CASE 3: GUANXI IN JEOPARDY

JOINT VENTURE NEGOTIATIONS IN CHINA

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1) What are the main characteristics of Chinese culture ? How do they

differ from the predominant characteristics of U.S culture? How do these
differences relate to the negotiation process?

Characteristics of Chinese culture:

 They are centered around relationships.
 They are weak in ability of making immediate responses.
 They are Indirect in dealing business counter parts.

 They are courteous & take things personally.

 They have long memory for both favors and humiliations.

 Relationship comes first for Chinese.
 They don’t give much preference to women in business matters.
 There do not stick to particular time for meeting in business. They are
flexible.

Characteristics of U.S culture:

 They are individualistic.

 They are strong in making immediate decisions.
 They are Direct in dealing business counter parts.

 For them memory for conflict is superseded by business objective

 Business & economic matters comes first.
 They treat men and women equally in business.
 They are not flexible in timings for meetings.
 They are more open.

The differences in these characteristics also effect the negotiation process

between them in business.

 As American are direct and to the point but Chinese are indirect so
problem arises when they negotiate .

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 Language is a main concern for both as Chinese are not good in English
and Americans are not good in Chinese language.
 Chinese think of the relationships in business but the Americans do not.

2) What are the criteria that should be used in selecting a joint venture
partner ? Have those criteria met in this situation? Why or why not?

A joint venture is a strategic alliance where two or more parties, usually

businesses, form a partnership to share markets, intellectual property, assets,
knowledge, and, of course, profits.

Criteria that should be used in selecting a joint venture are:

 The critical aspect of a joint venture does not lie in the process itself but in
its execution.
 The objective of this strategic alliance.
 Understanding cultural backgrounds of all the countries involved
 Understanding legal and regulatory regime of all the jurisdictions involved
 Negotiating win-win contract.
 Create an action plan and implement it.
 Giving leeway for international contingencies and environment
 Having Comprehensive Joint Venture Agreements which lays down a road
map of duties and obligations of all the parties involved
 Involving lawyers from all the jurisdictions early on
 Having a workable and efficient Dispute Resolution Mechanism
 Termination Terms and Conditions.

In the current case I feel that most of the criteria for success of the JV are not
met because

 They don’t have proper understanding in their cultural backgrounds.

 They don’t have proper negotiation between them.
 They did not involve lawyers early on discussions.

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 They did not come to understanding between them what actually their
objective is about.
 They have not taken proper decision on who should control what 7 and
how the profit generated should be used.
 They don’t like the working style of each other.
 Their termination terms are not yet finalized.

3) Evaluate the composition of Electrowide’s team and of Motosuzhou’s

team. Did each of the companies make appropriate choices for this
negotiation? Give reasons for your answer?
Electrowide’s team:

Tom :

 He was assigned with two person team to visit china and negotiate the JV.
 He was 55 year old with only one international experience was
participating in a technology transfer symposium in Canada two years ago.
 He was leading the team and not familiar with Chinese culture and
language.
 Came to china to negotiate the JV between the two companies.
 He failed in convincing the Chinese to accept the terms of JV.

Barb Morgan:

 She was 42 year old and working Electrowide for three years.
 She can speak conversational Chinese & fluent in French.
 She stood as a supporter for tom but did not actively participate in the
discussions because the Chinese involve her.

Mark Porter:

 He is 31 years old with MBA degree & employed with the company for 6
years.
 He is a business analyst.

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 Mark was very much troubled with the behavior of the Chinese team
behavior.

Motosuzhou team:

Ai Hwa Chew:

 He is 55 year old .he is deputy director of supply chain & distribution.

 He is very poor in English and need a translator to understand.
 Involved in the JV for decision making.

Deng Zang :

 He is 62 year old & is the factory director.

 He speaks very poor English.

Wang Yoo:

 He is 65 year old & the minister of finance.

 He is relatively fluent in English & cousin of Deng Zang.

I feel that each of the companies did not make appropriate choices for this
negotiation.

Because the team from Electrowide is not familiar with the Chinese business
culture and the main lead does not know Chinese language. None of among
them has proper experience in these kind of JV discussions. All them are new
to this kind of negotiation.

Coming to Motosuzhou’s team they are very poor in English & do not know
the business culture aspects of U.S people. Only one among them is educated
properly. They are very indirect in nature & did not how to negotiate in the
joint venture.

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4) Should Barb Morgan have been on the negotiating team?

Evaluate & give your reasons?

The positive aspects of her being in the negotiation team are:

 I think the aspect that supports Barb to be in the negotiation team is that
she can speak Chinese.
 She has prior experience in acquisition venture in Sweden.
 She was a student of psychology so she can know what others are
thinking.

The negative aspects of her being in the negotiation team are:

 The Chinese are not comfortable with women in dealing Business matters
as they feel women are inferior.
 Barb is working with Electrowide only from the last 3 years so she does
not know much about the company.
 She took this overseas assignment as a means f coping up with her recent
divorce.

5) What does Tom Sherman do?

 Tom Sherman being an employee of Electrowide for 32 years knows
about the company strengths and core competencies.
 He should take help of Barb as she can speak in Chinese & she had
already involved in acquisition project and also has psychology background.
 He should also learn about the Chinese business cultures & should get
some help from the government of china as the company is mainly linked with
government.
 He should ask their company management to send someone who is
familiar with Chinese culture into the team.