Team 2

Cross Cultural Communications Lydia Gustafson October 30, 2010

Team 2 Abstract

The Chinese business practice is vastly different from the Western method as we know it. With the Chinese economy opening up, business practices are beginning to align with more conventional methods. Even though many Chinese are now returning from studying business in the US and are bringing back with them western ways of doing business, China will always have its own unique business culture and etiquette. This culture is based upon history and the values that the Chinese people place on tradition. We must give attention to these differences if we are to secure successful business relationships. This paper will discuss what culture is and what it is not, historical references to the culture and some of the main types of cultural difference between the United States and China as it involves business. It is believed that culturally intelligent people have the knowledge to understand cross-cultural phenomena and have the skill of adapting behavior to act appropriately and successfully in a range of situations. This has been proven by successful international, cross cultural businesses. Culture is shared, learned, powerfully influential, systematic and organized, and is largely invisible. Nations are often formed because of cultural similarities among different population groups, and over time they reinforce their adherence to a national culture by means of shared institutions, legal and educational systems, and of course, nowadays, the mass media. National cultures are particularly important in international business because of the concept of national sovereignty and the need to conduct business affairs within national, legal, and political frameworks.

Team 2 Cross Cultural Communications

Some people believe that the effect of the internationalization of travel, business, and the media will make all countries converge toward a single culture, ironing out all the special differences that make each national culture and subculture unique. Because of the economic dominance of Western countries, particularly the United States, it is thought by some that cultural forms will gradually submerge cultures around the world. Thus, the international proliferation of organizations such as Nike, McDonalds and Starbucks are often welcomed as economic success stories but also criticized as an intrusion of American culture. If the convergence theory is correct, it might be a reason to downplay the notion of cultural intelligence. If this is the case, it could be best to work with people from all nations to help them to get away from their own cultural habits and instead to understand and practice the values and customs that are becoming standard around the world. Nevertheless it is possible to un-package cultures if we understand them. Lets review some key components between China and the US in regards to the business world. The Initial Approach Chinese business contacts are mostly referrals; essentially a business relationship is struck based on another business associate recommendation. The best prices and deals often come from a strong recommendation. Chinese business relationships tend to become a social relationship after a while. This is unlike American business relationships which tend to remain professional. Chinese people tend to value relationships much more than American people do. In business the initial effort is usually focused on developing the relationship. Typically the objective of a business meeting is to develop a relationship; this is opposite to the American approach of

Team 2 closing the deal. In China, when giving out your business card, it is appropriate to start with the most senior person as hierarchy is important. It is proper to extend both hands when delivering your business card and it is courteous to have your information translated into the appropriate language. Seniority

Seniority is very important to the Chinese. Instead of addressing the other party as Mr. or Mrs. as we do in the United States, it is always appropriate to address the other party by their designation such as Chairman, Director or Manager followed by their name. Giving Face In China it is very important to give the appropriate respect according to rank and seniority. Seating positions in a meeting room or a dining table is generally accordingly to rank and importance. Unlike in the US, family members are usually business associates in the Chinese culture whether they are qualified or not. In the Chinese culture, they will carefully select family members and close friends for most critical positions in business, qualifications are largely overlooked. This is done out of respect, which is the opposite in the US. In some US companies, it is against policy to hire relatives and the resume which includes experience and education is reviewed thoroughly during the interview process. Meetings It is appropriate to have an agenda. Formal introductions are expected in both the US and China. At the conclusion of a meeting, it is important to know that Chinese business is largely inconclusive, open ended and uncommitted. This is opposite of American business which view business as not finished until there is a conclusion, if there is no deal or no next step, it is

Team 2 considered an unsuccessful meeting. In China it is considered rude to try to force a conclusion, rather the focus is on developing a relationship, which then leads to a business deal. Thinking Patterns

