RESEARCH PAPER subject international business topic differences of business customs between

FOREIGN TRADE UNIVERSITY FALCUTY OF INTERNATIONAL BUSINESS AND ECONOMICS ***************** RESEARCH PAPER Subject: International Business Topic: Differences of business customs between US and China and implications for Apple in China Group members: Nguyen Quynh Chi ID: 1711140014 Nguyen Thanh Dung ID: 1711140020 Nguyen Thuy Duong ID: 1711140023 Tran Nguyen Lan ID: 1711140047 Le Quang Minh ID: 1711140059 Doan Hai Nam ID: 1711140062 Hanoi, September 8th, 2020 TABLE OF CONTENTS A INTRODUCTION - B Comparison of business customs between US and China - Greeting and meeting people 2 Giftgiving - 3 Structure of business meetings: Idea of connection (Guanxi): Idea of face (Mianzi) 6 Hierarchical structure - 7 Individualism versus collectivism - C IMPLICATIONS FOR BUSINESS 10 Case study: Apple in China - 11 D CONCLUSION 13 E REFERENCES - 14 A INTRODUCTION The rapid evolution of Chinese businesses has raised endless opportunities for foreign business cooperation, especially, US’s multinational companies At the same time, cultural factors play an important part in the success of those corporations Businesses in China operate according to a different set of values and it is important to understand those values if one wants to be successful doing business with Chinese partners Furthermore, Chinese people and particularly businessmen often follow their culture’s etiquette strictly and pay attention to the details, so it would be better for foreign companies which desire to establish in China to get used to some of those business customs Some important factors include greeting and meeting, gift giving, business meetings, idea of connection and the idea of face In this paper, we will analyze those cultural factors of Chinese and the US businesses, and the impacts of the differences between them We would conclude with important implications for US businesses to better follow the Chinese culture while entering this prospectus country B Comparison of business customs between US and China Greeting and meeting people In any international business activity, meeting and greeting protocol always play an important role, especially in the negotiation process From the initial interaction, a first impression can be a key factor to move further steps forward both personally and professionally Besides formal standards, such as punctuality and truthfulness, which are considered essential in many countries, there are some remarkable differences between the US and China greeting culture a Handshakes: Handshakes are generally the most common form of greeting They represent the friendliness and cooperation positively However, there is a slight difference between the two nations' customs In fact, Chinese handshakes are not nearly as aggressive as an American handshake Strength in a handshake can be seen as professional and confident in the United States however in China, it would be preserved as overbearing (Huebsch, 2015) b Business cards: In general, Chinese business professionals seem to pay more attention to the business cards than American ones, because they often transfer and receive cards with two hands Moreover, they immediately look over the business card as a sign of respect and honor rather than putting it away with no regard to the information on it (Fox, 2008) In contrast, American businessmen may receive cards in a more indifferent manner and then place them somewhere for later use c Position: Normally, according to Chinese customs, an American guest should be welcomed by someone from the Chinese company that holds an equal or higher position than that of the guest (Seligman,1999) Also, Chinese people prefer calling the surname first then the title follows in addressing individuals (Christensen, 2013) However, with American people, the ranking is often used only in their introduction (Davis, 2003) Giftgiving: Gift giving is less common in America due to strict laws and regulations The idea of gift giving is not intended to bribe someone but rather is a generous practice involving the exchange of gifts for another’s time and hospitality before any business is done (Chua, 2012) These gifts should not be too expensive or extravagant so that the individual on the receiving end does not feel embarrassed for not having something of the same caliber Giving a gift in China can be a great way to start the foundation of relationship Gifts that are not generally acceptable or can be misconstrued in the Chinese culture include clocks and flowers (which are symbols of death and funerals), scissors, knives, letter openers (which symbolize the breaking or ending of a relationship), and much more (Seligman, 1999) Gifts, once they are received, are not opened in front of the recipient in order to save face There is little to no protocol for gift giving in American business as it is not a common practice In 1977, the Federal Corrupt Policies Act was enacted to make it unlawful for people and entities to make payments or extreme offerings to help retain or obtain business This law applies to United States citizens, specific foreign issuers of securities, and foreign firms or people who perform corrupt actions on United States Structure of business meetings: A business professional must be conscious and obliging during business meetings In general, the host of a conference is commonly the person who takes the encouraging function during the conference It is extremely helpful to have an assortment of materials available for all members in a gathering (Christensen, 2013) In fact, there are several differences between formal business meetings held in China and the United States a Style: American financial specialists prefer making fast decisions and prompt choices On the other hand, Chinese individuals are less worried about time, but they are more concerned about interfacing and building a relationship with their guests (Engel, 2015) Moreover, Chinese managers don’t bother to take multiple days, various gatherings, and considerably different occasions to make sure that whether a business arrangement or understanding will be acknowledged Tolerance for the sake of the American financial specialist is basic concerning the style of conferences, the language hindrance, and the general culture (Roldier, 2015) b Dressing: Normally, it is expected in both China and the United States that businessmen should wear formal clothing to a meeting, or business casual dress Unless they are informed beforehand, however, it is safer to dress business professionals ("Office Dress") Nowadays, there is a remarkable concern on how young workers and their managers are adopting from corporate cultures For example, in many companies around the world, people are now wearing business casual clothing instead of formal attire It means that even traditional practices from different societies can get outdated and be replaced by another one Idea of connection (Guanxi): A key principle of focus is the idea of connections and networking In China, it is known as ‘guanxi’ It represents a complicated item in Chinese culture, and it is used for describing personal relationships between people In general, building good relationships and connections are essential for successful business in both countries (Graham & Lam, 2015) The stronger the relationship between two parties would mean greater trust and better cooperation in business negotiation In China, ‘Guanxi’ is considered to be more than just a normal relationship, which carries a great responsibility to maintain (Christensen, 2013) Guanxi, especially Guanxi with Chinese government, can assist transnational companies to obtain sources of information which mainly includes business opportunities and government policies (Davies, 1995) For example, when KFC opened its largest chain store in Tiananmen, Beijing, in 1987 its good Guanxi with Chinese central government helped them, to a large extent, to get the building permission (Luo 2000, p 124) Furthermore, Guanxi is perceived as a significant way of keeping organizations updated with government policies, such as import regulations and export restrictions (Davies, 1995) Therefore, Guanxi is a useful method for gathering information about government policies Another benefit that multinational companies can obtain from Guanxi is getting access to sources of resources As a result of the scarcity of some necessities and the shortage of professionals, organizations rely on Guanxi to get access to these resources in China (Thomas, 2002) Moreover, many production materials are under the control of local authorities, such as bricks, plaster and power equipment In this regard, good relationship with relative government officials is necessary for companies to make these resources obtained with higher efficiency Furthermore, a strong Guanxi network also can lead to a reliable supply of common production materials which is vital for a manufacturer’s success For example, Shanghai Volkswagen (SVW), which is a joint venture signed between Volkswagen AG and a group of Chinese partners, has established good relationship with its suppliers; therefore, they can get required parts with high quality and urgent shipment from its suppliers, which contribute to the success of SVW to a certain extent With regard to business opportunities, the stronger the Guanxi network of an enterprise is, the more opportunities it has or will have Chinese business professionals follow the idea of ‘reciprocity’, which means that when a relationship is established, both parties of the relationship should be interdependent in a time of need and in return, a request of equal or greater status will be reciprocated (Graham & Lam, 2015) According to Phyllis Davis, the American idea of networking is the ability to develop business and social contacts While these relationships may build over time, most only remain at an acquaintance level (Davis) American business people thrive on a large network that can range from contact within their work, industry, and even as broadly as someone in the business world (Davis) According to Hofstede (2020), Americans are the best joiners in the world; however it is often difficult, especially among men, to develop deep relationship Americans are accustomed to doing business or interacting with people they don’t know well Consequently, Americans are not shy about approaching their prospective counterparts in order to obtain or seek information Idea of face (Mianzi): In business it is important to respect and avoid embarrassment, aka mianzi Mianzi can be simply known as the "idea of face" (Seligman) in English In China, mianzi ranges from avoiding errors that could draw unwanted attention to oneself, lending praise to others, and maintaining a good self-image of the public (Carden & James) American businessmen see face as a basic term, but face is a fundamental thought in China and affects several things such as the social status and reputation of individuals Besides, in Chinese business culture, ‘save face’, ‘lose face’ or ‘giving face’ also has a strong impact on business activities ‘Saving face’ is basically when a person preserves his current position in society by preventing loss of face circumstances (Christensen, 2013) In order to business effectively, intermediaries or someone who is very familiar with both languages, social signs, mannerisms and a description of the subject under discussion is imperative (Graham & Lam) Because of the language barrier, intermediaries may help save face by resolving or elaborating on any issues that might arise They may also provide resources to defuse any disputes that might occur (Carden & James) Losing face, on the other hand, is when your reputation's current status is put at risk owing to humiliation from others or yourself Face loss can occur in some ways including being rude, challenging other people's views, criticizing in a public setting and more (Christensen, 2013) Having someone lose face in your organization can cause serious disagreement However, face is not always viewed negatively; another can raise someone's Mianzi as well Complimenting someone in front of other colleagues is a form of "giving face" and can create respect and loyalty of subordinates In American culture the notion of meeting others will be considered the equivalent of motivation or appreciation (Christensen) Giving face should be presented in a manner that exemplifies approval or appreciation that is cautious rather than flamboyant (Engel, 2015) Hierarchical structure: This factor can be analyzed based on the power distance index (PDI) developed by Hofstede This dimension deals with the fact that all individuals in societies are not equal – it expresses the attitude of the culture towards these inequalities Power Distance is defined as the extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally (Hofstede Insights, 2020) At 80 China sits in the higher rankings of PDI – i.e a society that believes that inequalities amongst people are acceptable The subordinate-superior relationship tends to be polarized and there is no defense against power abuse by superiors Employees are expected to respect hierarchies (decisions made by those above are considered final) and understand the invisible rules of respect and deference toward superiors In the US, within American organisations, hierarchy is established for convenience, superiors are accessible and managers rely on individual employees and teams for their expertise Both managers and employees expect to be consulted and information is shared frequently Many Americans won’t hesitate to challenge their managers in the workplace, and often management professionals are on the same level as team members in a collaborative environment Individualism versus collectivism: This factor can be analyzed based on the individualism index (IDV) developed by Hofstede The fundamental issue addressed by this dimension is the degree of interdependence a society maintains among its members It has to with whether people's self-image is defined in terms of “I” or “We” In Individualist societies, people are supposed to look after themselves and their direct family only In Collectivist societies, people belong to ‘in groups’ that take care of them in exchange for loyalty China is a highly collectivist society where its people act more in the interest of a group that they are associated with than their self-interest In the workplace, decisions are made collectively and it is not desirable for someone to stand up for something that the majority of your group does not coincide with (Christensen, 2013) Maintaining harmony and peace within a society is one of the key principles brought about through the primary philosophy followed in China - Confucianism Confucian values promote harmony, maintaining status quo, and great emphasis on the different types of human relationships (Seligman, 1999) Chinese business professionals see themselves as part of a whole where they may think of successes as a nation or successes as a company Focusing on individual successes can be seen as braggadocious and lacking in humility In addition, in-group considerations affect hiring and promotions with closer ingroups (such as family) are getting preferential treatment (Hofstede Insights, 2020) The US is one of the most individualist cultures in the world where it is acceptable to be unique rather than conforming to society In the business world, employees are expected to be self-reliant and display initiative Americans are tempted to brag about personal successes In addition, hiring, promotion and decisions are based on merit or evidence of what one has done or can In the American enterprise, it stressed individualism, which is the spirit of everyone's goal, with individual struggle, adventurous thoughts, and continuous innovation Individualism is the main characteristic of healthy organizational cultures in the USA People always say, freedom is filled in American 15 business enterprises They can have their own opinions; have their own rights However, The core spirit of freedom is individualism, and the meaning of individualism is that people should respect personal capability Under the background of American business management, individualism becomes the main spirit, but it does not mean employees will not stay in contact with their associates On the contrary, American business culture emphasizes the relationships between employees and the relationships between enterprises C IMPLICATIONS FOR BUSINESS As discussed above, companies should be aware of the main differences of business customs between China and the US, which are greeting and meeting people, structure of business meeting, idea of connection, idea of face, and cultural impacts on business etiquette Acknowledging of these differences, companies from the US entering China should flexibly adjust and adapt their business behaviors when working with foreign partners “When in Rome, as Romans do” - this is an indispensable quote to remember for any business operating in a foreign country To be specific, if you are a newcomer US company to China, and want to partner up with some local companies, finding some local intermediary to be “the bridge” connecting you with the Chinese partner is a good idea Since the Chinese put a really high value on “guanxi” (relationship), a referral from the intermediary would make your company more trustworthy, and make it easier to build your partnership For instance, when KFC opened its largest chain store in Beijing in 1987 its good “Guanxi” with Chinese central government helped them, to a large extent, to get the building permission More than that, good connection with the government is also a significant way to get updated with government policies, such as import regulations and export restrictions (Fan Yang, 2011) Besides, “quanxi” also means a kind of relationship which requires exchange of personalized favours (Lee et al., 2001), which implies that when a relationship is established, each partner has the right to call upon one another in a time of need to ask for help in return (Graham & Lam) The US companies need to show their Chinese partners that they are open for a long-term relationship (both business, and maybe personal), then the partnership would be easier to form 10 When discussing partnership, also remember that the Chinese tend to take more of their time discussing a business and deliberating on its pros and cons, compared to the fast pace of the Americans’ decision making It is usual that the Chinese will consult with many others on their organization hierarchy before they