Cross-cultural business

As an unfortunate example, let's look at what happened recently during a long drawn-out negotiation in Ho Chi Minh City. Executives from one of northern Europe's largest breweries had been haggling for months with a Vietnamese public sector company over the details of an agreement to build a joint-venture brewery in central Vietnam.

Towards the end of a particularly frustrating day the leader of the European team could simply no longer mask his irritation. His face got bright red, he clenched his fist so hard the wooden pencil he was holding suddenly snapped in half.

At that sound the room instantly become silent. A moment later the entire Vietnamese team rose as one man and stalked out of the conference room. The next day a three-line fax arrived at the headquarters of the European brewery informing them that the Vietnamese would never again sit down at the same table with "such a rude, arrogant person" as the head of the European team.

What to do now? Months of painstaking discussions had already been invested in this complex project. To save the deal the Europeans decided to repatriate the offending manager and replace him with a stoic type famous for his poker face. Some months later the agreement was duly signed and visitors to central Vietnam can now imbibe lager and pilsner to their heart's content.

What could the deal-focused head of the northern European team have done to prevent that fiasco? When I asked participants in one of our recent Global Negotiator seminars that question, the best answer was "Take a walk!" Exactly. Call for a recess. Have a cold drink. Go for a brisk walk. Do whatever it takes to relax and cool down.

Your face turning red is an involuntary response you can't control. But you can take a break before something snaps.

While Westerners associate the concept of 'face' primarily with East Asian and Southeast Asian societies, it is in fact a cultural universal. To the Italians it is honore, to the Spanish dignlui, to Anglo-Saxons self-respect. Nowhere in the world do human beings enjoy rude and offensive behavior. We tend to feel uncomfortable when others are angry with us or when we are embarrassed, mocked or singled out for criticism.

It is true that people in relationship-focused culture are often especially sensitive to face, perhaps because RF cultures are group-oriented. One's self-image and self-respect depend very much on how one is viewed by others. That is why business visitors need to be especially conscious of how their verbal and nonverbal messages may be interpreted in RF cultures.

Miscommunication Across Cultures

The strong East Asian concern for covering negative emotion can be confusing to outsiders from deal-focused cultures. When we moved from Germany to Singapore in 1988 my wife and I decided to try learning Mandarin on weekends. We hired Stefanie, a pleasant young woman who had recently immigrated from Taiwan to tutor us.

My lessons were rudely interrupted late that year when my mother passed away and I had to fly to Wisconsin to attend the funeral. Unfortunately, barely had I returned to Singapore when my brother phoned again to break the sad news that our father had just passed away. As you might imagine, this was a very difficult time for me.

It happened to be a Saturday when I got back from this second funeral, and Stefanie dropped by to enquire why I had missed over a month's worth of lessons. Suffering from grief compounded by jet lag and exhaustion, I blurted out that both of my parents had just died.

A stricken look flashed across the young woman's face for just a fraction of a second, and she gasped. Then Stefanie suddenly laughed out loud, right in my face. And proceeded to giggle for several seconds.

Now, intellectually I was quite aware that people from certain cultures hide their nervousness, embarrassment or severe stress with a laugh. I also knew 1 should have broken my sad news much more gently. After all, Stefanic was a Chinese person raised in the Confucian way: She revered her parents. For her the sudden realization that she could perhaps lose both of them almost at the same time must have come as a terrible shock.

Nevertheless my immediate reaction to her laugh was visceral. I felt as though I had just been hit very hard in the stomach. Even though I understood rationally what had happened I had difficulty relating to Stefanie as 1 had before the incident. A few weeks later she stopped coming and we had to find a new Mandarin tutor.

'Low-Context' and 'High- Context' Communication

We have seen that RF negotiators tend to be circumspect in the use of language in order to avoid conflict and confrontation. The polite communication of Asians, Arabs, Africans and Latins helps maintain harmony. The meaning of what they are saying at the bargaining table is often implicit. That is, the meaning is found more in the context surrounding the words rather than in the words themselves.

Many years ago U.S. anthropologist Edward T.Hall, the guru of cross-cultural communication, coined the useful term 'high-context' for these cultures.

In contrast, when northern Europeans, North Americans, Australians and New Zealanders speak, more of the meaning is explicit - contained in the words themselves. A listener is able to understand what they are saying at a business meeting without referring much to the context. Hall termed these cultures 'low-context'.

