Business Negotiations Between American and Vietnamese Businesses: The Influence of Proxemics and Site Setting on Negotiation Outcomes

The term globalization is often used to describe the increase of interactions and integration among people, corporations and governments around the world. Many nations have adopted policies to open their economies both domestically and internationally, to support free-market economic systems, and to highlight their potentials to create additional opportunities for international trade and investment.

Vietnam is one such country that has sought to present itself as an attractive target for foreign investment, international technology transfer, and job placements. According to a 2011 globalization report published by Ernst & Young and the UK Economist Intelligence Unit (“VN’s globalization,” 2011), Vietnam has launched itself into the top 50 globalized economies and as a result received considerable inflows of foreign capital. More and more companies and businesspeople are looking toward Vietnam a promising option.

However, working with foreigners and expanding business abroad can be risky for all parties. When business executives from all over the world gather in face-to-face meetings to establish joint ventures or negotiate contracts, communication problems may arise. Different cultures with different rules can hinder the business process in the most unexpected ways. The diversity among business cultures frequently leads to confusion, misunderstanding, and failures in cross-cultural endeavors. There is hence a need to study business negotiation in a cross-cultural setting.

Among the investing countries, the United States has always been on top of the list, with a strong strategic partnership for years and more than ten billion U.S. dollars in 2012’s registered invested capital (Burghardt, 2012; Vietnam Report, n.d.). Numerous studies have been conducted to understand this important partner, yet none of them thus far have addressed nonverbal communication during negotiations between Vietnamese and American businesses.

In Vietnamese business today, there are two main streams of values and communication. The first follows traditional ways, established thousands of years ago. It operates in a typical East Asian cultural sphere, collectivistic and heavily influenced by Confucianism, where companies are hierarchically structured, highly organized and formal (Reischauer, 1974). The second stream follows Westernized ways and is favored by younger generations. It sees a shift of values to individualism, emphasizing image, competition, and consumerism (Ashwill & Diep, 2004).

The adoption of each stream influences how a company organizes and conducts its business. Within this paper, the author is interested in identifying how proxemics, one important subclass of nonverbal communication, affects the negotiation in a traditional company, and how American people perceive it. This paper thus aims to examine the proxemics within a traditional Vietnamese company, specifically the choice of negotiation site (e.g. location) and the room arrangement of that site.

There are two guiding research questions for this paper, from which two hypotheses are employed.

• RQ1: How do American negotiators perceive the role of location in a cross-cultural negotiation process?

Traditionally, Vietnamese people prefer to hold meetings in their own territories, which can be their offices or familiar locations. An office is usually set up strategically to facilitate the negotiation process. Vietnamese people utilize feng shui in their room settings, and/or place significance in negotiating in the “home turf.” Such arrangements make them more confident and help them work more effectively (Zing, 2013).

Moreover, because members of different cultures often have very different standards, they use the accepted forms of etiquette and protocol of the society in which they live and work (DuPont, 1997); hence in this case, American people may accept the location that Vietnamese people choose. Therefore, it is hypothesized that (H1) American negotiators find it agreeable to meet in the locations that the Vietnamese partners choose.

• RQ2: How do American negotiators perceive the role of physical arrangement in a cross-cultural negotiation process?

Vietnamese people tend to arrange meetings in an intimate area, where visitors are treated as welcome guests. However, the room is usually set up so that there are distinctive differences between the host’s seat and the guests’, which allow the host to seem more in control of the situation than the guests. H2 is formed to evaluate Americans’ perceptions of such a setting in a Vietnamese company or meeting location: (H2) American negotiators find the physical arrangement in a Vietnamese location less than preferable for a successful negotiation.

Literature Review

Business Negotiations

Business negotiation is a crucial leadership and management skill, needed in a wide range of business contexts, and is highly essential to the implementation of business strategies (Ghauri, 2003). Business negotiation can include, but not be limited to, deal-making, employment, management talks, contract signing and issue solving. Business negotiation involves a large portion of problem solving, where both or all parties try to find a mutual understanding and willingness to work together and arrive at a solution to a common problem (Ghauri, 2003). Therefore, business negotiation is more than just a discussion; it contains true understanding and persuading as parts of the negotiating process.

