Cross Culture Communication Building Chinese Partnerships
These obstacles often result from the intercultural differences between those involved in the business. Intercultural business ventures often present companies with unfamiliar relations with other businesses which more often than not have different ways of conducting business than what they are used to.
Acciaio Steel Company seeks to establish inroads into China and phase out its local operations. In this regard, it will be very imperative that the company gets a clear insight of this overly significant move that it is undertaking and what it shall entail. The company should familiarize itself with the Chinese mode of doing business in order for it to succeed in its objectives.
Basing on the fact that the company does not have a lot of experience working in China, it is also important to ensure that it establishes relevant and effective intercultural links with an appropriate Chinese partner with whom it is hoped that the company will develop a long lasting, trustworthy relationship.
Furthermore, Acciaios existing partnership with one Chinese import-export company is expected to significantly ease the process of identifying a suitable partner in China. Our relationship with this company will also be in focus noting its strategic position in the industry.
In light of this, Acciaio is faced with a number of tasks that it needs to fulfil in order for it to achieve its goal. Key among these tasks is to identify and partner with a suitable Chinese Steel supplying company with competitive prices and that gives us minimal financial risks, thereby guaranteeing our survival in the industry. This is especially important seeing that the company will be phasing out local operations and therefore will be very dependent on its Chinese partner.
Another concern for the company as it takes this venture is how it should handle all the tasks and details involved in starting up and implementing the partnership with the Chinese supplier from the period of negotiation to that of contracting. These may be done during the negotiation stages or any other time thereafter. This is important since it will help us to deal effectively with any differences or issues that may arise.
In addition, both Acciaio and its expected Chinese partner will need to identify individuals in the respective companies that are best placed to handle the negotiations. Finally, how there is need to analyze how agreements or contracts between the partners will be drafted and where will the legal team be drawn from. Therefore, this paper is aimed at examining these tasks and coming forth with a way forward keeping in mind the cross-cultural nature of the companys business venture.
Identifying a partner
A common problem that arises out of inter cultural relationships is the cultural differences that may exist between the parties involved. Pan, Scollon and Scollon (2009) argue that these differences in cultural approaches are capable of stopping or derailing any efforts to establish deeper cross cultural interaction between individuals or groups.
These cultural differences can be explained using Holfstedes dimensions of cultural variability. Holfstede (cited in Gudykunst 2003) identified four aspects of cultural variability. These are individualism collectivism, low high power distance, masculinity femininity and low high uncertainty avoidance. These dimensions help in explaining why some cultures have different approaches to the way they deal with each other and also those outside the cultural group.
In the first dimension, an individuals goals are usually more pronounced in individualistic cultures while collectivistic cultures emphasize on a groups goals. The second dimension has the members of high-power distance cultures accepting that power is part of the society while members of low-power distance societies are of the view that power should be used only when justified and by a legitimate or expert party.
High uncertainty avoidance cultures have clear rules and procedures to guide interactions and behaviour in all situations while in low uncertainty avoidance cultures, these rules and norms are rigid. Finally, cultures of high masculinity value ambition, material things, assertiveness, power and performance while high femininity cultures value caring for others, being nurturing, quality of life and service.
In view of the Chinese society, the first dimension of cultural variability is predominant. The Chinese are a collective culture and therefore the kind of business they conduct is largely shaped by their collective identity. According to Cushman and King (2001), the Chinese practice Guanxi which basically refers to a blood andor social connection between different people and that defines their relations and actions (p. 114).
The Guanxi system is not only reciprocal but also most importantly definitive of the Chinese way of interaction and doing business. This feature makes most Chinese business people to look at any outsider as untrustworthy. In order for us to gain the trust of Chinese business people and also identify a trustworthy partner in the country, Acciaio will need to lubricate interpersonal relations with the Chinese by engaging and sharing in social activities like wining and dining with the potential partner.
