Labor and Human Rights Across Borders has quite a detailed page about Labor and Human Rights, which goes into detail about being a member of the Fair Labor Association, ending indentured migrant labor, preventing underage labor, addressing excessive work hours, prohibiting discriminatory policies, and sourcing conflict-free materials. Despite saying they ‘prohibit practices that threaten the rights of workers, even when local laws and customs permit such practices,’ they have recently admitted that some of their suppliers continue to overwork and underpay their employees.

Foxconn, located in Taiwan, Apple’s most well known supplier who assembles most of their iPads, had numerous incidents of suicide in 2010, as well as the mass suicide threat in protest of working conditions that took place a few weeks ago. Imagine seeing a factory that has installed safety nets to prevent suicides from taking place, and think about what must truly going on behind those walls.

In an audit conducted at 229 factories, 93 were found to have workers working more than Apple’s 60-hour, six day limit, and 42 factories had been delaying paying wages and did not pay overtime. Worst of all, 5 of the factories were found to be employing underage children.

Put yourself in the Chinese workers shoes. Imagine you are working far away from your family for eleven months out of the year, and to top that off you are being forced to work 60+ hour weeks without earning overtime, you are exposed dangerous working conditions leading to blistered hands, breathing dust, and often times you haven’t received adequate training.

How does that make you feel about buying Apple products? Will you keep buying them despite the fact that Apple can’t seem to control what is going on at its supplier’s factories?

Please note the statistics in this video are from audits conducted for 2010.

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Photo Credit – 150 Chinese workers at Foxconn, threatened to commit suicide by leaping from their factory roof in protest at their working conditions

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To-Do List Before Doing Business in China

I have emphasized the importance of relationships and trust building when doing business in China, and I will continue to do so. In addition to building a relationship with your Chinese manufacturer, there are more than a few cultural intricacies you need to master before attempting to do business there. The Chinese understand the potential of partnering with American companies, but because of cultural reasons they will always prefer to do business with people they trust and have already built long-term relationships with.

There are 7 basic ‘to-do’s’ you should know and learn before doing business in China:

  • Begin by forming relationships
  • Learn the Chinese business etiquette
  • Be conscientious of your communication style
  • Know the difference between gifts and bribes
  • Learn how to negotiate
  • Be prepared for lawsuits
  • Learn to adapt and be flexible

I have already discussed the importance of forming relationships and learning the differences between Chinese and American negotiation tactics, but for the other 5 to-do’s I can offer a few tips of advice..

  • Business etiquette – Everything starts with your introduction, and be sure to give your business card with two hands to whoever you are meeting with. The business card should include your name and the name of your company in English and in Chinese characters.
  • Communication style – Be conscientious of your gestures; a gesture that may seem insignificant to you could be highly offensive to someone else. Also remember ‘Mianzi’ or ‘saving face,’ as this will affect how the Chinese communicate yes, no, or maybe so!
  • Gifts vs. bribes – Gifts are small items such as pens, t-shirts, candy, or a touristy gift from your home country. An example of a bribe is a someone asking you to help get their child into a foreign university in return for helping to avoid paying city fees.
  • Lawsuits – Lawsuits will commonly arise from Intellectual Property Rights violations. If you have to enter into a lawsuit, chose a major city where the judicial system will hopefully be less corrupt.
  • Adapt and be flexible – The Chinese supplier market is forever changing so you need to learn to adapt and be flexible. Don’t fight the change, just learn when to go forward or cut back when necessary.

Remember these are only basic, superficial tips that I am providing to you. Do your research and be prepared for the unexpected because it’s unavoidable! Doing business in China can be highly beneficial and profitable and it will be a continual learning experience, but it will never be easy.

“No matter how much success you’re having, you can’t continue working together if you can’t communicate.” – Matt Cameron

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E-mail Etiquette Matters

As you all know, e-mail has become the main form of communication taking place in the business world. Unfortunately, there are some people who do not realize how annoying it is when ‘u abbrvt.’ Do u thk its annoying 2? If you come across someone who has yet to learn e-mail etiquette, send them this this link! E-mailing can be difficult for some, especially because e-mails can be very ambiguous and easily misunderstood. Take the time to research e-mail etiquette as it will make your job much easier and lead to less misunderstandings.

