CROSS-CULTURAL NEGOTIATION

AMERICANS NEGOTIATING A CONTRACT IN CHINA

Prepared for
Mr. Artimus Pyle
Assistant to Mr. Ignatius J. Reilly
Wilson Motors
Graball, Alabama 90210

Prepared by
Quinn Wilson
Wilson Motors
Graball, Alabama 90210

December 2, 2014

To:

Artimus Pyle, Assistant, Wilson Motors

From:

Quinn Wilson, Business-Intern, Wilson Motors

Date:

December 2, 2014

Subject:

Wilson Motors Cross-Cultural Integration into the Chinese Market

Attached is the report that summarizes the issues Major Vehicle Component Company (MVC)
experienced and recommendations on how to prevent these from happening at Wilson Motors.
In order to successfully expand to the Chinese market, it is important that Wilson Motors
learns from MVCs mistakes.
MVCs report includes information regarding misunderstandings between the American and
Chinese companies. Disagreements and misunderstandings amongst the company
representatives, Mr. Jones and Mr. Wang, arose due to cross-cultural communication
differences. The attached report recommends strategies that will help solidify Wilson Motors
expansion to the Chinese market and create strong business relationships.
It is essential that we approach our expansion into the Chinese markets very carefully, as we do
not want to jeopardize any potential business relationships. Wilson Motors must research
Chinese cultural norms before pursuing a serious relationship with the Chinese as the Chinese
have different ethics, language, culture and values. Mr. Reilly and management team must
maintain a strict level of patience because it is imperative to establish a respectable level of
trust between the two companies. In addition, Wilson Motors must keep in mind that the
Chinese will only do business if guanxi exists, in other words, a mutually beneficial network of
contacts must exist.
Thank you for the opportunity to research and provide my feedback on Chinese relationship
building task. I enjoyed learning new business skills related to joint ventures and cultural
norms. If you have any questions about the material in this report, please feel free to call me.
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Wilson Motors Cross-Cultural Integration into the Chinese Market
Table of Contents

Memorandum of Transmittal.. ii
Executive Summary.... iv
Introduction...... 1
Purpose and Scope... 1
Assumptions..... 1
Methods........................... 1
Limitations... 1
Understanding MVCs Attempted JV with the Chinese Market. 2
Establishing And Maintaining Strong Business Relationships 2
Conclusion and Final Recommendations.... 4
References........... 5

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Wilson Motors Cross-Cultural Integration into the Chinese Market
Executive Summary
This report examines an unsuccessful Joint Venture between Major Vehicle Component

Company (MVC) and a Chinese vehicle company. Wilson Motors is in the initial stages of
expanding into the Chinese market. Wilson Motors reputation and image is important to
maintain; thus it is essential the joint venture is successful in entering the Chinese market.
Additionally, expanding into the Chinese market will result in a broader business appeal in
America and internationally. Wilson Motors must learn from MVCs Chinese experience. This
report identifies what went wrong during MVCs trip to China and offers recommendations for
Wilson Motors. It is imperative that Wilson Motors understands cultural norms, demonstrates
patience, builds trust and develops strong mutually beneficial connections (networks). Wilson
Motors must show strong qualities of trustworthiness, respect and reliability, specifically, to
plan a successful joint venture into the Chinese market, Wilson Motors must:
1. Understand Chinese cultural norms.
o Research Chinese business culture and learn how to adapt to their norms
o Overcome the language barrier

Useful to have a translator on call

o Know Confucianism
2. Establish trust and maintain patience
o The Chinese like to do business with people they know and trust
o Trust is leading indicator for the Chinese

Chinese will not rush into a business deal with a company they do not
trust.

o Negotiations take longer in the Chinese market

3. Create Guanxi
o Need good guanxi to enhance trust
o Connections and relationships must be seen as beneficial and create additional
value
iv


MVC, located in Alabama, was pursuing a Joint Venture (JV) with a Chinese stateowned vehicle component company located in Shanghai. However, the JV was not successful
due to cultural misunderstandings, miscommunications and both parties unwillingness to
compromise.
Purpose and Scope
The purpose of this report is to outline the issues and problems surrounding MVCs
business trip to China and furthermore, to recommend a course of action that will focus on how
to avoid comparable misunderstandings when it comes Wilson Motors developing
relationships with China. I will specifically look at the cross-cultural differences involved in
building a long-lasting relationship with the Chinese. The core principles/ideals are unfailing
trust, patience and guanxi. Although other principles of negotiations are pertinent to consider
these core ideals must be achieved for Wilson Motors to successfully expand to the Chinese
market.
Assumption
The recommendations for this report are based on MVCs unsuccessful attempt at a
joint venture with the Chinese markets. It is unknown whether there were other circumstances
that contributed to their failure, e.g. competition, quality, poor timing, etc.
Methods
After reviewing MVCs Chinese interactions, which were outlined in a negotiators notes, I
researched online various cross-cultural communication methods in the Chinese markets. The
information gathered for this report has been compiled from numerous sources.
Limitations
MVCs report is based on a single unsuccessful deal, thus Wilson Motors cannot
generalize the information to all American-Chinese Joint Venture negotiations. Wilson

