Procurement managers involved in cross-country negotiations, especially with the Chinese, often find that cultural differences may put the success of contractual arrangements at risk. Yet, understanding these differences may help mitigate any confusion early on. Read more or visit us at http://www.verityconsult.com
1. Mitigating the Risks of
Cross-Country Business Dealings:
A Cultural Perspective
By Sandy Chong & Guy Callender
In this series, we take a peek into the norms of different cultures
and suggest how these norms may affect business practices in
the respective cultures. Procurement managers involved in cross-
country negotiations often find that cultural differences may put
the success of contractual arrangements at risk. Yet, a better
understanding of these differences may help one to preempt and
mitigate any confusions and misunderstandings early in the
business transaction.
Part I
CHINA
Creativity | Passion | Growth
2. Creativity | Passion | Growth
Over the past 20 years, the People’s That said, misunderstandings and
Republic of China has emerged as one disagreements may arise from
of the most significant economies in intercultural differences, which
the world; its GDP growth has been explains why every cross-border
more than double that of most Western procurement contract bears high risks.
economies. Today, China is the world's
largest consumer of natural resources It is therefore crucial that managers
such as oil and gas, and Western understand what effects cultural
countries like Australia, being differences between buyer and seller
competitive exporters of such may have on a business transaction,
resources, are well poised to respond especially within a globalised
to their consumption needs. marketplace.
"I am convinced that much of our difficulty with people
in other countries stems from the fact that so little is
known about cross-cultural communications."
E.T. Hall in The Silent Language, 1959.
Mitigating the Risks of Cross-Country Business Dealings 2
3. Creativity | Passion | Growth
The purpose of this article is to help
businesses understand the Chinese
culture better. To put things into
context, selective elements of the
Chinese culture are compared against
the Australian culture.
Certainly, the views provided here do
not reflect the Chinese culture fully,
but the broad overview will provide
procurement managers with meaningful
insights about the challenges of cross-
cultural contract negotiations.
Mitigating the Risks of Cross-Country Business Dealings 3
4. Creativity | Passion | Growth
CHINA
Confucian philosophy forms the basis In his 2006 pledge, President Hu Jintao
of Chinese culture. The ideals of the reinforced the country's commitment
great 6th century BCE thinker to make China "an innovation-oriented
permeated throughout China since the society in the 21st century" (said
Han Dynasty, amongst other during China's National Science &
philosophies like Taosim. Today, Technology Conference in 2006).
researchers have noted that many
behaviours and values of the Chinese • Nature of human activity
are deeply rooted in Confucianism and
other ancient Chinese philosophies.
(chuan dao qiao tou zhi ran zhi)
Adapting to This is a Chinese idiom that literally
translates as "the boat will be
Environments straightened on its own when it gets
under the bridge", i.e., the future will
• Relationship with nature work itself out. This school of thought
One of the key teachings of ancient is deeply ingrained amongst the
Chinese philosophy is that one must be Chinese, who tend to take a longer
in harmony with nature, rather than time to reflect, plan and adapt to new
strive to have a hold over it. The situations. In most cases, maintaining
widespread practice of Feng Shui in the status quo is preferred.
China is a case in point. Australians,
on the other hand, often demonstrate • Dealing with logic and reality
an abiding sense of domination over In business presentations, Chinese
nature. tend to begin with an in-depth analysis
and explanation before arriving at
Chinese people also tend to avoid risks their conclusion in the end. The
and uncertainty. This is reflected in reverse is frowned upon as it implies
their management styles - the need that there is no room for evaluation
for adequate and careful planning. In and open discussion.
China, the tried and tested methods
are highly valued for they guarantee
future success. This phenomenon is Social Integration
slowly evolving, nevertheless. With an
economy greatly impacted by • Human nature
globalisation, Chinese entrepreneurs
are embracing more risks in order to
survive in the international
(ren zhi chu xing ben shan)
marketplace.
Mitigating the Risks of Cross-Country Business Dealings 4
5. Creativity | Passion | Growth
These were the opening words of an such ideals.
ancient Chinese scripture ("The Three
Characters"), which reflects the belief Australian society recognizes
that human beings are kind by nature. hierarchies as well, but pays limited
This is often interpreted in a social respect to senior colleagues. Seniors
context, but in a corporate context, are usually addressed by their first
Legalism (another ancient school of names, and badges of rank are often
thought) overrides Confucianism. I.e., what matter. In fact, there is evidence
it is believed that law in itself of negative attitudes toward older
possesses a virtue that sets it above workers.
any other human principle and thus
should be applied without exception. • Collectivism
The family and social contexts (i.e.,
In Australia, however, 95% of all societal roles and relationships) often
religions were Christian define an individual, according to
denominations, which generally Confucianism. The former Chinese
believed that man are inherently Communist leader, Mao Tse Dong, was
sinful. a firm champion of the slogan:
• Human relationships
The Chinese culture is generally (tuan jie jiu shi li liang)
socially oriented, which is exhibited by
the people’s tendencies to avoid That is, "unity is power". This ideal is
punishment, embarrassment, conflict, still embedded in contemporary
rejection, ridicule and retaliation. Chinese management philosophy.
Correspondingly, harmony, self-
discipline, moderation, and teamwork Western cultures like in Australia show
are highly-regarded, so as to create a strong support for individualism,
positive atmosphere. This is unlike the though. There is usually much focus on
general Australian population which is personal progress and performance.
more task oriented.
The Chinese term (guanxi) is Space, Language & Time
widely known amongst those who have
business dealings in the Republic; it Studies have shown that the Chinese
literally translates as "relationship". To people’s deeply rooted family values,
the Chinese, establishing "guanxi" is of and their communal living experiences
utmost importance, as it is a way of contribute to their preference for
developing a network of contacts, physical closeness. This is in contract
from whom favours are expected, and to Australians who, having grown up in
to whom favours are done. houses on large pieces of land, are
used to large spaces.
• Hierarchy
In China, silence is often considered
an important part of language. The
(jiang hai shi lao de la) above saying literally means "silence is
gold" – which lends support to the idea
Confucius' idea of respect for of "do more, say less".
tradition, ancestors and elders best
explains the hierarchical emphasis There are generally two types of time
found in Chinese societies. The above management styles: Polychronic
traditional Chinese saying translates as (multi-tasking) and Monochronic (doing
"the old ginger still tastes better". one thing at a time). The Chinese tend
Where two people of the same ranks towards the former style, and are also
are compared, the older one should strict on keeping with time
receive greater respect. This notion commitments and schedules. Similarly,
was prevalent previously, but Australians regard time as a resource
globalisation and the permeation of to be used effectively.
Western culture has started to weaken
Mitigating the Risks of Cross-Country Business Dealings 5