The differing business cultures of the United States and China can be easier understood if the difference in thinking patterns is recognized. These thinking patterns are separated by a variety of cultural values. Some notable different cultural values include the expression of agreement and disagreement. In the United States, business people are more verbally argumentative, while the Chinese are more inclined to not say 'no'. The Chinese communication of information is more often implied and they have more use of indirect language patterns than in the United States, where there is more use of direct language to communicate the message to the other party. Seeing as China is a Communist country, their expression of self in business is often we oriented, while in the United States, people tend to be more I oriented. As individuals in business, the Chinese are accustomed to 'group duty' and seeking a 'preservation of harmony (Chinese Business Practices, Culture and Etiquette, 1996). The United States sees itself deserving rights and freedom, while seeking individual achievement for themselves. As gone into more detail later, China has a less rules based approach to thinking orientation and conflict resolution. This can be seen in the case of Nike Inc. and their continuous problems with business practices in China. In the United States there are regulations and laws that would not have allowed child labor to occur in production warehouses, however in China this did occur because there are less laws and regulations enforced and the East has a spiral type of logic and expression of honesty, which is more subtle and non-verbal. Some critics argue global corporations and their suppliers, such as Nike, exploit business culture in China by taking

Team 2 advantage of their lack of corporate codes of conduct, a downfall of Chinese business culture (Locke, R., Qin F., & Brause, A., 2007).

The one piece of information someone should learn about a company is Guanxi, which cannot be overlooked. This popular term of China means relationships and it is understood in the business world as the network of relationships among different people who work together and support one another and can be summed up as the exchange of favors between businesspeople. In China business culture, these relationships are very important and demand a lot of time and money from the business and its workers. Businesses work to establish wide networks with their suppliers, retailers, banks, etc. and work to form acquaintances with a variety of different people from different companies (Chinese Business Practices, Culture and Etiquette, 1996). In China, these relationships are made even more beneficial to the company and or business person when a person shares more of their personal life, including family, hobbies, and political views. Business Times & Business Attire China's business culture is different in a variety of areas including business times. According to China Business Culture Guide, business hours are 8 am to 5 pm Monday through Saturday, and store hours are from 9 am to 7 pm daily. China's lunch hours are different than the United States, in that theirs is a time of shutting down from 12 pm to 2 pm, and during Chinese New Year, some businesses may be closed for up to a week. Dress code is rather different from the United States in that conservative suits are the norm and you will not see anyone wearing bright colors as this is deemed inappropriate (Chinese Business Practices, Culture and Etiquette, 2006). For women, high heels are not acceptable because they are not considered modest. In

Team 2 their business culture, communication is based on a positive reply, such as 'maybe' instead of saying 'no'. Case Study - Nike Inc. One business that displays a very different business culture in two different locations is Nike Inc. Nike Inc is a producer of footwear, clothing, and other athletic items and is ranked as

the highest seller of these items in the world, with about 19,000 retail accounts in the US (Baker, Mallen). These items are manufactured primarily in China, Taiwan, United States, Korea, and Mexico. For a deeper analysis of business culture in the United States vs. China, we will focus in on Nike Inc. in China. We will go over Nike Inc. current business practices and bans, company culture, different problems this company has been encountering over the last 10 years, and what is being done to improve these problems. Since the 19th century, Americans have dreamed of penetrating the Chinese market, but war and communism worked to keep the Westerner's out and the Chinese poor (Forney, Matthew, Fonda, & Daren, 2004). Since the rise of the affluent class in China, however, exports to China have risen 76% and according to a survey by the American Chamber of Commerce, 3 out of 4 US companies say their operations in China are profitable and their margins are higher. These numbers have brought companies, like Nike Inc., to China even though the threat of democracy to Chinese consumers has been a hurdle for these companies to overcome. The one thing that did work to close this gap is the status quo. China's consumers have chosen Nike as their shoe of choice due to the status they seek. A social scientist at the Chinese Academy of Social Sciences explains this choice by saying, Nike was smart because it didn't enter China selling usefulness, but selling status, (Forney, Matthew, Fonda, & Daren, 2004). In 1980 Nike's founder, Phil

Team 2 Knight, decided to move production of Nike goods to China from South Korea and Taiwan because he believed China was more than a workshop. He has been quoted as even saying, There are 2 billion feet out there, go get them!