Both intracultural and intercultural business negotiations involve representatives from different organizations working to find an agreeable solution. However, intercultural negotiations face more difficulties in reaching such a solution. As Samovar, Porter, McDaniel and Roy (2013) mentioned, culture plays a critical role when it comes to negotiation. Representatives from different cultures hold differing cultural values, have contrasting decision-making processes, and have incongruent perceptions of nonverbal behaviors. Success in the international business arena requires that one knows and understands the basic features of negotiation, as well as the value differences in all involved cultures.

Proxemics

Proxemics is a more abstract part of nonverbal communication. Edward Hall (1960) was one of the first people to study people’s spatial needs and perceptions, and coined the word “proxemics” as “the interrelated observations and theories of man's use of space as a specialized elaboration of culture” (p.1). His research into this field has led to new understanding about our relationships with others.

Even though it was introduced almost six decades ago, both communication scholars and negotiators often overlook proxemics. It has, nevertheless, a subconscious contribution to the tone and mood of negotiations, and influences negotiators’ preferences and decisions (Lewicki & Litterer, 1985). It is hard to analyze how people perceive these subtle cues, since most people do not actively voice their opinions about settings, nor do they recognize that the setting has an impact on their negotiation process. What makes it even harder to study proxemics cross-culturally is that different cultures have different ways to set up environments, preferences and interpretations of these cues. Hence negotiators who understand the differences and utilize them to their advantage are more likely to achieve their goals in business negotiation than those who neglect the proxemics elements.

Location

As discussed by Bottom (2003), a classic example of how undermining the importance of location failed a negotiation was the Treaty of Versailles, which was one of the peace treaties held by the Allied victors at the end of World War I. The negotiation ended the state of war with Germany. This negotiation was organized in France, in a city that had recently been under siege by the Germans. Later this site was deemed to be a crucial error ruining the negotiation. French public opinion was negative, which led to a wave of angry people arriving outside the negotiation site, which acutely disturbed both negotiating parties. The location made the negotiators nervous and exhausted, which eventually contributed to the lose-lose outcome of the treaty.

Site selection is considered a critical element that influences both negotiating parties. The example underscores the importance of location and site selection strategy. Particularly, site selection can affect the ability to achieve communication goals, the psychological climate, space and time availability, information flow, agenda setting, and communication channels (Knapp & Hall, 2001; Mayfield, Mayfield, Martin & Herbig, 1998). Negotiators should be conscious of its impact and choose the site that serves the purpose and desired mood.

Neutral Territory

Typically, people distinctively think that they would be more comfortable in their own territory and less comfortable in the opponent’s turf. Therefore, when looking for a more agreeable site for both parties, Western negotiators tend to prefer a neutral setting to prevent any favorable conditions the host may have (Mayfield et al., 1998; Spoelstra & Pienarr, 1999). A neutral site has high psychological significance for both parties because neither side owns it or is overly acquainted with it, and would have an upper hand even before the real negotiation starts. A neutral site can also assist conflict avoidance and make it more convenient and culturally sensitive for both parties. Nonetheless, even though a neutral site is agreeable, it is not a favorable option for American negotiators. Chu and colleagues, in their 2005 study on silent messages in negotiation, found that fewer than 40% of negotiators surveyed felt confident when negotiating outside their own territory (Chu, Strong, Ma & Greene, 2005).

Nowadays, with the increasing use of electronic communications, neutral territory can also mean a virtual territory. Instead of physical meetings, more and more companies are adopting teleconferencing, videoconferencing, emails, or phone communication. Vietnam’s companies also follow this trend and hold some of their meetings virtually. This innovative way of communication can save negotiators from the psychological stress of working in an unfamiliar zone, and also from the time and efforts of traveling. Moreover, research has shown that electronic communication can create a more favorable environment for decision making (Mayfield et al., 1998), save travel time and expenses when the two parties live far apart (Rothwell, 2012).

However, virtual communication requires more time than face-to-face to develop positive social relationships, which can affect the decision quality (Rothwell, 2012). Additionally, virtual territory and electronic communication may not work as well cross-culturally. Many countries, including Vietnam, are high context cultures that have a more indirect style of communication that is heavily based on context and nonverbal cues (Ashwill & Diep, 2004). Without seeing each other face-to-face, it is very hard to read between the lines and avoid ambiguity. Therefore, electronic communication between Vietnamese and American should be used only when a certain level of trust and understanding has already been established, or to set the stage before the final decision-making meeting is held at a physical site.Continued on Next Page »