The best way to keep your e-mails professional, yet personal, is by following a few tips of e-mail etiquette that I am providing for you today:

  • Courteous greeting and closing – Hello, thank you, have a great weekend, best regards, etc.; leaving these out can make an e-mail seem harsh or cold even if that was not your original intention.
  • Spell the name correctly to whom you are addressing and use the correct level of formality when necessary – Using the correct level of formality is a sign of respect. It might not be necessary in the United States, and after e-mailing with your Chinese counterparts for  while it might not be necessary, but in the beginning it will help to build a trusting relationship.
  • Spell check – An e-mail with spelling mistakes is not taken seriously. However, there are exceptions when dealing with foreign companies because English might not be their first language and/or they might not speak English very well, so spelling errors are to be expected. In addition, spelling words correctly and using proper grammar is also important because some foreign companies use a translator built into their e-mail system, and incorrectly spelled words will be lost in translation.
  • Read your e-mails before sending them – This will help you ensure your e-mail has the tone you are intending. It is also nice to read through your e-mail and add in a few pleases and thank yous, as these will go a long way with the receiver. A final read through will also ensure you have included all necessary details and information. The more accurate and detailed the information, the less back and forth you will have to deal with.

Have a great week, and thanks for listening!

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Hofstede’s 5 Cultural Dimensions for China

Professor Geert Hofstede conducted one of the most significant studies on how culture influences workplace values. Hofstede’s most recent publications included 93 countries. He emphasizes and studies five dimensions of culture:

  • Power Distance (PDI) – Power distance is the extent to which less powerful people in an organization will accept and expect power to be distributed differently. China ranks 80 on PDI which is very high. This means there is a lot of power distance between subordinates and superiors, but that it is accepted and normal.
  • Individualism/Collectivism (IDV) – This is whether or not people think with the mentality of “I” or “We.” The American culture is very “I” focused, meaning that we focus more on furthering ourselves and careers versus furthering our department or group. On the other hand, China ranks 91 on IDV, meaning that they are highly collectivistic and think as a group versus individually. This can be seen with the high amount of in-groups and out-groups.
  • Masculinity/Femininity (MAS) – This is the first dimension where the Americans and the Chinese rank similarly. China ranks 66 for this dimension, meaning they are very driven by successful, competition, and achievements. The Chinese will often put work before family or leisurely activities. This dimension can be seen in the fact that Chinese workers will leave their families to go work at factories for 11 months out of the year, proving how important work truly is to them.
  • Uncertainty Avoidance (UAI) – This is the second dimension where Americans and Chinese rank similarly as well. China ranks 40, meaning they accept ambiguous situations and are not deterred by them. It may seem like China has a lot of rules and regulations in place to avoid ambiguous or uncertain situations, however they are willing to bend and changes the rules as situations require it. The Chinese language is also very ambiguous; the Chinese characters are hard to interpret or understand if it is not your native language.
  • Long-term/Short-term Orientation (LTO) – The Chinese rank extremely high on long term orientation at 118, meaning they focus on persistence and perseverance, and that they will dedicate however much time is required to achieve their goals. This is seen in the very time consuming Chinese negotiation process, the time required to build trust and long-term relationships, and their focus on long term results versus short term goals.

These cultural dimensions are deeply embedded in a country’s culture and are difficult to understand unless you are born and raised there. The Chinese culture needs to be studied and taken into consideration before entering any binding contracts. Not understanding these cultural dimensions can be damaging to any relationship you are trying to build with the Chinese.

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What about my Patent?!

It is a well-known issue that some Chinese companies do not acknowledge or respect intellectual property laws. In the United States there are four different types of Intellectual Property Laws:

Intellectual property laws are only valid within the United States, but worldwide there are Intellectual Property Rights.

Intellectual Property Rights (IPR’s) have been and will continue to be an issue for foreign companies operating with Chinese borders, despite the fact that China joined the World Trade Organization and upon joining, pledged to recognize, enforce, and respect all IPR’s. The Chinese government is working hard to enforce all IPR’s; however there are a high amount of black markets where pirated software and counterfeit goods are sold. Another type of intellectual property theft that has been on the rise in China is occurring when Chinese companies hire licensee employees working in China for American companies to expose and share an American company’s trade secrets. This can be very damaging to American products and needs to be watched out for.

Microsoft recently filed a lawsuit based on piracy against Shanghai Gome and Beijing Choayang Buynow. Microsoft discovered pre-installed versions of Microsoft Office and Microsoft Windows on computers sold in both stores. This will be the first time Microsoft is filing a lawsuit against retailers based on piracy, but it will not be the first time Microsoft has filed or won lawsuits against software pirates. When shopping in China, consumers also need to beware and watch out for counterfeit goods. There was a fake Apple store discovered in Kunming, did you buy an Apple product there? It might be a fake.

