As an oil industry sales executive, John Shipwright equipped himself with a handy booklet about Chinese business practices and etiquette and headed to Shanghai, China alone to close a sales deal. After two days’ negotiation about the delivery, the Chinese customer agreed to an order-to-installation cycle that would take six months for whole delivery— John considered the deal done and couldn’t wait to go home. However, the Chinese customers brought up the delivery issue again and that was where John lost his temper and shouted, “What? You want to talk about delivery again?” The Chinese team was at a loss and asked the interpreter what was wrong. Because of this misunderstanding, both sides postponed the negotiation without arranging another meeting, and the U.S. company that John Shipwright represented lost this deal to a competitor (Graham & Lam, 2003, p. 3-4).

            The negotiation failure above is due to an underlying lack of awareness regarding cultural differences. Negotiation is a formal dialogue between two parties to search for a resolution. To a large extent, negotiation is influenced and shaped by culture, “the collective programming of the mind that distinguishes the members of one group or category of people from others” (Hofstede, 1991, p. 5). With the rise of globalization, there is a growing trend of international negotiation, emphasizing the increasing importance of understanding cultural differences. In this article, I will apply three most important and relevant culture dimensions from Hofstede’s culture dimensions theory—power distance, long-term orientation and individualism — to negotiation styles.  Table 1 illustrates Hofstede’s cultural dimensions and will inform the forthcoming analysis. Based on that, I will also explain differences between Chinese and the U.S. negotiation styles to provide basic understanding to negotiators from both sides.

Table 1

Hofstede’s Six Culture Dimensions for China and United States

Note. The power distance index expresses the degree to which the less powerful members of a society accept and expect that power is distributed unequally. The long-term orientation index shows whether a culture values (long term) pragmatic or (short term) normative. A higher score means more persistence and thrift in a society. The individualism index reflected the degree to which individual interests are given priority over the group. Source from http://geerthofstede.nl/dimension-data-matrix.

            First, we can look at this case in terms of power distance. As shown in Table 1, China scores 80 in the power distance dimension: Chinese society enjoys a strict hierarchy and firmly believes that inequalities of power among people are acceptable, making the status and division between supervisors and subordinates quite clear. The U.S. score is relatively low compared with the Chinese one, and the score gap of 40 points reveals that although the U.S. recognizes inequality within the team, differences between team members on the American side based on hierarchy are not unbridgeable. This distinction results in two different approaches to selecting negotiators. The U.S. side, with a relatively low power distance culture, is more likely to appoint people as negotiators or even negotiating leader because they are able to solve the problem. By comparison, as a relatively high power distance culture, the Chinese side is more likely to choose negotiators and assign roles in the negotiating team based on the existing hierarchy. In the oil industry sales case, the U.S. team only sent a sales executive to China because they thought Shipwright had the authority and ability to decide on delivery issues; meanwhile, the Chinese team was composed of several people who had their own focus and Shipwright could not figure out the leader, contributing to the negotiation failure.

            We can also view this case in terms of long-term versus short-term orientation. With a high score of 87, China is a culture paying more attention to the future and long term benefits or costs. The U.S., on the other hand, scores a relatively low 26, which implies its focus on the present and short-term interests. A perfect reflection of this difference could be the Chinese “relation-based” negotiation approach and the U.S. “task-based” approach (Samovar, Porter, McDaniel, & Roy, 2016, p. 352). During the negotiation, the Chinese would consider not only the interests at the moment but also the potential development afterwards, so they would not rush in negotiating details. Instead, they would start with general principles and common value discussion and then spend most of the time building relations. The American, on the other hand, would strive to complete the task assigned to them, separating the people from the issue and focusing on their own goals for this negotiation. Once they know where the interests are, they prefer getting straight down to business. In the case, the Chinese team repeatedly asked about delivery issue where an agreement had been reached, a sign of confirmation and relationship building. John Shipwright, on behalf of the U.S. team, considered task completed and totally ignored the signal. What was worse is that Shipwright regarded the Chinese customers unreasonable and shut the door of further negotiation possibilities.

            Finally, an examination of individualism versus collectivism can also further our understanding of the case.  A score of 20 indicates that China is a highly collective culture, where people are loyal to their groups and act in the groups’ interests. As Hsu (1981) pointed out, Chinese people emphasize the group goal and appreciate “relational harmony.” On the other hand, the Americans score a high 91, indicating that they are more concerned about personal interests rather than their group. According Ma and Alfred (2010), a more individualistic negotiator would be expected to demonstrate “self-assertive behavior.” The more individualistic U.S. negotiators would prefer handling divergences with rational competitiveness and pursue their own self-interests, while the collectivistic Chinese would prefer handling conflict in indirect ways to preserve relationship. This also indicates why the U.S. negotiators tend to make the first offer: they are more likely to assert their interests directly. Meanwhile, the Chinese negotiators tend to react to the offer and defend their interests indirectly because they do not want to be the first to break the harmony. Things would also have changed if Shipwright had realized that the Chinese team was searching for more benefits but they did not want to break the harmony.

            Ultimately, it is clear that China and the U.S are growing accustomed to each other’s negotiation styles. However, the main differences deeply rooted in culture still largely influence the negotiation dynamics and results. Therefore, understanding each other’s culture is crucial to the conclusion of an agreement, and the application of Hofstede’s culture dimension model can enhance this understanding. Going back to the case mentioned earlier in this paper, if the U.S. negotiator had identified the true leader according to the Chinese negotiators’ titles first, spent some time building relations and general principles and understood the underlining demands of the Chinese customers, Shipwright would not have struggled and lost this client. Meanwhile, if the Chinese negotiators had understood the American task-based approach and clarified their interests more quickly, it would have saved both sides much time and effort. A mutual understanding of each other’s culture can greatly smoothen negotiations and contribute to successful agreements.

References

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