The Impact of Cultural Differences on Negotiation with Third Party Logistics

Chapter 1 Introduction

1.1 Culture, communication, negotiation, contract and third party logistics

National culture can be viewed as the broadest social environment, and a cross-cultural communication is a collision of two distinct cultures (Carnevale, 1995).  Cross-cultural business communication has become trendy with the aggravation of internationalisation. Since 1980s, relevant articles and scholarly journals has been increasing (Bond, Leung, & Wan, 1982; Maisonrouge, 1983; McCaffrey & Hafner, 1985; Sanders, 1988; Limaye and Victor, 1991; Earley, 2006; and Kawar, 2012). Business representatives with different cultures when negotiating for business partnership and the transactions are assessing and learning traditions, differences, cultures and properties of targeted countries (Peleckis, 2013). Negotiation as a part of business communication is significant to study. Sufficient studies illustrate the relationship cultural impact and negotiation (Drneich, 2003; Bloom, Sadun, and Van Reenen, 2007; Akgunes et al., 2012; and Peleckis, 2013), however few scholars concerns business negotiation with contractual third party.

Third party management monitors and manages interactions with all external parties and third party consists of contractual and non-contractual parties. Negotiation with contractual third parties is primary and formal, and the failure of the negotiation could result in trial. An organisations’ relationship with third party plays an important role in organisational performance and sustainability. Communication is critical to maintain appropriate relationship.

Third party logistics (TPL) is the companies that employ other organisations to carry out its logistics activities (Lieb, 1992). The third party logistics companies have no ownership of products and no responsibility to sell and purchase the products (Vasiliauskas and Jakubasuskas, 2007). Third party logistics, contract logistics, contract distribution, and logistics outsourcing are the interchangeable terms that means an organisational practice that outsources part of or all logistics operations that previously operated by itself (Aertsen, 1993; Bowsersox, 1990; Sink et al., 1996; and Selviaridis and Spring, 2007). Third party logistics (TPL or 3PL) is a firm employing a third party business to construct-out the firm’s distribution and fulfilment services (Selviaridis and Spring, 2007). Apparently, TPL is a subcategorise of contractual third party. The emergence of TPL resulted from the increasing in the number of large logistics companies that have capabilities to provide global logistics solution, and TPL’s clients strive to expand their scope of operations. Hence, international trade and cross-cultural communication are indispensable. To be noticed, TPL is not necessarily to involve large logistics corporation. Small Medium Enterprises also relates to TPL.

There has been a surge of academic interest in cross-cultural communication since 1980s and academic publication in third logistics party just aroused for about a decade. All of academic publications barely concerned cross-cultural negotiation with contractual third party particular in third party logistics. Now, it is time to fill this research in order to enrich theory and knowledge in third party management.

Limaye and Victor (1992) suggest that cross-cultural communication and intercultural communication are interchange terms and representing same meaning. Intercultural differences dimensions perhaps have relationship with the negotiation process, which formed by a number of representatives with various culture (Peleckis, 2013). Therefore, it is important for those representatives to understand other cultural features, and politeness.

Many cross-cultural communication and negotiation studies adopted Hofstede’s cultural dimension theory (Drnevich, 2003; Yafeh, 2010; and Akgunes et al., 2012), and more cross-cultural management researches used Hofstede’s cultural dimension as conceptual framework (Kundu, 2001; Glick, 2002; Maznevski, et al. 2002; and Kawar, 2012). Basing on previous researches support, it is meaningful and necessary to consider Hofstede’s cultural dimension in cross-cultural studies. Since 1980s, Hofstede has been revisiting and evolving the cultural dimensions, which include power distance, uncertainty avoidance, individualism versus collectivism, masculinity versus femininity, and long-term versus short-term orientation (Hofstede, 1980, 1984, 1991, 2001, and Hofstede, Hofstede and Minkov, 2010). These cultural dimensions specifically classify the cultural impacts on individuals’ behaviour and action during interaction process.

This dissertation aims to clarify the impact of cultural differences on negotiation with third logistics party in relation to Hofstede’ cultural dimension. Through using it as a tool, cultural conflicts in the negotiation can be classified into five categorises and the reasons of the cultural conflicts will be explained by Hofstede’s cultural dimension. This dissertation will use the five cultural dimensions to reveal communication conflicts created by these dimensions. It will follow the pattern of previous academic publications of cross-cultural communication and management, and apply it on the negotiation with third logistic party. To be differentiated with previous studies, this dissertation focuses on third logistic party and highlights its characterises that influences negotiation process. This will review, evaluate and compare different viewpoints on cross-cultural negotiation, and discuss for the most suitable viewpoint in third logistics party. Additionally, it will recommend how to improve the effectiveness of the negotiation with third logistics party.

1.2 Aim and objectives

The purpose of this dissertation is to explore and elaborate the impact of cultural differences on negotiation with third logistics party. To build a new contractual relationship with third party logistics and renew or maintain relationship with current third party logistics contractors involves business negotiation. This dissertation aims to explain the relationship between cultural differences and negotiation in the management of contractual third party logistics. The expected result of the dissertation to facilitate the success of all negotiation related to contracts including the bargaining for a new contract, the debating for specific provision in contract period, and the discussing for renewing a contract.

In order to achieve the dissertation aim, there are three specific objectives:

To prove the significance of cross- cultural communication in third party logistics relationship;

To clarify how do cultural differences affect negotiation with contractual third party logistics; and

To recommend how to improve the effectiveness of the negotiation practices with contractual third party logistics.

1.3 Significance

Silversides and Spring (2013) propose to investigate the impact of culture and communication on the success of third party logistics. More literatures appealed to explore cultural distance and its application in supply chain management and international business management (Gelfand et al., 2007; Pagell et al., 2005; and Tong et al., 2007).

Hermalin (2001) demonstrates that culture forms the behaviours of individuals and organisations. Sufficient researches support that cultural differences cause impairs communication resulting in failures of economic interaction (Bloom, Sadun, and Van Reenen, 2007; Weber and Camer, 2003; and Weber, Shenkar, and Raveh, 1996). However, Yafeh (2010) proposes that the extent of the effect of cultural differences on economic interaction is inconclusive. Even though Yafeh (2010) explored the impact of culture difference on financial contracts written and contractual outcomes, the research had no involvement in third party management. Apparently, third party management addresses governance and risk management more than regularly merger and acquisition do. Furthermore, negotiation requires proficient communication and skills that adheres to third party’s national culture. In comparison with financial contract written, negotiation is inclined to a complicated communication process. Drneich (2003) studies on the role of cultural distance in international negotiations however without consideration of third party management. Krishman, Smark and Pepper (2013) illustrate that there is a significant relationship between national culture and the performance of third party logistics outsourcing and national culture affects the decision-making and implementation process of logistics outsourcing. This research targets at third party contract environment, however it also has no investigation on cross-cultural communication in negotiation. Overall, adequate articles and researches propose the significance of the influence of cultural differences on economics interaction, but territories of these studies are distinct and none of study identifies the correlation between cultural differences and negotiation with third logistics party. Given that the importance of culture distance in economic interaction was proved, the dissertation that aims at third logistics party negotiation is significant and it will fill the research gap.

Furthermore, understanding the effect of on cultural distance on negotiation process illustrates the reason of null outcomes and it can be used as an effective tool or technique for negotiators to boost cross-cultural negotiations for appreciated outcomes (Drneich, 2003). Strategic alliance relationships are based on individual relationship, engaging in culture enables organisations to build and maintain proper relationship with their strategic alliances (Krishnan, Smark, and Pepper, 2013). Involving cultural techniques in negotiation facilitates negotiation success (Akgunes et al., 2012). This dissertation arouses organisations’ attention to culture in the process of cross-cultural negotiation thus improving the effectiveness of negotiation, which benefits multinationals and Small Medium Enterprises (SMEs). Particular in SMEs in which lacks of experiential negotiators, this dissertation plays as an enlightenment role. Moreover, studying on cultural difference in negotiation with third logistics party fills the research gap identified above and it dedicates not only the performance of third logistics party management and effectiveness of cross-cultural negotiation but also the exploration of theory and knowledge in the field of third party management.

Chapter 2 Methodology

2.1 Research onion

Saunders, Lewis and Thornhill (2008) summary and attribute a set of methodologies into the research onion, which clarifies the hierarchical relationships of these methodologies. This dissertation with no involvement of primary data collection adopts interpretivist philosophy, deductive approach, case study and cross-sectional time horizons.

Figure 2.1 Research Onion (source from: Saunders, Lewis and Thornhill, 2008)

2.2 Research objective and question

In order to investigate the impact of cultural distance on the negotiation with third party logistics, there are three research objectives:

1) To prove the significance of cross- cultural communication in third party logistics relationship;

2) To clarify how does cultural distance affect negotiation with contractual third party logistics; and

3) To recommend how to improve the effectiveness of the negotiation practices with contractual third party logistics.

Three research questions are set that aligns with the research objectives:

1) How important is the relationship between cultural distance and the negotiation with third party logistics?

2) What factors originated from cultural distance can affect negotiation with third party logistics; and

3) What strategies negotiators can be used to avoid unappreciated and failed negotiation with third party logistics.

This is an exploratory study that targets to figure out what is happening, to find out new insights, and to ask questions and evaluate phenomena in a new light. Robson (2002) explains that exploratory study is a meaningful approach to clarify the happenings, to explore new findings, to propose questionable issues, and to assess phenomena in the new viewing angle. Exploratory study is especially helpful to clarify your understanding of a problem.

2.2 Research philosophy

The philosophy of positivism and realism on the contrary to interpretivism advocates subjectivism basing on the philosophical perspectives of the natural scientist. Positivism and realism address social reality and produce law-like generalisations, which are similar to the findings of physical scientific experiment (Remenyi et al., 1998), however positivism is far more complicated, rigorous and premise than realism. Only observable phenomenon is collected by positivist researches as credible data. In the rigorous research structure, positivist researches avert the objectivity and feeling of inquirers. In order to build the structure, positivist researches collect secondary data to examine and review existing theories and develop hypotheses. The strategy of positivism is to answer research question and achieve research purpose by testing and confirming research hypotheses (Kervin, 1999). Positivists hold a belief that reality is constant, and depicted by an objective perspective, and the process of research should not interfere the research phenomena. Inquirers should isolate from the phenomena and the observations are repeatable. Philosophy of positivism manipulates reality and attributes variations in reality to independent and dependent variables in order to identify regularities, and to identify the relationship of these variables. The philosophy of positivism is conventional and historical that roots in human society, and knowledge which is not proved by positivist research are likely to be regarded as unscientific and invalid knowledge (Hirschheim, 1995). Alavi and Carlson (1992) indirectly proved the viewpoint, and demonstrated that all empirical studies are consistent with positivist approach.

