Cross-Cultural Transaction Management - Essay Example

Cross-Cultural Transaction Management Introduction Joint ventures are generally proposed to enable firms to enjoy the opportunity of exploiting the capacity of their partner which is not currently possible while also extending similar privilege to the partner as a strategic advantage in operations. Negotiations of a similar transaction must be conducted on the fundamental provisions of successful international business (Keegan and Schlegelmilch 2001, p43). In this discourse, several aspects of such negotiations involving joint venture proposal between an American (Electrowide) and a Chinese (Motosuzhou) firm are discussed. Main Characteristics of Chinese Culture Whereas the Chinese space for individuals to make decisions appear to experience some direct influence from the government, the US has a liberal space for individuals to decide on many issues without a direct influence from the government. Politics around the social scene affects the cultural definition between the two countries with the Chinese culture being closely monitored and dictated upon by the strong political forces. The US democratic model is perhaps one of the most liberalized in the world making it one of the leaders in the most favored nation (MFN) in economic terms. In contrast, the Chinese political setting has been a socialist model that appears to be on the opposite end when compared to democracy, which depicts the setting as intolerant of democratic values and principles (Bucknail 2002). Entering the Chinese market to set up shop is likely to be subjected to tight government bureaucracies than in the US. The government cronies found all over China may pose the greatest challenge to setting out investment due to their political inclination thereby affecting foreign investment. In addition, the highly patriarchal cultural system that is established in the political arena hinders the role of women in Chinese economy. The economic decisions that the Motosuzhou management makes are defined by high political influence right from the organization structure. Considerations of the political influence that the Electrowide joint venture may have on the Chinese foreign policy of isolation based on its government structure come into the equation. Despite the apparent allowance that the government has accorded Motosuzhou along side other 1000 companies in terms of liberal decision making, the role of Minister of Finance in the internal structure contradicts this assumption. Socialist model of the Chinese culture that emphasizes on understanding social attributes of the negotiation panel forwarded by Electrowide also consumed a lot of time that would otherwise have made progress in terms of the Americans’ estimation. Gender discrimination of female negotiator in the Electrowide team was not welcome from the Americans causing more frustrations. Negotiations failure between Electrowide and Motosuzhou Joint venture negotiations must contemplate the selection criteria of a partner for success in such negotiations, which were heavily compromised in the Electrowide and Motosuzhou case. During the negotiations, it was not clear what each partner was willing to obtain and offer as part of the joint venture. The Chinese team acted casually and did not utilize the time as the American team expected during the negotiations. Several assumptions were made by both parties which were not the exact positions of the intended entry strategies for the other parties. The accounting policies that the two firms applied in their operations were very different, for instance, in the treatment of manufacturing costs and their allocation in the books. For better performance of the joint venture, it is important that the internal operations of the firms are not very different for purposes of harmonizing the joint operations. As it also appeared in the disparities, Motosuzhou did not strictly comply with audit rules which are fundament in American corporate operations. Thirdly, communication is a basic necessity in the negotiations of a joint venture as well as during the implementation of the agreement. Apparently, it was not possible for Electrowide and Motosuzhou to engage in useful discussions as a communication barrier was created by the cultural assumptions from either side. As an illustration, the American corporate culture was approached in carrying out negotiations which affected the tolerance level from the Americans. Fourthly, successful joint venture contracts must be devoid of trust issues. Suspicion and mistrust at the beginning and during the negotiations do not present the right setting for a suitable agreement (Alon 2003, p77). As observed in the Electrowide and Motosuzhou negotiations, there were several indications that the parties were suspicious of each other. Composition of Electrowide’s Team As part of staffing for international assignments, particularly important discussions such as regarding joint ventures, the team must be competent enough to handle the challenges of such an assignment. The company did not make the appropriate choice of representatives, although it did try to balance a few considerations which appeared inadequate for the Chinese assignment. At a glance, the Electrowide negotiation team for the joint venture was professionally composed and capable of arriving at the most