Setting Up a Joint Venture in China - Assignment Example

Memorandum of Transmittal March 24th Mr. Artimus Pyle Major Vehicle Component Company Graball, Alabama Dear Mr. Artimus, As requested from our last departmental meeting, I am submitting an analysis and report of the negotiation between our company (MVC) and the Chinese company concerning setting up a joint venture in China. The report has been titled "Report on Cross-Cultural Negotiation: Americans Negotiating a Contract in China." and as requested I have tried to analyze both cultural and communication challenges that may have occurred during the negotiations. I have also given possible recommendations as a way to curb such an event from occurring again. I hope you will find this report resourceful and also satisfactory. Yours Sincerely Business student intern Table of Contents Title page __________________________________________________ 1 Memorandum of transmittal ____________________________________ 1 Table of Contents _____________________________________________ 2 Executive Summary ___________________________________________ 3 Introduction __________________________________________________ 4 The people-to-people vs. Business-to-people ________________________ 4 Mr. Jones Attitude ____________________________________________ 4 The Chinese Social-holistic approach ______________________________ 6 Recommendations _____________________________________________ 7 Works cited __________________________________________________ 9 Executive Summary Every society has its own cultural practices and beliefs. These form part of their daily life including business, family relations and any other aspect regarding their lives. Business operations must to some extend involve the social and cultural practices of the people involved. A better example is when developing a marketing strategy. The ways of the targeted clients have to be understood (Curry and Putzi 27). This report analyzes difference in communication and understanding between two negotiating teams, one team from America led by Mr. Jones and the other from China led by Mr Wang. The two companies are in plans to establish a joint venture in China where there seem to be cheaper and affordable labor. The American company sends its delegation led by senior negotiator Mr. Jones. The report has singled out two main factors that might have played key roles in jeopardizing the negotiation and hence diminishing the possibility of business partnership between these two companies. The issues tackled are; Mr. Jones attitude The social-holistic approach by the Chinese The report reviews how these two factors collided in the negotiations and eventually affected the whole process. Important to note here, the two teams almost reached an agreement, as a matter of fact, they had already reached a tentative agreement only to call it off at the last minute. Introduction The people-people vs. the business-people According to (Williams. 105) the principles of economies and business are universal regardless of people’s culture and background. The situation in China might prove otherwise considering the outcome of the process. From the beginning of the process, all seemed to be well for both companies. Both companies did thorough research concerning each other. The problem is that each company did research based on what their expectations were. Mr. Jones and his team did research on the operations of the company, the technicality in terms of business operations, the figures, profits and losses. The Chinese company on the others side was more concerned about the people in the company, the company policies and the company culture. This put the two companies on completely two different platforms. However, of all the differences that existed between these two companies, the two factors that greatly affected the negotiation is the attitude from Mr Jones and the social-holistic approach by the Chinese people. Mr. Jones Attitude Mr Jones seems to be successful in his job and was impressed about going to China. The problem is that he already had a presumption concerning how the Chinese work in business. This is fairly good especially when going to meet a new business partner. You need to be informed about their strength and weaknesses too. Unfortunately, there was consistency in a number of issues that might have jeopardized the whole process. One main issue is expression of facts and truth. It is evident from the statements made by Mr Jones himself and Mr. Wang that Mr. Jones was harsh and did not choose the right words in communication. The use of the word non-sense is extremely offensive and should not be accepted in a business setup. According to Gelfand and Brett (161) the process of negotiation is crucial and allot comes to consideration. The parties look out for weaknesses from their opponents in order to use it to their benefit. One should be very keen on the tone and choice of words, facial expressions among other important behavioral changes. It was also reported on how many times Mr. Jones lectured the Chinese team and negatively criticized their social culture. The Chinese hold dearly their culture and practices. The warm and welcome gesture from the arrival of the American delegation was already part of the negotiation. The Americans were expected to have known this. Mr. Jones put much attention to the business agendas and closing of the deal and forgot that he was dealing with people who have different culture. The fact that the two parties were coming from different backgrounds required both to compromise their stand in order to accommodate the other. The Chinese had a totally different