Friday, 24 November 2017 Sydney
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WAYS NOT TO LOSE MONEY IN CHINA::

Ignoring important cultural differences costs organisations billions of dollars, says Dr Mona Chung, an expert inChina-Australia business relations and cross-cultural communication. Dr Chung gives an Australia-side perspective on doing business in China, and finds that one culture’s rigidity is another’s flexibility.

China is an especially attractive proposition for Australian organisations because the US economy is now officially in a recession. However the Chinese market is a complex and difficult one due to cultural differences between it and Australia. It is unique – there is no other market like China. Billions of dollars have been lost in the past and many companies continue to pour money in but ignore important cultural differences. 

If you’re looking to lose large sums of money, here are three simple guidelines to follow.

1) Don’t seek for expert assistance: “We’ll be right, mate!”
Cultural differences are the major impediments to doing business with China. Business culture and practice are unique and, without insights, comprehension is impossible. These differences are not easy to comprehend for those who come from different cultures such as the Australian culture. Therefore, expert assistance is essential because only those who are experienced and knowledgeable “know their way” around China. 

Australians don’t seek help and they continue to make the same mistakes. They also have a ‘gung-ho’ attitude culturally. They are not frightened of trying anything and everything. There are many cases which are not registered or published as lost opportunities. No lessons are learnt. Is this because Australians like being pioneers and do not mind heading off to the wild like Burke? Or it is the migrant culture which gives them the ‘gung-ho’ attitude?

The major difficulty with China is that no other market shares its special characteristics. For a start, it is a market economy with socialism characteristics. Try to explain what that is! Even the Chinese government has had to come up with newly invented terms. 

Western companies regard China as lacking in transparency. This is simply because they don’t understand how China works. To the Chinese and bi-cultural personnel, China is transparent and flexible. Where Australians and Westerners might refer to the law and a framework, the Chinese can rely on relationships and networks. They manoeuvre within these relationships to take advantages.

From a Western cultural perspective, Chinese communicate vaguely as a part of the ‘Chinese communication style’; no ‘transparencies’ are needed from the Chinese perspective. It is better things are 
not put down in a concise way. Culturally Westerners – including Australians – cannot cope with this vagueness. But if you understand the cultural context, everything is functional. 

Chinese are culturally trained as Chinese in the same way that Westerners are trained as Westerners. When the Chinese venture into the Western markets, they experience the same problems. The way to deal with China, Chinese and all the differences is to learn about these differences and master some skills in dealing with these differences. It is not by ignoring the differences. Of course, this is no easy task. After all, Australians are usually trained within a culture for 30-40 years by the time we are assigned an overseas posting. We are culturally well formed. To be re-shaped culturally may take another 30 years. So if your company is looking for results and cannot wait for 30 years for you to learn, you need to seek help. You need to find people who already have the skills to help you because every step in China will be different. 


An Expert Guide

The right consultant/expert is critical to the success of any business entering the Chinese market, and the same can be said of Chinese entering the Australian market. 

Either spending a lot of resources to learn expensive lessons or utilise your resources wisely, that is the question. 

Australians rightly value their culture, but need to be mindful that jumping into the deeper end may be okay if you already know how to swim a little, and providing the deeper end is not too deep. The sea of China can be very deep indeed. So buy yourself a floaty! 

Not anyone who speaks the language is an expert. The person who is most valuable is a bi-cultural person with business experience in both Australian and Chinese cultures. 

Bi-cultural personnel can have advantages in gaining the trust of both the Australians and the Chinese in business interactions. A bi-cultural staff member will be able to interpret the viewpoint from both parties rather than only from the Western or Chinese perspective. Although consultancy fees are often seen as a cost initially, in the long run, it saves you much by reducing the time required in relationship building especially in avoiding errors.


7910715 xl copy opt2) No need to worry about relationship building – “people are people and the Chinese want to do business too”

‘Guanxi’ is no longer a completely foreign word to many Westerners, however, exactly what guanxi means is not yet clear to many. Guanxi is a form of relationship that Chinese use from business to personal relationships. 

It is more appropriate to understand Guanxi as a network and relationship building. Chinese use guanxi to pull strings and getting things done. Guanxi can’t be purchased. In reality, it is expensive, costly and time-consuming, however, without it, Chinese don’t do business.

Guanxi is built. If someone is selling you guanxi on an airplane or in a hotel, you are simply naïve to believe this can be done. This complex relationship concept relies on trust.

Building relationships is like growing trees. The Chinese have a saying that the first generation plants the trees, and the second generation will enjoy the shade. To build a relationship with the Chinese, you need to go there and visit them. You need to have many banquets and many ‘ganbeis’ before you starting doing business. You will be considered a tourist at the start. You will be considered as an ‘outsider’ always. But you can do business.

3) Don’t respect the Chinese way because we know better
It is still an attitude we encounter: the Chinese are behind us. This is simply because Chinese often do things the Chinese way which is different from the Australian way. 

In 1993 when Foster’s first set up its joint venture in Shanghai, the Australian brewers made Chinese do things the Australia way. The Chinese did them, but only in front of the Australians because they did not want the Australians to ‘lose face’. The minute the Australians turned around, they went back to do thing their own way. This was because they had no faith in the Australian way and knew it would not work in the environment. Ten years later, when some Australian brewers revisited Shanghai, they commented on how slow Chinese learn things as they were still doing things the same old way despite being shown the ‘new Australian way’. 