This move into China was not an easy one for Knight. His first ventures to get Nike in the Chinese market included getting the Nike brand logo, the Swoosh, recognized. This was proven easy at first because a new basketball league was formed in 1995 in China, and Nike was put to the task to sponsor and outfit all of these Chinese athletes. During this time, however, there were continuous job terminations, and Nike was accused of exploiting Chinese labor. When Nike had established itself in China there were no protective labor laws, endless supplies of cheap labor, and authoritarian leaders who outlaw independent labor unions (Global Exchange, 2008). Nike had moved away from the United States, a culture that was based around rules and regulations and placement of ethical codes of conduct. These rules and regulations and ethical conduct were not present in China and this proved to be a problem for Nike. Nike's Code of Conduct, at the time, only listed the human labor practices they were told to abide by. The Code of Conduct read, "...in the area of human rights...in the communities in which we do business we seek to do not only what is required, but what is expected of a leader," (Global Exchange, 2008). Workers in China do not have a minimum wage and therefore can be paid whatever the company, in this case Nike Inc., proves to be most profitable in the long run. Recently, since 2008, Nike has worked to improve their worker rights laws in China, however according to an article in USA Today titled "Nike still sees China Labor Problems, Nike still has large problems with working conditions and with managers not meeting Nike's Standards (Skidmore, S., 2008). According to Nike Report Cites Continuing Problems in China, there are continuing problems with working conditions and managers who fail to meet companys standards. A corporate

Team 2 responsibility report was run, which showed employees were using bad documents to get jobs and they were working too much overtime. These problems are not a matter of problems that happen globally, they are a matter of corporate responsibility, which is new to Chinas business culture. China is new to corporate responsibility and this is something that is being watched because China plays a very large role in Nikes production of shoes with one in three pairs being made there (Associated Press, 2008).

Since China joined the WTO and hosted the Olympics in 2008, China's business practices with Nike have seen a lot of changes, with Nike trying to align itself with more conventional methods. Managers from these companies that have moved their operations to China have had to accommodate the workforce with what they feel is necessary in a job. According to the Mercer Human Resource Consulting LLC, New York, 27% of 718 million people of the Chinese labor force are considered skilled workers and 16% are employed in production jobs. It was found that additionally, these employees have little loyalty to the company they work for unless the employees' interests are kept in mind (Purdum, T., 2005). Companies, including Nike, have had to implement training programs into their production environments to keep these employees interest in mind as well as increase the percentage of workers who are skilled in the Chinese labor force. Another key to a company's success in China is their Human Resources team, which must make sure their practices match those of the Chinese culture or work to translate well in China. According to Ming-Jer Chen, professor of business administration at the Darden Graduate School of Business Administration at the University of Virginia, saying "no" to a Chinese worker can have undesirable consequences (Purdum, T., 2005). The consequences of saying such a thing

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could make a worker in China feel as though they have been rejected and they are no longer seen as a colleague. Nike has also worked to better their business practices by improving their companys corporate responsibility. According to Maria Eitel, new vice president and senior advisor for corporate responsibility who joined Nike Inc. as the new vice president and senior advisor in the 1990s during a time of intense criticism for bad labor practices, said That experience forced us to decide who we were when it comes to corporate social responsibility, and forced us to really figure it out," (Williams, D., June/July 2002). Eitel acknowledged at the time that this lack of corporate responsibility had caused damage to Nikes image and it hurt the people who worked for Nike. Eitel further explained, The way it hurt our business was that it hurt our people. Individual employees at Nike started to wonder what kind of company they were working for and what message was being sent about the people who worked there, (Williams, D., June/July 2002). Eitel had the task at the time to communicate the companys ethics and social responsibility to Nikes 500,000 employees in 58 countries, including China. By reiterating the importance of this corporate responsibility to not only the upper management, but also the employees that worked at Nike, Nike was able to show Chinese employees their importance and build a better relationship with them. As noted before, relationships in business are one of the most important cultural aspects a company can understand and work on. Many of Nikes business practices have been shown to move in the Western direction, however, China will always have a unique business culture and etiquette that is all their own. A recent example of this has been shown with Chinas ban of Nike commercials featuring Lebron James and an animated cartoon kung fu master. This commercial, which shows the US basketball star battling an animated cartoon kung fu master, was banned because it was thought to 'insult

Team 2 Chinese national dignity'. Nike failed to learn China's policy on advertisements, which states that ...all advertisements in China should uphold national dignity and interest and respect the motherland's culture (Associated Press, 2008).

