This assignment proposes to investigate: "Cross-cultural management. Poland (host country) doing business with China (second country)." A case study of possibilities of negotiation between Energomontaz-Poludnie SA, a Poland-based company specialized in assembly, modernization and repair of machines and installation for utility and industrial power plants and Chinese based Dongfang Electric Corporation (DEC).
Aims and Objectives
The aim of the research is to discover if Poland can become a successful partner for Chinese company. This investigation should serve managers and investors as a guide on how to overcome cross cultural barriers and successfully negotiate. The core question answered will be whether Poland and China can find a common ground in communication.
First, 5D Model analysis of Poland vs. China made by professor Geert Hofstede will be discusses to compare the similarities and differences in cultures. This will provide us with a theoretical framework suggesting what direction the industry should be heading.
Secondly, this paper will illustrate how cultural similarities and differences may affect the partnership between these countries in the future. Moreover I will focus on how Polish managers should act and behave in order to gain the Chinese trust and which cultural features and characteristic may help in building the partnership.
This assignment will thus produce conclusions proving a hypothesis that Polish companies fulfills the criteria and are able to become Chinese partners.
Justification: purpose of study
Nowadays China is the biggest Polish economic partner in Asia. But as well since 5 years Poland is their largest market partner and gate into The European Union (Ministerstwo Gospodarki, 2010). That is way Chinese government encourages domestic companies to participate in the construction of the Polish infrastructure (MinisterstwoGospodarki, 2008). Moreover in 2010 on 3 November, China and Poland signed a declaration on economic cooperation which confirmed their good relations. Their bilateral trade in 2010 was expected to exceed 13 billion Euros (Ministerstwo Gospodarki, 2010). Poland is now regarded as a paradise country for the power industry investors because of big lags behind in terms of technology and investment. (www.Polishmarket.com, 2010). That is way it would be essential for China and Poland to cooperate in this field. This paper will help to show the potential way of cooperation on the example of Energomontaz Poludnie Sa, polish company coming to negotiate business deals and partnerships with Dongfang Electric Corporation limited international - Chinese company. They will need a clear understanding of the whole picture of cultural background differences and similarities. They cannot treat this negotiation as a learning experience they need to come already prepared in order to do not lose potential strong business partner.
The 5D Model of Professor Geer Hosfstede
In order to compare two cultures of Poland and China it is worth to look at the 5D Model prepared by Geer Hosfstede. His findings are focus on 5 different dimensions: power distance index, individualism, masculinity, uncertainty avoidance index, long term orientation. (see appendix 1)
Figure 1: The 5D Model of Professor Geert Hosfstede (Hosfestede, 2009)
This is a general conceptual framework but it may help managers to understand how, on average, people from different nations view and solve basic problems. Moreover this model helps us to recognize that Polish and Chinese culture differentiate mainly in 3 points: individualism, uncertainty avoidance and long term orientation. Both countries are extremely similar in masculinity index and there is only small difference in power distance.
Power Distance Index
First we would discuss the little differences coming from Power Distance Index. Most probably both countries have high level of power distance coming from the past communist ideology and cultural heritage. In that case both companies would have no problem with authorities. Decision making will be more willing to come from main manager and cannot be discuses and questioned on public. In China Confucianism teaches them that people are not equal. To this day, people in China are defined by their role in society and contribution to it, Status is influenced by relationships and these are attached to implicit duties and obligations. People are viewed as relation-oriented beings, regulated by cardinal relationships that dictate an individual's obligation - renging- toward other people (Dana, 2007) Power distance can be as well easily observed in using titles. In Poland and China until you become good friends and/or they let you know the nickname or in case of china "Western name" it is needed to call people by their titles. It is the way of showing status, respect and recognition (Boye Lafayette De Mente, 1994) .
