Negotiations in the New World: Global Advanced Negotiations

First Edition

NEGOTIATIONS

in the

New

World

Dr. Karl Sarkans

Dr. Karl Sarkans

Chairman

Global Negotiations Institute

Geneva, Switzerland

www.globalnegotiationsinstitute.com

Negotiations in the New World

www.negotiationsnewworld.com

©2012 Karl Sarkans. All rights reserved.

Special thanks to Sofia Sarkans, Clayton Young and Mark Alexander-Warne for their support and editing work with this book.

ISBN: 9XX-1-42XX-27XX-3 (print)/ 1-42XX-27XX-3 (print)

ISBN: 978-0-9886265-1-5 (epub)

PPN: 32XX-00XX

Global Negotiations Institute™, Chartered Global Negotiator™, CGN™

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Permission for use of any material herein, please contact: karlsarkans@yahoo.com

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Welcome to the New World

A New World is already in place, where the formerly poor countries of the emerging markets are rising quickly, expanding their economic and political influence as they produce most of the globe’s growth. By contrast, developed countries like the United States, the United Kingdom, and Japan are sinking fast. In an attempt to keep their citizens at the lifestyle they have become accustomed to during the days of their economic and lifestyle peak, these countries with their ageing populations, huge government overspending, and mounting trade deficits have now borrowed to crisis levels... setting in motion a chain of events that will inevitably end in their fade into insignificance after their final act of ever-larger borrowing and irresponsible money printing - producing no real growth and potentially yet again destabilizing the world economy. Their few politicians are not willing to stand up and deny their general populations their unaffordable fantasy of unreasonable levels of growth and employment – expectation levels set during their credit driven peak. The kamikazee borrowing spree will only serve to speed up the transition of wealth and power to the New World... making this book even more essential for your future.

Whether you like it or not, you will be negotiating with the emerging countries and with people from those countries... as they flood into yours buying your remaining assets and, you travel into their markets to sell your technology and goods, and work with them. You will need to adapt or at least understand how they go about negotiations if you do not want to emerge the loser every time. If you are to prosper in this ‘new-age’ of dog-eat-dog, new negotiating strategies are needed.. ones dictated increasingly by the techniques used in what were formerly the ‘emerging markets’.

Recent academic findings show that ‘win-win’ negotiations, as suggested in the 1980’s by the academic elite and followed since by many of us, are not the best for your pocket. More importantly, they are techniques not being used by the people getting ahead today. You are falling behind if you are sticking to these old methods, and this is your wake-up call. It is time to alter some of your tactics and try to maximize your gains. This book is about experiences from and with the New World... it shows how business really takes place and examines those key factors you need to be aware of to help you adjust your arsenal of techniques and in so doing, protect yourself.

Be forewarned: the book is direct. It includes what is really discussed between experienced businesspeople and negotiators, rather than the politically correct and empty commentary available in most other books and in popular media. You can keep living in your ‘matrix’ and forget about the New World, but if you do, be prepared to idly watch as your country goes bankrupt, your assets are sold in garage-sale fashion, and you lose all your wealth. My deepest apologies to anyone offended by comments in this book. This is a learning process... admittedly sometimes painful - where we see ourselves and our culture through the eyes of others.

Dr. Karl Sarkans is a graduate of Wharton Business School and was a lecturer in the business faculty of the Higher Colleges of Technology and at CERT – the Centre of Excellence for Applied Research and Training, the largest post secondary level education institution in the United Arab Emirates with bachelors, masters, and doctoral programs. The Emirates, and in particular the capital city where Karl resided - Abu Dhabi - holds the world’s fourth largest reserves of oil, good for production for the next 175 years (ranked fourth after Saudi Arabia, Canada and Iraq) and is shared by a local population of only 1.2 million. Dr. Sarkans was the Dean of Banking and Finance. Karl is a regular visiting professor of Financial Negotiations for Wealth Management in Europe at the University of Liechtenstein, a premiere finance education and research institution in a country with the highest per-capital GDP (gross domestic product) in the world.

Dr. Sarkans brings two decades of personal experience in Asia, in the former Soviet Union, the Middle East, and the Americas, as the head of a mergers & acquisitions unit and as the world’s highest performing hedge fund manager in the years 1997 and 2006. In 2008, the fund he managed was ranked the best-in-category by the Wall Street Journal in ‘global macro’.

An emerging market friend said to me, having discussed this book and the views of some of the people I interviewed:

„It is not us that are aggressive, we are just adapted to dealing in the real world. It is you that are naive, you Europeans and Americans. We have learned our ways and yours. You stubbornly stick only to yours. In doing so, we are able to transact business globally and expand, while you are stuck in your declining slice of the world economy."

I sincerely hope you will gain some useful insights from this book as well as find it an interesting and entertaining read!

When you are ready to pursue a professional qualification in negotiations, to earn the Chartered Global Negotiator - CGN designation for your career advancement and to truly enhance your ability to negotiate... you can begin your journey with the Global Negotiations Institute at www.globalnegotiationsinstitute.com.

