Introduction

Abstract:

Chapter one gives an overview of the book and emphasis on the importance of bicultural negotiators. It starts with high lighting the importance of doing business with China today especially in the relationship with US. It states that doing business with China today is a 'must' for all organisations. Therefore organisations must pay attention to the fundamental determining factor-cultural differences. This book focuses on this point and draws full attention to the key issue in doing business with China - to understand its culture and do business the Chinese way in China to ensure success - hence doing business successfully in China.

Key words

China

doing business in China

doing business with Chinese

Chinese economy

Chinese market

cultural differences

The Glass Wall Effect

bicultural negotiators

The importance of doing business with China

In 2010, as people in the world's long-established and emerging economics pondered whether they had finally survived the global financial crisis, or were heading towards another, even deeper recession, the position of China continued to change rapidly on the international stage in many ways. Foremost in this regard is economic development, closely followed by political positioning. The world's number one economy, the United States, is now being seriously challenged by China.

Attached to this challenge is an increasing tension between the US and China on a number of issues: trade, currency valuation and debt level. On the surface they are economically related matters, but history tells us that economics is closely linked to political influence. The US-China political relationship has not been so tense since the visit by US President Richard Nixon to Beijing in 1972. It is clearly an arm wrestle between the US and China for the title of number one economic power and this means future political dominance. For Western nations, at least, political clout coupled with economic strength has always meant trade dominance.

Against this background, it is essential to understand the importance of China internationally. To all Western organisations and businesses, China is no longer a choice but a necessity for their future. Doing business with China is now a 'must', and they must get it right.

This introduces the question of how to do business successfully in China. Businesses large and small began testing the waters with business activities in China as soon as its open-door policy was tentatively implemented in 1979. Since then, for more than 30 years, and specifically in the first 20, a large number of companies have lost thousands of billions of dollars between them in this most attractive market.

China's economic importance as a market and the dominating position of its manufacturing capacity has made it a very attractive destination for international businesses. China's current position as the manufacturing base of the world means that organisations find it difficult to avoid direct or indirect involvement. Yet after all this time, and the now obvious urgent need to understand how the Chinese do business and how 'outsiders' must conduct business with them, there is no commonly available publication on 'doing business with China' that combines a theoretical framework with knowledge gained from practical experience.

The core emphasis of this book is on how cultural differences affect companies' return on investment. The book aims to provide executives and entrepreneurs with a golden opportunity to succeed in the Chinese market, instead of suffering the fate of many others in the past. As one business executive has said: 'the path to the Chinese market is littered with corpses'.

The lure of 1.3 billion consumers

Multinational companies around the world entered the Chinese market for a simple reason: its 1.3 billion consumers. From a purely strategic viewpoint this has proven to be unsuccessful, simply because of the cultural complexity of China's vast mass of potential customers. Without culturally suited marketing strategies, billions of dollars were poured into China and it became a giant black hole for many marketers. This book looks at why it is essential when marketing products to the Chinese to take cultural differences into consideration. It draws on research by the author into the Foster's Group experience of three joint ventures with Chinese breweries from 1993 to 2006. (This research, for a PhD project, led to her first book: Shanghaied: Why Foster's Could Not Survive China.)

All marketing activities, anywhere, begin with an analysis of the market and a process of formulating strategies and plans, according to all trained marketers and their text books. Some argue that setting up the right strategies is crucial to success in international business; others believe the implementation of strategy is more important. It is argued here that establishing correct strategies is a prerequisite for adequate implementation.

Being a huge market of rapidly growing prosperity and social change, China is attractive to multinational corporations around the world. In 2006 it was the second-largest recipient of foreign direct investment in the world, according to US statistics. Companies from around the world have been pursuing the Chinese market in a more focused manner since China's economic reforms in the late 1970s. Inward investment in China in 2005 and 2006 was approximately $70 billion a year. However, only a very small number of firms are meeting profitability projections and many others have made large capital writedowns. Most US and European multinational corporations have never made a profit in China.

Communication is fundamental to all business activities, and cross-cultural communication is far more complex than mono-cultural communication. The problems of communicating with multiple stakeholders embedded in diverse cultures are complex. These are exacerbated by the linking of macro-cultural issues, such as globalisation, with micro-cultural and community identity issues. In relation to doing business in China, communication has been the most important issue that has caused tremendous difficulties. For this reason, communication with Chinese is best conducted by those with a depth of knowledge and skills.

Different behavioural patterns may cause inefficiency in a cross-cultural communication process. Misunderstanding across different cultures is harder to recognise than in mono-cultural communication and is more difficult to deal with. Cultural capability is caused by an inability, or varying degrees of ability, to interpret cross-cultural behaviour. Not understanding culturally related behaviour often results in a complete misunderstanding when encoding and decoding messages. Communication is, in effect, blocked not by one barrier but by too many barriers.

A little knowledge can be dangerous

With increasing business activities in China, more and more people are benefiting from the experience of visiting, working or studying in China. But many of them are in danger of suffering from the Glass Wall Effect (discussed further in chapter 2).

In some cases prior knowledge or experience of a culture is misleading and unhelpful in dealing with cross-cultural situations. People may be caught in a situation where they cannot explain differences in behaviour. For example, knowledge in dealing with Japanese may give false confidence in dealing with Chinese, by thinking that 'Asian' cultures are all the same, or similar. This is especially confusing when Asians of Chinese background present themselves as Chinese - an ethnic group, rather than a nationality group.

The importance of competent and trained interpreters cannot be emphasised enough, because half-baked cultural knowledge, and incompetent language skills in both English and Chinese, are likely to confuse matters rather than clarify them.

Differences in the expertise of individual interpreters engaged by Westerners and Chinese are unavoidable and therefore an imbalance in the spoken communication processes is likely to occur and miscommunication is equally inevitable.

By understanding this, Western companies will also understand the importance of engaging good interpreters who have competent cultural knowledge of Australia and China, as well as competent English and Chinese language skills.

Current and constant change

This book is timely as while it is in production China's position is changing on a daily basis.

The increasingly important and controversial position of China in world trade raises the topic of negotiating with the Chinese on a new level of importance. In more recent years, this topic has become increasingly interesting from both sides of the negotiations. Although Chinese universities and publications pay much more attention to the topic than do Western universities and literature, the actual business activities suggest that both Chinese and Westerners have equally poor negotiation results.

Bicultural negotiators are the most effective. They are familiar with both cultures, are capable of effective communication beyond language...