P a g e | 1

Negotiating Across the Pacific

P a g e | 2

Executive summary

All the people involved in the transactions had major cultural difference and none of them had

worked with the people from other culture before. This led to major cultural differences like

implicit communication, different business conducting methodologies of both sides etc. The

Americans have a very practical and matter of fact approach towards business they believe in

hard bargains and haggling while the Chinese are more emotional towards their business conduct

and believe in show of faith and loss of face. Everyone involved in the deal had little knowledge

or information about the thinking or cultural differences shared amongst them. They

communicated implicitly leaving out the harsh realities and often assumed the other person has

understood him.

Hofstede’s had identified the 5 dimensions for values and cultural differences between different

countries. These includes, power/distance, individualism, masculinity, uncertainty/avoidance

index (UAI), long term orientation.

P a g e | 3

Major Issue Presented in the Case

All the people involved in the transactions had major cultural difference and none of them had

worked with the people from other culture before. This led to major cultural differences like

implicit communication, different business conducting methodologies of both sides etc.

Emotional vs. Practical Methodologies of Business Conduct

The Americans have a very practical and matter of fact approach towards business they believe

in hard bargains and haggling while the Chinese are more emotional towards their business

conduct and believe in show of faith and loss of face. Like, even after knowing that the price of

consignment will look extravagant to the BBT, Bill decided to go ahead with it. He thought

according to the American mentality that they will either come back to him stating the price is

very high or they will accept it. Now, both the scenarios are acceptable in American industry and

work ethics. However, If you consider the Chinese they take it as a mark of disrespect and as

they are more emotional and sensitive scoring very high on the fifth cultural dimension of

Hofstede (Long term orientation) decided not to reply to such an extravagant offer and waited for

a month (Wang M. M., 2000). This shows that they were too ashamed to even name a price they

thought to be correct and decided to wait till the other concerned party went back to them with

renewed terms. This affected them to an extent that they thought the Americans were not serious

about the business and even with renewed terms they cut the order by 50%. (H. Geert, 2001).

P a g e | 4

Implicit Communication

Everyone involved in the deal had little knowledge or information about the thinking or cultural

differences shared amongst them. They communicated implicitly leaving out the harsh realities

and often assumed the other person has understood him. There are many instances of such

behavior like: The conversation Edward had with Bill after being confronted by Mrs Ming kuo

that “they will file a lawsuit against Bill if the delivery was not on time” he still omitted this

detail while stressing the point that he should apologize to the BBT and suggested him to offer

BBT a favorable contract without calculating any commission for the work. This led to the

following analysis by Bill: He was under the impression that Chinese people never resort to any

legal formalities and was still trying to make a profit out of the deal and was also not ready to

acknowledge any responsibility for the loss incurred by the Chinese company. (H. Geert, 1984).

Cultural Theories

Hofstede’s had identified the following five dimensions for values and cultural differences

between different countries (Hoftede, G.,). They are listed below:

1. Power\Distance – This signifies the inequality that exists in the society between the

people with and without power. If a country has a high value on this parameter then the people in

that society agree to the distance and hierarchical system. It also suggests that the society’s level

of inequality is as much a fault of followers as it is of the leaders. Anyone with some

P a g e | 5

international experience would realize that all the societies are bound to be unequal but some are

more than others.

2. Individualism – This dimension demonstrates the loyalty and respct people have towards

the society, countries with high value in this does not have a high regard of sharing responsibility

beyond their family and friends. Here everyone is expected to take care of him\herself and their

family. The people are more independent and practical in their approach in this cultural setting

like US and other western countries. However in the countries having low value on this

dimension, people display strong group cohesion with loyalty and respect for the members of the

group. In these societies a person is strongly connected to the society many times their extended

family of aunts and uncle and display an unwavering loyalty towards them.

3. Masculinity – This defines how the much the society follows the traditional male female

roles and values. High score in this dimension results in a society where man is still looked upon

as the provider and the stronger of the two sexes. In this society men are expected to be strong

and assertive. Women are allowed to work outside of home but they have different jobs than

men. On the other hand, in a society with low Masculinity index the jobs and responsibilities of

men and women are blurred together. Women are considered equal to men and do all the jobs

which men do. It has been observed that Men’s value change more than the female values in

some societies they are more assertive and competitive and in others they will be modest and

caring which is more similar to the women’s values.

4. Uncertainty/Avoidance Index (UAI) – This part defines the anxiety of society members

when confronted with unknown or uncertain situations. The nations which score high on this

index try to avoid these situations whenever possible. They try to achieve a collective truth

which is governed by rules and order. These people are afraid of innovation and new ideas and

P a g e | 6

believe in traditional order of things. The other side of spectrum shows us countries where

people are encouraged to form new thoughts and ideas and pursue them; the risk of failure

associated with these ideas is also acceptable to the society. This results in a more independent

thinking and a practical approach towards work and business. There are rules in these countries

but people are encouraged to find their own truth rather than seeking the collective truth as in the

case of countries scoring high on this dimension.

