Cross-Cultural Negotiation

CROSS-CULTURAL NEGOTIATIONS

CROSS-CULTURAL NEGOTIATION

Americans Negotiating a Contract in China

Prepared for

Mr. Artimus Pyle

Chief Negotiator Assistant, Negotiations Department

Major Vehicle Component Company

Graball, AL

Prepared by

Student name

Business Intern, MVC

Graball, AL

Date

CROSS-CULTURAL NEGOTIATIONS

Letter of Transmittal

Graball, AL

Artimus Pyle, Chief Negotiator Assistant

Cross-Cultural Negotiations

Major Vehicle Component Company

Graball, AL

Dear Mr. Pyle:

Here is the report authorized in December highlighting the cross-cultural issues in business

communication between the American Motor Company and the Chinese company aimed at

signing a joint venture. The report provides recommendations to address the issues related to

trust, patience, and Confucian and guanxi communication styles that are prevalent in the case

study.

The different cultural aspects of the American and Chinese culture act as barriers to effective

business negotiations. The American has a stereotypes and perceptions that the Chinese people

are tough in business negotiations. The Chinese researched the American company and also

perceive that the Americans are autonomous and somehow rude in business negotiations. The

cross-cultural issues impact the communication and decision making process in multiple ways.

These issues affect the success of the business negotiation process.

To help alleviate the conflicts and barriers that arise in the case study, the negotiators should

attain cultural competency. This entails sufficient understanding of the counterpart’s culture

which will ensure they have a clear perception and understanding of what to expect and meaning

of the different communication connotations utilized by the counterpart culture. Additionally,

patience and essence of time should be utilized since the Chinese value patience and aim at

building trust within the business negotiations. Also, the Chinese business network is influenced

by Chinese bureaucracy and contribution of other background players, which may slow the

business negotiations process. With the consideration that the cultures share different

communication styles, it is essential that mutual understanding is achieved amongst the cultures

to ensure both parties understand and benefit from the negotiations and the contract.

The information from this report came from print and online sources. The case study, “Cross-

Cultural Negotiation: Americans Negotiating a Contract in China” by Markus Pudelko was

helpful in exploring the cross-cultural issues in business negotiations in multinational companies.

Thank you for the opportunity to conduct this research. I have enjoyed learning more about

cultural aspects of American and Chinese communication with the case of the American moor

company negotiating a contract with a Chinese company. In case of any question about the

material in this report, kindly contact me.

Sincerely,

Student’s name

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iii

Table of Contents

Letter of Transmittal ....................................................................................................................... ii

Executive Summary ....................................................................................................................... iv

Introduction ..................................................................................................................................... 1

Purpose ........................................................................................................................................ 1

Background ................................................................................................................................. 1

Cross-Cultural Issues in the Case ................................................................................................... 2

Time and Patience ....................................................................................................................... 2

Trust ............................................................................................................................................ 3

Confucian gentleman and Guanxi Chinese Negotiation Style .................................................... 3

Conclusion ...................................................................................................................................... 4

Recommendations ........................................................................................................................... 5

References ....................................................................................................................................... 7

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CROSS-CULTURAL NEGOTIATION

Americans Negotiating a Contract in China

Executive Summary

To enhance business negotiations across different cultures, cultural literacy is required between

the negotiators from the participating cultures. There several cultural issues that arise in cross

cultural business negotiations.

The case of the American motor vehicle company getting into negotiations with the Chinese

company with an aim of establishing a joint venture was unsuccessful attributed to the different

facts with cross cultural issues being one of them. The varying cultural aspects between the

Chinese and the American culture influenced the effectiveness of the negotiators in achieving the

end result in signing a business contract.

The American and Chinese negotiators held varying perceptions and philosophies about the

counterpart culture which may have contributed to the failure in business negotiations. The

American view the Chinese as tough people in business while on reality they were friendly in

business negotiations. The American cultures perceive the purpose of negotiations is to get into

signing the contract while highlighting the need for changes within the terns of agreement.

Whereas the Chinese culture perceive negotiation to be a timely process that requires both parties

to build trust through honesty and openness. Chinese view that negotiations are core aspect of the

contract process and a business contract is just a document to justify the negotiations. However,

the Americans believe in business negotiations in getting into the details of the contract and signing

the contract. The differences in the cultural contexts between the American and Chinese cultural

contribute to communication conflicts which may be assumed to be the cause of failure of success

business contract. Trust, patience and Confucian and guanxi communication styles are prevalent

issues within the case study. The issues are discussed in the paper and proposals to help resolve

the failures in cross-cultural communication and business negotiations are explored.

