ABSTRACT

Case Studies: Overcoming Across-cultural Negotiation in doing Business in

China.
Saikat Gochhait,
Lecturer, RATM, Mathura

The impact of international business in domestic markets compels us to ask a question:

"How can we survive in this global playing field, and what can we do to run our
businesses more effectively?" Nowadays, businesses of all sizes search for suppliers
and customers on a global level. International competition, foreign clients and suppliers
may become bit cautious, but they may also create huge opportunities in developing our
business. The increasingly global business environment requires managers to approach
the negotiation process from the global business person's point of view. This approach
may not be relevant in domestic negotiations. Some of the components of a cross
cultural negotiation process are more complex and difficult, but will surely help in
overcoming barriers and failures in the international business arena.
When doing business internationally, we need to consider (Salacuse, 1991):
1.
2.
3.
4.
5.
6.
7.

The negotiating environment

Cultural and sub-cultural differences
Ideological differences
Foreign bureaucracy
Foreign laws and governments
Financial insecurity due to international monetary factors
Political instability and economic changes

If we consider the fact that negotiating with our fellow citizen is not an easy task due to
many individual differences, it would be reasonable to suggest that negotiating with
foreigners may be even more difficult. The way we perceive and create our own reality
may be completely different to our counterpart's way of thinking, behaving and feeling.
Unfortunately, knowledge of any foreign language is not enough to face and solve the
problem. Language is a cluster of codes used in communication which, if not shared
effectively, can act as a barrier to establish credibility and trust. We need more effective
tools, and the most important is knowledge of all factors that can influence the
proceedings. Nations tend to have a national character that influences the type of goals
and process the society pursues in negotiations. This is why specifying and
understanding cultural differences is vital in order to perform successfully in inter-cultural
communication (Schuster-Copeland 1996, 33). As we better understand that our
partners may see things differently, we will be less likely to make negative assumptions
and more likely to make progress when negotiating. When crossing Cultures, it is
essentials that the source of the Communication think of the product in terms of the
culture to which the communication will be directed rather than the home culture.
(Cateora and Keavency, 1987)
Keywords: Cross Cultural Competence, Cultural Orientations Model, Culture Shock,
Cultural Characteristic, Cross Cultural Attributes

Case Studies: Overcoming Across-cultural Negotiation in doing Business in

China.
Saikat Gochhait,
Lecturer, RATM, Mathura

Theory of cross cultural management: Cultural orientations model

Here we will introduce the cultural orientations model. This model includes ten cultural
dimensions while applying the following three criteria: (1) Each dimension needs to
recognize an important aspect of social life; (2) Each dimension needs to be something
to which any socio-cultural environment gives its members a basic orientation as the
shared rationale for behavior; (3) Each dimension has practical value to managers,
leaders, and anyone else who needs to reconcile, integrate, or transcend cultural
differences in order to obtain a desired outcome. ( Walker, D.M, Walker, Thomas,

Joerg, Schmitz, 2002).

Definitions of ten dimensions:

Environment: How individuals view and relate to the people, objects, and issues
in their sphere of influence

Time: How individuals perceive the nature of time and its use

Action: How individuals view actions and interactions

Communication: How individuals express themselves

Space: How individuals demarcate their physical and psychological space

Power: How individuals view differential power relationships

Individualism: How individuals define their identity

Competitiveness: How individuals are motivated

Structure: How individuals approach change, risk, ambiguity, and uncertainty

Thinking: How individuals conceptualize

Comparative Cultural Orientations Model

Environment
Time
Action
Communication

China
Harmony
Past
Being
High Context

Germany
Control
Future
Doing
Low Context

Japan
Harmony
Future
Being
High Context

USA
Control
Present
Doing
Low Context

Space
Individualism
Competitiveness
Structure
Thinking

Public
Collectivist
Cooperative
Order
Systemic

Private
Individualistic
Competitive
Order
Linear

Public
Collectivist
Cooperative
Order
Systemic

Private
Individualistic
Competitive
Flexibility
Linear

See: Doing Business Internationally: The Guide to Cross-Cultural Success

Presence of Tata Group in China
China is a critical and growing market for the Tata Group, which has a bit of history to fall
back on with regard to doing business with the Middle Kingdom. In 1859, a young
Jamsetji Tata, the founder of the Tata Group, was sent to Hong Kong to open a branch
for his fathers banking firm. He relocated a few months later to Shanghai, where he
remained till 1863.
The Tata Group currently has a more modest presence in China than in the US and the
UK, but its companies are developing plans to expand their presence in the country
dramatically. The Group recognizes the potential for high growth in existing businesses
and opportunities for new ones. (Source: www.tata.com)