For a Japanese executive trying to do business in Amsterdam this difference in communication styles quickly becomes obvious - as it does for a Swede or German trying to close a deal in Tokyo. That's because Japan lies at the high-context/RF end of the culture continuum while Sweden and Germany are perched at the low-context/DF end.

What is less obvious are differences between cultures which are located fairly close together on the continuum. For example, let's look at Greater China, the constellation of the PRC, Hong Kong (politically independent of the PRC until July 1997) and Taiwan. We will add Singapore as well because although the population of the lion City is only about 77 percent Chinese, the business culture is strongly Chinese-oriented.

Fig. 4.2

DF/Low Context  -- Singapore -- Hong Kong -- Taiwan -- China --  RF/High Context

Figure 4.2 shows that while China - the mother culture - is still located at the RF and high-context end of the continuum, Taiwan, Hong Kong and Singapore are spotted at varying distances away. Business people doing business in these three outposts of Chinese culture notice that while they are definitely more RF and indirect than say Australia, they are also more deal-focused and direct than most of their counterparts in the PRC.

Old Pacific Rim hands know that Hong Kongers and Singaporeans are somewhat more open to direct contact than PRC Chinese, require a shorter time for building rapport and tend to use more direct language.

Equally interesting, recent research by a Danish scholar reveals similar fine gradations of cross-cultural business behavior among markets at the deal-focused/low-context end of the spectrum. Professor Malene Djursaa of the Copenhagen School of Business studied the interaction of over 50 Danish, German and British businessmen and published her findings in the June 1994 issue of the European Management journal

Although all three of these European cultures are unmistakably low-context they also display significant differences - differences that can cause problems for people doing business in the three markets. While the British are clearly more low-context and deal-focused than Arabs, they are also more high-context and RF than their Danish and (especially) German counterparts.

Fig. 4.3

DF/Low Context --- Germany --- Denmark --- UK ---  RF/High Context

In lengthy interviews with the business people of these three related cultures Professor Djursaa learned for example that Germans find personal relationships to be more important in the UK than back home. The interviews also reveal that the British employ more roundabout, indirect language than the Danes. Further, the Danes reported that they get down to business more quickly than the British but less quickly than the Germans.

The research of Hall, Djursaa and many other scholars confirms what business people have learned from experience: Differences in cross-cultural business behavior create invisible barriers to international trade.

Variations in verbal and nonverbal behavior can cause culture clashes. But a skilled interpreter can often smooth over verbal problems. That's what is going on when an interpreter takes several minutes to render in Japanese or Chinese what a DF speaker just said in a couple of short sentences. Part of the translator's task is to cloak overly blunt statements with the proper amount of polite circumlocution.

Saying It Like It Is vs 'Saving Face'

Even when indirect RF and direct DF people are both speaking the same language - English for example - they are really speaking different languages. A Dutch or German negotiator will choose his words carefully so that his counterparts will understand exactly what he is saying. He wants no ambiguity, no beating around the bush.

Meanwhile his Arab, Japanese or Indonesian counterparts are choosing their words even more carefully - but for a completely different reason. RF negotiators want to make sure that no one at the meeting will be offended. No rude directness, no crude bluntness, no loss of face.

I personally come from a fairly deal-focused background. When an Australian, a German or a Dane describes me as a direct, straightforward person I take it as a compliment. That's because in 13F cultures directness and frankness are equated with honesty and sincerity.

But those same adjectives coming from a Japanese would more likely be meant as criticism. Why? Because in RF/high-context cultures, directness and frankness are equated with immaturity and naivete - perhaps even arrogance. In strongly R.F cultures only children and childish adults make a practice of saying exactly what they mean. They just don't know any better!

The Two Meanings of 'Sincerity'

As a final illustration of the differences in 13F and RF communication styles let us look at the contrasting meanings of the word 'sincerity.' To English speakers from the deal-oriented part of the world sincerity connotes honesty, frankness. A sincere friend for instance is one who tells you the truth even when the truth is unpleasant.

In contrast, for RF people a sincere friend is one who always shows his willingness to be helpful. For example, suppose a West Asian asks a deal-focused person for a favor which the latter knows he will not be able to do. The 13F friend would probably show his sincerity by responding, 'Very sorry, I won't be able to do that because..."

