Free Essays

Risk taking propensity

Closely allied with time value differences, there are differences in attitudes towards risk. Cultures can be highly risk avoidant: slow to make decisions and apparently always in need of more information, dependent on rules and regulations, heavily bureaucratic and hierarchical. On the opposite side, cultures can be very low risk-avoidant: entrepreneurial, making quick decisions base don little information, tending to disregard or find way to work through or around hierarchy and bureaucracy. At the negotiating table, more conservative culture will probably have an intricate decision making process.

Certainly making individuals will be required to make decisions (Foster, 1995, p. 287). Risk is a key issue in China and plays a unique role: risky situations may be used to shame the other side. Risk avoidant behavior in the west can be taken as a form of casting guilt on the other side. This is one of the reasons why the most successful companies operating in China belong to Chinese residing overseas. Overseas Chinese excel in risk taking and they have the competitive advantage of having the ability of operating in its underdeveloped legal environment.

Risk is the very life blood of cutting edge business but managing that risk is even more important for building a successful enterprise. As one European businessman discovered at his own cost, keeping one step ahead of unforeseen legal pitfalls is a mammoth task in China, where things are never as they seem (Foster, 1995, p. 287). Concession making Concessions usually are the final stage of business negotiations between two parties in China. Negotiations require compromise, as the Chinese say “Finding the way”. Usually both sides give p something to get even more.

But the approach use for compromise differs between East and West. In this stage, the Chinese show a strong inclination to settle all suspending issues in a package deal. Unlike the West, in China things take lot of time to get settles i. e. it is not right to assume that half the issues would be sorted out by the time the deal is half done, as in the West. This is one of the major issues o negotiations between the East and the West. Western countries like US offer the concessions upfront and present them as advantages of the deal and then end up giving up much more at the final concessions related discussions.

It is hence considered to be extremely important to document the concession strategies right at the start when preparations for the business deals are going on and then sticking to the finalized concession schedule. Trading concessions with Chinese bargainers does not work as they view nothing be settled until everything is really settled. Hence, no concessions should be made until all issues and interests have been exposed and fully discussed. Then concession should be made on minor issues first, to help establish the relationship (Collins, Block, 2007, p. 109).

The Chinese expect their business counterparts to make significant concessions for the opportunity to work with them. They insist that they are willing to make concessions too. The statement is just a way for the Chinese to get to their counterpart’s side to further concessions not to favor them n any way. Hence, the route of concessions must be planned thoughtfully before entering into any discussions with the Chinese and then the corresponding terms can be negotiated. Hence, it is advised that concessions should not be decision upon at the negotiating table.

Rather, the concession must be reconsidered from every angle away from the social pressure at the formal negotiations (Bucknall, 2002, p. 148-149). Chinese have a habit of roaming between different points of the agreements, going backward and forwards and may thus save their concessions up to the final stages, and business parties must be aware of this practice and make appropriate strategies. Chinese often expect a sweetener to be thrown into the deal near the conclusion of negotiation. The way business is conducted in China often involves suddenly speeding up things as the end draws close and the time of signing the contract draws near.

The final concession has to be big enough that it is not considered trivial but small enough to convince and opponent that there are no more concessions to be had (Lam, Graham, 2007, p. 188-189). Decision making A typical Chinese manager operates in a very hands-on style and is familiar with all aspect of business. He or she delegates far less than his or her western counterpart, spends less time in meetings, less time consulting and more time actually making decisions and implementing policy.

Some recent surveys have suggested that Chinese manager believe that traveling and meeting are the least important aspects of their jobs; they would rather spend more time doing desk work, assessing and evaluating information and making decisions. Decision making in Chinese organizations tends to be autocratic. Decisions are made by one individual, the owner/manager/director, and in private. The results of the decision are then announced, usually without explanation. It is assumed that the decisions has had sufficient consideration before it is made and to be understandable to these people under the influence of this decision.

However, there may have been extensive consultation first (Ambler, Witzel, 2007, p. 197-198). A typical Chinese manager listens to the workers and takes their opinions into account, up to a point. There may also have been lateral discussions with ministries, local officials, and the guanxiwang. Decision making in China can ve remarkably quick or remarkably slow. The quick ones are where experience provides the solution. Nevertheless, there is not much democracy about all this; the leader makes the decisions and the employees are expected to carry them out exactly.

Challenging a decision once it has been made is considered as a serious offence; it causes the superior to lose face. At this stage, the workers are expected to keep their views to themselves (Ambler, Witzel, 2007, p. 198). The decision making styles in china can be divided into two methods: Decision maker is pushed by a higher authority to make a decision. This type of decision making takes place in organizations that are state owned and collective within a hierarchical system where higher authority is mandated.

Such organizations serve to facilitate decisions from a higher authority. The process of the decision making in this form is illustrated in the figure below: Fig – 1 Structure of an organization mandated by higher authority(Huang, Leonard, Tong, 1997, p. 76) A decision is made without basing it on a decision from a higher authority. While the process defined earlier is the usual form of decision making in China, some independent companies do make decisions without basing it on a higher authority. The process of the decision making in this form is illustrated in the figure below: