RESEARCH PAPER subject international business topic differences of business customs between

The rapid evolution of Chinese businesses has raised endless opportunities for foreign business cooperation, especially, US’s multinational companies.. Businesses in China operate accord

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 8 th , 2020

TABLE OF CONTENTS

A INTRODUCTION -1

B Comparison of business customs between US and China - 2

1 Greeting and meeting people - 2

2 Giftgiving - 3

3 Structure of business meetings: - 3

4 Idea of connection (Guanxi): - 4

5 Idea of face (Mianzi) - 6

6 Hierarchical structure - 7

7 Individualism versus collectivism - 8

C IMPLICATIONS FOR BUSINESS - 10

Case study: Apple in China - 11

D CONCLUSION - 13

E REFERENCES - 14

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

1 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)

2 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

3 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

4 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

5 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

do 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)

6 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

7 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 do 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