Chinese Negotiation Style - Essay Example

Chinese Negotiation Style Introduction With the advent of globalisation, the business world in the last decades has expanded exponentially its latitude concerning international transactions. While there was international trade in antiquity, much of it was carried out between government and a few very powerful companies. However, today as the world gradually shrinks into the proverbial global village, business are finding it easier to cross-geopolitical boarders and this has spurred the rise in multinationals which are some of the major players in international business. Different cultures have different ways of doing business, what may seem like a perfectly natural thing for English or America for instance may be interpreted as being rude or impudent in say a Japanese of Malaysian context. For this reason, it is incumbent upon any individual or organisation engaged in business transactions or more to the point partnerships involving people from a different culture to ensure they have at least a basic understanding of their cultural mind-set concerning the enterprise. Background It is with this in mind that China which has in the past half century established itself as a global industrial powerhouse will be analysed in respect to the business culture it embodies especially because the chines are involved in innumerable business deals with international firm’s particularly those from the west. It is unequivocally the world’s fastest growing economy and by any standards, it can be considered a giant or more aptly a dragon in its own right in the global business arena. It is the most highly populated country in the world and approximately one fifth of all the worlds consumers live there, this means that any international firm which intends to gain a major market share in its field needs must invest and divest in china in some capacity (Neidel 2010, p.32). The importance of China in the international scale is further underscored by the fact that tiger economies, such as Hong Kong Singapore and Taiwan have also exhibited significant growth in respect to international business and imports and exports in the region have attracted a great deal of attention from western investors. Today, thousands of American companies have outsources parts or event their entire production process to china where they can produce their goods for significantly less and are close to a huge markets. As a result China has become a manufacturing hub, loosely referred to as the world’s workshop, this requires a great deal of contact between the Chinese and their America business partners which given their radically divergent cultural backgrounds can often be a challenge if both sides do not account for the differences (Ghauri 1988, p.21). America has been used to against China primarily because both countries, despite being the two biggest world economies function in radically dissimilar and often antithetical ways in their political, economic and social cultural contexts. Chinese Negotiation; in a Cultural, Historical and Economic Contexts According to the Harvard Law Review, in the preparation for a business trip to china, most westerners in this context, Americans will gather some sketchy data on Chinese cultural and business ethics, which they imagine, will ensure they fit in perfectly with their hosts (Graham and Lam 2003, p.2). The list will include carrying numerous business cards, dressing conservatively, speaking in short sentences and preferably bring one’s own interpreter. The authors argues that while learning the general ulterior cultural norms and avoiding faux pas is important and may even get one through the door, hypothetically speaking, it may not be enough to keep them inside long enough to clinch a deal (Graham and Mark, 2003). Even if it does, it may not be enough to sustain a long-term business partnership which given the nature of investments in china is an inventible objective for those who want to establish themselves. Conflicts arise because both American and Chinese business people have deep-seated underlying assumptions and expectations about how business negotiation should be carried out and these eventually emerge in the course of the negotiations (Ma 2007, p.261). Americans are typically considered more aggressive and direct in their negotiations (Lin and Miller 2003, p.286) while the Chinese tend to be more laidback and flexible in their approach. One of the major causes of negotiation breakdown between the two parties is that the Americas fail to understand the significantly broader context of Chinese cultural values and ideally, although both sides should contribute, the Americans as the visitors have a greater obligation to conform. The challenge of mutual understanding is underscored by the fact that to Americans, Chinese businessmen may appear as inefficient, indirect, insincere and even corrupt, the Chinese on the other hand may perceive Americans as excessively aggressive impersonal and excitable. These perceptions are based on the different cultural understating of various symbol and actions in negotiation and to each side the others approaches may appear to be incompatible with their own. In theory, this is a plausible assumption given the contrast; however, those who manage to navigate the differences often end up making the best of them and creating thriving and mutually profitable business partnerships and relationships. Before setting out to discuss these differences in detail, this paper will first examine Chinese business negotiations in its social cultural and political context so it may act as a backdrop against which the comparisons with the American setting may be grounded. Analysis Framework; Cultural Threads What sets china aside from every other society in the world by their rich and long history given that they are estimated to have the oldest civilisation dating back over 5,000 years. During this period, they have been joined together by five cultural threads which can be used to construct an analytical framework on which Chinese cultural economic practices can be discoursed. The first is agrarianism, unlike the predominantly urban American population, the majority of Chinese live in the countryside and they primarily subset on rice and wheat cultivation (Graham and Lam, 2003. 