Negotiating Across the Pacific - Case Study
Table of Contents
2.0 Executive Summary 2
3.0 Case Analysis 2
3.1 Major Issue 2
3.1.1 Relationship Building 2
3.1.2 Adversial versus Guanxi Business Methodologies 3
3.2 Cultural Theories 4
3.3 Cultural Characteristics involved in the case 8
3.4 Solution and Action Plan 10
4.0 References 12
2.0 Executive Summary
There was breach of faith by withholding information and not being upfront during the communication process between different parties. This situation was also caused by cultural differences like relationship building, “Guanxi”, emphasis on personal relationships versus factual-based legalistic approach, completely ...view middle of the document...
This process has more significance in most countries except the Unites States. The approach in the U.S. is to get down to business straight away without wasting too much time on people. This is in stark contrast to the process in China where the focus is on building “Guanxi”, that is, the intricate and omnipresent network of personal relations. The U.S. approach can be a huge problem when doing business with China. The American efficiency interferes with the patient development of a mutually trusting relationship – the very basis of an Asian business agreement. This is what happened in the case study. Mr. Smith had done his research and was aware about the Chinese business methodology, but he did not think it was important to implement it. He was well advised by Mr. Tang. Mr. Tang, even though pointed out the significant features of the “American” and the “Chinese” way of doing business, did not stress enough to make Mr. Smith understand its significance. Mr. Tang also jeopardized his relationship with Mrs. Ming whom he had known for many years by not disclosing that the supplier was not a direct supplier.
3.1.2 Adversial versus Guanxi Business Methodologies
Americans have a very straight forward and practical approach towards business. They believe in driving hard bargains and negotiating, while the Chinese put more focus on respect, friendship saving face in their business conduct. Mr. Smith was a typical American businessman who in spite of knowing that the price of the consignment was high, decided to go ahead with it. It seemed natural to him that they would either come back stating the price was very high or they would just accept it. These situations are completely acceptable in the American industry and work ethics. However, from the perspective of the Chinese, they take it as a mark of disrespect, and being more emotional and sensitive, decided not to reply to such an excessive offer, and waited for a month. This shows that they were too humbled to even name a price they thought to be correct, and decided to wait till the other party came 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 the new terms ended up cutting the order by 50%.
3.2 Cultural Theories
Fons Tompennars has researched value dimensions that affect daily business activities. Some of his dimensions are detailed below.
Universalism versus Particularism: In the universalistic approach people place a high importance on laws, rules, values, and obligations. They try to deal fairly with people based on these rules, but rules come before relationships. It helps people understand how their work ties into their values and beliefs. It provides clear instructions, processes, and procedures. It also helps in keeping promises and be consistent. It gives people time to make decisions. It uses an objective process to make decisions yourself, and explain your decisions if others...