Chinese and American Business Negotiations a Corporate Law Firm - Research Paper Example

Business Negotiations Running Head: Business Negotiations The 7 Variables of Culture during Chinese and American Business Negotiations in a Corporate Law Firm Business Negotiations 2 Abstract The Globalization and Liberalization policies, adopted by different countries have opened the door widely for the international business. The free trade policies have made the market competition immense. Big firms are swallowing small firms to keep their monopoly intact. The business negotiation process is an important aspect of every business irrespective of the size of the business. Domestic business negotiation is easy comparatively to the international business negotiations. This paper briefly explains various factors in an international business negotiation process between China and America. Introduction “Negotiation is a process whereby two or more parties--be they individuals, groups, or larger social units--interact in developing potential agreements to provide guidance and regulation of their future behavior. Such negotiation can be conducted between nations; between companies; or between any two or more parties that need to cooperate or bargain to attain certain common or conflicting ends.” (Phatak & Habib, 1996) Most of the international negotiations are between two companies or two nations. Because of lot of differences like social, cultural, linguistic, environmental legal and technological, international business negotiations is not an easy task. Both the parties should have considered lot of factors before arriving at an agreement. The cultural dimensions of international business negotiations are defined by former professor of Business Negotiations 3 Eastern Michigan University, David A. Victor in his famous LESCANT model of cultural variables. They are Language, Environment, Social organization, Contexting, Authority, Nonverbal behavior, and Temporal conception. (The cultural variables for development of models of culture) Language Language is an important entity in every business negotiations especially in international business negotiations. The views and opinions of each party can be communicated properly if both the parties don’t have a language barrier. Language fluency and accent can affect a business deal. Both the parties must understand clearly what others are trying to communicate or convince. English is an international language or global language used in almost every country and in most of the international business negotiations it is used as the medium for communications. The competency of Chinese people in English language is less compared to some other countries like India, Japan or Pakistan. “English has no legacy in the land of China. In fact, China had a long history of deliberately avoiding contact with the West for fear of cultural contamination. A great deal of attention has been paid to English teaching and learning since the beginning of the reform of Chinese economy in 1978. With more and more Western companies and joint-ventures rushing into China, many college students would like to pursue their further education in the West to acquire Business Negotiations 4 advanced knowledge in science and technology. At this stage, China needs and will continue to want English badly. In order to function efficiently in its economy with the global market, Chinese needs to bring large numbers of people to a higher level of proficiency in English for a wide variety of functions “(Ji Shaobin) Environment “Whenever two parties negotiate, the entire process occurs under two umbrella contexts, environmental and immediate. The environmental context refers to forces in the environment that are beyond the control of either party involved in the negotiations. The immediate context includes such aspects as the relative power of the negotiators and the nature of their interdependence factors over which the negotiators have influence and some measure of control.” (Phatak & Habib, 1996) Environmental characteristics of China are different from that of America. The natural resources, the weather, political system, all will be different in China compared to America. The working culture and environment will be different in America and China. The culture is influenced by climate, topography, population size, density, and natural resources. (The cultural variables for development of models of culture) Americans are not much concerned with the climate differences as they strongly believe that any climate changes can overcome using modern technologies. But the Chinese is more concerned with climate changes. Business Negotiations 5 Population size can influence a business deal immensely. Most of the industrialized countries with less population are often export driven countries like Sweden or Switzerland. (The cultural variables for development of models of culture) But China has the largest population in the world and hence their attitude towards exporting or importing can be different from that of the Americans. The Americans are searching for markets to sell their products while the same cannot be said about the Chinese. Though lot of Chinese products is entering the global market, the quality of their products is still debatable. In a business negotiation, these things will definitely influence the negotiators. Moreover the population density can influence the behavior and perception of the negotiators. For example, the shopping habits, land use, or transportation means in China and America can be extremely different. The ordinary cars in America may be a luxurious one in China. The amount utilized to start a small business in America can be utilized for starting two similar businesses in China. In short, the American market is expensive compared to the Chinese market and hence these factors can influence the negotiation process immensely. The American technology in many areas found far more superior than the Chinese technology, and hence the Chinese will definitely have interest in importing the American technologies to their country. The technological dominance of America may reflect in any business deal with America by other countries. Moreover the Americans are looking suspiciously at the growth of China and hence they will be extremely careful about the deals in which technology comes as a factor. Business Negotiations 6 Social organization Social organizations can have an external influence on individuals. For example, religion is an important entity in American culture whereas in China it is less important. Class systems in America and China are entirely different. In America there are upper class, middle class and ordinary class people are there where as in China because of socialism only the working class is there. Family structure is also different in these countries. In America the democracy is followed while China communism is followed. In America everything is transparent while in China everything will be opaque. The recreational activities are more in America compared to China. The judicial system in America is more open compared to China. Because of the above factors, an American entrepreneur may find it difficult to establish a firm in China as per their law. But China has liberalized so many rules to attract foreign investment as they have realized that in order to utilize the opportunities opened by Globalization, their policies should be changed. But even then, an American entrepreneur who enjoyed lot of freedom in every aspect of his business life and personal life may find it difficult to invest in China. Contexting “Contexting is the amount of information transmitted and the amount of information stored.” (The cultural variables for development of models of culture) If the negotiators are able to share more knowledge and experience between them