business negotiation paper

Negotiating with Chinese: success of initial meetings（启动会议） is the keyThe AuthorsYunxia Zhu, UQ Business School, University of Queensland, Ipswich, AustraliaBernard McKenna, UQ Business School, University of Queensland, Ipswich, AustraliaZhu Sun, Genertec Advertising International Co. Ltd, Beijing, People's Republic of ChinaAbstractPurpose– Negotiating with the Chinese is an important topic in international business and cross-cultural management since China is playing an increasingly active role in doing business with the western countries. The purpose of this paper is to study initial meetings with the Chinese during business negotiation processes. In particular, it seeks to explore the processes of negotiation between the Chinese, Australian and American cultures.Design/methodology/approach–The discussion is based on authentic cases collected from meetings which took place in both China and Australia, and the negotiation cases are analysed in the theoretical framework based on cross-cultural negotiation processes and intercultural dimensions.Findings–The findings indicate that success of initial meetings is an important key to determine success for business negotiations.Originality/value–The paper is of value through highlighting the fact that initial meetings with the Chinese can be seen as essential to negotiation since the Chinese tend to develop relationship or guanxi first before the actual negotiation takes place.Article Type:Case studyKeyword(s):China; International business; Negotiating; National cultures; Cross-cultural studies.Journal:Cross Cultural Management: An International JournalVolume:14Number:4Year:2007pp:354-364Copyright ©Emerald Group Publishing LimitedISSN:1352-7606IntroductionMore and more countries are involved in negotiating with Chinese in international business since China started its economic opening-up around the 1980's. So negotiating with Chinese is also becoming increasingly important for international business successes in particular, since after China joined WTO in December 2001. It is anticipated that more frequent negotiations with Chinese will take place as China is going through free trade negotiations with a number of western countries. However, negotiating with Chinese can be very challenging and Chinese have been sometimes recognized as some of the toughest negotiators in the world (e.g. Young, 1994). People from other cultural backgrounds, especially those from the west[1], often find the behaviour of Chinese negotiators to be difficult and unintelligible. This is the reason why much attention has been given to studying Chinese negotiation styles. To our knowledge, the research on this topic has mainly focused on all the negotiation styles and very little has been done to examine the importance of initial meetings in business negotiations. The initial meetings with Chinese can be seen as essential to negotiation since Chinese tend to develop relationship or guanxi (Fang, 1999) first before the actual negotiation takes place. Based on the authors’ consultancy experience, initial meetings are of great importance to subsequent processes of negotiation. This paper will take this initiative of investigating into the importance of initial business meetings that may lead to successful negotiations. In the meantime, it will also look into the factors at the initial meetings that may interrupt negotiations. The cases analysed in this paper derived from a series of business meetings that took place in either Australia and China since from 1999. Business managers’ views are also incorporated to substantiate our arguments.The following research questions are proposed. First, what roles does culture play in the initial meetings of business negotiations with Chinese? Second, what are the specific cultural factors that affect the development of business negotiation processes? To answer these questions, this paper will first develop a theoretical framework followed by a discussion of the research method. The theoretical framework will focus on the universal or western cultural dimensions as well as Chinese-specific dimensions. The discussion will use this theoretical framework to analyse ten negotiation cases between Chinese and Australians or Americans. From this analysis, recommendations are made and the significant implications for cross-cultural management are highlighted.Theoretical frameworkThis theoretical framework to analyse negotiation with Chinese defines cross-cultural negotiation, and discusses negotiation behaviour andintercultural dimensions, particularly Chinese-specific dimensions of face and guanxi.Cross-cultural negotiationChaney and Martin (2004, p. 196) define cross-cultural negotiation as “discussions of common and confl icting interests between persons of different cultural backgrounds who work to reach an agreement of mutual benefit”. Cross-cultural negotiation is more difficult thanmono-cultural negotiation because of differences of language and culture (Woo, 1999). Because negotiations are often seen as composed of number stages, researchers pay particular attention to the development of stages that may lead to the final outcome of a business deal: indeed Adair and Brett (2005) speak of a normative negotation model, that is, “choreographed” around the stages of relational positioning, identifying the problem, generating solutions and reaching agreement. There are numerous other theorizations about stages. For example, McCall and Warrington (1984) use a three-stage model which involvespre-negotiation, face-to-face interaction and post-negotiation. Graham and Sano (1989) develop a four-step negotiation process, which is not dissimilar to the later Adair and Brett model. These steps are non-task sounding (negotiating