Revenge in 10 years is not too late – Chinese proverb

Rio Tinto has fallen into the same trap as Foster’s in failing to recognise China’s unique culture and the importance relationships play in doing business in China, according to Deakin University researcher Dr Mona Chung.

Dr Mona Chung - whose PhD and recent book Shanghaied: Why Foster’s could not Survive China examined why Foster’s failed in its 15 year sojourn in China - believes companies operating in China need to employ bicultural people.

These are employees who understand the differences between the Australian and Chinese approach to doing business, not just Chinese who speak some English.

"Someone who speaks both languages is not necessarily bicultural," Dr Chung said.

"A bicultural person is someone who understands the depth of understanding on both sides of the culture of doing business especially its delicacy when playing with relationships at a political level. Not only can they communicate fluently but they can understand the communication styles, patterns and context.

"You need a bicultural person to control your strategic plan because that determines your market entry, your human resource choices and marketing strategies."

Dr Chung said local Chinese understood the way business is conducted in China however, they often failed to communicate effectively with Australian business executives.

"This causes a disconnection between plans and the actual strategies deployed when doing business with China," she said.

On a recent trip to Shanghai Dr Chung said she saw another Australian organisation repeating the mistakes made by Foster’s.

Chinese employees were running things differently to the instructions that were given by Australian executives, taking advantage of the Australian executives’ lack of language and cultural recognition skills.

Dr Chung said companies needed to take into account that the Chinese government has different levels of power to Western governments.

"China’s different legal, political and economic systems and the impact on the management of their business have no comparison to Western systems," she said.

One important cultural character of the Chinese, something that Dr Chung pointed out in her book, is that they never forget or forgive.

"A Chinese proverb says 'to a gentleman, revenge in 10 years is not too late',” she said.

"Rio Tinto’s mistake is not just rejecting Chinalco’s recent offer which itself is a huge slap on the face. They also miscalculated the price ‘win’ in the negotiation they had with BHP in 2006.

"China had become the largest iron and ore purchaser in the world for the first time and had hoped to become the international iron and ore price dictator for the first time as well.

"Rio Tinto and BHP forced China’s hand by setting the price point with Japan first. That was a huge face-losing event for the Chinese. Had they lost the chance to the Europeans, it would have to be less humiliating. Instead, they lost the chance to the Japanese with whom they have an historically poor relationship.

"The current Rio Tinto event is for the Chinese to demonstrate that they are better at playing business games at a political level.

"While the rest of the world portrays the Chinese as unethical business players, to arrest an Australian citizen on bribery charges is a big slap back.

"To date Rio Tinto has made more than one cultural mistake. BHP is heavily tainted with Rio Tinto in many of their associations including the newly announced joint venture deal. Unless they start doing business differently with the Chinese, they will have a long bumpy road."

Previous No Limits stories on the research of Dr Mona Chung:
http://www.gsdm.com.au/newsletters/deakin/Nov08/mona.html
http://www.gsdm.com.au/newsletters/deakin/July07/mona.html

Dr Chung on Radio Australia:
http://www.radioaustralia.net.au/programguide/stories/200811/s2413349.htm

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