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P a g e | 1
Negotiating Across the Pacific
P a g e | 2
Executive summary
All the people involved in the transactions had major cultural difference and none of them had
worked with the people from other culture before. This led to major cultural differences like
implicit communication, different business conducting methodologies of both sides etc. The
Americans have a very practical and matter of fact approach towards business they believe in
hard bargains and haggling while the Chinese are more emotional towards their business conduct
and believe in show of faith and loss of face. Everyone involved in the deal had little knowledge
or information about the thinking or cultural differences shared amongst them. They
communicated implicitly leaving out the harsh realities and often assumed the other person has
understood him.
Hofstede’s had identified the 5 dimensions for values and cultural differences between different
countries. These includes, power/distance, individualism, masculinity, uncertainty/avoidance
index (UAI), long term orientation.
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Major Issue Presented in the Case
All the people involved in the transactions had major cultural difference and none of them had
worked with the people from other culture before. This led to major cultural differences like
implicit communication, different business conducting methodologies of both sides etc.
Emotional vs. Practical Methodologies of Business Conduct
The Americans have a very practical and matter of fact approach towards business they believe
in hard bargains and haggling while the Chinese are more emotional towards their business
conduct and believe in show of faith and loss of face. Like, even after knowing that the price of
consignment will look extravagant to the BBT, Bill decided to go ahead with it. He thought
according to the American mentality that they will either come back to him stating the price is
very high or they will accept it. Now, both the scenarios are acceptable in American industry and
work ethics. However, If you consider the Chinese they take it as a mark of disrespect and as
they are more emotional and sensitive scoring very high on the fifth cultural dimension of
Hofstede (Long term orientation) decided not to reply to such an extravagant offer and waited for
a month (Wang M. M., 2000). This shows that they were too ashamed to even name a price they
thought to be correct and decided to wait till the other concerned party went back to them with
renewed terms. This affected them to an extent that they thought the Americans were not serious
about the business and even with renewed terms they cut the order by 50%. (H. Geert, 2001).
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Implicit Communication
Everyone involved in the deal had little knowledge or information about the thinking or cultural
differences shared amongst them. They communicated implicitly leaving out the harsh realities
and often assumed the other person has understood him. There are many instances of such
behavior like: The conversation Edward had with Bill after being confronted by Mrs Ming kuo
that “they will file a lawsuit against Bill if the delivery was not on time” he still omitted this
detail while stressing the point that he should apologize to the BBT and suggested him to offer
BBT a favorable contract without calculating any commission for the work. This led to the
following analysis by Bill: He was under the impression that Chinese people never resort to any
legal formalities and was still trying to make a profit out of the deal and was also not ready to
acknowledge any responsibility for the loss incurred by the Chinese company. (H. Geert, 1984).
Cultural Theories
Hofstede’s had identified the following five dimensions for values and cultural differences
between different countries (Hoftede, G.,). They are listed below:
1. Power\Distance – This signifies the inequality that exists in the society between the
people with and without power. If a country has a high value on this parameter then the people in
that society agree to the distance and hierarchical system. It also suggests that the society’s level
of inequality is as much a fault of followers as it is of the leaders. Anyone with some
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international experience would realize that all the societies are bound to be unequal but some are
more than others.
2. Individualism – This dimension demonstrates the loyalty and respct people have towards
the society, countries with high value in this does not have a high regard of sharing responsibility
beyond their family and friends. Here everyone is expected to take care of him\herself and their
family. The people are more independent and practical in their approach in this cultural setting
like US and other western countries. However in the countries having low value on this
dimension, people display strong group cohesion with loyalty and respect for the members of the
group. In these societies a person is strongly connected to the society many times their extended
family of aunts and uncle and display an unwavering loyalty towards them.
3. Masculinity – This defines how the much the society follows the traditional male female
roles and values. High score in this dimension results in a society where man is still looked upon
as the provider and the stronger of the two sexes. In this society men are expected to be strong
and assertive. Women are allowed to work outside of home but they have different jobs than
men. On the other hand, in a society with low Masculinity index the jobs and responsibilities of
men and women are blurred together. Women are considered equal to men and do all the jobs
which men do. It has been observed that Men’s value change more than the female values in
some societies they are more assertive and competitive and in others they will be modest and
caring which is more similar to the women’s values.
4. Uncertainty/Avoidance Index (UAI) – This part defines the anxiety of society members
when confronted with unknown or uncertain situations. The nations which score high on this
index try to avoid these situations whenever possible. They try to achieve a collective truth
which is governed by rules and order. These people are afraid of innovation and new ideas and
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believe in traditional order of things. The other side of spectrum shows us countries where
people are encouraged to form new thoughts and ideas and pursue them; the risk of failure
associated with these ideas is also acceptable to the society. This results in a more independent
thinking and a practical approach towards work and business. There are rules in these countries
but people are encouraged to find their own truth rather than seeking the collective truth as in the
case of countries scoring high on this dimension.