parties get to know each other); task-related exchange of information (parties’ subjective needs and prefer ences open to discussion); persuasion (parties attempt to influence the other side's needs and preferences by using various persuasive tactics) and concessions and agreement (parties accomplish an agreement which often is the summation of a series of concessions).These stages will be used to analyse the negotiation cases in this study for two reasons. First, they incorporate relevant aspects to study the complicating effects of differing cultural behaviours. For example, cultures may resort to different ways of getting to know each other. Second, they represent a synthesised model comprehensively embracing both tangible actions of transactions and also the non-tangible processes of non-task warming up of interpersonal relations.Negotiation behaviourAccording to Ren et al.(2002), there are three approaches for the study of behaviour theory. The psychological approach focuses on analysing negotiators’ personalities, perceptions, expectations and their persuasive techniques. The learning approach views negotiation as a learning process in which each party is largely dependent on its experience of the results of past actions by the two parties. Lastly, the dual responsiveness model shows that a negotiator's response is a functionof their own previous pattern of making concession s（让步） as well as the opponent's concession rate(让步率). The psychological approach is relevant to our analysis since we focus on examining behaviours of people from different cultures.China appears to be one of the most challenging countries in which to conduct negotiations, according to Buttery and Leung (1998). Woo (1999, p. 116) finds that “western business people entering a negotiation in China are often confronted with fierce adversarial（敌对的） bargaining that appears to lack politeness and consideration and find that the Chinese negotiators are tough, shrewd and tenacious（顽强的）”. With the aim of finding reasons why negotiating with Chinese carries difficulties among western business people, these authors emphasise the great influence of Chinese culture on negotiation style, although Ma (2006) questions whether this is so. For example, they have investigated aspects such as Confucianism, Taoism, collectivism, face, patience, guanxi and social status. Among these aspects, Confucianism, face and guanxi are studied most frequently and are believed to be the key factors governing the behaviour of Chinese negotiators. They are also used in this paper to indicate a Chinese perspective since we are dealing with negotiation across cultures. More importantly this study will view them in relation to the processes as negotiations. As Woo and Prud'homme (1999, p. 315) appropriately point out, “in a cross-cultural negotiation, in addition to the basic negotiation skills, it is important to understand the cultural differences, and to modify the negotiation style accordingly”. Therefore, the discussion of intercultural dimensions is in order.Intercultural dimensions跨文化维度Among the various intercultural dimensions, the three seen as relevant to negotiating with Chinese because of their emphasis on communication styles are Hall's high- and low-context cultures and Hofstede's power distance and individualism and collectivism since China started its economic opening-up in 1978 (Hall, 1976; Hofstede, 1991). In addition, Confucianism is also discussed for obvious reasons of dealing with the Chinese culture. These cultural dimensions are seen as relevant to the negotiation processes. For example, if a culture has different expectations about the negotiation processes, members of this culture may have a clash as to where the first process ends and where the second process starts.According to Hall (1976, p. 79), a high-context（高语境） message emphasises “the physical context or internalized（内化）in the person” rather than the “coded, explicit, transmitted part of the message”. A low-context communication, on the contrary, stresses the importance ofinformation vested （既定的）in the explicit code (Hall, 1976, p. 70). Gudykunst and Kim (1997, p. 68) echo Hall's view and further confirm the above issues of high- and low-context cultures (see also Kim et al., 1998). Referring to the difference between Chinese and American cultures, Lin and Miller (2003, p. 288) state, “members of high-context cultures (e.g. Chinese) are not likely to express their opinion openly and explicitly, whereas members of low-context cultures (e.g. American) appreciate openness and directness with little attention to hidden contexts”. This kind of differences in communication style can be a barrier tocross-cultural negotiations since these cultures may not share same expectations about the behaviour involved in each of the negotiation processes. Hofstede's power distance can be another factor affecting cross-cultural negotiations. Power distance is “the extent to which the less powerful members of institutions and organisations accept that power is distributed unequally” (Hofstede and Bond, 1984, p. 419). Different cultures have different attitudes to hierarchy and the distribution of power. For example, “The Chinese have a strict hierarchical system and place emphasis on rank” (Sabath, 1999, p. 38), whereas Australians and Americans tend to pay less attention to social ranking.Hofstede (1991) also divides cultures based on the dimension of individualism and collectivism. Leung (1987, p. 899) further explicates collectivism as “the tendency to be more concerned about the consequences of one's behaviour for in-group members and to be more willing to sacrifice personal interests for t he attainment of collective interests”, whereas individualism refers to “the tendency