David Nagai: Today we have a special guest from the Netherlands. His name is Ed Kuiters. Ed, thank you so much for being on the show!
Ed Kuiters: Hello David, and thank you for having me.
David: So Ed, you have been in Japan for about 14 years, since 2007, and you have a background in IT and business, entrepreneurship (starting businesses). You’ve started a few businesses. Just tell us a little bit about what you do.
Ed: Okay, thank you for your question. So, yes, I do have a background in IT. I’m not a hard-core (seriously-committed) programmer, but I have been mostly involved in the project management side of IT. I have started a few businesses in Japan in different fields, mostly with an IT focus, and I’m currently working for a consulting company.
David: You also have some experience with negotiation, I know. So today I would love to hear your perspective on cross-cultural negotiation in the Japan context.
Ed: Oh, that’s a mouthful (a lot of words), David. Cross-cultural negotiation in the Japan context. So, yes, you’re right. Actually, I have been involved in negotiations in the Netherlands, and in Japan as well. But yeah, when you talk about negotiation you always need to realize that you are talking in stereotypes. That means that actually you’re making generalizations. So what I’m going to tell you today doesn’t to apply to everyone. So please keep that in mind. But there are some general tendencies that stand out when you talk about negotiations. So, yeah, through my experience and through actually discussing negotiation with Japanese business people I’ve learned a few things that really stand out and I think that are important if you are going to negotiate with a Western counterpart or with a foreign counterpart.
David: Great, so you don’t have all the answers but you do have some perspectives that you can share. We’d love to hear them.
Ed: Actually I have surprisingly few answers, David, (laughter) but I’m willing to share what I’ve learned or picked up along the way.
David: I’m sure you have more than me. So yeah, what should we keep in mind? What are some thoughts you have on that?
Ed: Okay, so basically, I would like to frame (shape, formulate) this in a Japanese perspective and then from a Western perspective.
Okay, so from a Japanese perspective first, I think there are three points that I observe happen on the Japanese side.
1. Cost-plus negotiation
Ed: So number one is a cost-plus negotiation. What does that mean? Basically, the Japanese side tends to look at their own cost and then add a margin (extra amount) on top – a fair margin on top. But it basically takes their own cost as the starting point and wants to give the other side a fair deal.
2. Decision-maker is absent
Ed: Number two: The decision-maker is usually not at the table (present). Usually there is somebody else who is doing the negotiation.
3. Relationship more important than contract
Ed: Number three: There is a commitment to a relationship instead of a contract. So Japanese sides really try to build up rapport (explanation below) with the other side. They’re not so much focusing on the contents of the deal, of the price, what they’re going to do. No, they’re trying to build up a relationship because that’s what they’re committed to.
Now if you mirror (compare) that with a typical Western negotiator we can see clear differences.
1. Value-based negotiation
Ed: Basically, the Western side doesn’t really think in terms of cost-plus. What a Western negotiator typically tries to do is to look at how much value they bring to the other side. Doesn’t matter how much it costs. If my solution really brings a lot of value to the other side, then I can adjust the price accordingly (appropriately).
David: So to understand the perceived value and the actual value?
Ed: Right, so basically, if I sell a soft drink in Omotesandou then I can sell it for 110 yen because there are vending machines everywhere. But if I sell a soft drink in the middle of the desert, the price of my soft drink will go up twenty times. Because the value I bring to my customer is ten times higher. My costs haven’t changed, but the value to the customer has significantly increased.
David: Right, the context changed a lot, yeah.
Ed: Right. So that is value-based negotiation.
2. Win-win mindset
Ed: Another thing to realize that Westerners do is try to engage in win-win-negotiation. Win-win negotiation is basically a two-stage negotiation. The first stage, you’re going to work together. You’re going to look at: “Okay, this is valuable to the other side. This is valuable to me. How can I find things that are valuable to the other side and that are not valuable to me and exchange that for something that is very valuable to me and not valuable to the other side.” By doing that, you grow the cake. So win-win negotiation, first you grow the cake. And then at stage two, you’re trying to get the biggest piece of the cake.
3. Contract more important than relationship
Ed: Then number three is: Western negotiators do not value relationship. Now, that’s not exactly true, but what they do value is a contract. The contract is more important. If a Japanese contract is three pages then a typical Western contract - especially an American contract - is like 30 pages.
David: Oh, that’s my culture, yeah.
Ed: Exactly. So as you can see there are clear differences.
But how do you deal with that if you’re a Japanese negotiator?
I have three tips.
1. Make space, give and take
Ed: Tip number one is actually: Try to create some negotiation room – space to negotiate. A lot of times, because the decision-maker does not sit at the table, the person who enters the negotiation basically conveys what the Japanese side has decided before the negotiation. This makes Western negotiators very nervous, because they have been taught to always negotiate with decision-makers. So what you need to do in order to be taken seriously by the other side is you need to be able to give and take (compromise) a little bit. So make sure that you have enough room to negotiate on price, on terms, on specifications, on services. If you don’t do that, there’s a big chance that the Western side will walk away (cancel/stop the deal). So that’s tip number one – create some space.
2. Prepare specifics
Ed: Tip number two: Make sure that you’re prepared. As mentioned, Western negotiators, they don’t care so much about the relationship – they are more interested in the contract. They want to make sure they get the right price, the right quantity, the right terms. So make sure that you’re prepared. Make sure that you know what you want out of this negotiation other than the relationship. Make sure that you can make a deal quickly.
3. Focus on everyone's interests
Ed: Tip number three is: Focus on interests. Try to understand that the Western side is looking for ways to grow the pie (cake, advantage). So instead of looking at your own price – instead of looking at yourself – try to find and relate to what the Western side’s real interest are.
If you do these three things, I think you can have a much better chance of having a successful cross-cultural negotiation.
David: Great, yes, thank you so much for sharing those tips. I’m sure many of our listeners will benefit from those ideas. So Ed, I have one last question for you. How do you practice continuous improvement in your life or work?
Ed: For me, that is not something I really need to work on. For me…
David: Really?
Ed: Yes. Actually, for me, growth is like breathing. Everywhere I look I see things that I don’t understand and I don't know – things that raise my curiosity. So for me, my curiosity drives me. And growth – learning – is something that has become just as important as breathing to me. So, growth for me is something that I cannot do without.
David: So stay curious. Keep learning.
Ed: I think that’s the point. Yes, thank you.
David: Now I know your secret. Great, thank you so much, Ed, for sharing your wisdom with us today.
Ed: Thank you very much, David
*Rapport – (silent ‘t’) The way in which someone is regarded; credibility, reputation, trust, mutual understanding, close relationship. Usually we say ‘good rapport’ or ‘build rapport.’ … “Over time we can build more rapport with our partners.” … “We actually have very good rapport with our customers.”
Want to connect with the changing world in English?
online or in Yokohama-Motomachi
to expand your:
creative thinking
global awareness
cross-cultural communication
(Advanced and intermediate only)