Cross-Cultural Deal-Making: Understanding Mexican And Chinese Negotiation Styles With ChatGPT-4

ChatGPT4 scores a B+ on international business culture. That gives the puny humans an opening - for now.

End of the Story:? The dream of using ChatGPT4 to take charge of your international negotiating is still not a reality. While it has a pretty good handle on basic Chinese business culture, AI is not as accurate or relevant when it comes to nailing Mexican negotiating culture. ?The information tends to be technically correct but not pertinent or timely. This creates a window opportunity for experienced human analysts.?

ChatGPT negotiates across cultures.? Its score:

????????????? Overall:? B+

????????????? China:? B+

????????????? Mexico:? B

When the AI apocalypse comes...

... the machines’ first challenge will be getting humans to rely on AI and accept its responses as true and honest.?

This should be a concern for international negotiators. AI systems seem to have a cultural bias (see comments for links) and the tendency to “hallucinate” credibly.? (If you are new to the AI space, “hallucinate” is tech-speak for “credibly fabricate nonsense for no apparent reason”.)? In other words, you could be walking into a meeting where at least one of the counterparties is woefully “misprepared” (he worked hard to come to the wrong conclusion / embarrassing assumption).? What’s even more concerning – that poor misprepared sod could be you.?

Testing the AI on Cross-Cultural Negotiation

To test this, I ran an exercise using ChatGPT4.? I created a simple but common scenario of a US-based company seeking to establish a partnership-level relationship with a mid-sized manufacturer in both China and Mexico.? As part of the test, I asked ChatGPT4 to create an introductory letter on behalf of my US company and propose that we begin preliminary negotiations.?? Eventually, I had the AI create an entire negotiating agenda for counterparties from both China and Mexico.

The Final Question:? Why?

My final step was to ask ChatGPT4 to explain the logic behind its differing approaches to Mexico and China.? Here is the AI’s response.? I have included my comments in italics:

NOTE:? The following contains AI-generated text. I wrote the italicized comments, but everything else is straight ChatGPT4, and not my content.?

Human Prompt:? Describe the key differences in your approach to the Mexican company and the Chinese company.

ChatGPT4 Response:

When approaching companies in Mexico and China, a negotiator must be mindful of the cultural, communicative, and business practice differences inherent to each country. Here's a breakdown of the key differences in approach:

1. Formality and Hierarchy:

?? - Mexico: Communication tends to be warm and personal. Even in business settings, building a rapport that feels genuine and friendly is important. While there is respect for hierarchy, Mexican business culture also values personal connections and trust.

?? - China: There is a strong emphasis on formality and recognition of hierarchy. The communication is more formal, and titles and surnames are used to show respect. Recognizing and honoring the status of the CEO or company representative in the initial approach is crucial.

Human Comment:? Pretty good, but quite generic.? This is a common problem when looking at the literature on cross-cultural business negotiation.? The AI is no better than Forbes/Economist-level analysts who take a similarly simplistic, general approach.?

Verdict:? The AI assessment was fine, but only if used in comparison. ?The differences between China and Mexico that the AI points out are valid, but in isolation, the AI’s advice is vague and sometimes irrelevant.?

2. Business Relationships:

?? - Mexico: While relationships are important, there's often an expectation to move forward with business dealings relatively quickly after initial introductions and trust-building.

?? - China: Business relationships are often long-term and require a significant investment in time to establish trust. The concept of "Guanxi," or the network of relationships, is central to business practices, and breaking into these networks is essential for successful business partnerships.

Human Comment:? I agree, especially with what ChatGPT4 says about Mexico.? I would add that Mexican counterparties are much more likely to return a definitive “NO” than Chinese negotiators.? In the case of family-run businesses, they may start with NO and then ask you to sit and talk.?

3. Communication Style:

?? - Mexico: Indirect communication can be common, where saying 'no' directly is often avoided to maintain harmony. Emphasis might be placed on diplomacy over directness.

?? - China: Indirectness is also a feature here, with an even greater focus on saving face and maintaining harmony. Messages are often nuanced, and it’s important to read between the lines.

Human Comment:? I have issues with the AI says about Mexico – but I have seen this “don’t say no” line before.? Mexican businesspeople pride themselves on cordiality and good manners, but I have found them to be fairly direct.? In my experience, Mexican managers are often a little too quick to accept the authority of US methods and processes. When the answer is NO, however, the Mexican side is comfortable saying it clearly.?? Don’t be put off by Mexican negotiators who immediately tell you how impossible your proposal is -- and then insist you sit and have coffee.? Especially in family-run businesses.

4. Negotiation Approach:

?? - Mexico: Negotiations may be more flexible, and while there is a respect for deadlines and agreements, there’s often room for adjustment and negotiation.

?? - China: Negotiations can be quite protracted, with a lot of time spent in the pre-negotiation phase gathering information. Decisions are often made by consensus and can require patience.

