Chapter 1: The Problem - Excerpt
There have been numerous publications written concerning international business theories and practices, for example, in economics, management, international business, marketing (Engholm 1994), and accounting (Clydesdale 1986). Reporters (e.g. Mann 1989) and business consultants (e.g. DeKeijzer 1995, Burstein 1998, Chu 1991) have also generated publications in this area. In addressing business in China, these publications focus on everything from how to conduct business in the “Chinese Triangle” to the economic reach of the “bamboo” network. The approach common to most of these publications is to provide international managers with an enormous amount of economic information, including market size, investment strategy, and business possibilities in a foreign country, while only providing a brief description of the cultural uniqueness of the country. The information contained in these publications is valuable, but its utility is limited because understanding the cultural traits of a target country is the critical factor to successful international business (Zeira 1995).
Recently, there have been numerous studies showing that understanding culture is the key to successful international mergers, acquisitions, and joint ventures (e.g. Miller 1999, Hoskins 1999, Ning 1998, and Zeira 1995). In 1995, an article in the International Executive by Zeira that estimated the failure rate of international joint ventures (IJVs) to be from 24 to 50 percent. Zeira attributed this failure rate to cultural differences arguing that “Organizational leaders often find it difficult to ascertain the latent intent or hidden agenda of potential foreign partners, and when they do venture jointly, they often find it difficult to share control mechanisms or to understand each other when cultural differences appear or environmental changes occur” (Zeira 1995:374). According to another study, 75 percent of the companies that have experienced such failures believe their business alliances failed because of an incompatibility of country and corporate cultures (Dutton 1999:36).
Much of the current business literature is designed to direct companies to new markets by pointing out market size, their key industrial areas, and easy ways to enter the market. They do this because it is well-understood that international managers need economic information to decide whether or not to enter a new market. To enter and compete successfully in a new market, however, they also need cultural information. These same publications seldom provide the useful cultural information that international managers need to address the most common problem with international investment: understanding the latent intents and hidden agendas of companies and their potential foreign partners. Instead, these publications address cultural issues by telling international managers simple “canned” answers, such as the Chinese term “guanxi” means “connections,” or “back door” and that you need this to do business in China (Engholm 1994). These simple answers, however, do not address the serious and complicated cultural issues that are the causes of conflict, and that generate hidden agendas and latent intents.
Recently, there have been numerous studies showing that understanding culture is the key to successful international mergers, acquisitions, and joint ventures (e.g. Miller 1999, Hoskins 1999, Ning 1998, and Zeira 1995). In 1995, an article in the International Executive by Zeira that estimated the failure rate of international joint ventures (IJVs) to be from 24 to 50 percent. Zeira attributed this failure rate to cultural differences arguing that “Organizational leaders often find it difficult to ascertain the latent intent or hidden agenda of potential foreign partners, and when they do venture jointly, they often find it difficult to share control mechanisms or to understand each other when cultural differences appear or environmental changes occur” (Zeira 1995:374). According to another study, 75 percent of the companies that have experienced such failures believe their business alliances failed because of an incompatibility of country and corporate cultures (Dutton 1999:36).
Much of the current business literature is designed to direct companies to new markets by pointing out market size, their key industrial areas, and easy ways to enter the market. They do this because it is well-understood that international managers need economic information to decide whether or not to enter a new market. To enter and compete successfully in a new market, however, they also need cultural information. These same publications seldom provide the useful cultural information that international managers need to address the most common problem with international investment: understanding the latent intents and hidden agendas of companies and their potential foreign partners. Instead, these publications address cultural issues by telling international managers simple “canned” answers, such as the Chinese term “guanxi” means “connections,” or “back door” and that you need this to do business in China (Engholm 1994). These simple answers, however, do not address the serious and complicated cultural issues that are the causes of conflict, and that generate hidden agendas and latent intents.