Individualism
Polish and Chinese individualism index is totally different and it can highly influence the motivation system inside the company. It is important to realize that Polish and Chinese workers will expect different kinds of rewards for their high performance. Polish people will be more willing to gain economic and material prizes based on their individual achievement while Chinese prefer to have collective responsibility so they would rather feel uncomfortable and intimidated if the rewards would be given to individuals. Poland emphasizes competition, usefulness and ability and China give attention to social ethics morality and spirit. (Jiazheng, 2006)
Masculinity
Taking into account masculinity index of both countries it will indicate that this societies can be characterized by material success and progress. They can be motivated by sympathy for the strong leaders, stress on equity, and gaining achievement. This countries are expected to be decisive and assertive. They live in order to work
Uncertainty Avoidance Index
This index can tell us that Polish workers may be more emotional in their work and can try to take control over some events, try to be innovative and make fast decisions while Chinese who believe more in destiny- fatalism coming from Confucius philosophy would be more contemplative and won't express their emotions and ideas in hurry. So for Polish people developing the ability to be patient and tolerant can surprisingly speed up negotiations. (Dana, 2007)
Long Term Orientation
The biggest difference in this index is coming from the Guanxi ( see appendix 2) existence. Therefore this countries need to put much more effort to understand each other and overcome this barrier, which can be a mile stone in many negotiations steps. Polish companies need to try building relationships with Chinese. They should start sharing experience, gifts and favors and try to do only long term business instead of single deals. Consequently it will build trust and certainty between them. But important thing to remember is that Guanxi does not transfer. When your guanxi person will be moved or go away, so does the relationship. Guanxi relationship is with person at the organization and not the organization itself. (Chan, 2011)
Case study
As we can see globalization may have given rise to a global village, but has not produced a homogeneous world culture. Instead, there are still variety of belief systems and sets of customs. This is important because culture shapes managerial assumptions. While that which goes on around the negotiation table is important, everything that sounds a deal is equally influential- spoken or unspoken (Dana, 2007) Our personal interpretation based on our cultural frame may lead us to incorrect conclusions. That is way Energomontaz Poludnie SA to provide effective negotiation with Chinese Dongfang Electric Corporation must foster cultural sensitivity and acceptance of new ways of doing things within the organization. Management should for example develop institute internal education programs (Czinkota, Ronkainen, Moffett, Marinova, & Marinov, 2009). These two mentioned parties are willing to meet and discuss a new business venture. Energomontaz would like to convince Dongfang to become its partner not only in operational level but also on the capital level. That will help them to develop faster and win new projects to realize and Dongfang can gain a new platform access to Polish and European energetic markets. At this stage companies try to get together and they do not have any specific proposals as for the structure of the deal. It seems that all options are open, including majority stake for the Chinese investor. First Polish company is going to China to present themselves and if the visit will go well they should afterwards before signing contract invite Chinese representatives to Poland to show the company and to host them warmly. To the Chinese, there are three distinct stages in establishing business relations: the social aspect, the talks and relationships leading to the signing of a contract and then really getting down to the give and take of the working relationships after the contract is signed.
Social aspect: meetings & greetings behavior
First impression made during a meeting is extremely important, polish managers will need to be aware to do the handshake properly (in Poland just one right hand). In China traditional handshake is to cup one's own hands (left over right), chest high, and rise them slightly while bowing for every greeting it is needed to stand up. (Boye Lafayette De Mente, 1994) After the shake business card should be exchanged by using both hands. Business card should be facing the receiver and they should not have red ink on them as it is suggesting in Chinese culture the end of relationship. When you will receive the business card do not put it directly into your pocket but read it to show respect (Seligman, 1999). In case of appearance there should not be a lot of problems as specially polish businesspeople are modesty and well educated with proprieties manners (Kissel, 2000) (Boye Lafayette De Mente, 1994).
