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Negotiating Across the Pacific Case Study

Negotiating Across the Pacific Case Study


Clashing Cultural, its Effects and its Solution
Oscar Voigt
University of Houston Victoria
MGMT 6377 23704
Chun-Sheng Yu
4/26/2015

Negotiating Across the Pacific Case Study

Executive Summary
Dangerous assumptions and costly misunderstandings are symptoms of ineffective
communication resulting from the clashing cultural values of Guanxi and practical business
methodologies found in the business interactions of NutriNex, Bill Wright, APCG, and BBT.
Utilizing Hofstede and Tompennars most pertinent cultural value dimensions it becomes clear
that failure was inevitable due to conflicting communication, relationship building, and
negotiation styles. As a result these factors ultimately lead to Bills breach of BBTs trust by him

Negotiating Across the Pacific Case Study

withholding the fact that he was not the direct supplier. An action plan consisting of a mixture of
dulled cultural sensitivity, cross cultural education and the importance of fostering personal
relationships, is the suggested solution to this issue before it escalates in an international lawsuit.
3.1 Major Issues
As is common when businesses are new to intercultural interactions effective
communication between the four parties diminished exponentially with each attempted
interaction due to a lack of cultural awareness, sensitivity and understanding. More specifically,
the communication process was hindered by the differing relationship building methods when
conducting business: Guanxi vs. low relationship orientated approach. Although enlisting the
help of a third party was a step in the right direction, the situation quickly soured when a lie by
omission, the withholding information, was brought to light which was a devastative breach of
faith, or loss of face. Cultural differences lead to each party simultaneously conducting
counterproductive business methodologies driven by their clashing implicit vs. explicit
communication styles (high context vs. low context cultures). Furthermore, what are considered
good negations tactics in America are recipes for failure in China mostly due to their polar
opposite expressive vs. instrumental oriented conflict resolution tendencies. All of these factors
ultimately lead to dangerous assumptions and costly misunderstandings which resulted in a
potentially lose-lose situation.
3.1 Guianxi vs. Practical Business Methodologies
Guianxi is the implicit cultural norm which relates to how Chinese businesses build
relationships, negotiate, communicate, and in general conduct business, which loosely refers to
the intricate, pervasive network of personal relations Chinese businesspeople carefully cultivate

Negotiating Across the Pacific Case Study

(Pg. 159). Chinese put more focus on respectfulness, personal relationships, saving face for all
parties involved, communal goals over individual ones, and believe the overall harmony of
business decisions is a result of trust, ritual, and a mutual give-and-take. Patience is definitely a
virtue in Chinese business with decisions and negotiations taking a longer time because all risks
and benefits should be considered carefully. The need for both parties to save face is extremely
important in successful relationships, weather its not calling out failure, avoiding saying no, or
the over emphases of honor and reputation. Saving Face or giving face is especially high in
BBTs communication, negotiations, and relationships since they are geographically located in
Beijing. Just like an accent, each Chinese region or city has slightly varying cultural norms with
Beijing described as political, bureaucratic, educated, diversified, high relations orientation,
more direct, high face (Pg. 157) than its other Chinese city counterparts.
Americans on the other hand, take an almost polar opposite approach to communication,
relationship building, and negotiation. Having a very practical, matter of fact, attitude towards
business is widely acceptable behavior for American businesspeople. Openly bargaining and
engaging in head on, direct negotiations are also common practices for Americans. Even though
businesses, especially those revolving around professional selling, have realized the potential
benefits of building, maintaining and strengthen relationships on both the personal and
professional level, with strategic partnerships taking the place of transactional ones, it still is
uncommon for emotions, sensitivity, and friendship to play any role in business discussions and
transactions. So much so that businesspeople in America pride themselves on being dominant,
those who take risks are idolized, and making on the spot tough decisions is also a desired trait.
The biggest cause of confusion was the differing communication styles; Bill utilized an
explicit style whereas BBT communicates implicitly. Chinese businesspeople convey their plans

