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Mar 16

China: Business Goldmine or Cultural Minefield?

Cross Cultural Training, Culture, Culture training for Business & Management, Culture training for Human Resources No Comments »

Ever since details of Marco Polo’s adventures in Medieval China began to reach Western shores, China’s image grew in the imagination of early Europeans as a land of riches and opportunities awaiting whoever was courageous enough to make the long journey there.

Now, in the twentieth century, things are not too different. Since the communist regime in China opened the country’s borders to trade, Western companies have gone to great lengths to establish business ties there.

Results, however, have been mixed, and what was often idealised as a goldmine revealed itself to be a cultural minefield. While there are of course a number of cases where Western businesses have performed successfully in China,  there are others where organisations have encountered many challenges doing business in China, ranging from logistical to linguistic or cultural.

© istockphoto.com/Tigress

When China first opened its economy to international trade and business in the 1980s, much of the debate in the West centred on the most effective way of gaining a stronghold in what was a new and unknown market. The majority of international companies doing business in China opted for Joint Ventures (JVs) with Chinese counterparts which ended in mixed results.

The different experiences of Western companies doing business in China shows success and failure factors vary greatly, from purely technical reasons such as low quality and uncompetitive products, to serious cultural misunderstandings as to how to work with Chinese colleagues and potential Chinese partners.

Maytag’s case in particular is one example of Western-style management gone wrong. Once the third largest manufacturer of large home appliances in the US and a company that prided itself on the use of modern management methods, Maytag entered the Chinese market through a JV with the Rongshida Group.

This had developed from a small, collectively owned enterprise and had a corporate ethic of ‘harmonious business’, so when Maytag decided to launch a restructuring programme in the face of increasing competition by other Western companies, the relationship between the JV partners eventually collapsed leading Maytag to eventually withdraw from China.

However dynamic and increasingly modern, China remains a heavily traditional society where relations – whether in business or in everyday life – are heavily dependant on a system of ‘face’ and ‘guanxi’, a term which can be translated as “relationships” or “connection”. A principle that binds friends and associates in relationships promoting trust and cooperation, ‘guanxi’ commits a friend to do what he can for another friend when called upon and violating this implies a loss of face and reputation.

Despite the many challenges of doing business in China, many companies have discovered ways of not only dealing with Chinese cultural differences but harnessing them to create very successful business ventures and opportunities in China. One of the most effective is to pre-empt any issues related to business practices and customs by providing international staff and management with cross cultural training programmes such as Communicaid’s Doing Business in China.

Maytag Case Study Source: China & World Economy (67-79, Vol. 12, No. 5, 2004)

© Communicaid Group Ltd. 2010

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Mar 10

Challenges of Doing Business in China

Cross Cultural Training, Culture, Culture training for Business & Management, Culture training for Human Resources No Comments »

© istockphoto.com/ Izabela Habur

China’s booming economy, one of the largest in the world, is a magnet for foreign business investment. According to the China National Tourist Office (CNTO), China is a multi-racial country with over 56 ethnic groups. In the long course of its development, all the nationalities have joined in the effort to create the great culture that China represents.

The earth’s most populous and third largest country is often thought of as synonymous with ceremony, etiquette, ancient history and culture. International organisations will find a wealth of benefits to doing business in China however there are a few cultural challenges that must be taken into account to avoid misunderstandings, conflict and substantial direct and indirect costs to the organisation.

Cross-cultural training programmes for business and management such as Doing Business in China increase an organisation’s awareness and understanding of any potential cultural stumbling blocks to ensure that all involved create strategies for drawing benefits from these differences. The following are six of the key cultural concepts international organisations face when setting up or doing business in China.

Rules and Etiquette – Many aspects of Chinese society still strongly adhere to rules of etiquette. Elements of Chineses business etiquette code include rituals of gift giving and receiving (“songli”), accepted practices with regards to personal space and rules regarding dealing with older people or people in important positions. Various conventions also exist with regards to body language. For example, it is considered rude to point with just one finger and therefore Chinese people tend to indicate with an open hand.

Mianzi – When doing business in China, it is important to pay attention to the protection of “mianzi” or “face”. Face is entwined with personal pride and forms the basis of an individual’s social status and reputation. Damaging face through overt confrontation or criticism threatens the foundation of Chinese hierarchy and can be disastrous for business relationships in China.

Hierarchy – The strong influence of Confucianism is still evident in many Chinese attitudes and actions. The Confucian philosophy emphasises the importance of responsibility to one’s community, harmony and deference to authority. This is evident, for example, in China’s hierarchical system which tends to link respect, responsibility and authority to age, status and gender. When doing business in China, greet another person with a slight bow or a nod of the head and a firm handshake. Dress tends to be quite formal in the workplace, with men usually wearing a suit and tie and women in dress suits. When addressing other people, the last name should be used preceded by “Mr.,” “Mrs” or another relevant title.

