East Meets West in Shoe Manufacturing Negotiations

Introduction

The global nature of commerce has necessitated businesses to spread internationally in the hope of becoming competitive. This expansion naturally meets many barriers, chief among being the different cultures that the business encounters as it spreads to other nations. The way a firm handles its foray into a different culture can make or break an international investment (Charles, 2007). In order to survive the international venture, the management of a firm has to do the prerequisite investment of getting to know and understand the nature of the culture in their new destination. The importance of this is that the business can then undertake the necessary adjustments in order to replicate their domestic success internationally. For instance, there are some cultures in which a woman, although successful and competent in her duties, may find it hard to run a business and so a male executive may be the only viable option for the start up.

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The American shoe manufacturer, Brown Casual Shoes, Inc. based in Houston, Texas is a fine example of a firm that is looking to expand to the international market so as to improve its bottom line. For the 30 years the firm has been in operation is has had no difficulty expanding its operations throughout the United States and Canada mainly due to the uniformity of the cultures in North America. However, rising costs of production and stiff competition from business rivals has forced the management to look into ways of improving its competitiveness (Asante, Miike & Yin, 2008). Fearing for the future of the company occasioned by the continued fall in sales and market share, the company’s President chose to look into investing in China. On paper the venture seems to be clear cut seeing as China not only has the necessary labor capacity but also a represents a huge market potential. This research report examines the challenges that the American shoe company encountered during its negotiations with the Chinese, and looks into the alternative methods in which they could have conducted their negotiations for a more fruitful outcome.

Geographical culture clusters

The difference in culture between the US and China are so significant that Harry Livingston, the Senior VP of Operations at the shoe company identified its significance. To this effect, he was able to do a background check on how other American businesses have fared on in the Far East. This undertaking was a fruitful one for Brown Casual Shoes, Inc. as the Senior VP was able to identify some very important aspects about investing in China. For one, the demographic nature of the nation meant that the ideal partner to pair with is one that is based in the country’s major cities (Washington, Okoro & Thomas, 2012). This could mark the difference between investing heavily on a plant for a new venture and using existing industrial facilities in the cities to do the same. By looking at the geographical culture cluster of China, the company was able to identify the ideal location to set up shop due to the prevailing governance structures in China. It was agreed that although a company near the capital, Beijing, Chang manufacturing met all the required criteria that the firm was looking for, a Shanghai company was preferred. Based on the track record of Chinese politics and governance, the company felt that investing in Beijing would leave the company exposed in case social and political risks in addition to the possible bureaucratic down falls associated with operating too close to the centre of power. Globe’s cultural dimensions

Globe’s cultural dimensions come to the fold when Mr. Brown goes to China for the all important business meeting with Mr. Deng Kim Lee, president of the Shanghai shoe firm. The first handshakes and pleasantries reveal that the American executives are well studied in the way their hosts conduct business. This is especially important as any form of mishap during the introductory phase of a meeting can have the potential of completely derailing the talks (Nakayama & Halualani, 2010). Gift giving is a sensitive matter especially in cultures where looks and presentation are shrouded in hidden meanings, for instance the colour of a gift wrapper alongside that of the ribbon used to tie it may have different meanings (Nakayama & Halualani, 2010). As far as first meetings go, though subtle, it is important not to present a gift that may be misconstrued by the host. In the Chinese culture for instance, a gift tied in a white ribbon and wrapped in white symbolizes death. Although the colour of Mr. Brown’s gift is not explicitly mentioned, the fact that Mr. Deng was not overly excited on seeing it implies that the colour choice could have a negative connotation (Braber, 2004). The Americans were uncomfortable with the humane orientation of their Chinese hosts.

In some cultures, being pinpoint and straight to the point in a business negotiation is considered as being responsible and professional (Castillo-Ayometzi, 2009). To others, however, business negotiations preferably occur once the parties have become acquainted with one another in social conversation before any form of business is discussed. It must therefore have come as a shock to the American team as a meeting scheduled for 3 pm drew to a close at 5 pm without a single mention of the business at hand. This was despite the Americans having sent Mr. Livingstone to meet with Mr. Li beforehand and both parties having informed their respective companies on what was at hand. The aura of uncertainty persisted even in the banquet held in honour of the Americans by their hosts as the dinner drew to a close without business discussions taking place. Mr. Brown found himself in a dilemma after the banquet, wondering whether to leave and retreat to their hotel or wait for his host to leave first.

