Crossing the cultural barrier.
While China offers unlimited opportunities for would be franchisors, it also poses significant hurdles. And few challenges come bigger then culture.
Unfortunately, the subject of cultural differences is often glossed over by the investors.
Is there a cultural barrier to cross when establishing a franchise in China?
The answer to that is a resounding ‘ yes’, especially if you are an American franchisor. In the Asian Wall Street Journal, China Bureau Chief Marcus Brauchli said ones, The historical crevasse separating Chinese and American ways of thinking is shrouded in myths the countries sustain about themselves and about each other. America thinks of China as a huge, prospective democracy, its potential to become more like the United States evident in its quick grasp of market economics. China thinks of the United States as less as an ideological center than as a consumer society, revolving around the expansionist creation of wealth and the ability to project itself in the world. In fact China does not share the American Dream as American Know it, and the United states has a deeper felt ideology then its consumerist veneer would suggest. The resulting collision as any newspaper reader knows has been noisy and may be dangerous. This cultural chasm is worsened by the fact that for years America has been known in the Chinese political shorthand as ‘meidi” or “beautiful imperialist”. The persistence of this concept can be traced back to the Pearl Buck syndrome-, the belief among Americans that the United States offers a model that the Chinese should aspire.
If you really want your franchise to succeed in China, you have to dispel from your mind any notion that China or the Chinese are the source of the “frustrating” “cultural barrier” you will ever encounter. Such a mindset will doom your enterprise from the start. The “cultural barrier” we are talking about has more to do with different expectations and perceptions then with any inherent national or cultural traits. Actually as a guest of the host country, the onus is squarely on the franchisors shoulders to learn – and understand- the characteristics of Chinese culture and to adapt his business accordingly.
When in China, do as the Chinese do…
Don’t get me wrong. I’m not advocating that you throw out your corporate culture, first class quality control and everything else that has made the franchise successful in the first place. But I’m saying the franchisor should exercise more flexibility when trying to transplant their system to Chinese soil.
I think American franchisors, in particular, are prone to imposing their values and way of working in a wholesome fashion on their foreign counterparts. They have a tendency to believe that the rest of the world should follow the American way, because it is the best or only way. That will not go down well with the Chinese- or any nationality for that matter. When operating in another country – any country- the watchwords are compromise and flexibility.
You cannot simply badger your way through. The Chinese will have none of it.
Jean Cocteau once said: “Tact consists of knowing how far we may go too far”.
To illustrate my point, I will give you an example from the industry I’m familiar with. An American restaurant franchisee with presence in Singapore and several other asian countries with one of its trademarks an extremely casual and friendly service. The staff are encouraged to entertain their customers and use “Americanism’ in speech and behavior to create the American dinning ambience.
Your average American waiter and waitress will have no problem meeting these expectations comfortably because they come quite naturally to Americans. But get the local staff to do these things, and the come across as poor actors and worse still, clowns. This is hardly surprising when you consider that many of them do not speak American English to begin with, or hardly speak any English at all. I suspect this pseudo American mannerism has put off more Asian diners then the quality of food or décor.
Another case in point is the experience of an American franchise in Bangkok.
Like the case I just mentioned in Singapore, that particular case happened in Bangkok and the franchise is known for their legendary super-friendly waiters. But you could say it was too much of a good thing in a highly stratified society.
Thai people who are not used to sitting with servants, found it offensive that the waiters sit with customers to take their order. The company realized their problem and finally got their waiters to take the orders standing. Business has since improved!
Always remember – respect and compromise.
Of course there are fundamental differences between China and the West that you ignore at your own peril. The west takes its inspiration from the Greek-Roman tradition. China, on the other hand, if firmly rooted in centuries of Confucianism. The Greek and Roman forefathers of western civilization encourage a questioning mind. Confucius however advocates absolute reverence to authority and tradition.
We are who we are. We cannot deny our heritage. Developing a rewarding cross-cultural business relationship however requires a focus on common ground and shared principles, not differences.
If you are already beginning to despair at the amount of work cut out for you, don’t. Because there is a tried and proven formula for managing franchisor-franchisee relationship in China. It is what we call the Asian third party solution. A franchisor who is interested in expanding his franchise in China may tap into the regional expertise, business network an connections of non China based Asian Master franchisee.
First the Asian master franchisee is going to be a lot more familiar with China’s market conditions, cultural idiosyncrasies and legal climate then the western franchisor. Second, the franchisor can also exploit the franchisees network of Chinese business and government contacts.