to be more concerned about the consequences of one's behaviour for one's own needs, interests and goals”. According to Hsu (1985), as members of collective culture, Chinese people emphasise group goals and needs, and strive to maintain relational harmony.A meta-analysis（荟萃分析） by Sama and Papamarcos (2000)also supports the claim that collectivisitic cultures make decisions differently particularly considering such issues as group harmony and in/out-group allegiances（忠诚）. In contrast, members of individualistic culture such as Australians, value individual autonomy（自治权） and interests, and encourage competition (Hofstede, 1991).Confucianism emphasises the responsibilities of individuals toward one another on five important human relationships –those between ruler and subject, husband and wife, father and son, brother and brother and friend and friend. Confucianism also advocates a social order that values duty, loyalty, honour,filial piety（孝顺）, respect for age and seniority and sincerity (Seligman, 1999). As Woo points out (1999, p. 117), Confucianism concerns “obedience to, and respect for, superiors and parent, duty to the family, loyalty to friends and the hierarchy at work”. Consequently,effect of the Confucian li principle on negotiation is a tendency to favour organisational hierarchy and centralized decision making (Hong and Engeström, 2004, p. 554). Confucianism has implications for negotiating with Chinese. According to Fang (1999), Confucianism is more concerned with righteousness（义） and human-heartedness than profit. This explains why Chinese negotiators do not rush into formal contract discussions, but take considerable time to build up trust with their negotiation partners. Second, because Confucianism considers that business is governed more by moralistic notion of sincerity and trust than by the legalistic concept of contract, Chinese business is mostly built on trust instead of law. Chinese negotiate a deal with their partners most effectively when thereis enough trust between the parties, and to western business people a verbal agreement with Chinese is as effective as a written contract (Roehrig, 1994). Third, Confucianism advocates the relative importance of knowing others and the relative unimportance of being known. This is the reason why Chinese negotiators are so attentive to discern（辨别）the interests and personalities of their negotiation partners and defensive about freely disseminating（散播） information about themselves (Buttery and Leung, 1998).The role of Confucianism, however, must also incorporate the related aspects of face and guanxi. Face involves projection （投影）and reflection of self-image because it is “a claimed sense of favourable socialself-worth that a person wants others to have of her or him” (Ting-Toomey and Kurogi, 1998, p. 187). Face is described as “a projected social imagein a diverse range of communicati ve situations” (Wright and Orbe, 2003, p. 2). More specifically, face “implies status and prestige and is a mark of p ersonal dignity” (Woo, 1999, p. 117). This is linked to Confucianism and power dimension in the Chinese society. The significant role of “face” in Chinese society could be seen through Woo and Prud'homme's (1999, p. 316) words: “The Chinese are preoccupied with the concept of face and are very sensitive to having and maintaining face in all aspects of social and business life”. According to Zhu and Ulijn (2005), Chinese-specific dimensions including face can be an important reason for cross-cultural management and negotiations. Here two Chinese face-related terms can be crucial for understanding Chinese negotiation: giving face and losing face. Giving face during the negotiation can be understood as giving one's respect to negotiators on the other side of the table and recognizing the status and moral reputation of the negotiators in society. It is important for western business people to protect their Chinese counterparts’ face but it is perhaps even more important to give face to them (Buttery and Leung, 1998). Losing face can occur from a positive or negative perspective. Positive face refers to the desire for acceptance and approval from others. This involves showing approval of “theirpersonality, attributes（属性）, accomplishments, appearance … as well as to show that they are considered likeable and worthy to be a friend and companion” (Metts, 2000, p. 84). Negative face, on the other hand, can be lost when a person's autonomy and freedom is limited (Trees and Manusov, 1998). Treating Chinese negotiators as junior in rank when their official status in an organization is higher can cause them to lose face (Woo and Prud'homme, 1999). Therefore Brahm (2003, p. 18) believes that it is important to “to give your Chinese counterpart “face” at the negotiation table without losing it yourself”. Oetzel and Ting-Toomey (2003)point out that face negotiation theory provides an organising and explanatory framework for conflict behaviours in negotiation and, in particular, they point out that cultural backgrounds directly affect negotiators’ attitude toward face.Guanxi, the Chinese term for relationship, is one of the most important Chinese cultural traits. Its meaning has altered over time from the five Confucian role relationships in interpersonal relationships to the mutual exchange of favours in diverse social networks (Hong and Engeström, 2004, p. 554; see also Luo, 1997). It is also translated as “personal contacts” or “personal connections”. Chinese give considerable effort to developing guanxi, which is usually established among people who share a commonality of certain identities –for example, schoolmates, fellow villagers and old friends (Fang, 1999). The importance of developing guanxi with Chinese for foreign business people has been emphasised by many researchers from different respects, such as relationship marketing (Arias, 1998). For example, Fang (1999) believes that doing business in China is not just a matter of price and product. To achieve success, western business people must rely on good personal relationships. Woo and Prud'homme (1999) state that in business negotiations the side that can assemble more guanxi network will be more formidable. Schnepp et al.