then the Business Negotiations 7 written agreement may be less significant and if the negotiators are not able to convey their views properly then everything needs to be specified in the written agreement. Because of the cultural and educational differences between the Americans and the Chinese, contexting may be less in a business negotiation process between them. Members of same culture can have a big amount of contexting because of their large awareness between each other. Authority Authority is defined as the shared beliefs about the power or influence of an organization or an individual representing that organization. Power is an element of authority deals only with substantive action while leadership deals with the meaning of the action involved. (The cultural variables for development of models of culture) Authority and power are the two sides of the same coin. Leadership definitely needs power to execute their functions. The Americans are more authoritative and their leadership styles are extremely different from that of the Chinese. In business negotiations the American may utilize their power and leadership traits effectively. The Chinese need to find an alternative to deal with the powerful negotiators from America. Business Negotiations 8 Nonverbal behavior In LESCANT, nonverbal communication is the exchange of information through nonlinguistic signs. (The cultural variables for development of models of culture) In some business negotiations, the amount of nonverbal communication may exceeds the verbal communication. Our gestures, facial expressions and body language can communicate so many things to the people to whom we are dealing with. About 65% of a message is communicated through nonverbal communication. (The cultural variables for development of models of culture) The appearance, eye contacts, a warm handshake or a hug has lot of meaning in a business negotiation process. Temporal conception In LESCANT model, temporal conception is a cultural variable related to Monochronic time (M-time) and Polychronic time (P-time). M-time is characterized by one thing at a time while P-time means several things happening at the same time. P-time put more emphasize on human relationship rather than a task or job alone. Also P- time concentrate more on long term relationship. Chinese are known to be polychromic in their dealings while monochronic in their approaches. The following table shows the differences between monochromic and polychromic cultures. Business Negotiations 9 (The cultural variables for development of models of culture) Geert Hoftede’s Cultural Dimensions Culture is more often a source of conflict than of synergy. Cultural differences are a nuisance at best and often a disaster." (Geert Hofstede) Geert Hofstedes research gives us insights into other cultures so that we can be more effective when interacting with people in other countries. If these principles formulated by Geert Hofstede studied and implemented properly, it can reduce the level of concern, frustration and anxiety of in international business negotiation process. Business Negotiations 10 In Geert Hofested’s opinion, when negotiating in Western countries, the objective is to work toward a target of mutual understanding and agreement and shake-hands when that agreement is reached - a cultural signal of the end of negotiations and the start of working together. But in Middle Eastern countries much negotiation takes place leading into the agreement, signified by shaking hands. However, the deal is not complete in the Middle Eastern culture. In fact, it is a cultural sign that serious negotiations are just beginning.  Geert Hofested argued that awareness about factors like Power Distance Index (PDI), Individualism (IDV), Masculinity (MAS), Uncertainty Avoidance Index (UAI), and Long-Term Orientation (LTO) can affect international business negotiations. Power Distance Index (PDI) Power and inequality, of course, are extremely fundamental facts of any society and anybody with some international experience will be aware that all societies are unequal, but some are more unequal than others. (Geert Hofstede). In a business deal between China and America, PDI can play a vital role. Both countries are developed countries and also members of the superpower group. America is considered themselves as the sole super power while China may not agree that. So in a business negotiation process these factors can affect a lot. Business Negotiations 11 Individualism (IDV) “On the individualist side we find societies in which the ties between individuals are loose: everyone is expected to look after him/herself and his/her immediate family.” (Geert Hofstede). The family and social setups in China and America are entirely different. Since both the countries have different political systems, it can affect the perceptions of the individuals as well. In a business negotiation, these individual aspects like, superiority or inferiority can play a vital role. Masculinity (MAS) The role of genders in both American and Chinese societies is different. Mens values from one country to another contain a dimension from very assertive and competitive and maximally different from womens values on the one side, to modest and caring and similar to womens values on the other (Geert Hofstede). Uncertainty Avoidance Index (UAI) It deals with a societys tolerance for uncertainty and ambiguity; it ultimately refers to mans search for Truth. It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations. (Geert Hofstede). In a business negotiation process between the Americans and the Chinese, there can be lot of unfamiliar situations because of the cultural differences. The success will stay with those who tackle such situations diplomatically. So in a business Business Negotiations 12 negotiation between unfamiliar cultures, flexibility is an essential required qualification for a negotiator. Long-Term Orientation (LTO) versus short-term orientation: It can be said to deal with Virtue regardless of Truth. Values associated with Long Term Orientation are thrift and perseverance; values associated with Short Term Orientation are respect for tradition, fulfilling social obligations, and protecting ones face. (Geert Hofstede) These values and principles are mostly associated with the Chinese culture because of its relationship with the famous Chinese philosopher, Confucius. So in business negotiation with Chinese negotiators, these values will come at the first place of the deal. Conclusions “Negotiators should be forewarned about the legal traps that could transform a supposedly good agreement into a nightmare if the legal implications of the transaction are not carefully examined. It is imperative that negotiators be extremely careful in avoiding the risk of doing something illegal under the laws of either the home country or the host country.”(Phatak & Habib, 1996) it is extremely important to know about the Chinese culture before establishing a business in China. The American and Chinese culture has more differences than similarities. The political system in each country is Business Negotiations 13 also entirely different. America is the sole superpower in the world after the destruction of former Soviet Union and China striving hard to challenge the American supremacy as a super power. So in every mutual action between these countries, these factors will come at the forefront. Business Negotiations 14 References 1. Phatak Arvind V. , Habib Mohammed M. (1996), The dynamics of international business negotiations, Retrieved on March, 3 2009 from 2. The cultural variables for development of models of culture, Retrieved on March, 3, 2009 from 3. Ji Shaobin (2002), English as a Global Language in China, Retrieved on March, 3, 2009 from 4. Geert Hofstede, Cultural Dimensions Retrieved on March, 3, 2009 from   Read More