approach towards business. To the Chinese, the "General Principles" are the core foundations for any business partnership. If there was no much seriousness in the general principles, the details of the partnership would have no meaning. Upon meeting the Chinese CEO, Mr. Chen, Mr Jones was quick to jump into the details of the partnership. The fundamentals of this negotiation were put forward by the CEO but Mr. Jones failed to take note. The problem with this approach is that it put one at a grey area. Mr Jones fear might have been in understanding what general terms like trust, harmony and long-term relationship would imply when it comes to doing business. Mr Jones should have considered the suggestion to read the book The Arts of War", by the Chinese business expert. This in return might have been the solution to this process. Reading the book would ensure two important things. One, the book would prepare Mr Jones psychologically on how to deal with the Chinese and how to fight them back mentally in the negotiation. Secondly, the knowledge of the book would have given Mr. Jones talking points while interacting with the Chinese people mainly the CEO Mr. Chen and also the other Chinese people during the dinners and banquets. The approach used by Mr. Jones was slightly bound to superiority. The Chinese wanted to be treated as equal partners other than juniors. The Chinese social-holistic approach The Chinese do not separate business from their social lives. As a matter of fact, they base every relation, activity to their social life and culture. Their way of life is holistic. They have incorporated the business principles with the business principles. Principles like friendship, trust, honesty and morality are very frequent terms while doing business with the Chinese. To the Chinese, business partnership is as good as your friendship. The American delegation did not understand this at first. The expectations were different from what the encountered. The warm welcome, the banner at the gate and all efforts were made to make them feel at home and comfortable. On the other hand, the Americans were eager and anxious to talk about business. (Jansson 213)For the Chinese, the major factor behind their business success is the cultural influence and social linkage. The Guanxi behavior effectively goes deeper than professional friendship. The act of incorporating business with other social principles has a great effect. The Chinese would expect the Americans understand terms like mutual benefit, long-term relationship and honesty. These are terms that are best understood in social set up. In business, as the Americans would say, we talk about numbers, outcomes, results, assurance and such. The Chinese were more serious and held strongly social principles over details in a contract or agreement. They wanted to understand the Americans first, become friends then go into business partnership. The concept of Guanxi seemed to be very controversial to the Americans. The Chinese considered this concept as vital in building strong social relationship with people from all over the world. It involves giving favor to people in the hope that they will reciprocate the same sooner or later. It was hard for the American team to understand why the Chinese would want them to take the senior leaders of the local planning approval commission for an expensive dinner. To the Americans this is corruption; to the Chinese this is extending a hand of good will or simply showing favor. (Kaynak, Wong and Leung 4) Says Guanxi seems to be the driving force of the Chinese business community. They have also extended this aspect to politics and society. But this aspect is more of personal relationships that aim to benefit only individuals. Recommendations The failure to set up a joint venture in China comes with series lessons that if given much attention will help avoid a repeat in the future. Below are some of the recommendations retrieved from the report A new department that strictly deals with cross-cultural research should be set up in the company. The main duty of this department will be to study the cultures and ways of lives of people we are potentially going to work with. This ranges from foreign employees, clients, investors and most importantly business partners. The company should diversify the top leadership in negotiation department to accommodate people with different capabilities especially in communication. A new negotiation strategy should be put that will not only be business-oriented but also social-oriented. The instance in China would have worked best with a social-oriented strategy Mr. Jones should be encouraged to use more acknowledged and acceptable methods in dealing with potential partners and clients. Using harsh words and high tone should be avoided. He should also be encouraged to open up to new ideas and be welcoming to other people’s ways of life. Works Cited Curry, Jeffrey E. and Sibylla Putzi. Global Road Warrior: 95-country Resource for the International Business Communicator and Traveler. Petaluma,CA: World Trade Press, 2011. Gelfand, Michele J. and Jeanne M. Brett. The Handbook of Negotiation and Culture. Stanford,CA: Stanford University Press, 2004. Print Jansson, Hans. International Business Strategy in Emerging Country Markets: The Institutional Network Approach. Northampton, MA: Edward Elgar Publishing, 2008. Kaynak, Erdener, Y.H. Wong and Thomas Leung. Guanxi: Relationship Marketing in a Chinese Context. London: Routledge, 2013. Williams, Mark S. Business and Peace: The Case of La Frutera Plantation in Datu Paglas, Maguindanao, Philippines. Florida: Universal-Publishers, 2011. Read More