Intercultural Negotiation Example -- Haoran Tang (Nicolas)

A real example of business communication and negotiation
As we know communication and negotiation between businesses are very important to us. The skills of business communication and business negotiation are quite useful and helpful to us when we are doing a business with others, especially when we need to start a brand new international business or just think about how to establish an international business relationship. We need to be concerned about the foreign policies and the foreign investment environment. In addition, the most important point is how you take a look at the foreign culture. The culture influences the business directly as well as the material determines the quality. Looking around us, we see many instances of one displaying effects of their culture in their daily activities.

There is a good example that can explain why the business communication and negotiation is quite useful and important to our business that occurs in Nov 1988. This example is about two company’s negotiation, one is the American company called Buckeye Company and the other one is Chinese company. At that time, Chinese government just carried out the open door policy recently. Most of the foreigners were the first time to come to China. You can image that how a new born baby does knows about his brand new world. Obviously, they did not know anything about Chinese business situation even through the Chinese culture. The quite different culture is the main reason that why the Buckeye Glass team fails in china. In western countries, their business are more simple, efficient, and directly. But in china at that moment, the economics are controlled by government, the business is quite complex and Chinese people are looking up relationship and power. The awareness and understanding of each other’s culture become the most effective way to avoid misunderstanding and to achieve agreement.

According to these two kinds different culture between china and western country, I conclude some point below:

The importance of "guanxi"

Regardless of business experiences in ones home country, in China it is the right "guanxi" that makes all the difference in ensuring that business will be successful. (Definition - Le Figaro September 1997: "Guanxi: literally "locked system" or "relations". Personal and friendly relations, without it nothing is possible in China. Indispensable, either for the administration, customers or suppliers. They take time to build and require constant attention. They allow navigating the labyrinths of an extraordinary complex administration") By getting the right "guanxi", the organization minimizes the risks, frustrations, and disappointments when doing business in China. Often it is acquiring the right "guanxi" with the relevant authorities that will determine the competitive standing of an organization in the long run in China. And moreover, the inevitable risks, barriers, and set-ups you’ll encounter in China will be minimized when you have the right “guanxi” network working for you. That is why the correct "guanxi" is so vital to any successful business strategy in China.
Although developing and nurturing the "guanxi" in China is very demanding on time and resources, the time and money necessary to establish a strong network is well worth the investment. What your business could get in return from the favors for your partners are often more much more valuable, especially in the long run, and when you’re in need. Even domestic businesses in China establish wide networks with their suppliers, retailers, banks, and local government officials. It is very common for individuals of an organization to visit the residence of their acquaintances from other organizations, bringing gifts (such as wine, cigarettes, etc.). While this practice may seem intrusive, as you spend more time learning the Chinese culture, it will become easier to understand and take part in this practice that is so central to successful Chinese commercial activity. To start, pay close attention to your immediate Chinese network, and try to establish good "guanxi" with them. They can indirectly link you to new acquaintances and information resources, thus helping you to develop other right "guanxi" you need.

Build relationships (Intermediary agent)

Westerners normally build transactions and, if they are successful, a relationship will ensue. However, the Chinese believe that prospective business partners should build a relationship and, if successful, commercial transactions will follow. This difference underlies many misunderstandings arising from business negotiations. Virtually all successful transactions in China result from careful cultivation of the Chinese partner by the foreign one, until a relationship of trust evolves. In additional, the Westerners need to find some professional and smart people to be the intermediary agent, which represents the western’s company. These people used to know how to build relationship between Chinese and they know how to build the “guanxi” between the Chinese. This advantage can bring a huge potential benefit to their trade.

Respect face

Face is an essential component of the Chinese national psyche. Having face means having a high status in the eyes of one's peers, and is a mark of personal dignity. The Chinese are acutely sensitive to gaining and maintaining face in all aspects of social and business life. Face is a prized commodity which can be given, lost, taken away or earned. Causing someone to lose face could ruin business prospects or even invite recrimination. The easiest way to cause someone to lose face is to insult an individual in front of others. Some of Chinese people always think a lot of face. They consider face-save was important in negotiation sometimes. Actually, this habit becomes a huge disadvantage of negotiating right now.

Know the tricks of the trade

Chinese negotiators are shrewd and use a wide variety of bargaining tactics. The following are just a few of the more common strategems:
- Controlling the meeting place and schedule
The Chinese know that foreigners who have traveled all the way to China will be reluctant to travel home empty-handed. Putting pressure on foreigners just before their scheduled return can often bring useful benefits to the Chinese side.

- Threatening to do business elsewhere

Foreign negotiators may be pressured into making concessions when the Chinese side threatens to approach rival firms if their demands are not met.
- Using friendship to extract concessions
Once both sides have met, the Chinese side may remind the foreigners that true friends would reach an agreement of maximum mutual benefit. Make sure that the benefit is genuinely mutual and not just one-way.

- Showing anger

Despite the Confucian aversion to displays of anger, the Chinese side may put on a display of calculated anger to put pressure on the foreign party, who may be afraid of losing the contract.
- Attrition
Chinese negotiators are patient and can stretch out discussions in order to wear their interlocutors down. Excessive hospitality the evening before discussions can be another variation on this theme.

Conclusion:

Despite the negotiation between these two companies failed at that time. We can learn something in this case. In this case, we can find out the culture barrier is impossible to avoid, but the awareness of each other’s cultures would helpful in International Business. The westerns can know Chinese culture quite well according to contact with Chinese business man. In additional, the westerns need know how to build relationship between Chinese and set up an intermediary agent that represents their company. Beside, the westerns have to know that how to respect face and what the tricks involved in the trade. On the other hand, the Chinese need learn more from the western include the habit, manner and humor. The more knowing to each other can bring the better benefit to each other.