Cross-cultural business

The first step would be to arrange for legal registration. This is complicated because setting up such an office in Bangladesh requires the approval of several different ministries and government agencies.

To handle the registration we talked to some local law, accounting and consulting firms. They said the approval process would take up to a year and quoted fees of up $ 10,000, justifying this exorbitant amount by hinting at "special expenses" - meaning of course bribes to the responsible officials. Unwilling to engage in bribery, we reluctantly shelved the idea of a Dhaka office.

Then a few weeks later one of my Hong Kong contacts phoned to ask a favor. "An old friend of mine from Bangladesh is checking into the Mount Elizabeth Hospital near your office tomorrow for a major operation. The poor guy will be all alone in Singapore. Would you please stop by and give him my best wishes for a swift recovery?"

The old friend turned out to be a charming, well-read gentleman who had headed two different ministries in a previous Bangladesh government and was now a consultant in Dhaka. Chatting with him about many things that day I also mentioned our wish to develop long-term suppliers in his country. After the operation I dropped by again with a couple of novels to wish him well.

Two days later the ex-minister phoned to thank me and offer his help. "Your company's plans will obviously help promote Bangladesh exports. If you wish I will arrange to get your office registered within a month. Can you pay me $900, the cost of my airfare?" I quickly agreed and three weeks later our Dhaka office was a legal entity - the fastest liaison office registration on record in Bangladesh.

Since he was personally acquainted with all the senior officials involved, the ex-minister was able to hand-carry our registration documents from one agency to another and get them signed without delay. And also without any "special expense."

I relate this incident in some detail because it shows that in RF cultures having the right contact can be just as important for buyers as it is for sellers. In the next chapter we will look at how to build those all-important relationships in RF cultures.

3. Deal First - or Relationship First?

Now let's get back to Danmark Widgets. Lars Larsen was fortunate in that DMW's bank was able to provide a letter of introduction to one of the Japanese candidate distributors while the Danish embassy in Tokyo performed the necessary introductions to the other two. As soon as the three Japan appointments have been confirmed Lars and his technical colleague Christina take off for the USA on the first leg of their round the-world sales trip.

Their first meeting is with Chicago Widget Systems, where the two Danes are given a friendly greeting and seated in a conference room. "Oh, you're from Copenhagen. 1 guess that's in Sweden, right?"

Not totally surprised by the American's knowledge of European geography, Lars and Christina sip their coffee while answering a few more questions about Danish pastry, Danish blondes and Danish beer.

Getting down to Business

And then, about five minutes after they entered the CWS office, they hear "Okay, now we'd better get down to business. Time is money! Why don't you tell us about those Superwidgets of yours that are selling so well in Germany." To international marketers who have done business in deal-focused cultures, that way of starting a meeting will sound quite familiar.

After all, why not get right down to business? The Danes asked for this meeting in order to evaluate CWS as a possible distributor. And the Americans agreed to the meeting to find out whether they would be interested in handling the DMW line. So why should buyer and seller waste time with extraneous preliminaries?

Obviously exporter and importer will want to learn a lot more about each other before they are ready to sign a distribution agreement. But that comes later. Meanwhile the two sides are sizing each other up while they discuss price, payment terms, specifications, quality, quantity, delivery dates and all the other issues involved in an international distribution agreement. They talk business right from the start and get to know each other as things proceed.

Deal-focused buyers and sellers do plenty of socializing over drinks, meals and on the golf course. But to a great extent they build rapport right at the bargaining table in the course of hammering out an agreement.

Which is why after one or two meetings with each of the U. S. companies our two Danes feel they have learned enough to make a tentative ranking of the three candidates. While references and credit reports remain to be checked, Christina and Lars already have a pretty good idea of which of the three would make the best American partner for DanMark Widgets.

In deal-focused markets such as the the USA, the UK, Canada, Germany, the Netherlands, the Scandinavian countries, Australia and New Zealand you can usually get down to business after a few minutes of small talk. And you can learn most of what you need to know about your potential DF counterpart in a matter of days rather than the weeks or months it will take in strongly RF cultures such as Japan.

Figure 3.1 shows that the USA and Japan are at opposite poles in terms of relationship-focus and deal-focus.