In the perspective of symbolic interactionism, humans are in a sustainable process of interpreting the world around us in that we perceive and explain the other people’s actions and behaviours which related to the us and this explanation results in the adjustment of our own meanings and actions. The core of interpretivist philosophy is empathetic stance (Gummesson, 2000). The challenge of interpretivist philosophy is to deeply participate in the social world of research topics and recognise the social world from the perspective of research respondents. Interpretivist philosophy is highly effective and suitable for the research of business and management, especially for the researches related to organisational behaviour, marketing, and human resource management, as business situations are complicated and unique. These research subjects can be regard as the result of a function of a specific set of circumstances and individuals. Saunders and Lewis (1997) concluded that interpretivists criticise the inherent flaws of positivism that law-like generalisation is inadequate to unscramble social phenomenon and positivism may ignore critical variables in the social phenomenon compromising insight of human behaviour. Nevertheless, interpretivist philosophy typically is carried by qualitative research, which could be negatively affected by bias and subjectivism thus misleading the research result (Saunders and Lewis, 1997). Creswell (2007) highlights that the empiricism and objectivity in positivism research are unsuitable to study on social phenomenon especially for human behaviour, and objectivity and empiricism are not appropriate for social and natural sciences.

In philosophy of interpretivism, phenomenology and symbolic interactionism are two conventional methods. Phenomenology means the manner that human make sense of the world. Phenomenology emphasises experience, and the meanings of human experiencing, sensory perception, imagination, desire, action, emotion and thought (Zahavi, 2003).

In term of comparison of philosophies of positivism and interpretivism, only observable phenomena can be measured and collected into the credible data analysis. In order to generate a research strategy, researchers review the existing theory to set research hypotheses in order to answer research question. The data analysis in positivist research is to test these hypotheses for further development of law-like theory. As the data analysis is calculated by the techniques of statistics, the findings of the research are law-like and scientific. Furthermore, Remenyi et al. (1998) illustrate that positivist philosophy eliminates subjectivism in the research process and frames a rigorous and compact structure for researchers to explore research questions. Meanwhile, the element or variable which is not involved in this research will not be identified and studied in the research. Nevertheless, the research will have little involvement of subjectivism and feelings. In the data collection, positivist research employs standard techniques to gather data, which eradicates the researchers’ bias and subjectivism. The result of positivist research is more objective and could be more accuracy. Gill and Johnson (2002) illustrate that positivist researchers mainly quantify observations in order to attain statistical calculation and statistical analysis.

2.2.1 Weakness of positivism

Westfall (1997) criticises that positivist research actually requires more expenditure and resources, which neutralises the benefits of home working for research, because it requires telecommunication equipment and computer technology to spread questionnaires and conduct survey.

Stahl (2007) highlights that empiricism and objectivity as the mainly beneficial characteristics of positivist research are improper for social science researches including human behaviour because objectivity and empiricism are unsuitable to support social and natural sciences, and the finding of positivist research could miss the consideration of some important factors and not completely explain an issues because positivist researches only examine and address the issues in the established framework. Without a comprehensive perspective, the finding of the research could be inaccurate and incomplete. Inaccurate data definitely generates incorrect findings, and participants in survey may irresponsibly answer the questions and meanwhile the design of questionnaire may have flaws so that the questionnaire cannot explore sufficient data or collect expected information (Haworth, 1984). The generalisation brought by positivist philosophy may be too universal and broader for specific issues, and/or knowledge originated from positivist philosophy is so general that has no practical values.

Guest et al. (1999) illustrate that interpretive research concentrates on the socially nature of reality, values the intimate relationship between researcher and respondents, and allows situational constraints to alter the process of research. Interpretive researches have no pre-set dependent or independent variables, so it has no process to test predefine dependent or independent variables; but the purpose of them is to understand the social context of the phenomenon and the process whereby the phenomenon effect and is affected by the social context (Walsham, 1995).

Nevertheless, there is a debate that whether positivist paradigm is completely appropriate for the social sciences (Phillips, 2007). Social sciences are highly different with the physical sciences. Positivism uses previous knowledge to design research hypothesises but some variables or constituent parts of reality are not identified by pervious researches, thus the positivist researches may miss important variables (Rorty, 2007).

2.2.2 Weakness of interpretivism

It is hard to maintain the cohesion if inquirers adopt interviews in international research because the variants in researchers’ differences are significant and uncontrollable; a number of researchers has different feelings, interview skills and standards for data collection and management of these researchers to attain the same level is difficult so that the process of data collection is inadequately coherent and consistent (Jankowicz, 2005). Interpretivism intimately relates to subjectivity so that the chance of generating bias is large, and the primary data is not generalised due to the influence of researchers’ individual perspectives and values. Thus, the problem in reliability and representativeness of data is unavoidable (Shafer, 2004). The reliability of sample in an interpretivism research is always questioned, and the objective data analysis is debatable. As a result, the findings are unlikely to convince a large number of scholars and easily overthrow by other researches. Comparing to positivist research that possesses statistic evidences, interpretivist researches with inquirers’ deduction and induction are seemly less convincing (Shafer, 2004). Furthermore, as interpretivist research relies on personal feeling and objectivity, researchers with different backgrounds tends to generate opposed findings, thus arousing debates. However, Jankowicz (2005) observes that even though the debates make a topics have no conclusion, they promote the enrichment of knowledge. The dialectical process of debates creates new findings and theories, which can be discussed openly and proved or rejected. Browaeys and Prices (2011) found that interpretivism is more suitable to culture studies because culture is related to objectivity that needs an objective perspective.

2.2.3 Explanation of using interpretivism

None of research methodology perfectly satisfies the needs of research purpose and research questions; all methodologies have inherent flaws; inquirers should design the research methodologies basing on their own capabilities and resource, research subject, and research purpose (Saunders, Lewis and Thornhill, 2008).

Browaeys and Prices (2011) criticise that surveys are unsuitable to investigate culture and Hofstede’s culture dimension originated from surveys, so the validity of the culture dimension is questionable; countries as units of study of culture is infeasible as most countries have various cultures. Collins (2010) also reveals that survey is unsuitable to explore human behaviours particular in culture as such behaviour is so intricate that questionnaires are unable to measure and even participants are incapable of understanding the impact of culture on their behaviours. Culture studies need proper objectivism and feelings to recognise the characteristics of culture and explore feature of that; and rigorous framework and subjectivity in the philosophy of positivism study improperly explain the cultural phenomenon (Weber, 2004).

According to above analysis, the philosophy of interpretivism is more suitable for social research, as it allows researchers to scan all of variables within the context of research subject and offers researchers an opportunity to fully identify all variables within the research subject. Furthermore, this research has no data collection process

2.3 Case study

Case study as a research method allows researchers to have an in-depth data analysis within a particular context. In the nature of cases study, it exploits and analyses contemporary real phenomenon by specific contextual analysis of a constricted quantities of events or conditions, and their relationships (Campbell, 1975). Robson (2002) defines case study as a strategy for research that uses empirical investigation of a specific contemporary phenomenon in its context adapting various sources of evidences. Yin (2003) argues that case study focuses on the correlation between phenomenon and its real life context; and suggests that case study should be employed to study on the subject whose boundaries between the phenomenon and the context are not clear. Morris and Wood (1991) highlight that case study are favour by the research which expects to obtain an understanding of the context of research subject and the process. Case study strategy is effective in explanatory and exploratory research. The data collection techniques in case study are various including interviews, observation, documentary analysis and questionnaires, thus case study tolerant both quantitative data and qualitative data (Saunders et al., 2009).

Yin (1984) categorises case study in to three categories including exploratory, descriptive and explanatory case study. Exploratory studies case studies are designed to investigate any phenomenon in the data which is used as a point of interest to the inquirers. Secondly, descriptive case studies are designed to describe the natural phenomena which exists within the data in research questions. According to McDonough and McDonough (2007), descriptive case studies are narrative type. Thirdly, explanatory case studies test the data from a surface level to deep level to interpret the real life phenomena (Zaidah, 2003). Furthermore, Yin and Moore (1987) illustrates that these forms of case studies can be attributed to three rival theories including a knowledge-driven theory, a problem solving theory, and a social-interaction theory. In the knowledge-driven theory, the final commercial products are the results including ideas and findings from basic investigation. in problem-solving theory, products originate from external sources instead of research. Social-interaction theory stipulates that overlapping professional network promotes researchers to communicate and interact.

Yin (2003) categories case studies into four groups consisting of single case, multiple case, holistic case and embedded case. A single case often reflects a critical phenomenon, or a specific and unusual case, which is highly representative or offers an opportunity to study a phenomenon (Walsham, 1995). Meanwhile, case study strategy can consist of multiple cases and the findings are built by the first case and proved by other cases. Yin (2003) argues that multiple case studies may be more reliable and convincing that a single case.

Case study strategy has relatively strong capability to form answers to the questions including ‘why’, ‘what’, and ‘how’, even though ‘what’ and ‘how’ questions are more associated with the survey strategy (Stake, 1995). Case study is completely on the opposed side of experimental studies. Interpretivists criticise that survey strategy has insufficient capability to identify variables in relation to research subject because its well-established structure constricts the number of variables that are used to understand context and research subjects (Pyecha, 1988).

In the comparison with case study, survey has many disadvantages particular in culture and social studies. Browaeys and Price (2011) illustrate that surveys are unable to measure cultural phenomenon and it is improper that Hofstede to adopt surveys to build the cultural dimension. Surveys in the group of positivist philosophy may be unable to identify all variables in social phenomenon. Surveys quantify the facts or evidences into numerical forms and in this process some critical variable may be missed (Sudman and Bradbum, 1982).

