International Business In The Middle East

Case Studies

Ashok Kapoor

• Publisher: Routledge
• Year: 2019
• eBook ISBN: 9780429726682
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: International Relations
• Index: Politics & International Relations

This book, designed for academic and business communities, discusses the dimensions of business development in the Middle East. It identifies distinguishing features, calls for attention to the human resources needs of an operation and the special requirements of host governments.

1
International Business Development and Negotiations: Selected Characteristics of the Middle East

Eugene Bird

Selected Characteristics

To be really successful in the Middle East, in business just as in diplomacy, requires an understanding of the Middle Eastern negotiator. So much has been written and spoken since 1973 on both the Arab countries and Iran as unique markets that it is difficult to sort myth from reality.

Recently L'Express, not noted for a pro-Middle East bias, had a two-page spread with a full-page picture of an Arab in his typical kefiyah looking suspiciously intelligent. "Pratiquez-vous aussi bien que lui l'art de la negociation?" asked the headline. (Are you as good at negotiating as he is?) The advertisement was by a French bank, Société Générale, which, in comparison to American banks, has done little business in the Middle East itself, but is important in the North African trade, where the French learned much of what they know about Arabs.

"Shrewdness, finesse, ability, a taste for secrecy, patience, self-control, perfect knowledge of the files; it took the recent oil crisis to reveal to the stunned Western world the extraordinary talents of Arab negotiators." This is an exaggeration, of course, but it represents the revised appraisal of the Arab going on all over the Western world. The need now is for a controlled response to our new view of the Arab as a business negotiator. While many advantages do lie with him, he is in need of Western ties; he is basically imaginative, yet conservative, and has the same need as every other business negotiator, that is, to avoid being made a fool by accepting less than the optimum.

Are there any unique facets to negotiation with Middle Easterners? It is tempting simply to look at the Middle East as a whole, as if it were a single, large marketplace. But it is much more than that, and is becoming as diverse as Europe was in the nineteenth and early twentieth centuries. Negotiating with Kuwait may resemble negotiating with a Swiss banker, except that the woman negotiator is already evident in Kuwait. The Saudis, the quietest of the Arabs, are easily underrated by both their fellow Arabs and by Westerners. Iranians are flamboyant in their style, promising sometimes more than they can deliver, and are very specific and knowledgeable in their demands. Before discussing differences among Middle Eastern negotiators, however, it may be useful to review cultural similarities endemic to all groups in the area.

The generation gap is not a Western phenomenon. The head of the Middle Eastern firm may have little more than a superficial acquaintance with the West; but his son, nephew, or general manager may share with many an American negotiator allegiance to the same U.S. alma mater and fondness for the hamburger. A leading U.S. engineering firm, faced with simultaneous negotiation with three Arab nationalities on a single project (an increasingly common kind of negotiation), evaluated the Saudi engineers as the best they had seen. They should be—the company's own engineers were graduates of the same universities as the Saudis.

A sense of humor about oneself certainly does not harm the chances of achieving a breakthrough in tough Middle East negotiations. During difficult negotiations between Aramco and the Saudi government some years ago, a two-stage system emerged. The experts would meet and talk exhaustively, coming to no agreement during the day. The two principals would meet in the evening, often on the way to the airport in Minister of Petroleum and Mineral Resources Yamani's Mercedes. The confrontations of the day would be reviewed briefly and the knottiest problem usually solved. On one of these occasions during the month-long negotiations, the Aramco vice-president turned to Yamani and said, "We have taken care of all the elephants. Now let us deal with the rabbits." Sheik Yamani laughed and repeated the story to friends, adding, "That is where the profits were for Aramco . . . with the rabbits."

One should not be surprised, however, to find as well surprising sophistication among Middle Eastern negotiators. Yamani himself is a classic example of this point. Shortly after three or four Saudis had been trained by Aramco in computer science technology and had taken positions with the Ministry of Petroleum and Mineral Resources, Yamani and his staff met the Aramco negotiators at a Lebanese mountain resort. To each proposed change in oil price and lifting arrangements, Yamani produced his own figures, independent of the company figures. He had installed his own small computer center and manned it with his Aramco-trained experts.

The atmosphere of the negotiations is especially important in the Middle East. Yamani is reported to have made a habit of opening negotiations with a series of unrelated questions: "What is happening in Iran? Is that man in Libya still giving you a bad time?" As one executive noted, Yamani knew more about the Iranian and Libyan scenes than did the Americans, and his questions were more directed at setting the mood for negotiations than at soliciting information.

It is extremely important to the Middle Eastern negotiator to have a confident feeling about the character and personality of those with whom he negotiates. It is usually necessary to prepare the way by sharing social occasions, developing friendships, and revealing early and with good proportion and dignity "what is behind your mind."

