is therefore wise for any company that wishes to venture out in a foreign especially in Asia and Latin America where communication is mostly in the native language to get a reliable interpreter or have a solid grasp and understanding of the native language (in legal context) before approaching the local authority for permission to invest (Morris, 2006).
In the case of the above situation, the region manager of BWA Company was faced with an uphill task on coming up with the best strategy of the challenge at hand. As a manager, the secret to dealing with such a situation is to apply excellent professionalism to avoid further conflict of interest and attracting unnecessary fines and penalties. Having excellent public relation skills and a convincing language is the key to the success of any business venture. Being an investor in a new country, he should have first studied the business ethics of the Indonesian community and how they interpret contracts and thereafter use the different managerial skills to personally intervene and save the face of the company. Another important thing that he should have taken into consideration is the cultural practices of the region and the different levels of administration that one has to go through before onset of a project. By so doing, Jared would have avoided the ugly encounter that the company faced with the administration, the inconvenience it caused the clients, the delay of the project and the monetary loss it incurred.
Recommendations / Summation of the Paper
Misinterpretation of business ethics of a particular nation can affect the performance of a company that wants to enter the nations’ business market, there are however some recommendations that if they are taken into consideration can help to avoid this. According to Morris, some of these include; adapting to business models that do not favor any culture and focusing on the positive cultural values, aspirations and virtues that will help in the growth and development of the nation’s economy (Morris, 2006). It is therefore important for any company that wants to make and invest to critically understand the ethics of the region. It should also understand the legal interpretation of the contract that it signs and where it stands to lose or gain.
This research paper has discussed in detail the obstacles that the BWA Company faced when it attempted to set up projects in Indonesia. Most of these have been blamed on the different business ethics between America and Indonesia. The paper has also discussed other cultural challenges that may hinder a company from successfully setting up an office in a particular location. In addition to that a few suggestions have been given on the best way that the local manager (Jared) should have adapted to solve the crisis that the company was facing.