5. Long-Term Orientation – This dimension was added later after a study on student in

various countries. Hofstede deduced that the countries scoring high on this believe in long term

relationships. People in such countries believe in doing business with a long-term relationship in

mind. They prefer to do business with only their known associates or relatives. The countries

scoring low on this do not mix emotions with their business and will only associate with

someone till it is profitable to them and are very practical and upfront about it. (H. Geert, 1984;

2001).

The dimensions discussed above are observed at various places. BBT only decided to work with

the western companies once they were assured by a long term known associates and friend

Edward that he will oversee the transaction. The loss of face suffered by Edward in front of Mrs

Ming Kuo, when he withheld information from her stating Bill is the actual seller while he was

only a facilitator in the deal shows High values and ‘Long-Term Orientation’. The refrain from

the Dr. Fisher to complete his verbal contract shows the low ‘Long-term Orientation’ and

individualism.

Cultural Characteristics Impacting the Issue at Hand

P a g e | 7

Power\Distance – Bill Wright was an executive vice-president and his work was not concerned

with the day to day functioning of the company. This shows that he was not in contact with the

people with lesser pay-grade and also shows the distance between the people with and without

power. His work was more directed towards exploring new business possibilities out of the

country; this also provided him with opportunities to work with people in Europe.

Individualism – This characteristic was visible many times in this case study. It is clearly

evident that the Chinese people have a high group cohesion value; they are more intent on trust

and relationships and feel comfortable with doing business with only people they have known for

long or people that have been vouched for by some known acquaintance. This can be seen in the

discussion between Mrs. Ming and Edward when she says ‘I would rather work with someone I

know’. It is also established that Edward and Mrs. Ming had known each other for a long time

and she had expected him to be trustworthy. The Chinese also believe in ‘Guanxi’ or Face. It can

be understood by the fact that Mrs. Ming believed in Edward to provide them with a trustworthy

supplier so in effect Edward is giving face to the US supplier and US supplier is taking or

borrowing face from Edward. In Chinese terms this is a favor from Edward which the supplier

would have to pay back as and when requested. Now, for Americans we see a completely

different approach and understanding. Bill and Dr. Fisher had known each other for a long time

and they were good friends so, Bill did not find it necessary to have a written contract between

them regarding the delivery of product. This came as a major blow to Bill when he asked Dr.

Fisher to make an exception this time and try to find a way to make the delivery on-time as they

had been agreed upon but, Dr. Fisher plainly told him there was no signed contract obligating the

company to keep their end of the bargain.

P a g e | 8

Uncertainty/Avoidance Index -Bill had never worked with the Chinese before and he was

taking a big risk launching this trade by taking the full responsibility as the supplier, but he could

go ahead with his plan in-spite of taking the whole responsibility on his shoulders. This is the

culture promoted in countries with low value of uncertainty avoidance index. Bill was ready to

explore and find his own truth and never thought of it to be compelling to follow the normal

order of things and do business with people he already knew like European countries. The

Chinese have a more group truth approach this becomes clear when BBT provided no response

for 4 weeks after receiving the exorbitant quotation from Bill. The words used by Mrs. Ming

shoes they were hart to an extent that they thought the seller was not serious to do business with

them. The unrealistic high pricing in the contract was taken as a mark of disrespect by the

Chinese. The reduction of order by Mrs. Ming shows Edward had lost face in front of Mrs. Ming

and now they did not trust them enough to give them a big order of 40 ft container and reduced it

to 20 ft.

Long-Term Orientation

BBT was looking for a long term relationship and they even stressed on the fact they would like

to have a reliable supplier with whom they can associate themselves for a long time. This shows

the Chinese intent of Long-term relationships. They also appointed Edward as their front and

trusted him to provide him with a reliable supplier. Their confidence was however broken by

Edward when he withheld the information that Bill was a middleman and was not the real

supplier. The Americans however do not involve emotions in business, This is displayed by the

fact that Bill quoted a unacceptably high price by any standard and even after being confronted

with Edward decided to go ahead with this stating ‘We can always back-down if they say the

P a g e | 9

price is too high.’ This shows he was not looking at the broader picture of long-term relationship

but was intent on making considerable profit on the first deal. (Wang M. M., 2000).

Solution and Action Plan

In an international business scenario, cultural differences are very likely to arise. Different

cultural have different sets of implied rules and different dynamics. It is very important for the

both the business companies to understand the fact that cultural differences will occur and be

cognizant of the results pertaining to that. Everyone involved in the deal had little knowledge or

information about the thinking or cultural differences shared amongst them. They communicated

implicitly leaving out the harsh realities and often assumed the other person has understood him.