Fig. 3. 1 Deal First or Rapport First?

Deal First DF/USA --------------------------- RF/Japan Rapport First

Having done their cross-cultural homework our two Scandinavian marketers already know about this key difference. That's why they know they're in for quite a different meeting scenario in Tokyo.

Getting to Know Each Other

At Nihon World Widget their first meeting starts with the elaborate greeting ritual of the meishi., the formal exchange of business cards (more about that in Chapter 9). Lubricated with large quantities of tea the two sides then dialogue about everything on earth except the matter that brought them together: widgets.

The visitors answer polite questions about Copenhagen and Denmark and respond with a similar number of questions about Tokyo and Japan. The two sides discuss weather, sports, music, movies ... all part of the RF "getting to know you" game.

Nor are Christina and Lars surprised when the meeting ends without a single mention of business. When Watanabe-san suggests another meeting on Wednesday they accept his offer of arranging transport back to their hotel.

The second meeting with NWW again ends without a discussion of widgets. But this time Watanabe-san invites his visitors to a Japanese dinner - a good omen.

At the restaurant the four Japanese men are impressed with the elegant way Christina handles her chopsticks. Lars is somewhat less adept with the unfamiliar utensils but shows that he can sip his sake with aplomb. But it's when the dinner is over that Christina really demonstrates her thorough grasp of Japanese social protocol. She suddenly puts a hand to her temple and excuses herself politely. "Watanabe-san, I'm so sorry. I seem to have developed a rather bad headache. Would you mind terribly if I go back to the hotel now?"

Of course Mr. Watanabe does not mind! This diplomatic headache frees the men to spend the next three or four hours in the way they should: building a relationship over beer, karaoke and whisky. Probably a good deal of each.

So it's no great surprise when at next morning's meeting it is Christina who leads the Danish side of the business meeting while Lars gulps quantities of white aspirin and black coffee. The Japanese now feel they know their foreign counterparts well enough to discuss business. They signal their readiness by asking a number of detailed questions about those famous Superwidgets.

It takes time, patience and sometimes a cast-iron liver to develop a strong relationship in RF markets such as Japan, South Korea and Taiwan. Getting inebriated together seems to speed up the rapport-building process in East Asia - but normally only for men. Women are still usually personae non gratae at these quasi-adolescent male bonding rituals.

The best way to get to know your local counterpart varies from one RF culture to another. In much of the Arab world steaming platters of rice and lamb may take the place of booze. Brazilians and Mexicans love to talk about their art, music, literature and films. And then there is golf In many parts of the world today a five iron closes the culture gap faster than a fifth of Scotch.

Yes, building trust and rapport with your customer is important everywhere in the world, not only in relationship-oriented markets. The difference is that with Arabs, Africans, Latin Americans and most Asians you have to develop that climate of trust before you start talking business. In RF markets, you first make a friend, then you make a deal.

You Need to Develop a Personal Relationship

In RF markets the relationship you build with your counterpart will have a strong personal component in addition to the company-to-company aspect. Your customer or partner will want to know that you personally as well as your company are committed to the success of the venture.

For instance, Watanabe-san may want to be able to phone Lars Larsen at any hour of the day or night to solve problems and smooth out difficulties.

And because of this personal element it is important that continuity is maintained as far as possible throughout the relationship. Lars should personally handle the NWW account, should make the return trips to Tokyo and should be on hand when Watanabe-san and his colleagues visit Denmark.

If Lars is promoted or transferred to another assignment he must take care to personally introduce his replacement. Since the Japanese already know Christina she might be well placed to continue the relationship. However, the special challenges women face in doing business with Japanese and certain other RF cultures should be taken into account when making such a decision. The delicate issue of gender and international business will be addressed in Chapter 5.

Bureaucracy in RF Markets

Business negotiations usually last much longer in RF than in DF cultures, for two reasons. First, it often takes time to arrange an indirect approach. And second, there is the lengthy process of building trust and developing a personal relationship.

When negotiating with governments and public sector companies in relationship-focused markets a third factor - bureaucratic inertia -comes into play. Of course, government officials everywhere tend to be cautious. They may find it safer to postpone a decision or to deny your request rather than to give their approval. Moreover, red tape often slows the process of getting things done. But in RF cultures suspicion of strangers, especially foreign strangers, often make officials even more hesitant to move things along.