Negotiating Across the Pacific Case Study

in an indirect, implicit manner, softening expecting others to readily understand unarticulated


plans, thoughts, and gestures, which is defined as a high-context culture (pg. 126). For
Americans an interaction with a Chinese businessperson may come off as nondisclosing, sneaky
and mysterious, mainly because America is considered a low-context culture which is driven by
its explicit communication style (pg. 127). Bill made incorrect assumptions derived from the
mysterious messages of BBT because he simply did not read between the lines. Implicit
communication calls for context to be decoded by personal relationships, but explicit
communication inserts information directly into the conversation. There is also a degree of
compartmentalize of personal and business relationships that play a role in how messages are
decoded on opposite sides, which also lead to misunderstandings. Indicative of conflicting
business methodologies all parties fell prey to a barrage of noise, resulting in a loose of the
intended meaning.
Circumventing a core competent in any business discussion and transaction, relationship
building, a third party was used to bridge the trust gap between the two cultures, but in the long
run the need for a speeding discussion to take place was more harmful then helpful. Asia-Pacific
Consulting Group (APCG), is a state side based consulting firm with strong ties to China, more
specifically with Beijing Bio Tech Co. Ltd. (BBT), which already had a personal relationship
with one another. It is important to build relationships directly with all parties involved,
especially intercultural ones, since it is the process of getting to know ones contacts and the
foundation on which mutual trust is built before diving into business. Bill Wrights need for
efficiency and hes lack of patience interferes with BBTs need for developing a mutually
trusting relationship, which obviously takes time. An important step was completely skipped,
which lead to costly missteps. Knowing that Bills higher priced bid was only meant to start

Negotiating Across the Pacific Case Study

negations and not show disinterest in furthering this business opportunity is just one example a
misinterpretation that took place between the two parties.
Even though Bill was briefly educated on the differing cultures by APCG, whenever he
was at a cross roads which could have benefited from this knowledge he decided against it and
instead went with a factual-based, legalistic and generally straightforward method (pg. 5).
Instead of entering into a cultural neutral arena when engaging in business, both parties fell back
on their own business methodologies.

3.2 Cultural Theories (Fons Tompennars)


Listed from most pertinent to this particular case to the least, we define and describe Fons
Tompennars most important value dimensions. These dimensions effect business decisions,
discussions, interactions, and partially have a key role in essentially every aspect of daily
businesses activities. We focus only on the dimension of neutral vs. affective, but Tompennars
also includes the dimensions of achievement vs. ascription, universalism vs. particularism, and
specific or diffuse.
Neutral versus affective approaches relates to the level of emotional orientation in
relationships. A person in a country who utilizes a neutral approach will not let emotions play a
noticeable role in their actions, decisions, and rarely let feelings influence their business
activities. Factual decisions coupled with reason based influences take precedent over emotional
ones. In fact, expressing emotions or feelings during a meeting or interaction is considered
unprofessional in nature. If someone wants to find out how a person is feeling, a combination of

Negotiating Across the Pacific Case Study

nonverbal cues and body language may have to be utilized to determine the emotional state
individuals are in.
With an affective approach, displays of emotions are a common practice with feelings
being openly expressed and the displaying of them during ongoing communication is common
place. Not only are openly expressing emotions welcomed but are often the building blocks used
to gain trust, respect, rapport, and more importantly start, build, maintain, and strengthen
personal relationships. If a conflict arises within a conversation, having an affective approach,
leads to a more effective and instantaneous conflict resolution since emotions are made evident
in a more direct and verbal way.
3.2 Cultural Theories (Hofstede)
Hofstedes identified five value dimensions for cultural differences between differing
countries. Listed in order of how influential each value dimensions was to this particular case
and only mentioning the most important dimensions for this case. Even though China has four
distinctly differing dimensions when compared with the USA, namely Indulgence, Long Term
Orientation, Power Distance, and Individualism, we will focus only on three dimensions.
(Reference chart)
Even though Hofesede developed this fifth dimensions after he had already defined the
other four dimensions it is the most influential to this case: Long-Term Orientation / Short-Term
Orientation. Businesspeople with a long term orientation believe in the importance of long term
relationships and prefer to conduct business with previously established relationships with
familiarly businesses. Long term oriented companies will choose a known associate or a relative
over lesser known or new clients. Individuals will even sacrifice short term profits in order to