Yours truly and my sincerest welcome to you!

Dr. Karl Sarkans

email: karlsarkans@yahoo.com

www.negotiationsnewworld.com

www.globalnegotiationsinstitute.com

TABLE OF CONTENTS

1.  INTRODUCTION

Can a billion people be wrong?

Ignore cultural differences and you miss a large part of your market

Dr. Karl Sarkans’ model for adaptation to global negotiations

Which region has the fastest growth in the number of billionaires?

Current trends - Stephen Jennings, founder of Renaissance Capital

U.S. economy is one giant Ponzi scheme says Bill Gross of PIMCO

Listing of the top sovereign wealth funds

2.  INDUSTRY CROSS CULTURAL INTERVIEWS

Constantine Karayannopoulos – NEO Materials, global producer of Rare Earths

Carbon Black from Shanghai

SAF Tehnika – Normunds Bergs

The view from China – a marketer that sells to the world

AMD – Chipmaker - Acquisition of ATI

Senior Partner – from a leading dispute resolution firm

Carbon Black post deal comment

3.  PROPERTY AND SERVICES SECTOR INTERVIEWS

Karlis Cerbulis – major property investor, Eastern Europe and former Soviet Union

Preparing your seller

A top real estate broker, Mitra Katirai

Free furniture rental

Cheated by the real estate profession

Every transaction is a sale – an aggressive property developer

4.  RETAIL AND WHOLESALE SECTOR INTERVIEWS

Albert, the diamond wholesaler

Buyer for a major Scandinavian building products retail chain – Rautakesko

Perspectives of a Persian carpet seller

Views from a retail stockbroker

A Chinese furniture store owner’s buyer profiling

Chinese buying strategy

5.  EDUCATION, GOVERNMENT, AND HEALTHCARE SECTOR INTERVIEWS

An elementary school principal... about unions

Pushed into a corner – the other side does not acknowledge you

Negotiations in the criminal justice system (EDITED)

Negotiations in the criminal justice system (UNEDITED)

A software company for employee salary systems

A German healthcare professional in Singapore

6.  ETHICS ABROAD

Three rule

The magic briefcase – judo in negotiations

Lying and telling the truth — all the same for some

A nice lunch at the Mandarin Oriental Hotel in Hong Kong

Bribery in India

Bribes paid and unpaid

In India, will corruption slow growth or will growth slow corruption?

But they are protecting their markets and treating us unfairly!

Guilty... of something... all of the time

The girl trap

Global corruption ranking

7.  SCAMS AND WHAT WE LEARN ABOUT HUMAN NATURE

Gambling and leveraged foreign exchange

Nigerian scam

The confidence game

The Hong Kong sandwich

Pricing when the buyer does not want to pay

8.  ADVANCED TECHNIQUES

Standard techniques for negotiations – review of the basics

Some more advanced techniques

Checklist: negotiation preparation... at the very least

Write your own first legal contract in any deal

Switched contracts

Increasing your negotiating results using tradeables

Methods of interrogation

Posturing

Come near close of the sale... the Mom method

Tips from the real estate profession

The whipping boy

Alternatives to giving up price

Advanced electronics to be aware of

9.  UNIVERSAL TRUTHS

Swim with the stream

Prime is prime!

Sexy is expensive

Buy the bottom, sell the top OR buy the top, sell the bottom?

Mergers & Acquisitions is (usually) a loser

Smallest house on the street

Build it and they will come

After closing a deal, change the subject!!!

10. DANCE... INTERNATIONAL STYLE

Believe the fantastic... and let them pay for it

Advice from an old China hand

Scuttling the deal

Hide the profit – not just a North American technique

Slicing the offer

11. OTHER NEGOTIATING WISDOM

Experience bias in negotiations

Every family needs a public company

Valuation methods

12. CONCLUDING REMARKS

Go for your maximum advantage in negotiations... here’s why

Brains not braun this century

The numbers... just in case you didn’t get it

Conclusion

Summary of negotiator interviews

Comment on the New World

Parting Wisdom

APPENDIX

Earn the Chartered Global Negotiator – CGN – designation

About the Global Negotiations Institute

CASE: AMD acquisition of ATI

AMD acquisition of ATI - Case Instruction 1 - Valuation

AMD acquisition of ATI - Case Instruction 2 - Preparation

AMD acquisition of ATI - Case Instruction 3 - Negotiations

CASE: Negotiation preparation and valuation – selling the family home

Selling the family home - Case Instruction 1 - Valuation

Selling the Family Home - Case Instruction 2 – Negotiations Preparation

Selling the family home - Case Instruction 3 – Negotiate the home sale and purchase

Selling the Family Home - Case Instruction 4 – Contract terms and alterations

Selling the family home - Case Instruction 5 – Release or not?

1. INTRODUCTION

Can a billion people be wrong?

They have us by numbers alone. If this is a mostly democratic world, Indians at 1.1 billion and the Chinese at 1.3 billion are the dominant cultures and are doing things the ‘normal’ way. We are the oddity! Let’s make this our starting position for the book and for your onward education in negotiations.

