When a company buys $40 billion in materials and services from suppliers in one region of the world, it wants to make sure it gets the best possible value for its purchases.

That's why Hewlett-Packard, based in Palo Alto, Calif., conducted a study to determine which negotiation strategies and techniques are most effective when dealing with suppliers in China, Japan and South Korea.

The study concluded that the Mutual Gains Approach (MGA) to negotiations, which stresses the idea of win-win for both parties, works well in Asia. It also found that knowing the background of the Asian negotiator and using a "middleman" to set the stage for negotiations are effective tools in cross-cultural negotiations.

"The use of middlemen, managing status of negotiators, understanding the underlying interests of the people involved in negotiations, looking for opportunities to avoid haggle and to build strategic partnerships work are viewed favorably in Asia," says Ben Webster, global negotiation program manager for HP.

HP hired academic researchers from Harvard and Massachusetts Institute of Technology, who interviewed about two dozen HP executives doing business in Asia. They also interviewed Asian suppliers and wrote a report on their findings.

"We gleaned some prescriptive advice from the report that is now used in negotiating training programs to prepare buyers when they negotiate with companies in Asia," says Webster.

More important was the revelation that the "principles and general rules of the western model of MGA" are valid in Japan, China and South Korea, he says. The idea of MGA is to downplay the adversarial notion of negotiations and create a win-win situation for both parties. MGA recognizes that both parties have legitimate interests. Both sides listen carefully to each other's issues, which should be addressed as problems to be solved by both parties.

Such negotiations require trust and time. "You have to build trust and understand the underlying interests of the people you are dealing with," says Webster. "This idea that you are going to fly in on Monday and bang out a deal on Tuesday night is unrealistic when you walk into a large Chinese manufacturer."

Ben Webster: “You have to build trust and understand the underlying interests of the people you are dealing with.”

Before negotiations occur, western negotiators should learn as much a possible about their negotiating counterparts. "Understand the people you are working with on a personal level, where they come from in their society, and where they are structured in the company. That type of knowledge will be critical in understanding their decisions," says Webster.

He adds western negotiators need to be aware that a demographic shift is occurring in China and Japan and it could affect a negotiation. "It helps to understand if you are dealing with someone who grew up in the global economy or someone who got thrown into it mid-stride," says Webster.

He says such a shift is a big issue in China although it doesn't exist in the same way in Europe or the U.S. People who grew up in the global business culture in China are very entrepreneurial and have an understanding of how the western business model works. They also have communication skills and can use that to their advantage. Greg Shoemaker, vice president of procurement at HP, says preparation is key for HP's senior negotiators who handle HP's most important, sensitive negotiations with suppliers.

"You have to do your homework," says Shoemaker. "You have to understand the other company, its structure, what the company's goals are and what the individual negotiator's goals might be as well the cultural aspects of the country," he says.

Western negotiators also need to know the status of their negotiating counterpart, says Shoemaker. In some cases, the negotiator isn't the decision maker and in most Asian companies, lower-level staffers will defer to the highest-ranking decision-maker.

Buyers involved in intercultural negotiating also need to be careful about contracts. "In the U.S., we are so concerned about the legality of contracts," says Shoemaker. "When we put a term in a contract, it is expected that both sides will execute to the term. In Asia, the contract is viewed as more of a guideline and you have to be a little more flexible."

Webster agrees that the role of a contract is significantly different in Asian countries than in the U.S. "It is more fluid. It evolves more. It is symbolic. The idea of saying 'hey it's in the contract' and that is the end all as it sometimes is in the U.S. doesn't exist that way in some Asian countries. Think of the contract as something that keeps everyone in the same field."

He adds that negotiators have to be careful about the signing of contracts after a negotiation. "When you reach an agreement and then a couple of days later you put a piece of paper in front of them and say 'sign,' you might be offending them," says Webster.

"When you present a contract in the wrong way, you could be viewed as saying 'I don't really believe what you said the other day. I don't trust you,'" he says. "Understand not everyone makes a final agreement by signing on the dotted line. There are other ways to do it." In some cultures a handshake and a person's word are still good enough to seal an agreement, according to Webster. "The higher up you go, the more someone's handshake and word are valuable."