Negotiating Across the Pacific Case Study

meet their long term goals. Being future oriented it is easier for long term oriented individuals
and companies to accept a delayed gratification of their needs. If a business were to approach a
new venture the primarily focus initial communication and the resulting business plan would
revolve almost exclusively around long term relationships. Businesses would have a strong
propensity to save, invest, encourage thriftiness, and always consider all risks and benefits of
before making their decisions. Societies with this dimension prioritize time honored traditions
and view societal change as suspect.
Short term orientation describes businesspeople who value short term results and
profitability over longer term goals. Transactional sales reign supreme over strategic
partnerships, where a business usually only conducts business when it is profitable for them,
practical, and more importantly short term gains are easily realized. It is extremely common for
companies with a short term orientation to conduct business with numerous companies at the
same time and only for the duration of that initial deal. Since relationships come secondary to
profits for short term oriented firms mixing emotions with business is frowned upon, but being
practical and straight forward is a welcomed trait.
Uncertainty is loosely defined as the predicament of outcomes and conditions that are
unknown, ambiguous, or unpredictable, so uncertainty avoidance refers to the extent to which
people in society feel threatened by ambiguous situations. (pg. 84) High uncertainty avoidance
cultures obviously try to avoid ambiguous or uncertain situations and by definition try to also
avoid any harsh realities head on whenever possible. They adhere to strict laws and procedures
and therefore also usually have a stronger sense of nationalism. Afraid of innovation, businesses
lean on formal rules and procedures which in turn result in job security and career sustainability.

Negotiating Across the Pacific Case Study

On the other side of the scale, a lower uncertainly avoidance encourages innovation and
independent thinking which usually resulting in a more practical approach towards business.
Society rewards high risk decisions and more readily accepts failure from those decisions. On
top of that, nationalism is less pronounced, high job mobility is common, and business activities
are less formal.
Individualism versus collectivism, refers to the degree of interdependence a society
maintains among its members. Individualism in this context refers to the dimension that
demonstrates a tendency of people to care for themselves and immediate family and friends over
the needs of the society. In societies with an individualism mindset value democracy, individual
initiative and achievement highly. Emotional detachment from an organization is fairly common.
On the exact opposite side of the spectrum for this value dimension is collectivism in
which cultures act in the interest of the group, or in the interest of the business. Personal
relationships will take president over achievement within a company. Especially indicative of a
collectivist culture are the characteristics of harmony and saving face. Control over business
situations usually manifests itself by passive aggressively enlisting the collective needs, exerting
social pressure and/or utilizing the fear of embarrassment. Other key characteristics for
individuals or businesses who are classified as collectivism demonstrate respect, a shared
responsibility and unwavering loyalty.
3.3 Cultural Characteristics (Fon Trompenaars)
Neutral versus affective approaches were made evident during two incidents. Bill having
a more neutral way of expressing his emotions did not see the error in his ways when declining
Edwards suggestion of lowering the compensation amount which would have been a generous
gesture in the eyes of BBT. Another instance of this conflicting cultural characterizes was clearly

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causing problems was shortly after Bills breach of faith had come to light and BBT asked
numerous times for an apologize for his obvious disrespected actions. Indirectly these conflicting
approaches may have played a key role in how conflict was resolved, or rather how poorly it was
handled.
3.3 Cultural Characteristics (Hofstede)
Bill Wright wanted new business and China was rapidly growing with a massive market
potential which Bill wanted to take advantage of. BBT was very clear that they would only
entertain a long term relationship where the result would be continued and reliable source of high
quality lecithin. Bill was short term oriented, whereas BBT was long term oriented. This was
made extremely evident when Bill quoted an indecently high price to BBT with the thought that
this was the start of negations. BBT took this unacceptably high price as a sign that Bill was not
serious about a long term relationships and was more concerned with short term profits. After it
came out that the deliveries of the products were going to be delayed it was suggested that in the
next dealings compensations would be dropped in order to make up the losses from the current
deal. This is a prime example of future oriented problem solving which BBT and APCG would
have been open to, but Bill most likely would not be quick to agree to. Although not directly
associated with this dimension, time or rather patience did play a key role in this case. When the
goal is long term oriented patience is often necessary which of course contradicts those with
short term goals taking priority. This was made clear when Bill referenced the fact that it had
taken four months to finalize this deal and that he had been always very quick to respond, but
BBT had been slower to respond back with decisive decisions. Another interesting interaction
between Dr. Fisher and Bill regarding the honoring of a verbal agreement relates to long term
orientation. If these two businesses were in China, both firms would have tried to solve this

