Segolene de Couessin - M00375188


Managing Across Borders - MGT3203 Individual Coursework

Guanxi in Jeopardy

Relationships between China and the rest of the world have known an incredible
progression since the Four Modenizations policy. The rate of Chinese economic growth improved and sustained at around 10% those last years, and the West is investing in this country more than ever, attracted by its 1,34 billion potential customers. But it is also because China is the ideal Asian gateway for Western firms. At the same time, China is one of the world’s oldest civilizations, and traditions are still very important in this country. Thus, more than anywhere else, the influence of culture should be taken into account and be the core of strategic choices. But first and foremost, it is worth recalling and reminding the deep signification of the word negotiation. According to the Business Dictionary, it is a “process between two ore more parties (each with own aims, needs and viewpoints), seeking to discover a common ground and reach an agreement to settle a matter of mutual concern or resolve a conflict”. It is particularly important to highlight the notion of “agreement” and “mutual concern” in the case of Joint Venture, which itself is a partnership and a temporary arrangement. It is clearly suggested that there is a need to acquire a profound knowledge of the other in the case of a negotiation, and particularly to negotiate a Joint Venture. It is therefore true that negotiation activity has skyrocketed in China, but nevertheless these negotiations are frequently unsatisfactory, because they still do not incorporate the knowledge of the Other and his various cultural profiles and values. This case “Guanxi in Jeopardy” is an interesting example of cross-cultural negotiation, and we could wonder how Electrowide overcome those difficulties, and which strategy should be the best one. First of all, to answer this question, it is important to define the gap between Western and Chinese culture, and then secondly consider how the negotiation have been carried out against this background. Then, with those enlightenments in hand, we could evaluate the choices made by Electrowide’s team, and finally suggest a strategic alternative to Tom Sherman.

which is a result of their competitive business ethics. The Westerners put the individual after the company. while Americans doesn’t want.M00375188  The gap between Western and Chinese culture (Question 1) Although China’s imperial institutions end one century ago. Our case involves a multi-billion dollar American manufacturer of automotive electronics products. the predominant characteristics of U. offering another new face to the world. The interest of Electrowide was the geographical position of en Asian partner. criteria for the JV have to be met. as Confucianism and Taoism. and an enterprise of the Beijing municipal government.S culture are capitalism and efficiencyoriented control. Without the correct understanding of the “Other”. dinners. Indeed. On the other hand. History is still the cement of current China. Undeniably.  Negotiations between Electrowide and Motosuzhou (Question 2) With the background of cross-cultural business. Taoism emphasizes harmony with Nature2. in order to . The Chinese use the term Guanxi to indicate a trust-based. family orientation and the concept of face1. impersonal. and even worse. traditional Chinese philosophies. In our case. This is reflected in the more pragmatic and results driven approach to business negotiations. many westerners find Chinese negotiators to be inefficient. this is illustrated by the interest of Tom’s counterparts for the visitors’ personal lives. Chinese negotiators consider that their western counterparts are aggressive. present… Failure to follow Confucius’ moral code in business could lead to public disapproval and destroy the reputation. indirect. and probably felt humiliated. Confucianism is a form of moral ethics and a doctrine of relationships involving six core values: moral cultivation. and more specifically in negotiation. pursuit of harmony. the importance of interpersonal relationships. XXI Century has witnessed China’s deep transformation. For the Chinese. Yet. reciprocal relationship. at first glance. Therefore it is difficult for a Chinese to accept “constructive criticism” approach frequently adopted by westerners during public presentations. Chinese and Western negotiators often harbour mutually unfavourable perceptions. First. It is consequently manifested with patience. remain the core value system in Chinese business behaviour today. and we can understand that the Ai Hwa’s reaction at the end of our case. This paradox is omnipresent including in the business arena. anchored in tradition but opened to the modernity. but also in their Win-Win conception of negotiation and their pursuit of harmonious relationships even in business. to build personal relationships. It is an important illustration of the gap between both culture. Americans are often “struck by the spread of a grasping. money-seeking mentality”4.Segolene de Couessin . respect for hierarchy and seniority. a contrario. accept a personal gift. and dishonest. and business can only be settled if the trust is allowed. jeopardizing respectability. thus finding a middle ground or a compromise3. and the elevation at the top table of world powers. which means finding the Tao (the Way) by a perfect balance between the Yin and the Yang. and all moves are taken in the aims of succeed in their mission. They cannot imagine the possibility to create a relationship between individuals in the context of a Joint Venture negotiation. is linked to this concept of face. and insincere.