Other cultural dimensions at play were those of hierarchy; in all cultures there is a clearly laid out pecking order that dictates who exactly is entitled to act on behalf of an entity (Alred & Byram, 2002). For both cultures, hierarchy is clearly very important as evidenced by the way the two company presidents immediately go into social engagement with each another. The same happens for the junior executives, Mr. Livingstone and Mr. Li, who immediately strike a conversation of their own aside when their bosses start their discussions. This hierarchy also demonstrates the importance of the concepts of both individualism and collectivism in business negotiations. Before a successful business partnership, junior level executives are fast tasked with establishing initial ties so as to determine the potential viability of the venture. It is only after successful background work by the juniors that the senior level management is involved in the piecing together of the eventual deal. The importance of this is that the top management is shielded from the laborious duties of prospecting, of which all opportunities do not necessarily come to fruition (Braber, 2004).

Communication and perception

The ability to communicate with different cultures is the foundation of any form of international negotiations (Nakayama & Halualani, 2010). The American company identified the importance of language earlier on when Mr. Livingstone was quite relieved when Chung Sun Manufacturing referred his proposal to a Mr. Li who was in charge of international business development in the Chinese firm. The fact that Mr. Li spoke fluent English meant that discussing business would be considerably easier seeing as the risk of issues being lost in translation was greatly reduced (Charles, 2007). For the case of Mr. Brown who did not speak any Chinese, chose to use a translator, Mrs. Wang, in his conversation with Mr. Deng. The issue of perception in business negotiation is also very paramount seeing as it affects the way in which business is conducted. There is a stark difference in the way the two sets of executives view business negotiations; whereas to the Americans getting straight to the topic is of paramount importance, to the Chinese getting to know their potential business partners ranks higher to them in their scale of priorities (Jameson, 2007).

There is also a marked difference in how the Chinese and Americans view time management. During the second day of the meeting when Mr. Brown and his team were to pitch their proposal, their hosts were not particularly too keen to get on with the discussion as evidenced by the 30 minutes that were spent in exchanging niceties. There is also a difference in business beliefs and attitudes that the two companies clearly have. This is especially visible during the presentation of Mr. Brown’s proposal to Mr. Deng and company. In some nations, during a business presentation the presenter is given time to finish his presentation before he is asked questions on the same (Kotthoff & Spencer-Oatey, 2007). For Mr. Brown’s pitch, however, the situation was contrary to what he expected as he was constantly interrupted and bombarded with questions throughout the duration of his presentation.

Conclusion

The need for international business cooperation is now greater than ever due to the global nature of commerce. That being said, the one significant barrier that exists hampering this expansion is that of the different cultures. The role of culture is such that it essentially defines how various business dealings interact and can make or break a venture (Kotthoff & SpencerOatey, 2007). The case of the Brown Casual Shoes, Inc. shows the challenges that the company’s executives had in conducting negotiation with Chung Sun Manufacturing of China. The challenges originated from the geographical culture cluster differences between America and China in which the Americans express reservations of investing too close to the capital. The effects of communication and perception become a stumbling block to a quick sealing of the deal as much time is spent on niceties that have very little to do with the venture. The cultural dimensions reveal just how important it is to be in sync with potential business partners as it can determine the speed in which a venture can materialize (Samovar et al., 2012). That being said, the shoe manufacturing negotiations could have gone remarkably better if the following issues where looked into more keenly:-

Recommendations

Although the location of a business is important when it comes to determining the viability of business venture, Mr. Brown was rather quick to dismiss Beijing. This shows that Brown Casual Shoes, Inc. did not do enough to look into the background of China’s sociopolitical power. Better work ought to have been done so as to understand how the governance mechanism in China operates. Unlike in the US, where different cities may have varying degrees of government control, China’s government is a highly centralized system whose presence is virtually the same in all major cities. Better understanding on how the host culture operates could have saved Brown Casual Shoes, Inc. significant amounts of money. Had Mr. Brown understood that he would require more than a single trip to China to seal the deal, perhaps more appropriate planning could have gone into the planning of the visit.

Before travelling to a business negotiation meeting it is imperative to agree on the agenda and points of discussion. That way, a preliminary delegation can be sent to discuss on background issues before the executive arrive to close the final deal. The meeting between Mr. Li and Mr. Livingstone could have done more to educate their respective bosses on what to expect from the other president during their initial encounter. This goes to show the importance of an exhaustive and comprehensive inquiry of the business culture of the target investment destination. By so doing a potentially embarrassing power play between top executives can be avoided. Uncertainties should have no room in any business meeting as it has the potential of hampering the conduction of any meaningful business and may lead to a collapse of discussions altogether. Take the case of Mr. Brown during the banquet and his dilemma of what to do after the banquet. Lastly, top executives should do more to learn other languages as this can enhance negotiations greatly seeing as it personalizes conversation by eliminating the need for translators.