The Arab culture in Negotiations


           Within the scope of this research, we will elaborate on Arab culture in the negotiations. We will also discuss the similarities and differences between the Arab culture and western culture in the negotiation. Since the term 'Arab culture' is a rather general one, and even in different countries that are associated with Arab culture negotiations styles may vary (not conceptually, but in some minor details, for instance), it would be more useful to base this analysis on a specific country that would encompass characteristics of most other Arabic countries. For the purposes of this analysis, Saudi Arabia was selected as the country that would generalize the notion of 'Arab culture' and encompass the rest of Arabic countries.

           The rapid economic development of Arabic countries at large and Saudi Arabia in particular means substantial business opportunities for foreign business executives. The government is by far the most dominant market in Saudi Arabia. It seems especially interested in acquiring operations and maintenance services, laborsaving equipment, agricultural machinery, irrigation systems, arid land-use technology, computer technology, electric and my electric machinery, pollution control devices, control systems, and other specialized in ancillary services. One will need to negotiate with everyone government agency because Saudi Arabia does not have a centralized office responsible to tenders and contracts.

           The decision-making process is centralized in Saudi Arabia and confined to very specific levels. (Casse 1995) Control rests with members of the House of Saud, senior government officials, and the commercial elite. Older decision makers are largely influenced by highly personal factors, such as trust and their impressions of you. They do not have as. Much education and technical knowledge as the younger members of the elite, although the Saudi government bureaucracy is getting bigger, only a few key officials are significant in terms of decision-making. Ministers and lesser technocrats are vitally important to the king and his advisers.

           Their positions in power depend a lot not only on how they perform their duties, but also and perhaps more importantly on the goodwill and positive relations, they are able to maintain with members of the ruling family. (Binnendijk 1997) Social cliques exist in the more traditional offices were former schoolmates, relatives, and friends get together for playing cards and socializing. Members of these cliques also create power blocs in the decision-making process and tend to influence each other's votes over an issue.

           In order to start the negotiations process efficiently, one must enlist the support of one's agent to identify who holds the decision-making power in matters that concern one's business. One of the difficulties of doing business in Saudi Arabia is finding the precise people who make these decisions. Although there is a growing number of technocrats who occupy management positions in both the government and private sector, one will have to make sure that their actual authority corresponds with their title or function in the company. It may or may not. (Fisher 2002)

           Saudi Arabians indicate that a firm agreement has been reached with a handshake or oral commitment. As a rule, they do not like lengthy and tedious contracts, which they feel only, imply mistrust. This does not mean, though, that they will not be very careful in drafting a tight contract with detailed, specific terms. The legal consultants of both sides usually draft The actual contract. Once the contract is signed and business activities begin, the foreign party must register with the Ministry of Commerce. (Schoonmaker 1999)

           One should exercise great care in drafting contracts and in complying with tender specifications - this will help avoiding future disputes. Observers note that foreign parties are usually at a disadvantage when involved in disputes with Saudi businesses and especially so with the government. (Schoonmaker 1999) It is best to avoid getting into this no-win situation with the government. In cases where no resolution of the dispute is in sight, the local Sharia adjudication takes over.

           When negotiating with Arabs, one need to be sure to include top-level executives on one is negotiating team. They should have enough decision-making authority to sign deals with top negotiators in both the private and government sectors. Experts advise against including females on the negotiating team. This will complicate matters, they state. (Fisher 2002) Saudis consider females subordinate to males, and they will probably have a difficult time dealing with a social mores that gave women equal status to men. Prepare to negotiate team and materials very well before the presentation is made. This is usually scheduled after the Saudi negotiator has read the proposal.

           Make sure that all written materials and documents are translated into both Arabic and English. As much as possible, try to bring tangible prototypes or models representing the product or service that is being sold. Use vivid visuals with a lot of animation. (Fisher 2002) This can be done today with computer graphics, software, and the latest audio-visual equipment. The Saudis respond better to tangible visual materials rather than to abstract words. One of the things the negotiating team will have to get used to be the constant traffic of. People that pass through offices in Saudi Arabia. One may want to divide the presentation into several brief modules, not only to accommodate these interruptions, but also to give the audience a chance to clarify concepts and meanings while going along.

           It is important to be aware of Saudi Arabian sensitivities. Generally, the Saudis are not confrontational. Because of this, they will not be open and honest about their problems and complaints. The ways they say "no" are indirect - they will delay matters or avoid being accessible. Their society is largely shame oriented, and so they suffer more from being found out rather than from actually violating a social norm. (Schoonmaker 1999) Therefore, they place a premium on putting on appearances and preserving their favorable social image.

