3 Tips To Negotiate Effectively With Different Cultures - Forbes

It’s easy to think of the world as a homogenous place. 

When multinationals trade in every corner of the globe and our digital communication systems make it just as easy to talk to friends on the other side of the world as to the neighbor next door, we forget that many differences persist. 

Much unites us as a species, but there is just as much that differentiates us – creating a diversity that makes us richer, but also creates challenges when working together.

Humphrey Wireko is an associate principal at CrossBoundary, an investment firm that works in underserved markets to create sustainable growth. Humphrey is currently working on financing ‘minigrids’ in Africa. Approximately half of Africa’s 1.2 billion people have no electricity, and the minigrids being installed are self-contained utilities for small towns and villages – often in remote areas – giving them access to a reliable power supply. Humphrey talked about some differences of doing business in Africa, and what lessons it had for doing business in the rest of the world.

Being culturally aware

Human psychology tends to group other people into large categories – a phenomenon known as ‘outgroup homogeneity’ – not recognizing that the diversity they see in their own group is the same in other groups, but instead assuming that because one characteristic is shared, all characteristics are shared.

Africa is commonly misunderstood because of this. People will assume a broad similarity instead of realizing that the huge continent has over fifty countries, more than 1,000 languages, and a range of political, legal, and economic systems. These differences aren’t always national – you can see variations just by moving from town to town.

Working in Africa means understanding and adapting for these differences. However, it’s not just an African phenomenon. You would have to make the same allowances for example when trading in Asia or Europe, or when marketing to the young or the old. Just think about the range of interests, temperaments, and lives among your friends or in your workplace, and you will get an idea of the diversity that exists everywhere.

You will, obviously, have to choose some level at which to use generalizations, but it’s almost certainly going to be at a level lower than you think.

Build relationships

Humphrey highlights that in large parts of Africa, negotiating is natural –  it is just the way business works at every level. Whether he’s installing a minigrid or buying an apple, there is an agreement to be made. Humphrey told a story about going to the market to buy fish. The trader would look at him or his wife and make an assessment before giving a price. When his wife explained who her mother was, a local and a regular buyer, the price was nearly halved.

This is true everywhere. You are more likely to negotiate a better deal if you have a strong relationship and if they trust you. That trader may have been looking to maximize profit from customers he didn’t know but assessed as wealthy, but a similar process happens all the time. Is the new client good for the contract? Is there a risk to service levels with other clients? How can I price to hedge the risks? Building a strong relationship means more trust, and that means better deals.

Understand the risks

The diversity of Africa brings a diversity of risks, which investors from elsewhere might not anticipate. Economic volatility can mean sudden changes in currency values. For example, while the value of the plant (purchased in dollars) remains stable, the return on investment (paid in local currency by residents) on the minigrid can suddenly plummet. Or, in some areas, the legal jurisdiction might be weaker, presenting a risk that there is no disincentive for non-payment.

Much of this can be mitigated with cultural awareness so that you know the potential problems, and by building those strong relationships, it helps ensure that those involved will remain committed. However, it is always important to remember to be aware of the risks, and know that sometimes there will be risks that you never thought of.

CrossBoundary is doing some excellent work using investment to improve the lives of people around the world. In doing so, they show that it is possible to make businesses and entrepreneurship work in places that have been overlooked, and that all it takes is cultural knowledge, good relationships, and understanding of the risks: the same things you need anywhere.

Click here to listen to Humphrey’s episode.

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