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A Joint venture is a new wave of thought in which a synergy is created by two business house mostly in similar arena but different geographic region with contemplating skills. Example can be of two retailers in Western economy and China merging. The two companies can do a lot better by pooling their resource and their expertise across two geographic region while sharing the risk and rewards.
What is culture
Culture is a composite index which is not well understood. Culture of man , community, country, religion, union is a set pattern of governing norms, perceived values, existing beliefs, and attitudes. These attributes are normally defined either at top by governing leaders as norms and perceived values which is then passed downwards. The bottom of the pyramid is also very influential and might have their own existing beliefs and personnel attitudes. The mergers of this two layers slowly filter either ways giving rise to the overall work ethics and humanities of the organization giving rise to success and failures and very influential in mergers. The norms and values can be altered while the beliefs and the attitudes need time to divulge. This is a cyclic process and needs to and fro couple of time for success. The Corporate culture is a composite variable of business equation with facts and artifacts. Culture vibrates in the business strategy with culture defining how we get things done and strategy defining what needs to be done.
Western Culture is a composite index collated over a period of like a heritage consisting of social norms, traditional customs, political systems, ethical values, religious beliefs, and technology. The western culture is also a impact of various western civilization like the Greek, Latin, Roman, Anglo Saxon and has embedded values of European origin of literary, political, philosophical, scientifically, artistic . These cultural influx is also found in countries and continents of European migration like US and Australia. These societies have political pluralism (acknowledgment of diversity) which supports individualism, classical pluralisms in western society supports politics and decision making process to be vested with the governmental framework, while various groups can challenge the government and veto them, these give rise to individualism alongside government forms which is a classical example of renaissance movement of Europe. The western thoughts also support freedom, democracy and the relativistic theory which argue that different cultural norms should be treated equally. Communism or Marxism is also a European thought followed by Russia, China and few other countries.
What is Chinese culture
The Chinese culture is very traditional and they are very proud of their culture and is the "longest continuous civilization with the longest tradition of record-keeping and collection" (Ropp, 1990.p.x). The Chinese population largely lively in country side and live in a collective sense and do group farming and traditional family oriented business. They have a robust chain of command within the group with agrarian values. These was later well supported by the Chinese cultural revolution. The Chinese use pictographic language to teach their children contrary to the western child who builds words from letters hence the Chinese sees the whole picture were the westerner sees the detailed, Professor Michael H Bond(1997) at the Chinese University of Honk Kong stated in the journal article "beyond the Chinese face" that "Chinese children are very good at seeing the picture and Western children have an easier moment focusing on the details at the same time, so, Westerners are very quick to make decision".
It's a well know factor thus each Organizations will have its cultural ethos. Countries have different cultures ethos too. Chinese national culture will be values and attitudes shared by Chinese that shape their behavior and their beliefs about what is important; These will echo into the business Joint ventures should see to it that there is no imperialism on the cultural side.
These are profound as alternative view of culture (Kroeber, 1951, p. 19) and " is a way of habitual acting, feeling and thinking, channelled by a society out of an infinite number of variety of potential ways of living'' To run a business in a country cultural effect plays a big role.
The Chinese are having a rapid economic , political and social change and is developing into one of the largest economy in the world. During the last two century they had civil wars, internal arguments, violent attacks from every neighboring country . This has given rise to distrust about the rules in general and rule of law and the Chinese believe only their family with no willingness to do business with strangers unlike the westerners.
Who are the cultural gurus
The cultural gurus of china are Confucianism, Taoism and Buddhism. "Confucianism deals with human relationship, Taoism deals with life in harmony with nature, and Buddhism deals with people's with immortal world". (Fang, Chinese Business Negotiations style, p.26). Chinese philosopher Fung Yu-Ian states that "Chinese sages historically distinguished between the root (agriculture) and the branch(commerce).The root and some of the branch were tended to favor by Social and economic theories and policies. The people who were contracted with the branch they become merchants. " This is typically followed by Chinese and clearly divide them into merchant class and peasants class.
