SARS Teaches Business a Few Lessons

By William R. Dodson

1 July 2003

 

Severe Acute Respiratory Syndrome  (SARS) is no common cold. SARS is an especially infectious disease with higher than average kill-rates. Billions of dollars of plans for Foreign Direct Investment (FDI) were put on hold in the Spring of 2003 as executives of Fortune 500, multi-billion dollar companies, medium and small enterprises curtailed their dealings with China for fear of boosting SARS to a global contagion.

 

Companies placed bans on travel to China; foreign staff that had planned to attend international conferences in China cancelled their reservations; negotiations that were to happen face-to-face were put on hold indefinitely; effectively, anyone traveling between China and other countries from any one of the hotspots on the Mainland were sequestered for at least ten days until authorities were sure the passenger was not contaminated.

 

Now, with the World Health Organization (WHO) and the United States Center for Disease Control (CDC) lifting the travel warnings to China, companies are looking forward to when their representatives can once again engage Chinese businessmen in China in personal dialog. Still, it is helpful to consider making permanent fixtures some of the strategies companies adopted as workarounds to the SARS-related travel bans.

 

A prime example of rapid and sustained response to a major disruption in China-related activities is a division president of a multi-billion dollar auto-parts manufacturer based in America. The division president quickly shifted gears to maintain the momentum of his efforts in China. For instance, market research he was going to conclude on the ground in China he continued through the internet and through long distance phone calls. Instead of meeting the President of a Chinese company face to face near Shanghai, the president quickly set up a videoconference session with his opposite number. He used email more often to correspond with his negotiation counterparts in China, and bolstered back-channel communications to overcome impasses.

 

The Internet

The internet is an effective but limited research tool if criteria are limited to the English language. Foreign companies can extend their reach into China through searches in Chinese language for Chinese content. For instance, a search for distributors of a plumbing fixture in China revealed very little information in English. In Chinese, however, Chinese analysts were able to find an explicit list of twenty distributors for a competitor of the foreign company. The list provided contact information and information about the state of distributor networks in the country.

 

Teleconferencing

Phone calls by Chinese analysts based in America reveal a great deal of information, too. Business communications in China is not as rationalized as it is in Western countries. For instance, publicly traded companies in the West have annual reports; industry associations are the keepers of statistics about their industries: sales, growth projections, and market share. In China, though, the only way to discover much of that information for private companies and State-Owned Enterprises (SOEs) is by talking with others: company presidents, sales managers and secretaries. The challenge though, is speaking their language, literally and figuratively. It’s important in order to develop a rapport with Chinese nationals in China to speak Chinese; further, foreigners need to know the key cultural words and phrases that will unlock the pent up conversations about an industry. So, even though a company may be sequestered in America or France or Britain, isolated from direct contact with Chinese counterparts because of an inability to travel, it’s still possible to forge ahead with market research that will illuminate business prospects in China.

 

Chinese Staff

Instrumental in keeping the American president’s efforts to enter China from flagging was the use of Chinese professionals to translate videoconference proceedings and emails. Key to communications was the experience his translators had developed with industry nomenclature and processes common to operations in America and China. Chinese managers would sometimes send emails solely in Chinese and sometimes in both English and Chinese. Or the division president would write an email in a curt, direct form for communications that would sometimes just not make sense to Chinese. A translator would quickly re-organize and re-frame correspondences for Chinese audiences. Also important was the ability of the translators to turn around translations within hours. Often, the American president wanted China to receive his responses at the start of the next Chinese business day so he was sure the obligation for follow-up fell squarely on the shoulders of the Chinese.

 

Establish Alternate Channels of Communication

The President also found it necessary to resort to back-channels more often during this period than he would if he could travel. Back-channels are communications between Chinese on both sides of a negotiation that moderate disagreements between foreign and Chinese companies. Chinese representatives are sometimes not comfortable directly confronting their foreign counterparts about issues with which they may disagree or may not understand. Chinese business will use a roundabout method for getting their message across to their foreign partners.

 

In one instance, one of the Chinese parties with which the President had begun negotiations during the SARS quarantine had suddenly become mute after a meeting of intent had revealed both parties interested in going ahead with negotiations. Through back-channels the American company discovered that the Chinese had become overwhelmed by the number of questions the Americans had sent to learn more about the Chinese company, and by a non-disclosure agreement the Americans had sent the Chinese. The Chinese representative for the American company used back-channels to explain to Chinese managers in China that the American President required the information so he could talk with his company’s board; without such measures it would not be possible for the Americans to continue conversations.

 

International Travel with a Twist

The American president also offered to one of his China-counterparts that he would travel to a country mid-way between China and America to continue negotiations in person. The American knew it is of paramount importance sometimes to meet in person the individual with whom one is negotiating. Settling on a country that had no SARS problem would give them both a retreat from their home offices that would encourage relaxation of approach and greater creativity than videoconferencing.

 

Unfortunately, the American president was not able to make full use of the sister-office of the market-research group he employed. Most Chinese cities barred entry to residents of Beijing, where the office was located. As well, the Chinese government had restricted many train and flight schedules to essential travel.  Under other circumstances, the team could have traveled to facilities to extend market research activities and perhaps even to continue negotiations.

 

The SARS virus has forced Chinese and Western businesses investing in China to think about international business in a different way. Though the barriers to traveling to China are lifting, it is certain that there will be future disruptions in China to developing and maintaining business there, beyond SARS. A China Development department staffed with Chinese nationals is insurance that minimizes disruption to investment activities that can cost a company millions of dollars in real and projected revenue.

 

William R. Dodson is Managing Director of Silk Road Advisors, L.L.C., a market research and business development consultancy that positions companies for success in China. He is the contributing editor on international business to the American Management Association’s (AMA) MWorld Journal of Management, and writes the column “The Cultured Business”, found at www.silkrc.com and at the Global Perspectives section of the AMA’s member website. He can be reached at sradvisors@gmail.com or +1 (847)630-1271.