Negotiation Strategies and Cultural Differences in Hong Kong

Hong Kong's Cultural Identity and Business Environment

One of the most important economic regions in Asia is Hong Kong. Although it is relatively small compared to mainland China — and one might therefore expect it to carry a similarly modest significance — its unique political and cultural history make it a singular entryway into the wider culture of China. As such, any negotiation conducted in Hong Kong or with local companies and individuals must take these cultural differences carefully into account.

Hong Kong is a city-state that enjoys relative autonomy from the People's Republic of China, even as the larger country ultimately governs Hong Kong following the transfer of sovereignty from Britain in 1997. This political autonomy is coupled with a degree of geographical separation: Hong Kong is surrounded by water on all sides, though it sits fairly close to the mainland on its northern and northeastern edges. The residents are mostly ethnic Chinese, but this does not mean that Hong Kong's culture is indistinct from that of the mainland. In fact, Hong Kong has developed a fusion of traditional Chinese culture and modern aesthetics, producing a business culture that retains elements of traditional Chinese attitudes alongside contemporary practices. This distinctive culture has arisen out of necessity: Hong Kong's status as a preeminent port city and its unique political history have made it the ideal nexus of Eastern and Western influences.

For example, the success of cognac as a popular drink for special occasions in Hong Kong illustrates what Kanter (1994) calls "the art of alliances" — ultimately, the act of "acknowledging and then effectively managing the human aspects" of alliances and negotiations in general (p. 98). Unlike previous failed attempts at marketing Western goods to Hong Kong consumers, the successful integration of cognac into Hong Kong culture was predicated on an understanding of "the social fabric of Hong Kong," because "gift exchange, wedding banquets, business dinners, [and] household consumption" was the key to its stake of a certain market share (Smart, 2004, p. 219). By engaging with prospective consumers at an individual level, cognac wholesalers successfully strengthened their ability to do business in a foreign country in conjunction with local distributors and retailers. This, in turn, allowed cognac to enter the cultural consciousness of mainland China, where it remains particularly successful even though "the Chinese population in Hong Kong is extremely light in their drinking habits with less than 4% of the population described as regular drinkers" (Smart, 2004, p. 219).

Why Cultural Norms Matter in Negotiation

The importance of understanding the cultural norms of a country in which one plans to do business cannot be overstated, because it is ultimately these norms of interaction and interpersonal relationship that shape any negotiation. Researchers characterize this importance in different ways — sometimes treating it as a humanizing approach to business practice, as in Kanter's essay, and sometimes adopting a more detached analytical stance by observing that "like an individual species in a biological ecosystem, each member of a business ecosystem ultimately" contributes to the outcome of the whole (Iansiti & Levien, 2004, p. 69). Paying attention to the "human aspects" of negotiation means recognizing that the outcome of any given negotiation has as much to do with the collective influence of many small cultural differences as with major substantive disagreements.

That this is so often a neglected feature of cross-cultural business interactions is surprising, given that attending to one's "ecosystem" is simply the lower end of a spectrum that extends all the way to efforts at vertical integration aimed at controlling every variable in a process. In much the same way that Dell eliminated "the reseller's markup and the costs and risks associated with carrying large inventories of finished goods" by selling directly to customers and thus controlling every variable from production to sale, any productive negotiation should be preceded by a thorough examination of cultural variables that might result in costly errors, damaged relationships, or missed opportunities (Magretta, 1998, p. 73). Cultural preparation is, in this sense, the negotiator's equivalent of supply-chain discipline.

References

Iansiti, M., & Levien, R. (2004). Strategy as ecology. Harvard Business Review, (March), 68–78.

Kanter, R. (1994). Collaborative advantage. Harvard Business Review, (July/August), 96–108.

Magretta, J. (1998). The power of virtual integration: An interview with Dell Computer's Michael Dell. Harvard Business Review, (March/April), 73–84.

Shell, G. (2006). Bargaining for advantage: Negotiation strategies for reasonable people. New York: Penguin Books.

Smart, J. (2004). Globalization and modernity — a case study of cognac consumption in Hong Kong. Anthropologica, 46(2), 219–229.