2). Many of those living in town were brought up in these agrarian setting and they still hold on to the traditional values such as corporation, harmony and loyalty to familial binds which were embedded in the largely communal agricultural based labour system. This system is historically underpinned by the move by Mao Tse Tung who promoted agrarianism over commerce in the 1980’s by sending bureaucrats and students for “Re-education” by the peasants. Fung Yu Lan, a Chinese philosopher put this into context in his works by demonstrating the difference in commerce and agriculture from the Chinese point of view (Graham and Lam, 2003. 2). Agriculture is symbolically presented as the root while commerce is the branch the social economic policies in the past tended to favour the root and to some extent slight the branch and the fact that most foreigners are involved with the branch weighs in their perception by natives. The second is the principle of morality; this is founded on the writings of Confucius, which served as the corner stone for education for over 2000 years, during this period knowledge of Confucian texts were the primary requirement for one to qualify for jobs in state offices. According to him, the society should be founded on a morally upright and benevolent so that it may be economically and politically stable (Ford 2007). He emphasised on the importance of recognising and respecting kinship and scholarship and came up with a list of five cardinal relationships. They were Ruler vs. Subject, Husband vs. Wife, Parents vs. Children Older and Younger brothers and Friends vs. Friends (Mullis 2010, p.391). Everyone was expected to respect the superiority of their “superiors” and a strict adherence to the hierarchical relations was a major contributing factor to peace and harmony, which served to reduce violence during Confucius’s time. These values are upheld even today, a story is told about a woman who dared to beat her mother in law and her punishment involved having her and her husband skinned alive and burned to ashes the neighbours and extended family were also severely punished. While this may be viewed to be on the extreme side, the ferocity of the consequences of violating the actions for both the couple and the community serves to underscore why the Chinese may be easily and greatly offended by insolence and disrespect of the established hierarchy, which the westerners tend to take casually (Friedman, Shu-Cheng and Liu 2006, p.78). Another philosopher whose ideas lend themselves albeit covertly in Chinese negotiation is Lao Tsu who was a contemporary of Confucius. He inspired Taoism, which was a movement concerned with studying the relations between the Yin which was the dark, passive and feminine force with the Yang which was the opposite. These two both oppose and complement each other but they are inseparable and must be viewed as a whole, their implication is perceived in every aspect of Chinese life; Taoism was about finding the way between the two forces (Schipper 2000, p.35). The moral values enshrined in the philosophies of these two involved looking for a way rather than the ultimate truth, which is viewed as the ultimate trophy by most philosophers. In negotiation, these moral values are evident in the fact that Chinese negotiators are often more concerned with the means than the ends, which are in direct contradiction with the supposition of many western business people that the end justifies the means. The Chinese, hold that the means are more important than the end and a good compromise will only be achieved through haggling ritualistically back and forth until both sides are holding valid positions. The third cultural thread or characteristic is enshrined in the Chinese pictographic language, in the same way American children study the alphabet, the Chinese have to memorize the thousands of characters that make up their language. These characters are actually pictures as opposed to words and this sever to give them a more holistic method of processing information, as it will be discussed later, in negotiations Chinese tend to cover everything and nothing at the same time. This may appear careless to westerners but in reality the Chinese are better able to see the “big picture” and the naturalness of it makes it difficult to understand how their western contemporarily do not see things as the do. Studies conducted on chines and American children have often shown that Chinese are better at understanding entire picture while those who had undergone a western system of education were better with details. Finally, the fourth cultural thread is embodied in the Chinese’s tendencies to distrust foreigners; this is motivated by a long history of violence and attacks from different neighbours (Dennis Van 2002, p.28). The Americans on the other hand are less likely to be suspicious given that they have never hosted a foreign war apart from the independence one against the British who were not really any less of strangers in America than the Americans themselves were. In addition dues to a past of political instability, they are generally cynical of the rule of law, in fact a common albeit stereotyped adage has it that the Chinese only trust their family and their bank account. This is quite different from the Americans who are generally friendly and trusting quick to take strangers to confidence make friends and although good at criticising it they have a lot of confidence or at least expectations of their government. When two people from bearing such different approaches to life politics and business sit down to negotiate on a deal, a lot of strategic manoeuvring patience and tolerance on both sides as well as willingness to compromise is vital. China vs American Negotiation, Assumptions Because of China becoming an important global business hub, Chinese businesspersons have inevitably been forced to deal with a proportional number of cross-cultural problems in the business negotiation process. One of the hardy concepts in the description of the cultural economic situation is acculturation (Solís and Saori 2007, p.239); it is divided into low medium and high acculturation. Low acculturation refers to a situation where business people know very little about each other’s culture as a result they use their mother tongues and depend on interpreters while sticking to their cultural identities. In medium acculturation both sides use their traditional negotiation culture but they still take to account the culture of their partners, they can speak each other’s language fluently and have a basic