Northern China/Beijing

Sean Krug Kathy Miller Stan Tellins Joe Siripong Northern China/Beijing Tommy Beatrous Haein Cho Kevin Havice Louise Johnston

Agenda Objectives Doing Business in China and Beijing The Rules and Scenario of the Game Cross-Cultural Game Summary

Objectives • Prepare teammates for a business meeting in Northern China, specifically Beijing • Teach beginning cross-cultural skills, using a scenario-based game as the framework for the training

Why do Business in China? • 2nd largest economy in the world, current account surplus of $180 billion, $10 trillion GDP • Transforming from outpost of low-cost manufacturing to hub of technology creation – design, R&D, engineering • Large and quickly expanding pool of engineers and scientists • Huge, young and literate market – population 1.3 billion, median age is 32, literacy over 91% • Socialist market economy - market mechanisms introduced to attract foreign investment and improved trade terms

China Business Trends • Chinese stock correction - A-Share IPO pipeline - est $30 billion raised in ’07 • Major bank makeover (and deal with $200+ billion in non-performing loans in state-owned banks) • Rural strategy – improving income levels in rural sectors • $1.1 trillion in foreign currency reserves – new channels for money management (70% are US treasury bills) • 5% appreciation in the Chinese yuan in 2007 - reflects confidence that the financial system can accommodate a stronger currency • China reported a record $177 billion trade surplus last year

Why do Business in Beijing? • Capital of China, where all decisions are made • Aggressively becoming a ‘global’ city, attracting many MNCs, huge investment in transportation and infrastructure • Home of the 2008 Summer Olympics • Beijing taking the lead in combining traditional Asian and Western values • Industrial Parks - Beijing Economic & Technological Development Zone, Zhongguancun Science Park • Top universities and R&D institutes - Peking University, Tsinghua University, Chinese Academy of Science

Game Basics Each team has two game boards 4 players for each board The Scenario will be read so that the players understand the setting Eight questions After the question is read, the player’s note on their handout their choice (A or B) After the answer is read, the player will move to either the left (correct answer) or to the right (incorrect answer) The answers will be explained and discussed

Game Scenario • American-based MNC manufacturer is interested in procuring parts from Chinese-based MNC • The Chinese firm can give a strong competitive advantage to the American firm • The American firm wants an exclusive contract with the Chinese firm • The two MNCs have never worked together before

Game Scenario • A week-long meeting has been scheduled in Beijing • 7-10 representatives from each company, many different organizational levels • American MNC will send mostly Americans, • Chinese MNC participants will be mostly Chinese

Game Scenario • Primary objective of the meeting • Americans want to share information about their company, goals and lay the groundwork for successful contract negotiations • Due to the competitive nature of the industry, they want to work as fast as possible, and if things don’t work out with this Chinese firm, they will quickly need to try and procure material from their second choice • The Chinese firm has many options so they want to determine if there can be a successful long-term profitable relationship with the American firm.

Q1: You are working on the presentation materials for the meeting. The text of the presentation will be in English, and because this will be the first time your company has worked with the Chinese company, the information presented will be completely new. Do you… A: Print hard copies of the presentation and give to everyone as they enter the meeting room B: Send the material to the participants at least one week ahead of the meeting

Q1: You are working on the presentation materials for the meeting. The text of the presentation will be in English, and because this will be the first time your company has worked with the Chinese company, the information presented will be completely new. Do you… A: Move 1 space to the right B: Move 1 space to the Left

Explanation • Though it is fine to print hard copies of the material, don’t present to the participants as they enter the meeting room • The first part of the meeting is for introductions • Participants working in a 2nd language will want to find ways to add value to a meeting rather than sitting back and saying nothing • If they have the material beforehand, then they can prepare questions and comments and be prepared to express them

Introductions Make contacts prior to arriving Make an appointment Introductions Shake hands if Chinese partner offers

Introductions Business Cards Printed in both English and Chinese Use both hands Bring lots Inspect closely Treat card with respect Meeting Preparation Slides and handouts in black and white Bring more handouts than you think you need Be on time

Q2: Your Chinese business partner just offered you a gift. Do you… A: Politely refuse it with no explanation B: Accept it graciously and open it

Q2: Your Chinese business partner just offered you a gift. Do you… A: Move 1 space to the left B: Move 1 space to the right

Explanation Often gifts will be refused 3 times then accepted Gifts are not opened immediately It’s the thought that counts If refused 4 times, graciously put it away Just like American’s not being allowed to accept gifts

Gift Giving Avoid black, white or blue paper Value should match recipient’s level Quality writing pens are good Avoid sharp objects, or pens with red ink 6 and 8 are lucky, 4 is not

