International Business Mid Term

Name: Pankhuri Bhatnagar

Batch: April 2019
Roll No: 19PT1-18
Q1: Should Obisoft set up its R&D center in China? What the Obisoft board need
to do to make an informed and appropriate decision?
Ans1: Yes, Obisoft should set up its R&D center in China.
If we analyze both the countries in view, USA and China, using CAGE framework,
we reach to following conclusions:
1. Culture:
• Through the lens of Hofstede cultural dimensions of US and China:
China is on the higher end of power distance and Long term
orientation as compared to USA. On the other hand, we value things
like freedom and individuality more in USA. It is also supported from
that case fact that Ling invited Herfken and his wife to visit him in
Shanghai that China is highly collectivist culture where people act in
the interests of the group and not necessarily of themselves.
However, they both are almost similar in terms of Masculinity and
Uncertainty avoidance (China, slightly on a higher end).
• From the case fact that says that Ling understood from his previous
experience that the pricing of enterprise software was a complicated
matter shows that China is future oriented while USA has this
practice of focusing on quarterly on yearly results that shows that
they are more spontaneous.
• Although, there are few cultural difference between USA and CHINA
but both countries are incredibly diverse and multicultural and since
China is more future oriented which shows that they believe to
engage in planning and strategies to achieve future goals.
• Also, while coming to Language barriers between China and USA,
since Ling and Herfken already knew each other’s languages, this
 language barrier is not a big deal when you see a greater success
after transferring R&D to China.
2. Administrative:
• China is a Communist country.
• Since China has a huge market for software and at that time, Obisoft
had no presence there which shows that Obisoft R&D department
has a great scope in China.
• Also, the case fact regarding new Chinese government policy of
granting subsidies for up to 50 percent of the establishment cost to
foreign companies that relocated their R&D departments to China
which is very profitable for ObiSoft as this will enable their greater
social efficiency, lower down the overall price of software.
• Also, from the Obisoft financials provided, we see that the estimated
savings in terms of Salaries and wages in moving research and
development to China would be 14,000,000 from 2021 which is
currently 84,000,000 expense for 2018 which would directly lead to
reduction in overall expenses of 227,270,000 in 2018 and increase in
overall revenue of Obisoft.
3. Geographic:
• China shares its borders with maximum no. of countries ,i.e., 14
countries .
• It is the 3rd largest country with the population of 1.33 Bn.
• It has a huge amount of Geographical area which is a plus point for
R&D department.
• Distance from China to United States is 11,671 kilometers.
4. Economic:
• Chinese economy runs on Manufacturing, agriculture, shipping and
exporting.
• It has the second strongest World economy.
Hence, overall it would be beneficial for Obisoft to set up its R&D center in China
and this should be an informed and appropriate decision of Obisoft board.
Q2. Herfken did not fully understand Ling’s negotiation with Chinese customers due to
the language barrier. What should have been the strategy of Herfken to have an upper
hand in the negotiation process?
Ans2: Though, there was some language barrier between Herfken and Chinese
customers, Herfken should have started the conversation and kept his points in the
starting in English to have upper hand in the negotiation process. Ling was anyway
present there who had the knowledge of both the languages and he could have helped
with the translation.
He could also be well prepared in advance and should have prepared a presentation to
show them in the beginning itself for a clear picture.
Also, in all big companies in countries like China and any other, there is always a
translator (Human or any other AI machine) which can help in translating the languages
in such matters. He should have asked for the same in the beginning to keep his points
on his own because in the case it is mentioned that Herfken was only able to follow only
the disjointed translations that Ling provided him time to time since the meetings were
often very fast and completely in Mandarin.
Also, in such negotiation process for having an upper hand, he should have asked them
to slow down the conversation process and made them understand that even he is the
big part of the conversation.
He should have tried to show some emotion to develop the understanding with the
clients on personal level so that even they try to communicate and understand what
Herfken wants to say.
He should have tried using pictures to communicate his ideas in a better way, express
more that doing the talking.
It is very important to be patient in such situations, try to build trust and understanding
with the customers, direct eye contact and try to understand each and everything thing
they say on personal level.
Last but not the least, he should be well prepared in advance with the basic knowledge
of their language for better understanding.