understating of nonverbal customs making them moderately tolerant in their attitudes. They are highly acculturated business negotiations are conducted with businessmen using each other’s culture comprehensively such that there can be no detachment of cultural ways of thinking. Chinese businesspersons are generally likely to be of lower acculturation and studies have found that over 69 % will tend to be inadequate in terms of adaption to foreign language and etiquette and they will not negotiate in a foreign language. Etiquette in China is very important and the Chinese formal and informal education has always tended to emphasise on the nurturing and developing etiquette in children from a very young age. In social order, they tend to follow certain principles mediated by a set of norms and values, which constrain the behaviour of every citizen. As discusses in Taoism, the Chinese advocate for a middle way, this implies that they want to run business in a manner that is neither too humble nor arrogant but this delicate balance is often a difficult act for the western negotiator. Their humility dictates that they politely refuse offers and they do not like to be rushed in the interest of “saving face”, they cherish mutual respect in interpersonal relations and this limits their aggressiveness (Ma and Jaeger 2005, p.419). The application of the game theory in Chinese negotiation shows a formalized negotiation culture in view of the fact that traditional Chinese culture is founded on a long history of strategy inspired by many influential philosophers negotiators in china are taught to pay more attention to the process as opposed to the ultimate result (Jiang 2013, p.112). Chinese negotiators will try to make the negotiation a bit informal by arranging some leisure activities so they may get to understand each other better especially when they are dealing with American or western negotiators (Pranee 2009, p.15). It should not however be assumed that the Chinese negotiator trivialize the result. However, it is very important to them that the negotiation go smoothly so since if the process is unpleasant, for example through some faux pas by the foreign negotiator resulting to embarrassment of threat of face, it might negate all the benefits of the negotiation even though it may not have been intentional. Before making a comparison, here is a brief discussion of the cultural presumption that are prevalent in US negotiation that do not always rhyme with other cultures and which may result in negotiation breakdown especially in china. Time is money is a common phrase in America business circles with a widely accepted belief that efficiency is good, tasks should be carried out in as little time as possible, and the faster someone can do a job the better (Faure & Rubin 1993, p.11). Secondly Americans tend to believe in the deconstruction of issues and that to them the various aspects of a negotiation need not be connected. For example, a US negotiator would like to discuss the wages they pay the labourers before they can share the final project plan believing that the former is conditional on the later (Hickson and Purg 1995, p.90). Based on the capitalist and democratic American backdrop, they tend to uphold the rights of and individual over those of a group (Foster 1995, p.75) this ideal is entrenched in the US constitution, which provides for equal protection of every citizen and a person should not be punished for making an unpopular decision since he is just exercising his rights. In addition, while teamwork is valued, the American culture nevertheless has health respect for people who can get a job done on their own (Huang 2010, p.197) Americans are by nature forthright and honest in business and they can separate the business and personal, they encourage business partners to be direct and they are not concerned about saving face, in an American negotiation table it is not common for someone to correct or contradict their superiors and actually get praised for it. When an American negotiator goes to the negotiation table, as they must be willing and able to negotiate which means they should have the power to make deals and concessions depending on the nature of this business, however in China the decision maker may not even be at the table (Levicki, et al, 2003. 95: Guy 1999, p.219). In addition, to Americans, an impasse is bad for the deal because it is seen as a failure by the negotiator. In case one is sent to negotiate and fails to arrive at a deal, the feel they have been unsuccessful, for the Chinese an impasse is just a part of the negotiation process not necessarily the end and it can be worked around. Finally there is the tendency albeit not universal for American businessmen to assume the American way is the best and things should be done, “the way we do it in America” under the assumption that they have a great deal of influence on other cultures (Blankley,nd, 23) . While this may work in some setting, the Chinese one may not apply since the Chinese take pride in their cultural heritage, which unlike the American one is not predominantly based on materialism so they may be reluctant or even offended if it was implied they should copy the American model. American Negotiation Style; Basic Assumptions and Contrasted with the Chinese Before undertaking price negotiations with the Chinese, the US negotiator needs to put their cost perspective into its right context. When a US businessperson see a 100 Yuan bill they will automatically dived by the current exchange rate and under prevailing circumstances it will amount to about $ 15. However a Chinese seeing a the same 100 Yuan equates it to $ 100, this is because the price perspective of the Chinese is lower. Therefore, when the Chinese side differs about money, the Americans will need to get a clear understating of the values indicated since the host may simply have a different and even lower cost perspective, which can be realised through open ended discussion and acculturation. To the American negotiator, describing past achievements and success, or showing off may appear to be a sure way of impressing the Chinese into signing a deal with them. However, this is not the case, the Chinese value humility and they will tend to listen to what one does not say just as much as what is said. Therefore, while not implying that one should not talk about their past success or their grand plans, they should do it in a humble and