5. Long-Term Orientation – This dimension was added later after a study on student in
various countries. Hofstede deduced that the countries scoring high on this believe in long term
relationships. People in such countries believe in doing business with a long-term relationship in
mind. They prefer to do business with only their known associates or relatives. The countries
scoring low on this do not mix emotions with their business and will only associate with
someone till it is profitable to them and are very practical and upfront about it. (H. Geert, 1984;
2001).
The dimensions discussed above are observed at various places. BBT only decided to work with
the western companies once they were assured by a long term known associates and friend
Edward that he will oversee the transaction. The loss of face suffered by Edward in front of Mrs
Ming Kuo, when he withheld information from her stating Bill is the actual seller while he was
only a facilitator in the deal shows High values and ‘Long-Term Orientation’. The refrain from
the Dr. Fisher to complete his verbal contract shows the low ‘Long-term Orientation’ and
individualism.
Cultural Characteristics Impacting the Issue at Hand
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Power\Distance – Bill Wright was an executive vice-president and his work was not concerned
with the day to day functioning of the company. This shows that he was not in contact with the
people with lesser pay-grade and also shows the distance between the people with and without
power. His work was more directed towards exploring new business possibilities out of the
country; this also provided him with opportunities to work with people in Europe.
Individualism – This characteristic was visible many times in this case study. It is clearly
evident that the Chinese people have a high group cohesion value; they are more intent on trust
and relationships and feel comfortable with doing business with only people they have known for
long or people that have been vouched for by some known acquaintance. This can be seen in the
discussion between Mrs. Ming and Edward when she says ‘I would rather work with someone I
know’. It is also established that Edward and Mrs. Ming had known each other for a long time
and she had expected him to be trustworthy. The Chinese also believe in ‘Guanxi’ or Face. It can
be understood by the fact that Mrs. Ming believed in Edward to provide them with a trustworthy
supplier so in effect Edward is giving face to the US supplier and US supplier is taking or
borrowing face from Edward. In Chinese terms this is a favor from Edward which the supplier
would have to pay back as and when requested. Now, for Americans we see a completely
different approach and understanding. Bill and Dr. Fisher had known each other for a long time
and they were good friends so, Bill did not find it necessary to have a written contract between
them regarding the delivery of product. This came as a major blow to Bill when he asked Dr.
Fisher to make an exception this time and try to find a way to make the delivery on-time as they
had been agreed upon but, Dr. Fisher plainly told him there was no signed contract obligating the
company to keep their end of the bargain.
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Uncertainty/Avoidance Index -Bill had never worked with the Chinese before and he was
taking a big risk launching this trade by taking the full responsibility as the supplier, but he could
go ahead with his plan in-spite of taking the whole responsibility on his shoulders. This is the
culture promoted in countries with low value of uncertainty avoidance index. Bill was ready to
explore and find his own truth and never thought of it to be compelling to follow the normal
order of things and do business with people he already knew like European countries. The
Chinese have a more group truth approach this becomes clear when BBT provided no response
for 4 weeks after receiving the exorbitant quotation from Bill. The words used by Mrs. Ming
shoes they were hart to an extent that they thought the seller was not serious to do business with
them. The unrealistic high pricing in the contract was taken as a mark of disrespect by the
Chinese. The reduction of order by Mrs. Ming shows Edward had lost face in front of Mrs. Ming
and now they did not trust them enough to give them a big order of 40 ft container and reduced it
to 20 ft.
Long-Term Orientation
BBT was looking for a long term relationship and they even stressed on the fact they would like
to have a reliable supplier with whom they can associate themselves for a long time. This shows
the Chinese intent of Long-term relationships. They also appointed Edward as their front and
trusted him to provide him with a reliable supplier. Their confidence was however broken by
Edward when he withheld the information that Bill was a middleman and was not the real
supplier. The Americans however do not involve emotions in business, This is displayed by the
fact that Bill quoted a unacceptably high price by any standard and even after being confronted
with Edward decided to go ahead with this stating ‘We can always back-down if they say the
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price is too high.’ This shows he was not looking at the broader picture of long-term relationship
but was intent on making considerable profit on the first deal. (Wang M. M., 2000).
Solution and Action Plan
In an international business scenario, cultural differences are very likely to arise. Different
cultural have different sets of implied rules and different dynamics. It is very important for the
both the business companies to understand the fact that cultural differences will occur and be
cognizant of the results pertaining to that. Everyone involved in the deal had little knowledge or
information about the thinking or cultural differences shared amongst them. They communicated
implicitly leaving out the harsh realities and often assumed the other person has understood him.
