Contemporary Strategic Chinese American Business Negotiations and Market Entry: A Dialogue Between Cultures

This book is an effort to provide a "primary source", a guide for Chinese/American cross-cultural negotiations, which has been constructed and amassed by professionals living and working in China. Research included personal interviews, surveys, case studies, face-to-face negotiations, and consulting, melded with a broad body of international business. This book that has two focuses, China market entry and negotiations, Both China and the United States are vast, complex markets, with different histories and cultures. China market entry requires extensive research and understanding, of the inextricably linked elements of (a) how business is managed in China, (b) understanding the China market, and (c) negotiating all elements of your China market entry and ongoing business. To be successful in China, your firm will face these elements in terms of explicable and solvable activities. Research into data, theory, and perceptual cultural differences between your firm and your Chinese counterparts adds magnitude to your China overall business strategy, and mandatory and essential negotiations. Dr. Steven J. Clarke arrived in academia in 2017 after spending 45+ years in international business. He is currently an Hinrich Foundation Honorary Global Trade Leader, having collaborated with the Hinrich Foundation and RMIT University on the state of the art Masters of Global Trade (by industry for industry) program, helping the future global trade leaders meet the dynamic and contemporary issues facing business leaders improving sustainable trade, benefitting many and contributing to great levels of peace. In 1998, Steve moved to Bangkok, Thailand, where he consulted for retail stores and brands in Asia, including Central Department Stores, Robinson Department Store, Nike, Adidas and Reebok. He was responsible for the design and sourcing for brands and retail, including men's furnishing, sportswear, sport apparel, kids and outerwear. In 2002, he founded Freesia Development in Shanghai with government officials in China to help foreign companies enter the market Acknowledgments Empathy Contents Notes on Contributors List of Figures List of Tables Preface Introduction References China Strategic Analysis 1 Critical Research 2 Preparation 3 China Research Analysis Agenda 4 China Macro- and Microenvironment 5 Competitive Strategy for China 6 Competitive Advantage for China 7 Situation Analysis 8 China Market Entry Analytical Tools 8.1 PESTLE 8.2 SWOT 8.3 Value Chain View (VCV) 8.4 Resource-Base View (RBV) 8.5 Porter’s Value Chain Primary and Support Activities for China 8.5.1 Primary Activities 8.5.2 Support Activities 8.5.3 Porter’s Five Forces—China Market 8.5.4 Porter’s 5 Forces Model for China Business Strategy 9 Comparative China and US Economics and Demographics 10 China Conventional Strategic Miscalculations (CCSM) 11 Does the Shoe Fit? 11.1 China Marketing Mix 11.2 China Marketing Mix Strategy 11.3 China Market Segmentation 11.4 Standardization versus Customization (SvC) 11.5 China Brand Standardization 11.6 China Brand Customization/Adaptation 11.7 Research Support References China and Negotiation 1 Why Study Negotiations? 2 Negotiators Theory 3 The Negotiations Approach 4 Norms—Attitude and Behavior 5 Adverse and Favorable Practical Behavior 5.1 Ethnocentrism 5.2 China Foundations for Ethnocentrism 5.3 United States Foundations for Ethnocentrism 5.4 National Feelings 5.5 Xenophobia & Xenophilia 5.6 Power and Authority 5.7 Power 5.8 Authority 5.9 Trust 5.10 Assumptions 5.11 Why Do We Need to Manage Assumptions During Cross-Cultural Negotiations? 5.12 Values 5.13 Chinese Misconceptions and Values of Americans 5.14 Misconceptions 5.15 American Traditional Values 5.16 Avoid Cross-Cultural Fallacies 5.17 American’s Misconceptions and Values of Chinese Misconceptions 5.18 How to Debunk Misconceptions 5.19 Contemporary Chinese Trends in Values 6 Process & Stages of Chinese Negotiations 6.1 Process 6.2 Stages 6.2.1 Pre-negotiation/Preparation 6.3 Research the Negotiator 7 Characteristics of Behavior and Style in Negotiations 7.1 Chinese and American Comparative Behavior, Styles, and Perceptions 7.2 Six Dimensions of Chinese Business Negotiation Style 7.3 Chinese/American Descriptive Devices 7.4 Conflict Resolution 8 China Negotiations and Market Entry 8.1 Phases in International Strategy Formulation 8.2 Ping-Pong Model 8.3 Adverse Practical Boundaries 8.4 Favorable Practical Boundaries 9 Sun Tzu 9.1 Sun Tzu Military Strategy Applied to Business Strategies 9.2 Thirty-Six Chinese Stratagems 9.3 Tai Chi Negotiations Stratagems References China Market Environment 1 China and Globalization 1.1 Waves of Globalization 1.1.1 First Wave of Globalization: 1860–1914 1.1.2 Second Wave of Globalization: 1945–1980 1.1.3 Latest Wave of Globalization 1.1.4 China’s Standing in Globalization 2 China and Capitalism 3 China Market Structural Distinctiveness 3.1 How Will Your Firm Compete in China? 