However, the mainstream of criticism to case study is that case study has less robustness and reliability. The design of case studies is important that determines its robustness. Researchers choose single case, and multiple case basing on research question (Lovell, 2006). Clough and Nutbrown (2002) conclude the disadvantages of case studies in two aspects. Firstly, case studies not very rigour that case study inquirers are sloppy, use ambiguous evidences and tolerance biases that negatively affect the direction of the findings and conclusions. Secondly, the typical criterion to case study is that a small number of cases is unable to generate reliable and convincing findings and generalisations; and especially for single case study scientific researchers criticise that ‘how can case study make generalisation from a single case’ (Yin, 1984; Hamel et al., 1993; and Campell, 1975).

Despite the disadvantages of case study, there are many advantages in case study strategy. Inquirers examine data within the context of its use (Hosenfeld, 1984). Case study strategy is more effective to seek out variables in the research subjects which mix with its contexts. Case study explore research questions in a relatively openly angle rather than in a constricted structure. Secondly, case studies sustain both quantitative and qualitative analyse of the data (Block, 1986; Hosenfeld, 1984; and Yin, 1984).

In this dissertation, case study strategy is adopted to answer research questions. In the cross-cultural research, surveys may be unsuitable to investigate variants in cultures; and interviews require researchers to investigate a number of negotiators with different cultural background but it is hard for researcher to access these negotiators. Survey needs a mass amount of data from various culture backgrounds. Hofstede (1980) collected 2,000 questionnaires from 11 countries thus built Hofstede cultural dimensions. Survey has to use a large amount of data if investigating cultural issues. Both surveys and interviews depend on critical resources that are hard to access for the researcher. This dissertation is constituted by an independent research, so there is only one researcher and a tutor who provides guidance. Not only the resource for survey and interviews is not available, but also case study strategy is more suitable for this research. Case study can identify the variables in the third party logistics negotiation which incorporate its contexts. The negotiation in third party logistics and culture factors in the negotiation are highly associated with contexts, so it is meaningful for this dissertation to adopt case study. In order to avoid the weakness of case study, this dissertation adopts two cases in order to investigate the third party logistics.

Chapter 3 Literature review

3.1 Project and project negotiation

3.1.1 Project

Project is a temporary endeavour cause to generate a special product, service or result (Knapp, 2010). Similarly, Shenhar and Dvir (2007) define that a project is a temporary organisation that is generated with a goal that delivers one or more business products according to an agreed business case. Larson and Gray (2010) defines project management as an endeavour that develops a new approach to allocate human resource and financial resource to build a special scope of work of certain specification often within limitations of cost and time to gain beneficial transitions in relation to quantitative and qualitative objectives. Kerzner (2009) illustrates that project management uses plan, allocation, organising, guidance, and control to address corporation resources to achieve a relatively short-term objective that aligns with the general goals and missions of an organisation. Moreover, project management adopts the systematic meanings to management through possessing functional personnel (the vertical hierarchy) distributed to a certain project (the horizontal hierarchy) (Kerzner, 2009). The commons of these definitions of project management are obvious. Many definitions use the word of ‘endeavour’, that means that project management is challengeable. Furthermore, they use unique and special describe these objectives which is served by project (Knapp, 2010). Project management typically is carried by new-formed team to solve the problems that constrict the further development of an organisation or achieve some difficult objectives which are the part of organisation’s new strategies (Lock, 2007). Project management has a clear start and endpoint, and makes efforts to attain new projects (Newton, 2007). It is suitable to conceive a project as a single continuum that constantly causes negotiations among many parties at different times for various concerns (Murtoaro, Kujala and Artto, 2005).

Project business relates to complicated transactions involving products and services that mix in the ‘total solutions’ to offer particular business benefits within the limitations of time, cost and quality (Cova and Hoskins, 1997). Project is viewed as a shielded market for goods and services so that normal market mechanisms and ambiguous authority structures are unable to finish any certain project transaction (Williamson,1991). Negotiations play predominant role of organisation sustainability as they organise project transaction between independent parties (Skaates, Tikkanen and Lindblom, 2002).

Murtoaro and Kujala (2007) agree that the impact of negotiation is significant that determines the terms of the trade and the result of payoffs in the aspect of project management. Projects typically are encompassed by hundreds of terms and conflicts of interests, causing complex negotiations between contractor and client. The attitudes to details from two parties are exchanged during extensive interaction between the client and the contractor (Turner, 1999). Project negotiations are end with the signing of contract Aggressive bargaining is aroused after the initial agreement is accomplished, and then project managers have to more austere negotiations in the period of implementation of contract and after the implementation. Hence, project negotiation is a process that relates to contract building, and contract implementation. In the sector of third party logistics, variants in order quantity, schedule, accidents, and other disturbances bring probability to renegotiate the provisions in the contract and abandon previous agreements (Muroaro and Kujala, 2007).

3.1.2 Project negotiation

Negotiation is a set of joint decision-making (Young, 1991). Negotiation is communication, direct, or tacit, formal or informal between negotiators who expect to have mutual agreements which are consistent with their mutual internets (Kremenyuk, 1993). The essential mechanism of negotiations is to mutually design, choose, agree, and implement the actions beyond unilateral action (Lewick, Saunders and Minton, 1999). Although joint action yields a surplus compound to run independently and precisely complies with the agreement, negotiating parties may still reduce cooperation, information interchange and compromise their commitment to adhere to the agreement, as they have the thought that the counterpart can take advantage of their information, acclaim an incommensurate share of the implied surplus of cooperation, and have fraud (Raiffa, Richardson and Metcalfe, 2002). Negotiating partners are compelled to make equilibrium in cooperative actions, and use contract rationales that ensure surplus generations will be explored properly and separated suitably (Raiffa, 1982).

Negotiation happens in all fields of reality, but the essential structure of negotiation is unchanged in various contexts. In general, negotiations show four mutual features. First, there are at least two parties in negotiations. Second, negotiations have potentials to have creation and cooperation to achieve a joint decision. Third, the payoffs for all parties are determined by either the outcomes of the joint decision or other choices beyond the negotiations (Ehtamo, Kettunen and Ha¨ma¨lainen, 2001).

Previous studies offer a set of systematic, logically coherent, and theoretically well-established instruments to study on negotiations. There are three principal fields of study, namely game theory (GT), decision analysis (DA), and behavioural decision theory (BDT) (Muroaro and Kujala, 2007).

Game theory is the framework to analyse interdependent decision-making (Luce and Raiffa, 1957). The core of game theory uses strategies to explain the actions of negotiation parties. Rigorous analysis of the negotiation causes negotiators to look forward equilibria. The limitation of game theory is that it only can be helpful if all parties have complete information of the other parties’ choices (Luce and Raiffa, 1957).

Decision analysis systemically decomposes and clarifies a decision problem, in which the payoffs of a single party are not influenced by the decisions of other participating parties, anticipating one’s actions (Clemen, 1996).

Behavioural decision theory (BDT) mainly explains how and why negotiators have their behaviour and thoughts. The descriptive study of negotiators’ behaviour found negotiators’ biases and heuristics and focuses analysis of negotiators’ value and beliefs. Instead of regarding negotiator as rational economic man, BDT considers sophistication, hidden agendas, and rounds of interactive (Sebenius, 2002). Project negotiations are concerned with humanity and cognitive limitations.

Murtoaro and Kujala (2007) summarise that negotiated agreement, negotiation structure, and negotiation strategy are the key phases of the negotiation analysis. Negotiation structure is the stage of pre-negotiation that recognises the zone for possible agreement (ZOPA) before the real negotiation. Second, negotiation strategy is the stage that negotiation parties set their objectives, utilises a basic behavioural orientation, and analyse potential scenarios to plan and prepare for the actual negotiations. As the final stage, negotiated agreement represents the stage in which negotiators converge an agreement. After the participants implement the contract, the further negotiation is activated.

Figure 2.2 Critical phase of the negotiation analysis

Danciu (2011) also summaries the negotiation process consisting of preparing the negotiation, setting the objectives, developing the conversation, and conclusion of negotiation. The first stage of negotiation process has the highest cultural distance, and cultural misunderstanding originated from unconscious cultural blindness, inadequate cultural knowledge, similarities and parochialism (Danciu, 2009). The Using own cultural values to judge other party’s behaviour causes unconscious cultural blindness. Setting the objectives as the second stage of negotiation process aims to achieve equilibrium between the cultural self-reference criterion and the cross-cultural knowledge. In the third stage - developing the talks, negotiators have different styles of negotiation, which indicate the extent to creating cultural empathy for effective communication. Cross-cultural communication training and approach of capitalisation contribute to the exchange of information in negotiation process. As the last stage, conclusion of negotiation emphasises the result all parts tend to achieve. The opportunity to increase the ratio between the planned and achieved result is to enhance the effects of cultural empathy in the negotiation process (Danciu, 2011).

3.2 Third party logistics

Logistics outsourcing, logistics alliances, third party logistics, contract logistics and contract distribution are interchangeable terms that refer to an organisation that outsources its logistics activities and operations through contracts (Aertsen, 1993; Bowerson, 1990; Libe, 1992; and Sink et al., 1996). Murphy and Poist (1998) highlight that contemporary 3PL arrangements are formed by formal short-term or long-term contractual relations which is different with purchase of logistics services. 3PL generally has multi-functional services rather than single transport or warehousing services (Leahy et al., 1995). Rao and Young (1994) emphasises that 3PL has freight forwarders and shipping lines. Unlike normal logistics activities, third party logistics activities possess exclusively customised services (Murphy and Poist, 1998). Providing customised services require understanding clients’ needs, which relies on communication.