It is now up to us to catch up with the fastest growing and largest parts of the world, to learn their techniques and their methods of negotiation. That is what this book is about. It includes suggestions from the experiences of mostly Western people that have dealt with people from the countries of the new world. There are a few interviews with people from emerging economies, getting their perspective of us, so you get a taste from the other side.

Ignore cultural differences and you miss a large part of your market

I took a group to the Emirates Palace, a luxurious hotel located in Abu Dhabi. The hotel is one kilometre long and is managed by the Kempinski Group. Picture below. Note: Sex and the City II was filmed at the Emirates Palace.

The General Manager of Emirates Palace, a Dutchman, spoke about his target customer segments. He said that European guests come as one or in a pair and prefer to stay by themselves. Russian guests need fruit in their room when they arrive and flowers to be given to each female in their party on ‘Woman’s Day’, a celebrated holiday in Russia. When they have fruit in their room, they will praise how wonderful the hotel is, said the general manager. Chinese need a buffet. They always ask for the buffet. And Arab visitors come as a large group, the entire family together. They need adjoining rooms or rooms near one another. They eat and do everything together.

In summary he said:

„If you ignore cultural differences, you miss a large part of your market".

Dr. Karl Sarkans’ model for adaptation to global negotiations

I propose six possible states of adaptation to international negotiations. You have your own system of negotiating, developed in your own country, culture, social circle, and work environment. You consider it to be your ‘normal’ way of doing things. The question is „What do you do when you deal with someone from another culture, when THEIR ‘normal’ way is so substantially different than yours?". Here are some states for the adaptation process progression.

DR. KARL SARKANS’ SIX STATES OF GLOBAL NEGOTIATIONS CAPABILITY ADAPTATION are ordered from easiest to most difficult to achieve, in a range from making no changes to your style to fully adjusting to the foreign style. Depending on the nature of transactions handled, whether one-off each time or where long term cooperation is necessary – there seems to be an optimal point reached for the adaptation, beyond which becoming too aggressive begins to work against you – causing the counter-party to retaliate and you to incur unnecessary and sub-optimal costs such as litigation and sabotage.

PROGRESSIVE BENEFITS OF EACH METHOD - DR. KARL SARKANS’ MODEL FOR INTERNATIONAL ADAPTATION

DR. KARL SARKANS MODEL FOR ADAPTATION TO GLOBAL NEGOTIATIONS – THE SIX STATES

# 1

STICK TO YOUR WAY, EVERYWHERE

Do not adjust, at all. Just study and learn their way to know how to get conclusion in deals and how to protect yourself, continuing on as you always have. This is the easiest approach and can be effective, as colonialism was, when you get the other party to compete on your terms. If you get the others to switch to your system, you will ‘win’ most of the time.

However, I would not become too dependent on this, as the New World is no longer the old one. They will not ‘play’ with you as you want to play... especially as your country fades from economic significance. You are the minority now, so it will probably be necessary for you to adapt, at least to some extent.

Who can use:

Large corporations from high litigation risk or dominant culture jurisdictions such as the United States or Russia still tend to use this approach. When you have too many people in your organization and cannot control them effectively, you just train them all one way: your way from your home country and then enforce it. The dominant income stream for companies using this method comes from the home country (other countries not important).

# 2

CROSS MARKET LIMITED ADJUSTMENT

This method relates to companies with limited contact with people from other cultures, or when most dealings are between your country and only one or, at most, two others. The method works for a company based, for example, in the United States and that deals only with clients from the United States and say Japan. In such an adjustment, you focus on the two ways, the American and the Japanese, and learn to adapt to the Japanese way only as necessary... to present business cards in the Japanese way using both hands, in saying a few words in Japanese, and being patient when decisions have to travel up and down the organization before they are approved, Japan style. By default, the majority of people fall into this category, as they specialize in their companies or in their daily lives with just a few other cultures.

Who can use:

Medium sized corporations and persons that specialize in one particular market outside of their own and where the majority of revenues comes from the home country and one other market only.

# 3

GLOBAL IDEAL

Here, acquiring an understanding of all cultures, especially the ones you most frequently deal with, is the goal in order to develop a code of negotiations that you consider safe and ideal for your objectives. You need to also consider whether your clients are long or short term customers. Large companies and high profile individuals have significant risk exposure with respect to ethical and legal issues, as well as their requirement to maintain a certain ‘image’ abroad. By creating a global ideal, it will limit your scope for gains in foreign markets, perhaps even make you unable to access certain cultures and countries, or segments thereof, but will keep you ‘safe’ from negative aspects related to international and cross-cultural dealings. There are always many grey areas in negotiations. By developing a global ideal and having this approved by your senior management and legal counsel, you will be relatively safe.

Who can use:

Large corporations with significant image and legal risk. A ‘one-world’ strategy.

# 4

GLOBAL BLEND – BEST OF THE BEST

Take all countries, cultures, and standards, extract the best and most effective from each and put these into your arsenal. There is no one best