Doing Business in Asia

By: Ames Gross
January 1, 1992

There is a common misconception that all Asian countries share the same Asian values, attitudes, and mindset. This idea is occasionally promoted by some Asian politicians who emphasize pan-Asian values when arguing against the incursion of Western influence into their countries. When viewed in detail, Asian cultures share a variety of characteristics, but each distinguishes itself from the next through specific cultural elements and accepted business norms. Therefore, it is important to understand the cultural or business norms that are unique to a specific country or ethnic group, and then adapt one’s business approach to address such customs or norms.

CULTURAL DIFFERENCES

Western Approach Eastern Approach
Do a deal Build relationships
Maximize short-term profits Establish long-term foundations
Assess competitive capabilities Assess integrity and trust
Be frank Don’t deliver bad news
Make changes fast Move when ready

DOING BUSINESS WITH THE CHINESE

I. INTERCULTURAL COMMUNICATION

A. Personal Connections (Guanxi)

1. Earning respect and trust should be considered the first step to business interaction – development of close personal ties with business associates are a necessity for success in business with the Chinese

2. The Chinese possess a clan mentality – those inside the clan work cooperatively; those outside are seen as inconsequential or a potential threat

B. Cultivating Relationships

1. Find a mutual friend to serve as an intermediary to introduce you to a potential business associate

2. Try to schedule trips for times when there is a trade show in the area – this will allow you to display goods and services while simultaneously gauging your business contacts

II. IMPORTANT ELEMENTS FOR CONDUCTING EFFECTIVE BUSINESS

A. Introductions

1. Business Cards

- Exchange with both hands, holding the card corners between thumb and forefinger

- Take a few moments to read the card and study it carefully

2. Direct communication

- As a sign of deference and respect, lower your eyes slightly when you greet someone

- Refrain from looking directly into a person’s eyes; this can make the Chinese very uncomfortable

3. Appropriate Attire

- Dress should be formal for business dealings

- Women should dress fashionably but avoid hemlines above the knee and low necklines

B. Negotiating

1. In contrast to Americans who value straight unambiguous dialogue, Chinese are masters of the oblique -- what is not said in conversation can be more important than what was actually said

2. At least one member of your negotiating team should have in-depth technical knowledge of every aspect of your business and be able to display it to the Chinese

3. Be willing to cut your losses and go home - when negotiations are held, the Chinese are aware that foreigners must spend a good deal of time and money to travel and that they do not want to leave empty-handed

4. Chinese may appear indifferent to the success or failure of the meeting at the negotiating table and then make excessive demands of the foreign side

5. They may stretch out the negotiations to wear you down, or delay substantive negotiations until the day before you plan to leave, in order to force you to make a hasty decision

6. Remain calm and impersonal during negotiations - the Chinese will use friendship, flattery, or anger during negotiations to try to gain concessions. They may also threaten to do business elsewhere or play off competitors in order to put the other side on the defensive

7. Take copious and careful notes - the Chinese often take detailed notes at discussions and then quote a foreigner’s own words in order to refute his current position

8. Do as the Chinese do: pad your price; the Chinese often inflate prices and hide the real bottom line

9. Cover every detail of a contract before signing

10. Giving some leeway to the Chinese over a specific issue can result in far greater benefit in the future

C. What to do when the Chinese visit

1. Be extremely hospitable; remember that the “red carpet” treatment in America is the norm in China

2. The Chinese expect to be picked up at the airport by a company executive

3. Pay for meals and hotels

4. Pay attention to details

5. Get answers

III. CHINESE BUSINESS VALUES

A. The Chinese Mentality

1. Individualism invites criticism. Chinese society is based on Confucianism – emphasis on family and respect for humility and courtesy

2. Status and the concept of “face” (mianzi)

a. The Chinese are very concerned about the status of a particular individual within the company or organization, and will evaluate the seriousness of a trade delegation by the rank of its members. A delegation is not likely to succeed if the Chinese know that its head is a junior executive

b. Losing “face” - There are numerous ways for one individual to cause another to lose face, including:

- Insulting or criticizing someone harshly in front of others,

- Making fun of the Chinese in a goodnatured way,

- Treating someone as an underling when his or her official status within an organization is high

c. Gaining “face”

- Helping someone avoid an embarrassing situation can help a person save face – the person whose face you save will not forget the favor, and will be in your debt

