Three common business mistakes made in Asia (and how to avoid them)

" Everyone thinks China is a free economy now, it's not. It's a centrally planned economy."
Dr Mona Chung, China business expert and cross cultural consultant

One of the most frequently shared case studies is about Australian brewer Foster's first foray into China in the 90s. It went into China assuming it would make a fortune selling beer in such a large market. The trouble was the Chinese were not big beer drinkers then. In any case, many didn't like the Foster's taste and they rejected the colour blue on the Foster's logo.

To solve its initial issues the brewer hatched a novel marketing plan. To the Australian ear, it sounded good. Certain bottles would be carrying a stamp inside the cap. Anyone opening a bottle and finding a stamp would get a prize. Sounds simple, no?

Not so, said the Chinese marketers. That might work in Australia but what's to stop the people who own the shops opening the beers, keeping the caps with the stamps, recapping the bottles and then later collecting the prizes?

The Foster's people disagreed. No one would do that, they said. They were wrong.

From the comfort zone of Australia, they failed to see China was a very different market. It's one of several common mistakes Australian companies make when entering Asia. BlueNotes spoke to two experts about the biggest and how they can be avoided.

IGNORING HIERARCHY

Cynthia Dearin from Dearin & Associates says companies from some more western cultures such as Australia have difficulty adjusting to hierarchies in Asia as their workplaces tend to be more egalitarian.

“You look at a culture like Japan, it's very hierarchical and formal,'' she says. “Lots of titles are used. Australians tend to be more laid back."

Dearin says in Australia or New Zealand staff are largely treated more or less as equals, with rank and title there for convenience.

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“If you go to some other places, like Japan, China and or Thailand, you are looking at situations where hierarchy is a formal thing and if you greet the most junior person in the room first as opposed to the most senior person, you are going to cause a great deal of offence," she says.

“If you don't use someone's title or if you're too casual with them, that can cause problems."

CULTURAL MISMATCH

China business expert and cross cultural consultant Dr Mona Chung says there is a world of difference between Chinese and more western cultures.

“Everyone thinks China is a free economy now, it's not,'' she says. “It's a centrally planned economy."

One of the big differences, Chung says, is in the communication styles and culture. For example, Australian culture and communication is low context while China is the complete opposite.

“The difference between a high-context culture and a low-context culture is in the low-context culture, when we communicate, we try to communicate as precisely as we possibly can,'' she says. “We use words very carefully and select these words to give very precise meanings."

“The Chinese have a high context culture where they use lots of words to describe things in a very round about sort of way and in a very vague way."

That can lead to all sorts of problem and mistakes.

One of the most common mistakes is to assume a deal will be accepted when saying no is not part of the culture where the agreement is taking place.

“Culturally, it's very rude and very blunt to say no [in some places],'' Chung says. “When you come from a culture and language that's not vague, you are disadvantaged to start. The same word can mean different things."

She says there are other signs you are being told no without it actually being said. There might be a delay in responding, they might be unclear or vague or they might avoid answering questions.

“One can make it sound absolutely positive when you're giving someone a negative response,'' Chung says. “If you don't know the cultural context, you can be totally fooled by that."

In her book Dancing With The Dragon, Chung lists different meanings of the word: “Yes". There can be “Yes, I agree", as opposed to “Yes, I am here" or “Yes, I hear you" or “Yes, because I don't want to say no and I'll figure that out later on" and “Yes, I don't quite know what to make of it now".

“In other words, there's about a 20 per cent chance yes means they agree,'' Chung says. This is also true in other Asian countries, notably Japan.

To pick that up, businesses need someone who understands the culture, who can pick up what the word “Yes" means by the way it's said, the sound, the cadence and what is said later.

Having a translator is not good enough, she says. Companies also need an interpreter. The translator will translate everything word for word while the interpreter says what it really means.

“The difference between a translator and an interpreter is the interpreter will say to you they said yes but this is what it actually means. That is what I do with my clients,'' she says.

DEVELOPING RELATIONSHIPS

Many Asian businesses, particularly in China, are built on relationships. Chung says a lot of Australian businesses find this difficult.

“To start with the Chinese won't negotiate business with you because there isn't a relationship to start with," she says. “You should be prepared to go to China first three or four times and get to know them before you can do that."

“From a business management perspective, you can put the costs down there. We seem to think why am I wasting my money going to China four times a year?

“But once you have the relationship, then you can start doing business and once you start doing business, that relationship can last a very long time."

The other big mistake is focussing on the price and not the relationship.

“Everyone seems to think negotiating with the Chinese is always about price,' Chung says. “It's not. The Chinese would do business with people and lose money if they have to do something like keep the relationship and save face.

“The attitude is if we have a long-term relationship and I am doing business with you, I am losing money I have to carry it out."

As Dearin says, that's the challenge for Australian businesses.

“They want to have the relationship and if they decide they trust you and like you, then they will think about doing a business deal,'' Dearnin says. “It's much more trust based, that takes time and that's a problem because Western cultures tend to be more transactional."

“Sometimes you will need several meetings to get to the end result. You could be spending a year doing that.

“It might feel you are not getting anywhere but the flipside could be that it's very long term so it's a case of whether you take the long or the short view."

Leon Gettler is a veteran management journalist, Leon blogs at leongettler.com.