The earliest cultural influence start with Confucius who is the foundation of Chinese education. Confucius states that " the society is organised under a benevolent moral code for prosperous life, politically stable and safe from attack. He also taught curtsy for good relationship and scholarship." Relationship according to Confucius was classified into the following "Ruler and ruled, Husband and wife, Parents and children, Older and younger brothers and , Seniors and juniors" . They were respect for chain of commands and led to harmony and is the basic virtue of Chinese culture which can be found in Chinese corporate. The next great guru is Lao Tsu who led to Taoism, whose fundamental notions involve the relationship of yang (the active masculine and light force) to yin (the passive, feminine and dark force). The two forces are opposite and complement each other. The basic two gurus set the initial belief system and values of the Chinese which is still followed by the Chinese. Confucius and Lao Tsu were gurus who were more concerned of the pathway then the results. In Chinese negotiating style they are more concerned with method than the goal. The next is the political moment started by Mao and the cultural revolution during which he closed schools and universities and sent bureaucrats and students to the countryside to be re-educated by the peasantry. These led to "collectivisation" in the industry and agriculture which is a major part of Chinese culture. The western culture were set by Socrates and Plato and Aristole who led with school of parallel thoughts and pluralism which led to individualism while still letting the government run the political show and the managers the company while thoughts and process can still be challenged.
What is cultural Diligence - Western Vs Chinese
Cultural diligence is a mixture of the Chinese culture and western culture in a joint venture it's the cultural aspect of an Chinese organization ( value, ethics, honesty, loyalty) to that of its parent company in china to that of its new parent from Western economy zone western cultural aspects ( value, ethics, honesty, loyalty). The structure of the organization, the hierarchy, the leadership, the motivation, the HR model in practice all constitutes the cultural diligence.
The modern term Globalism has articulated the western ways has more entrepreneurship than that of the Chinese, Russians, Indians in the final shots. The globalism has negative and positive feelings called the Occidentalism has mentioned by James(1995) in his book "Occidentalism: Images of the West". The reverse is the terminology called Orientalism.
Analysis of previous Joint Venture.
The most important in Joint venture is to understand the underlying values in the cultural diligence which are both explicitly stated and implicitly held . The strategy of the western company and that of Chinese counterpart in terms of vision, mission, goals, objectives, future products and services, core competency, dynamic capabilities, financial expectation
Tesco a Giant in UK has monopolized the UK market the only way forward was to enter new markets overseas. Tesco entry into China came through the joint venture TING HSIN, M&S another UK retailer did try the same but most of their venture overseas was not a success. The difference was in the integration with the Chinese company greater access to the established markets and distributions channels of Tesco for the Chinese products with less risk while contemplating the technical expertise of Tesco and increasing resource pool, synergies capacity
Tesco Website said "Both parties are committed to growing the business together. Ting Hsin, one of China's leading consumer food and beverage producers, will bring their extensive local knowledge and operating expertise gained not only from Hymall but also from their wider business interests in China. Tesco will add its supply chain, product development and store operations expertise to improve the shopping experience for customers."
The next most importance in Joint Venture is for understanding the decision making process and behavior of the organization. Here again we have the oriental versus western thoughts in the positive and negative paradigm giving rise to complexities to be handled professionally.
Cultural Diligence is understanding this dynamics and handling them with maturity and not look out for a best fit model. Further we can refer back to Cisco - the best company in mergers and acquisition. The Cisco website states "They company has a 40 person strong team with a range of expertise's in the Business development group working has a team, they identify potential buys, conduct due diligence on target companies, negotiate with senior execs, and integrate new companies into the greater Cisco whole"
The next is negotiations style while most westerners believe in meeting and to and fro of ideas and representation with interpretation of thoughts even in aggressive manner, Chinese believe its too hard to get too fact with arguments and aggressive mannerism and haggle to settle differences. Fang(1998) quotes that " In the Western relationship grow out for business deals and in China business deals grow out for relationship. Westerners are tending to monitor a clear difference between professional and personal relationships, but the Chinese rely on interpersonal contact to solve business problems. This difference approaches often create culture clashes throughout Sino-foreign negotiations."