- Praising or thanking someone for a good job in front of peers or superiors will help the person gain respect. However, overly effusive praise can appear insincere

B. Little Things That Mean A Lot

1. Gifts

a. Chinese are inveterate gift-givers, so spend time choosing appropriate presents before embarking on a trip to China

b. Foreigners visiting a place of business may present a single large gift to the company as a whole; gifts to an individual should be of a lesser value, in the range of US$10 to US$25

c. If one gift is to be given, it should be presented to the head of the Chinese group at a dinner banquet or at the conclusion of a business meeting

d. If numerous gifts are to be given, care should be taken that each person receives a gift of roughly equal value

e. When a gift is offered to you, humble acceptance and a few words of appreciation are suitable

2. Body Language

a. Pointing at someone with one’s forefinger is an accusatory motion that is considered rude or hostile. To point, use the entire hand with an open palm.

b. Winking is impolite and can have a negative connotation

c. When the Chinese want someone to approach, they extend the palm down and curl the fingers, as if scratching an imaginary surface

d. When embarrassed, the Chinese cover their faces with their hands

3. Banqueting

a. When foreigners are happy, they dance. When the Chinese are happy, they eat. Eating with the Chinese can be an excellent way to network and build relationships

4. Conversation and Informal Communication

a. Chinese are often curious about foreigners and their habits, and their questions reflect what they consider important. Often these questions may revolve around money: someone may ask how much your watch cost or what kind of car you have and how much it is worth

b. The subject of income often comes up in conversation. If a business associate asks you about your income, you may wish to avoid this topic

c. You need to be particularly sensitive about discussing politics – avoid talking about the Tiananmen Square tragedy, Tibet or human rights. Avoid criticizing Communism, even if the Chinese initiate such talk. You should also avoid speaking about the Republic of China on Taiwan, although discussion of Taiwan as an economic entity or as a province of China is fine.

d. Family members can be an important topic of conversation – Chinese who are getting to know you may evaluate you just as much on a family level as on an individual level

e. Although telling jokes is fine in informal situations, it is best to avoid them in large groups. Sexual jokes are taboo and should be avoided altogether. Also, cross-cultural humor is hard to convey, and the point of a joke is often lost in translation

f. The Chinese will usually avoid saying no when asked for a favor, as to do so causes embarrassment and loss of face. If a request cannot be met, Chinese may say it is inconvenient, under consideration, or ignore it altogether. Unless a request is urgent, it is best to respect these subtleties and not press the issue

IV. COUNTRIES WHERE CHINESE INFLUENCE IS DOMINANT

A. China

1. China remains country ruled by decree: although problems of bureaucratic meddling by party and government officials have been minimized in the Special Economic Zones (SEZ,) foreign business people will often be frustrated by the layers of bureaucracy (particularly in northern and inland areas)

2. You need to be particularly sensitive about discussing politics – avoid talking about the Tiananmen Square tragedy, Tibet or human rights.Avoid criticizing Communism, even if the Chinese initiate such talk. You should also avoid speaking about the Republic of China or Taiwan, although discussion of Taiwan as an economic entity or as a province of China is fine

B. Hong Kong

1. Although now part of China, still remains fairly independent and business environment is still excellent

2. Hong Kong people are very money oriented and speak Cantonese (not Mandarin)

C. Taiwan

1. Speak Mandarin and are generally very favorably disposed to the West

2. Good business people with a good understanding of mutual benefit

D. Southeast Asia

1. There are 55 million Chinese outside of China and Taiwan – most in Southeast Asia

2. In Southeast Asia, the Chinese run 90% of the overall trade

 

DOING BUSINESS WITH THE JAPANESE

I. INTERCULTURAL COMMUNICATION

A. Personal Relationships

1. Cultural insensitivity and a “business first” attitude are the greatest handicaps for foreign businesspeople in Japan

- Significant business relationships are built on trust and interpersonal communication; without which it is unlikely any relationship will develop

II. IMPORTANT ELEMENTS FOR CONDUCTING EFFECTIVE BUSINESS

A. Planning

1. Time is money – developing a good business schedule beforehand saves time and embarrassment

2. Appointments and meetings should be scheduled weeks in advance

B. Introductions

1. Rank determines order of introductions

- Senior delegation leaders should be introduced first (with a handshake, although the Japanese bow amongst themselves)