           They dislike arrogant and harried behavior on the part of their business visitors or partners. This kind of behavior suggests that visitors consider themselves superior and the Saudis not important enough to spend time with. Initial conversations with Saudis are usually spent talking about personal matters, something that really differs from Arabic negotiation style from a western one. They value spending a lot of time getting socially and personally acquainted with their potential business colleagues. (Fisher 2002)

           One important thing foreigners have to learn is the way Saudis use social space. Watch their social behavior in their offices. They observe the same social mores that they use in their Majlis system of tribal meetings. (Binnendijk 1997) In the early days, subjects had access to their leaders through the Majlis system - the leader had an open-door policy, and anyone who had a problem could approach him personally and meet with him in his tent. This pattern is still used in modern offices. Saudis value their family members, relatives, friends, and countrymen so highly that they are willing to interrupt any business meeting, no Matter how important, if these constituents should drop by for any reason. Foreigners should expect to see constant traffic in the Saudis' offices, particularly unexpected drop-ins. Sometimes, you will be exposed to another approach called the diwaniyah, where the business is conducted in one of the rooms of the Saudi's house. (Fisher 2002)

           Saudis think what can be accomplished in a unit of time depends not so much on a person's effort as it does on God's will. The expression, "God willing," is the Saudi's daily affirmation of this belief. (Fisher 2002) Saudis, therefore, do the best they can in a situation and accept delays and interruptions as signs that God's approval had not been earned. Westerners will certainly find their orientation toward time difficult to adjust to because it is diametrically opposed to their own sense of mastery over nature and life itself.

           One should be aware of the unique social sensitivities one will find in Saudi Arabia. Do not put the other side on the spot by pushing for answers, clarifications, and decisions when they are not ready. Show deference and respect, and respond positively to their need to preserve a good social image. One way of doing this is to avoid using dirty tricks when you negotiate. Another way is to allow lots of time for the other side - the agent, Saudi counterpart, or other business contacts - to accomplish what they have to regarding business requirements. (Schoonmaker 1999) To Saudis, time is a highly malleable frame of reference within which they operate. They do not want to be rushed.

           During the meetings, an interpreter should be sued. Remember that Saudis appreciate being informed ahead of time about the agenda they will be discussing. Before the meeting, make sure that all documents are translated into Arabic and English. When one is dealing with Saudis, who come to a one's country, there is more leeway. One does not have to observe.
Their social rules. Make sure to follow them when in Saudi Arabia, though - for example, never hand the other side documents with the one's left hand; never expose the soles of one's shoes when sitting cross-legged; and so forth. (Fisher 2002)

           Saudi Arabians value doing business through people they know and respect. Their culture revolves around family ties and extended family connections. Success in business depends a lot on the connections they make within their own family and institutional networks. With the country's rapid modernization, these traditional values are slowly but surely being replaced by more modern values, such as power based on possession of knowledge or technical information. Traces of traditional values will be a strong underlying current for a long time to come, though.

           It is important to make sure that one's agent has significant connections with important social institutions such as the House of Saud, top government levels, the banking system, and big business. (Schoonmaker 1999) Expect agents to spend a considerable amount of time socializing with their contacts to solidify relationships on one's company's behalf. Once they have introduced the negotiations' team to their contacts, the initiative should be taken.

           To illustrate the power of having good connections, examine the case of Saudi Pritchard, an Anglo-American company that had business relationships with Prince Abdul-Rahman bin Abdullah. The prince took a fifty percent stake in the company. The company had a difficult time dealing with British banks, which were not keen on backing up performance bonds required by the Saudi government. With the support of the prince's connections that have provided substantial guarantees, Pritchard managed to get the Saudis to cut the bond to ten percent of the value of each year's work, reducing the liability to two percent of the total contract versus the five to ten percent usually required. (Casse 1995)

           Saudis appreciate the value of investing in friendships to facilitate their business transactions. This attitude goes all the way back to their nomadic days when tribes had to cultivate as wide a circle of friendships as possible, particularly among the nobler tribes. The latter owned and controlled access to waterholes and wells, which were indispensable to the survival of both the nomads and their animals during periods of drought.

