IPSCMI Monthly Newsletter 2012-1, January 15, 2012
Doing Business With Chinese and Japanese
By Dr. LeRoy H. Graw, CPSM, CPP, CPPM, C.P.M., CPCM, CISCM, CIPTC
Introduction
My daughter asked me recently what the difference is between the Japanese and Chinese. More specifically, she asked me if there is a difference between the Japanese and Chinese business methodology? In last month’s newsletter we focused on negotiating with Japanese. We also have a very detailed lesson in our “Negotiating With Foreigners” Portfolio that covers “Negotiating With Japanese”. That same portfolio also includes a separate lesson on “Negotiating With Chinese”. These, and several other “Negotiation” lessons, are available at www.ipscmi.org.
But the question posed by my daughter remains. What can I tell you about my experience doing business with both Japanese and Chinese? Are they really different? If so, in what ways? I shall attempt to answer those questions in this newsletter.
How Japanese and Chinese Are Similar
It should not surprise anyone that Japanese Culture is primarily derived from Chinese Culture. Buddhism, for example, migrated from India to China and thence to Japan. One would expect Japanese Buddhism to bear the imprint of original Indian Buddhism with a “Chinese Flavor”. We also see in both China and Japan a long history of autocracy and masculine dominance. We can also observe a strong caste system operating in both societies, which have persisted until very recently in both countries. There are minor differences between those two caste systems, but none that warrant special consideration on our part.
I found Japanese and Chinese similar with respect to their work ethic. Both Chinese and Japanese are hard workers. Their students study long and hard, a behavior which tends to carry into adulthood. Both Chinese and Japanese societies are highly competitive, and there is a belief that only hard work can differentiate a person from others competing against them.
How Japanese and Chinese Are Different
On a personal level, I found Chinese to be less “inscrutable” than Japanese. It takes longer to develop a personal relationship with Japanese than with Chinese. In addition, I always felt like Japanese were “condescending” with me, whereas Chinese tended to deal with me on an equal level.
With respect to gender equality, I found Japanese to be much more “macho”, consistent with Geert Hofstede’s research findings that Japan is one of the world’s most “Masculine” societies. Although Hofstede gives China a high rating for “Masculinity”, I found women in China have greater equality with men than I perceived in Japan. Part of my support for this is the fact that many businesses in China are owned and managed by women, a situation that is not duplicated in Japan to a major degree.
I also found Japanese and Chinese cuisine to be quite deliciously dissimilar. As an island and seafaring society, Japanese love their fish and seaweed and rice. As predominantly a continental-based society, Chinese love their chicken, pork, and wheat noodles (in the north) as well as their rice (in the south). Recent research suggests the Japanese diet is healthier than the Chinese diet. Because I have developed a taste for both sushi and dim sum, I tend to favor either Japanese or Chinese food in preference to American food.
I also found Chinese to be more “public sector” oriented than Japanese. Chinese tend to think in terms of public sector solutions to societal problems. A Government job in China is highly sought after and is the first preference of most University graduates. I never gained that impression from my associations with Japanese, who are much more “private sector focused” than Chinese.
Some people believe “The Spirit of the Samurai” still exists in the heart of Japanese businessmen. I subscribe to that opinion to a degree. In China there is no such “Military Service” ethos like that found in the Samurai Code. My overall impression is that Japanese tend to be more disciplined than Chinese, a behavior consistent with the highly disciplined Samurai system.
In the business arena, the Japanese with whom I have negotiated tended to be very tough and dogmatic. Part of the reason for that is the nature of those negotiations, which tended to be sole source. Conversely, I never perceived severe dogmatism or inflexibility on the part of Chinese. I do perceive that Japanese are more sophisticated in their market research and cost analysis than Chinese negotiators. I always felt like the Japanese knew the cost of the products and services they were selling. Conversely, I always felt like the Chinese were “winging it” and relying more on “discounts” than a “bottom up” approach to pricing. A possible reason for this is that Chinese businessmen rarely study accounting and finance, which makes them ill-equipped to know the “real cost” of what they are selling.
Chinese also tend to rely on “Guanxi” (liberally translated as “relationships”) in their business dealings much more than the Japanese. When problems arise in contract performance, Chinese will try to “work around” the contract and ask for “extra-contractual” consideration while the Japanese will generally try to follow the contract. Where I did observe Japanese attempts to “work around” the contract, they tended to modify the contract by increases in work scope with decreases in work scope in another area of the overall contract work. They tried to keep the “ups” and “downs” as closely as possible to a “one for one tradeoff” so neither party ended up with an advantage.
I gained the impression that Japanese have a greater knowledge of law in general and the law of contracts in specific than the vast majority of Chinese. In my purchasing, contracts, and supply chain classes in China, I have found that virtually no Chinese professionals working in those professions manifest any real knowledge of laws relating to contracts. I would rate Chinese a 2 on the scale of 10 and Japanese 8 on a scale of 10 with respect to knowledge, skill, and ability relating to contract law. One of my Chinese colleagues remarked that Chinese lawyers sell their ability to build relationships (Guanxi) rather than their ability to practice law.
An important aspect of contract performance is QUALITY. As I have previously observed and commented upon, Chinese are challenged by their inability to focus on quality of goods and services produced. I have even commented that Chinese culture and its extreme concern for “face” makes it difficult for them to assure quality. This cultural propensity is exacerbated by the fact most Chinese manufacturers are pressured to reduce profit margins in their exports. You cannot have the lowest profit margins and keep quality levels high. One of them has to “give”, and that “give” is typically quality. Conversely, Japan in recent years has been noted for the high quality of its automobiles, electronics and other exported products. Most Western consumers are accustomed to paying the premium for Japanese products that this quality demands. I do not believe this is true for Chinese products.
Summary
Despite a common cultural background, Japan and China have not been “the greatest of friends” with each other during the last 1000 years. This mutual antipathy has enabled them to proceed on their own separate paths of societal development. Chinese and Japanese might look similar (to the unsophisticated observer), but their business behavior tends to be more dissimilar than similar. Doing business with Japanese is disciplined and predictable. Doing business with Chinese is more “fun” and “interesting” and less predictable. I tend to experience both anger and happiness in a typical negotiation with Chinese while negotiations with Japanese tend to promote neither highs nor lows in emotion.
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Subscribers to this newsletter may be particularly interested in IPSCMI’s Negotiation portfolio of lessons including the following:
“Negotiating With Americans”
“Negotiating With Chinese”
“Negotiating With Japanese”
“Negotiating With Germans:
“Negotiating With Arabs”
“Negotiating With Mexicans”
“Negotiating With Brazilians”
“Negotiating With Indians”
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