Jandt (2009) further notes that communication in high context cultures like the Chinese is more indirect because of the fact that the Chinese culture places greater concern on inclusion and interdependence and the Chinese would most likely prefer to use indirect-face negotiation. This implies that they would prefer to negotiate through an intermediary as this will reduce chances of confrontation or losing face (p. 74).
An intermediary will therefore serve not only as a link between the two partners but also help in establishing a trust relationship between them. Usually, the intermediary is familiar for both parties and can be trusted by them. It is also important that they have some level of experience in the field.
It is for this reason Acciaio Steel Company will need to take advantage of its existing partnership with the Chinese importexport Company. This company should act as an intermediary between the two parties. This will prove advantageous since it has experience dealing with companies like ours and enjoys an existing trust relationship with other steel companies in China.
Negotiation timeframe
It is important to note that different cultural orientations have different approaches to doing business. These approaches may have significant impact on the amount of time that is likely to be taken in negotiating and therefore on the period before implementation of the deals will be put into effect.
According to Chen (2003), the Chinese take a slow and largely patient approach to negotiation (p.114). This is especially because a lot of time is spent on building relationships with the potential business partner before, during and after the negotiations. The reason for this is that they prefer to gauge the suitability of the partners before getting into an agreement with them.
This is in sharp contrast to Western negotiators who put a lot focus on sealing deals quickly and very little time is spent on building relationships. Acciaio Steel Company needs to put this into consideration and be patient and understanding of the partners business practices. This however, should significantly increase the time within which Acciaio is expected to achieve its goal and have the steel supplies arriving in the local market.
Further, Fang (1999) has noted that unlike other cultures where the negotiating parties are more likely to have the final say when making the deal and would have very little consultation, Chinese negotiating parties usually have to consult with a number of parties that usually operate behind the scenes before giving a final position on the deal (p.213).
These include the government and family members that usually hold stakes in company operations decision making in China. This also substantially lengthens the negotiating process to accommodate these behind the scenes negotiations.
According to Solomon (1999), it is common practice for Chinese officials to prolong the negotiation process. This is in order for them to explore their partners patience, flexibility and views (p. 5). Based on this, the company will have to allow for a longer period of time before it can start running its normal operations. Steel products from our potential Chinese supplier should start coming into the country after the finalization of these processes.
Negotiating team
Another important factor that the Company should consider in the negotiations with its potential Chinese supplier will be the size and composition of the negotiating team. This is because, while it may be of little or no significance who an Italian company sends to a negotiation table, the Chinese read a lot into the composition and size of a negotiating team.
Therefore when Acciaio Steel Company is deciding on who will represent it, a few factors are considered. Chen (2003) has pointed out that the Chinese are very respectful and sensitive to business and corporate ranks. In other words, the people sent to represent a company at negotiations speak a lot of the intentions and capabilities of the company.
He argues that if the company that is negotiating is represented by an individual of high authority or rank, it sends a message to the Chinese that it values both the deal in question and the negotiation process (p. 143). The Chinese are also likely to send high ranking officials to the negotiating table. The reason behind this is sometimes to intimidate the other team which may not be represented by a top ranking official.
It is in this regard that it will be imperative for Acciaio Steel Company to be represented by some of its top management that should be backed by a number of other expert officials from the finance and legal departments at the negotiations. The Chinese are likely to present a large delegation at the negotiations. This should not intimidate the team as it is also an intimidation tactic.
Contract
When dealing with people from different cultures, it is always important to consider their norms and business practices. This is especially applicable when the two parties have not had much previous contact as is the case of Acciaio and its potential Chinese partner. It is evident that even when it comes top coming up with a contract that needs to be signed by the parties in the deal, Acciaio will have to understand and put in practice while coming up with the contract. During this contracting phase, there are a number of factors that need to be considered.
First, it is important to take note of the fact that Chinese business people do not usually sign contracts without first establishing personal trust with their potential partners or clients. This is because, as Cheng-Shu (1996) indicates, to the Chinese trust between them and their business an associate is more important than coming up with a formal contract.