Positive points are Barb who can speak conversational Chinese. Electrowide had two possible choices: either it should have had chosen a team with some Chinese negotiations experience. both of them would like to take advantage of a relationship with local government policies. or it should have had trained this team on the Chinese culture and business relation. and a development in the region. the company did not make the appropriate choices for this negotiation. who has never been in such a situation. but even more for Chinese. the JV can be in jeopardize. and at this level there is a win-win situation. With an educated group some mistakes could have been avoided. Moreover. this special relationship is built on trust and communication. which is communication and trust. Marc Porter does not have the qualities to ease Chinese relationships. the Chinese business organization does not completely match with the American point of view. Negotiators had not the appropriate knowledge of the country and its culture.M00375188 - take the opportunity of an important potential market in China. as I previously highlighted. if they had made inquiries. they would know that a woman (especially the only one who speak Chinese) would not be a better choice. As for Motosuzhou. the organization minimizes the risks. especially the accounting system. Electrowide would like to expand their market and increase the efficiency. is looking for a common ground. So. it is worrying to notice both parties standing their positions when the definition of the term negotiation. Nevertheless. Indeed. and in its accounting practices.Segolene de Couessin . frustrations. For these reasons they feel lost in the negotiation. Tom Sherman’s team does not understand its counterparts and can’t sit around a table to discuss issues. and Tom’s long career path within Electrowide. giving in addition another mission to her. At this point of negotiation. like refuse some present. nights out…). It is important in the context of negotiations. Indeed. Indeed in China it is the right "Guanxi" that makes all the difference in ensuring that business will be successful. But we could also emphasize the negative points of the team to explain the failure of the JV. and do not present a written contract in English to Ai Hwa Chew. Furthermore.  Electrowide’s team and decisions (Question 3-4) Electrowide team certainly has had a role to play in the jeopardizing of negotiations. eventually with concessions. which is in opposite of Chinese culture ways. The . while Motosuzhou would like to keep entire control in its local market. Yet. By getting the right "Guanxi". He is individualistic and self-propelling. These remarks bring us to an other key criteria for a JV partner. but also with the productivity policy. its interest was the opportunity to acquire technologies and valuable business know-how. Finally. and the idea to make a contract without Motosuzhou opinion was the illustration of the end of a possible communication (which is already complicated by the language barriers). none of them have degrees that would benefit in international business management. including the leader. It is all the more regrettable that the head office did not help. the two team members international experience. and disappointments when doing business in China. These mistakes greatly offended Motosuzhou and put in jeopardize the JV. and without these important criteria. do not accept the rule of Guanxi (means dinners. As far as I am concerned. Tom Sherman. strategic interests and operating policies are complementary.

companies will need to become adept at conducing international negotiation with difference business culture. a preparation for this mission. Many firms rush the process of partner selection and all that comes with it. usually because of ineffective managerial decisions including careless partner selection”. differences of culture and language. A substantial body of research already exist on the topic of negotiating with the Chinese (numerous books and websites). Not to be aware of this different culture can obscure decision-making processes. especially in the emerging market like China. some curiosity. “60% of IJVs fail. a different way of life… Particularly. which could become a new “centre of gravity”. that China is the second country to prefer Problem-Solving Negotiation Strategy6. empathy. to establish long-tasting relationships and mutual trust.  Conclusion The most important single factor determining IJV success or failure is the choice of a partner7. western businesses negotiating with Chinese firms face many challenges. . As the world’s market becomes increasingly global.M00375188 - According to Helen Deresky5. It was pointed out in a survey. The third alternative strategy could be the adoption of a Problem-Solving Negotiation and seek mutually satisfactory ground. It is totally in accordance with the Chinese culture. or flexibility would have made this a successful Joint Venture.Segolene de Couessin . that it to say the human question. which is beneficial for both companies (rather than competitive negotiation).

Culture as a Driving Force for Interfirm Adaptation: A Chinese Case.pdf International Joint Ventures: A Welfare Analysis: http://unpan1.hbs.137-148 Cultural Notes on Chinese Negotiating Behaviour: http://www.233 Salacuse.M00375188 - Sources: 1 et 3 2 Tony Fang. An Important Chinese Business Element http://chinese-school. Issue 30. Negotiation Journal. April 1998. pp. 7th ed p.29 Tony Fang. Chinese Business Negotiation Style p.un. Negotiation: the Chinese Concept. “Ten ways that culture affects negotiating style: Some survey results”.109 – International Management Managing Across Borders and de Couessin . 2001 4 J. Some Strategic Speculations about International business in China 5 et 7 Helen Deresky.html . Negotiation Journal. Frankenstein. July 1998. pp. 221-240 6 Guy Olivier Faure.pdf Chinese Business Culture. Jeswald W.

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