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Faculty Insights

The World Isn’t Flat for Supply Chain Negotiators

By Wisconsin School of Business

May 29, 2013

It’s hard to argue with an idea that’s sold millions of books! “Everybody knows” the world is becoming “flat”…but is it really? Well, that depends. One of the most vocal opponents of the “flat Earth” idea is Pankaj Ghemawat of Harvard. In Professor Ghemawat’s view, the entire world is not flat. From his perspective, globalization continues but it’s not universal. He argues that regional and even intra-country trade is the dominant model for global commerce.

The debate about a flattening world is sure to continue in academic and business circles. However, when teaching classes for professionals involved in global supply chain management, I recommend they keep an open mind. Negotiation of cross-border agreements is an example of where the flat world idea may cause headaches. Why? Because all negotiations take place within a context. The context for international negotiations is more complex: culture, language, religion, geopolitical considerations, trade agreements, and basic geography all shape the negotiating environment. The problem is that we tend to frame our expectations based upon what we know—or think we know—about that context. 

A simple way to look at framing is that people use the information they have to make sense of a situation. This impacts their decisions and actions. Sometimes we think we know something just because we’ve heard it so often—for example, “the world is flat.” Repetition does not always mean something is a fact. For instance, research done on global perceptions of cultural stereotypes found that generalizations we may have about people in other cultures will almost always be wrong for an individual in that culture. Maybe our perceptions are based upon movies! Yes, that’s not unusual.  Unfortunately, research shows that we’re more likely to recall a movie (fictional) version of events than even the real history we’ve been taught. So where does “flat earth” come into this?

Every negotiation should begin with a plan. Supply chain professionals can’t let an unwarranted sense of universal similarity distort their views in developing that plan. Although their counterparts may “speak English and dress like us,” skilled negotiators realize that an unfounded belief in cross-border commonality often results in less-than-satisfactory agreements…or none at all. Let’s take a look at how this impacts just a couple elements in a negotiation plan.

Goals. One of the stereotypes of U.S. negotiators is that we tend to focus on “getting the deal.” That’s not always the case in other cultures, where building a relationship is considered more important.

It’s also not a good idea to assume that profit is the only goal. Sometimes we think that each negotiator comes to the table just to maximize profit or minimize price, but that’s not so. Each party may have multiple different yet compatible goals based upon factors such as domestic government policies, the business environment, employment laws, internal management directives, and individual motivators. 

Communication.  Language is often a known obstacle in cross border negotiations. Yet, we may overlook the fact that the actual process of communicating may itself be completely different. Whereas Americans may want to “stick to the facts” and move in a sequential fashion, other cultures will prefer a more indirect, holistic approach.

Obviously technology is continuing to make our world increasingly interconnected and interdependent. But when negotiating cross-border agreements, I recommend that supply chain professionals view the world as a globe—not a flat map—where distances and differences do matter.