There are many instances of such behavior like: The conversation Edward had with Bill after
being confronted by Mrs Ming kuo that “they will file a lawsuit against Bill if the delivery was
not on time” he still omitted this detail while stressing the point that he should apologize to the
BBT and suggested him to offer BBT a favorable contract without calculating any commission
for the work. This led to the following analysis by Bill: He was under the impression that
Chinese people never resort to any legal formalities and was still trying to make a profit out of
the deal and was also not ready to acknowledge any responsibility for the loss incurred by the
Chinese company (Crisp R. J., 2010). Some of the solutions to such discrepancies are listed
below:
Culturally Neutral: Both parties should behave in a culturally neutral way as much as possible.
This can be done by following a very cold approach, where in they can avoid personal flavor to
the deal and do the business very professionally. All the steps are written down and every
approach is formally followed. Advantage is that the companies will be formal towards each
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other and hence it will minimize any risk pertaining to cultural differences. The biggest
disadvantage of this approach is by avoiding personal flavor, long term relationship is at risk.
Moreover, it inhibits mutual relations which can strengthen their business relation.
Cognizant of Culture and Value system: It is a very suitable step, if both the companies before
undergoing the business deal are cognizant of the basic cultural differences between them. It
helps them to understand, where the misconceptions can arise and thus can avoid the same. They
can have a communicator in between who is aware of both cultures and thereby can state things
clearly in the respective business side. It is beneficial in the sense that, it would eliminate the
opportunities of miscommunication and thereby would lead to success of business operation. The
limitation of this step is that it would need prior work and hence can delay the business
operation, which itself can cause loss of time and money.
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References
H. Geert, 2001, “Culture's consequences: comparing values, behaviors, institutions, and
organizations across nations”, SAGE , pg 207
H. Geert, 1984, “Culture's consequences: international differences in work-related values”,
SAGE, pg 212
Wang M. M., 2000,”Turning bricks into jade: critical incidents for mutual understanding among
Chinese and Americans”, Intercultural Press, pg 134
Crisp R. J., 2010, “The Psychology of Social and Cultural Diversity”, John Wiley and Sons, pg 3
Hoftede, G., http://www.geert-hofstede.com/, accessed on 24 November 2010.
Cultural differences, http://www.mindtools.com/pages/article/newLDR_66.htm, accessed on 24
November 2010.
Deresky, H. (2010). International management: Managing across borders and cultures. New Jersey: Prentice Hall.
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Appendices
The Five Dimensions of Culture
Characteristics Tips
High PD
Centralized companies.
Strong hierarchies. Large gaps in
compensation, authority, and respect.
Acknowledge a leader's power.
Be aware that you may need to go to the top for answers
Low PD
Flatter organizations.
Supervisors and employees are considered almost as equals.
Use teamwork Involve as many
people as possible in decision making.
Characteristics Tips
High IDV
High valuation on people's time and their need for freedom.
An enjoyment of challenges, and an expectation of rewards for hard work.
Respect for privacy.
Acknowledge accomplishments.
Don't ask for too much personal information.
Encourage debate and expression of own ideas.
Low IDV Emphasis on building skills and
Show respect for age and wisdom.
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becoming masters of something.
Work for intrinsic rewards.
Harmony more important than honesty.
Suppress feelings and emotions to work in harmony.
Respect traditions and introduce change slowly.
Characteristics Tips
High MAS
Men are masculine and women are feminine.
There is a well defined distinction between men's work and women's work.
Be aware that people may expect male and female roles to be distinct.
Advise men to avoid discussing emotions or making emotionally-based decisions or arguments.
Low MAS
A woman can do anything a man can do.
Powerful and successful women are admired and respected.
Avoid an "old boys' club" mentality.
Ensure job design and practices are not discriminatory to either gender.
Treat men and women equally.
Characteristics Tips
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High UAI
Very formal business conduct with lots of rules and policies.
Need and expect structure.
Sense of nervousness spurns high levels of emotion and expression.
Differences are avoided.
Be clear and concise about your expectations and parameters.
Plan and prepare, communicate often and early, provide detailed plans and focus on the tactical aspects of a job or project.
Express your emotions through hands gestures and raised voices.
Low UAI
Informal business attitude.
More concern with long term strategy than what is happening on a daily basis.
Accepting of change and risk.
Do not impose rules or structure unnecessarily.
Minimize your emotional response by being calm and contemplating situations before speaking.
Express curiosity when you discover differences.
Characteristics Tips
High LTO Family is the basis of society.
Parents and men have more authority than young people and women.
Strong work ethic.
Show respect for traditions.
Do not display extravagance or act frivolously.
Reward
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High value placed on education and training.
perseverance, loyalty, and commitment.
Avoid doing anything that would cause another to "lose face".
Low LTO
Promotion of equality.
High creativity, individualism.
Treat others as you would like to be treated.
Self-actualization is sought.
Expect to live by the same standards and rules you create.
Be respectful of others.
Do not hesitate to introduce necessary changes.