Mahmoud has opened a small grocery shop and quickly things went pretty well. So well that he now needs to increase his purchase from his German supplier Hans who’s been in Luxembourg for 25 years.
Mahmoud: I wanted to negotiate further and deepen my relationships with Hans, so I tried to get to know him better. If I establish a trustful relationship with Hans, our businesses may both benefit. So I asked about Hans’s family, talked about football and just making small talk.
Hans: Mahmoud is a new customer in our town with his new shop. He is doing well and I always liked to deal with him, he is serious about business and reliable. But recently, he started talking about my family and about sports. What was he trying to get at? We do business, nothing else. I backed off and left.
In Mahmoud’s perception, he has to establish a friendly, trusting relationship before negotiating better terms for his business, such as lower prices. In his world, doing business may be compared to people doing favors for each other, and the favors get better if they know each other better.
In Hans’s world, doing business has nothing to do with a personal relationship, it is a business transaction between two parties. Personal and business relationships are usually not mixed and Hans is probably wondering why Mahmoud is being a bit intrusive.
What are possible solutions?
If Mahmoud wants to negotiate better prices, he can just ask Hans under what circumstances he would offer discounts and Hans will give him a fair answer. Doing business in Luxembourg and Germany, Mahmoud should understand that usually commercial relationships, terms, discounts etc. are not negotiated individually based on relationships, like in Mahmoud’s country, but on straightforward companywide procedures, strictly based on volume. Hans, on his turn, may realize that it can be interesting to get to know Mahmoud, as he offers to talk about things outside work. He may then also explain that this does not affect business.
In an individualistic culture (IDV +), people interact and do business based on the specific need or task at hand. A business transaction does not require or involve any interaction on a personal level. Any business-related interaction takes place at the shop, business is not discussed at social encounters, as Luxembourgish or Germans like to keep their business interactions separate from their personal relationships.
In collectivistic cultures (IDV -), a personal relationship will facilitate any business transaction – the selection of the business partner is determined by the social network and so are the terms of the transaction. If you want better terms, you need a better social relationship with your business partner. So business and private interaction are clearly intertwined.