- The visiting delegation leader introduces other members in descending order

2. Business Cards (meishi)

- Present and receive cards with both hands, taking a moment to read each card. Business cards should be given to each member of the other delegation

- Treat the cards you receive with care – never write on, fold, or damage the card in the presenter’s presence. Never toss casually in a pocket or briefcase

- In a meeting, cards are typically laid out before you on the table in order of seating to help with names

C. The Meeting

1. Seating arrangements

- Visitors are generally seated together on the opposite side of the table from the Japanese

- Delegations are seated with equals (i.e. company rank) across from each other

2. Attitude and Direct Communication

- The Japanese are extremely averse to people who act conceited or superior in any way; humility is considered a virtue

- Use a personal, conversational manner when speaking, and address the entire group

- Be aware of body language – avoid slouching, fidgeting or distracting movements

- Avoid concentrating on English-speaking Japanese delegation members; their rank may or may not deserve the attention

- Don’t rush to fill awkward silences; they aren’t necessarily considered awkward by the Japanese

3. Corporate materials

- Corporate materials should include the following:

- one to two page itemized summary of company information; address, names, and titles for top officers, products, and a short company chronology

- short biography of President or Chairman

- press clippings or third party endorsements

- All items should be professionally translated into Japanese; poor quality materials are a significant corporate embarrassment

- Corporate material kits should be assembled and distributed to each member of the meeting

4. Language

- “Hai” (the Japanese word for “yes”) does not always mean “I agree” – it can also mean “right” or “uh-huh” in the English sense of “I understand what you’re saying”

- The Japanese often use the word “difficult” to mean “impossible” or “highly unlikely,” or as a polite way of saying “no”

- The term “cooperation” can be used to indicate sincere interest in completing an agreement, but usually requiring sacrifice on the part of one or both parties

5. Interpreters

- Because of the differences in Japanese language nuance, employing a good interpreter is extremely important

- Be aware of potential “double-agent” interpreters. Bring (hire) your own professional interpreter to meetings, and use the same one for the entire trip if possible

- Ensure that the interpreter sits where he/she can hear everyone, and don’t interrupt when he/she is listening or speaking

- Don’t ask the interpreter for an explanation or clarification of something – have him/her get it from the source

6. Negotiating

- Americans tend to charge ahead focusing on clear goals and objectives; the Japanese remain flexible, constantly reassessing how to take the fullest advantage of their current position

- Present objectives in clear, easy to understand (and translate) terms to avoid confusion

- Americans TALK; Japanese LISTEN – Following a presentation, don’t let their (seemingly uncomfortable) silence induce you to ramble – that’s what they want you to do

- It is fairly common for Japanese to lean back and close their eyes as they consider an item; this should not be considered rude or offensive

- The Japanese never make decisions individually or “on the spot”

- The Japanese abhor confrontation; receiving a non-committal agreement after pressuring them means very little in reality

- Profits should not be emphasized; the Japanese place more value on long-term growth, market share, and stability

- It is common for negotiations with the Japanese to drag on for weeks and months, while they maneuver to get the most advantageous deal; if possible, avoid setting a deadline on the length of negotiations. The Japanese will also negotiate literally up to the very last minute before signing

- One fairly common Japanese negotiating tactic is to suddenly “break off” negotiations when everything looks great – typically inciting panic and concessions from the other side

7. About Your Negotiator

- Honesty, integrity, and cultural sensitivity are essential characteristics; the way the Japanese judge and perceive the chief negotiator (and team) is often the way they perceive your company and the deal itself

- Around the same age or older than those with whom they are negotiating; age is respected in Japan and Asia in general

- Calm, patient personality; able to think logically and rationally; well developed intuitive powers

- Should enjoy the trust and confidence of top management, and has his/her responsibilities and authority clearly defined

- Likeable personality; someone who genuinely enjoys Japanese culture and people

D. Other Considerations

1. The Decision-Making Process

- Americans make instant decisions – then take six months to implement them and rarely as intended; the Japanese take three to six months to reach a decision, but once made they can implement it fairly quickly

- The typical corporate decision-making process in Japan is called the document system (ringi-seido.) A document is drafted, then passed around to all other department heads and various levels of management who either approve or reject it. If everyone approves the document, it automatically becomes company policy; if not, it is sent back to the drafters along with suggestions on how to “improve” the document

