Doing business in Pakistan

Effective negotiation is an integral part of all successful business transactions. It is imperative to assess feasibilities of all business prospects e.g. technical appropriateness, return of investment, sustainability etc. However, business negotiation outcome is not always a direct consequence of ticking all the feasibility boxes. One of the most common facets that plays a significant role during this process is awareness (or lack) of local cultural influence, especially if it involves cross-cultural interaction.  There are numerous theories that aim to explain the art and science of engaging in effective negotiations. In the business/sales context, one of the traditional theories describe the business negotiation in six (6) distinct steps*. 

PDI (Power Distance Index Score: 55) 

Even though not quite as high as some other regional countries, Pakistan’s culture is still considered to lie at the higher end of the Power Distance Index. That is, in Pakistani society hierarchical inequality is somewhat accepted as a norm; hierarchical rank influences communication and tilts the balance in favour of the power holder.

IDV (Individualism Score: 14) 

Pakistan is one of the most collectivist societies in the world. This manifests in a long-term commitment to the member ‘group’, be that a family, extended family, or extended relationships. Loyalty in a collectivist culture is paramount, and over-rides most other societal rules and regulations. The Pakistani society fosters strong relationships where everyone takes responsibility for fellow members of their group. As a result, in Pakistan, offence leads to shame and loss of face. Employer/employee relationships are perceived in moral terms (like a family link). Additionally, because relationships are more important than tasks, Pakistanis tend to have a very fluid attitude towards timeliness and punctuality.

Uncertainty Avoidance (UAI score: 70) 

Pakistan’s score on this dimension signifies a high preference for avoiding uncertainty. They like to maintain their rigid codes of belief and behaviour and are intolerant of unorthodox behaviour and ideas. In Pakistan, there is an emotional need for rules (even if the rules never seem to work). This may sound a little paradoxical; perhaps a better way to understand that comment is to view it from an emotional attachment perspective. In other words, people in Pakistan may not follow traffic rules because emotionally they may not be attached to traffic rules. However, when it comes to religious or social norms, they are quite emotional and don’t want to deviate. 

What does this combination mean?

A combination of these dimension profiles (i.e. relatively High PDI, very Low IDV and high UAI) makes Pakistan what cultural experts describe as a society of ‘Reciprocators’*. The higher power distance index (PDI) translates to different equations in different circumstances linked to market conditions. Is the advantage to the Buyer or the Seller? Are there other suppliers or buyers? Essentially, one must work out who is the power holder in the equation. If you are a buyer in a seller’s market, then the seller is the power holder and vice versa if it is a buyers’ market. While that may or may not end up closing the deal, it will provide you with some idea of the extent to which you may be able to negotiate. 

Meaningful negotiations mostly take place at the higher end of the hierarchy. What is said at the mid- or lower levels should not be what you base your decisions on. Do not disagree with a power holder in front of others. Any disagreements must be discussed in private because otherwise the power holder is backed in a corner and must assert himself or herself to be respected by his or her subordinates. 

Pakistani society expects a certain level of respect to be shown to the elder members of the team, identifying the power holders and honouring the group traditions with respect to that structure. Respect for the religious customs and traditions of the people around you and, if the opportunity arises, taking part in small traditions that you may encounter along the course of your visit is recommended. It is often advisable to bring token gifts as a symbol of respect, and to accept invitations for a meal or visit to a colleague’s home, which is an honour and in keeping with the tradition of hospitality of the collectivist culture.  It also helps to use any opportunity to make that personal connection - remembering birthdays, for instance, gives the impression that you consider your partner in Pakistan important enough to remember him or her. 

Another manifestation of this combination is reluctance to trust total strangers. Therefore, their business dealings are almost always initiated through trusted intermediaries. Trust in business dealings is also assessed by virtue of credibility, qualification, rank within the organization/society or recognized expertise. Just because you claim to know how to fix an electronic gadget, may not be enough to engage. You need formal credentials to support your claim. 

