A former China market entry strategist answers questions about the cultural issues of American-Chinese business relations and discusses how American companies should manage these differences.
When Den Leventhal found himself singing a near-and-dear Hebrew song at a karaoke bar, and his Chinese business partners started clapping and stomping along, he knew he was on to something. Once he showed his appreciation for the culture he was immersed in, the former Liberty Mutual Insurance Group China market entry strategist was encouraged to share something from his culture—and it was this sharing that he found to be the key to success in China.
In his new book “How to Leap a Great Wall in China: The China Adventures of a Cross-Cultural Trouble-Shooter,” Leventhal explores his 30-year career as a market entry strategist in China. As a pioneer in the newly-opened economy that nearly 40 years later is the world’s second largest, Leventhal helped lead the way for foreign firms like American Cyanamid Company and certification and testing company SGS in joint ventures, government affairs, institutional mapping, and perhaps most importantly, relationship building.
A major theme in Leventhal’s memoir is the difference between business culture in the United States and in China. China Business Review asked Leventhal how he overcame those differences, and how US companies today can copy his success.
You highlight how spending time developing a rapport and relationship with potential Chinese business partners is more important than hashing out the merits and logistics of a deal. For Westerners used to hard and fast business deals, how would you suggest they establish both?
Leventhal: A concrete example is [the Chinese] approach to a contract. [They] will have a very short contract that is more a letter of intent… that allows [the parties] to renegotiate everything infinitely, whereas the Westerner wants to have everything nailed down and clear. The Chinese think: we’re going to get married, we haven’t even kissed yet, and all you’re doing is talking about the divorce!
When I worked at SGS, I was tasked with negotiating a contract with state-owned enterprise China Standards Technology Development Corporation. I needed to add a service mark protection clause because China had not yet promulgated a service mark protection law. It was vital for SGS, but made my counterpart nervous because of a lack of familiarity. To avoid generating distrust, we re-wrote the clause, substituting the Chinese party’s name for my company’s name, and spent several days explaining why it needed such protection. Once they understood and accepted it, they had no difficulty with the SGS putting an identical protection for itself. They like this equity idea. They don’t want to feel like the foreigner is getting one up on them.
You liken conflict resolution in China—when it does occur—as being handled through conciliation, mediation, and diplomatic guidance a la Confucius. In the US, on the other hand, confrontation, challenge, and debate are key tools. How are these very different approaches reconciled?
Leventhal: That’s a fundamental style difference. When you’re going into a different culture, you should learn as much as you can and accommodate as much as you can without compromising your objectives or your agenda. Try to do it in their way, because that’s how you come to an understanding of them. Over time, after you’ve developed the relationship, they’ll begin to absorb the Western style where they’re not afraid to sit down at a table and argue very loudly, bang the table, and walk away and still have a couple of beers together. [If] you’ve made the effort to educate yourself… they’ll become educated as to what you’re like as well. It’s a mutual process.
In the US, the speed of the “bottom-line mentality” deal is most important, while in China, it’s most important to cultivate a comfortable business relationship first. For representatives from US companies operating in China, who must please their both headquarters and their Chinese counterparts, how can they best handle these two conflicting ideologies?
Leventhal: The people that are making the decisions from the home office need to be educated. I remember when an attempt to develop a joint venture to produce surgical supplies in China was torpedoed by an impatient senior executive in my home office. It proved impossible to explain the failure of this initiative to my home office. They just didn’t understand the cultural minefield.
You need to understand that a three-month mentality is not going to work in China. If you have a long-range view and do all this cultivation and study and research, [plus] institutional mapping and putting people on the ground, [the deal will] actually [happen] a lot faster than you may have expected. But a three-month mentality—forget it.
How can headquarters prepare its employees before they are sent to China to develop a business relationship or make a deal?
Leventhal: I think the greatest weakness in the whole system lies in the home office because [it often doesn’t] prepare its executives sufficiently to deal with the culture. Almost everything involved with marketing in a foreign country involves a deep understanding of the culture. The key point in my book is the value of inter-cultural competence.
If you’re going to have a person go overseas, take a look at the person: are they the type of person that would be open to learning another culture? If you think they have that kind of character, give them some support—and three months of intensive training in the language and culture.
For me, executive coaching for colleagues visiting China was an ongoing, mostly informal process. For senior executives, I would also provide a “trip book” that told them who they were going to meet, what their responsibilities and interests were, and where we had—relatively—common interests. I also always included some cultural tips that would prove useful in formal meetings.