- In situations where a policy is strongly supported but unanimity cannot be reached, an elder statesman (usually a retired president or majority stockholder) is called in to hear all sides and then render his opinion. The minority is then permitted to agree that this "wise statesman” is correct, so that overall consensus is maintained

- This process also applies to conducting a foreign business venture – accounting for the substantial time involved in negotiating

- The larger the company, the more complicated the process

III. JAPANESE BUSINESS VALUES

A. A Different Way of Thinking

1. The Use and View of Time

- Americans experience time by the minute, hour, or day; the Japanese experience time as an event or a season

- Pressing the Japanese to agree to time schedules that they perceive as unrealistic typically backfires – if and/or when the schedule isn’t met, they consider it your fault

- The group is again the emphasis; events move forward when the group is ready

2. Relationships

- There are three types of relationships in Japan; 1) the company to company relationship, 2) the person to person relationship, and 3) the family relationship

- The Japanese business relationship develops from a personal relationship: a company or person introduced by a mutual friend/business associate has a much greater chance of success in entering discussions than would a cold call

- Mutual trust, mutual help, and guarantees of reciprocity are far more valuable to the Japanese than guaranteed profits

- By recognizing the importance of and catering to all three types of relationships – you can demonstrate your genuine interest and appreciation for Japan and Japanese culture

3. Japanese Logic

- Western and particularly American logic tends to be static and based on reason, observance, evidence, projections, etc.; Japanese logic is flexible, relative, and occasionally based on emotion rather than reason

- A Japanese statement might be, “I am a Christian in faith, Buddhist in philosophy and Shintoist in my views on society.” Their views are determined by context and circumstance – what applies in one realm does not necessarily apply to all

4. The “Group” and the “Individual”

- No single person can be targeted as “the one” to try and influence; group consensus is an important facet of Japanese business and several individuals and sometimes groups all partake in the “final” decision. No single individual is responsible for any decision (i.e. document system)

- The importance of the group is demonstrated by emphasis on “company spirit;” the loyalty demanded from employees, the responsibility of the company to the employee (lifetime employment) and the complete conformity of the individual to the group

- However, this conformity has created a certain vacuum of innovation and leadership – many companies are now promoting individualism and initiative to maintain a fresh, competitive edge

5. When Things Go Wrong

- The apology is a very important element in Japanese culture when something negative or unintended occurs. A sincere, emotional apology is often more well received than any other form of atonement – even in extremely serious matters

- The art of the apology in Japan has become so ritualized that some companies employ a specialist in writing apology letters (shimatsu-sho)

B. Little Things That Mean A Lot

1. Bowing

- While handshaking is becoming more common, you may also be bowed to in the traditional Japanese fashion

- The depth of the bow indicates the level of respect given; among equals – simply match the depth and number of bows

- Men keep their hands at their side; women fold their hands in front of their waist during the bow

2. Shoes

- Some restaurants and most homes will require that you remove your shoes before entering; therefore be sure to wear clean socks with no holes

3. Gifts

a. Honored guests are customarily presented with some kind of gift. If you are not able to reciprocate the gift, be sure to express your gratitude

b. Businesses should have some kind of high quality (but not very expensive) gift to present, which may relate to their company or country. Gifts should be wrapped and presented with both hands

c. Gifts are not normally opened in front of the giver; however, if this does occur, do not tear the wrapping paper

d. In some situations, gifts may only reluctantly be received by the Japanese if their company feels there is no prospect for future business and therefore want to avoid the return obligation

C. Recreation and Business

- Recreation (be it a night on the town or a round of golf) is very important in establishing the personal relationships with your Japanese counterparts

- Japanese businessmen are notorious “social” drinkers as it applies to the business entertainment process; this is an excellent opportunity to establish rapport. Still, be conscious not to exceed your limits. While drunkenness is considered an important tool by the Japanese to break down the social barriers in order to build a relationship, passing out is considered a loss of face

- Limit the business talk during recreation that involves alcohol, but don’t overtly avoid it

- There is a fairly complex order regarding where to go and what kind of night-time entertainment to partake (karaoke, cabaret, geisha house) depending on the rank of your counterparts – when in doubt, let them decide where to go