There are many instances of such behavior like: The conversation Edward had with Bill after

being confronted by Mrs Ming kuo that “they will file a lawsuit against Bill if the delivery was

not on time” he still omitted this detail while stressing the point that he should apologize to the

BBT and suggested him to offer BBT a favorable contract without calculating any commission

for the work. This led to the following analysis by Bill: He was under the impression that

Chinese people never resort to any legal formalities and was still trying to make a profit out of

the deal and was also not ready to acknowledge any responsibility for the loss incurred by the

Chinese company (Crisp R. J., 2010). Some of the solutions to such discrepancies are listed

below:

Culturally Neutral: Both parties should behave in a culturally neutral way as much as possible.

This can be done by following a very cold approach, where in they can avoid personal flavor to

the deal and do the business very professionally. All the steps are written down and every

approach is formally followed. Advantage is that the companies will be formal towards each

P a g e | 10

other and hence it will minimize any risk pertaining to cultural differences. The biggest

disadvantage of this approach is by avoiding personal flavor, long term relationship is at risk.

Moreover, it inhibits mutual relations which can strengthen their business relation.

Cognizant of Culture and Value system: It is a very suitable step, if both the companies before

undergoing the business deal are cognizant of the basic cultural differences between them. It

helps them to understand, where the misconceptions can arise and thus can avoid the same. They

can have a communicator in between who is aware of both cultures and thereby can state things

clearly in the respective business side. It is beneficial in the sense that, it would eliminate the

opportunities of miscommunication and thereby would lead to success of business operation. The

limitation of this step is that it would need prior work and hence can delay the business

operation, which itself can cause loss of time and money.

P a g e | 11

References

H. Geert, 2001, “Culture's consequences: comparing values, behaviors, institutions, and

organizations across nations”, SAGE , pg 207

H. Geert, 1984, “Culture's consequences: international differences in work-related values”,

SAGE, pg 212

Wang M. M., 2000,”Turning bricks into jade: critical incidents for mutual understanding among

Chinese and Americans”, Intercultural Press, pg 134

Crisp R. J., 2010, “The Psychology of Social and Cultural Diversity”, John Wiley and Sons, pg 3

Hoftede, G., http://www.geert-hofstede.com/, accessed on 24 November 2010.

Cultural differences, http://www.mindtools.com/pages/article/newLDR_66.htm, accessed on 24

November 2010.

Deresky, H. (2010). International management: Managing across borders and cultures. New Jersey: Prentice Hall.

P a g e | 12

Appendices

The Five Dimensions of Culture

Characteristics Tips

High PD

Centralized companies.

Strong hierarchies. Large gaps in

compensation, authority, and respect.

Acknowledge a leader's power.

Be aware that you may need to go to the top for answers

Low PD

Flatter organizations.

Supervisors and employees are considered almost as equals.

Use teamwork Involve as many

people as possible in decision making.

Characteristics Tips

High IDV

High valuation on people's time and their need for freedom.

An enjoyment of challenges, and an expectation of rewards for hard work.

Respect for privacy.

Acknowledge accomplishments.

Don't ask for too much personal information.

Encourage debate and expression of own ideas.

Low IDV Emphasis on building skills and

Show respect for age and wisdom.

P a g e | 13

becoming masters of something.

Work for intrinsic rewards.

Harmony more important than honesty.

Suppress feelings and emotions to work in harmony.

Respect traditions and introduce change slowly.

Characteristics Tips

High MAS

Men are masculine and women are feminine.

There is a well defined distinction between men's work and women's work.

Be aware that people may expect male and female roles to be distinct.

Advise men to avoid discussing emotions or making emotionally-based decisions or arguments.

Low MAS

A woman can do anything a man can do.

Powerful and successful women are admired and respected.

Avoid an "old boys' club" mentality.

Ensure job design and practices are not discriminatory to either gender.

Treat men and women equally.

Characteristics Tips

P a g e | 14

High UAI

Very formal business conduct with lots of rules and policies.

Need and expect structure.

Sense of nervousness spurns high levels of emotion and expression.

Differences are avoided.

Be clear and concise about your expectations and parameters.

Plan and prepare, communicate often and early, provide detailed plans and focus on the tactical aspects of a job or project.

Express your emotions through hands gestures and raised voices.

Low UAI

Informal business attitude.

More concern with long term strategy than what is happening on a daily basis.

Accepting of change and risk.

Do not impose rules or structure unnecessarily.

Minimize your emotional response by being calm and contemplating situations before speaking.

Express curiosity when you discover differences.

Characteristics Tips

High LTO Family is the basis of society.

Parents and men have more authority than young people and women.

Strong work ethic.

Show respect for traditions.

Do not display extravagance or act frivolously.

Reward

P a g e | 15

High value placed on education and training.

perseverance, loyalty, and commitment.

Avoid doing anything that would cause another to "lose face".

Low LTO

Promotion of equality.

High creativity, individualism.

Treat others as you would like to be treated.

Self-actualization is sought.

Expect to live by the same standards and rules you create.

Be respectful of others.

Do not hesitate to introduce necessary changes.