Motors negotiations will differ from MVCs because different people are involved, timing is
unique and product differentiation; therefore, Wilson Motors will have to tailor their
interactions.
Understanding MVCs Attempt at JV in the Chinese Market
Major Vehicle Component Company, a company based in Alabama, was looking to set
up a Joint Venture with a Chinese vehicle company in Shanghai. The American company
travelled to China for two months in order to negotiate the business deal. The Chinese
company wanted the JV to assist in improving their technology knowledge base, while the
Americans want to use the Chineses production facilities to improve product quality and lower
production costs.
The JV was not successful primarily because of cross-cultural miscommunication by
both the Chinese and American parties. For a JV to be successful negotiators must understand
that the Chinese first focus on generating a friendship and long-term relationship with the
Americans, primary with the focus is solely on creating a business deal. As result, their Joint
Venture was not successful.
Establishing And Maintaining Strong Business Relationships
Since Wilson Motors is looking to expand to the Chinese markets, first and foremost it
is crucial that the company is sensitive to cultural norms. Joint Ventures have the potential to
offer to generate significant revenue, cheaper costs and less risk (Davison 78). The Chinese
have different cultural customs than North America, as result Wilson Motors must through due
diligence complete their research before further attempting to expand into the Chinese market.
It is important to understand the different cultural norms China has compared to the North
America.

Secondly, when communicating with potential business partners, Wilson Motors must

be sensitive to the Chinas business practices. To understand the need for patience, it is
important for Wilson Motors to understand that the administrative structure in the Chinese
government has the ability to slow down the negotiation process as the Chinese negotiator does
not have much decision making authority (Davidson 78). In addition, Chinese businesses
emphasize the importance of building long-lasting personal relationships with their business
partners. To facilitate a good business relationship the Chinese will spend a significant amount
of time extending invitations for their partners to dinners which involve introductions to
government officials and people of high rank. It is important that Wilson Motors prioritizes
attending and hosting social functions during negotiations. The Chinese will not go into
business with somebody they do not trust (Ghauri and Fang 320). This takes time and patience
to build up. North-American companies rely on contracts and paperwork to solidify
partnerships with other companies. The Chinese explain, they [Western firms] want to come
and sign the contract quickly and do not know that [if] we do not understand each other there
is no business relationship. First we have to know and trust each other, then we sign the
contract (Ghauri and Fang 314).
Finally, Wilson Motors must establish guanxi with the Chinese market. This is
understood as a network of relationships that support one another. Creating guanxi will ensure
that the business venture is successful and minimize potential risks. Even though creating
guanxi requires a great deal of time and resources, it will give Wilson Motors a competitive
advantage over other companies.

Conclusion and Recommendations

This report identifies cross-cultural issues that Americans must be aware of when considering a
Joint Venture with China. In order for Wilson Motors cross-culturally integrate with the
Chinese markets, this report recommends:
1. Research Chinese cultural norms. Not all communication is spoken; there are verbal
and nonverbal differences that vary between countries

Enroll in a cultural diversity course specific to China; a reputable daylong

course is available at the Alabama University.

Be sensitive to a different countrys lifestyle

2. Maintain patience and establish trust

Express courtesy and appreciation of the hospitality provided

Show the Chinese company that Wilson Motors is reliable

Dedicate time needed to create a strong relationship

Understand government relationships

Expand communications to include people met at functions

3. Create Guanxi

Be patient with non-business related inquires

Understand needs and wants of the Chinese company and seek to resolve
through secondary partnerships

Request American suppliers to support Chinese venture. The suppliers will add
value to Wilson Motors proposal

The above recommendations will allow for successful integration into the Chinese markets.

References
Davidson, William H. "Creating and Managing Joint Ventures in China." California
management review 29 (1987): 77-94.ProQuest. Web.
Ghauri, Pervez and Tony Fang. Negotiating with the Chinese: A Socio-Cultural Analysis.
Journal of World Business 36.3 (2001): 303-25. Web. 1 Dec. 2013.