IMM2012 INTERNATIONAL NEGOTIATION ASSIGNMENT 3

From the external environment analysis, next gaps are between Dutch and Chinese negotiators The current government controls on the economic and financial systems of China can (suddenly) be changed to fit to with the new direction due to the strict controlled five years planning, while in Netherlands it will be more stable even during the change of government parties Chinese economy has huge impact on the international trading with her huge size and China still has high potential to grow. The currency fluctuations & foreign exchange is strictly controlled by Chinese government, since Chinese government wants to have a competitive currency, the value is actually lower than its market values which is not be easily changed by the market demand; in Netherlands it is regulation by the market. Individual, high freedom and short term focus of Dutch versus the harmony, modesty and community and long term focus of Chinese are huge differences. The dismissal process in Netherlands is very difficult for companies than in China. External Netherlands China environment Political and legal Netherlands is a democratic country with good political China is a communistic country, the political pluralism and legal system, but the central government has been issues are sensitive especially regarding quite instable since 2004, there are several times; the freedom and Tibet; the legal and tax system tax system is matured are matured Foreign Netherlands has the market economy; she has been China has the 5 years planning term government dealing low or negative economic growth due to the economy. She has been growing with double control & financial deficit since 2010. The financial system is digits since 1980 till last few years due to the bureaucracy partially controlled by the European union financial deficit crisis from Europe. rd International $705 billion, on 23 world ranking; In 2011, Holland's $11.29 trillion, on 3rd world ranking; the economies most important export partners were: Germany major export countries are European union (24.1%); Belgium (12.1%); France (8.9%); UK (8.0%); (20%), USA, Hong Kong, Japan and SouthItaly (4.8%) and USA (4.1%); import partners are Korea; the major import countries are Japan, Germany (16.7%); Belgium (10.0%); China (8.4%); UK EU (13%), South Korea and USA; (6.7%); USA (6.6%) and France (4.6%). Currency Within companies, there is almost no control from the There is a strict control on currency exchange fluctuations & government, except on banks and their exchange rate rate and Reserve Requirement Ratio from the foreign exchange Chinese government Instability The social system is stable The social system is stable, but there are frequently riots in Tibet Ideology Strong root in democracy, the freedom of each There is a huge influence of Confucius on differences individual is very important for Dutch; this is clearly that order, balance and harmony. In general, the Dutch prefer to spending more time on private life with privacy of individuals is less important due family and friends the emphasis on the community; but this mindset has been changing since China was doing business with western Culture Dutch are in generally speaking open and direct; the Chinese are in generally speaking more differences main focus during the negotiation is on the structure indirect and modesty; the main focus on the and short term outcome. negotiation is maintaining a good relationship and long term outcomes External There are organized unions, but the influence is The dismissal process of personnel is stakeholders gradually reducing. The dismissal process of personnel regulated by government and favours is regulated by government and favours personnel, companies, it is quick and easy. letting someone go is usually taken long and costly

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IMM2012 INTERNATIONAL NEGOTIATION ASSIGNMENT 3

The Hofstee is used to benchmark the cultural distance between Netherlands and China. The major gaps between China and Netherlands are the long term orientation and Individualism, then the Masculinity and high power distances are the next ones. The power distances index of China is much higher than Netherlands. China is a society that believes that inequalities amongst people are acceptable; therefore it is very important to find out who the decision maker of Chinese team is, since he has the most influences on the outcome; in case if this decision maker is well-informed, the decision making of the negotiation can be quickly done. On the hand, the decision making process is mainly done by the Dutch negotiator self. The Individualism of China is much lower than Netherlands. It could explain why Chinese prefer to team negotiations and consist of members of different departments, who can provide input and decisions for different disciplines. The Masculinity of China is higher than Netherlands. It can be a problem if having a female negotiating with negotiators especially from north part of China; Chinese team can be offended since women have lower status in north part of China. In same token, the Dutch female negotiator can feel offended if Chinese team does not take her seriously for the negotiation. The Uncertainty Avoidance of China is (not significantly) lower than Netherlands. It means that Chinese are more adaptable and entrepreneurial; this could mean that Chinese negotiators are willing to take more risk when they see the opportunities while Dutch negotiators prefer to sort things contracts details clearly out before taking a decision, especially related to laws regulations. The long term orientation of China is highest among all other countries. This could explain why the relationship or Guanxi is very important in China and therefore the trust is the foundation to build a good relationship with Chinese, and in certain cases Chinese are prepared to take lose to start-up business and aim for better future, while it is unacceptable for Dutch negotiators since Dutch are more driven by short term orientation.

From the immediate context analysis, Negotiators can have easily access to information source in the Netherlands due to matured information infrastructure, while it will be difficult to obtain similar information in China; in this case Chinese negotiators can have better information source than negotiators. Dutch tend to build professional relationship and focus on the negotiation process and short and midterm outcome. While Chinese focus more on the long and lasting relationship. It is important to find out who the key decision maker of Chinese negotiators is, because sometimes this person is not in the negotiation.

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IMM2012 INTERNATIONAL NEGOTIATION ASSIGNMENT 3

Immediate context Relative bargaining power of negotiators and nature of dependence High level of conflict

Netherlands The open economy enables the transparent market; the information are usually easily accessible for everyone There is no conflict between the groups, but the conversation about religions should be avoided Dutch tend to build relationships on the professional level, there is almost no focus to build the personal relationship Dutch are focused on the negotiation process and well prepared, and the short & mid-term target, if possible they prefer to have whole pie for themselves In general, Dutch negotiators can decide by themselves; therefore the decision making process can be done during the negotiation.

China The personal connection with (government) people will provide better access to specific access to market, distribution system and government relations There is no conflict between the groups, but avoid talking about Tibet and Taiwan. Building a long and lasting relationship on the professional and personal level is very important for Chinese. Chinese know that opponents might still be needed in the future Chinese are focused on maintaining a good relationship, also during the negotiation; the focus is in generally on long term than short term targets In the most of the cases, Chinese negotiators still need approval on their management to approve, which decision making process can take quite long; usually the senior manager in the negotiation is making the decisions

Relationship between negotiators

Desired outcome

Immediate stakeholders

The cultural factors are the main challenges, then the external environment factor is another challenge for the negotiation between Dutch and Chinese (see above). Important aspects of Netherlands China negotiation style Individual vs. group In general, Dutch prefers having individual In general, Chinese prefers having team negotiation and he can make decision for the negotiation with different disciplines and outcome by himself during the negotiation decision maker, so the decision can be partially taken by other stakeholders or totally by the decision maker Open/ direct vs. subtle Dutch prefers to have open and direct Chinese prefers to have subtle communication communication communication due to the high efficiency due to modesty culture and afraid to hurt culture someone with too direct messages Readiness to risk Low risk taking, since the most outcomes are High risk taking when Chinese believe that linked to personal KPI there is trust and even there are volatile government & economic changes Time sensitivity and Dutch prefer to have a structuralized Time & structure is less important for Chinese; negotiation structure negotiation within the limited time; therefore they can postpone meetings to put therefore the preparation is important opponents under time pressure Maintain a good Dutch mainly focus on the (short and midChinese mainly focus on the long term relationship term) results and less focus on developing a professional and personal relationship, they good personal relationship are even willing to lose some benefits for the short term if they feel that other party is sincere and honest

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