Selviaridies and Spring (2007) summarise literatures review in third party logistics and identify 3PL’s success factors including compatibility of organisational culture, active and efficient communications and information exchange, joint investment for accomplishing relationship objectives, joint projecting, managing and controlling 3PL relationship, equilibrium in power between contracting parties, and understanding client’s supply chain needs (Lambert et al., 1999; Leahy et al., 1995; Murphy and Poist, 2000; Tate, 1996; and van Laarhoven et al., 2000). All these success factors require communication for adaptation, compatibility, tolerance, understanding, and collaborate. Above scholarly journals agree the significance of communication in the success for 3PL. Garhner et al. (1994) elaborate the core stages in the process of 3PL partnership building are the selection for partner, and the designing and evaluation of relationship. Svensson (2001) emphasise the prominent influence of compatibility of culture on relationship formation, and the necessity of joint planning and control in relationship management. Certain relationship characteristics particular in communication positively affects relationship outcomes including customer retention and performance enhancement (Knemeyer and Murphy, 2005). Selviaridies and Spring (2007) criticise that some of above researches have no consideration to specific 3PL characteristics. Those researches ignore the impact of culture and communication on 3PL relationship. Communication facilitates collaborative 3PL relations formulation so as to openly exchange information, knowledge and skills (Halldorsson and Skjoett-Larsen, 2004). Selvaridies and Spring (2007) propose to focus on theory-based research for reducing frictional costs such as contract re-negotiation.

Contract preparation is critical to the success of 3PL relationships (Boyson et al., 1999). However, Selvaridies and Spring (2007) observe that there are two opposing viewpoints arguing the role of formal contractual agreements. Majority of authors supports the necessary of formal contracts in 3PL relations management and control, but detailed contracts can be regarded as the evidence of lack of trust (Lambert et al., 1999). A representative 3PL contract has following features: contract term, costs per activity, services and activities details, rewards, penalty, roles and duties, risks and insurance costs, and contract termination consequence.

Although Selvaridies and Spring (2007) recognise a flaw in third party logistics study and propose to investigate related theories about communication and re-contracting, they have no suggestion for the frameworks and techniques and to consider cultural impact. Krishnan, Smark, and Pepper (2013) discuss the impact of national culture on third party logistics outsourcing and use Hofstede’s national dimension of culture. The principles, significance and application of Hofstede’s culture dimension in their dissertation, however they have no discussion about how to use the cultural dimension in third party logistics management. Nevertheless, their dissertation discusses culture in supply chain management. Aquilon et al. (1997) explore the link between cultural distance and supplier selection. Blocher and Flint (2007) involve cultural distance measure in term of provision of customer value in cross-cultural relationships. However, none of these publications narrows down study scope to third party logistics negotiation and analyse the influence of cultural distance on the negotiation.

3.3 Culture

With a number of definitions to culture, Javidan and House (2001) define that culture is a set of beliefs and values. Culture is the collective programming of thinking which is exclusive and distinguishable, and the differences in various collective programming of thinking are in values, forms, beliefs, assumptions, expectations, perceptions, and behaviour (Hofstede, 1991). Cultural values are the practices and reflecting of desires, and they represent people’s perceptions of everything what is being done in their countries (House et al., 2002). Culture is a set of shared attitudes, values, goals, and practices, basing on which described institution, organisation or group affect all aspects of society and human life (Gaygisiz, 2013). Culture is the reflecting of the values and thinking patterns, feelings, emotions and behaviour of identifiable groups, and it has been developed and maintained from generation to generation branding in nature (Kitayama and Markus, 1999). Pitta et al. (1999) illustrate that cultural values are secondary factors influencing ethical behaviour and involve the differences in the laws between nations, referred to human resource management system, organisational cultures, professional cultures, and codes of conduct. Above scholars point out those beliefs, values, thinking patterns, feelings, emotions and behaviour are compounds of culture and culture is the image of a group of people’s nature. It cannot be changed in short term and it is exclusive and unique. Therefore, cultural values are adopted in management and business field. Studying on culture is observing and inquiring human behaviour.

Cultural values have a close relationship with members’ behaviour and they determine what do members perceive as significance, and the cultural norms clarify the line between appropriate and inappropriate behaviour (Christopher et al., 2005). Johnson (1962) highlights that cultural values and norms affect how members perceiving situation and how they make respond to other people’s behaviour. A collision of two cultures emerges when a situation or behaviour is perceived as appropriate action in one culture but as inappropriate action in another culture. As culture incorporate members’ routine and nature, members normally are unlikely to realise their inappropriate activity, which pushes the collision to deeper conflict.

Hofstede (1980) identified four dimension of cultural change through a survey that investigated a number of international corporations from 50 countries and three regions. After he investigated culture in Hong Kong, Hofstede et al. (2010) proposes short / long term orientation as the fifth cultural dimension for Asia.

Hofstede’s cultural dimension (2001) is developed according to the principle of individual’s mind programming. A people in the process of socialisation from ambient environment accept models which drives his thinking, feelings and behaviour. Values are primary elements that compose mind programs and culture. Thus, culture is ‘the collective programming of the mind which separates the members of one group from another.’

Collective behaviour system originated from values constitutes culture. Cultural values affect how the individual or a social group is responding to the current environment. Hofstede et al. (2010)’s culture dimensions can be adopted to address all cultures and generate solutions for them. The five cultural dimensions are power distance, uncertainty avoidance, individualism versus collectivism, masculinity versus femininity, and long-term versus short-term orientation. The universality of these dimensions indicates the culture in which people who carry and spread national treasures (Pruskus, 2004).

3.4 Hofstede’s dimensions of national culture

3.4.1 Power distance

Power distance as the first dimension in Hofstede (1980) describes to way of a society to address the fact that people face inequality in relation to physical and intellectual capabilities, which means the openness of upward communication within an organisation in details. Power distance refers to the extent that low powerful people in a society tolerate the phenomena that power distribution is unequally. In countries with high power distance, people respect old citizens, and status quo expresses power. On the oppose of high power distance, in countries with low power distance residents prefer young-aged figure. Even though inequities are common in all countries, the extent of residents tolerate these inequities are different (Natlandsmyr and Rognes, 1995). Hofstede (1991) points out that inequity exists in any nation, group, and organisation. In countries with high power distance, people must be respect authority; in contrast people respect individuality in countries with low power distance (Hofstede, 1991; Mooij, 2001; and Mooij and Hofstede, 2002).

3.4.2 Individualism versus collectivism

In the dimension of individualism versus collectivism, the weight of relationship between individuals and social group is distinct. Individualists concerns self-actualisation and career progression in the organisation, while collectivists value the overall interests to the group more than their own interests. Individualists only take care of their family and themselves, however collectivists are more concerned with group and look after group for loyalty. In individualist countries, the identity is basing on individual, but it is on the basis of the social network in collectivist countries. The communication is more clear and verbal in individualist, yet it is ambiguous in collectivist countries because people attempt to maintain harmony in group. In individualist countries, people make decisions basing on individual needs; in collectivist countries, decision making have to consider the group’s interests (Hofstede, 1991; Mooij, 1997; Mooij, 2000; Mooij, 2001; and Mooij and Hofstede, 2002; Mooij and Sociedad, 2002; and Mooij, 2003).

3.4.3 Masculine versus feminine

Masculinity versus femininity targets on the relationship between gender and work roles. In masculine countries, sex roles are perceived as masculine values involving achievement, and practicable power. In masculine countries, people focuses on achievement and success which constitute the core value in these societies. The core value is to look after and concern others and life quality in feminine cultures. In masculine cultures, people are more concerned with performance and achievement and statue can significantly express success. Feminine countries refer to people orientation, and statue is less relevant. The roles of males and females are various and distinct in masculine countries; and the differences of roles of them are few. Masculinities have pressure on competition and performance and they are motivated by ambition; and femininities stress on elaboration and awareness of environment, who are drove by service (Hofstede, 1991; Mooij, 1997; Mooij, 2000; Mooij, 2001; and Mooij and Hofstede, 2002; Mooij and Sociedad, 2002; and Mooij, 2003).

3.4.4 High/ low uncertainty avoidance

Uncertainty avoidance describes the degree of distinct cultures to accept ambiguous circumstances and personal differences and tolerate uncertainty. In high uncertainty avoidance culture, rules and regulations are specifically written, which is stressful. Uncertainty avoidance means the degree of people feeling threatened by uncertainty and ambiguity. In countries which is high in uncertainty avoidance, people perceive uncertainty as threat so that it must be removed and they have low tolerant to distinct persons and unusual ideas. They desire to have accurate forecast and clary future and prefer predictability. People have strong tendency to resistance to change because changes mean uncertainty in their perspective. Regulations and clear rules guide their life and activities, and people must strictly comply with these standards. Capability or competency is pursued by people causing belief in experts. In such culture, people think consensus among people is better than conflicts. People are likely to be industrious as they have inner urge to work hard (Hofstede, 1991; Mooij, 1997; Mooij, 2000; Mooij, 2001; and Mooij and Hofstede, 2002; Mooij and Sociedad, 2002; and Mooij, 2003).

On the other hand, in countries which is low in uncertainty avoidance, distinct individuals and ideas are not threat. Ambiguity in future can be tolerated. People have willingness to take risks and they can tolerate of innovation. The fewer rules are better than complicated and substantial rules. People take advantage of competition and conflict to improve and progress, and these conflicts are constructive. Hard work is not relating to virtue. Belief is the generalist and people are inclined to be more innovative and entrepreneurial. People in the cultures in high in uncertainty avoidance are inclined to be better groomed than people in the cultures in low in that (Hofstede, 1991; Mooij, 1997; Mooij, 2000; Mooij, 2001; and Mooij and Hofstede, 2002; Mooij and Sociedad, 2002; and Mooij, 2003).

3.5.5 Short/ long-term orientation

This dimension is linked to Confucian dynamism or time-orientation dimension. Cultures facilitate a long-term orientation toward life advocate the respect to thriftiness, perseverance, and the desire for orderly relationships with others. Long-term orientation refers to the degree of a society showing a pragmatic, future-oriented viewpoint instead of a traditionally historic or short-term viewpoint. Long-term oriented culture concern embracing change, perseverance, thrift, and chasing peace of mind, which is common in East Asia. Short-term orientation is manifest in Western world (Hofstede, 1991; Mooij, 1997; Mooij, 2000; Mooij, 2001; and Mooij and Hofstede, 2002; Mooij and Sociedad, 2002; and Mooij, 2003).

In long-term oriented culture, people need responsibility and accountability as well as self-discipline. People build and maintain life-long personal networks and they cannot tolerate large social and economic differences. On the contrary, people demand achievement and self-determination. Loyalty can be switched with the respect to needs of business and other needs. People are rewarded basing on their abilities regardless of the concern of social and economic gap (Hofstede, 1991; Mooij, 1997; Mooij, 2000; Mooij, 2001; and Mooij and Hofstede, 2002; Mooij and Sociedad, 2002; and Mooij, 2003).