Frequently the Middle Eastern executive demands more personal involvement in briefing than would the Westerner. When a company asked permission to send a group to brief Yamani's experts on what was expected to happen in oil offtake and supply, he expressed an interest in being present himself. The executive joked, "Of course, Zaki, we will arrange a time convenient for you, but you won't take the time ... I know that." Yamani protested that he would, and he did. The American had used a sense of humor, coupled with the Arab sense of honor, to make Yamani want to keep his word. While it can be effective, such a technique must be natural and used very sparingly.

Negotiations are long if there are any complexities at all. The Middle Easterner who feels at an advantage may politely request proposals from the other side. The question then becomes whether one should respond with an outrageously high bid and make a request for concessions that are obviously inflated. According to oil company negotiators, this is not the best tactic. It is better to explain quietly and rationalize terms by some logical device that will stand up and at least initially or nominally impress the other side. Fencing, not bushwhacking, tactics are called for. Adroit arguments, not high demands, impress the Arab. The Arabic language itself places a high value on clever logic and shrewd appraisal. Direct confrontations may occasionally be necessary, but then they are best done with humor and through softening devices that signal to the other party that this particular demand is a must in the negotiations.

Experienced negotiators have found that though the discussion may become quite specific, final details are often deferred and are dependent upon the general agreement. The wrap-up may take place only at the last minute, literally while the pens are being prepared for the signatures.

It has been found that negotiations are pursued in an entirely different manner when a technical or nonroyal minister, rather than a member of the royal family, is the negotiator. The technocrat will be much more likely to insist on specifics and demonstrate a knowledge of Western concepts of finance, marketing, and administrative techniques. In the negotiating situation, however, he will still seek a personal relationship of trust.

Recently, an important authorization was given a deputy to a national bank to negotiate with an American advisory service. The highly trained, but young, Saudi financier faced representatives of the American firm and a young prince who had made the initial arrangements. The talks seemed aimless for several days. The Americans discovered by accident that the Arab bank representative was highly suspicious of the presence of the Arab intermediary in the talks. "We do not want anyone with a vested interest in these talks except the Americans," the negotiator finally admitted in private. The talks proceeded smoothly after the intermediary was gently removed.

The profile for a perfect negotiator includes frankness, quick-wittedness, calmness, sensitivity, a finely tuned sense of dignity and grace, and a generous sense of humor. A negotiator must occasionally endure flamboyant behavior and be able to genuinely appreciate and relate to the closeness of entangled family life in the Middle East, Above all, he must present a sincere and open mind.

Corporate Profiles in Approaches to Negotiation

The variety of corporate images that have proven successful in the Middle Eastern market proves the diversity of successful methods of negotiation. Most well-regarded corporations, however, seem to be discreet, underplaying their role in joint operations. They are usually global in their marketing span, but are at the same time able to delegate rather comprehensive and direct authority to their local Middle Eastern field managers, while insisting on constant feedback and modern management techniques. That impresses both Arabs and Iranians, particularly when it proves profitable.

The approach used by a few corporations coming to the market in the Middle East includes protective phalanxes of vice-presidents, experts, computer programmers, jets standing by—a sort of panoply of overwhelming arrogancies. Others approach it in cowboy boots and suede jackets—informalities that appall trained area experts. Although these negotiators may be amusing to Middle Easterners, they also have proven to be competent in their discussions and successful in securing contracts.

A third type of corporate approach is the use of the old school tie, the friend, the man who has been successful in his own corporation and decides to exploit his friendship of years gone by with a Middle Easterner who has now risen to a ranking role in his own society. The U.S. corporation may elevate its man to vice-president or director of international marketing (Middle East), regardless of his age or background. Successful negotiation in the Middle East may result in relocation of the new executive to Athens, Bahrain, Riyadh, Cairo, or Tehran, close to the location of decision-making authority. Sometimes the old school tie works, sometimes it does not. However, unless the new vice-president has the extra patience and persistence to pursue more than the old school friend, he is not likely to succeed in doing anything more than spending an unusually large amount of his corporation's money.

One large eastern institution with close ties to a Middle Eastern prince sent a five-man old-school-tie contingent seeking financial support for a new chair in Middle East studies and other programs. While not entirely shunned, they were politely told that during the time the minister-prince had been at the institution, he had been constantly reminded of his Arab ancestry in a rather derogatory fashion and he did not consider the present university administration any different from that of his time. Such frank talk from an Arab is unusual.

Summing Up

During one six-week period in early 1975, the U.S. Embassy in Jidda recorded forty different bankers or banking groups seeking advice on making the Saudi connection. The number of other American firms was not recorded, but as bankers tend to follow businessmen in investigating investment opportunities, we can assume that the forty banking groups were preceded by at least as many business groups. In these circumstances it is understandable that the number of seminars and books on the Middle East market have burgeoned.

It is worth listening to new information about the Middle East. However, it would be foolish to follow any of it blindly, without testing against the key to negotiations, which demands that accords be beneficial for all parties. An intriguing blend of grace and intelligence keyed to that rule is what makes the Middle East such an interesting and unique market. The following illustrations elaborate on the characteristics that affect international business negotiations there.

