Business Negotiations in China - Essay Example

? BUSINESS NEGOTIATIONS IN CHINA Introduction This paper discusses business negotiations for joint ventures with international companies with special reference to China. The paper is based on a case study of a business negotiation process which became unsuccessful with explanation of possible causes of failure. The Chinese culture as the determinant of business negotiations is discussed in comparison to the American culture. The paper also evaluates the negotiating team and provided recommendation for success in future international negotiations. Question 1 According to Neidel (2010, p. 32), Confucianism is a theory which describes the Chinese culture’s value for relationships as a moral expression of ethical behavior. The Chinese people highly regard and value interpersonal relationships. This explains the reason why Tom Sherman and his team from Electowide Inc. were taken to so many social and informal functions which was directly opposite of their expectations. Kam-hon, Yang and Graham (2006, p. 623) say that family orientation is a very important value in the Chinese culture. This is demonstrated by the fact that Tom and his team were bombarded with questions about their family and personal lives. The fact that Barb Morgan was divorces must have portrayed a negative picture on the team. Because the Chinese value family bond they are usually more interested in personal information on business partners. The value of interpersonal relationships in the Chinese culture shows that the American negotiation team should have been more interested in socializing with the Chinese and make friends with them instead of paying more attention to the formal business negotiation process. Woo, Wilson and Liu (2001, p. 349) assert that the Confucianism theory further explains the cultural basis of Chinese behavior as being motivated by the high values that the Chinese put into hierarchy and seniority. As a result, male business partners are considered more important in business negotiations. In the Chinese culture men are considered more significant than their female counterparts and for this reason men occupy most of the senior managerial positions in business organizations. The issue of seniority and gender in business culture is illustrated by the fact that the Motosuzhou Team talks with Barb Morgan while their eye contact was focused on Tom Sherman and Mark Porters because they were male and their opinion was thus considered of more value by the Chinese than that of Barb Morgan. This ruined the relationship of Morgan with the Chinese later during the negotiations and hence showed a negative image on the team by the Chinese who value good relationships. The American culture is very different from the Chinese culture as explained by Al-Khatib, Vollmers and Liu (2007, p. 84). Firstly, the Americans value formal relationships in business negotiations and activities and personal relationships are not considered necessary in doing business. On the other hand the Chinese consider business negotiations as personal interaction rather than interaction between companies or business firms. Because of these differences in culture the Electrowide team viewed the negotiations as two companies trying to strike a deal while the Chinese viewed the process as relationships between individuals. These differences must have caused disharmony between the Americans and the Chinese and hence contributed to the eventual failure of the negotiation process which was aimed at creating a joint business venture. Kam-hon, Yang and Graham (2006, p. 625) add that the western culture does not uphold physical expressions such as handshakes while the Chinese value physical expressions because they act as a sign of appreciation and respect. Question 2 According to Graham & Lam (2003, p. 82) strategic corporate plans of a company are crucial to the management decision of two companies which are trying to negotiate for a joint venture. Therefore, lack of compatibility in two companies which are planning to partner in business would result into failure of the negotiations. From the case study, the strategic plans of Motosuzhou and Electrowide companies were not complimentary. This is illustrated by the differences in the strategic plans for training human capital. During the negotiations, the Motosuzhou team asked the Electrowide team to provide consultation, training and warranties to them without the Chinese incurring any cost related to these aspects. Woo, Wilson and Liu (2001, p. 349) assert that the operating policies of two companies which want to enter into a joint venture must be closely related because incompatibility means that the two companies cannot reach a mutual agreement. The case study clearly demonstrates disharmony in the accounting policies between the two companies. The accounting systems of the two firms were different as pointed out by Motosuzhou’s CEO Ai Hwa. Tom’s team assumed that the differences in the accounting systems and the associated policies would be appreciated by the Chinese company because the Americans used accounting information systems which were efficient and effective. On the other hand, the accounting systems of the Chinese were very manual and lacked official recording of the transactions. Lack of effective communication between the Motosuzhou team and the Chinese is apparent from the language barrier between the Americans and the Chinese regardless of the translators because they would not translate everything especially at the social functions which were the most valued occasions by the Chinese in their relationship with the Americans. Barb Morgan who knew some Chinese changed her attitude towards the Chinese when she realized that they valued her male partners more and hence she would not have a good communicative relationship with the Chinese during the social functions. Poor communication