Tata Sons has a representative office (Contact: James Zhan, Group chief
representative at tatachina@tata.com)
Tata Consultancy Services has signed a joint venture to develop a software
business in China in collaboration with the Chinese government and Microsoft.
Tata Steel has two rolling mills in China following its acquisition of NatSteel.
Tata Refractories has opened a plant in Liaoning Province, the Groups first
Greenfield project in China.
TACO has a factory in Nanjing to make auto components for General Motors and
Ford.

Case studies:
Case Study-1
TRL China Ltd.
Tata Refractories has set up a new plant in China to manufacture Magnesia Carbon
Refractories. With a capital investment of Rs. 37 crore. and a production capacity of
30,000 MTPA, this strategic initiative has been taken to leverage the proximity to raw
material sources and to avail of the low-manufacturing-cost structure of the Chinese
economy. This would not also facilitate smooth supply of cost-effective products to
customers across the globe.
The Greenfield plant, located at Bayuquan in Lioning province situated in the north
eastern part of China, is the first Greenfield manufacturing unit of TRL as well as of Tata
group in China. The plant was inaugurated by the managing director of TRL, C D
Kamath on December 28, 2006, coinciding with the birthday of group chairman Ratan. N
Tata.
The plant has been commissioned at a record time of exactly eight months, a record in
project completion even by Chinese standards. Similarly, TRL has set up a production

facility in Gujarat to manufacture bauxite-based Refractories. These strategic initiatives,

aimed at making TRL a global Refractories company, are a part of company's expansion
and modernization drive launched two years back at a capital investment of Rs 282
crore. This drive has resulted in making the company one of the most modern plants,
and has enhanced its capacity to 2,50,000 MTPA, the highest for any Refractories unit
under one roof in the world.(source:www.steelworld.com, 2009)
Performance
The Company has two Subsidiary Companies viz. TRL Asia Private Limited (a Special
Purpose Vehicle in Singapore) and TRL China Limited, a 100% Subsidiary of TRL Asia
Private Limited. Companys holding in TRL Asia Private Limited is 88%. TRL China
started commercial operations from 28th December 2006. TRL China has earned a profit
during the first full year of its operation , It has achieved a turn-over of Rs.67 Crores and
PBT of Rs.0.63 Crores. Profitability of TRL China has been, however, seriously affected
due to withdrawal of VAT benefits by the Chinese Government as well as by the
strengthening of Chinese Currency (RMB) against the Dollar. In order to meet market
demands, TRL China is undertaking the Phase-II expansion of its production facilities at
an
estimated
capital
expenditure
of
Rs.14.95Crores.
(Source:www.tataref.com)

Case Study-2
Tata Consultancy Services, China
When Indias Tata Consultancy Services set up in China, it was mindful to develop a
strategy that took the countrys heritage and customs into account.
Part of the huge Indian conglomerate Tata Group, TCS entered the Chinese outsourcing
arena by tapping multinational corporations in China, before focusing on regional
companies and finally the domestic Chinese market.
We have grown steadily and profitably since inception, says Girija Pande, executive
vice president and Asia Pacific head for TCS. We did not believe in spending millions
before getting to the first customer. TCS in china is a very profitable operation.
The Indian companys history in china is a reflection of governmental support and
collaboration. In 2002, TCS became the first Indian Software company to establish a
wholly owned foreign enterprise in china. It followed quickly in 2005 with plans to
establish a landmark software joint venture in Beijing with the Chinese governments
National Development and Reforms Commission and Microsoft Corp. The JV was
inaugurated in February 2007 in a high-profile ceremony.

