Influence of culture in the negotiation between Ericson (Swedish company) and China telecommunication (Chinese company)

Author: Iloka Benneth Chiemelie

Published: 15/12/2013

1. Introduction

David and John (2005) presented an analysis of the negotiation between Ericson (Swedish company) and China telecommunication (Chinese company). Considering the huge Chinese market and the current economic transformation of China, investing in the market is always an option for MNEs and this paper seeks to understand things that Ericson did in the right way and those that they did in the wrong way during the negotiation with view on cultural differences. The empirical data in the research was gathered by interviewing Mr Stefan Montan, the Sales Manager of China Mobil (David and John, 2005). Mr Montan has 5 years experiences in his position within the Chinese market and has in the course of his experience negotiated deals with numerous telecommunication companies internationalizing into China such as IP-solution, GSM system, and broadband-solutions (David and John, 2005).

2. Cultural perspective

The focus of this analysis will be only on the cultural aspect as to how differences in culture influence the business negotiation process.

2.1 What Ericson did right

2.1.1 Status – the seating position in China during negotiation is the Manager seated in the middle and other alongside him/her in their order of hierarchy to showcase who is in charge. This is exactly the way the Ericson’s negotiation team where seated (David and John, 2005).

2.1.2 Face – saving face is very important to the Chinese as the loose of face clearly means that the person is not doing the right thing. Responding a direct “no” can lead to a high level of face lose in the negotiation process due to the presence of numerous people and this can influence the Guanxi (friendship) through the negotiation. Ericson did the right thing by ensuring that this issue did not occur as it undertook a friendly negotiation (David and John).

2.1.3 Trust and friendship – the understanding in this case is that China is high on long-term orientation and businesses are conducted more towards friendly grounds. Even when two companies have high trust between each other, the managers still need to know each other better in order for the business to effectively go through. Prior to the negotiation, Ericson has worked with the Chinese customers for over 10 years and this paved the right way for negotiation due to the high level of trust the market has for the brand (David and John, 2005).

2.1.4 Guanxi networks and the intermediary – in Sweden employees are recruited in most cases, but in China employees are selected. Guanxi network is the explanation of how Chinese companies prefer staffs that have acquaintances with the current workforce as it would easily create trust and make the organization look more like a home where mutual respect and understanding prevails. This is the case of the negotiation process as Ericson concurred with the idea of adopting a workforce rich in Chinese values (David and John, 2005).

2.2 What Ericson got wrong

2.2.1 Status – China is a higher power distance country unlike Sweden and the negotiator always need to seek approval of the manager before making any decision. During the negotiation, Ericson’s negotiator was a marketing manager and he made all decisions without seeking approval (David and John) and it must have looked somehow awkward to his Chinese counterpart.

2.2.2 Ambiguity – the case of ambiguity arose in the negotiation because in the Chinese negotiation process, when a Chinese says “Yes,” it doesn’t necessary mean “Yes” as it can be used to describe phrases like: “it seems to be a great idea” or “let’s see what we can do.” Additionally, Chinese don’t use the word “no” in negotiation due to the face issue discussed earlier. However, the Ericson’s representatives translated “yes” as always concurring to the idea which raised issue of clarification later on (David and John, 2005).

2.2.3 Holistic thinking – the Chinese prefer to discuss issues individually in order to negotiate lower price on every new deal, but this is not how the Ericson team approached it as they preferred to discuss issue in a group in order to arrive at a packaged deal (David and John, 2005).

2.2.4 Patience – the Chinese always like to take extra time to view things from different angles before making final decisions and they can also be quick with decision and expecting their counterpart to agree on everything on the bases of trust. However, Ericson did not concur with such as the company complained on the high time taken to address minor issue and required more time to analyse terms of the negotiation before signing anything (David and John, 2005) due to the high level of Swedish uncertainty avoidance.

3. Conclusion

The Hofstede’s model presented an analysis of cultural differences in the form of individualism-vs-communism, masculinity-vs-femininity, power distance, long-term orientation, and uncertainty avoidance. The above analysis shows that these differences in culture influence the negotiation process between Ericson and Chinese communication company as they were cases where issues rough decisions was present in the negotiation process.

4. References

David, M. and John, A. (2005), “Negotiation with the Chinese: The Swedish Perspective.” Available at: http://epubl.ltu.se/1404-5508/2005/005/LTU-SHU-EX-05005-SE.pdf [Accessed on: 26/10/2013]