SCDigest Editorial Staff
SCDigest Says: |
A Western company entering into a sourcing agreement with a Chinese supplier that does not understand these and other differences in cultural and business practices risks disappointment or outright failure.
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Despite the huge flow of manufacturing work into China by Western companies, many fail to understand key differences in how relationships work there.
That’s the message in a recent article for the Wall Street Journal by the University of Akron’s Andrew Thomas, and Jon Hawes and Timothy Wilkinson from the College of Business at Montana State University, Billings.
“Americans tend to view a business relationship as a win/win proposition -- a contract between two corporate entities designed for their mutual benefit in long-term profitability and growth,” they write.
But Chinese companies and executives often view things much differently.
“In China, personal relationships among business partners are far more important, and the benefits foreseen in entering a partnership often are broader and focused more on the near term -- and not necessarily evenly balanced,” they say.
A Western company entering into a sourcing agreement with a Chinese supplier that does not understand these and other differences in cultural and business practices risks disappointment or outright failure.
Case Study Shows the Peril
In the mid-1990s, a US distributor entered into an agreement with a Chinese manufacturer to produce a line of motorcycles to sell into the Latin American and African markets.
According to the authors, there were big differences in goals and objectives from the start. The US company assumed the Chinese manufacturer was interested in a long-term, win-win relationship that would include building a quality brand image.
The Chinese company, however, viewed the relationship more as a way to get needed US currency from the exports, and to learn about penetrating foreign markets – an opportunity they could never find on their own.
(Manufacturing Article - Continued Below) |