Today, TCS has a 65 percent stake in the entity while the Chinese government holds 25
percent and Microsoft the remaining 10 percent. In a sign of growing Sino-India
teamwork, TCS is merging its subsidiary with the joint venture, a move that will dilute the
governments share to 10 percent.
Like other Indian companies that have entered the Chinese market, TCS has a growing
footprint in the market. It has multiple offices in China (including new premises at
Beijings sprawling Zhongguancum Software Park), 1,200 employees and a mix of global
and local customers. Seventy percent of revenues come from U.S. but it also has a
smattering of domestic clients including Chinese banks. Finance is the strongest sector,
representing 40 percent of volume, while telecom is eyed as the next promising vertical
sector.
Compared with the local Chinese service providers, TCS considers its main advantages
to be size and scale, global and regional reach and international quality standards. Such
attributes have helped in winning business from such large clients as General Electric
Co., Motorola Inc. and Cummins Inc.
Moving deeper into the Chinese market, TCS recently won a significant multi-million
dollar contract to implement a comprehensive international trading system for China
Foreign Exchange Trade System, part of the Peoples Bank of China. While language
barriers have not proven to be a barrier, TCS deals with noticeable cultural differences.
We find that our people in India are more global, says Pande, adding China will
become to be more regimented. In India, if you ask, when will you finish, the answer
might be seven or eight days, observes Pande. In China, you get a precise time.
Certainly, there are trade-offs in finishing for lucrative contracts in rapid growth market of
China. Continuing upstream, Pande says TCS has a goal of building up its workforce in
China to 5,000 in the next five years.(source:www.tcs.com)
Methodology
The design of the present case studies on Overcoming Across-cultural Negotiation in
doing business in China was a descriptive one. Data was collected from both primary
and secondary sources. Books, Journals, Magazines, Newspapers, Booklets and
Websites etc were referred for collecting data from secondary sources. Primary data
was collected through the help of structured questionnaires and personal interview
based on 1) What was Tatas experience of doing business in China, where nondemocratic governance set up is prevailed? 2) As we have not found the same pluralistic
culture in China and Singapore like India. How Tata dids managed with cross cultural
issues?
Results
In this chapter we will present the results of the case studies considering the data
collected based on the above two parameters:
1. Tatas experience of doing business in China, where non-democratic governance set
up is prevailed. How?

The Chinese Government extends all facilities including infrastructure to attract foreign
invested companies to ensure quick project execution and smooth operations after the
plant starts. In fact local mayor takes it as his credit to have investment done in his
district. Also good infrastructure, highly productive work force and a helping local
government makes it easy to do business in China sometimes easier than India. In fact
the plant, TRL, China was set up in record timing of 6 months because of TRL, China
developed a strategy for dealing with key government constituencies. The foundation of
this strategy is meeting and cultivating relationships with government officials at all
levels. The next TRL, China took the advantage of bringing something of value China
such as job opportunities, technology or investment. Government agencies will
automatically take interest in the foreign entity if the company is bringing something of
value to their country.(Li,J.T ,2001)
Lastly TRL, China developed relationship with the State Administration for Industry and
Commerce (SAIC) representatives who helped them in combating intellectual property
infringements.
2. How Tatas managed with cross cultural issues against the pluralistic culture in China?
Finally, a key element of the strategic plan for China must be the recruitment of strong
local leadership in China to execute the plan. The best practice is to initially select a
great local team and keep it intact from the initial planning stages through the start-up of
operations and growth phase. Most of the employees in TRL, China are local people
(out of 124 employees 120 are Chinese). They are very soft and open to change and
they adopted Chinese culture in TRL, China, says Dr.A.K Chattopadayay, Managing
Director, TRL
TCS, China (out of 1200 employees 1000 are Chinese). "Our strategy has always been
to recruit locally. Wherever we go we ensure we hire local people. It is a key to
leveraging the talent pool that exists in that country," says Atul Takle, Vice-President
(Corporate Communications), TCS.
Suggestions for
( www.indik.de)