           One should invest a lot of time and effort in cultivating and maintaining friendships in all-important sectors - the government, banking system, the marketplace, private businesses, and so forth. (Fisher 2002) It takes time to clinch major deals. One wins the trust of Saudis only after a long period of cultivation, even when one has the right contacts. This investment pays off, particularly for subsequent business deals whose gestation times need not be as long. In the construction business, the government prefers to give jobs to Saudi Arabian contractors as long as they can deliver within ten percent of the quality specifications. The Council of Ministers prohibits foreign contractors from using imported materials, tools, and equipment that local sources are able to supply. Foreign contractors are required to subcontract part of the project to local firms. (Binnendijk 1997)

           When it comes to government contract projects, the Saudis are tough negotiators. The government prefers to fix the price of the contract even for projects that will take years to complete. Government negotiators, who are experienced project managers and estimators, make sure that the contract is tightly written with very exact specifications and that the margin for inflation allows for about three to five percentage points below the actual inflation rate. The Saudi government requires that the foreign firm offer both bid bonds (one to two percent of price) and performance bonds (up to five percent of the contract value). Both bonds will have to be submitted in the form of certified checks drawn on Saudi Arabian banks or in the form of a guarantee backed by syndications of several foreign banks, and these must be payable on demand. (Schoonmaker 1999) In addition, the Saudis require guarantees on the performance of all components of a project for at least ten years.

           One important issue in bargaining with the Saudis is price. Although the Saudis do not like it when one uses hard bargaining tactics on them, they take a hard bargaining stance when haggling with over prices. Of course, just like many other negotiators, they try to get as many bids and quotes as possible from firms in different countries to enhance their bargaining position. They negotiate from a position of mistrust if you do not already have a long-term relationship with them, and they often maintain that western international firms charge exorbitant prices.

           Their frequent experience is that prices tend to be much lower from international firms based in the developing or Asian countries for a project of comparable quality and workmanship. It is on that basis that they often feel they are being taken advantage of by western companies. In one case, for instance, in 1977, blue-chip international companies submitted their bids for $700 million worth of electrification schemes. The contract involved supplying switchgear, transformers, electric power lines, and diesel-powered generator sets, with extensive engineering work required in Jizan, Al Kharj, Baha, and Asir. The Industry Minister accused these companies of price rigging. He charged that eight of these companies. We were in collusion in setting their prices. The accused companies were blacklisted and barred from submitting tenders in the future. (Schoonmaker 1999)

           The Saudi government likes to use the turnkey approach in huge construction projects. This means the foreign contractor has to turn over the entire physical plant, workforce, and management team to the government when the project is completed. The foreign contractor bears total responsibility for the project. The Saudis respond favorably to the "power of powerlessness" tactic and often extend their kind consideration to foreign negotiators who are in greater need of winning a contract. (Reardon 1994) If a one's competitive position allows doing so, one will want to build in the cost of agent's commission, performance and bid bonds, and penalty guarantee in the price quoted. One can greatly enhance the one's bargaining position if one demonstrates a serious intention of following up on commitments. Saudis respond to close and constant personal follow up - not to mere correspondence or long-distance phone calls.

           Another significant way one can enhance the company's leverage is to offer specialized and technical training to the local people along with the project and technology one is selling. Technical training and education are one of the government's top development priorities. (Binn?ndijk 1997) If the one's proposal involves technology transfer, one should be careful about the information released to the Saudis. The government is still working on patent and licensing legislation. Therefore, if one introduces sensitive technology, one should be aware that the risk of patent infringement is a real threat. (Binnendijk 1997) One should try to build in explicit provisions in the contract regarding the use and protection of patent rights that are involved in the project.


Bibliography

  1. Adler Nancy J., and John L. Graham. (1999). "Cross Cultural Interaction: The International Comparison Fallacy." The Journal of International Business Studies. 20 (3) (fall): 515-537.

  2. Binnendijk Hans, ed. (1997). National Negotiating Styles. Washington, D.C.: Center for the Study of Foreign Affairs, Foreign Service Institute, U.S. Dept. of State.

  3. Casse Pierre, and Surinden Deal. (1995). Managing Intercultural Negotiations. Washington, D.C.: Sietar International.

  4. Fisher Glen. (2002). International Negotiations: A Cross � Cultural Perspective. Chicago: Intercultural Press, Inc.

  5. Herbing Paul A. and Hugh E. Kramer. (1991). "Cross � Cultural Negotiations: Success through Understanding." Management Decisions. 29/1: 19-31.

  6. McCall J. B. and M. B. Warrington. (1997). marketing by Agreement: A Cross Cultural Approach to Business Negotiations, second edition. New York: John Wiley and Sons.

  7. Reardon Kathleen Kelley and Robert E. Sparkman. (1994). "Starting Out Right: Negotiation Lessons for Domestic and Cross � Cultural Business Alliances." Business Horizons. (January-February): 71-79.

  8. Salacuse Jeswald W. (2004). Making Global Deals: Negotiating in the International Marketplace. Boston: Houghton Mifflin.

  9. Schoonmaker Alan. (1999). Negotiate to Win. Englewood Cliffs, N.J.: Prentice Hall.

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