Second step would be preparation for banquets, dinners and visits which for Chinese are not only meeting but already a deal points and the way to know you better. Casual conversation is mandatory before any serious business is done at the meeting. Refusing to participate will be seen as insulting moreover letting them always to make the arrangements will reinforces the notion that you are playing on their home court. During these meeting it will be more likely that Chinese colleagues will be asking Polish representatives personal questions like, how many kids they have etc. that will show that they want to know how stable and trustworthy Polish company can be as a partner and Polish representatives should ask Chinese similar questions - as well about their plans for growth, expansion and client relationships to do not forget about business issues. (Seligman, 1999)
Another important issue during meetings and banquets is arrangement aspect. In Poland usually the most important 2 people are sitting at the top of the table instead in China (see appendix 3) the principal guest is seated at the principal host's right on a sofa or in chairs opposite the door. Other High-ranking guests are seated in the immediate vicinity, as are interpreters. (Seligman, 1999)
Finally, considering etiquette of gift giving and receiving it is the Chinese way to decline gifts, invitations and other offerings two or three times, even when they want to accept. It is seen as a matter of etiquette. Due to Polish similar attitude connected with modesty it will be easier for them then the other foreigner to know how far to go in repeating offerings, and how far to go in declining offers made to them (Boye Lafayette De Mente, 1994). The biggest difference in gift giving between Poland and China is the way to open it and value. In Poland it is seen rude if you do not open the gift immediately but in China it is rude to do that as you will be looking as aggressive and greedy. Polish managers need to be aware to do not make their Chinese colleagues into trouble by offering them anti-communist materials like foreign movies, magazines etc. and should remember that monetary value indicate the importance of relationship.
Relationships
Main differences between Polish and Chinese culture long-lasting relationships is that Polish people are more willing to still keep it on more "professional closeness" instead mixing business and private life. Polish are slowly giving someone their trust but as well like in China business is based on mutual respect and honesty. Both countries treat these forms of relationships and all contracts really seriously - that can be coming from their hard historic background, so finding a common ground would be possible. They understand that it is essential to show reliable image and make others to feel safe doing business with them. In order to prevent all the misunderstandings all the discussions and contracts should be clear and translated into Polish, English and Chinese. In both countries negotiations won't be progressed towards claiming value or achieving substantive goals if misunderstandings have not been clarified and trust established. (Flader, 2006)
Negotiation & signing contracts
For Polish company, before starting negotiation it would be recommended that negotiators will read Sun Tzu's "Art of War" as all the Chinese are strongly influenced by its ides of negotiation and strategies. (Hupert, 2008). Main points mentioned in Sun Tzu's Art of War are:
Using friendship to gain concessions
Playing off competitior
Getting the other side to show their cards
Using proponents to practice their own skills
Taking advantage of foreigners' investment or fear or failure
Using your own words against you
Flattery
Delaying negotiation until last minute
Inflating prices and hiding the real bottom
Using interpreters (Li, 2003)
During the negotiation is as well worth to understand Lao Tsu concept (see appendix 4), the inspiration for Taoism which express moral Chinese values and influence their negotiation style (more concerned about the way of doing business, process itself than the end of it). But regarding foreigners Polish businessmen need to be aware that Chinese negotiation is linked to both guerrilla warfare and psychological warfare- strike, retreat; strike, retreat; confuse the "enemy", get them off guard, weaken their will, make them to feel guilty for opposing you, make a "final offer" that is considerably below what they know is acceptable. Often Chinese managers were already trained in cross-examining and intimidating opponents (Boye Lafayette De Mente, 1994). In dealings with state-owned or state-related businesses like Dongfang, government is still the "invisible hand" which helps and manipulates the negotiation process. They offer political considerations and nuances the forces that guide managers' behavior (but afterward if the contract is signed they will help both sides). That is way Polish representatives cannot fell easily intimidated and need to be prepared for barging - which is not their cultural strength.
The other cultural difference which can influence perception of doing business and discussing contracts is difference in the Chinese pictographic language and Polish Roman letters. Chinese at an early stage of their life are able to memorize thousands of pictorial characters rather than sequences of letters this developed two ways of thinking. Chinese look more at the big picture and Polish people are more focused and find it easier to look at details. (Harvard Business Review, 2003.)
Finally, if the contract will be up to sign, Energomontaz must to make sure that the signature on Chinese sight will come from a senior Dongfang official with real authority. Moreover it is essential that this senior official will stay in his position over Energomontaz contractual period or at least till they become well established venture. The reason behind that is that in China, the signing person holds ultimate responsibilities for the agreement, whether it is a private-owned or publicly-listed company this is important difference as in Poland signatory is generally signing for the organization not for person. (Strategic Negotiation Institute, 2009)
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