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All of these obstacles could have been prevented if Nike would have had a better sense of Chinas business culture. Business culture differs between countries and it is important for a company to recognize these differences and learn how to adjust their business style accordingly. Nike has been unfortunate to learn the hard way understanding the culture of China, the communists role in business, and Chinas labor rights. Before a company does business in

another country, they must do their research and form a rudimentary understanding of the countrys culture and business etiquette. Conclusion: Cultures can be defined according to their valuesthe fundamental beliefs that people within the culture share about how things should be and how one should behave. Culture is shared; it is passed on from one generation to the next. While it has a profound influence on behavior, the most important aspects of culture are invisible. A key feature of culture is that it categorizes others and us into in-groups and out-groups. This categorization of people into them and us underlies much cross-cultural behavior. There are several important dimensions along which cultures can be defined, the most important being individualism and collectivism. By understanding our own culture we can then make initial comparisons with others to understand areas of possible agreement or disagreement. The knowledge gained in this way is a necessary first step to becoming culturally intelligent.

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References (1996). The Global Leader: Understanding Chinese Business Culture and Business Practices. Legacee. Retrieved from http://www.legacee.com/Culture/CultureOverview.html#bibliography

Associated Press (2008). Nike says Chinese labor issues persist. MSNBC.com. Retrieved from http://www.msnbc.msn.com/id/23621005/

Chinese Business Culture. Los Angeles Chinese Learning Center. Retrieved from http://chineseculture.about.com/

Chinese Business Practices, Culture and Etiquette (1996). The Global Leader: Understanding Chinese Business Culture and Business Practices. Retrieved from http://www.legacee.com/Culture/CultureOverview.html#bibliography

Cowan, J. (2010, February). A TALE OF TWO CHINAS. Canadian Business, 83(2), 32-35. Retrieved November 4, 2010, from ABI/INFORM Trade & Industry. (Document ID: 1970754551).

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Forney, Matthew, Fonda, & Daren (2004). Marketing: How Nike Figured Out China. Time Magazine. Retrieved from http://www.time.com/time/printout/0,8816,995462,00.html

Global Exchange (2008). Facts about Nike. Third World Traveler. Retrieved from http://www.thirdworldtraveler.com/Boycotts/NikeFacts_GX.html

John Ruwitch. (2008, March 15). Nike's Chinese suppliers defy labor laws; Report cites underage staff, unpaid wages. National Post, FP.16. Retrieved November 1, 2010, from ProQuest Newsstand. (Document ID: 1447436011).

Locke, R., Qin, F., & Brause, A. (Oct. 2007). Does Monitoring Improve Labor Standards? Lessons from Nike. Industrial and Labor Relations Review, 61, 3-31.

Baker, Mallen. Corporate Social Responsibility - Companies in the News. Mallenbaker.net. Retrieved from http://www.mallenbaker.net/csr/CSRfiles/nike.html

Purdum, T. (2005, February). Managers must rethink HR practices to keep skilled workers: free lunches and Popsicles may help. Industry Week. Retrieved from http://www.industryweek.com/articles/china_checklist_9668.aspx

Scribd. (2003). Chinese Business Culture Guide. Retrieved from http://www.scribd.com/doc/6257/China-Business-Culture-Guide

Team 2 Silkroute Investment Services (2005). Understanding Chinese business culture and etiquette. Chinese Culture. Retrieved from http://www.chineseculture.net/html/chinese_business_culture.html

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Skidmore, Sarah (2008). Nike still sees China labor challenges. USA Today. Retrieved from http://www.usatoday.com/money/economy/2008-03-13-2398561655_x.htm

Williams, D. (June/July 2002).Weaving Ethics into corporate culture: Ethics keep companies and their employees connected and productive. Communication World. Retrieved from http://findarticles.com/p/articles/mi_m4422/is_4_19/ai_88253008/