non-excitable way otherwise they may be viewed as rude and uncultured. American negotiation are often lead by lawyers who want to ensure they pin down every detail of the agreement presumably so they can have the upper hand should something occur in the future to prevent the agreement from being fulfilled. The Chinese on the other hand are used to operating on basis of trust and this is often a challenge when the two sides negotiate, as they will frequently work at cross-purpose (Kam-Hon, Yang and Graham 2006, p.631). In a hypothetical scenario, say American and Chinese negotiators are trying to hammer down the final stages of a business agreement, the Chinese will be presented with a carefully drafted contract and they respond with objections to the terms of language. They renegotiate and come up with a solution and the Americas write up another contract reflecting the changes under the assumption that the next stage will be implementation of the deal. The Chinese may however proposing corrections and objections to appoint of even seem to repeat matters that have previously being agreed on. This is because for the Chinese the negotiation is a continuous process, which should ideally go on even as the contract is implemented as they do not want to be tied down by wording of the contract. Should something happen, maybe a market crash or natural disaster, the Chinese will expect their partners to adjust the contract to fit with the new circumstances while the Americans will be likely to insist the original contract is upheld irrespective of the new developments. Fang (2006 p.50) suggests that “Chinese negotiator does not possess an absolute negotiating style but rather embraces a mixture of different roles together: "Maoist bureaucrat in learning", "Confucian gentleman", and "Sun Tzu-like strategist", this makes it natural that the negotiation will be viewed as a long term event. Therefore, as they negotiate, it is important that the Americans take to account that the Chinese expect business partners to be capable of trusting and depending on each other. This is actually the whole point of creating relationships that can see the partnership through hard times as opposed to binding contracts, which often send the parties to court when one reneges or is unable to hold up their end (Warden and Chen 2009, p.530). This can be explained by the concept of Guanxi, which involves having possession of influence and the right political connections and social capital to build relationships with a network of people through which they connections and deals can be brokered (Kumar and Worm 2003, p.262). Therefore, Chinese businesspersons see negotiations as a way through which relationships can be forged and strengthened, in China, one can almost never get anything done without Guanxi. To build a sustainable in the Guaxi, one need must have at least some basic knowledge in “renging” which involves the exchange of favours and Mianzi activities, which serve to enhance or build someone’s social status of face. To the American negotiator Americans the idea that one may require to proffer a present or seek favour from the other side in negotiation is viewed as a strange expectation bordering on corruption. Given the strong beliefs about fair play, Americans do not believe in showing or giving favours and they expect to be judged solely on the merit of their ideas. As a result they may fail to proffer a present or even work on the relationship outside the business and this may complicate negotiations with the Chinese who may feel slighted or disrespected. Theoretically and largely in practice, China is a communist country and although attempts have been made at privatisation, the business world is still largely controlled by the government. Sharply contrasting with this is the American capitalistic ideology in which the government has little or no power over the actions of the corporates, when executives from this different backgrounds meet, there are bound to be challenges. The Chinese for example will take time to forge a relationship with a senior government official, and when they run into challenges, they will expect the individual to assist them. The American reality is however very different, on many occasions, Chinese business in America for instance run into challenges and quite genuinely expect their “friends” in politics to held smoothen things for them (Zhang 2008, p.1305). This could possibly be a politician who encouraged them to invest in America or a similar scenario, in such a case they are often surprised to learn that their friends are not only unable to help but even if they could using political influence to help a business friend would be deemed as an illegal act. Ergo, when negotiating, the Chinese side may put a lot of emphasis on the requirement to get connected with the right people in high places because to them this is a basic requirement. Americans will have a hard time understating that since to them the deals they need to carry through only require the input of those at the table and external influence is trivialized over such things as quality of the end product they are offering. Conclusion This globalisation of business has brought about considerable diversity turning the business world into a cultural melting pot where people from diverse social economic meet to pursue similar or competing interests as the case may be. The interaction of diverse cultures is however not as novel a concept as many may want to imagine, while it often serves the invaluable role of exposing people to different cultural beliefs and situations. Sometimes, cultural beliefs and values may clash and lead to miscommunication or misunderstanding in the business scene, which can be financially, and socially damaging for both parties. At the end of the day, it is incumbent on both sides to acknowledge that despite their different social economic approaches to negotiating and business practice, the key factor that brings them together is a mutual desire to engage in progressive and profitable business activity. While American and other western nations need to work hard in adapting to the Chinese way of doing business the Chinese also need to make more effort and increase their level of acculturation since this will give them more power over the negations if they are able to understand instead of taking offense at the western negotiating techniques. 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