3.5 High and low context

Hall (1976) introduces the concept of high versus low context as an approach to understand various cultural orientations. The gaps between high and low context cultures are determined by how much meaning is found in the context versus the code. Hall (1976) interpreted the code as message and context as environment and circumstance, including individuals, in which the message exists. In details, context causes differences in how and what people communicate. In Hall (1976)’s perspective, a high context culture refers to a culture in which individuals are deeply involved with each other. With intimate relationships among people, a structure of social hierarchy maintains; individual inner feelings are covered by deep meaning. For instance, the communication styles of Asian and Arab nations are typical high context cultures. On the other hand, European and American communication styles are perceived as low context cultures, in which people are highly individualised, somewhat alienated, and fragmented, and relatively little involvement with other individuals (Hall, 1976). As a result, social hierarchy, generally whole society, less imposes on individuals’ lives, and communication in low context is more explicit and impersonal than that in high context.

Kim et al. (1998) also agree that communication style is affected by the closeness of human relationships, detailed and solid social hierarchy, and strong behaviour norms, in high culture, and that internal meaning in message buries deep in the communication, which means that not every detail is explicit so the listeners are expected to have capability to read between the lines, and understand the unsaid through their background knowledge. Hall (1976) argues that a high-context communication presents most of information either in the physical context or internalised in the person, while a little of information exists in the coded, explicit, or transmitted part of the message. In a high context culture, people are likely to speak one after another in linear way, thus it is seldom that speaker is interrupted, and communication deliveries more of the information in physical context or internalised in the person and greater confidence situates in non-verbal communication than the verbal communication (Hall, 1976). In high context culture, communication is indirect, ambiguous, harmonious, reserved and understated (Gudyhunst and Ting-Toomey, 1988).

In a low context culture, language explicitly presents meanings. People commonly expect to have an explanation when situation is unclear. People expect to deliver information in the transmitted message so as to figure out what is missing in the both internal and external context. The main characteristics of linear communication are direct and linear communication, and constant words. In low context, communication is direct, precise, dramatic, open, and related to feelings and true intentions (Gudykunst and Ting-Toomey, 1998).

In some degree, Hall (1976)’s high vs. low context has no significant conflict with Hofstede’s cultural dimension, expecting the fact that the cultural dimension has more specific categorises to describe various characteristics of culture but Hall’s theory is more inclined to assess the personal relationship in different culture. Hall (1976) suggests categorising culture into high context and low context in order to understand individuals’ basic differences in communication style and cultural issues. Hence, unlike Hofstede’s cultural dimension, Hall’s high vs. low context particularly targets at communication.

3.6 Cross-cultural communication

Under the international context, negotiations confront the challenges of cultural differences: communication with long term attitude, the power allocation, the uncertainties avoiding, and emotional variables among negotiation parties (Pruitt, 1990); and the representative with distinct cultures face the negotiation which is affected by these challenges (Peleckis, 2013). Symbols, actions, and behaviours are likely to be perceived differently in distinct cultures. Negotiation strategies are significant to the final negotiation results, and therefore it is not negligible to assess and measure the cultural dimensions of the other party in the preparation stage of negotiation (Peleckis, 2013). Peleckis (2013) reviews international business negotiations in relation to Hofstede’s cultural dimensions and negotiation context.

3.7 Impact of culture on negotiations

Negotiation among different cultures may arouse various misunderstandings, which can be avoided by the knowledge of the fundamental incompatibility of the negotiating parties. Misperception in international business communication is the symbol of different cultures. As negotiation is carried by communication, there is a significant relationship between culture and cross-cultural negotiation.

Culture is a prominent factor influencing the international negotiations and performance. Values and norms as elements of culture have influence on negotiation in both perspectives of stronger and weaker (Christopher et al. 2005). Liu et al. (2012) highlight that culture, accountability and group member determine approach to relationships in the negotiations and negotiated rates and possibly affect negotiation outcome (Walton and McKersie, 1965). Negotiation process and outcomes associate with culture of accountability and ownership of the group, and approach-oriented relationship acts as catalyst to mediate between culture, accountability, and the group outcome (Liu et al., 2012).

Cross-cultural negotiation is a complicated process in which two or more companies and organisations with variety of nations and cultures interact for their own interests and definition of their mutual dependence (Rao and Schmidt, 1998). Negotiator tactics result from the assembling and mix of negotiators trust, possession of alternatives, conflict background, time available, social sustainability, ethics, etiquette, political affiliation, and cultural distance. Luo and Shenkarb (2002) propose that a national negotiating team embodying negotiating behaviour and style, resulting from geography, history, religion and policy forms.

For negotiating partners, conflicts normally arouse due to the gaps in perception, preferences, behavioural styles and the failure in objectives of the transaction is to adventure for each nation of opportunistic behaviour and private initiatives (Buckley and Casson, 1988). Gaps in culture, legal pluralism, monetary factors, ideological diversity and greater uncertainty differentiate cross-cultural business negotiations from one cultural negotiations (Luo and Shenkarb, 2002). Various expectation resulted from distinct cultures has influence on all business transactions; and culture is a variable related to business ethics (Pitta et al., 1999). The corporate culture originated from the national culture is forged by time and conventional practices prevailing business practices and thinking pattern throughout a long period, which stood for thousands of years, during which, and has generated a business culture in the country (Pitta et al., 1999). Christopher and Cousin (2005) demonstrate that cultural values form a negotiating rate differential, which means that cultural values also are a tool to explore and comprehend the relationship between the other country’s culture and negotiation strategies. Negotiator behaviour generated from the other negotiator’s emphasis on the other side of behaviour, capability to study, to comprehend and to assess. Hence, the existence of an error in one of the circuit elements may causes misunderstanding and failure. Bargaining is reasonable and required in some cultures, but it may be perceived as impolite or even insulting behaviour (Larson and Seyman, 2010; Khail, 2011).

Negotiating context is a critical component in negotiation strategy. Understanding bargaining context helps negotiators to choose their bargaining power and tactices (Peleckis, 2013). Cross-cultural context of negotiating is constricted by legal environment, organisational values, and cultural values. Without considering these factors, negotiators are hard to comprehend objectives, strategies, tactics and relationship with negotiators on another side. Cultural context delivers the picture of a whole culture that enables to recognise structure of ethical decisions (Peleckis, 2013). The negotiators with distinct culture background implement different negotiation strategies and communication pattern within the country and between countries (Lewicki et al., 2001).

Danciu (2011) proposes the layers of culture that may affect the negotiation, including national, organisational, group and individual levels. The impact of cultural differences on communication during negotiation results from multiple sources. National culture is the widest variable that affects negotiation result and process.

Source from: (Danciu, 2011)

3.8 Contracts and negotiation

There are sufficient evidences that prove the difference between low and high context communication in the contracts. In Western contracts, which represent low context and individualism, information is explicit and description is thoroughness. After a contract is signed, flexibility will not emerge unless both parties agree to negotiate. Any failure in contracts could lead to the legal system involve.

However, contracts in high-context societies have distinct characterises. In accordance to the nature of high-context communication, it is not required to clarify everything in contract as people pay more attention to mutual understanding and handshake suffice. A written contract is likely to be a memorandum of understanding more than to be a blinding legal document (Smith, Dugan and Trompenaars, 1996). For compliance, parties tend to depend on a pre-existing trustworthy relationship than a legal system. Furthermore, ambiguous contract results from that no every culture perceives contract as a central (Sellin, et al. 2005). To be specific, in Western world the idea of a covenant can be traced back to the Christian Old Testament, which describes the relationship between God and humankind. Whereas, Confucian culture advocates that business is primarily developing personal relationships. This idea associates with family or clan connections, and relationships of mutual obligation, known as guanxi in Mandarin Chinese. The development of business plan accompanies the relationship instead of formal communication and written contracts. Managers perhaps draw up contracts to please their Western business partners, however it is normal that they request to modify terms after the contract is signed (Schneider et al., 2002).

Negotiations refer to the discussion, conversation, and talks for a contract, deal or covenant. Negotiations mean the process that parties seek a commonly acceptable agreement (Akgunes et al, 2012). The process perhaps adheres to mechanisms to build trust so as to have a proper cooperation for benefit.

Zhao (2000) illustrates that negotiations bring more benefits if two parties have an in-depth cooperation. Akgunes et al. (2012) found that the appropriate result commonly is brought by using Confucian tactics negotiation strategy rather than warrior-like Sun Tzu strategies. Adopting problem solving strategies improves the chance of success for both two parties (Adler et al., 1992).

The appropriate result in negotiation commonly is brought by discussing with counterpart rather than threatening legal action when engaging high context and collectivistic culture such as China.

3.9 Hofstede’s dimensions and high vs. low context in negotiation

Triandis (1995) argue that individualism versus collectivism is the more significant attribute that differentiates various cultures. Under high collectivism cultures, organisations are likely to treat employees as family to communicate (Hofstede, 1980). Collectivistic cultures emphasise connection and relationship rather than separateness (Bond and Hwang, 1986). The unique tactics of collectivistic negotiators reflect as highly centralised decision-making, and a strong focus on collectivism and group behaviour (Cheng and Seeger, 2012). In a high power distance culture, organisations normally have a high degree of centralisation of authority and of autocratic leadership (Hofstede, 1980). Organisations adhere to particularism emphasising relationship more than the rules in collectivism culture, while organisations advocate individual and universalism, adopting general rules and obligations as benchmark to criticise in individualism cultures (Tromperaar and Hampden-Turner, 1998). These tactics also emerge in the negotiation and communication. In negotiation, organisations originated from individualism countries pay more attention to specific provisions.

Hall (1976) demonstrates that miscommunication is on the root of variants in language, cultural traditions and management styles. In individualism culture, interpersonal interactions have tendency to be aggressive and assertive (Brodbeck, Frese and Javidan, 2002). Under such culture background, indirect conversations in a business context is regarding as wasting time (Hinner, 2009). People in individualism culture are not inclined than people in collectivism culture to adopt confrontational strategies when addressing interpersonal issues (Lustig and Koester, 2006). Triandis (1995) emphasises that individualists prefer to use confrontation and hyperbole, focus the content of communication, and employ an anticlimactic sequence of presentation in low context communication. Individualistic negotiators tend to express their viewpoints through a more confrontational approach and open verbal aggression is acceptable in individualism country. However, in collectivism country this approach tends to be perceived as conflict and a sign of collapse of a relationship.