It is already a well known fact that in China, “guanxi” – or who you know – is often more important then what you know in getting things done. The master franchisee’s connections can open doors that would otherwise be closed.
A Singapore or Hong Kong based master franchisor is ideal for western franchisors Both have predominantly Chinese populations with similarities in culture and language to the mainland. Both have well established links with the Chinese business community and government. Both have significant first-hand knowledge and experience operating in potentially treacherous Chinese market. And Singapore is on political good terms with Beijing – a fact not dismissed lightly. On top of all that, Singapore and Hong Kong have highly capable and experienced managers in franchising.
I like to use the Tony Roma’s experience to throw light on what I have said.
Roma Corporation of Dallas, Texas, the Franchisor for Tony Roma’s Famous for Ribs awarded the Master Franchise to a Singapore based company in 1991. The franchise agreement covered then 6 countries. Following the successful introduction to this markets the master franchisor was awarded the additional territory for the Philippines, China, Australia and Germany.
In June 1995, Tony Roma’s became the first American full service restaurant
franchise to start operation in Shanghai.
The franchisor-master franchisee agreement has worked extremely well over the years and the company is today one of the success stories in the restaurant industry in Asia. The franchise has outlasted some of the most famous names in the industry by adapting to the potential cultural barrier.
The franchisor gets access to new markets in Asia where it has little prior knowledge or experience with the help of the franchise. The master franchisee, in turn, benefits from the wholesale transfer of the restaurant system and brand equity that the franchisor spent millions of dollar developing. It is a win-win situation.
The cultural divide between east and West, and more precisely between China and the West, manifests itself in many ways. But perhaps nowhere is the manifestation more evident then on the negotiation table. The negotiation process, regardless of where it takes place in the world, is often fraught with pressure and tension because so much is at stake for both sides that have their own agenda and objectives to meet. In these tense settings there is a strong tendency to focus on the differences rather than the similarities. The tendency does everything to promote an ‘us versus them’ mentality and nothing to promote empathy or cooperation between the two negotiating parties. And without empathy or cooperation, there can be no true compromise or comfortable agreement. Anything less then a win-win situation is a failure for the partnership.
Another phenomenon that frequently rears its ugly side at the negotiating table is the magnification and gross exaggeration of cultural idiosyncrasies in the eyes of the other party. The perceptual shortcoming is a product of the inherently adversarial nature of negotiations, a shortcoming that inevitably sharpens the edges of conflict.
The negotiation table can thus be likened like a giant chessboard where two opposing forces wage war against each other.
What happens during the negotiation process – with all its verbal and non verbal nuances – can give a macrocosmic view of thousands of other business transactions that transpire between Chinese and Western individuals and groups. Because in this confined sphere of activity, all other characteristics and peculiarities of the Chinese and western business cultures are played out. It is therefore worthwhile for us to take a deeper look into the negotiation process and what insights they can offer.
The negotiation process can be highly challenging and frustrating for a would be or first time franchisor. This is even truer when the negotiations involve cross-cultural barriers. You can learn the rules of the game and put them to work at your advantage.
I think it would be instructive at this point for us to examine a cross-cultural study that was conducted by David K.Tse, June Francis and Jan Walls. The study, which appeared in the Journal of international Business studies some time ago, focuses on Sino-Canadian business cultural comparisons. I believe that Canadian business culture is sufficiently similar to American business culture in particular and western business culture in general, to warrant the use as a yardstick for comparison with Chinese business culture. The value of the study lies in the fact that it throws on the salient differences between Chinese and Western culture. And for western franchisors, understanding this salient difference is half the battle won.
In the study the conflict resolution strategies of Canadian and Mainland Chinese business executives were investigated. The methodology involved recording and evaluating the executives’ responses to two types of joint project conflicts-task related conflicts, and a person-related conflict with partners from their own culture or partners from the other culture.
Perhaps the key fact to arise from the study is that neither group executives altered its strategy when engaging in cross-cultural negotiation. In other words, neither of the groups studied made an effort to adjust their style to accommodate the foreign counterparts-despite the obvious cultural chasm that separates the two parties. Both held on tightly to their own prejudices and biases. In situations like these, where neither party budges, any hope for corporation and mutual trust is doomed from the start.