Intellectual property rights violations can affect your supply chain immensely because you may never know if a Chinese company you are working with respects IPR’s, and if they don’t respect other IPR’s, why would they respect yours? If a company in China is found to not be respecting IPR’s there is the risk they will be shut down, and your product will no longer be produced there. If this happens, you will have to conduct negotiations with a new Chinese manufacturer, and this can be very time consuming leading to lost revenue. Before going into business with a Chinese manufacturer you need to be sure that they respect all IPR’s.

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Negotiating into the Night

As discussed yesterday, Mianzi and Guanxi are essential skills to develop when doing business in China, especially when it comes to negotiating deals with your Chinese counterparts. In order to cultivate cooperation between your business and your Chinese partner, there has to be the development of a strong, trusting relationship. Americans tend to be more aggressive and emotionally explosive than the Chinese; this can be disastrous to the negotiation process because it can cause distrust or worse, for someone to lose face. The many years of wars and conflicts that have taken place between China and foreign countries have caused the Chinese to distrust foreigners, making the development of trusting relationships of utmost importance for the negotiation process.

When Americans enter into negotiations they tend to have quick meetings, to be informal and direct when communicating, make cold calls, and present all proposals up front. On the contrary, the Chinese have long meetings, communicate formally and indirectly, use intermediaries instead of cold calling, and they expect all explanations first before hearing proposals. It is obvious that American and Chinese negotiation processes are completely opposite; Americans negotiate as to establish the best deal and the Chinese negotiate to form a long-term relationship. Probably the most difficult obstacle for Americans to overcome during the American-Chinese negotiation process is patience. Remember that patience is a virtue – the Chinese will wait and wait while the Americans grow tired and wary ultimately leading to the Chinese achieving more of what they want and the Americans get the bottom end of the deal.

When supply chain and logistics managers are looking to do business in China, they really have to recognize the importance of understanding the Chinese negotiation methods. A negotiation is meant to end in a long-term business relationship, and that will take time. The best way to get what you need and want is to understand the negotiations will take more time, patience, understanding, and tolerance than you are usually accustomed to. Be thoroughly prepared with all the details and numbers pertaining to the negotiation, otherwise your lack of preparation may be used against you. At the end of the day, make sure that you are 100% confident with the contract because upon revisiting it once, it opens the floor to revise and renegotiate all aspects of the contract.

Finally, be prepared to continue negotiations after hours. Americans are used to leaving the office at 5 PM and continuing official business the next day, however, the Chinese like to take the final decisions to the dinner table and then onto karaoke!

(FYKI – it would probably be in your best interest to keep your pants on)

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Guanxi and Mianzi – Building Relationships and Saving Face

Guanxi and Mianzi are two social concepts deeply ingrained in the Chinese culture that must first be understood and put to practice before attempting to do business in China. Failure to respect and utilize these two important concepts can cause business and personal relationships to fall apart and negotiations to go sour. To the Chinese, these cultural aspects are considered part of business etiquette and are essential for international business relationships to flourish.

Guanxi is best defined as the formation of relationships or the act of social networking. In the business sense, Guanxi is how you can form social connections as to give you and your company a competitive advantage. Guanxi helps to form trusting relationships which can immediately benefit your business because when you need a favor it will work to your advantage, but be cautious because it can also be dangerous. Bill Dodson did a great job at describing Guanxi as “you scratch my back, I scratch yours,” but he also noted to beware that once offered the ‘back scratch’ do not question the quality or validity of the favor because your Chinese connection will take offense and might never offer a favor or recommendation again. Also important to keep in mind is that someone who offers you a favor may ask for a favor back at the most unexpected of times. Knowing that Guanxi is closely linked to the concept of Mianzi will help you navigate the difficult business channels of China as long as they are used properly.

The concept of Mianzi, also known as ‘saving face,’ often leads to misunderstandings between American and Chinese businesses. Mianzi is how one saves reputation and builds credibility. It is a strategy that Chinese people use to respect and preserve relationships. Saving face is top priority in the Chinese culture, meaning that the Chinese will often say ‘yes’ even if they mean ‘no.’ For buyers doing business in China this can cause complications (and here are those hidden costs again!) because a Chinese manufacturer may say ‘yes’ when asked if they understand all the requirements stated by their American partner, when they actually mean ‘no.’ If a Chinese supplier does not understand the product specifications and requirements, they may try to figure out and invent their own, leading to dysfunctional or poorly made products.

How are we Americans supposed to know when a Chinese person is really saying yes, no, or maybe? My answer is by experience! Learn to read between the lines, pay close attention to the small details, and always double check and question if something seems off.

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