- Golf is very popular in Japan among those who can afford it (one round can easily cost $500) – if invited to play, you should accept. You don’t have to play well, but the time spent on the course is invaluable towards developing the personal as well as the business relationship

 

DOING BUSINESS WITH SOUTHEAST ASIANS

I. INTERCULTURAL COMMUNICATION

A. Do not point – Southeast Asians find this extremely threatening

B. Dress conservatively – less formal than the West, but neat, fully covered, and conservative is the best way to go (especially in Muslim countries)

C. Don’t touch anyone’s head and avoid pointing the bottoms of your feet toward another person. The most sacred part of the body is the head, and the least worthy is the feet

II. IMPORTANT ELEMENTS FOR CONDUCTING EFFECTIVE BUSINESS

A. Personal Connections

- Having the right connections is crucial – personal relationships and connections are often more important than economic criteria in making government and business decisions

B. Third Party Intervention

- Tap the resources and energy of a third party who is respected by both parties in order to help relieve strained ties and solve problems in negotiations

C. Negotiating

1. Bargaining is a way of life to people in Southeast Asia – they bargain daily for purchase of groceries and other goods, and it has become an automatic response to bargain and negotiate for more favorable terms in the business world

2. Join in the bargaining – don’t make concessions quickly, but be ready to use a concession to extract a better bargain for yourself

3. Never lose your temper, shout or become overly demanding at delays in decision-making or bureaucratic procedures

4. Saving face is the rule – let your local representative or partner monitor progress and problems. If you must criticize, do so gently and indirectly

D. Management by objectives does not function well in most Southeast Asian countries where issues are settled by reference to established rules rather than personal negotiation

III. CULTURAL BUSINESS VALUES

A. High Power Distance Cultures – reflected in rigid hierarchy, ascribed status, strong formal structure of social relations and great social distance between those who wield power and those who are affected by that power

B. Status – names and titles are strongly emphasized and are used in all contexts. The status value of a product, rather than its utility, is the selling point in high power distance cultures. This is best exemplified by the gigantic screen size on a household TV or a top-of-the-range Mercedes for a 10 km commute

C. Southeast Asians find it difficult to tolerate uncertainty and minimize the possibility by creating strict laws and rules

D. People are not generally time conscious and demonstrate a laid-back approach. They are reluctant to take on responsibility and prefer to follow instructions

IV. PHILIPPINES

A. Business Etiquette

1. Conversation during an initial business meeting is light; this is how Filipinos size their counterparts up. It is standard procedure to become comfortable with others before beginning to negotiate serious business arrangements

2. When there is a delay in discussion or during crucial points in negotiations, stay jovial and avoid comments designed to get things “back on track”

3. Bureaucracy and red tape is rampant, but you should avoid showing frustration or impatience with the proceedings. It will only make a bad impression and delay (if not actually negate) your negotiations

4. ALWAYS get Filipinos to confirm what they agree to in writing. To avoid confrontation, many Filipinos will express approval for something they disagree with or have no real intention of carrying out. Verbal commitments will not necessarily be honored, so the terms of any negotiation or business deal should be established by written agreement

5. Address businesspeople by putting his or her title in front of the last name (Doctor X, President Y, etc.)

6. Gifts should be bestowed after the relationship has developed rather than at the first meeting

7. The party that invites someone to a meal pays, so avoid ordering the most expensive items on the menu when asked to a lunch or dinner

B. Negotiations

1. ALWAYS get Filipinos to confirm the terms of any negotiation or business deal in writing. To avoid confrontation, many Filipinos will express approval for something they disagree with or have no real intention of pursuing; these verbal commitments will not necessarily be honored

2. Bureaucracy and red tape is rampant, but you should avoid showing frustration or impatience with the proceedings. It will only make a bad impression and delay (if not actually negate) your negotiations

V. THAILAND

A. Business Etiquette

1. The monarchy is held in great respect in Thailand, and visitors should be respectful of this at all times

2. Thais greet each other with a wai, a prayerlike palms-together gesture. When someone wais you, you should respond with the same gesture

3. The feet are considered the lowest part of the body both spiritually and physically, so never point your feet at anyone or anything

4 . Never touch a Thai on the head – the head is regarded as the highest part of the body

5. Keep your cool in any argument or dispute. You should also avoid showing frustration or anger – shows of emotion will generally not get you anywhere


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