Successful

Navigation

of

Cross

Cultural

Challenges:

Adaptation of International Business Orientation

Today there is more awareness in China of cross cultural issues and their affect on the
economic development and success of Chinese enterprises. The Chinese population is
observing the cultural similarities and differences among their indigenous ethnic groups
and those of the large number of foreigners coming into the country largely for
commercial purposes.
One strong viewpoint of the local Chinese population is that it is the foreigner not the
Chinese individual or organization that needs to be more culturally aware. Most times it
is a foreigner coming into a commercial enterprise in a management position over
Chinese employees. This is a short sighted approach that today through increased
education and awareness, is changing. There is a realization that cultural awareness is a
two way communication and relationship issue.
Building Communication and Management Systems with Cross Cultural Attributes

Today China is an open economic development zone which has become intertwined with
global business development. Informed Chinese will tend to copy what they view as
successful business practices regardless of cultural orientation. There is a realization
that Chinese enterprises cannot compete based solely on the attribute of the lowest
cost product/service alternative. Todays global customers consider many attributes
other than cost when making purchasing decisions. This has required Chinese
enterprises to spend more time observing and understanding their business partners
and customers i.e. culture.
The need to adopt international business practices to compete with other countries that
are members of WTO; build a better image for products and services to enter the global
marketplace. As well as free trade of products and services based on competitive
advantages have motivated Chinese enterprises to become more culturally aware.
Today consideration of self (Chinese) as an international citizen, consumer cultures are
different resulting in more open minds. The competitive atmosphere in business rather
than the cooperative international business environment is profit oriented; not planned;
forcing Chinese enterprises to change their previous business models.
Chinese business organizations are how not so dependent on top down instructions
from a central governmental agency. Organizations are becoming more democratic in
decision making styles resulting in increased accountability. The continued positive
attributes of Chinese enterprise operations continue to be a willingness of employees to
help each other and the leaders continued feeling of paternal responsibility for his
employees.
Accepting Cross Cultural Challenges
In this section we will propose some suggestions for increasing the cross cultural
competence regardless of current cultural orientation. These will be focused on personal
attributes that may assist individuals to better navigate cross cultural situations.
To begin a tolerance for ambiguity i.e. the unclear or the unknown is a helpful attribute
when faced with a new cross cultural situation. Individuals are advised to develop a
confidence in the face of new situations that are outside their home country experiences.
Next openness both of behavior and cognitive functioning will greatly assist an individual
in reaching a comfort zone within a foreign culture. A willingness to be flexible in ones
own behavior and thinking will lead to more productive cross cultural experiences.
Individuals with a strong sense of self awareness and personal identity will do well in
cross cultural situations. They will be able to maintain their identity with little confusion
when faced with new cultural customs. In conjunction with this, a core of cultural self
awareness and recognition of how ones own culture has influenced their value systems,
behavior, and problem solving abilities will contribute to success in a foreign culture.
Patience with oneself in new situations that may be uncomfortable is a valuable attribute
for people exposed to cross cultural situations. Interpersonal sensitivity to others will also
smooth communications and interactions among people of different cultures.
Being open to new experiences and appreciating the differences will lead to more
comfortable integration between two or more cultures. A sense of empathy in
understanding other cultures will also be helpful. Finally a substantial dose of humility
will serve anyone is a cross cultural interaction well. The ability to be modest and have
an honest respect for cultures other than ones own will lead to more satisfying cross
cultural relationships.
Successful Navigations across Cultures in Global Companies Operating in China
In this final section we will make some general suggestions on considerations related to
cross cultural issues when attempting to do business in a Chinese environment. (1) Hire