Like most of the world, everyone in the Pakistani market is there to make money. However, it may sound counter-intuitive that in Pakistan, talking money at the first step is difficult, because psychologically money is considered dirty and the enemy of relationships. Pakistanis would rather establish the trust and relationship first before talking about money. It is very common to hear ‘Money is like the dirt on one’s hands’; ‘You can pay me whatever you feel is appropriate’ or ‘You are just like my brother/sister, we’ll take care of you’.

Having understood the cultural profile of the Pakistani society, the revised business negotiation process* in a Pakistani culture would look something like: 

Conclusion

Like any other country, effective negotiation is an integral part of securing business deals in Pakistan. While assessing business proposals through traditional criteria (ROI etc.) is important, however cultural awareness can significantly influence the negotiation outcome. Since Pakistani society prefer ‘hierarchical’, ‘collective’; and ‘uncertainty avoidance’ tendencies, building relationships and warming up to each other is their top priority. They are sensitive and emotional about their beliefs and social norms; therefore, respecting their norms is considered a trust building measure. They find it difficult to talk about cost/price at the first step, because they perceive money as the enemy of relationships. As trust is very important, Pakistanis prefer introductions through their own trusted intermediaries. Business deals in Pakistan are usually finalised as a trusted ‘’Friend’, not as a business partner.
 

*Jean-Pierre Coene & Marc Jacobs (2017) - Negotiate like a local – 7 Mindsets to increase your success rate in international business. Helsinki, Finland: Hofstede Insights.

One of the most effective ways to understand any theory is to present it through a real-life example. Let’s review an example of doing business in Pakistan through a case study. Notably, some sections of this case study have been highlighted with italic underlined’ text to emphasize key aspects of Pakistani culture. While some readers may find these notions surprising or unusual, however it is encouraged to read the underlined text in the context of Pakistani culture. Please note that names in this case have been changed to protect the individual's privacy.

Case

Based out of Antwerp, Belgium, Louis is starting his medical device distribution business. He found out that forty percent (40%) of surgical instruments are manufactured in Pakistan. He decided to buy surgical instruments from Pakistan and distribute them throughout the European Union. After some research, he found a few potential companies in Pakistan and emailed them with his enquiries. Even though he was getting responses back, for one reason or another, he was not getting the right information about the product price and was struggling to calculate cost of doing business and overall business overhead. 

Numerous other new business stresses were taking their toll and the weekend came just at the right time. On Saturday he took his son ‘Julien’ to a local football match. All the parents introduced themselves and there he met Mr. Ali, the father of Julien’s team-mate Hasan. During their conversation, Louis came to know that Ali is an investment banker and grew up in Pakistan before moving to Belgium. Louis mentioned his admiration for Pakistan’s surgical instrument industry, and that he was hoping to do some business with Pakistan. Ali said, that’s good to know, let me know if I can help you in any way.

The following week, Louis attended a seminar of Small Business Forum in Brussels. There he heard a story from a presenter on his experience of doing business in Pakistan and the importance of local cultural awareness. Louis also learnt that it is better to approach Pakistani business’ through referrals. 

Louis came back wondering how he might find someone who could refer him. The only Pakistani he knew is Ali, who he just met last weekend; and he’s an investment banker with absolutely no knowledge of medical devices. On the following Saturday, Louis met Ali again at football practice. After a few minutes of general chit-chat, reluctantly Louis mentioned his predicament to Ali in a very nonchalant manner. Ali responded, I don’t know anyone from the top of my head, but let me see what I can do.

A few days later Ali rang Louis and informed he had made a couple of phone calls, he had found someone who knew a businessman in the City of Sialkot, the industrial city of Pakistan. Louis remembered that most of his prospective surgical instrument suppliers are based out of the city of Sialkot. Ali suggested that they should meet for dinner at his house later that evening. Louis reluctantly accepted the invite. 