suitable deal for the firm. However, negotiations for cross cultural deals require better preparations in understanding the environment in which the negotiations are to be conducted (Legacee n.d, para.4). In terms of professional strengths, Tom, the team leader had deep understanding of technicalities in management and a rich experience at managerial level. As a weakness, little encounter with international transactions stretching to just one symposium is likely to have compromised his ability to lead the negotiations team. Further weakness is the form of international assignment that the symposium exposed the leader to overseas transactions. Canadian setting in terms of business duties is by far similar to American setting while the Chinese setting presents a material difference likely to have affected the competence of the group leader. The group leader appears to be impatient and judgmental which led the hasty handling of matters based on wrong assumptions. Barb Morgan as a team member was perhaps presented with the wrong assignment before the Chinese delegation, bearing in mind that the patriarchal system would overlook at any female delegate from the beginning. As qualified as she was, it was not possible for her to make a mark at the negotiations table as she always felt intimidated by the male domination of the Chinese deep cultural setting (Kwintessential n.d, para.7). She has personal issues regarding her divorce which could have affected her judgment and concentration in the proceedings. Alternatively, Mark Porters’ position in the company’s ranks would have enabled him to deliver better results had he been exposed to overseas assignments. In terms of corporate experience, business analyst roles must have been his biggest asset in analyzing the deal and advising the team. However, he appeared disoriented and disinterested from attending the negotiations which affected his team’s competence. Strategic Alternatives to Tom Sherman Firstly, perhaps the most important consideration that Electrowide management team must have addressed in the generation of a negotiation strategy to accompany the set out plan was the cross cultural setting of the assignment. Despite the fact that the Chinese firms are continually embracing foreign investment and allowing liberalism in the operation of several firms, the impact of political forces on foreign investment must have been addressed (Mungenast 2007, p123). Understanding that the finance minister was indirectly involved in the decision taken by Motosuzhou negotiation team would have forced the team to consider what the other parties to the deal would have liked. As an illustration, socializing issues of the business partners must be understood to avoid sending the wrong signals of distrust and suspicion. Whereas communication would be eased by the presence of an interpreter in the negotiations, there are certain aspects of non-verbal communication that play a defining role in different cultures. It would perhaps been important for the Electrowide team to consider their team being equipped with deeper Chinese cultural setting to avoid feelings of time wasting and excessive philanthropy (Sims 2002, p108). Whereas it may not be easy to understand every culture on earth, it may be simply done by dedicating sufficient research to the negotiation team to an extent of dispatching a team ahead of the main discussion for purposes of familiarity (Jackson and Mathis 2006, p600). It would have been found out that sending a lady in the discussion table was not acceptable before the Chinese and probably contribute to faster mutual consensus. Conclusions Cross cultural negotiations of important transactions such as joint ventures are subject to several setting factors which determine the outcomes. As a general, future international negotiations in which Electrowide will engage must be based on an understanding of the socioeconomic and political setting of the host country (Sims 2002, p109). Research on the implicating factors such as culture and politics will be useful in defining the composition of the staff as well as designing the timetable of the assignment. A flexible timetable for the negotiations would involve an allowance of delays such as those witnessed in the case, if anticipated in advance. Staffing needs of negotiation team must consider outsourcing services such as those of home firms operating in the new market for important detail on the proceedings. References Alon, I. (2003) Chinese Culture, Organization Behavior and International; Business Management, Westport, CT: Praeger Publishers Bucknail, K. (2002) Chinese Business Etiquette and Culture, Raleigh, NC: Boson Books Jackson J. H. & Mathis R. L (2006) Human Resource Management, Mason, Oh: Thomson South Western Publishers. Keegan, J. W. & Schlegelmilch B. B. (2001) Global Marketing Management: a European Perspective, Eaglewood Cliffs, NJ: Financial Times Prentice Hall. Mungenast, H. (2007) Chinese Business Culture, Norderstedt, Germany: GRIN Verlag Sims R., (2002) Organizational Success through Effective Human Resources Management, Westport, CT: Quorum Books Kwintessential (n.d) Doing Business in China [Online] Available from [Accessed 18 January 2012] Legacee (n.d) The Global Leader: Understanding Chinese Business Culture and Business Practices, [Online] Available from [Accessed 18 January 2012] Read More