To address the cross cultural issues in business negotiations, the American and Chinese negotiators

should focus on achieving cultural literacy by understanding the varying cultural contexts of the

other culture. The negotiators should;-

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 Have sufficient understanding of the other culture before getting into negotiations. Cultural

literacy is critical in helping to reach business agreement to achieve successful business

negotiations.

 Develop an awareness of the dimensions of the Chinese culture which will help predict and

interpret the behavior of the Chinese in the business negotiation.

 Implement patience in business negotiations. Chinese need time to build up trust and get

to understand the personality and sincerity of the negotiating culture before moving ahead

into signing contracts.

 Ensure that trust has successfully being built in the early stages of the negotiation process.

Chinese tend to be open and sincere with people they can trust which will help to provide

adequate information to improve the negotiations by making the persuasion process less

time-consuming.

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Introduction

Purpose

Cross-cultural communication in business communication has evolved with the increased

interest of countries such as China focusing on doing business with western countries such as

Europe, Canada, and the United States. The purpose of this paper is to examine the cross-cultural

issues in business negotiations. In particular, it seeks to address the cross-cultural issues in the case

study of business negotiation between America and China.

Background

With globalization, businesses have expanded their market share to international borders.

This has raised the issue of cross-cultural communication in business negotiations. With the

different cultures such as Americans, Indians, Japanese, and Chinese, which all have distinct

beliefs and characteristics that shape choices and decisions made by individuals, it is essential to

articulate the facets of culture in communication. Considerably, it is crucial to note the differences

in cultural aspects that may lead to successful business negotiations or failures. Some cultural

aspects of communication may be acceptable to one culture, while another culture may find the

same aspects to be unacceptable.

Ferraro and Broody (2017) assert that different cultures share different views about the

process and purpose of the business negotiation process. While some cultures view negotiation as

a conflict in which one party loses and another wins, some view it as a collaborative process

amongst the parties. Additionally, cultures stress on different aspects of the negotiations. Some

culture emphasizes on trust and mutual business relationships, while others focus on substantive

issues directly related to the business contract.

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Business negotiations are attributed to both parties realizing purposeful benefits. Parties in

business negotiations aimed at reaching an agreement. The agreement is the core point of focus in

any negotiations. Although negotiations are aimed at ensuring each party enjoys maximum

benefits from the agreement, it is imperative to note that the cultural aspects influence the

negotiation process. To analyze the cultural issues and their different meaning and effects in

business communication, this paper will examine the case study about Chinese and American

business negotiations. The case study will be used to analyze the issues in cross-cultural

communication between American and Chinese culture and formulate recommendations to

address the issues.

Cross-Cultural Issues in the Case

Time and Patience

The value of time varies from one culture to another. In some cultures, time is considered

limited and thus should be used wisely. On the other hand, some cultures such as the Chinese, they

believe that time is always sufficient, and in this regard, patience should be utilized which slows

the progress of negotiations. Chinese take considerable time to build up business relationships by

gaining trust and deciding the genuine interests and personalities of the Americans (Liu &Deng,

2014). However, the Americans view the process to be time-consuming and rather want to get

directly into signing the business contract. The negotiation process started out well since both

parties had conducted some research about the counterpart culture. However, after highlighting

the general principles, the Chinese raised concessions time to time which was a nuisance on the

American’s part. The Chinese needed more time to get to more information about the American

negotiators.

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Trust

One of the foremost factors that determines the long-term success of businesses working

together is trust. Trust is essential in business agreement in ensuring both parties benefit mutually

from the negotiations and the business agreement. It is a necessity that parties seek to establish

trust in the negotiation process. Trust is vested in the communication style and skills utilized in

the negotiation process. Chinese, a high context culture, values communication in explicit codes,

that is, Chinese people are not likely to express their views explicitly and openly. On the other

hand, the American, a low context culture values openness and direct communication with less

attention on hidden contexts(Lee &Seo, 2013).The differences in communication style among the

two cultures create a barrier to both parties trusting each other. As shown in the case study, the

Chinese business based on friendship, personal relationship, and trust and not on the basis of a

written agreement. Conclusively, Chinese culture believes in trust in building successful business

ventures.

