Executive Summary

Cross-cultural differences in business negotiations are highly relevant in international business relations. The understanding and appreciation of differences in culture is important in providing a solution to the challenges and problems often encountered in business negotiations. The case study utilized is the case between Mr. Jones, an American negotiator representing an American firm, and Mr. Wang, a Chinese negotiator representing a Chinese firm. The discussions include an introduction of the problem statement, a brief background and history of culture and business relations, a comprehensive discussion and examples of the problems encountered during negotiations between Mr. Jones and Mr. Wang, and recommendations regarding future solutions to be implemented towards the problem.

Introduction

In many aspects, business negotiations occur at national and international levels. At the national level, it is simpler to focus on tactics of persuasion and other mitigating factors between negotiating parties. However, at the international scene, cultural differences between negotiating parties tends to create impeding factors to proper negotiations (Singh & Singh 203). In the case of Mr. Jones and Mr. Wang, cultural differences affect their outlook in business and personal beliefs; which in turn, affect their ability to negotiate throughout the scene.

Background and History

The American and the Chinese cultures emerged and grew at different stages in time, and the two countries have developed under different forms of rulership. The Chinese system of governance has largely been dynasties, and their cultural living has often bee defined as ‘communal’ (Singh & Singh 205). As communal populations, the Chinese understand and accept family values as dictated by the community, and communal living is a major part of their livelihoods.

Americans emerged as a colony of the British empire, and later, became the champion for democracy and democratic governments led by the rule of the people (Singh & Singh 204). Based on this developmental path, Americans are believed to be capitalists embedded in the Marxist theory of capitalism. Given that the two countries are geographically segregated (America is in North America while China is in Asia), the evolution of culture in the two countries is diverse. As such, their perspectives on business negotiations differ significantly.

Cross-Cultural Differences in Business Negotiations

Community Allegiance vs. Company Allegiance

The first cultural difference encountered in the negotiations was the “relations” mentality. The mentality is common among any groups of people who have established familiarity. In this case, the interpreter was an American citizen with Chinese origins, and who worked for the Americans as an interpreter (Pudelko 1). During the negotiations, the Chinese felt that the interpreter should have more allegiance to them than the Americans because he is a part of their origins. This is a common misconception and mistake people make in business negotiations (Pudelko 2). The bond of familiarity can, at times, be misguiding. It is common in instances where an individual seeks to establish commonality regardless of the person’s cultural upbringing (Singh & Singh 204).

Examples of this cross-cultural differences exist in life. For example, Africans who emigrate into the United States are more friendly to African-Americans because of their relationship in skin color; completely disregarding the effects of culture in the behavior of the two people. Thus, in this case, there was a difference in perspective between Americans and Chinese (Pudelko 1). The Chinese expected loyalty and support from the interpreter because he had Chinese origins, and implied that Chinese is a community which should work towards their own advancement (Pudelko 2). However, Americans viewed the interpreter as an employee whose allegiance lay with the American company, regardless of his origins or ethnicity.

Effects of Guanxi in Business

The second cultural difference affecting the negotiations was the effect of guanxi. The concept lay in ancient Chinese tradition where the target of persuasion is the belief in relationships (Pudelko 3). The Chinese have a strong belief that people exist because of the connections they have with each other. Although guanxi is central to Chinese business culture, it is a value practiced in many individual lives (Pudelko 3). For instance, we are more likely to trust family members than strangers, or trust people we know than those we do not know. A similar concept is applied in Chinese negotiation culture.

The Chinese delegation, through Mr. Wang, urge the Americans to take the senior officials to dinner and build a repertoire with them (Pudelko 3). From the perspective of the Chinese people, this will help reduce the tension between the two groups, foster understanding and cohesion among them, and reduce the time it takes to get the planning permits for the plant to the constructed (Pudelko 3). In Chinese culture, guanxi is important because people can use their connections to obtain something, and to help others. This, though centered on communal living, revolves around the principle of ‘give-and-take’ in business culture.

