How to make a deal in China - A guide for German negotiators

  Jan Schnack IB 4 SS  2002

  Managing Cultural Diversity  

Table of content:

1  Introduction p  1

2  Negotiation  

2  a Introduction phase p 2  3

2  b Starting the negotiation p 4  5

2  c Signing the contract p  5

3  Conclusion p  6

4  Bibliography p  7

Jan Schnack, IB 4 Managing Cultural Diversity How to make a deal in China:

- A guide for German negotiators

1 Introduction

Since the opening of the People’s Republic of China in 1978 1 , China has become a more and more important business partner for Germany. Today China is the second biggest Asian trade partner of Germany. In the year 2000 the trade between China and Germany increased by 34 %. 2 That is why more and more managers from Germany go to China for business negotiations. “Global managers spend more than 50 percent of their time negotiating.” 3 In this paper I am going to explain the differences how negotiations are conducted in China and Germany and what German managers involved in cross-cultural negotiations with the Chinese should bear in mind in order to avoid conflicts and misunderstandings. I assume that both, the Chinese and the Germans have not been trained in intercultural management before joining the negotiation.

Fons Trompenaars describes the German culture as universalistic, collectivistic, diffuse and achievement-oriented, whereas he characterizes the Chinese culture as particularistic, collectivistic, very diffuse and ascriptive.

In this paper I will divide the negotiation process into three stages and explain the cultural dimensions involved.

2 Negotiation

2 a Introduction phase

For Chinese punctuality is very important. Being punctual is a way to show respect, sincerity and concern. 4 , 5 When being early don’t hesitate to let your host know. Being early is also showing respect. 6 When shaking hands, using both hands, is a way to warmly welcome the guests. 7 Shake hands first with the most important person, as China according to Fons Trompenaars is a quite ascriptive culture. 8 That means that in China status is ascribed to people on the basis of age, class, gender, education and position not on their achievement. 9 , 10 As result of this when entering the conference room the Chinese top executives will enter the room first, followed by the rest of the group. 11 During the introduction phase it is very important to exchange business cards. This will

Jan Schnack, IB 4 Managing Cultural Diversity help you to know who is the most important partner in the negotiation. Usually Chinese use both hands to hand over their business cards.

When you entered the room where the negotiation will be held you will find name cards with titles on the table. In China it is very important who is sitting where. Usually the host will sit in the middle of the table. At the host’s right side, the second important person will be seated. 12 This behavior is also showing the ascriptive way in which the Chinese normally act.

In Germany being punctual is also a way to show respect. 13 Arriving a little late without a good excuse is viewed as being unfriendly. 14 It is considered good manners to shake hands with all people present. 15 It is not so important to follow a certain order when shaking hands but it is considered nice to shake hands with women first. 16 According to Fons Trompenaars the Germans are rather achievement oriented. That means that status and power are determined by what a person has achieved and how effectively the person performs his or her job. 17 Therefore seating arrangements and name cards including the position of a person are not so important. Achievement-oriented cultures, use titles “only when relevant to the competence.” 18

For Chinese it is very important to build a trustful relationship with their business partner. For them a negotiation should lead to partnership characterized by trust, obligations of mutual support, and permanence. 19 That is why after having introduced each other it is very likely that the Chinese will invite their guests from Germany to have lunch together or to do sightseeing before discussing the important business topics. Small talk is a good way to get to know each other and to build a good relationship. 20 This behavior is showing the particularistic aspect of the Chinese culture. Particularism means that relationships are more important than rules 21 and “a trustworthy person is the one who honors changing circumstances”. 22

The German culture is rather universalistic. That means that rules and contracts are more important than relationships. 23 “A trustworthy person is the one who honors their “word” or contract. 24 According to Trompenaars Germans are rather task oriented. Nees says that when speaking their focus is on content and thereby they de-emphasize the relationship level. 25 This also shows that for Germans relationships are not so important as for the Chinese.

2 b Starting the negotiation

After having finished the food and the private discussions the Chinese negotiation partners will be willing to start the negotiation. According to Hu Wenzhong “most meetings are held over tea in a large reception room with comfortable chairs” 26 and not at the person’s office. Usually Chinese do not prepare contracts before having started the negotiation. In case they have already prepared a