Confucian gentleman and Guanxi Chinese Negotiation Style

In Chinese culture negotiations are based on mutual trust and benefit. The business

negotiations seek to ensure that both parties succeed and benefit from the agreement and expects

the parties to show trust and sincerity throughout the negotiation process. The Confucian

gentleman negotiation style in Chinese is based on enhancing cooperation of the other party. The

choice of the negotiator is a determinant of the success of the negotiation and final decision of

signing the agreement. The selected team or individual negotiator affects the attitude and choices

of the Chinese negotiator towards the host company (Lee & Seo, 2013). Chinese cultural values

slow progress in business negotiations. They loathe fast talkers and view this as greed for the

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Americans who want to make quick deals that may be manipulative to the Chinese company.

Chinese expects the other party to portray patience, calmness, persistence, tolerance, and honesty

to win the trust of the Chinese business people and the government which is an important party in

business networks (Fang, 2014).Considerably, cultural contexts and the constant flux of most

cultures influence individual’s behaviors and choices in multiple ways.

In Chinese Culture, Confucians and guanxi values respect for the elders and seniors and

sincerity in business negotiations. As seen in the case, the Chinese negotiator was not happy with

the fact that the CEO of the United States MVC firm did not attend the negotiations. This principle

follows organizational hierarchy in business negotiations and decision-making process. With this

in mind, the Chinese people are less reluctant on signing agreements rather they focus on building

trust and mutual relationships with business partners. On the contrary, the Americans, as

highlighted in the case, were more concerned about the agreement and the profits. Although the

Chinese view verbal communication and agreements to be effective in business communications,

the Americans emphasize of written contracts in business communications.

Conclusion

Cultural differences influence people’s values, philosophies, and perceptions in business

negotiations. Some ideas in the American culture have a different connotations in the Chinese

culture. For instance, Chinese value handshakes as a critical element in starting off the negotiation

process. Also, the Chinese and Americans have a different view of the purpose and the process of

business negotiation. For instance, the Americans view the negotiation process as way to close

business agreement through binding of contracts. Chinese view negotiations as a way to achieve

mutual trust and beneficial business relationship in which the contract justifies the existence of the

relationship. In application to the case of study between the American MVC companies negotiating

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for a joint venture with the Chinese company, several cross-cultural issues are highlighted that

seem to have contributed to the failure of the business negotiation. The two cultures share different

views regarding the essence of time and time schedules in a business negotiation. Secondly, the

American and Chinese cultures show the need for trust in influencing the success of the business

negotiation. Contrary to the American culture, the Chinese to do rush into signing the contract

rather they stress on building up trust. Lastly, the two cultures portray different communication

styles in business negotiations which are influenced by the cultural context. The Chinese culture

values influence the Confucian and guanxi communication style in the case’s business

negotiations.

Recommendations

Cross-cultural negotiations are influenced by different aspects of culture among the

participating nations. To help solve the issues highlighted in the case, there is the need for

understanding and awareness of the cross-cultural communication skills and understanding of the

cultural context of the participating parties, which can simply be referred as cultural literacy or

cultural competency. The first step in addressing the issues in cross-cultural business negotiations

is ensuring negotiators have an understanding of the cultural aspects of the culture of the other

party. Cultural literacy can be attained by research aimed at understanding the cultural aspects of

other cultures (Ferraro & Briody, 2017). This will help alleviate the stereotypes and bias associated

with cultures. Cultural literacy will enhance effective business communication which improves

business negotiations. The American company needs to have a sufficient understanding of the

Chinese culture before getting into negotiations. Cultural literacy is critical in helping to reach an

agreement to achieve successful business negotiations.

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The recommendations can be utilized to help achieve successful business negotiations between

Chinese and American cultures;

 Develop an awareness of the dimensions of the Chinese culture which will help predict and

interpret the behavior of the Chinese in the business negotiation.

 Patience is key in Chinese business negotiation process. Chinese need time to build up trust

and get to understand the personality and sincerity of the negotiating culture before moving

ahead into signing contracts.

 It is essential to ensure that trust has successfully being built in the early stages of the

negotiation process. Chinese tend to be open and sincere with people they can trust which

will help to provide adequate information to improve the negotiations by making the

persuasion process less time-consuming.

CROSS-CULTURAL NEGOTIATIONS

References

Fang, T. (2014). Understanding Chinese culture and communication: the Yin Yang

approach. Global leadership practices, 171-187.

Ferraro, G. P., & Briody, E. K. (2017). The cultural dimension of global business. Taylor &

Francis.

Lee, S., Adair, W. L., & Seo, S. J. (2013). Cultural perspective taking in cross-cultural

negotiation. Group Decision and Negotiation, 1-17.

Liu, Y., & Deng, P. (2014). Chinese cross-border M&A: Past achievement, contemporary

debates and future direction. In Advances in mergers and acquisitions (pp. 85-107).

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