For those who have dealings with Chinese, they understand Chinese work all hours. The nine-to-five, five-day week is a Western construct. The Australian way of only communicating during business hours and especially not responding on the weekends and holidays can drive the Chinese away. 

The secret is all in cross-cultural communication and negotiation. Australian value systems are different from the Chinese ones. We are often missing the point trying to sell something to Chinese when we see as great value but often the Chinese don’t even understand what we are talking about. 

With the help of the right bi-cultural personnel, this major impediment can be overcome. Negotiation and communication are ongoing activities’.

It is possible to engage in negotiations with people in China who do make decisions. These decisions can be made quickly, sometimes even on the spot. In contrast, when the Australian organisations do not respond at the same speed, opportunities may be lost. Again the secret is in cross-cultural communication – an ongoing process. 

Dr Mona Chung is a Deakin University lecturer and principal of Cross Culture International.


Culture, culture, culture …

Deakin University international business expert Dr Jane Menzies says one of the main issues companies found starting to do business in China was bridging the culture gap.

 “One of the significant findings from the research was that the culture gap between Australia and China had a major impact on the ability of companies to develop relationships with potential Chinese partners, establish partnerships and contracts and manage operations in general,” says Dr Menzies.

“It also influenced the cultural acceptance of specific products and services in the Chinese market.”

Dr Menzies says the cultural gap included language differences and style of communication.

“Australians tend to be direct and say what they mean, whereas the Chinese tend to be indirect and the meaning can be infused through the conversation to prevent the loss of face.

 “This caused difficulties for some of the companies when negotiating business plans or proposals, and slowed down the negotiation process.”

 Other significant cultural differences identified in the research related to:
• an emphasis on the group’s interests over that of the individual; 
• an ability to deal with a high level of uncertainty
• and lack of understanding of key cultural values in China, such as guānxi, face (miànzi), and reciprocity (rénqing).

“These values are particularly important in Chinese business negotiations,” says Dr Menzies. “They determine the rules for 
the development of relationships by showing appropriate levels 
of respect and ensuring that loss of face is prevented and 
favours are reciprocated.”

Dr Menzies says companies could employ a number of strategies to reduce the impact of the cultural differences by using cross-cultural training, reading books, employing a bi-cultural consultant, using staff with a Chinese background, learning 
the language, using employees as translators and learning 
from experience.

“Other companies found it helped to focus on relationship building, localising the business, recruiting Chinese staff with Western knowledge (hăiguī) or Westerners with Chinese experience, and adopting the correct approaches for dealing 
with Chinese staff.”

Dr Menzies says companies also needed to investigate and obtain the appropriate political support at home and in China.

“The political landscape of China is an important determinant 
for establishing a suitable business there,” she said.

“But companies should expect more intervention by the Chinese government than they are used to here.”

Dr Menzies says the legal environment also played a role in companies’ success in the country.

“Corruption and Intellectual Property protection are particular issues. While good legal advice is essential, legal contracts are generally unenforceable.

“The companies we spoke to found that having strong relationships with customers, suppliers, and authorities were 
an effective approach for managing legal issues.

“They also found using local Chinese advisers, who generally had more influence and a better understanding of the rapidly changing regulatory environment, were just as effective when dealing with the Chinese legal system.

“Some participants also found using a legal company that 
was represented in both Australia and China to be helpful.”

In a new book Doing Business in China – Getting Ready for the Asian Century Dr Menzies, and fellow Deakin academics Dr Chung and Professor Stuart Orr outline the strategies for China-Australia business engagement.


Chung Mona opt
Doing business with Australians

Dr Chung ...

1. Be ‘fair dinkum’ and ‘straight-up’. If Chinese are finding Australians trying to offer them values or things they do not believe they need, “ says Dr Chung, “then it will be most effective for them to tell Australians straight what they are looking for.”

2. No double-dipping in such a small sea. “Do not try to negotiate the same deal with several Australian contacts at the same time. Australians don’t do that. The Australian business community is small. It is likely Australians will know each other within the same industry sector, and once they find out they will stop dealing with you.”

3. Only if you are interested. “Do not get Australians to quote unless you are really interested. You will burn your bridge and won’t be able to get back.”


Dr Menzies ... 

1. “From a large-scale investment point of view, seek to understand the attitudes of the Australian government and community towards investment; and customise strategies for investment towards those attitudes.”

2. Seek to develop business that is both beneficial for the Chinese organisation but also makes a contribution to Australian stakeholders – employees, community, suppliers, etc.”

3. “Seek to develop a business that incorporates elements of both Chinese and Australian business culture, which would implying using a mixture of both Chinese and Australian staff.”

4. “Develop a publics relations (PR) strategy that emphasises the positive benefits of the Chinese organisation to Australia.”

5. “Chinese organisations should have patience for the Australian market and seek to build trust.”


China is unique

Do not treat China as just another market. It is a society based on trust rather than codified rules and laws. Allow yourself time to build your network, relationship and a credit system. This is definitely more useful than an American Express. 

Finally learn the Chinese system – it is a huge machine that has been working for over 5000 years. It is no way near perfect, but there must be a reason things are structured that way. 

 

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