Question

Your firm designs, manufactures, and markets children’s toys for sale in the U.S. Almost 90% of your production is done in China. During the 1990s, U.S. relations with China improved. Even though there were many disagreements between the two countries, the United States granted normal trade status to China and supported China’s membership in the WTO in 2001. Your firm invested heavily in China during that time. You have developed close ties to Chinese suppliers and have come to depend greatly on inexpensive Chinese labor and the lower costs of doing business there. You are now concerned about increasing political tension between China and the United States over a variety of issues: China’s s treatment of the Tibetan people, reports about the use of prison labor to manufacture goods for export, China’s population policies, and differences over relations with communist North Korea. The United States has also accused China of corporate and industrial espionage in the United States to obtain scientific, industrial, and trade secrets, and of hacking into corporate and government computer networks. There are also disagreements over China’s censorship of Internet search providers, and over the protection of U.S. intellectual property rights in China. The United States is also concerned with China’s tax policies, which are said to discriminate against imported goods, and also with China’s state subsidies to domestic industry. The U.S. accuses China of currency manipulations of the yuan, making Chinese goods unfairly cheap in foreign markets and imports into China artificially expensive. Most worrisome is the potential for conflict over Taiwan, with which the United States has had a mutual defense pact for 60 years. China claims Taiwan under its “One China” reunification policy, while accusing the United States of fostering “independence” there. Despite the issues, both countries recognize their deep economic reliance on each other. With that background, consider the following:

Although both mainland China and Taiwan are “Chinese,” doing business in Taiwan differs greatly from doing business in China. Investigate and describe that difference. How do business opportunities differ on the mainland versus the island?

Answer 1

As companies continue to expand their operations across borders and with the increasing accessibility of international markets, there are sufficient opportunities to work globally. However, an accepted and practiced business style in one country can greatly differ to that of another country primarily due to differences in their cultures. In order to expand in a foreign land these cultural and business aspects need to be understood in order to create a sustainable business opportunity.

Both China and Taiwan have familiar traditions of harmony, respect and gaunxi (the process of social networks and influential relationships facilitating businesses). Respect of elders is important in both cultures and businesses also follow this trend largely. On the outset negotiating a business proposition in Mainland China or Taiwan might appear similar but its only when one deep dives into their culture, social norms and other business aspects that they will understand the differences.

Basic difference between both countries as far as business opportunities are concerned are:

1. While Taiwanese focus on long-term contracts, larger volumes and structured business transaction sbased on their own technological advantage, Chinese are interested in extracting technological and business skills from foreign counterparts in name of partnerships and then later terminating the contract when their motive is fulfilled.
2. Historically in Taiwan, one would see a strict adherence to international business legal structures and conventions and Taiwenese make money while staying in the ambit of these rules. On the contrary, China obeys these legalities when in suits them and discards it when it becomes a hindrance.
3. The onset of global players in China is seen more as an intrusion than an opportunity. They are forever suspicious that these global players will cut into their business opportunity and hence deal with them accordingly. However, Taiwan is more welcoming in this regard.

While considering business opportunities in both countries below are some aspects that need to be considered:

Mainland China

1. Often global sides do not see a shift in power balance. When they start negotiating they seem in control of their offerings but at a later stage they feel hard done by their Chinese counterparts.
2. Deals should be structured in such a way that capital transfer and knowledge transfer accentuates your position rather than undermines it. Chinese are masters at finding loopholes and using them to their advantage.
3. It is of paramount importance for the Chinese to deal with only the heads of business organisations while proposing a business opportunity. So, physical presence of business heads is a must to get started.
4. They are absolute masters of bargains and often end up getting more than what you were willing to offer.

Taiwan

1. When negotiating the Taiwanese are used to consulting experts and do through research and groundwork on their part.
2. Though they are quite adaptable in their approach initially, they often hold their ground and are very particular about their business deals during later stages.
3. Personal interaction with business heads is an equal requirement in Taiwan just like China.
4. They look for long term and sustainable partnerships with their foreign counterparts and make sure its a positive experience for either side.

Hence, we can say that though there are similarities between the two countries there are many aspects which foreign global players must take care of while venturing into businesses in these countries. Their difference is business style is substantial to warrant a different appraoch in both countries.