people that have interest in China and Chinese culture or industry experts; (2) Hire
mirror leaders: one international leader/ one local Chinese leader; (3) Understand and
be educated about target country culture; (4) Appropriate preparation and training of
both expatriate and local employees; (5) Determine the best method of merging cultural
attributes of the people and organizations. Internal company training to communicate the
big picture for each employee in the company is the first step. Utilize experts for cross
cultural training.
As to hire people that have interest in China and Chinese culture, there are three ways
to hire people. (a) Center of nation policy using only headquarters people who familiar
with national policy and power structures; (b) Use local people or overseas Chinese; (c)
Global employees.
Conclusion:
From the narrative of these case studies, we have concluded that choosing to enter the
Chinese market is a big challenge for many foreign companies such as those Indian
companies, entailing a difficult process of learning, overcoming challenges, adjusting to
new circumstances and accomplishing localization and integration. Rigorous and
professional consulting services are invaluable for facing these intangible obstacles.
Since there are great differences between China and other countries such as India in
their culture and thinking habits, together with the asymmetry on their respective
strength and information, those Indian SMEs have been faced with many difficulties and
problems when they try to sell their products in China. Clearly, relying solely on their own
efforts to build a presence in China would represent a great challenge for these
companies. Tata Group has opened a door for other industries in setting up smooth and
successful business in China.

Attachment : Questionnaire of Cross Cultural Management:

The questionnaire contains 14 scenarios about cross cultural management. We would
like you to select the one or more that most closely correspond to what you would do or
what happens in your organization.
1. Are you really familiar with cross culture management?
a. Much
b. A little
c. Never heard
2. How many employees who have overseas experiences in your company?
mostly
A

About a half
B

A few
C

No
D

3. What is the proportion of middle-top managers who can communicate proficiently in

English in your company?
80-100%

50-80%

30-50%

Below 30%

4 .How would you rate the level of interaction between locals and foreign workers?
a. High: local and foreign people work in the same team
b. Moderate: local and foreign people work for inter-related teams
c. Low: local and foreign people work for non-related teams, and have rare opportunities
to work together
5. How is composed the top management of your subsidiaries in china?
a. All members are local
b. All members are from the headquarters
c. Mostly local with some international members
d. Mostly international with some local members
e. A balanced mix of local/international members
6. Which is the dominant culture atmosphere in your local company?
a. Mother culture-centered
b. Local culture-centered
c. Compromise
d. Others
7 .To what extent do you think the culture difference between China and mother country
have impact on business in China?
Significantly
A

Fairly
B

A little
C

Not any
D

8 .What do you think the relation between the most equity joint ventures and
government?
a. Close b. Good c. Moderate d. Not very well
Close
A

Good
B

Moderate
C

Not very well

D

9 .Does your company have right to formulate human resources policy?

No

Partly

Yes
except To some extent
important events
C
D

10. If human resources policies are defined by the Headquarters, the information on the
local culture/workforce is obtained by: (Select all that apply)

Consultants

Employees

Books

Other source
(Please give

details:)
D

11. Which of the following events are commonly promoted by Chinese subsidiaries to
facilitate the integration of employees (Select all that apply):
a. Luncheon
b. Dinner
c. Off-site meetings
d. Sports events
e. Sponsored events
f. Annual party
g. Barbecue
h. Other (Please give more details: __________________________________)
12. What do you think is the most urgent aspect that should be improved in cross
cultural communication?
a. Speaking local language more fluently
b. Understanding and accept the local culture more deeply
c. Behaving more positively in adapting the local culture
d. Settling the dispute due to culture difference more effectively
e. Other (Please give more details______________________________________)
13. How was your Companys experience of doing business in China, where nondemocratic governance set up is prevailed?
_____________________________________________________________________
14. How your Company managed with cross cultural issues against the pluralistic culture
in China?

References:
Salacuse, Jeswald W. (1991). Making Global Deal Negotiating in the

International Market Place. Boston: Houghton Mifflin.

Cateora, P.R

and Keaveney, S(1987) Marketing: An International

Perspective Homewood, II: Richard D.Irwin.

Walker, D.M, Walker, Thomas, Joerg Schmitz (2002). Doing Business

Internationally: The Guide to Cross-Cultural Success. University of

California. McGraw-Hill
http:/www.tata.com

 http:/www.steelworld.com,2009
http:/www.tataref.com
Li, J.T, (2001) . Managing International Business Ventures in China, pp-7.
http:/www.indik.de/aktvelles/papers/CCM_Chinalast_version_in_berlin_hua
ng.pdf