Stories of the cultural differences between China and America are plentiful and colorful. Learning how to navigate these disparities may be interesting for a traveller, but it is crucial for a business.
Want to buy a kite? | Cost benefit analysis
One day, while walking along the Bund in Shanghai, an American businessman was confronted by a Chinese kite vendor. “Mister, you want a kite? Only 200 RMB, very good price,” the man said. The American shook his head and walked away, and so the salesman countered, “OK, only 100 RMB. You buy for wife.” Still uninterested, the businessman said no and continued on. But the salesman followed him and persisted, dropping the price to 50 RMB, then 20 RMB, then finally 10 RMB. “Wow,” thought the American, still quite jet lagged, “$1.60 for a beautiful kite. Why not?” So he bought it. However, the kite proved too cumbersome to travel with, and so the businessman gave it away before returning home.
Moral: While $1.60 is undoubtedly a great price for a kite in the US, the burden of transporting it overseas outweighed the cost savings. When considering outsourcing, it is crucial to examine the whole picture, not just the purchase cost. And secondly, don’t let the lure of cheap prices distract you from your needs!
The Jade Boat | Pricing in China
A group of Chinese and American business people were waiting in the lobby of a five-star hotel in Shenzhen. One of the Chinese businessmen left temporarily and, on returning, informed the group that the hotel’s souvenir shop was being replaced by a clothing store. He suggested that the group visit the shop while waiting, and be sure to notice the magnificent jade boat. The asking price for this boat was 68,000 RMB, but it was now available for the low, low price of 3,000 RMB. One of the Americans decided to see. The boat was spectacular, made from hundreds of individual pieces of jade and measuring almost 5 feet in length. When the American asked, he was told, “Mister, we are ending this store. You may buy the boat for 5,000RMB, an excellent bargain.”
Moral: There is a two-tier pricing system in China, one price for Chinese buyers and another for foreigners. Foreigners are thought to be wealthy and they are asked to pay a higher price. In business, this principal extends from the individual to the organization.
A Grain of Rice | Lessons in Communication
In the humid summer climate of China, an hotelier noticed that salt did not flow freely from the restaurant’s salt shakers. He instructed one of the waitresses to put a few rice kernels in the shakers. These kernels would absorb moisture and help the salt flow freely. The next day, the situation was not improved, but was far worse. Opening a shaker, he found that the waitress had added cooked rice.
Moral: Unimaginable mistakes are made throughout the world. Most of these can be traced to incomplete or faulty communications. When sourcing manufactured goods in China, it is essential to have open communication channels, take nothing for granted, document everything, and verify, verify, verify.
Mr. Li | Human Limits
Mr. Li works for a medium size manufacturer located in Texas. Over the past five years, this company has increasingly sourced components and subassemblies with Chinese suppliers. A year ago, they hired Mr. Li, a Chinese national, to manage their outsourcing in China. Mr. Li is one of twelve people in their purchasing operations and the only one living in China. He is responsible for sourcing castings, fabricated assemblies, plastic moldings, printed circuit boards, electronic components, and many other items. Mr. Li has found sources for all of these goods, but many have run into quality and schedule problems.
Moral: Don’t expect one foreigner to handle the workload you would spread among many local employees. Mr. Li, no matter how skilled, cannot cover a disparate set of commodities involving different manufacturing technologies in a country as vast as China.