Comparison: International Business Negotiation

Comparison: International Business Negotiation

(China & USA)

Word count: 3134.

Introduction:

With the globalization of world businesses, China has become an appealing market for foreign investors. The problem of cross-cultural management arises as the cooperation between China and its culturally different Western partners continues to increase at an unprecedented rate. This paper presents an understanding on the general cultural differences between United States of America and People's Republic of China (PRC) by applying the cultural dimensions of Hofstede and Bond: power distance, collective vs. individualism, feminity vs. masculinity and uncertainty avoidance in each culture is considered to give a better indication of the likely differences that will certainly be confronted at the negotiation table.

Our essay tries to recognize some of the distinctive traits that Chinese culture and American culture will display when negotiating. These include sensitivity to time, emotional control, team organization, negotiating objectives and different levels of cultural importance applied to a relationship building.

Cultural differences in negotiation

Negotiations are crucial to business alliances; Firms are increasingly forming international partnerships as a response to industrial globalization, these processes can become more complicated if there are language barriers, differences in cultural values, customs, and lifestyles, such as United States of America(USA) negotiating with the People's Republic of China (PRC) (stark et al., 2005). According to Appendix 1 cultural clusters, Chinese culture belongs to the Confusion Asia, whereas USA's culture belongs to the Anglo culture ( Gupta, Hanges & Dorfman , 2002). There are various differences in culture between these two countries.

To elucidate the differences between China and the US, we will refer to Hofstede's four cultural dimensions of power distance, individualism/collectivism, masculinity/femininity, and uncertainty avoidance. Further research by Michael Bond identified a fifth dimension called long-term/short-term orientation (Fan & Zigang, 2004).

* Power distance-

It is defined as the extent to which the less powerful members of the institutions and organizations within a country expect and accept that power is distributed unequally (Hofstede, 1991, p.28). Differences in the power distance culture between organizations, countries can influence the team organization and Decision making in international business negotiations. In terms of power distance scores, china scores 80 and USA scores 40 (Appendix 2). This score indicates that Chinese accept the fact that power is unevenly distributed in the society and business, however in USA equality and opportunity for everyone is stressed and the differences between citizen's power and wealth are de-emphasized (Fan & Zigang, 2004).

* Individualism/collectivism-

Individualism focuses on the degree the society reinforces individual or collective achievement and interpersonal relationships. Under different extents of individualism, people have different ways of communication and emotional control, which could effect how the teams act in the negotiations (Hofstede, 1991). On the Individualism scores, China scores 20 and USA scores 91 (appendix2). Such obvious differences indicate that human relationships in business are more likely to be group focused in china rather then the more individualistic nature of Americans. These types of human ties lead to a more collective group in china. In business the group culture rather than loose relationships is more common in china than in the USA. In addition, this differences not only exists between china and USA, but also exists between Asian and western countries (Fan & Zigang, 2004).

* masculinity/femininity-

Masculinity measures on the degree that society reinforces the traditional masculine role model of male achievement, control and power. In the strong masculinity culture, men plays vital roles in business area and are supposed to be more concerned about achievements outside the home. Also in the negotiation teams, male negotiators from high masculinity culture may tend to control the whole process, from team organization the decision making (Hofstede, 1991). In terms of masculinity scores, China scores 50 and USA scores 62 (Appendix 2). The difference between China and USA is not as remarkable as in the other dimensions. One of the reasons may be the rapid economic growth in China and the immense foreign direct investment (FDI) which has provided women in China with more education and work opportunities (stark et al., 2005). In addition, western management style also has an influence on the traditional roles. Women play equally important role in the Western business culture and roles which were male dominated in the past have now opened to females (Fan & Zigang, 2004).

* uncertainty avoidance-

Uncertainty avoidance focuses on the level of tolerance for uncertainty and ambiguity within the local society. In a business area, the different uncertainty avoidance extent results in different risk attitudes (Hofstede, 1991). In terms of the Uncertainty Avoidance score, China scores 60 and USA scores 46 (Appendix 2). It means that China has higher values for uncertainty avoidance than USA, Which shows that Chinese are relatively risk-avoiding while Americans are relatively risk-taking (Fan & Zigang, 2004).

* long-term/short-term orientation-

It regards the degree that the society embraces, or doesn't embrace, long-term devotion to traditional, forward thinking values. In business negotiations, the negotiators from long term orientation culture tend to establish long term relationship with their counterparts. The people from short term orientated culture may focus more on signing a legally bidding contract. In terms of long-term orientation score, China scores 118 and USA scores 29(Appendix 2). Confucianism particularly emphasized the importance of perseverance and thrift. Also, in the modern society of China, the personal long-term relationship (Guanxi) plays a very important role in people's everyday life. Hence, it is not surprising that China has significantly higher score then USA (Fan