Introduction
It is often argued that when business persons of different cultures negotiate commercial deals, there is bound to be a culture clash. I disagree with this view. It is true that cultural differences influence business negotiations but with the appropriate approach to deal with the differences, culture clash is to be least expected in any business negotiations, especially with the Chinese. As Sun Tzu would advised in his book The Art of War “Know your enemy and know yourself and you will win all battles” (Sun Tzu 1913).
According to Newstrom and Davis (2002) there are many striking differences across countries, just as there are some surprising similarities. Clearly, residents of each country have their own preferences for clothes, food, recreation, and housing. In his research about national cultures of sixty countries, Hofstede (1993) revealed that cultures differ in five key factors namely, individualism/collectivism, power distance, uncertainty avoidance, masculinity/femininity, and time orientation. Among these factors, the Chinese have the culture that value clarity and have the kind of orientation that accent values such as necessity of preparing for the future, the value of thrift and savings, and the merits of persistence. Literatures on different cultures also classify China as high-context culture which tends to emphasize personal relations, place value on trust, focus on non-verbal cues, and accent the need to attend to social needs before business matters (Newstrom and Davis 2002).
Why Culture is Very Important in China?
Huntinghon (2000) as cited by Fellner (2008) defined culture as the values, attitudes, beliefs, and underlying assumptions prevalent among people in a society. He stressed that culture is dynamic, interactive, and synergistic, and intermixes with all the elements of the society such as business and economic development (Huntinghon 2000; Fellner 2008). Huiping (2009) stated in her article entitled Understanding Chinese culture leads to business success with China’s growing significance as an economic superpower, understanding the Chinese psyche becomes very helpful and useful in business negotiations management of supplier relations and many other business situations. As emphasized by Uthaisangchai (n.d.), Chinese history and culture has impact on the way they do business and each of the many elements of the Chinese culture has a role to play in today Chinese business world.
In Hofstede’s (1980) theory of individualism-collectivism as cited by Jones (2009), the individualism and collectivism dimensions differs on the degree a culture is committed to an in-group such as extended family, company or village. In the individualistic society, people are less attached to an in-group (that is, people are more self-centered and in pursuit of their own self-interests). Meanwhile in the collectivist society, people are more attached to an in-group, that is the interests of the in-group come first. Jones (2009) also noted from Hofstede and Bond (1988) that such value of collectivism likely stems from a deep rooted, ingrained culture based on the traditional philosophy of Confucianism.
Uthaisangchai (n.d,) gave emphasis of the teachings of Confucius in the development of the culture of Chinese. In the article entitled Connecting Confucianism, Communism and the Chinese Culture of Commerce, Keller and Kronstedt (2005) explained that Confucianism is a very important component of the Chinese culture. “In a Confucian society, everyone has a role to play, and the key relationship is built around the family Chinese cultures value family connections and protecting relationships (saving face). Developing ‘family-like’ relationships takes time and patience, not merely a contractual deal based solely on money. If one has to do business in a Chinese culture, it is critical to understand and respect Confucian values” (Keller and Kronstedt 2005).
Keller and Kronstedt (2005) further emphasized the significance of connections-Guanxi. In Confusian-based society like China, guanxi or proper connections are more crucial than price, product, place, etc. According to Jones (2009), China is known for being loyal to their in-group’ and favoring them in business related decision. As given emphasis by Li (2008) as cited by Jones (2009), understanding the guanxi is critical for conducting business in China and it involves cultivating trust, credibility and reciprocity.
Cultures that Clash; Cultures that Do Not.
One way to understand cultural differences is through the concepts of high-context culture and low-context culture. The notion of ‘context’ can be understood as the social environment in which a business transaction takes place. Edward T. Hall’s theory of high- and low-context culture explains the powerful effect culture has on communication.
The countries classified as high-context cultures include China, Korea, Japan, Middle East, Africa, Italy and South America in which people are characterized as collectivists, relational, contemplative and intuitive. This implies that the people in these societies put emphasis on good relationship between members of the society. In relation to business transactions, the development of trust is a very important step. Hall (1976) argued that the people in high-context cultures prefer harmony in group and agreement for the achievement of individual members; also individuals make decisions based on their feelings or intuition. The theory further emphasized that individuals focus on non-verbal cues, that is, words are not so significant in communication as compared to context; rather, more is given emphasis on context which include facial expression, tone of voice of the speaker, posture, gestures, and family history and status of the individual. The communication in the high-context culture is depicted as formal and indirect, which suggests that flowery humility, flowery language, and apologies that are often too elaborated are common. Also, communicators in this type of culture do not depend on language precision and legal documents.
Meanwhile, the countries classified as having low-context culture include Germany, North America, Finland, Canada, Norway, Denmark, and Sweden are linear, logical, action-oriented, and individualistic. Individuals in the low-context countries value facts, logic and they prefer directness. Finding solutions to problems involves identifying and enumerating all the facts and evaluating each of the options. Also, each decision is based on facts; more often each discussion ends with an action. Communicators in this type of culture are anticipated to be concise, straightforward, and efficient in conveying the action that is expected. According to Hall (1976), communicators have to be precise in the words used in communicating to be absolutely understood. All negotiations are always concluded with definite contracts.
Summing up the differences, on the one hand, high-context cultures tend to emphasize personal relations, place high value on trust, focus on nonverbal cues, and accent the need to attend to social needs before business matters. On the other hand, low-context cultures tend to interpret cues more literally. Individuals tend to rely on written rules and legal documents, conduct business first, and value expertise and performance.