Open communication alleviates ambiguity and clarifies expectations of speaker. Hall (1976) illustrates that in high context cultures individuals seem to sometime present their ideas in a roundabout manner as they attempt to reduce the possibility of an open and direct disagreement.

Face consideration as a factor affecting the communication process is the outcome of culture values, and thus various culture values result in distinct face consideration, which also relates to the cultural dimensions. Triandis (1995) highlights that individualists are aware of saving their own face, also known as self-face concern, however collectivists value saving group’s and group members’ face, also known as other-face concern. The differences in face considerations can be interpreted by the individualism-collectivism in relation to the cultural dimension.

Under a collectivist and high context culture background, communication tends to be indirect and implicit and to use an intermediary. In a high collectivist culture, group harmony is critical and the role of leader is to enhance group ties (Cheng and Seeger, 2012). Jandt (2007) explains that social harmony and face maintenance are critical in such culture, intermediaries in communication have especially function as they avoid face-to-face confrontation and weakens the risk of losing face.

Lustig and Koester (2006) observe that in high context cultures the purpose of interaction is to maintain and facilitate harmony among speakers. Hence, unrestricted and explicit reactions have tendency to threat the face or social esteem of others.

The negotiators from low context cultures such as Germans tend to offer more information during negotiation, however the negotiators from high context cultures often only give a message that requires background information to understand (Danciu, 2011). In low context, negotiators tend to clarify the information in the message (Hooker, 2008).

In high context and collectivistic culture such as China, negotiation means to judge and discuss (Neidel, 2010). Some negotiators perceive negotiation as an art that requires years to perfect, and others considers successful negotiation associating with nature talent and inherent personality.

Akgunes et al. (2012) found that in long term orientated cultures such as Chinese culture the concept of negotiation emphasises forming a framework that guides long -term cooperation and problem solving, and short-term oriented cultures such as America, by contrast, advocates to generate a onetime agreement between two parties.

Danciu (2011) re-describes the low and high context cultures and proposes two novel categories: low context culture is described as rule-based culture and high context culture is regarded as relationship-based culture. Danciu (2011) also agrees that cultural distance has relationship with the negotiation style. Differences occur in communication style in accordance with each cultural context: the negotiators in high context cultures adopt relationship-based style of communication, and their behaviour is guided through close supervision by authority figure. In contrast, the communication style in low context culture is rule-oriented and people respect rules for their own interest, whereas relationship-based cultures obtain their authority from the individual who lay them down (Hookers, 2008). The variants between relationship-based and rule-based culture also generate differences in negotiation styles. The frankness of rule-based cultures is possible due to a potential confidence that rules are objective and perceived as basis to resolve disputes, while relationship-based culture lacks of such confidence but emphasise courtesy and face saving (Hooker, 2008). Furthermore, Danciu (2011) observes that differences also show in other parts of the negotiation style and elaborates that North Americans as a low context culture believe that the goal of negotiation is to seek out a better and quicker solution and the Japanese negotiators perceive negotiation as an opportunity to build and develop relationship for achieving mutual long-term benefits. In high context culture such as Japanese culture, the economic and commercial issues are treated as the context rather than the content of the negotiation and negotiators argue that solution will emerge when harmonious relationship is found. Moreover, Danciu (2011) proposes an assumption that cultural distance is creating issues which can be explained by the level of the negotiation management. Typical Western negotiators divide problem into more specific and smaller issues and solve them one by one (Lam, et al., 2007). They individually solve issues including price, logistics, guarantees, and services contracts and the outcome of the negotiation is the sum of partial components. In Asia, negotiators solve these issues without order and hierarchy and the concessions points out their intention at the end of the negotiation.

The confusions and tensions could result from the conflicts between successive approach of negotiation in West and the conventional negotiation approach in East. The Northern Americans with the belief – “Time is money” are hard to accept slow progress in the negotiation process with Asian partners. During the negotiation process, there is seemly no agreement but an agreement suddenly is concluded in some high context cultures such as China, Japan and Korea (Graham and Mintu-Wimsatt, 1994).

3.10 Negotiation process

Akgunes et al. (2012) study on negotiations between Chinese and Americans and make suggestions referring to the negotiation process constituted by preparing, context of the deal, your negotiation partner, know yourself, strengths and weakness of each company, operational readiness, never-ending negotiations, places, reputation, and communication. Akgunes et al. (2012)’s negotiation process, apparently, is much more complicated than Danciu (2011)’s.

To begin with preparing, Americans exploit the fundamental differences in culture and expectations before negotiating, thus spending more time in this stage (Ford et al., 1996; and Neidel, 2010). In high context culture such as Chinese cultural, negotiations begin with the general principals and move to the details. Hence, it suggests to retard the transition from general principals to the details. In stage of context of the deal, knowledge of regulations and policies relating to the deal is very helpful to facilitate the negotiation (Neidel, 2010). ‘Your negotiating partner’ means to do background investigation to negotiating party (Zhang, 2008). Know yourself is knowing the ‘big-picture’ of your own company and the impact of the contract and how to improve your credibility (Neidel, 2010). The strengths and weakness of each company must involve social and economic aspects, and with internal and external analysis the negotiation is inclined to success. In the stage of operational readiness, Akgunes et al. (2012) suggest to have the Chinese party asking questions instead of processing what they may consider useless information. Neidel (2010) highlights that the negotiation term must be cohesive and disciplined. The high context cultures such as Chinese culture are unlikely to directly disagree a proposal. It is suggested to make the party with such cultural background ask questions, and employ cultural interpreter so as to give insight to non-verbal communications and body language. In the stage of negotiations, negotiations in high context cultures such as China are never final (Zhang, 2008). The Chinese parties build relationship during the process of negotiations. The commitment of a contract in long term oriented cultures means the start of a long-term cooperation relationship. In such cultures, the customs are far more valuable than any contract, and remarkably, these parties have a viewpoint that a long-term commitment can tolerate modification any time (Zhang, 2008). In term of reputation, the Chinese negotiators as a representative of high context, long-term oriented and collectivist culture advocate sincerity (Lee et al., 2006), and insists that communication should be harmonious and well intentioned with a number of complements. As a result, Chinese negotiators are likely to make concession to avert embarrassment and protect reputation and face (Lee et al., 2006). In term of communication, American negotiators ensure that communication between two parties is unambiguous and understandable. Misunderstanding in negotiations leads to suspecting, emotional fluctuation, and unappreciated outcomes (Zhao, 2000). The nonverbal and personal relations are much more significant than formal contract because Chinese contract law permits contract to be recorded in paper, sounds and other ways.

3.11 Critical analysis

3.11.1 Case study

This dissertation collects four cases involving the cross-culture negotiation between China and some Swedish company. According to Hofstede and Hofstede (2010), China has a high power distance, collectivist, and long term-oriented culture, and on other hand, Sweden is a typical individualist, low power distance and short-term oriented culture. Mooij (2003) claims that China is representative high context and Sweden is commonly seen as low context. Hence, it is meaningful to explore the negotiation between Chinese business and Swedish business. There are three cases exploited and then proved the key features of Chinese negotiators and one case makes suggestion to avoid Chinese counterpart’s tricks.

A) Ostnor

According to Eklund (2006), the experience of Ostnor is summarised. Ostnor is a Sweden group selling taps and accessories. At present, Ostnor has over 700 employees who commit to the organisational goal that become the most profitable growth company in its industry. Eklund, a representative of Ostnor, concludes his experience of negotiation with Chinese counterparts. The negotiation purpose of Eklund is to build long-term cooperation, ensure partners have strong commitment, and concern the management. Eklund found that establishing relationship is the approach to success in China, which need to acquire Chinese people’s trust. To be honest and respectful is the most effective approach to gain the trust.

“One experience more important than any other is that you will get far by being honest and having a humble attitude.” (Eklund, Ostnor)

Eklund describes that in Chinese business field, food is something critical that promotes relationship and enhances trust. The most impolite behaviour is to reject others’ food or ignore their good intentions. Building business relationship is more happening in a karaoke bar, and sings a song. Also, it is vital to show yourself to gain their trust. Furthermore, Eklund also observes the cultural differences in China. Southern people in general are straighter forward, but the northern people are more concerned with relationship. Negotiation with northern Chinese needs more time, and in return they are more honest.

On the whole, in the experience of Eklund, relationship and respect are important to make negotiation success. Ostnor commits to develop long term cooperation, which is suitable for Chinese enterprises.

B) NCC

According to (Lindblom, 2006; and Anonymous, 2006), the data about NCC’s is collected. Nordic Construction Company (NCC) is a Swedish company engaging in real estate business and its major business is in northern Europe with around 22,000 employees and a turnover of 45 billion SEK. The vision of NCC is to be the leader to develop the future’s environments for living, working and communication.

In order to enter Chinese market, NCC adopted three steps: analysing and strategy, execution, and development. In the process of scanning, NCC attempted to find supplier and strategic partners to achieve the objectives and criteria of NCC. As the second step, execution negotiates prices and other details for a contract. NCC lacked vague attitude to contracts and responsibility in China, so the negotiation was difficult. Lindblom, who was the leader of the negotiation with Chinese party, stated that they attempted to write all details in the contract; even though 99.9% of details was clarified in the contract, the 0.1 % part still went wrong; and he highlighted that an agreement in China is never definite. It is consistent with the theory that Chinese negotiators are likely to change provisions after the signing of contract (Hookers, 2008; and Danciu, 2011).

In third step, development means that to build relationship between two parties after the signing of contract. Lindbloms spent a large amount of time with Chinese representatives and thus they built close relationship. It proves that high context cultures use the negotiation process to build relationship.

Lindbloms concluded his negotiation experience with Chinese logistics parties: in northern of China, negotiators pay less attention to meeting but utilise the side-activities such as dinners to build relationship, and analysing and feeling each other. In the southern parts of China, relationship is important to southern negotiators but not as important as northern negotiators. It further proves that relationship in negotiation is valuable in China, which has a high context culture.