(1990) hold that a fine guanxi with high-level officials in Chinese bureaucracy can smooth negotiation and generate good business. However, guanxi is not about immediately returning one favour with another. It may involve the constant giving without obtaining a favour in return or vice versa for an extended period of time (Buttery and Leung, 1998; Zhu, 2004).The above intercultural dimensions can be used to interpret cultural differences and will be used as part of the theoretical framework to analyse cross-cultural negotiations. Our contribution lies in the fact that they will be studied in the light of processes of cross-cultural negotiation from both the western and eastern perspectives.Research method and dataThe research method is based on a case study of ten negotiations over the period between 1999 and 2002 between Chinese and American/Australian business organisations. They took place either in China or in Australia and they were recorded and written by one of the authors. None of the negotiations took place in the researchers’ organisations. The cases were analysed to determine the types of processes that were implemented using the theoretical principles outlined above. One case is provided in the Appendix as a representative illustration of the data.The negotiation casesFrom 1999 to 2002, one of the authors worked in an investment promotion service centre in Beijing, China, a not-for-profit organisation directly affiliated to and totally funded by a district government. Because the mission of the centre is to act as a liaison bridge for investors in Beijing, it attracted a lot foreign attention. In her three years’ experience working in this centre, she participated in ten initial face-to-face meetings between Chinese and western business people, mainly from Australia and America. To enhance cooperation between the two parties, the meetings were in different forms including seminars, negotiations, forums, and informal discussions. Despite this, the results of all these meetings were the same in that no business cooperation between both parties occurred. One specific case has been chosen for discussion to more closely consider the different stages of negotiation.Analysing the casesGeneral findings from the data are discussed first. The apparent common business objective of the negotiating parties is to achieve a business deal. There are four findings. First, the Chinese delegations showed a concern to establish further trust or relationship before any business deal can be signed. Second, only up to three negotiation processes including non-task sounding, exchange of information and persuasion were completed in the ten cases. This was mostly because the final process of completing the deal did not occur. Third, communication barriers were apparent and appear in all three processes. Finally, conflicts occurred, which involved all the cultural dimensions. In particular, Confucian cultural traits were a major cultural factor triggering barriers to the Chinese–American/Australian business negotiations. While causation （因果关系）cannot be established between these traits and negotiation failure, this suggests strongly the importance of initial business meetings.A closer look at the first non-task sounding process provides some useful insights. Normally both parties began by introducing each other. However, confusion often occurred here in deciding on the finishing point for thisprocess. As shown in the case in the Appendix, both parties seem to have started well using appropriate terms to greet each other. However, the rest of the process experiences difficulties as to when to end the non-task sounding （试探）process. The cultural dimensions discussed earlier can help explain specifically what the barriers are and the Chinese negotiators as part of the collectivistic group seem to need more time for this process. The conflict in this process is invisible. The Australian group may have thought that they had finished the first process of knowing each other. However, the Chinese actually seemed to need more information about their Australian counterpart after the greetings in order to establish personal rapport consistent （和谐一致）with guanxi. What the Chinese expected in this process was not the Australians’ current business, but some more personal information, such as the past work experience of the Australians and where they originally came from. Such information would have helped the Chinese group establish guanxi with their counterparts. Furthermore, Confucianism advocates that knowing others is more important than being known.The uneasiness caused by this conflict in the first process often carries over into the ensuing stages to such an extent that the negotiation process seems doomed. In fact, what sometimes follows was predominantly （显著地）communication within the Chinese group as they usually tried to determine what their communication strategies should be after the first process had failed. As illustrated in the Appendix, the conflict between the two groups becomes even more evident in this process. Since the Chinese thought they had not established the mutual trust and guanxi with the Australians, they were reluctant to speak much in front of strangers.The second process of information exchanging was often uneasy with further mismatches in satisfying each other's information needs. Sometimes communication styles can even have an impact on the authenticity of information. As shown in the Appendix, the Australians, after extensively introducing their products and services, must find it difficult to follow the Chinese speeches, which include considerable acknowledgement to C District Council？？？