3.2 China Competitive Advantage 3.3 Typical Steps in Industry Analysis 3.4 The China Market Value Chain—China Value Created and Captured—Cost of Creating Value = Margin 3.5 Competitive China Strategy 3.6 Contemporary China Competitive Strategy and social media 3.7 Porter’s Diamond of China National Advantage 3.8 Socio-Cultural Influences 3.9 Institutional Mapping 3.10 Risks 4 China Markets 4.1 Market Potential 4.2 Bottom of the Pyramid (BOP) 4.3 Scope of Your China Company References China Market Entry 1 Approach to China Market Entry Strategy. 2 China Mode of Entry Options 2.1 China Mode of Entry 3 Ownership 4 Location Advantages 5 Internalization Advantages 6 Direct Exports to China 7 Indirect Exports 7.1 Intercorporate Transfers 7.1.1 Intermediaries 8 Additional Considerations 9 Government Regulations and Policies Considerations 10 China Party Role 11 Marketing Considerations 12 Top Marketing Strategies for China (2021) 13 Logistical Considerations 14 Distribution Considerations 15 Ease of Doing Business in China 16 China Licensing 17 China Franchising 18 China Foreign Direct Investment 18.1 China Greenfield Investment Strategy 18.2 China Brownfield Investment Strategy 19 Strategic Alliances 19.1 Trading Alliance 19.2 Comprehensive Alliances 19.3 Functional Alliances 19.4 Strategic Alliances and Joint Ventures 19.5 Strategic Alliance Management References China Cultural Environment 1 Chinese National Culture 2 Cultures and Negotiations 3 Cultural Dimensions 3.1 Power Distance 3.1.1 China 3.1.2 United States 3.2 Individualism 3.2.1 China 3.2.2 United States 3.3 Masculinity 3.3.1 China 3.3.2 United States 3.4 Uncertainty Avoidance 3.4.1 China 3.4.2 United States 3.5 Long Term Orientation 3.5.1 China 3.5.2 United States 3.6 Indulgence 3.6.1 China 3.6.2 United States 4 Yin Yang 5 Time References China and Guanxi 1 What Is Guanxi? Guanxi Defined 2 Understanding Guanxi 3 Chinese Terms and Definitions References American and Chinese Ethics and Their Influence on Multinational Business 1 American Ethics 2 Chinese Ethics 3 Chinese Ethics Applied to Business 4 Mendacity 5 Corporate Social Responsibility 6 Ethical Issues of Multinational Corporations 6.1 Introduction 6.2 Respect as the Premise for Resolving Ethical Conflicts 6.3 Communication to Resolve Ethical Conflicts 7 Corruption 8 Conclusion Resolving Commercial Dispute in China: The Legal system, The Law, and The Dispute Resolution Methods 1 The Chinese Legal System as a General Background 2 Choice of Law 3 Contract Law in Relation to the Commercial Dealings in China 3.1 Chinese Contract Law 3.1.1 The General Principle of Good Faith 3.1.2 Formation of Contract Under the Chinese Law 3.1.3 Specific Rules on Electronic Commerce 3.1.4 Validity/Vitiating Factors of Contracts 3.1.5 Pre-contractual Liability 3.1.6 Specific Performance 3.1.7 Force Majeure and the Doctrine of Change of Circumstances 3.2 The CISG 4 Commercial Dispute Resolution in China 4.1 The Chinese Judicial System and Civil and Commercial Litigation 4.2 Commercial Arbitration in China 4.3 Mediation 5 Concluding Remarks References China’s Circular Economy Toward Environmental, Social, and Governance 1 Introduction 2 China Circular Economy and Net-Zero Directives: Implications on a company's ESG 3 Investment in Circular Economy and SI Activities 3.1 Designing-Out Wastes 3.2 Keeping Material in Use 3.3 Adopting Restorative/Regenerative Processes 3.4 Circular Economy Toward Regenerative Agriculture 4 Opportunities Where Being Circular in Constructs Pays 4.1 Regenerative Agriculture 4.2 e-Mobility Related Business 4.3 Electronic or Information and Communications Technology (ICT) Product-as-a-Service 4.4 Data Provenance, ESG Monitoring, and Carbon-Emission-Footprint Management Services 4.5 Reverse Logistics 4.6 Circular Economy in Textile and Fashion 4.7 Circularity in Habitat and Lifestyle Consumption Patterns 5 Moving Forward References China Ecommerce and Marketing 1 Introduction 2 Using Online Channels to Open the Market 3 An Overview of the Ecommerce Platforms 4 Choosing the Right Ecommerce Platform 5 The Golden Triangle of Chinese Ecommerce 6 Consumer Market—The Eight Consumer Profiles in China Ecommerce 7 Merchandising 8 Marketing—In vs Out of App 9 In App Marketing 10 The First Double 11 11 Campaigns 12 Important Festivals to Breakdown 13 Marketing IP’s 14 Out of App Marketing 15 KOLs and Affiliate Marketing 16 Seeding and Harvest 17 Co-marketing with the Platform 18 Breakdown of the Ecommerce Equation 19 Data Analysis 20 Data Bank 21 Uni ID 22 Emerging Trends 22.1 Livestreaming 22.2 What Is Livestreaming? 