B: Maintain strict compliance with a joint-approved meeting agenda and work together as a single monolithic team. A: Break into smaller teams based on seniority and shared personal interests to recreate and socialize together in a non-business setting. Schedule an extra couple of days to accommodate these activities. Q3: During the first couple days of meetings, the American and Chinese teams should:

B: Move 1 space to the right A: Move 1 space to the left Q3: During the first couple days of meetings, the American and Chinese teams should:

Explanation • Show you value and respect relationships • Understand corporate values and objectives – don’t waste each others time • Respect for social hierarchy • Efficiency and depth of diligence; Easier to point out weakness or disagreement • Seize every opportunity to give mainzi (face)

SGE Example • Intercultural supply chain SNAFU: • Marketing pressure • Lost incumbent relationship • Poor communication • Lack of ownership • Loss of tacit knowledge and corporate sponsorship • Ignorance about relationships – go for quick fix • Technical communications can be very difficult

北京欢迎你

Q4: The business meeting has come to an end and it is time to say goodbye. A: You stand up, bow, shake hands, and then leave. B: You stand up, shake hands, and then leave.

Q4: The business meeting has come to an end and it is time to say goodbye. A: Move 1 space to the right B: Move 1 space to the left

Explanation Bowing in China is reserved for formal occasions such as funerals or ancestor worship

Meeting Expectations Start meeting with small talk Do not mention deadlines Be prepared for Q&A in Chinese Bring your own translator Escorting guests out is respectful Don’t refuse invitations for going out

Q5: Which one is the best subject for small talk in Beijing? B: Economics and current stock market A: History and culture

Q5: Which one is the best subject for small talk in Beijing? A: Move 1 space to the left B: Move 1 space to the right

Explanation Beijing is the capital of History and Politics Shanghai is the capital of economy Beijing people emphasize history more than actual profit More related to Mianzi (face)

Relationship Building Guanxi: “The age-old practice of continuously cultivating and valuing relationship” How to build Guanxi? Being friends with business partner Doing something together outside the office Emotional bonding Guanxiwang: New phenomenon

B: Intersperse everyone so that each person sites next to individuals from the other company Q6: During a post-meeting dinner banquet, do you… A: Seat all of the Chinese company’s attendees on one side of the table, facing all of your company’s attendees

B: Q6: During a post-meeting dinner banquet, do you… A:

Q6: During a post-meeting dinner banquet, do you… A: Move 1 space to the right B: Move 1 space to the left

Explanation Importance of relationships Opportunity to build relationships One-on-one conversations

Explanation Door

Hierarchy & Guanxi Guanxi relationships Hierarchy Send matching seniority levels Order matters -- enter in order of seniority

Q7: If you are full what should you do with the food that is still left in your dish. A: Finish everything in the dish B: Leave some food in your dish

Q7: If you are full what should you do for the food that is still left in your dish. A: Move 1 space to the right B: Move 1 space to the left

Explanation A clean plate indicates you are still hungry and it is the host's responsibility to see that you are continually served food and drink Dinner ordering

Dinner Etiquette Don’t start eating or drinking before your host Try every dish offered There may be several courses Sample size portions are recommended Chopsticks Don’t push business during meals Let the Chinese bring up the subject first

Q8: You are the guest at a social function, it’s getting late and you wish to leave. Do you… A: Start telling your business partner it’s late, keep sipping beer and restate for another hour before leaving B: Tell your Chinese partner it’s late and you need to go soon, then leave in a few minutes.

Q8: You are the guest at a social function, it’s getting late and you wish to leave. Do you… B: Move 1 space to the right A: Move 1 space to the left

Explanation Guest usually initiates the end to social functions Host will remain until guest leaves Should inform host several times Don’t stop drinking unless you have a face saving excuse

Explanation • Chinese generally feel that in a formal business setting, people put up an artificial impression that hides the person’s true inner self. • Through enjoying social alcoholic drinks together, they believe one can attain a better understanding of a person’s true character. Based off that understanding, they can build business relations through a deeper sense of mutual understanding and trust.

Party Basics • If the Chinese side invites its guests to social drinks after a formal dinner, it would be rude to refuse, and potentially death to the business relationship. • On entering the bar, the host should enter the bar first and then get the waiter. • It is important to let the most senior members sit first and juniors sit afterwards in the remaining seats. • The group that makes the invitation to go drinking pays for the bill.

Extra • Use formal titles and last names • Avoid large hand gesture • Don’t talk too much • Don’t brag or flaunt – promote your virtues inconspicuously

Extra • No jokes or insults of others • Speak in short simple sentences • Avoid slang and technical terms when possible

Next Steps • If you ended up in the United States end of the board... • You need to invest in building credibility with your Chinese partners • Learn about the culture and how to do business in China – hire an expert to help bridge the cultural differences between companies • Set up a meeting (in person is best) to apologize and discuss next steps with the most senior person who attended the meeting – show respect and a commitment to change

Northern China/Beijing