The West Asian however would regard such a person as a very fickle friend indeed. A sincere friend would reply, "Of course! I will do my best and let you know ..." In relationship-oriented cultures you show sincerity by declaring your willingness to help out - even when you cannot or will not do the favor.

In the next chapter we move from the 13F/RF divide to that between formal and informal business cultures.

5. Formal vs Informal Business Cultures: Status, Hierarchies, Power and Respect

Many a promising international deal has fallen through when a negotiator from an informal culture bumps heads with counterparts from more formal cultures. In this chapter we will look at several examples.

Formal cultures tend to be organized in steep hierarchies which reflect major differences in status and power. In contrast, informal cultures value more egalitarian organizations with smaller differences in status and power.

Why does this matter when we are doing business abroad? Because contrasting values cause conflict at the conference table. On the one hand, business people from formal, hierarchical cultures may be offended by the breezy familiarity of counterparts from informal, relatively egalitarian societies. On the other hand. those from informal cultures may see their formal counterparts as stuffy, distant, pompous or arrogant.

Such misunderstandings can be avoided if both sides are aware that differing business behaviors are the result of differing cultural values rather than individual idiosyncrasies.

Culture Clash in Germany

I learned about the informality/formality divide the hard way in the early 1960s when my employer at that time, a Chicago export management company, transferred me to Germany to expand sales in Europe.

My first appointment was with our largest account. a distributor of hand-tools located in Stuttgart. I spent that day in meetings with the boss of the company, Doctor Wilhelm Mьller, and I found myself saying "Herr Dr. Mьller" and "Dr. Mьller" the whole day. All this formality was oppressive for a young man from the United States, one of the world's most informal cultures. So returning to Frankfurt that evening I phoned my German friend.

"Hans, I'm really tired of this medieval formality. How many times do 1 have to meet with this guy before I can start calling him 'Willi'?"

Fortunately Hans straightened me out on the formality issue right then. "You are asking when you can start calling Dr. Mьller by his first name? Well, the answer is niemals, Dummkopf! Never, you dummy!"

Of course Hans was right. 1 spent the next two years addressing this distinguished gentleman in the proper German way. And when I met his wife 1 called her "Frau Doktor." Why? Because that's the proper form of address in Germany, a relatively formal society.

I soon learned that most of Europe follows the same rules of formal address. Your French contact remains Monsieur Dupont, not Ren~. And for years in Italy we addressed the head of a our largest supplier in Italy with the honorific 'Commendatore' until we got to know him well enough to call him Gustavo.

By way of contrast, my most recent meeting in Sydney, Australia started with a hearty "G'day mate! Let's 'ave a beer!" Now that, dear reader, is an example of a very informal culture!

Formality actually is about status, hierarchies, power and respect. Whereas informal cultures are supposed to value status equality, formal cultures value hierarchies and status differences. Ignorance of this distinction can cause serious problems across the bargaining table. A participant in one of our export marketing seminars in Europe related an incident which illustrates the point.

Case 5.1: How to Insult a Mexican Customer

Jose Garcia Lopez, a Mexican importer, had been negotiating with a Danish manufacturing company for several months when he decided to visit Copenhagen to finalize a purchase contract. The business meetings went smoothly, so on the last day of his visit Sr. Garcia confided that he looked forward to signing the contract after his return to Mexico.

That evening the Danes invited Sr. Garcia out for an evening on the town. Flemming, the 40 year-old export manager and his 21 year-old assistant Margrethe hosted an excellent dinner and then took their Mexican prospect on a tour of Copenhagen nightspots. Around midnight Flemming glanced at his watch.

"Sr. Garcia, I have a very early flight tomorrow to Tokyo. I hope you'll forgive me if I leave you now. Margrethe will make sure you get back to your hotel all right and then drive you to the airport tomorrow morning. I wish you a good flight!"

Next morning in the car on the way to the airport jos~ Garcia was uncharacteristically silent. Then he turned to the the young assistant: "Margrethe, would you please tell your boss I have decided not to sign that contract after all. It is not your fault of course. If you think about what happened last evening 1 believe you will understand why 1 no longer wish to do business with your company."

