Case Study #2: Cultural ConsiderationsKnow Before You Go Note: This case study is based in part on the FITT Going Global Workshop:

Case Study #2: Cultural Considerations—Know Before You Go 

Note: This case study is based in part on the FITT Going Global Workshop: An Introductiono the Cultural Aspects of International Trade 

tcase study, Beamer and Varner, pp. 216-217 

Canadians “Hit the Wall” in China 

A team of two top executives of a Canadian equipment manufacturer had just arrived in China to negotiate a sale with a local manufacturer who needed new equipment to increase production. The Canadians had never sold in Asia before, but based on the communications that had taken place over the past several months, were confident they could provide the right solution for the prospective new customer and get a deal done quickly. If all went well, they would save the last day to visit the Great Wall of China. 

The Canadians were in for a few surprises. Review the following and consider what they could have done differently. 

Planning 

While the Canadians scheduled a full week for their visit, they were surprised to find that for the first 3 days, no business was discussed. Their Chinese hosts took them out for elaborate dinners with top management and high ranking officials, and to night clubs for entertainment. They were taken on a tour of the city to view historical and industrial sights and eventually for a factory tour. Business discussions did not start until the 4th day. The Canadians were perplexed. The clock was ticking and their time was running out. Any attempt for them to initiate business discussions were repeatedly thwarted by the Chinese. 

Translation and Interpretation 

The Canadians used an interpreter supplied by the Chinese company. They found that translation slowed down communication and they were making little progress. The interpreter didn’t seem to understand some of the more technical terms and hesitated frequently, or just shrugged her shoulders. There were elaborate exchanges between the interpreter and the Chinese company since they knew each other well, and quite often the Canadians were left wondering what was being said. 

© FITT 1 FITTskills: Global Business Environment Case Study #3: Cultural Considerations—Know Before You Go 

The sales presentation 

When they were finally able to make the sales presentation they had prepared, they were surprised to find a team of ten Chinese facing them across the table. However, their hosts were cordial and frequently nodded, smiled, and said yes. They were not really surprised that a final agreement was not made that day, but were confident they could wrap things up the next day once their prospective customers had had the night to sleep on it. The next day they were asked to explain again the things they had covered the previous day, but this time to six new people. This time the questions were highly technical, and they were concerned about giving away too much information, so they answered in general terms. They returned to their hotel exhausted, made worse because again they didn’t feel as if they had made much progress. Although they now knew that their planned tour of the Great Wall was out, they began to wonder if they would be able to close the deal on the last day they had planned to be in China. They had pressing commitments at home and could not afford the time to extend their stay. 

The negotiation 

They arrived Friday irritated they had spent Monday touring the city instead of working and were determined to get a deal done, but in the meeting, they were asked again about the technological details. This time one member of the first-day team pointed out discrepancies between what they had said and what had been promised in earlier communications about technical support. The Chinese were reproachful about the discrepancies, and the Canadians were becoming increasingly anxious about making an agreement. The tone had cooled, but everyone remained polite. 

Discussions resumed with the same questions being asked yet again. The Chinese appreciated the high quality of the Canadian product but worried they wouldn’t be able to fix the equipment if it broke down. They suggested—delicately, so as not to imply they expected breakdowns—that perhaps the Canadians could give them some help with maintenance training. The Canadians pointed out the expense and difficulty of keeping someone in their city for several weeks or months and expressed confidence there wouldn’t be any problems that could not be worked out over the phone. 

Finally, before lunch, the technical discussions turned to price. The Canadians began to think they might get the deal done soon after all, but were shocked when the Chinese asked for a 20-percent price discount. The Canadians barely contained their irritation since they knew their original price was fair, but offered a 5% discount to try to get the order quickly. Further, the payment schedule could not be guaranteed because of apparent deadlines and requirements of the municipal officials. After lunch the Canadians began to ask pointed questions in an attempt to focus on the remaining unresolved points, but the Chinese seemed reluctant to do so. 

Although some minor progress was made, a number of issues remained unresolved that afternoon. At the end of the day, the Chinese manager smiled and spoke of mutual cooperation for the future, past Chinese-Canadian relations, and the great amount he and his factory could learn from the Canadians. They signed a general letter of intent, and the Canadians left with expressions on both sides of willingness to continue to discuss the sale. 

The Canadians were shocked to learn the following week that the factory had decided to buy from a Japanese equipment manufacturer. 

© FITT 2 FITTskills: Global Business Environment Case Study #3: Cultural Considerations—Know Before You Go 

Case Study Discussion Questions 

1. How could the Canadians have more effectively prepared for the negotiations with their Chinese counterparts? 

2. The negotiating parties seemed to have different expectations about the time needed to complete the process. What were some of the key reasons that caused negotiations to last longer than the Canadians anticipated? 

3. In communicating with the Chinese what was the key problem? What could the Canadians have done to avoid this problem? 

4. Reviewing how negotiations took place from the arrival to the departure of the Canadians, do you think the Chinese orchestrated the negotiations to put their Canadian counterparts at a disadvantage? If so, how? 

5. What key competencies were missing that caused the venture to fail?