Cultural Diversity essay
The cultural background is a pivotal factor that may affect negotiations, especially if such different cultures as Chinese and American ones are involved.
The lack of confidence in Chinese partner became one of the main reasons for the failure of negotiations. On the other hand, American negotiators were too direct that could be offensive for Chinese negotiators. Instead, the traditional way of conducting negotiations in China was perceived by the American part as cheating or attempt of it. The American part focused on specific business issues, including production facilities, costs, quality and other issues (Pudelko, 2005). On the contrary, Chinese put the corporate philosophy and culture prior to practical issues related to their business.
Americans were disturbed that they have not started negotiations from the moment of their arrival to China. Instead, they have received warm welcome not only from the part of the company but also from the part of local officials. Instead, Chinese focused on the establishment of close relations with officials to establish the higher status of the company and American partners. Moreover, Chinese did not always know agenda and could not respond to Americans succinctly to their inquiries about the agenda and negotiations, which Chinese perceived as rudeness.
In fact, Americans failed to understand that negotiations have started from the first hand-shake because Chinese way of negotiations turned out to be absolutely different from American one. At the meeting with the CEO, the American part had to agree general principles, which were long-term relationships, trust, providing Chinese company with American know-how and other strategic issues. However, Americans lacked specific, practical, material side of business in China being discussed. Instead, the Chinese CEO, Mr. Chen, refused to negotiate details because it apparently was not his matter but the matter of the company’s executives of the lower level. Instead, Mr. Chen could focus on the strategic or general issues only. In the course of negotiations, Americans apparently waited for the offer being made by Chinese but, instead, they signed what Americans perceived as a non-binding statement of some intentions. Instead, Chinese perceived the signed document on general principles of the US-Chinese partnership as the binding offer and further negotiations should be conducted within its framework.
However, Americans could not accept the signed document because they failed to accept it as an offer. Instead, they needed specific offer, where interests of either party are defined clearly. At the same time, the status of American negotiators did not match the CEO Chen level because Chinese expected the CEO of the US company would have arrived to the negotiations to determine general principles (Ely & Thomas, 2001). The Chinese part took a lot of time for consideration involving senior staff and officials in the important decision making process, whereas Chinese expected American negotiators to take decisions immediately, while any delays were perceived as malicious.
In fact, practical details of the contract were unimportant for Chinese because personal relations and mutual understanding were crucial for them. In other words, Chinese expected to establish strong interpersonal relations first and then come to agreement on practical aspects of the business development in the course of the implementation of the project. Instead, Americans needed settling practical aspects of business first, while interpersonal relations and incomprehensible general principles remained secondary for them.
Furthermore, Chinese insisted on clauses about arbitration to be able to refer to third parties, in case of breach of contract by either party, whereas Americans expected to stick to the contract and specific legal procedures, which should be applied in case of the breach of contract. Once again, Chinese put personal relations prior to the contract and they would rather negotiate controversial issues that could breach the contract with a responsible official or executive of the US company rather than undergo the legal procedure of breaching the contract.
In addition, Chinese way of building up relations means corruption for Americans. This is why the American part was unwilling to get too involved into building up relations with officials out of sheer fear of being involved in corruptive activities, whereas Chinese interpreted such position as offensive and dangerous because the failure to establish positive relations with officials threatened to the project, which could take either a couple of weeks, if the company had good relations with officials, or several months, if relations were poor (Hopkins, et al., 2005).
Chinese put moral obligations prior to contract ones and losing their face is the major threat to them, while going to court is the case of losing their face. This is why they insisted on the establishment of interpersonal relations and priority of moral obligations, while contract obligations were insignificant for them. On the contrary, Americans viewed contract obligations as their priority and the only issue that did really matter, whereas personal relations could not resolve any disputes or breach of contract if one could occur.
Thus, cultural differences have apparently played the key part in the failure of the agreement between Chinese and American part.
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