As one would have expected from experience, the study shows in no uncertain terms that the Chinese executives were far more likely to avoid conflicts than the Canadians. But when actually faced with a conflict that they had to resolve, the Chinese tended to recommend more negative strategies, such as discontinuing negotiations or withdrawing from the negotiation process altogether. Their Canadian counterparts were found to be less radical when making recommendations in situations where conflict was present.
Another major cultural difference between the Chinese and Canadian executives is the emphasis they place on the individual, vis-à-vis the social group. Their priorities were fund to be vastly different – one might say almost poles apart and seemingly irreconcilable. The Chinese placed great emphasis on group harmony and interdependency – or collectivism. The good of the group as a whole almost comes before the good of the individual. The lines are clearly drawn. There is no doubt about that. To ensure the survival of the group, preservation of intra-group harmony is paramount. This goes a long way in explaining why the Chinese as a general rule avoid conflicts that could threaten group harmony and social cohesion.
In a potentially conflictive situation, they resort to a variety of tactics to starve off disagreement of confrontation.
The Canadians on the other hand, put a higher premium on individualism and independence than their Chinese partners. This is consistent with the Greek-Roman tradition who prized a questioning mind. As a result the Canadian executives were markedly more authoritative and decisive. They were also more goal oriented, which explains why they were in a bigger hurry to close the deal. They generally seemed to be much more comfortable with disagreements and decision making in the pursuit of their goals.
Which brings me to the next point: The tendency of Chinese executives to delay or avoid decision making has much to do with their deference to authority.
This is a cultural trait as Chinese as apple pie is American. Throughout China’s long and eventful history, centralized control has been the underlying theme permeating all levels of life, from state to family. The Emperor was the undisputed head of the state. The patriarch was and still is the undisputed head of the family. Questioning their authority is tantamount to treason.
It may already be the late 90s but the scene hasn’t changed significantly. Accordingly, Chinese negotiators would more often choose to consult their superiors than make an independent decision. This tendency can be a source of great frustration to goal-oriented westerners who want to get the job done in as short a time as possible.
I have spoken briefly about Chinese collectivism versus western individualism and about Chinese deference to authority versus Western individual autonomy.
There is another aspect of Chinese culture which can baffle the neophyte franchisor from the West: the Chinese concept of “face”. In fact the concept is not so much uniquely Chinese as it is pan-asian. Since you will be coming face to face with it in your business dealing with Chinese business people, it makes sense to understand it well.
Chinese executives are more concerned about preserving an image of respectability in the eyes of their counterparts. For the Chinese, any overt defiance or confrontation in negotiation would be regarded as unnecessarily embarrassing and an explicit attack on the ’face’ or self esteem of either the other side or on themselves. Open conflict has to be avoided as far as possible.
When doing business in China always keep the “face” issue in the back of your mind. Sometimes it is not so much the proposals unattractiveness but the lack of consideration for the ‘face’ of the other party that causes a breakdown in negotiations or deal. Always remember that the Chinese want to appear respectable in the yes of the other. Doing anything that takes away his or her respectability will not be easily forgotten or forgiven. While many Westerners can take criticism in their stride, Chinese tend to take negative feedback more personally and as an assault on their self worth. Becoming familiar with the trappings of the alien ‘face’ concept is no easy task for the Westerner. But it is something that comes gradually with experience in dealing with the Chinese. Whenever in doubt, ‘err’ on the side of being accommodating and considerate.
The robust growth and performance of China’s economy have given the Chinese great confidence over the years and new hope. The future has never looked brighter for the Middle Kingdom. In spite of all the challenges, Western businesses can take heart from the rapid globalization of business norms. The globalization of business norms will pave the way for a universal standard of conducting business that minimizes the obstacles presented by cultural disparities. With globalization, the culture of negotiating parties becomes more marginal to the negotiation process.
Another ray of hope for western business people is China’s increasing receptiveness to the outside world.
China has embarked on a journey of no return and Chinas openness to western ideas will continue. The new generation of Chinese business leaders will present a different face to the world.
In conclusion, coming from a different culture does not automatically place you in a disadvantaged position with the Chinese. International negotiators from different parts of the world are becoming increasingly more informed and knowledgeable about the Chinese business culture. You can do the same. If you are mindful of the cultural pitfalls that lay in your path, temper your dealing with a good dose of patience, and do your part to bridge the gap, then you are already well on your way to having a rewarding and less frustrating business transaction with your Chinese partners.
Thank you.
This is a summary of a speech given to the Franchise Convention in Laguna Beach, California in the late 90s.