Further, Bucknall (2002) has noted that the Chinese view contracts as very flexible documents that can be amended even after its signing. They are therefore more likely not to put a lot of emphasis on the initial document. As has been discussed earlier, while building lasting relationships and trust between themselves and their potential partners, Chinese business people put more emphasis on the processes before and after negotiations than on the actual contract.
However, despite of this, the Chinese put substantial value on the contracts. Fung (1999) points out that the Chinese view contracts as a show of the other partys commitment to starting a lasting business relationship. Therefore, as much as they may not be the party that will be pushing for a perfect contract, they respect the principle and value contract signing.
Due to the obvious contrast in the levels of emphasis placed on the contract between the Chinese and Italians, it would therefore be in the best interests of Acciaio Steel Company to draft the legal contract for the partnership. This will give the company an opportunity to put in paper its expectations from the partnership and also address any arising legal issues.
In regard to the contract itself, Zinzius (2004) explains that for the Chinese, contracts basically serve the function of creating a framework for the desired business relationship. Chinese business people also regard the contract as a document that can be modified even after it has been signed (p. 72).
The contract should be drafted in both Chinese and Italian. It is also important that whoever will draft the contracts for Acciaio Steel Company makes sure that both the Chinese and Italian versions of the contract are exactly translated. This is because, in case of any issues of contention that may arise in the future, the Chinese partner will hold the version written in Chinese as the valid contract. The Chinese also put very little emphasis on including special paragraphs, phases and legal jargon on contracts (p. 73). This way, the drafter gets a chance to include issues of responsibilities in the contract and make it easier to comprehend for both parties. Also, the use of long catalogues of demands should be avoided.
Finally, Tian and Lo (2009) has noted a few conditions that a legally enforceable contract with a Chinese company must meet. First, there must be an offer and acceptance by either of the parties involved in the negotiation. In our case, the offer will be Acciaio Steel Company asking to import steel products from the Chinese partner with the acceptance coming from the partner who should accept to supply the steel product (p. 130).
There should also be a subject matter with the titles or names of the parties involved, the quantity or quality of steel products, the price at which they will be supplied, the time limit and the details of performance which should include conflict resolution mechanisms (p. 131).
It is clear that Acciaio Steel Company will have a number of factors that it will have to put into consideration as it seeks a suitable business partner in China. These factors are mainly based on the fact that the company is new to Chinese business partnerships and also because of the significance of the deal as the company is seeking to attain a reliable and suitable partner.
In the first instance, the company will need to adapt to the Chinese system of doing business and understand that the Chinese are a collective culture unlike Italians. The Guanxi concept of conducting business by the Chinese will vastly determine whether the company will gain access into the Chinese market. Therefore, it will be important for the company to take advantage with its existing relationship with a Chinese Steel import-export company.
Secondly, the company will need to take into consideration the fact that it may take a long time before we finally have the Chinese steel products coming into the Italian market. This is because of the Chineses patient approach to business negotiations which involve a long period of relationship and trust building and behind the scene consultations that prolong the negotiation process.
Establishing a trust relationship with the Chinese will not only be of benefit to the Chinese but also to our company. This is because it will give us a chance to gauge whether we are getting into a trustworthy and steady long term business relationship. This is especially important considering the weighty nature of our business interests in China.
In addition, the company should ensure that it is represented by a suitable and competent team at the negotiations with its potential Chinese partner. This team should preferably be made up of high ranking company officials like the CEO and his company executives who are backed by other expert officials in order to save the company face. This will show the companys seriousness in making the deal and building a lasting relationship with its Chinese partner.
Finally, when making the contract between the two partners, Acciaio Steel Company should take the lead in drafting the contract. This is expected to ensure that the companys objectives are met. It will also give us an upper hand in including details and duties as it best suits us. The contract document should be written in both Italian and Chinese with both translations being exactly the same. It should also have all the specified qualities of legal contracts as determined by both Chinese and Italian law. It should also be detailed enough to cover all aspects of the deal as pertains both the Company and the Chinese supplier.
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