between the two teams must have led to the loss of trust by the Chinese on the Americans. Al-Khatib, Vollmers and Liu (2007, p. 84) explains that in negotiating with the Chinese, figurative and elaborate communication is essential because it builds trust and bonds the relationship between the companies which are negotiating for a joint venture or partnership. Question 3 Tom Sherman has a good education qualification for his role in the negotiation process in addition to his vast experience in business operation management within Electrowide Company. However it is notable that he was not invited to participate in the councils which made deliberations and decisions on international expansion of the company in china. This shows that he lacked important information policies of the Chinese company and the objectives of the council for making a decision on partnering with Motosuzhou. The fact that Tom spoke conversational Chinese in addition to his educational background and experience made him well suited to be in the negotiation team. Mark Porters is also well qualified academically to be part of the negotiating team. He also has wide experience within Electrowide Company. Additionally; Mark had a type A personality, which is appropriate for the social mood of the Chinese. However lack of ability to speak Chinese makes him less qualified to be part of the team. Even if he is sociable, his skills would not be effective if there was communication barrier during the social functions with the Chinese. The inability of mark to engage in social interaction with the Chinese was demonstrated by his preference to work in the hotel room as opposed to participating in the social activities of the Chinese. Being female, Barb Morgan was disadvantageous to have been part of the negotiating team. Her ability to speak conversational Chinese was important value to be part of the team in addition to her working experience and education background. However, considering the Chinese culture which valued seniority of men, she would not have qualified to be part of the team as shown by the disregard of her by the Chinese during their active negotiations with the Chinese. Moreover, the fact that she was divorced and was driven into the Chinese negotiation by her need to recover from the divorce makes her less-objective to the task she was meant to play. Question 4 The leader of a negotiating team should participate in councils which deliberate and make decisions on international expansion and joint ventures as explained by Neidel (2010, p. 32). This is important because it helps the leading negotiator to grasp all important details on the company objectives and the motivation for the joint venture. Any possible challenges can be identified by the negotiating team if they engage in the initial discussions for international investment. Tom Sherman should have been part of the discussions of the deciding council which would have given him a heads up on issues such as the operational policies of the companies they needed to partner with so that adequate preparation and homework would have been done. According to Pranee (2009, p. 13), the culture of the country into which a company needs to expand its business should be given priority because it affects the success of business negotiations. Tom Sherman should consider the cultural differences between the US and the country into which his company wants to invest to avoid the misunderstandings which result from cultural differences. Peterson (2008, p. 8) illustrates that business negotiations with the Chinese must be done in their style of doing things especially in respect of their culture for them to succeed. Proper selection of a negotiating team is a very important element in any international negotiation. Zhu, McKenna & Zhu (2007, p. 354) emphasize that the abilities of the negotiating to interact effectively with people from different cultures determines the success of a business negotiation. Tom Sherman should have considered flexible personalities or otherwise prepared them for the cultural difference with the Chinese so that the team could adapt to the Chinese way of doing things. Conclusion Social functions are very important elements which characterize the Chinese culture. In international business negotiations the culture of the country into which a company wants to expand its business into must be put into consideration by the negotiating team to ensure that miscommunication and loss of trust does not jeopardize the success of the negotiation. References Al-Khatib, J., Vollmers, S.M. and Liu, Y 2007, "Business-to-business negotiating in China: the role of morality", The Journal of Business & Industrial Marketing, vol. 22, no. 2, pp. 84. Graham, J, & Lam, N 2003, 'The Chinese Negotiation', Harvard Business Review, 81, 10, pp. 82-91. Kam-hon, L., Yang, G. & Graham, J.L. 2006, "Tension and trust in international business negotiations: American executives negotiating with Chinese executives", Journal of International Business Studies, vol. 37, no. 5, pp. 623-641. Neidel, B. 2010, "Negotiations, Chinese Style", The China Business Review, vol. 37, no. 6, pp. 32-35. Pranee, C. 2009, "Impact of Chinese Cultural Development and Negotiation Strategies, FDI, Competitiveness, China International Business Growth, and Management Practice", International Journal of Organizational Innovation (Online), vol. 2, no. 1, pp. 13-40. Peterson, R.M. 2008, "Entrepreneurial Negotiations: an Exploratory U.S.-China Perspective", International Journal of Entrepreneurship, vol. 12, no. 10999264, pp. 1-10. Woo, H.S., Wilson, D. & Liu, J. 2001, "Gender impact on Chinese negotiation: "Some key issues for Western negotiators"", Gender in Management, vol. 16, no. 7, pp. 349-356. Zhu, Y., McKenna, B. & Zhu, S. 2007, "Negotiating with Chinese: success of initial meetings is the key", Cross Cultural Management, vol. 14, no. 4, pp. 354-354. Read More