Bridging the culture gap with Asia
A better understanding of culture can help Australia’s entry into the Asian market. But how can we find better ways to train managers to build insights and cultural knowledge?
As the world’s axis shifts from West to East, the race is on to build trade links with Asia. With over a million potential consumers, China is the jewel in the Asian crown and has had multinationals queuing at its door.
Yet cracking the Chinese market is proving more difficult than it might appear. Even some of the world’s biggest companies have had to admit defeat, with failure to understand the culture often cited as the cause. For Australians, this invisible barrier between us and our nearest neighbours continues to threaten our role in the Asian century. Although the government white paper in 2012 warned of the need to ‘become more Asia literate’, little seems to have changed – or has it?
Associate Professor Yunxia Zhu, an expert in cross-cultural management at UQ Business School, believes a better understanding of culture can help Australia’s entry into the Chinese market. She is pioneering a new approach to help businesses build ‘cultural fluency’.
“China is Australia’s largest trade partner,” says Dr Zhu, “and new free trade agreements recently signed with Japan, Korea and China will drive the need to focus on market strategy with Asia. In addition, Australia’s recent transition to services industries is likely to offer new opportunities for collaboration. It is imperative to increase Australia’s understanding of Chinese culture and perspectives as the ability to create good relationships with Chinese business partners will provide a powerful competitive advantage for Australian companies.”
Foster’s is one company that beat a retreat from China. The beer maker’s departure in 2006, two years after that of Lion Nathan, has been blamed on its failure to understand everything from supplier relationships to consumer preferences and consumption patterns. Similarly, both Rio and BHP Billion learned their cultural lesson in their hardball negotiations over the iron ore price with China when they paid inadequate attention to ‘face’- an important concept in relationship building in China.
According to a study in 2013 by Australia-China Business Week, 48 per cent of foreign companies entering China fail within two years. They include US toymaker Mattel, which spent US$30m setting up its flagship Barbie store in Shanghai before recognising that the brand was not sufficiently established and failed to appeal to a Chinese audience.
Dr Zhu emphasises that the Australian business culture is very different to China, which combines both market economy and state ownership.
One of the most important things in any market is to build trust – but particularly so in Asia where the old Confucian values reign, where business is more personal and based on the longer-term connections or ‘guanxi’. She says managers need to be patient, learn how things are done and - since the process of securing a contract is not as straightforward as back home - to remain positive throughout the ongoing ‘ping pong’ of negotiations.
“Building trust is not done in the same way around world,” adds Dr Zhu. “In China you can’t just fly in for a few days and fly out. However when you make friends in Asian countries they tend to be long-term friends. Foreign managers need to learn how to build networks and build relationships with people, and to build cultural fluency.”
Unfortunately years of research suggests that traditional approaches to cultural training are of limited use in real life, perhaps because trying to explain differences in terms of dimensions – for example, describing Asian cultures as collectivist and Westerners as individualistic – fails to take account of the complexities.
Dr Zhu’s approach - Situated Cultural Learning (SiCuLA) – encourages people to build insights of their own through experiential learning, by observing and reflecting on everyday practices, learning to interpret situations and question their own assumptions. The focus is on learning by doing, by taking part in real life activities such as working with other students, watching videos, or spending time in the workplace.
A useful tip is to use ‘cultural bridges’ - people whose knowledge can enrich our own understanding of local culture and help us understand what’s going on. Dr Zhu herself checks her perspective with her daughter and other second-generation Chinese who have been brought up in Australia. Having lived outside of China for more than 20 years, she also asks opinions from friends about local knowledge within the country.
This long-term, patient approach to building trust and learning has certainly paid off for Apple, which struck a deal to supply iPhones through China Mobile in 2014. Dr Zhu also cites the case of an Australian mining and engineering company investing in China, whose representative took the time to do research. “He learned how to network with people, made very good friendships and put a lot of effort into negotiations. Because people really trusted him, and were convinced his offer was realistic, he got a better deal.”
Dr Zhu recalls the ‘100 battles, 100 victories’ lesson from the legendary military strategist Sun Tzu, who taught that supreme excellence lies not in fighting and winning but in winning without fighting.
“We need to build bridges and talk to each other - we all have common goals, we all want to build a better future,” she adds. “It’s always good to check our own associations, never take things for granted, and always make sure that authentic cultural perspective is there.”