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Negotiating Across the Pacific

 
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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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^ajor 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 ^ethodologies 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 ³they 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

international experience would realize that all the societies are bound to be unequal but some are

more than others.

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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. ^asculinity ± 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. ncertainty/Avoidance Index (AI) ± 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

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
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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.

½. Œong-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 µLong-Term Orientation¶. The refrain from

the Dr. Fisher to complete his verbal contract shows the low µLong-term Orientation¶ and

individualism.

Cultural Characteristics Impacting the Issue at Hand

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
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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 µI 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 µGuanxi¶ 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.

ncertainty/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
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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.

Œong-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 µWe can always back-down if they say the

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).
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olution 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 ³they 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:

x
 

 
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

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.
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x
 
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 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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âeferences

H. Geert, 2001, ³Culture's consequences: comparing values, behaviors, institutions, and

organizations across nations´, SAGE , pg 207

H. Geert, 1984, ³Culture'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, ³The 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
{ Centralized { Acknowledge a
companies. leader's power.
{ Strong hierarchies. { Be aware that you
{ Large gaps in may need to go to
High PD
compensation, the top for answers
authority, and
respect.

{ Flatter { Use teamwork

organizations. { Involve as many
{ Supervisors and people as possible
Œow PD employees are in decision
considered almost making.
as equals.

Characteristics Tips
{ High valuation on { Acknowledge
people's time and accomplishments.
their need for { Don't ask for too
freedom. much personal
{ An enjoyment of information.
challenges, and an { Encourage debate
High IDV
expectation of and expression of
rewards for hard own ideas.
work.
{ Respect for
privacy.
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{ Emphasis on { Show respect for

building skills and age and wisdom.
becoming masters { Suppress feelings
of something. and emotions to
{ Work for intrinsic work in harmony.
Œow IDV
rewards. { Respect traditions
{ Harmony more and introduce
important than change slowly.
honesty.

Characteristics Tips
{ Men are masculine { Be aware that
and women are people may expect
feminine. male and female
{ There is a well roles to be distinct.
defined distinction { Advise men to
between men's avoid discussing
High ^A
work and women's emotions or
work. making
emotionally-based
decisions or
arguments.

{ A woman can do { Avoid an "old

anything a man boys' club"
can do. mentality.
{ Powerful and { Ensure job design
successful women and practices are
Œow ^A
are admired and not discriminatory
respected. to either gender.
{ Treat men and
women equally.
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Characteristics Tips
{ 'ery formal { Be clear and
business conduct concise about your
with lots of rules expectations and
and policies. parameters.
{ Need and expect { Plan and prepare,
structure. communicate often
{ Sense of and early, provide
nervousness spurns detailed plans and
High AI
high levels of focus on the
emotion and tactical aspects of
expression. a job or project.
{ Differences are { Express your
avoided. emotions through
hands gestures and
raised voices.

{ Informal business { Do not impose

attitude. rules or structure
{ More concern with unnecessarily.
long term strategy { Minimize your
than what is emotional response
happening on a by being calm and
Œow AI daily basis. contemplating
{ Accepting of situations before
change and risk. speaking.
{ Express curiosity
when you discover
differences.

Characteristics Tips
{ Family is the { Show
basis of society. respect for
{ Parents and traditions.
men have more { Do not
High ŒTO authority than display
young people extravagan
and women. ce or act
{ Strong work frivolously
ethic. .
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{ High value { Reward

placed on perseveran
education and ce, loyalty,
training. and
commitme
nt.
{ Avoid
doing
anything
that would
cause
another to
"lose face".

{ Promotion of { Expect to
equality. live by the
{ High creativity, same
individualism. standards
{ Treat others as and rules
you would like you create.
to be treated. { Be
Œow ŒTO { Self- respectful
actualization is of others.
sought. { Do not
hesitate to
introduce
necessary
changes.