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problem together rather than fall back on legal technicalities. This is where other dimensions
come in play.
Although the uncertainty avoidance is only slightly higher for Chinese businesses
compared to their American counterparts, the lack of face to face interactions, the differing
cultures and the relatively high amount of noise during communication attempts made for some
undeniably uncertain and ambiguous situations. Not only were there four week response times
but uncomfortable pauses between actual telephone conversations. BBT was located in Beijing
where businesses are known to be a little more political and bureaucratic in nature, BBT would
have a slight high score on the Uncertainty/Avoidance Index (UAI) compared to other Chinese
regions. In this assumption Bill was under the impression that Chinese businesses would avoid
legal action at all costs since laws and rules were thought to be more flexible and should be
customized to the situation. This however was not the case with BBT, which was made clear by
their quick decision to call legal action to the situation. Bill being an American, has a relatively
low level of uncertainty avoidance so it was much his drive to take risks that pushed him to reach
for the stars when he saw the potential to monetize the rapidly growing demand of Chinese firms
to find a reliable lecithin supplier. It was also his drive to take risks that drove Bill to the decision
to omit the fact that he was not the supplier. Being closer together on the UAI scale did allow
both parties to offer up flexible solutions, like the attempt to agree on taking a lower valued order
Looking at the characteristic related to individualism vs. collectivism, we almost
immediately understand that Bill and Dr. Fisher were clearly following the individualist
approach, whereas BBT was utilizing a more collectivist approach to conducting business. BBT
delegated its needs through a trusted third party, APCG, who had an existing personal
relationship with the owner Mrs. Kuo. This is very common for businesses with a high

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collectivist culture and was clearly present in the direct conversation between BBT and APCG
when she said I would rather work with someone I know. (negotiating across the pacific) Even
APCGs Mr. and Mrs. Tang tried to meet in the middle after conflict had resulted in Bills
misleading information. You know Bill, we are a team, and I made mistakes, too. Not only was
APCG trying to give face to Bill, but this is further proof that negotiations are a team sport in
China. (Forbes, ).
Even when both companies utilize the individualistic approach to conduct business,
costly conflicts can most certainly arise. The tendency to watch out only for yourself was made
evident when a flood delayed production and even though Dr. Fisher and Bill had an existing
relationship, Dr. Fisher did not sympathize with Bills predicament and instead defaulted back to
making sure his house was in order.

3.3 Cultural Characteristics (Cross Cultural Negotiation Variables)


Negotiations styles are highly dependent on the cultures involved in active negotiations.
The biggest differences in communication styles at play in this case are high context (BBT)
versus low context (Bill) which determine how conflict is resolved, context clues are interpreted,
and how negotiations are conducted. BBTs negotiation tactics would be more consistent with
expressive oriented conflict approach, where the situation is handled indirectly and implicitly.
Bill and Dr. Fisher would negotiation using a more instrumental oriented conflict approach,
where factual information and logic was used to resolve issues.
For BBT trust was being built by the back and forth dialogue which started during the
negotiation process, but was devastatingly broken by Bills failure to mention he was not the

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direct supplier. Whatever small amount of trust BBT had towards Bill and the actual trust they
had with APCG drastically changed once BBT was informed of Bills lie by omission. Bills
need for quick responses and his ridiculously high quoted price in the beginning also went
against the core concept of negations for BBT, which highly contingent on long term cooperation
and not one time resolutions.
When negations start in America it almost always revolves around price or financial
obligations, but for Chinese businesspeople it is broken down first into the technical details and
then the commercial. (pg. 159) In this case we saw both parties meeting in the middle, most
likely due to the third party consulting company APCG. BBT had to first negotiation the details,
nailing down the product name and packaging, before being able to continue with other
negotiations. (pg. 8 negotion pacfici) Another frustration that is linked to negotiation behaviors is
that in China the government plans a pretty big role, where it sometimes is the authoritative
decision maker of a deal. BBT being named Beijings Most Admirable Foreign-Funded
Enterprise allowed for some autonomy but BBT still enlist the services of Beijing International
Trading Co. Ltd to handle the import process. Governmental interaction or hindrance is common
place for BBT but not for Bill who was surprised by the delay. (pg. 158). Negotiations for
Chinese businesses do not stop when the contract is in, but formally begin ongoing negotiations.
(china business review)
3.4 Solution and Action Plan
Whats done is done, so listing how things should have been done will not be a
productive. Taking a step back to actually follow the negotiation process, will be key to the
potential success of future negotiations. It is extremely important for both parties to realize that
their negotiation tactics are polar opposites. Bills methodology is built around individualistic

