The Negotiation Process between Electrowide and Motosuzhou - Essay Example

?Management [The of the will appear here] [The of the will appear here] [The of the Introduction With globalization increasing its reach, US companies are also looking for increasing number of opportunities to expand into the interaction market. One such company is Electrowide that deals with electronic equipment in cars. They have chosen Motosuzhou as their joint venture partner in China. Motosuzhou is a company that is controlled by the Chinese government and thus would allow more room for expansion in the Chinese market. Motosuzhou is looking for technical and training opportunities from developed countries such as US. However, the negotiation failed as the negotiation teams failed to come on common grounds due to communication and trust issues. This case study aims to discuss the dissimilarities between both the cultures and how this impacted the negotiation process. Furthermore, this case study would move on to evaluate the reasons for the failure of the negotiation team and how this was impacted by the composition of the team. In the end, the case study would provide strategic alternatives and recommendations for this particular case. What are the main characteristics of Chinese culture? How do they differ from the predominant characteristics of U.S culture? How do these differences relate to the negotiation process? Chinese culture is a culture quite different from that of the American culture. Chinese culture relies on eastern values and traditions while the American culture is more modernized and relies of western values. Often these cultures come at a clash with each other due to the inherent differences in the way people within these cultures interact (Lee, Yang and Graham, 2006). The concept of Guanxi is very important for the Chinese. It relates to the building of a network within the business circle. This relationship is built upon mutual obligations that are not necessarily spoken among the people but these obligations are implied and known. Guanxi is developed usually among the Chinese people and foreigners are not included within this network due to cultural and language differences. The Guanxi is a powerful tool among the Chinese to develop trust among each other and to get the job done with minimal issues. In the case of negotiating with foreigners such as the Americans, Guanxi is not present. This means that the negotiation process lacks one of the basic elements and this makes negotiation considerably difficult (Pye, 1982). Trust is also another aspect of the Chinese culture. The Chinese must trust the other person they are dealing with before they sign an agreement with him. Trust is cultivated by spending time together and by belonging to the network. However, the Americans take on a direct approach. They use the law as a means of dealing with untrustworthy people. In the negotiation process, the Chinese take on a slower approach to negotiation as compared to the Americans (Tung, 1982). The Chinese is formal culture as opposed to the informality found within the American culture. The formality within relationships does not imply that the Chinese are pretentious or false. In the Chinese culture, expressing one’s emotion on the face is considered impolite behavior and thus the Chinese have a method of masking their emotions of hurt, anger, frustration behind a mask of neutrality. The Americans on the other hand, are forthcoming with their emotions and they believe in direct expressing of their emotions. While the Americans rely on direct words to convey their message, the Chinese are usually subtle in expressing their thoughts and opinions (Ghauri and Fang, 2001). In a negotiation process, the Americans go about by laying down the basic principles and demands. Once these demands and principles are acknowledged, they move on to the next phase of the negotiation process. In the Chinese culture, people wish to develop mutual understanding and trust before beginning the negotiation process. They do this by meeting on a regular basis without approach the negotiation process directly. Once trust and understanding is developed, the next step is to begin negotiations. Negotiations between Electrowide and Motosuzhou failed because four key criteria for the selection of a JV partner were not met: Strategic complementarity, compatible operating policies, communication, and trust. Using the case study, critically evaluate these. Negotiation between Electrowide and Motosuzhou failed because both the teams failed to reach a mutual agreement during the negotiation process. The Chinese and American attitude towards the JV was completely at ends with each other on different levels which include strategic complmentarity, compatible operating policies, communication and trust. In terms of strategic complmentarity, both the firms benefited from the joint venture that would be established had the deal gone through. However, both firms had their own objectives. Electrowide was looking for a partner that would provide them with a manufacturing facility along with a marketing team to penetrate in the market. For this Electrowide was willing to provide financial and technical assistance to Motosuzhou. Moreover, Electrowide wanted a higher percentage stake in the company. Motosuzhou, on the other hand, wanted that profits earned in the Chinese market would not be transferred abroad. He was not willing to provide a marketing team to Electrowide and demanded training of the employees, free of cost. Tom Sherman could have worked on the common ground as the Chinese stratagem is an important aspect of the business culture. The Chinese view business as war and use indirect means to win their wars (Fang, 2006). They may not get their way all the time but they wish to be defeated on a battle of wits rather than the direct approach Tom Sherman took. In terms of compatible operating polices, the companies differed greatly in their accounting and management practices. Tom believed that the Chinese did not have a good accounting system and no complete records could be extracted from the company. Furthmore, Motosuzhou’s accounting system would reduce operating margins for Electrowide. Ai Wang, on the other hand, differed in the allocation of manufacturing costs in the accounting system. Also Ai Wang believed that the management practices of the Electrowide lacked harmony. Communication was also one of the factors that led to the issues in the negotiation process. The lack of understanding on the Chinese culture on the part of Tom’s team widened the gap between the two companies. Tom’s team was unaware of how to handle the Chinese people. They did not understand the culture and were not willing to adapt to their practices in dealing with negotiations. Also Tom was unable to communicate with his own company due to the time difference between the two countries. This not only lengthened the stay but also prevented Tom from getting better directions. In terms of trust, both the teams failed on the most basic level. Since both the companies did not trust each other due to the lack of understanding, the negotiation deal was impacted. For the Chinese, trust is an important factor before moving forward