Monday, May 12, 2008

Lost in Translation?

An article in the WSJ makes the case that without understanding culture and perspective ventures between Chinese firms and western counterparts risk failure. The gist of the article is bland enough that it's difficult not to disagree:

The problem is that each side comes to the partnership with very different cultural and economic perspectives. Americans tend to view a business relationship as a win/win proposition -- a contract between two corporate entities designed for their mutual benefit in long-term profitability and growth.

In China, personal relationships among business partners are far more important, and the benefits foreseen in entering a partnership often are broader and focused more on the near term -- and not necessarily evenly balanced.
Where I think they go wrong is in ascribing the near failure of a relationship whereby a buyer removes their local representative (after 5 years of good product) in the vendor's factory and 6 months later, they start getting quality issues and learn that the vendor has substituted more expensive and specified Japanese engines for domestically sourced engines for their motorcycles:
From the American perspective, this is where the relationship went bad -- when the Chinese began using inferior parts. From the Chinese perspective, however, the removal of the observer was where the problems started, because it signaled a major change in the relationship between the two companies. While the Americans had viewed this person simply as a quality-control monitor in an overseas factory, the Chinese looked upon him as the personal representative of the U.S. company within the Chinese operation. The disappearance of this person, with no explanation and no replacement, was seen as a breach in the relationship.
While I think there's some of that, I don't suppose the fact the supplier thought they could pick up the extra margin on the engines that might have been up to 30-50% cheaper sourced in China and the fact that without the "watchful eye" they thought they could get away with it, had anything to do it. The bottom-line is this: there's no substitute to having your eyes on the ground - trust but verify.

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