That's why it took Volkswagen over nine years to negotiate the opening of an automobile factory with the government of China. And why McDonald's required more than 12 years to work out an agreement with the then Soviet government for raising the first Golden Arches in Russia.

Deal-focused executives should load their briefcase with an extra large supply of patience when preparing to do business with government officials in many RF markets.

The Importance of Face-to-Face Contact

The telecommunications revolution permits rapid correspondence with business partners around the world today. Telex, fax, E-mail, telephone and video-conferencing enable us to stay in constant touch with our international counterparts.

But none of the above has reduced the continuing need for face-to-face contact with our relationship-focused customers and partners. RF business people tend to be less comfortable discussing problems in writing or over the telephone. They expect to see their suppliers and partners in person more often than would be necessary in deal-focused markets.

The Role of the Contract

Deal-oriented business people rely heavily on written agreements to prevent misunderstandings and solve problems. U.S. business people in particular tend to take a rather impersonal, legalistic, contract-based approach when disagreements and disputes arise. I have an American friend who says, "If you took all 860,000 lawyers in' our country and laid them end to end ... Hey! Come to think of it, wouldn't that be a great idea!"

Many U.S. companies bring a lengthy draft contract and a lawyer to the negotiating table with them. They then proceed to discuss the proposed agreement clause by clause, consulting the legal adviser every time a question arises.

This approach makes sense in America, the world's most litigious society. But it can be counter-productive in RF cultures where business people rely more on personal relationships rather than on lawyers and detailed contracts. In strongly RF markets a better approach is to leave the lawyers at home and have them go over the agreement before it is signed.

Contrasting perceptions of the contract can cause misunderstandings between R.F and DF cultures. For example, a Korean partner might expect to renegotiate the terms of a contract as conditions change, even if the agreement had just been signed in New York a month ago. The Koreans would expect their close relationship with their U. S. counterpart to facilitate such a renegotiation.

The New Yorkers on the other hand might well misinterpret an early request for changing the contract terms as a sign that their new Korean partners are tricky, fickle and unreliable. R.F cultures depend primarily on relationships to prevent difficulties and solve problems while deal-focused cultures depend on the written agreement to fulfill the same functions.

As more companies from both sides of the Great Divide do business globally we can expect these n-misunderstandings to slowly diminish. In the meantime however executives need to be alert to cross-cultural differences that can wreck even the most promising international business deal.

4. Communicating Across The Great Divide: Direct vs Indirect Language

RF and DF business cultures also differ in the way they communicate. Negotiators on the deal-focused side of the Great Divide tend to value direct, frank, straightforward language while those on the relationship-focus side often favor a more indirect, subtle, roundabout style.

In my experience this communication gap is perhaps the largest single source of misunderstandings between RF and DF business people. Confusion arises because the two cultures expect quite different things from the communication process.

Harmony vs Clarity

It is really a question of priorities. For DF negotiators the priority when communicating with others is to be clearly understood. Most of the time they take pride in saying what they mean and meaning what they say. Dutch negotiators for example are justly famous for bluntness.

In contrast, RF negotiators assign top priority to maintaining harmony and promoting smooth interpersonal relations. Because preserving harmony within the group is so important, RF people tend to carefully watch what they say and do in order to avoid embarrassing or offending other people.

Fig. 4. 1 The Gross-Cultural Communication Gap

Direct Language DF ------------------- RF Indirect Language

Over the last 35 years I have noticed that the nearer the RF end of the continuum a culture is located, the more careful and indirect people are with their language. On the other hand, the nearer they are to the DF end, the more frank and direct people tend to be.

Things can get quite interesting when the two parties in a negotiation come from opposite poles, as is the case when most Americans and Japanese interact. For example, I have had the pleasure of negotiating with Japanese companies since 1971 and cannot recall hearing the word ,no' even one time.

Most Japanese, Chinese and Southeast Asian negotiators I have encountered seem to treat 'no' as a four-letter word. To avoid insulting you they may instead murmur "That will be difficult or "We will have to give that further study." Popular variations are "Maybe" and "That will be inconvenient."