With these classifications of cultures, it is apparent that when Americans negotiate with Chinese, a failure in negotiation if not a culture is more likely if the former group is not familiar with the latter. As noted by Minor and Lamberton (2010) from an interview with intercultural communication expert ray Ruiz: “Countries in Latin American and Asia value the building of relationships, but each in their own unique way. Before traveling to another country, I would recommend reading appropriate materials and speaking with foreign nationals residing in the U.S. in regards to the customs and business practices in their country of origin. I would also suggest that, once in a foreign country, it is important to observe your host’s mannerisms and responses and respectfully respond in a like manner. Be well versed on acceptable and unacceptable behaviors. For example, when in Asia, do compliment and share your impressions of their country. Do not decline any food or drink because this is viewed as an insult. In Latin America, do begin all meetings with friendly conversation regarding family or other social topics. Do not begin a meeting delving directly into the business objective. The lesson many American business people fail to learn is that “it is all in the relationships” (Minor & Lamberton 2010).
Successful and Unsuccessful Business Deals
In his article Doing Business In and With China: The risks are great, but so are the rewards, Atkinson (2004) noted from Stephen Nelson, the partner and co-head of the China practice group for the Hong Kong-based law firm Baker & McKenzie, that when acquiring businesses in China, it is important to realize that there are perceived cultural differences. One of the important lessons in making business in China is that foreigners simply cannot enter a venture in China with only a cursory understanding of its terms and conditions. Atkinson (2004) cited an example of a US company that recently decided to make an investment in China by setting up a joint company through its Hong Kong manufacturing agent. The US company sent over $3 million worth of equipment, then came to us with documentation written in Chinese and asked ‘Can you look at this and tell us whether we really own 50 percent of this company?’
Akgunes et al (2012) identified several points to consider for successful negotiations. According to Zhao (2000) as cited by Akgunes et al (2012), negotiations become successful when the participating parties are cooperative with one another; this can be done by applying the cooperative Confucian tactics. Also, for a western company like a US company, such company has to show that they have government support which is an indication that they are reliable, stable and credible to do business with. According to Fang (2006) as noted by Akgunes (2012), trust will lead to much better performance and being patient will be more beneficial to you than any other attribute you might possess. Bredin (1998) as cited by Akgunes (2012) also suggested that a foreign business negotiator should not give in to pressure from superiors to hurry up and complete the deal because can cause problems because the Chinese are not greatly concerned with the time dimension.
There are companies that also failed to successfully negotiate business deals with the Chinese. According to Fang (2006) as cited by Akgunes (2012), the most common reason for failure is that the Chinese firm lacks the funds to go through with a deal. Also, sending a low-ranking employee to make the negotiation will be viewed as very impolite and the Chinese may find it insulting and insincere, in this case failure is also almost certain. Moreover, it is important to note from Sebenius (2002) as cited by Akgunes (2012) that Chinese law says that one cannot leave a contract unless both sides approve dissolution.
Fang (2006) as cited by Akgunes et al (2012) also emphasized that Failure to say no to a Chinese negotiator who is using a Sun Tzu-like strategy could be detrimental to the deal, but on the other hand, saying “no” to a Confucian gentleman could cause a loss of face. This also will be very harmful, if not fatal, to a successful deal. The Chinese have regional areas just like the United States and there are very different cultures, traditions and sometimes languages in these regions. Not acknowledging these regions can cause you to have limited success in one area and a complete failure in another (Fang 2006; Akgunes 2012).
Conclusion
Like what Sun Tzu have said in his book The Art of War “Know your enemy and know yourself and you will win all battles” (Sun Tzu 1913). This means that for companies to be successful in making business deals, having the capital is not enough to close a business deal. Knowledge and understanding of the culture of the prospect business partner is very important. Other than this, Sebenius (2002) emphasized that culturl allegiances are often not as simple as they appear. Designing the right strategy and tactics in reaching the right people, with the right arguments, will result to a sustainable deal.
Fellner, Amira 2008, ‘Role of Culture in Economic Development: Case Study of China and Latin America’, Graduate School Theses, University of South Florisa Schoalr Commons, viewed from http://scholarcommons.usf.edu/cgi/viewcontent.cgi?article=1235&context=etd
Hall, Edward 1976, Beyond Culture.
Hofstede, Geert 1993, ‘Cultural Constraints in Management Theories’, Academy of Management Executive, pp. 81-94.
Jones, Gwen 2009, ‘Differences in the Perceptions of Unethical Workplace Behaviors among Chinese and American Business Professionals, Competition Forum, vol.7, no.2, pp.473-480.
Keller, G. & Kronstedt C. 2005, ‘Connecting Confucianism, Communicsm, and the Chinese Culture of Commerce’. Journal of Language for International Business, vol.26, no. 1, pp. 60-75.
Minor, Leslie & Lamberton, Lowell 2010, ‘High-Context & Low-Context Cultures’, viewed from http://www.cascadebusnews.com/business-tips/networking/154-high-context-a-low-context-cultures.
Newstrom, JW. & Davis, K. 2002, Organizational Behavior: Human Behavior at Work, McGraw-Hill
Sun Tzu 1913, The Art of War.
Uthaisangchai, Prasong (n.d.), ‘The Importance of Understanding Chinese Culture’, viewed form
http://www.bangkokbank.com/download/Week%2012%20Culture%20intro.pdf
Huiping, Iler 2009, ‘Understanding Chinese Culture Leads to Business Success, Canadian HR Report, vol. 22, no. 12, pp. 18.