, but very little information about the Chinese businesses. This kind of acknowledgement reflects the collectivistic nature of the Chinese culture: that is, to Chinese people, any success is the result of group endeavour. Individuals are not expected to display their own achievements in public; instead they should emphasise the help and support that they have obtained from others. So acknowledgement is an indispensable part of Chinese speeches. That is why both of the two Chinese businessmen expressed their appreciation to the C District Council, which Mr Wang, head of the delegation represents. The high-power distance also applies to this process. Mr Lin and Mr Ma followed Mr Wang'sorder by speaking up at the meeting immediately even though they showed clear signs of unwillingness.By the third stage, the accumulated uncertainty and dysfunctionality （功能失调）almost completely undermine the process of persuading each other. It was often impossible for the Americans/Australians to carry on with their pre-arranged persuasion strategies since the Chinese party had failed to provide them with the information essential for negotiation. Consequently, the negotiation meetings often ended here without any real outcome. As indicated in the Appendix, Tom hints the beginning of the third process by highlighting the importance of bicycles for China, and he also tries to persuade the Chinese group with two attractive factors of the product which are smart design and good quality. But his invitation for the Chinese group to speak fails to solicit any effective response from the Chinese delegates. Instead, they nod and smile, which can be simply a non-verbal symbol of being polite and giving face to others.Conclusions and recommendationsThis paper explored the processes for negotiating with Chinese. It did this by examining the specific negotiation processes. It then analysed initial meetings using a theoretical framework based on cross-cultural negotiation and intercultural dimensions. The four factors are high–low context culture; power-distance; individualism and collectivism and Confucianism incorporating face and guanxi.Specific factors relating to different cultural values were identified in each of the processes of negotiation. It has been found that the first process of non-task sounding process is essential for success in business negotiations with Chinese.In general, this framework is useful for understanding Chinese negotiation styles. Consequently, these findings offer relevant implications for negotiation in general. For example, as the purpose of any negotiation is to reach a mutually beneficial agreement, being able to conduct successful initial meetings can be a big challenge. In particular, in a cross-cultural context, negotiation becomes much more complex and difficult. The difficulty involves dealing with different sets of values, attitudes, behaviours and communication styles of the other party. As one way of dealing with these challenges, it is essential to apply both intercultural dimensions and culture-specific dimensions to each of the negotiation processes accordingly.Finally, since it is a mutual responsibility for both negotiation parties to understand the cultural realities of their negotiation partners, it is worthwhile for western business people to disseminate （传播）their cultural values to their Chinese counterparts as well. Interculturalcompetency（胜任性） is, after all, a two-way learning and communication process. Further research is needed to further explore ways of communicating in cross-cultural negotiations involving a dual cultural perspective. In particular, more attention should be placed on further exploring initial meetings of negotiation. The following recommendations are relevant for both further research and for conducting successful business negotiations across cultures:1.Develop an understanding of process-oriented dimension inparticular for non-task process for understanding Chinese cultural dimension, which would help explain the Chinese negotiationbehaviour. This point also leads to the next one.2.Be patient in non-task sounding process. Chinese usually need timeto build trust and create guanxi with their counterparts in this process before moving ahead with the next processes of negotiation.3.It is important to make sure that trust has been successfully builtin the task-related exchange of information process, becauseChinese tend to provide adequate and useful information for thepeople they can trust. This will eventually make the persuasionprocess easier.In sum, keeping good guanxi with Chinese negotiators and spending sufficient time to develop understanding in the non-task sounding process is the basis for achieving successes in business negotiations with Chinese. Further research, however, needs to be done to look at successful negotiation cases to see if initial meetings also play an important role for these successes.Note1.By west we refer to specific countries with a Eurocentric leaningsuch as the USA, Australia and New Zealand. These countries arerelevant to our discussion and analysis of our data.AppendixNegotiation caseAt the end of 1999, C, District Council of Beijing, sent a delegation to visit their sister town T City in Australia where C and T had already established a sound relationship. The delegation, headed by the deputy governor, included eight people with four government officials and three businessmen.。