Mind you, one of our sons speaks the language fluently and worked for a large Japanese company in Tokyo. While there he dated a number of Japanese young ladies and although he won't admit it, I think he may have heard the dread 'N' word once or twice.

Case 4.1 illustrates the contrasting approaches to business communication in RF and DF cultures.

Case 4.1: Bilingual Labels

As one of North America's largest importers of cotton garments, Great Northern Apparel of Toronto decided it was high time to start sourcing mens dress shirts in China. From an industry contact in the United States vice president Pete Martin heard about Evergreen Garments, a large manufacturer in Guangzhou with several years of experience supplying Los Angeles and New York importers.

After considerable correspondence Pete Martin flew to Guangzhou to finalize a purchase agreement for 8000 dozen shirts. Discussions with the Evergreen Garment people proceeded slowly but amiably, lubricated by endless cups of Chinese tea and punctuated by a couple of enormous banquets. Pete and the Evergreen team needed a week of nonstop meetings to agree on fabric construction, size and color breakdown, packing, carton markings, delivery, price and payment terms.

Exhausted from these interminable negotiations, Pete was looking forward to the signing ceremony on the last day of his visit. At this point however Pete suddenly remembered that Evergreen had not yet done business with Canada and hence might not be familiar with the Canadian bilingual merchandise labelling requirements. So he carefully explained that all apparel sold in Canada must carry labels showing fiber content and laundering instructions in both French and English.

This news seemed to cause some concern among the Evergreen team. Managing Director 11 had a long discussion with his production and export people and then replied with a smile, "Mr. Martin, I am afraid that supplying garment labels in French and English will be a bit difficult. The question of bilingual labels will require further study."

Careful to hide his irritation Pete further explained that bilingual labels were required by law in Canada. "If you wish we can send you the exact wording of the labels in both languages. just let me know. But the bottom line is that we really have no choice - it's the law."

The Chinese negotiating got together for another discussion. After a time Mr. Li spoke up with a smile, "Mr. Martin, as we said before this will be difficult. But of course we at Evergreen Garments will do our best to solve the problem." Relieved to have settled this last issue, Pete Martin signed the purchase contract and said his formal goodbyes to Mr. Li and his team.

On a warm spring day seven months later Pete got a call from the quality control chief at the Great Northern import warehouse. "Mr. Martin, we have a problem here. You know those 96,000 shirts that just came in from China? Well, they've got bilingual labels on them all right. But the labels are in English and Chinese'

Stunned, Pete slumped back in his chair, mentally calculating the huge expense of removing the illegal labels and having correct ones sewn in. The spec samples he had approved a few months ago had come in without garment labels, but that often happened and he hadn't thought much about it at the time. After all, the Chinese had agreed to supply French and English labels ... hadn't they?

Strongly RF people also have subtle ways of saying no with body language. Some Arabs lift their eyebrows to politely refuse a request - the nonverbal equivalent of the American slang expression, "No way, Joe&"

In many cultures clicking the tongue with a "Tsk Tsk" sound indicates a negative response.

Japanese and Thais often smile and change the subject or simply say nothing at all. I have found that silence during a meeting with East Asian negotiators often means "Forget it, Charley!"

The Myth of the Inscrutable Oriental

Suspicious deal-focused negotiators sometimes think all this indirectness is designed to confuse or mislead them. In fact it is the RF-D17 communication gap which gave rise to the myth of the 'inscrutable Oriental.'

But verbal subtlety and indirectness is only part of the story. To DF types East and Southeast Asians also seem inscrutable because they hide their emotions, especially negative emotion. In these cultures showing impatience, irritation, frustration or anger disrupts harmony and is considered rude and offensive. People mask negative emotion by remaining expressionless or by putting a smile on their face.

Thais for example seem to smile-die all the time. They smile when they are happy, they smile-die when they are amused, they smile when they are nervous, they smile even when they are absolutely furious. Thai people smile because to openly display anger would cause everyone concerned to lose face.

Communication and 'Face'

In the highly relationship-focused cultures of East and Southeast Asia, both sides lose face when a negotiator on one side of the bargaining table loses his temper. The person who displays anger loses face because he has acted childishly. And by openly showing anger he has also caused the other party to lose face. It doesn't take much of that to bring a promising negotiation to a lose-lose impasse.