To repeat, formality has to with relative status, organizational hierarchies and how to show respect to persons of high status. That is why international marketers always should know whether they are dealing with formal or informal cultures. Figure 5.1 shows who is who.

Fig. 5. 1

VERY INFORMAL CULTURES Australia, USA

MODERATELY INFORMAL  Canada, New Zealand, Denmark, Norway

MORE FORMAL CULTURES Most of Europe, Mediterranean Region, Arab World, Latin America, Most of Asia

In formal, hierarchical cultures status differences are larger and more important than in egalitarian, informal cultures. Formal ways of addressing people is one important way of showing respect to persons of high status.

Showing Respect in Europe

Let's take Dr. Wilhelm Mьller as an example. I addressed this German gentleman formally because that is the German custom. But the cultural value behind that venerable custom has to do with showing appropriate respect.

First of all. Wilhelm Miller was considerably older than I was. And in formal cultures age confers status.

Secondly, Herr Mьller had earned a doctorate - an academic distinction of great importance in Germany. One should acknowledge that distinction by including the title when talking to such a person. What makes this bit of protocol especially important is the fact that today some 40 percent of top managers in German manufacturing concerns hold a doctorate, usually in engineering.

Showing Respect to the Customer

But there is a third and supremely important reason for according great respect to Dr. Wilhelm Mьller - a reason that is valid far beyond Germany and Europe. Namely, this guy was my customer. International marketers must remember that all over the world these days the customer is king.

Except in Japan, that is. Because for Japanese businesses the customer is GOD! We can all learn something from the way our Japanese colleagues and competitors treat their customers.

Hierarchies and Status in Asia

People from egalitarian societies are often unaware of the importance of status distinctions in hierarchical cultures. During the five years we lived in Singapore we were friends with an American couple who invited us for dinner several times. At the first party there were a number of Singaporean couples present, but none of the locals accepted subsequent invitations.

The American couple had no idea why their Singaporean friends no longer came to dinner, but my wife and I knew. You see, these particular Yanks happened to be strongly egalitarian. They liked to have their maid sit at the dinner table with them. Now, like most Asians Singaporeans respect authority~ honor social hierarchies and value clear status differences. Feeling uncomfortable sitting at the same table with a Filipina maid, they said nothing but simply stayed away.

As the world's most egalitarian people, Scandinavians sometimes have a special problem doing business in strongly hierarchical cultures. Recently an associate of mine from a Nordic country visited good friends of ours in Bangkok. Svend politely shook hands with the host and hostess - and then with their young Thai maid as well. Much to Svend's surprise the maid immediately burst into tears, ran out and spent the whole evening sobbing in her room.

Our Bangkok friends are a Thai-American couple.They gently explained to Svend that as a farang - a Caucasian foreigner - he automatically enjoys high status whereas a domestic worker is of lower status. In Thailand people so far apart in social status do not shake hands. So when Svend grabbed her hand she thought he was making fun of her and was absolutely mortified.

The sharp divide between egalitarian and hierarchical societies can act as a barrier to trade for exporters. International marketers from informal cultures often do not know how to show respect to high-ranking persons from formal cultures, who in turn may be easily offended by perceived slights.

The bottom line for export marketers and deal-makers in today's global marketplace is that ignorance of cultural differences is not an acceptable excuse for failure. Case 5.2 shows how you can lose business due to ignorance of cultural differences.

Case 5.2: How to Insult an Egyptian Customer

A major Canadian high-tech manufacturing firm was deep in negotiations with an Egyptian public sector company. Vice President Paul White was pleased to learn that the head of the Cairo-based company was leading a delegation to Toronto with a view to concluding negotiations.

White was even more pleased when upon his arrival Dr. Mahmud Ahmed hinted strongly that discussions were moving along nicely and that a favorable outcome was likely. After all, this contract represented the largest and most profitable deal White's company had worked on to date.

Quite aware of the importance of relationship-building, Paul invited the Egyptian delegation to an elegant reception and buffet dinner at the prestigious Grand Hotel, with Dr. Ahmed as the guest of honor.

Dr. Ahmed was his usual charming, affable self when he arrived at the party and warmly shook hands with Paul. After a few minutes of chit-chit the Canadian led his chief guest to the drinks table stocked with wine, liquor, fruit juices and soft drinks. "Well now, what can I offer you to drink, Dr. Ahmed?"