Political Impact on Global Negotiations

A case study that reveals how a foreign political system can impact the manner in which we conduct an international business agreement in an international negotiation.

Negotiators have a general understanding of their own local political environment. They are raised in a business milieu that clearly distinguishes who the key players are, and who has to be pitched about a proposal. They learn the roles that each level of government may bring to the table, and its impact on the negotiations.

When negotiators take their proposals abroad and negotiate with a foreign power, they may not fully realize the impact that different political systems will affect the manner in how the negotiation should be conducted. The scope of the impact by the governments of individual nations will vary in the degree in the amount of influence they may have on international negotiations.

A major U.S. defence contractor, Raytheon found out for themselves several years ago just how differently this impact can have on their negotiations. Their first initial foray into international negotiations occurred in Europe. Raytheon was attempting to put together a consortium of European companies to produce a NATO weapons system. They had thoroughly researched all the possible contenders and compiled a list of those companies that they believed were best able to handle the contract they were trying to put together.

Raytheon then contacted those companies and started negotiations. Talks became suddenly stalled in their tracks when, much to Raytheon’s dismay, the governments of several European nations abruptly advised Raytheon to cease negotiations with the firms within their respective countries. These European governments said it was not up to Raytheon to decide who they would conduct business with in their respective countries. They would decide which companies could be contacted, and that Raytheon had no choice in the matter if they expected to fulfill the contract.

Raytheon realized that it had no choice in the matter. Accepting the political reality of the situation, they terminated talks with the companies that they had initially chosen. They then entered into talks with the consortium of companies chosen by the respective NATO members instead, and successfully completed the weapons system contract.

Several years later, the U.S. government convinced Raytheon to develop a similar weapons system for Japan. Having learned their lesson with the European consortium, they immediately initiated their talks with the Japanese government instead of going to individual companies like they did in the NATO situation. They sat back and waited for the Japanese government to tell them which companies to use in their weapons system project.

Nothing happened. The Japanese government remained curiously quiet. Some time elapsed before a senior executive from Raytheon had a conversation in private with the Japanese deputy minister of defence. The deputy minister advised the Raytheon executive that it was up to the U.S. company to make the decision about which companies to use, and not the Japanese government. It turned out that since two of Japan’s main electronics firms were considered as possible contenders; the Japanese government did want to anger either of these companies by choosing one over the other on behalf the American firm. The reason was because both of these companies wielded some considerable political clout with the Japanese government.

 

It’s a valuable lesson to remember that situations with individual nations are going to vary. What works in one country may very well not work in another country, so never make assumptions about what the political reaction will be.

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