Case 8.1.

Negotiating with Arabs, A Slip of the Tongue


Trans-Oceanic (T-O), a worldwide logistics services company, is involved in freight forwarding and container consolidation based in the United States. For almost six months they had been working hard to expand their network of local representatives throughout the Middle East. T-O’s top regional priority was to conclude a representation agreement with Arabco, one of Saudi Arabia’s largest and most established logistics companies.

To achieve this goal, Regional Manager Ted Goodfellow of Trans-Oceanic had been meeting once or twice a month with Arabco. By now the two companies had agreed on all the financial, legal and technical issues. Ted was now in Riyadh to wrap up the final details and sign the contract. This visit was largely a formality – both sides wanted this agreement.

During the pleasant meeting with the top Arabco executives Goodfellow casually mentioned, “We at Trans-Oceanic are really looking forward to working with you here in the Persian Gulf.” At that there was moment of shocked silence on the Arabco side of the conference table. Then the three senior executives arose and strode angrily out of the room, breaking off negotiations.

Bewildered, Ted looked at the two junior Saudis who had remained behind. He hated to see six months of hard work going up in smoke. “What happened here?” he asked the young Arabs across the table. “Did I say something wrong?”

After some hesitation one of the Arabco employees explained that in Saudi Arabia, the body of water in question is called the Arabian Gulf. By misnaming it Ted had unintentionally implied that the Gulf belonged to Iran – a country which Saudi Arabia considered hostile and threatening. The Arabco bosses were too upset with Ted to listen to an apology from him.

“Well then, what should we do to get these talks back on track?” asked Ted. At this the young Arabs shrugged, smiled faintly and ushered the American to the door. On the way back to his hotel Ted Goodfellow focused his mind on finding a way to repair the damaged relationship.

Case 8.1.

Negotiating with Arabs – A Slip of the Tongue

Solution and Discussion

During a conversation over drinks at a club in Singapore I learned about the incident on which this case is based. The guy we’re calling Ted Goodfellow had just arrived in the Lion City, promoted to the position of his company’s regional manager for Southeast Asia. Ted’s previous area of responsibility had been the Middle East. This case illustrates two useful teaching points: first, the importance of local sensitivities and second, how we can recover from a serious cultural gaffe.

Even though Ted Goodfellow had developed in good relationship with his Arabco counterparts over a period of six months, an innocent slip of the tongue caused his hosts to break off negotiations. Actually, Ted was quite aware that Saudis use the term “Arabian” Gulf; he simply misspoke.

Fortunately, over the months of negotiations Ted had learned a good deal about Arab culture. He knew that his Saudi counterparts were strongly status-conscious and hierarchical. Since he was relatively young and a middle-ranking manager, Ted decided to phone his boss in San Francisco and ask him to step in.

His boss in turn contacted his boss, the CEO of Trans-Ocean. Knowing the importance of this negotiation, the latter canceled his next four days’ meetings and took the corporate jet to Riyadh. There his seniority in age and rank so impressed the Arabco management that they returned to the bargaining table immediately. The contract was signed that week. Interestingly, no apology was made: the appearance of the CEO served as a sort of nonverbal apology.

One other factor helped placate the offended Saudis. In hierarchical cultures, size really does matter. As one of the world’s biggest logistics companies, Trans-Ocean is a much larger player than ArabCo. The appearance of the American firm’s top executive showed great respect and thus gave the Saudis face.

So one lesson is, when your negotiations in a strongly hierarchical culture breaks down, bring in the top brass to patch things up. That is a proven tactic. It usually works. But what if it does not? The last resort is to contact the person or entity who originally introduced you and your counterparts. For example, if the U.S. commercial counselor in Riyadh had been the introducer, Ted could have asked that high-ranking official to intervene and try to smooth things over.

The second lesson is, always be aware of local sensitivities. But if like Ted you unintentionally make a mistake, you need to know enough about local business behavior to make things right.
Because he knew how to solve the problem and had the moral courage to phone his boss, Ted was promoted to Singapore, where the author met him and got this story.

This case also reminds us that “To err is human.” Ted Goodfellow made a mistake, but came out all right in the end because he understood how to rectify his mistake.