You know when you go traveling abroad, and you experience a new nation for the first time, you often find yourself getting a bit of a culture shock? Something is different from your norm, and you feel mildly uncomfortable, but learn to deal with it. That’s culture shock. It is incredibly common in an age where you can travel just about anywhere in one way or another. While observing the supply chain world during the COVID-19 pandemic, and the product shortages that came with it, I found myself wondering about the broader issues with China and the U.S. supply chain bond, and whether the aforementioned culture shock affects it.
If you take a look at the global business relationship scene, a lot of world-conquering organizations don’t quite make the cut in certain nations; Starbucks failed in Israel; McDonald’s fries weren’t a welcome surprise in Bolivia, and Walmart, the world’s biggest retailer, didn’t meet the needs or realities of German life. The underpinning factor of all these failures is, invariably, the inability of corporations to adapt to the cultural norms and expectations of the country they’re involving themselves with.
That cultural inadequacy is potentially prevalent across transnational and international supply chains too, especially when it comes to Western buyers and Chinese suppliers. Let’s face it: quality costs. Yet, the Western mindset demands that we have the best of the best, for the lowest price possible. Unfortunately, this is an unrealistic request by Western consumers ─ and this difference in expectation is often the reason attributed to disputes between nations about services rendered. Organizations like Apple, Disney, and Nike that hold a monopoly on their respective industries, have access to the very best that China has to offer, while their smaller competitors have to settle for the lesser quality products and services that Chinese manufacturers will gladly provide for a pretty-penny.
This leads to Western markets being oversaturated with lesser products because they’re far more accessible to the average business ─ of which there are many. Then the returns and the customer complaints and negative reviews pile in, left, right, and center. It seems like an apparent external issue, but in reality, it could be the case that cultural differences between two nations at either end of the supply chain are the root cause internally. And, like McDonald’s, Starbucks, and Walmart demonstrated with their failures in Bolivia, Israel, and Germany, a prosperous trading relationship has everything to do with an organization’s ability to adapt to a new cultural norm.
The U.S.-China Relationship
Want to know one of the biggest killers of previously loving relationships? Different wants in life and lack of communication about them. That’s my theory, anyway. The same issue applies to the US-China business relationship. “Say what, Adebayo?!” You’re probably thinking. Sure, we have excellent trading relationships between businesses across the transpacific supply chain founded on a shared objective─supremacy─, but we also have different expectations from our relationship. If you take a look at the Western construct of supplier-buyer relationship management, and the Chinese equivalent, Guanxi, it’s clear to see that we’d probably fail a compatibility test.
According to Yang, Guanxi, generally speaking, refers to special types of relationships or social connections that are based on mutual benefits; the mutuality is shown through the bonding of the exchanging parties through the reciprocal exchange of favors and mutual obligations. For the Chinese, this is at the core of every business relationship and transaction that takes place. Whereas Western business deals are governed by law-abiding contractual agreements, not merely a handshake and a “you scratch my back, I’ll scratch yours” mentality. Thus, it would be fair to say that the U.S. end of the supply chain likely completely ignores the Chinese cultural norm of Guanxi, and assumes that the business relationship can be controlled through conventional contracts.
It cannot. As it happens, in Chinese culture, contractual agreements, laws, and rules and regulations will be thrown out the window or wholly removed from discussions in favor of harmony and mutual respect between two businesses, under the culture of Guanxi.
Mitigating Relational Risk
So obviously, if you’ve got a Western organization with a relative arrogance about its supremacy, and it uses the best lawyers to draw up the most lucrative contracts, then puts them to the Chinese suppliers with the assumption that they’re simply “in it for the money,” there will be an issue further down the line.
Because it wrongly assumes that Chinese manufacturers and industry-leaders enter an agreement with Western buyers with the characteristically-American, mindset of self-interest. The Chinese follow a path of collectivism in their beliefs and actions and have done for thousands of years. Yes, money matters, but the recipients of their products being on the same page is more important. This is where the rest of the world could do with a lesson or two; American and Western business-leaders need to understand that it takes two to tango, and while China is already stepping to our tune, we need to start grooving to theirs too. We need to adapt in a way that sees our norms converging with Chinese values through first understanding, second, adjusting, and third, learning so that we can move into the new era of our transpacific supply chain relationship, post-COVID, with a mutually, exponentially more respectful relationship with our Eastern partners.
After all, if it was a personal relationship, you’d assume that mutual respect is a beautifully simple, yet practical, and imperative cornerstone, without which the foundation of our partnerships would crumble.