Guanxi in Jeopardy and the Concept of Guanxi in General - Essay Example

When countries decide to conduct business and partake in the growth and stability of another for economic reasons, the intruder has to understand the diverse culture that governs one's actions. Critics have widely maintained “that multinational corporations are agents of destruction”. Their entry into the realm of another is therefore treated with apprehension.

Joint venture agreements are major trends of globalization seeking market opportunities that go beyond their own national boundaries. Certain criteria should be studied and observed in the selection of a Joint Venture Partner specifically where diverse cultures are existent. Pritchard in his report specified “Asset Specificity” of a potential partner’s resources is distinguished according to its market availability and potential financial results. A potential partner’s technical skill and managerial flexibility can provide the ability and plans for risk management. The recent political and economic events should also be among the considerations a JV requires.

A multi-national company cannot allow disruptions to the negotiations that political upheavals could result in. A partner’s economic viability and past dealings with other companies should also be considered as a reference for acceptable behavior especially where legal contracts are concerned to sea; the agreements and negotiations. The elimination of risk merger strategies pointed out by Pritchard should also hold enough weight. Competitive relationships with others should also indicate a positive outlook toward business deals. Where ownership issues arise, joint venture partners are very wary; extensive formal requirements undergoing technological and legal assessments must be panned out to minimize the risk of conflicts.

Tom Sherman’s involvement in the Joint Venture Negotiations with China’s Motosuzhou has afforded him ample time and resources to study the cultural background of the Chinese entities his company will be dealing with. Specifically where language barriers threaten a thin layer of trust, graceful allowances for differing viewpoints brought about by societal norms should be treated well rather than exhibiting an aura of superiority. The provisions in Tom’s JV agreement carefully pointed out the allocation of equity ownership in their favor. That alone should cause concern for Motsuzhou whose own resources are at stake in their native land. Instead of being the aggressor on foreign soil, a shrewd negotiator would go in for the “final deal” first rather than be on the offensive.

To recall, Tom was ill-prepared for the job. His focus was on the technical and corporate aspects of the deal. A multinational corporation before sending out personnel to handle negotiations should assess the situation, study their counterparts and send negotiators adept at the cultural background of a proposed partner. However, since Tom and the company underestimated their opponent, he still has every chance of turning the tables in his favor by invoking the offer of the friendship of the other Chinese bigwigs who could speak and understand the American Language. In the first place, “the guanxi” theory believes in camaraderie and dynamic reciprocity. His best bet would be the likely individual who would listen to him in the person Wang Yao. His apologies should be sincere without regard for his own principle to rebuild the alliance. Only then can he be accepted back and earn the art of “guanxi” effectively. Read More