Human comment:? Again, I think the AI is doing a better job on China than Mexico.? Chat4 isn’t WRONG, but just off-target.? Much of Mexico’s manufacturing culture is transplanted directly from Detroit, and decision-makers are Six Sigma black belts with decades of multinational experience.?

Mexican managers tend to be fanatical about workflow – but skeptical about your plans.? Factory managers will expect you to show up with a complete operations plan – including sourcing and customs.? If you have all of your ducks in a row, Mexican negotiators are flexible and open.? But Mexican factory managers have a much tighter range of activity than their Chinese counterparts, and they don’t like getting involved in sourcing or product design.? That will shut down a conversation pretty quickly.

5. Expectations for Partnerships:

?? - Mexico: There may be an expectation for a more balanced and reciprocal partnership where both parties are seen as equals, regardless of company size or international standing.

?? - China: Partnerships are often viewed within the context of mutual benefit, but there is also an expectation that foreign companies will bring advanced technology, brand recognition, or other significant advantages to the Chinese company.

Human comment: ?Some more B+ work from the AI. ??What the AI isn’t saying is that Mexican negotiating culture is characterized by intense skepticism of US proposals. ?You have to prove yourself in Mexico because they’ve heard your pretty story about mutual benefit before.? The comments about Mexico seeking balance and reciprocity aren’t wrong, but they’re not really particular to Mexican culture.?

6. Emphasis on Cultural Heritage:

?? - Mexico: While cultural heritage is valued, the approach can be more about blending tradition with contemporary business practices.

?? - China: There is a deep respect for cultural heritage, and it's often expected that foreign partners will show a high level of appreciation and understanding for Chinese traditions and business etiquette.

Human Comment:? Yes, I agree with the AI here.? ??

7. Legal and Regulatory Environment:

?? - Mexico: The legal framework may be more familiar to U.S. businesses, but it’s still important to navigate local regulations carefully.

?? - China: There is a complex regulatory environment that can be quite different from Western practices, necessitating careful navigation.

Human comment:? When looking at regulatory issues with Mexico, start by understanding USMCA (T-MEC in Mexico) and IMMEX.? If you qualify for exemption from duties and tariffs, then Mexico could make sense.? I think ChatBot4 is underestimating the compliance issues facing manufacturers in China - one of the problems of being off-line.

In summary, the approach to a Mexican company involves building personal rapport and a straightforward business proposal, while for a Chinese company, it requires a formal tone, recognition of hierarchy, and an emphasis on long-term relationship building and understanding of local business etiquette.

-------------?(end of ChapBot response)------------

HUMAN WRITING RESUMES:

The Final Grade for ChatGPT4’s International Negotiation Skills:? B+

Decision-makers are going to be relying on AI reports and analysis more and more, but should we?? AI always sounds correct and authoritative – that’s its main job.? It’s a responder – not an analyst. ??

International managers are the first to experience the new data challenge.?? ?

AI can be used to expand services or to cut costs. I know people like to say "both" before they've analyzed the situation carefully, but let's use history as our guide. When a new technology enters the business world it's just a matter of time before efficiency takes precedence over effectiveness. AI will be used by businesses 1) to cut costs, 2) to increase markets, and 3) to innovate new products and services - in that order. Cost cutting will be the main function of AI in many organizations.

Transitioning to Your AI Future

Here's the problem facing analysts and consultative sellers: Organizations have 3 choices about how to work with the coming generations of smarter AI assistants:

Choice 1:? 100% reliance on ChatGPT.?? All of your questions can be answered practically for free – but they are mainstream (i.e.: generic) answers that may contain assertions or figures that are 100% wrong.

Choice 2:? 100% reliance on Humans.? Some of your questions will be answered at medium – high cost.? Answers may contain game-changing insights that no one expected, but there are no guarantees.?? As AI becomes the go-to source used by most businesses, human analysis will become more expensive in both relative and absolute terms. Human analysis will become a premium service.?

Choice 3:? Blended Human – AI research.? See Choice 1, because that’s how this one ends up. Once the cost-cutting begins, it doesn't end.

There will be cases when organizations choose #2, but it will be either an added service marketed to elite clients or a special-purpose team tasked with problem-solving or new product development.

For the most part, AI will be used to reduce expenses. This will create a feedback loop where undercovered economies like Mexico will be discounted and overlooked by the AI even more.

Final Word:

The digital divide and coming AI ascendancy is a good-news/bad-news scenario for international negotiators.?

On the one hand, you’ve got a great new tool kit.?

On the other hand, the tools may be faulty, incomplete, or even dangerous.? The best-case scenario is that we experienced pros will be able to leverage our hard-won knowledge with powerful new AI systems to unlock even more value from developing economies.?

The more likely scenario is that dealmakers from developed economies will face data asymmetries and knowledge gaps.?

In other words, your Mexican counterparty will know much more about the US economy and market conditions than you know about theirs.