Cisco's vice president of business development Ned Hooper quotes that ""No matter how successful you've been and how much you make on the deal, it's traumatic because there's change coming."
The success of Cisco which has integrated so many companies is; It has put a team of professional to do this has a full time job. Brett Golloway, the former CEO of Airespace, a wireless networking company Cisco acquired last year quotes in USnews.com on June,18th 2006 that "My experience with most companies is that they do acquisitions infrequently and integration is somebody's nighttime job," He adds "Cisco has people who do this full time--it's a core function of the company."
One of the core components pointed out by these companies and especially Cisco Team is to assess the culture of both the companies involved in the joint venture. Though cultural diligence is mostly ignored and finance, accounts, operation is given a priority, it's wise to create a initial value of the shared culture and belief alongside the inequalities of the value in the two organizations with the following :
Management approach, Skills at Change Management ( Dynamic capabilities)
Standardization process and Adaptability
Training , effectiveness of training
The most important is the inequalities of the same value between the two organization like the perspective of working with a new management or exchange of loyalty might be not liked by Chinese or Japanese workforce.
The best way forward for any western companies for joint venture in china successfully and overcome the cultural problem is to first and foremost the organization should do a trust-building process by providing references of highly respected businesses known to be trusted by the Chinese. The next stage is to develop these relationship further by been polite and respectful individual, be a sincere, trustworthy negotiator finally a caring friend. The next is too understand the cultural values and their inequalities like in china the business procedure is slow and its best to be patient and polite and not pus business which is considered has rude behavior, first is friendship next is business. In western culture its not considered appropriate to ask someone their age, financial standing or marital status which is normal in China to ask about family and friends. Chinese also have belief system based on luck and have auspicious and inauspicious symbols hecne one should use positive symbols and avoid those with negative impressions. For example in numbers - 4 and 7 is unlucky, 7 is also negative, 8 and 3 is very lucky , 9 is longterm realtionship, 6 is good progress, in color it is red, yellow and gold are lucky white means sad, Clock is a bad gift. This point out that one has to understand the tangiable values of the belief system before presenting numbers, colors or gifts. The next is too understand the cultural inequalities that exist in how a western percieves numbers, colors, gifts which is a base of a belief system. The descion making process is the next most important and one needs to understand the collectiveness versus inividulaism process in the cultural dilegence while addressing the top pyramid of the chinese organisation. Next is to have a good plan in place like Cisco team.
Westerners have a good practice to have a clear agreement and its is still a essential part of a good relationship. This can be seen with Cisco who formualtes a plan, give new designation, visiting card very early stage of any joint venture and not delay such plans. The most diifuclt is to be having a cultural acceptable enviroment without any hassles.
In a joint venture one should try to find the differnce and once find try to address it and resolve it without time-delay.
Communication is very clearly a important of any relationship and its best way to understand the cultural diligence and understand the inequalaties in how certain belief system is values like color or number. It will also be best to have face to face meetings.
Trust in a relationship is very important and the joint venture leaders should be seen building trust at their levels and with their juniors and best to share infromation openly. Yet keep the relatiosnhip flexible, chinese are hard negitiators.
Performance indicators should be clear to employees of both the organisations and a clear evaluation process should be maintained with no ineualities.
The next is to avoid the following Poor understanding of cultural diligence , delaying the integration process, integrate vereyone to finish the integration process together and not have divergent initatives., good communication with employees to answer their personnel insecruitiies and not ignore them, the hierarch sshould be clear and not vague. Finally have a plan exit in case the joint venture is not working out to a synergy due to cultural diligence.
The joint venture to succeded its is very important due planning has been done from te beginning like in the case of CISCO and not considered it has a night time job. Good acknowledge of the impact of behaviour patterns have on the probability of the transaction's success is too be considered seriously. Mitigating the negative impact of culture on a deal, or accelerating the development of the culture necessary for success, requires adhering to a structured process. The process should map to good practices and do-nots to have a happy team ending for a western economy countries to do business successfully in China.