arrive at a decision Under this circumstance, avoid putting them under pressure to make quick decisions because it may lead them to shutting down and politely resisting you (Nicky LaMarco, 2018) Moreover, “saving face” is also an important thing to remember when working with Chinese partners The American tend to be direct when communicating with other people, and usually debate to defend their opinions However, most Chinese people are sensitive, and prefer to be polite and courteous The frankness of the Americans may sometimes seem offensive to them Thus, US entrepreneurs should show their Chinese partners their respect and politeness, they will match it and make it easier to negotiate without misunderstanding Another thing you may notice is the importance of personal guarantee in business contracts in China Americans value the contract and the finality of the written word When they make a contract, all terms must be clear, legally binding, as well as the penalties for breaching the contract On the other hand, the Chinese mostly seal their deals with handshakes and words, rather than signatures, and put more value on trust and personal guarantees than anything else Their contracts are not filled with as many terms and details as the US contract Forcing them to elaborate on details, especially the terms for breaching the contract, may be seen as violation of mutual trust between the parties In this case, take a little risk and give them a little trust is the advice Case study: Apple in China “When in Rome, as Romans do” is an indispensable quote to remember when doing international business This principle does not exclude Apple The 11 US giant tech company, when in China, to some extent, also has to “do as Chinese do” Understanding the differences in Chinese culture, Steve Jobs & Tim Cook, Apple’s CEOs, has so far had the following key actions towards Chinese stakeholders that may have contributed most to Apple's successful completion of the business negotiations: In 2011, there was a fake Apple store in Kunming, China Instead of fiercely attacking the store, which many Americans would do, Steve Jobs took a quiet and harmonic resolution, following the Chinese culture of avoidance of conflict In 2013, Apple was criticized by some Chinese media for bad customer services, and a regulatory governmental organization said it had its eye on Apple Instead of a Western approach of rational explanation and defense, Tim Cook wrote an apology letter to all Chinese customers This action was considered appropriate to the Chinese business custom of avoidance of conflict and search for harmony This was also interpreted as an acknowledgement of the power of and respect for the Chinese government, which would secure many Apple’s benefits thereafter In 2016, Cook himself made a visit to China, especially to the Chinese ministers and government This action showed that he greatly respected the authorities and helped him to use these relationships in securing a deal with China Mobile Cook’s action was based on the understanding of the importance of “quanxi” in China In 2019, Tim Cook even became a board chairman of a prestigious Chinese university that is owned by the government This shows Cook’s strong respect and acknowledgement for the university and the Chinese educational system, which got him more deeply involved with Chinese politicians, helping him in getting a network for other business purposes 12 D CONCLUSION The diversity of culture and its impacts on business practices is that these customs will keep changing everyday Evidence to this is in the Chinese culture itself when westernized practices have been implemented in Chinese culture and business etiquettes However, traditional values are still kept and play a big role in people and businesses’ decision making International business will continue to expand and as such, the demand for integration of cultures will be tremendous in the world It will be inevitable that business professionals be educated on other culture’s business customs Particularly when US enterprises establish in China, it is important to be knowledgeable of the differences in tradition, beliefs or mindset of the Chinese partners Being open, adaptable, and willing to embrace the culture and their business customs might lead to great success in business 13 E REFERENCES Hofstede, G.,n.d Hofstede Insights [Online] Available at: https://hi.hofstede-insights.com/national-culture [Accessed September 2020] Holland, H D., 2015 A Comparison of Business Etiquette and Culture in China and the United States, Boone, NC: Appalachian State University Christensen, Matthew B Decoding China: A Handbook for Traveling, Studying, and Working in Today's China Clarendon, VT: Tuttle, 2013 Print Seligman, Scott D Chinese Business Etiquette: A Guide to Protocol, Manners, and Culture in the People's Republic of China New York: Warner, 1999 Davis, Phyllis E2 — Using the Power of Ethics and Etiquette in American Business Irvine, CA: Entrepreneur Media, 2003 Print Group members Contribution Nguyen Quynh Chi Report: part - Idea of face (Mianzi) Nguyen Thanh Dung Report: part - Gift giving; part - Hierarchical structure; part - Individualism versus collectivism Nguyen Thuy Duong Powerpoint slides creator Tran Nguyen Lan Report: part A – Introduction; part D - Conclusion Le Quang Minh Report: part – Greeting and meeting people; part – Structure of business meeting; part – Idea of connection (Guanxi); Report: content aggregating and format editing Report: part C - Implications for business and Case study: Apple in China Doan Hai Nam All members Presentation 14 ... main differences of business customs between China and the US, which are greeting and meeting people, structure of business meeting, idea of connection, idea of face, and cultural impacts on business. .. get used to some of those business customs Some important factors include greeting and meeting, gift giving, business meetings, idea of connection and the idea of face In this paper, we will analyze... while entering this prospectus country B Comparison of business customs between US and China Greeting and meeting people In any international business activity, meeting and greeting protocol always