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tendencies and is by nature short term oriented. His methods can be interpreted as impatient and
his to the point, straight forward attitude towards conflict resolution can be considered
confrontational. If each party would move forward with only the negotiation process, starting at
preparation and ending with concessions and agreement, without factoring in varying negotiation
styles, they would most likely end in a very similar predicament again.
Another solution might be to enter into an atmosphere where there is an understanding of
the cultural differences and cultural sensitivity is dulled to the point of accident insults or faux
pas being acceptable. In order to eliminate miscommunication completely this solution would be
financially expensive since both BBT and Bill would need to enlist third party consultation firms.
Not only would this save face, increase the overall harmony and resolve translational noise, but
would also allow for both parties to voice their disagreements in a non-threatening manner to one
another (connecteast). This solution might allow for a one time compromise but will hinder the
development of personal relationship which is key to successful business with BBT.
Different solutions become clear choices for each party when considering an
individualistic approach. If BBT only cared about its own interested they would continue with
the lawsuit and start a relationship directly with the supplier, NutriNex. Disadvantages are
plentiful since there will be even more of a divide due to direct contact of these clashing cultures.
In order to not let this situation spin out of control into an international law suit, which
neither side undoubtable wants to do, both parties need to agree to a transparent and equally
beneficial action plan. BBT, having called Bill arrogant, will need a heartfelt apologize on
Bills part in order for discussions between the two parties to resume. Although Bill will have to
face his mistakes and swallow his pride, this attempt at giving face will help mend the broken

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trust between BBT and Bill. APCG had cleverly devised a scenario in which the compensations
from both APCG and Bill would be dropped during the next contract, so as to make up for the
financial losses of the current dealings. Unfortunately, by the looks of it, this suggested deal had
not reached BBT desk. After Bills step in the right direction, BBT might be receptive of this
middle ground offer seeing as how they would still be thinking of long term goals and this would
most definitely work out in the long run. Bill would have to forego short term gains and
instantaneous gratitude for a piece of the preverbal pie. In the beginning communication should
be conducted in a cultural neutral environment as to avoid any further miscommunications.
In order to continue this new action plan some changes need to be made in the way all
parties communicate, negotiate, and build relationships with one another. The most direct and
effective way, although it may take the longest, would be to a continuous giving and receiving of
face. Small gifts, praise where it is due, respect of each others character, and the pursuit of
fostering a mutually personal relationship with Bill and BBT will go a long way. Cross cultural
education of all parties should be viewed as mandatory and a certain degree of cultural neutrality
should exist when direct interactions are conducted. Bill needs to understand that him being
patient and understanding of elongated responses and decisions means BBT is weighing all risks
and benefits, but on the other hand BBT needs to realize they are dealing with a cultural that
emphases effect use of time, hence the saying time is money. Clearly defining the start of the
negotiation process and for the sake of BBT an easily way out of a conversation or business deal
should be included in the future contracts in order for all parties to save face. Saying no is a
seldom used word for Chinese businesspeople, even though Bejing companies tend to be more
direct. The factors needed to ensure a successful strategic partnership between BBT and Bill, will

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be highly dependent on patience, cultural sensitivity, respect, cross cultural knowledge,


preparation, and the evolution of a personal relationship.

Bibliography
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Huang, J. (2013, May 13). Four Strategies to Negotiate with the Chinese. Retrieved April 25,
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Lin, X., & Guan, J. (2001). Negotiating Across the Pacific. In Case research Journal (4th ed.,
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Perkowski, J. (2011, March 28). Negotiating In China: 10 Rules for Success. Retrieved April 25,
2015, from http://www.forbes.com/sites/jackperkowski/2011/03/28/negotiating-in-china-10rules-for-success/

Appendix 1