Lindbloms also suggest that bringing right people to meeting and dinner is important. The participation of people who have not enough high rank may be regarded as insulting. If negotiators with final decision authority argue with Chinese parties, the negotiation tends to fail. It is the feature of high power distance culture. Lindbloms complains that the negotiation process needs longer time in China than in many other countries. The task of Lindbloms was not to find the cheapest bidder because Chinese parties often suddenly request to re-negotiate the prices. Giving up this negotiation will be costly as it was already taken too long, so NCC had to endure higher price. In China, contract is never ended and contract negotiation is a more flexible process in China than in the low context culture.

Overall, this case found that Chinese negotiators focus on relationship, are likely to change contract, take long time for negotiation, and concern the power of count negotiators. They expect to develop close relationship to ensure the business.

C) Ericsson

Ericsson is one of the world’s largest suppliers of mobile system, which was found in Sweden in 1876. The company has been doing business in China for more than one century. The negotiation strategy of Ericsson is transparency and fixed price agreements. Even though Chinese counterparts fear the fluctuations in price of energy price, Ericsson insists to set fixed price agreement once a year. It uses their standard agreement to address a specific agreement, and takes one month to complete the negotiation. Ericsson’s experience also shows that it is critical to access the person who has authority to make final decision. For example, there was no person who can make final decision in Chinese delegation, the negotiation meeting was finished without any process. In return, Chinese negotiators expect to meet those persons who have the same level power. In addition, Ericsson shows that it is necessary to spend time with Chinese counterparts to obtain information and understand them, although it may take long time (Erisson, 2006).

Overall, the case of Ericsson proves that negotiation with Chinese requires more time; Chinese negotiators expects to communicate with people who have high rank enough. The experience of Ericsson is to fix the price.

D) H&M

NCC faced the problem that Chinese parties suddenly raised prices during the negotiation and after the signing of the contract. However, H&M has abundant experience to negotiate with Chinese counterpart. It uses one month to complete negotiation with Chinese counterparty. H&M can sign a contract involving large amount of money, thus it dominants the negotiating process. The pre-negotiation phase has the most important strategy of H&M. It scans the price quotas to build parameters before sets an expected quotation in order to have a fair, consistent and unbiased source process. During the negotiation, H&M can identify most tricks and tactics of Chinese counterpart as it knows the general price of different services. Furthermore, H&M has relationships with multiple suppliers so it has capability to pressure supplier’s performance and price (Plamqvist, 2006).

In general, H&M adopts multiply-partner strategy to rise the competition among services provides thus controlling the price.

3.11.2 Further analysis

In order to achieve the aims of dissertation, it reviews and collects knowledge, theories, and principles from the broad scope and narrow down to specific range to address three research questions. The pattern of exploring the answers of the research questions is to the successful key of third party logistics; identify the relationship between culture and communication; review Hofstede’s cultural dimension and high and low context; clarify the impact of culture on negotiation; discuss the role of culture in contract environment and contract negotiation; and apply Hofstede’s dimensions and high / low context culture in negotiation process. The analysis process is attempting to the confluences of this knowledge and examining whether these confluences are relevant to cultural impact.

This dissertation achieves the research aims through these inferential processes:

1) to prove the significance of cross- cultural communication in third party logistics relationship, it found that the culture and communication is important for supply chain management and third party logistics, and cross-cultural communication is important for all international business managements. Hence, cross-cultural communication in third party logistics relationship is important. Furthermore, this dissertation reduces the scope of communication from cross-cultural communication, to negotiation, and to contract negotiation, and proves that cultural impact on all of these types of communication is significant.

2) to clarify how does cultural differences affect negotiation with contractual third party logistics, this dissertation uses Hofstede’s cultural dimension and high / low context culture as measurement to interpret the impact of culture on negotiation in the contact environment.

3) to recommend how to improve the effectiveness of the negotiation practices with contractual third party logistics, this dissertation use Hofstede’s cultural dimension and high/ low context as principles to further explain the expressions of different cultures and make recommend for third party logistics negotiation basing on the explanation.

Third party logistics has been fast developing and growing as the impact of globalisation has been raising the needs of logistics and the wave of outsourcing logistics activities. Third party logistics also known as contract logistics as companies outsources its logistics activities by contracts, and it emphasises multi-functional logistics and customer communication, relationship and satisfaction (Aersen, 1993; Leahy et al., 1995; and Rao and Young, 1994). The successful factors of third party logistics are compatibility of organisational culture, efficient communication and information exchange, controlling third party logistic relationship, and understanding of customers’ expectation and needs to supply chain (Lambert et al., 1999; Leahy et al., 1995; Murphy and Poist, 2000; Tate, 1996; and van Laarhoven et al., 2000). Hence, it is clear from the previous academic publications that communication and culture understanding are important to the success of third part logistics.

As contract logistics, third part logistics sector has two opposed perspectives arguing the role of formal contractual agreements: 1) detailed contracts for third part logistics management is necessary; 2) the detail contracts are regarded as the lack of trust (Lambert et al., 1999). The two opposed perspectives also represent two different cultures when addressing contracts: Chinese culture as the representative of high context and long term oriented culture are likely to adopt ambiguous contracts; but American culture as the representative of low context and short term oriented culture prefers clear and specific contracts (Zhang, 2008; Lee et al., 2006; Neidel, 2010; and Akgenes et al, 2012). Chinese culture regards its contract with third party logistics as the sample of long-term cooperative relationship and such relationship must be kind and harmony; but American culture is more concerned with interests and law protection from the contracts. Given that Chinese businesses typically uses relationship to ensure the business cooperation rather than law, adopting undetailed contracts is reasonable. Overall, high context and long term-oriented cultures prefer undetailed contracts but low context and short term oriented cultures advocate detailed contracts.

Culture is the essentials of human behaviour that is the linage of conventional values, and it is hard to change the impact of culture on individuals and organisation even though the cultural interaction has a little impact on convergence on culture (Markus and Kitayama, 1999). Meanwhile, many scholarly researches prove that cultural impact, communication and re-contracting is important in supply industry; and there is a relationship between cultural distance and supplier selection (Aquilon et al. 1997). However, none of researches specifically targets at third party logistics. There are differences between third party logistics and normal logistics. Normal logistics could conduct between buyer and supplier with in two parties, however third party logistics refers to the third party and also involve contracts. Third party logistics is the target of this dissertation. Culture is the secondary factors affecting ethical behaviour, international business, business management, and organisational cultures (Pitta et al., 1999). As mentioned, they are important factors that affect the success of third part logistics. The influences of culture are overlaps with the successful factors of third party logistics, which prove the impact of culture on third party logistics. Hence, it is important for third part logistics to consider culture factors. However, it still cannot identify whether Hofstede cultural dimension is suitable to measure cultural issues for third part logistics.

Hofstede’ cultural dimension is regarded as an appreciated culture measurement including power distance, individualism versus collectivism, masculine versus feminine, high/ low uncertainty avoidance, and short/ long- term orientation (Hofstede and Hofstede, 2010). Hofstede and Hofstede (2010) attribute the characteristics of different cultures into these five dimensions and use them as indicators, and measure cultures by these indicators. Hofstede can measure most of cultural characteristics. Meanwhile, High and low context is a special theory for measuring the gaps between high and low context from communication. Hall (1976) illustrates that high context culture refers to a culture in which individuals are deeply involved with each other, which can be regarded as collectivist culture; and the description of low context culture can be viewed as individualist culture. The communication of Asian and Arab nations is typical high context culture, and that of European and American communication styles are representative low context culture. Comparing Hofstede cultural dimension to Hall’s high/ low context culture, Hofstede cultural dimension apparently is more specific and complicated which is sufficient for all cultural issues but Hall (1976) only has two dimensions which is concise and specific for cross-cultural issues. Furthermore, high context culture shares the features of collectivist, high power distance, high avoidance distance and long term oriented culture, while low context culture have commons with individualist cultures, low power distance, low avoidance distance and short term oriented cultures. As two model shares the same features, it is meaningful to use both models to measure the cultural impact on negotiation between third party logistics and its clients.

However, so far the all theories and knowledge are consistent with communication rather than negotiation. Peleckis (2013) proves the importance of culture on negotiation and the importance of negotiation strategy. The negotiators’ tactics are affected by negotiators trust, possession of alternatives, conflict background, time available, social sustainability, ethics, etiquette, political affiliation, and cultural distance (Rao and Schmidt, 1998), and the negotiating behaviour style related to geography, history religion and policy forms (Luo and Shenkarb, 2002). All these factors affecting negotiators are relevant to culture. The conflicts in negotiation originated from perception, preferences, and behavioural styles (Buckley and Casson, 1988), which can be attributed to cultural causes. Apart from company policy, legal pluralism, and monetary factors, culture mainly leads to conflicts in negotiation (Pitta et al., 1999). For example, bargaining is necessary that express the intension of cooperation in some cultures, but other cultures have no such conventional negotiation action. Furthermore, understanding negotiation context is an important strategy of negotiation that explains the opposite party’s structure of ethical decisions (Peleckis, 2013). The negotiator with distinct culture background should adjust strategies and communication pattern within the country between countries (Lewicki et al., 2001). Hence, negotiation should consider cultural impact, but above knowledge lacks negotiation within contract context, which is important as the negotiation of third party logistics always centres on contract.

Many scholars have applied Hall (1976)’s high and low context model into contract issues (Sellin et al., 2005; and Schneider et al., 2002). High-context communication requires no specific details and pays more attention to mutual understanding, but low – context communication specially concerns about written details as the legitimate evidences. Face and personal relationship is more valuable than contract in Chinese culture which is a representative of high context culture as Chinese people view the business relationship as the extension of personal relationship. Therefore, the contract communication also can be interpreted by high and low context model. Hence, it is suitable to use this model to study on the contract communication.

A number of inquirers studies on Hofstede’s dimensions and high vs low context in negotiation. Triandis (1995) explains that reason of individualism emphasis on specific provisions is that such cultures use general rules and obligations as benchmark to guide individuals’ activities (Tromperaar and Hampden-Turner, 1998), which can explain the reason of individualist cultures expecting detailed contracts. And, it also is consistent with low context culture. Hence, specific versus unspecific provision in contract is a factor causing the conflicts in negotiation.