© istockphoto.com/hfng

Communication Style – Differences in ways of communicating can often be a source of misunderstanding. As a result, international organisations doing business in China are sometimes left confused and struggle to achieve their business objectives if they don’t possess the required information. Chinese have a preference for indirect, high context communication. In other words, Chinese people often imply and infer rather than verbalise directly. Chinese also place a high importance on the impact of body language, relationships, emotion and other non-verbal communication. Conflict is best dealt with in private and indirectly. Equally, it would be wise to note that smiling is not necessarily a sign of happiness but can also result from worry or embarrassment.

Guanxi – meaning “relationships” or “connection” is a fundamental aspect of Chinese culture. Guanxi translates to a principle that binds friends and associates in relationships, promoting trust and cooperation, committing a friend to do what he can for another friend when called upon. To violate guanzi is to risk losing face and reputation (or that of another’s) and honouring it has been the main way of accomplishing every day tasks in China for centuries.

Communism– China is governed by a communist party which pervades into many aspects of life, including the economy and religion. The country is officially atheist. Topics such as politics and religion are best avoided in conversation when doing business in China until you have become well acquainted with your colleagues.

Recognising the cultural differences which exist when doing business in China is only the first step. International organisations must also understand the reasons behind these cultural challenges of doing business in China to develop strategies for maximum effectiveness. A Doing Business in China cross cultural training programme will help you turn challenges into benefits and maximise the potential of doing business in China. Moreover, it will contribute towards the development of an interculturally competent workforce, a huge advantage in today’s fiercely competitive global world.

© Communicaid Group Ltd. 2010

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Mar 08

Challenges of Doing Business in Russia

Cross Cultural Training, Culture, Culture training for Business & Management, Culture training for Human Resources No Comments »

© istockphoto.com/ numbeos

A huge country richly endowed with natural resources, Russia continues to develop both politically and economically. Russia’s cultural identity has been influenced by a mixture of ethnicities and a diverse history.

The largest country in the world, with the ninth largest population, Russia has recently established a consumer economy which is increasing business and investor confidence in Russia’s economic prospects.

While there are some clear benefits to doing business in Russia, an understanding of Russian business and social culture is essential to an international company’s success.

Punctuality – Russia is a polychronic culture, in other words, people tend to be flexible in the organisation of their priorities and attitudes towards punctuality are relaxed. Polychronic cultures also often feel it is more efficient to do several things at once; therefore meetings may not follow a linear agenda and may be interrupted by phone calls or people coming in. As a foreigner, you are expected to be on time to all business appointments, however social events are more relaxed and being up to 30 minutes late is acceptable. Patience is highly valued in the Russian society, try not to be mad when a colleague arrives late and do not expect an apology, they may simply be testing your patience.

Collectivism – Historically a country rooted in agricultural communes, Russia has maintained a collectivist spirit that pervades many sectors of society. The Russian affinity for the group can be seen in every day life, for example, Russians will often choose to join strangers in a restaurant, recreation is commonly arranged in groups and advice can sometimes be given to you by a complete stranger. This sense of co-operation and togetherness must be considered when doing business in Russia, especially when communicating. For example, it is important to remember to address the group rather than the individual.

Hierarchy – Hierarchy is an important aspect of Russian business culture with status being linked to age and position. It is important to be aware of the fact that usually meetings are held with people of equal status. Decision making is commonly done by the most senior employees in the company. Showing respect for seniority is essential for maintaining strong business relationships when doing business in Russia.

Personal relationships – Relationships start out quite formal within Russia but maintaining trust and a good working relationship from the beginning is invaluable for future business. When meeting someone for the first time, it is wise to address them by their patronymic name. This name is based on the name of the person’s father with the suffix “ovich” (son of) for men and either “ovna” or “evna” (daughter of) for women. The Russian language also has two forms of the word “you” distinguishing between the formal “vy” used to denote respect and the more casual “ty” used between friends.

Communication style – Russians tend to have a high context communication style. A high context preference translates to placing emphasis on relationships, emotions and body language and expecting the listener to read between the lines. Differing communication styles can often pose one of the most significant challenges for businesses working cross-culturally. When doing business in Russia remember that Russians are patient and will expect the same patience from you.

Negotiating – In negotiating, Russians often take their time and will not rush to make a decision. Russians tend to avoid compromise, which they see as a weakness and expect to either win or lose a negotiation. Therefore, expect negotiations to be tough and occasionally theatrical. Do not be surprised if you witness the occasional loss of temper, people leaving the room and threats to call off the deal, this is all part of the process of driving a hard bargain.

© istockphoto.com/dmbaker

Although recognising that cultural differences exist is an important first step when doing business in Russia, international organisations must also understand the reasons and implications of these differences in order to develop effective strategies for coping with these challenges.

A Doing Business in Russia cross cultural training programme will help organisations maximise the benefits and opportunities of doing business in Russia. Cross cultural training programmes also create a workforce with a high level of intercultural competence which is a huge asset to any organisation working in a competitive global environment.

© Communicaid Group Ltd. 2010

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