22.3 What Does a Livestream Room Look Like? 22.4 Evolution of Livestreaming 22.5 Shopping and the Metaverse 22.6 New Retail 22.7 Hema: The Ultimate Supermarket 23 Formulating an Ecommerce Strategy in China References Innovation and Technology in China 1 China's Historical Orientation Toward Technology 2 Assessment and Timeline of the Antecedent Conditions Leading to China’s Maturity in Technology Innovation 3 R&D Policy 4 Innovation in Manufacturing 5 Artificial Intelligence 6 Electric Vehicles 7 Payments Technologies 8 Practical Implications for Action in Engagement with China Through R&D 8.1 Commercial Sector 8.2 Government Sector 9 The Role of Higher Education in Enabling the Fulfillment of China’s Ambition References Challenge of Identifying and Negotiating with Chinese Factories 1 Three-Circle Control Framework 2 Making the Most of a Trade Show Visit 2.1 Red Flags: Wide Product Range 2.1.1 Poor Communication 2.2 Mistakes 2.2.1 “Can You Make This?” 2.3 Tips 2.3.1 Ask the Same Question Multiple Ways 2.3.2 Be an Exciting (but Honest) Potential Customer 2.3.3 Think Like a Manufacturer When Talking MOQ 2.3.4 Be Respectful with Sampling 3 The Factory Visit—Secret Ways to Get to the Truth About... Quality/Ownership/Reputation and Financial Stability/Customer Base 3.1 Quality (Do They Can Make the Product I Am Looking for?) 3.1.1 Engage a Professional for the Factory Audit and Tag Along 3.1.2 Do They Have a Quality Manual? 3.1.3 Look for Well-Documented Flow of Materials and Process 3.2 Ownership (Who Really Owns the Factory?) 3.2.1 Diplomatically Get Your Hands on the Business License 3.3 Reputation and Financial Stability 3.3.1 Due Diligence 3.3.2 Investigation 3.4 Customer Base 3.4.1 Ask for a Reference 3.4.2 Ask a Salesperson Away from the Group 3.4.3 Review the Website and Brochure (Especially Chinese Language) 3.4.4 Sample Room 3.4.5 Review the Tool Room 3.4.6 Special Attention to the Warehouse 3.4.7 Taobao the Seller in Chinese 4 Summary References Fintech Market Development in China 1 Fintech in Chinese Financial Markets 2 Fintech Industry Regulation in China 3 Comparative Advantages of the Chinese Fintech Companies 4 Accountability and Market Risk in the Chinese Fintech Industry 5 Challenges and Risks in the Chinese Fintech Industry 5.1 Operational Risk 5.2 Financial Risk 5.3 Business Risk 5.4 Cybersecurity and Data Privacy Risks 5.5 Regulatory Change Risk 5.6 Fintech Business Models in China 6 A Case Study of Chinese Fintech Company 6.1 The Ant Financial Services Group 6.1.1 Background 6.1.2 Business Model 6.1.3 Business Competency 6.1.4 Risk Management Strategy 7 Role of Fintech in the Inclusive Finance 8 Conclusion References China Belt and Road Initiative 1 Introduction 2 By Land and by Sea 3 The Silk Road Economic Belt 4 The Risks and Rewards 5 The Risks 6 The Rewards 7 Risks vs Rewards Viability Analysis Based on Each Economic Corridor 7.1 Opportunities for Business and Investments 8 Foreign Companies Find Their Foot-in-the-Door 9 Considerations and Implications 10 The Current State of the Belt and Road Initiative—2021 11 Conclusion References Case Studies 1 China Silk Inc. 1.1 Introduction 1.2 The Impact of Globalization 1.3 Supply Chain and Distribution Strategies 1.4 Ethics 1.5 Prospect 2 Evaluation of Apple’s International Strategy 2.1 Introduction of Apple’s International Strategy 2.2 Pricing Strategy 2.3 Apple’s Centralized Structure 3 IKEA in China (a Study of the Yin Yang Approach) 3.1 Background 3.2 Expansion Process 3.3 IKEA’s Marketing Strategy in China 3.3.1 Complete Supply Chain Management System 3.3.2 Precise Target Consumers 3.3.3 Unique Sales Techniques 3.3.4 Timely Adjustment of Strategies 3.3.5 Excellent Corporate Culture 3.3.6 Application of Yin Yang Method 4 Google 4.1 The Establishment of Google China 4.2 Growth 4.3 Exiting the Chinese Market 4.4 Reflection 5 Conclusion References General Glossary, Terms, and Definitions Index