Hall (1976) demonstrates that miscommunication is caused by variants in language, cultural traditions and management styles. In individualism culture, communication is more aggressive and assertive (Brodbeck, Frese and Javidan, 2002); indirect communication is regarded as low efficient activities (Hinner, 2009); and confrontational strategies are frequently adopted in conversation (Lustig and Koester, 2006). Hence, individualists are likely to use aggressive and assertive strategy to achieve their goals of negotiation and promote the success of negotiation. In contrast, collective cultures perceive such communication as harmful conflicts and the indication of lacking of trusts, and navigators present their ideas in a roundabout way in order to avert direct disagreements and conflicts. The reason is that those people are concerned with their faces (Triandis, 1995; Cheng and Seeger, 2012; and Jandt, 2007). Hence, the aggressive versus harmony communication as one of prominent factors causes the conflicts in negotiation. The causes of two forms of communication are the different perceptions in face and relationship.

Furthermore, the face consideration and the attitudes about the details in contracts even may affect the content of communication: low context cultures provide more information during the negotiation, but the negotiators from high context cultures only clarifies background information (Danciu, 2011; and Hooker, 2008). In high context and collectivistic culture, negotiation means to judge and discuss (Neidel, 2010). The amount of information that negotiators provided is different in high context and low context cultures. The amount of information that negotiators provided is significantly critical that may result in misunderstanding. Hence, the amount of information provided by negotiators can be considered as a factor affecting the negotiation process.

Long term-oriented cultures such as China expect to build long-term relationship through the contract and negotiation (Akgunes et al., 2012). Thus, they may have concerns to solve the long-term problems and flaws in the cooperation relationship. However, short -term cultures such as American cultures only intents to negotiate for onetime agreement (Akgunes et al., 2012). For short-term cultures, negotiators may not expect to cost a long time for a onetime agreement. The intention of negotiation may raise the conflicts between negotiation parties, as long term-oriented cultures negotiate for long-term relationship but short-term oriented culture only look forward to onetime agreement.

Low context culture as rule based culture is on the opposed of high context culture, which is basing on relationship; rule-oriented people complies with rules and use objectivity to resolve problems but relationship -based people is euphemistic for protecting relationship (Hooker, 2008; and Danciu, 2011). Hence, the relationship development in negotiation process could result in conflicts. The difference between objectivity and subjectivity should be considered as an important factor that affecting negotiation process.

The negotiation styles of low and high context cultures are distinct: low context cultures seek efficiency and quick solution but high context cultures view the negotiation as an opportunity to build long-term relationship (Danciu, 2011). Furthermore, typical low context cultures divide problem into more specific and smaller issues and solve them one by one; but high context cultures cope with these questions without order and pose their true expectation at the end of the negotiation (Lam, et al., 2007). It is deductive that many agreements that high context culture negotiators though were made need to be re-discuss again. Therefore, it may make low context culture negotiators lose their patients resulting in conflicts. The negotiation styles may be an important factor that affects negotiation process.

Low context cultures hold the belief of ‘Time is money’, however high context cultures tend use low slow progress in the negotiation process. In many cases, low context culture negotiators perceive that there is no agreement but high context negotiators frequently suddenly made agreement (Graham and Mintu-Wimisatt, 1994). However, before the sudden agreement, the low context negotiators could lose their patient, confidences and interests to continue negotiation, and they may choose to use aggressive language pushing the end of negotiation. Cultural value may cause conflicts in negotiation and should be attributed to the factor affecting negotiation.

Chapter 4 Conclusion

4.1 Overview findings

In conclusion, research questions are answered respectively and the findings are gathered in these answers. Three research questions are set that aligns with the research objectives:

4) How important is the relationship between cultural distance and the negotiation with third party logistics?

There are sufficiently evidences proving that cultural distance can significantly affect negotiation (Graham and Mintu-Wimsatt, 1994; Danciu, 2011; Lam, et al., 2007; and Drneich, 2003). Krishman, Smark and Pepper (2013) prove that the relationship between national culture and the communication with third party logistics is significant.

In the perspective of project management, behaviour decision theory (BDT) studies on negotiators’ behaviour and considers negotiators’ beliefs and values (Sebenius, 2002). For third party logistics, building relationship, evaluating partners and clients and communicating with client are important for third party logistics (Lambert et al., 1999; Selviaridies and Spring, 2007). Svensson (2001) found that it is necessary to consider cultural impact.

Many scholars claim that the relationship between culture and communication is strong (Peleckis, 2013; and Pruitt, 1990). A considerable number of academic researches proves the impact of culture on negotiation is significant (Christopher et al. 2005; Rao and Schmidt, 1998; Schneider et al., 2002, and Luo and Shenkarb, 2002).

Basing on the case study, the case of Ostnor explores the cultural effect on negotiation is important, and then the case of NCC and Ericsson further proves the effect.

On the whole, the relationship between cultural distance and the negotiation with third party logistics is strong and significant according to previous research and case study.

5) What factors originated from cultural distance can affect negotiation with third party logistics?

In the critical analysis, seven factors are identified: specific and unspecific provision in contract, aggressive versus harmony communication, the amount of information, the intention of negotiation, the relationship development, negotiation styles, and cultural value.

The factors are developed basing on Hofstede’s dimensions of national culture and high versus low context. These two models describe the characteristics of different groups of culture. Hofstede’s dimension of culture classifies five indexes to measure culture (Hofstede, 1980) and Hall (1976) uses two categorises. In their theories, the behaviour is affected by cultural values. Hence, many researchers used these theories to explain the cultural impact on negotiation (Triandis, 1995; Cheng and Seeger, 2012; Hinner, 2009; Lustig and Koester, 2006; Neidel, 2010; Akgunes et al., 2012; and Zhang, 2008). These researches found many conflicts in negotiation between different cultures, and they explained the conflicts by Hofstede’s dimensions of national culture, and Hall’s theory.

High context cultures prefer unspecific provision in contract but low context cultures concern provision, and it can be explained that high context cultures use relationship to ensure the business but low contexts cultures believe in law (Triandis, 1995; Tromperaar and Hampden-Turner, 1998). The relationship strategy also is proved by the case of Ostnor and NCC.

Aggressive versus harmony communication is the prominent factor that arouses conflicts in negotiation. In both Hofstede’s culture dimension and Hall’ theory, communication in some cultures is aggressive but that in others is not (Hofstede and Hofstede, 2010; Hall, 1976). Basing on the theory, many scholar proves that individualists use aggressive and assertive strategy to achieve their goals of negotiation and promote the success of negotiation, but collective cultures perceive such communication as harmful conflicts and the indication of lacking of trusts, and navigators present their ideas in a roundabout way in order to avert direct disagreements and conflicts (Triandis, 1995; Cheng and Seeger, 2012; and Jandt, 2007).

Meanwhile, the case of Ostnor, NCC and Ericsson also prove that Chinese negotiators try to build good relationship with counterparts by a soft way.

The intention of negotiation may raise the conflicts between negotiation parties. In long orientated cultures, negotiators attempt to build long term relationship so that they spend long time to negotiate details but in short orientated cultures, negotiators prefer one-time transaction and efficiency of negotiation. The different intentions will raise conflicts (Akgunes et al., 2012; Zhang, 2008; Lee et al., 2006).

The relationship development in negotiation process could result in conflicts (Hooker, 2008; and Danciu, 2011). Low context cultures appreciate high efficiency and misunderstand that high context cultures require long time for negotiation (Hinner, 2009).

The negotiation styles may be an important factor in negotiation process. Low context cultures solve problem one by one; but high context cultures cope with these questions without order and pose their true expectation at the end of the negotiation (Lam, et al., 2007).

Cultural value affects the negotiation. Low context cultures believe in ‘Time is money’. High context negotiators frequently suddenly made agreement (Graham and Mintu-Wimisatt, 1994). Before, the final decision, negotiators from low context cultures are likely to lose confident and give up.

6) What strategies negotiators can use to avoid unappreciated and failed negotiation with third party logistics?

Basing on the case study and the principles of culture dimension, this dissertation has many suggestions to negotiation with third party logistics.

Firstly, scanning the market before choosing negotiation partiers is helpful (Murtoaro and Kujala, 2007). H&M understands the general prices in Chinese market and then prepare to negotiation.

Secondly, understanding the negotiation counterpart is important (Sebenius, 2002; Javidan and House, 2001; Danciu, 2011). Third logistics partners should understand the needs of clients (Knemeyer and Murphy, 2005; and Selviaridies and Spring, 2007).

Thirdly, negotiators should be respectful and honest when communicating with counterparts from high context according to the cases. Aggressive language and behaviour are reviewed as threats and the end of conservation (Triandis, 1995). Negotiators need to specially care face and politeness in the high context.

Fourthly, spending time to understand counterpart and build long-term relationship is worth. The cases prove that spending more time can treat trust and high commitment.

4.2 Recommendation

This dissertation has identified the relationship between third party logistics and culture distances in the negotiation, fund the factors that affect the negotiation and made suggestions. Nevertheless, there are limitations in this dissertation and it suggests that further research can solve them.

Firstly, this research adopted interpretivism philosophy and case study so it inducts findings basing on subjectivism. It suggests that further researches to use other philosophies such as positivism to identify the research subject. Meanwhile, this research used the secondary data that is unable to perfectly address research subjects. A large proportion of data is not exactly discussing third party logistics and it discusses logistics, project management, and negotiation. Without perfect data, this research attempts to discuss culture distance and negotiation from wide scope and gradually narrow down to the exact third party logistics. Hence, it suggests that further researches to collect primary data related to third party logistics.

Secondly, this research, as one of a few research studying on third party logistics communication, proposes many cultural factors that affect the negotiation with third party logistics. However, many factors are concluded basing on previous researches and there is no specific knowledge proving these factors. It is still meaningful for other researchers to identify and prove these factors through multiple methodologies. These factors are specific and unspecific provision in contract, aggressive versus harmony communication, the amount of information, the intention of negotiation, the relationship development, negotiation styles, and cultural value. Further researches can use survey and/ or interviews to collect primary data to identify these factors.

Thirdly, all culture related theories in term to communication are basing on Hofstede’ dimension of national culture and high versus low context. Further researches can study the impact of culture distance on third party logistics from different angles. They can adopt their model of cultures.

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