with a business deal. Tom’s team broke the trust by introducing the demand for a marketing team which was not previously mentioned. Later they went on behind the Chinese to draft a contract that was not previously decided upon. Evaluate the composition of Electrowide’s team. Did the company make the appropriate choices for the negotiation? Give reasons for your answer. Electrowide sent a three people team to China to get the negotiation process with Motosuzhou under way. This team was headed by Tom Sherman who has worked for 32 years at Electrowide and had been dealing with the technical side of the operation. Tom Sherman, in my opinion, was not the best choice of a leader. He has no experience in dealing with international negotiation and most particularly with that of the Chinese culture that differed on the most basic level with the American culture. Sherman had also no experience of handling such negotiations. The rest of the team was composed of Barb Morgan and Mark Porters. Bob Morgan was skilled in speaking good Chinese and she had experience in dealing with an acquisition in Sweden. Considering these two factors, we would believe that Bob Morgan was a good choice for the company. However, her experience and her skills were undermined by the fact that China is a male-dominated culture and the Chinese do not wish to see women on the upper level of the management (Bucknall, 2002). The Chinese are not comfortable in a direct interaction with the female and this impacted negotiation as Morgan was already sensitive as a result of her recent divorce. Even with her knowledge, Morgan failed to guide her team to the best approach to dealing with negotiation process. The third team member, Mark Porters was relatively young. His personality shows that he is an ambitious person who does not wait for things to start rolling on their own. Rather he is self-starter who takes a proactive approach in handling situations. This does not make Mark Porters a suitable choice for the negotiation process in a country like China. While his proactive approach would have been appreciated in the Western culture, it is not taken pleasantly by the Chinese who wish to run things on a slower pace. Also Porters was not willing to actively take part in the situation. He wanted to work alone in this hotel room that would not have sat well with the Chinese, had they known. Basically, the team had no knowledge of how to operate within the Chinese culture. This was because of their lack of experience on this particular topic and their lack of training by the company before sending them for such an important project. Suggest three strategic alternatives to Tom Sherman (i.e. what should be done about the current situation) and advice him on what needs to be done before any future international negotiations by Electrowide. After looking at the situation and analyzing the situation, three strategic alternatives that could be recommended to Tom Sherman are: 1. Consider incorporating a local person in the team. This intermediary is known as the Zhongjian Ren in the Chinese culture. This local person would be beneficial as acting as a go-between the two teams. He would also be guiding the team towards the best possible approach to deal with the negotiation process. This local could additionally serve the purpose of developing a connection with the Chinese through the network of Guanxi. Since Chinese rely on this network greatly and trust their own people over foreigners, it is expected that the outcome could be improved (Graham and Lam. 2003); 2. While reconsidering the members of the team, Tom Sherman should also reconsider the current team members on his group. Though Barb Morgan is a good choice but her gender restricts her communication with the Chinese people. Also Mark Porters fails to connect with the Chinese on account of his type A-personality and his inexperience in dealing with international negotiations; 3. Also more time should be given to the negotiation process. The current time frame of two months is too short to implement an effective negotiation process. This is because the Chinese take their time in the negotiation process as they first build up trust and later move on to the actual business dealing. The American team also needs time to understand and adjust to the Chinese culture. Time would also allow the companies to come up with a suitable common ground where they understand each other and the position of their company. The time is also not right for Electrowide. This is because the company is going through a structural overhaul which impacts its communication with the international team in China. The organization and its management is busy dealing with the structural changes and thus they have little time to focus on the negotiation team. Conclusion The negotiation process between Electrowide and Motosuzhou failed basically due to a lack of understanding between the team members towards each other’s culture. ‘Win-win negotiators see deal making as a collaborative and problem-solving process; win-lose negotiators see it as confrontational’ (Salacuse, 1998).Tom Sherman and his team had difficulties in understanding the Chinese way of conducting business dealings and thus they adopted an approach that did not sit well with the Chinese. Their direct approach and their lack of communication prevented the two companies from coming up with a mutual agreement for their strategic and operational differences. Based on the analysis of the above situation, a few recommendations could be made that would have resulted in a better negotiation process. These include proper training to Tom Sherman’s team on the Chinese culture along with providing a local Chinese who would be making the negotiation process smoother and would also be guiding the entire. Also this is not the right time for Electrowide to conduct international negotiation as the organization is going through a structural change and they do not have the time to create a specific team that would be communicating and guiding with the American team in China. More specifically, the American team needs time to adjust to the Chinese way of conducting business if they wish to conduct long term relationships. References Bucknall, K. 2002. Chinese Business Etiquette and Culture, North Carolina: C&M Online Media Fang, T. 2006, Negotiation: The Chinese Style, Journal of Business & Industrial Marketing, Vol. 21, Issue 1, pp. 50– 60 Ghauri, P. and Fang, T. 2001. Negotiating with the Chinese: a socio-cultural analysis, Journal of World Business, Vol. 36, Issue 3, pp. 303–315 Graham, J. and Lam, N. 2003. The Chinese Negotiation, Boston: Harvard Business Review Lee, K., Yang, J. and Graham, J. 2006. Tension and Trust in international business negotiations: American executives dealing with Chinese executives, Journal of International Business Studies, Vol. 37, pp. 623–641 Pye, L. 1982. Chinese Negotiation Style, Cambridge, MA: Oelgeschlager, Gunn and Hain Salacuse, J. W. 1998, Ten Ways that Culture Affects Negotiating Style: Some Survey Results, Negotiation Journal, pp. 221-240 Tung, R.L. 1982. US–China trade negotiations: practices, procedures and outcomes, Journal of International Business Studies, Vol. 13, Issue 2, pp. 25–38 Read More