1. Corporate Personalities and Personal Relationships

Shaw represented Corporation Y, a company specializing in an area of airport landing systems. Smaller than most, the corporation recruited Shaw for the specific job of carving out a share of the rapidly expanding market in a country where Shaw had as his closest contact the man most responsible for airport works. It took Shaw many months to overcome the competition, both American and foreign, but the company backed him in his efforts and before the end of a year the first contract was ready for signature.

By the time the contract was written, a vice-president at headquarters had been placed in charge. He arranged to be present and actually signed the contract that Shaw had formulated. By the end of the second year, additional contracts were in the offing and again the vice-president magically appeared and got his name on the contracts. Although the vice-president stayed in the limelight at company headquarters, Shaw knew that he had absolutely no standing in the country or with Shaw's friends. Petty disagreements between the field and headquarters increased. Shaw was suddenly pulled away and replaced by the vice-president. Local sources predicted that the company would get little additional business, not because it transferred Shaw, but because of the way it was done.

This example demonstrates that corporate politics are sometimes more oriental than those of the Middle East. Host country nationals will do business with people they know.

2. Persistence

John Z. was the son of the founder of a small road-building firm interested in opening business in the Arab world. He had no experience there, but was able to quickly ingratiate himself in the society partly because the Arabs understood completely his role as a son in the corporation, and partly because of his youth and natural dignity. The company was doing less than $10 million a year in business, but its programs at home were winding down and it sought an expanding and less competitive market abroad. The effort cost the company at least $10,000 a month and went on for more than a year before the company even placed among the top three bidders. Finally, nearly eighteen months after first arriving, John Z. won a bid on a relatively small but potentially very profitable contract for fifty kilometers of road to be built to full American specifications. But the war of 1973 came before the contract could be finally negotiated and signed. John Z. had excellent rapport with the ministry and asked to see the minister when it became clear that the American company would not receive the contract. The minister told him that he could not award such a contract to an American firm at that time. "But wait," he said, "don't go away." The wait extended for another eight months, but the contract was eventually signed after a new figure was negotiated. The company continued to prosper with additional contracts.

Bidding is not a rigid process with Arab governments in particular and even less so with private Arab corporations. The personal affection and esteem with which the company representative was viewed added very little advantage in the negotiations over price and terms. However, it was certainly the critical element during the crisis in the contract negotiation.

3. Big Man in the Middle East

Corporation C was very hungry to move into the Middle East in a combined construction and servicing contract. As it was also convinced that the first contract would not be the last, it wanted to establish a firm hold in the area and cut its bid substantially below the competition for a big project involving complex training schedules. The company won the contract and then had to agree to tight timing to keep it. The company searched for a Middle East expert and found a retired businessman in Alaska who supposedly had outstanding credentials. He was big, heavy, and bearded, and he fit exactly the image most of the vice-presidents had of the typical Middle East executive who could handle the tough problems of cutting through the Arab red tape. Corporation C hired him without checking into why he had left the Middle East in the first place. The corporation delivered everything the man wanted, including a grand piano for his wife and a fine villa with swimming pool.

He seemed to start strongly, recruiting personnel away from several other companies and paying top dollar for experienced employees in language and special training—the real key to the contract. The staff may have expanded too rapidly, because regular employees sent out to assist him from corporate headquarters began to complain that no records were being kept and that there was little effort at management of any kind, much less the modern control necessary for a complex multimillion dollar operation. There were even reports that he abused certain employees. Some quit, and the training program ground down. The government began to hold up payments due. A controller sent out by headquarters waded through masses of complaints but also got into trouble and had to be removed. Vice-presidents began dropping in more frequently in an effort to negotiate with the ministry.

Bankers began pressing the company and the cash flow deteriorated beyond the most pessimistic predictions. That triggered the arrival of Corporation C's chairman, who promptly removed the manager and stayed on for three long weeks in an attempt to correct deficiencies in the operation. He later described these three weeks as the most difficult of his life. The contract was almost cancelled, and the company lost two other good opportunities for further work. This is an example of the consequences of failing to monitor corporate decisions—in this instance the hiring of the Alaska businessman. It took two more changes in command and a further shakeup at headquarters before...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Foreword
• Preface
• About the Contributors
• 1. International Business Development and Negotiations: Selected Characteristics of the Middle East
• 2. Bangor Engineering Ltd.: Working with an Agent
• 3. Aram Construction Company: Selling Prefabricated Housing in the Middle East
• 4. Automotive Parts, Inc. (Iran): Problems of a Tripartite Venture
• 5. Arab Potash Company: Project Development
• 6. Color Plant, Inc.: Training Foreign Nationals in the United States
• 7. International Resources Corporation: Dealing with Powerful Host Country Nationals
• 8. Kuwait in Kiawah: Arab Direct Investment in the United States
• Bibliography