Reference no: EM133190262
Global Business Environment: Cultural Considerations
Background Twelve Trees is a Scottish company that imports loose teas from China. It receives the tea in bulk from independent Chinese farmers, and packages the tea in 400g, 2000g and 5000g portions for distribution among its retailers, for the price of GBP 110, GBP 510 and GBP 1,180, respectively. Its suppliers reside in the Lingnan area (comprising the Guangdong, Guangxi and Fujian provinces), and they specialize in Oolong tea, although some of the suppliers also grow green, black and white teas. During the past fiscal year, the number of retailers interested in purchasing the product in bulk has increased by 37 percent. Twelve Trees attributes its product's rise in popularity to an increasing interest in alternative health treatments, particularly among young and middle-aged women, and to the fact that the teas are certified organic and grown in a socially responsible manner. While it is excited about the prospects of increased business, Twelve Trees is struggling to find enough Chinese farmers to fill its orders. There are several guidelines Twelve Trees requires its suppliers to meet. First, the tea must be grown in a way that maintains the long-term fertility of soils without using artificial inputs such as chemical fertilizers or insecticides. Second, the tea should be grown on an agriculturally diverse farm-a farm on which tea is not the only plant being produced. Third, the employees at the farms must be paid competitive wages, high enough to sustain a decent standard of living. This final point is dependent on the location of the farm-a "decent" standard of living is relative to the market forces of the region in which the farm is located. These three principles are ensured through regular visits to the farms by independent observers. By virtue of these inspections, Twelve Trees is able to guarantee an organic and socially responsible product to its consumers in Scotland.
Diversification and Cooperation
After speaking with some of its independent suppliers in China, Twelve Trees discovered a cooperative of small tea farmers in southwest China, which includes Yunnan, Guizhou, Sichuan and Tibet. This area produces mainly black and green teas, and specializes in Pu'er tea, which has been used in China for hundreds of years as a cleansing and detoxifying drink. The cooperative, Defang Hezuo'She, meets the three principles Twelve Trees insists upon to maintain its socially responsible and organic brand, and it teas will allow Twelve Trees to diversify its product offerings. A bonus of working with Defang Hezuo'She is that all participating farms have been growing tea for centuries, adding a rich historical background to the product.
Twelve Trees is interested in securing a long-term contract with the cooperative, but in order to do so, some of its team needs to travel to the Yunnan province to inspect operations and create stable relationship with the cooperative's executive members. Twelve Trees does not currently employ anyone fluent in Mandarin. It has managed its previous Chinese business through an interpreter, and plans to continue using interpreters to begin contract negotiations with the Chinese cooperative. After a detailed negotiation process, Twelve Trees and Defang Hezuo'She successfully agree upon contract terms, and the cooperative is now preparing its first major tea shipment to Scotland.
Case Study Questions:
1. What are some actions Twelve Trees can take with regards to its interpreter to ensure the success of its business deal?
2. China is considered a "higher context" society. What qualities of such a culture have the potential to affect an international business relationship?
3. Although no one on the Twelve Trees trade mission team can speak Mandarin, team members can each pay close attention to non-verbal communications to "read" the general reception they are being given. List some non-verbal communications techniques, and explain why it is important to read and understand these symbols.
4. What steps can Twelve Trees take to ensure the agreement it has with Defang Hezuo'She continues to be profitable and stable well into the future?