However, the assessment of this policy sounds more like corruption to the Americans. Americans believe in a strict code of conduct and staunch reliance on principles to complete business dealings (Pudelko 4). In their perspective, giving the Chinese head officials preferential treatment would imply persuasion and coercion through gifts and freebies; a policy that most American cultures do not entertain as “researchers have discovered that American managers are more loyal to their ethical beliefs, rather than to their superior’s or company’s ethical beliefs” (Garcia et al. 304). Seemingly, the Americans fail to understand that the Chinese do not view business negotiations as a one-off occurrence, but believe that people who discuss business are likely to engage in business over numerous occasions (Pudelko 3). Thus, although it might seem like corruption to the Americans, it is technically a way to build rapport with everyone involved.

Conclusion

Although many cultural differences exist between the Chinese and the Americans, the two discussed above are most relatable to business occasions. The Chinese people are highly impacted by their culture because it is homogenous, societal and has an impact in every aspect of their lives. The American culture differs significantly from the Chinese culture because of the geographical, political and social differences between the two nations.

This explains why their outlook and viewpoints in life are different. The Chinese believe that their people should be united; regardless of their locations globally. This includes the American-Chinese interpreter involved in the discussions. The Chinese believe in guanxi to create a bond between any two parties before any business opportunities are sought. However, the practice appears like corruption to the Americans. The difference between the two groups affects their negotiations significantly because the Americans think that the Chinese are conducting business to their disadvantage. As such, several measures should be enhanced during the negotiation process to avoid these challenges.

Recommendations

The first principle measure that both sides should have performed before the negotiations was cultural awareness (Groves, Feyerherm & Gu 209). Cultural awareness involves factors such as cultural knowledge, cultural skills, cultural proficiency, cultural competence and cultural sensitivity. It is always important for both sides to accept and agree that their cultures are fundamentally different and that “it is important to understand these differences to be a successful global manager” (Garcia et al. 304). Acceptance of this fact means that the cultural background of each group will affect their decision making, negotiation tactics and operations within the meeting (Groves, Feyerherm & Gu 211).

Thus, both sides should have acquired cultural awareness by accepting to become sensitive to their perspectives, gain knowledge through reading scholarly sources, become proficient in their cultural practices, and become competently aware of the impacts of culture on business negotiations (Groves, Feyerherm & Gu 210). The first step allows each group to have some information about the other’s culture, and become cognizant of any expected breakdowns in communication (Singh & Singh 204). Groves, Feyerherm and Gu note that “a culturally intelligent individual possesses the necessary background knowledge of a particular culture, as well as the motivation to learn about new cultures and create new mental frameworks” in order to develop behavioral skills in business negotiations (213). For instance, if the Americans understood the concept of guanxi fully, they would not have been confused about its mechanisms.

Secondly, it is important for each group to accept concessions on the negotiating table. Concessions are specific considerations that each side can accept to relinquish to the other side (Singh & Singh 205). The negotiation process is often tedious and bureaucratic in most cases, and on-the-table concessions can be difficult to provide when requested (Singh & Singh 204). Thus, each group must prepare in advance to provide certain concessions depending on the position and principle of each negotiating party (Singh & Singh 205). For instance, “both sides [should] cooperate to reconcile their differences and reach mutually agreeable solutions” (Singh & Singh 205). Especially, this would help the Americans appease the Chinese who view business transactions as a ‘give-and-take’ activity where providing one thing requires one to be paid back in return.

References

Garcia, Fredi, et al. “Cross-Cultural, Values and Ethics Differences and Similarities between the US and Asian Countries.” Journal of Technology Management in China, vol. 9, no. 3, Emerald, Sept. 2014, pp. 303–322. Crossref, doi:10.1108/jtmc-05-2014-0025.

Groves, K. S., Feyerherm, A., & Gu, M. (2015). Examining cultural intelligence and cross-cultural negotiation effectiveness. Journal of Management Education, 39(2), 209-243.

Pudelko, M. (2019). Cross-cultural negotiation: Americans negotiating a contract in China. University of Edinburgh Management School, 1-15.

Singh, A. K., & Singh, M. (2014). Cross cultural communication in negotiations. Scholars Journal of Economics, Business and Management, 1(5), 203-207.