Case StudyCase Study
The Importance of Business Communications (Japan Negotiation)
A case study that shows how a business relationship can fall apart when communications between the partners are not maintained.
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The importance of keeping the lines of communication open with your business partners cannot be overemphasized. Both our domestic partnerships and especially our foreign partnerships are premised extensively on the how frequently and on which important issues the partners talk.
Lines of communications need to be a two way process, flowing back and forth. Too many international negotiators do not take the time, and dismiss the need to include some frank discussion in how the two parties will maintain their negotiation deal once signed. They assume wrongly that the communication process will evolve on its own. The time to discuss the line of communications is when the venture is being negotiated. They should not consider the issue later, and after the fact, when serious problems have arisen that may challenge the viability of the joint venture.
Take the case that occurred between one particular U.S. company and their Japanese partner for example. The agreement that they signed stipulated that the Japanese company would supply the manufacturing, management, and marketing components of the deal, while the American company would supply the technology.
The American representative, who was based in Hong Kong, met with their Japanese counterparts only once every three months where all aspects of the operation would be discussed.
In between these quarterly visits, the two parties exchanged communications through written correspondence and infrequent phone calls. To the Japanese negotiating partner, this periodic though infrequent contact signalled that the American partner was not overly committed to building a trusting relationship in Japan. Needless to say, the Japanese commitment to the partnership began to dwindle as well. As time progressed, the U.S. company’s strategy altered as they began to concentrate on a smaller product line. The American company never bothered to advise their Japanese negotiation partner of the change in their strategy. Also, due to this smaller line, there was the additional fiasco in that the Japanese company was not going to be receiving the technology it had negotiated with the American firm.
The Japanese took a dim view of what they now perceived as an agreement that was signed in ‘bad faith’. The Japanese became bitter as the relationship soured and ended in arbitration. What was the result the arbitration? The partnership was dissolved.
This illustrates the importance and need for continued open communication. The American firm should have informed their counterpart about the change in their strategy. The Japanese should have communicated their displeasure sooner, rather than allowing their disgruntlement to fester. Be careful to not underestimate the importance that open lines of communications can exert on your business relationships.