You stress the importance of reading the political environment correctly. Under a one-party system, supporting policies that match your business objectives is a good way to establish what your company stands for and use that to secure business deals through political connections. Can you explain exactly how this works?
Leventhal: When Liberty Mutual wanted a business license to operate in China, at that time, the insurance authorities were only giving out two licenses per year to foreign insurance companies. Liberty Mutual was 89thon the list, which would mean in over 40 years they’d get one. So we had to come up with an idea to jump the queue.
Everyone was already in Shanghai. Where could we go where nobody has thought of it yet, but it’s most likely to be the next [city] to open up [in this market]? The State Council was trying to get investment in Chongqing as a gateway to the west… so we targeted it.
Your understanding of the cultural, economic, and historical differences between distinct Chinese regions—and their relationships with each other—served you well in your business relationships in China. What advice would you give foreigners seeking to gain the same understanding?
Leventhal: It’s a matter of due diligence. Ever hear of bei ma nan chuan? In the North, [go by] horse, in the South, [go by] boat. That’s how you understand communications throughout Chinese history. The horse has to be substituted for a truck or a train now, but in the North you don’t have the waterways while in the South, you do. It’s a matter of studying and paying attention. Learn something about the economics… learn the geography. The culture—that’ll come along as you get [to know] the people.
You describe the role of the middleman in the US as disposable once the parties develop their own independent relationship. However, in China, you say the middleman enjoys a secure role because of China’s need for social harmony, it’s preference for superficiality over conflict, and it’s sensitivity to non-confrontation. Given these inclinations, if a problematic conflict demanding resolution does arise between Chinese and US business partners, how is it handled?
Leventhal: [The middleman] role is more secure in [the Chinese] cultural framework than in Western countries. The [Chinese cultural framework] provides the guanxi necessary for accessing otherwise inaccessible contacts. Preserving the veneer of social harmony is intrinsic to the Chinese culture. Once in China, an ad hoc middleman facilitated my access to Chinese hospitals in several major cities in the face of bureaucratic obstacles for the purpose of carrying out a commercial survey. His guanxi connections removed the bureaucratic obstacles.
Let’s discuss the pitfalls of mingling business with social events in China. You discuss the Chinese cultural imperative that no one leave hungry, the dangers of ganbei—meaning “empty glass”—and delivering speeches that are formal and sans jokes. What advice would you give to the modern-day banqueter in China?
Leventhal: Taste everything, finish nothing. You don’t have to clear your plate. Whoever is bilingual automatically becomes the communication facilitator at the table, especially at these super formal situations. I’d like to refer to a story in my book :
After a brief discussion with our regional director, our big chief from the home office decided that I would interpret his remarks on this occasion rather than relying on the PRC translator whom our host would provide. Upon his arrival in Hong Kong, he then asked me if I had any suggestions about what he might say. I opined only that it might not be suitable to follow the Western tradition of starting off a formal presentation with a joke. I pointed out that jokes are culturally imbedded and therefore do not translate well in a different cultural framework. An American joke would make it very difficult for me to carry out my role in transmitting his initial remarks in Mandarin Chinese. Speeches in Chinese culture generally start out quite formally with detailed acknowledgment of those in the audience and of the honor to be addressing them.
Naturally, our vice chairman from the home office commenced his speech with a joke. I think it started with a couple of cowboys rolling into a Texas bar after a difficult trail ride…
I did the only thing that could get us quickly past this opening complexity. I said the following, in Mandarin: “Honored guests, my company leader has just told a joke, a common practice when making a speech in American business circles. But, as you know, it would take me at least twenty minutes to elucidate the cultural background that would explain why Americans would find this joke funny. So, if you would be kind enough to help me keep my job, would you all kindly laugh when I finish speaking.”
I stopped; they laughed…uproariously.
Later, my leader complimented me on translating his joke so well, and with so few words. He actually told me, “I knew you could handle it.”
I just smiled and said, “Thank you.”
Excerpted from and based on How to Leap a Great Wall in China: The China Adventures of a Cross-Cultural Trouble-Shooter by Den Leventhal. Copyright © 2014 by Den Leventhal. Excerpted by permission of MerwinAsia. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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About the Author
Den Leventhal is the author of “How to Leap a Great Wall in China: The China Adventures of a Cross-Cultural Trouble-Shooter” (MerwinAsia, 2014), nominated for the 2015 Hagley Prize for Business History. He is a former merchant mariner; former China market-entry strategist for American Cyanamid Company, SGS, and others; and a Volunteer Reserve Officer for Maryland’s National Resources Police and local school volunteer. [/box]
(Photos by Jack Shaum and MerwinAsia)