At the dinner, Ali introduced Louis to his friend ‘this is Rashid, he is like a brother to me’ Rashid was an importer of sports goods. Ali informed Rashid that Louis is a Biomedical Engineer who had recently completed his MBA from INSEAD and was now CEO of his own Medical Device Company. While everything Ali mentioned was 100% accurate and true, Louis felt a little embarrassed and felt uncomfortable with Ali’s introduction. Louis felt even more annoyed to learn that Rashid is not even in the Medical Device industry. Throughout the evening, they never spoke about business. All they talked about was family, sports, and food.  

Before leaving Louis thanked his host, and to his surprise Rashid gave him a gift for his son Julien, it was an Adidas Telstar 18, the official match ball used during the FIFA Football world cup in 2018.  Louis came back home feeling annoyed, surprised and confused. He had not met anyone from the medical devices industry, no one had spoken about business and a total stranger had given him an extremely valuable gift for his son, who he had never even met.

A couple of days later, Rashid rang Louis and informed him that he wanted to introduce him to one of his friends in Sialkot, that ran a surgical instrument business, and he gave Louis his friend’s telephone number. Finally, Louis started to feel hopeful.

Louis spoke to this contact ‘Asim Malik’; who received his phone call in a warm and thoughtful manner. Louis shared the detailed specification of his requirements and asked Mr. Malik about the price. Mr. Malik replied, “don’t worry about it Louis, you have been recommended by Rashid, who’s just like a brother to me. Let me send you some samples and don’t worry about the price, pay us whatever you feel appropriate”. 

A few weeks later, Louis received the samples from Mr. Malik; along with an invitation to attend his son’s wedding in Sialkot next month. Once again, Louis was stunned, why would a total stranger want to invite me to his son’s wedding? 

The product samples were excellent, far better than Louis had expected. Now all he needed to know is the price. He decided to visit Sialkot to finalise the deal. He was received like a King, he attended the traditional wedding and presented a nice gift for Mr. Malik’s son. A couple of days later, he visited the factory. He was received by another son of Malik, ‘Sameer’ who greeted him, ‘Hello uncle’, we have been expecting you. My father is running a little late, but we can start. Louis wondered, why did he call me uncle? 

Louis offered his price, and Sameer nodded his head with agreement, sounds acceptable. Louis felt relieved that the deal had been closed with relative ease. Mr. Malik arrived an hour after the agreed upon time, and Louis shared that he and Sameer had agreed on the price, however Mr. Malik dismissed the notion nonchalantly; “Sameer is young and inexperienced. He doesn’t know the intricacies of this product”. 

Louis was back at square one, he found it strange, but he made a new offer, after numerous counter-offers they finally came to an agreement. Mr. Malik exclaimed ‘even though it is not ideal, but we cannot upset our guests’ and they finalised the deal. Louis tried to shake hands with Mr. Malik, but instead of a handshake, Mr. Malik gave him a warm hug and said to Louis, ‘do not worry brother, our products will make you proud’.

Exercise

Map the underlined text with the corresponding aspect of Pakistani society:

Things to remember

• Relationships are more important than tasks; therefore, invest time & effort in building relationship and trust before the task.
• Intermediaries usually are the best and quickest means to gain trust in Pakistani society.  
• Be patient with their time schedule. Because they prioritize relationships over task, Pakistanis tend to have a relaxed attitude towards time and punctuality.
• Pakistanis tend to find it difficult to talk directly about money/cost at the first step; they would rather build and maintain a good rapport before any financial transactions.
• Respect Hierarchy & local norms; never undermine them.

References and Interesting Links

1.    Jean-Pierre Coene & Marc Jacobs (2017) - Negotiate like a local – 7 Mindsets to increase your success rate in international business. Helsinki, Finland: Hofstede Insights. 
2.    Geert Hofstede, Gert Hofstede and Michael Minkov (2010) - Cultures and Organizations – Software of the Mind. McGraw Hill.
3.    Hofstede Insights – Country Comparison Tool: https://www.hofstede-insights.com/country-comparison/