ChapterTwoIntroductiontoInternationalTrade2.1InternationalTrade2.2TradeBarrier2.3BusinessPreparation2.4BusinessNegotiation

2.1InternationalTrade

2.1.1WhatIsInternationalTrade?

Weallknowthatinternationaltradehasbeeninvogueforcenturiesandallcivilizationshavebeenengagedintradewithotherpartsoftheworld.Forexample,anytimewhenyouwalkintoasupermarketandpickupanystufflikeaknifeoratoy,chancesarethattheitemhasbeenmanufacturedinChinaorassembledinMexico.WhenyoupickupcoffeepodsandyouwillseethattheyhavebeenimportedfromAfrica.

Whenyoushopforclothes,itisquitelikelythat‘MadeinChina’labelsarefound.Indeed,internationaltradeisaffectingtheconsumersaroundtheglobeineveryaspectofourlives.Furthermore,theneedfortradingwilllongexistduetothevariationsintheavailabilityofresourcesandcomparativeadvantage.Inthepresentcontextwheretechnologyandinnovationinallfieldshavethrownopenborderstoglobalization,nocountrycanaffordtoremainisolatedandbeself-sufficient.

Internationaltrade,alsoknownasworldtrade,foreigntradeoroverseastrade,isthefairanddeliberateexchangeofgoodsand/orservicesacrossnationalboundaries.Itconcernstradeoperationsofbothimportandexportandincludesthepurchaseandsaleofbothvisibleandinvisiblegoods,theformerofwhichiscalledtradeingoodswhilethelatteriscalledtradeinservicesaccordingtotheWTOterms.Nowadays,industrialization,advancedtransportation,globalization,multinationalcorporations,andoutsourcingareallhavingamajorimpactontheinternationaltradesystem.Increasinginternationaltradeiscrucialtothecontinuanceofglobalization.Withoutinternationaltrade,nationswouldbelimitedtothegoodsandservicesproducedwithintheirownborders.

2.1.2InternationalTradeandDomesticTrade

Sharingseveralsimilaritiesbetweeninternationalanddomestictrade,therearealsosomenoteworthydifferences.Thesedifferencesoftenrelateto:howthegoodsaremovedfromthesellertothebuyer;theimpositionoftariffsandothercharges;thetypeofinsurancethatmustbesecuredaspartofthebusinessdeal;andevenhowthebuyergoesaboutpayingforthegoodsandshipping.Knowingthesedifferencescanallowbuyersandsellerstoparticipateintheglobaltradeofgoodsandservices,asituationthatprovidesadditionalopportunitiesforbothparties.

Oneofthemostapparentdifferencesbetweendomesticandinternationaltradeisthefactthatdomesticpurchasesandsalesarenotaffectedbythelocationofthebuyerandsellertothedegreethatistruewithinternationaltransactions.Whenthebuyerandsellerarelocatedinthesamenation,onlytraderegulationsrelatedtothatonecountrywillapply.Bycontrast,aninternationaltransactionwouldhavetobeconductedinamannerthatcomplieswiththetraderegulationsthatareinplaceforbothcountriesinvolved.Thisrequiresthatboththebuyerandthesellerbeawareofthoseregulationsandmakesurethegoods,themodeofshipping,andthedocumentationpreparedareinlinewiththoseregulations.Failuretodosocanleadtodelaysindeliveryorevenarefusalbythereceivingporttoallowthegoodstobeunloaded.

Anotherkeydifferencebetweeninternationalanddomestictradeliesinthetypeoffeesandchargesassociatedwiththeshippingprocess.Varioustariffsandotherfeesaretypicallyappliedtoshipmentsbetweencountries,regardlessofwhetherthemodeofshippingisbytraveloverland,bysea,orbyair.Incontrast,theprocessoftransportingashipmentbetweentwopointsinthesamecountryismuchsimplerintermsofthetypeoftaxes,fees,andchargesthatareleviedaspartoftheshippingprocess.Identifyingandproperlycalculatingallrelevanttaxesandchargesisoneofthemostimportantaspectsofunderstandinghowdomesticandinternationaltradearrangementswilldiffer.

Inaddition,therearesomeothercommonlyrecognizeddifferencesbetweeninternationalanddomestictrade.Problemswiththerateofexchangebetweenthetwocurrenciesinvolvedmayrequiresomeplanningtoarrange,whilethematterofcurrencyisnotaproblemwithdomestictransactions.Languageandculturaldifferencesmayalsobeofconcernwithaninternationaltransactionbutaremuchlesslikelytobeafactorinadomesticone.Whiletheprocessesusedforinternationaltradingmaybesomewhatmorecomplexthanconductingadomestictransaction,professionalshippersandagentscanhelpbuyersandsellersunderstandwhatneedstobedonetosuccessfullyexecutethetransactionandarrangeforshipmentanddelivery,whileavoidingsomeofthepitfallsthatcouldotherwiseoccur.

2.1.3ReasonsforInternationalTrade

1.ResourcesReasons

Theunevendistributionofresourcesaroundtheglobeisoneofthebasicreasonswhynationsbeginandcontinuetotradewitheachother.Thefollowingfactorsarethemajordifferencesamongnationsintermsofnaturalresources,whicharealsothebasicreasonsforinternationaltrade.

?FavorableClimaticConditionsandTerrain:Climateandterrainaffectthecultivationofsomeagriculturalproductsanationcanproduceandtradeinternationally.Itgivessomecountriestheonlychoicetoimporttheproductstheirconsumersneedhowevernotabletoproduce.

?NaturalResources:Somecountriesarethemajorsuppliersofcertainnaturalresourcesbecausethedistributionofnaturalresourcesaroundtheworldissomewhathaphazard.Forexample,theoilreservesfromtheMiddleEast.Itholds50%oftheworldtotalreserves,and40%oftheworld’stotaloutput.

?SkilledWorkers:Humanresourceslikeskilledworkersareverypreciousassetstoanation.Skilledworkersfromsomenationscanmanufacturesophisticatedequipmentandmachinerywhichgivesgreatercompetitiveadvantagestothemothernation.

?CapitalResources:Capitalresourcesarerichindevelopedcountries.Ontheotherhand,ifdevelopingnationswanttomodernizetheirindustriesandeconomies,theyneedtoutilizeadvancedmachinery,equipment,andplantwhichrequireabundantcapitalresourcestomanufacture.Therefore,ithasgivenrisetotheneedfordevelopinginternationaltrade.

?FavorableGeographicLocationandTransportCosts:CountriesarewillingtodevelopcloseeconomicrelationshipschieflybecausetheyaregeographicallyclosetoeachotherliketheSino-Japanesetraderelations.ThisisalsotheoriginalreasonfortheformationofRegionalEconomicIntegrationsliketheEUortheNAFTA.

?InsufficientProduction:Somecountriescannotproduceenoughitemstheyneed.Therefore,theyneedtoutilizeinternationaltradetooffset.

2.EconomicReasons

Withthedevelopmentofmanufacturingandtechnology,therearoseanotherincentivefornationstotradewithoneanother—economicbenefits.Itmakeseconomicsenseforanationtospecializeincertainactivitiesandproducethosegoodsforwhichithasthemostadvantage,andtoexchangethosegoodsfortheproductsofothernationswhichhaveadvantagesindifferentfields.Accordingtothetheoryofcomparativeadvantage,internationaltradeismutuallybeneficial,evenwhenonenationismoreefficientintheproductionofallgoods,aslongastherearedifferencesintherelativecostsofproducingvariousgoodsinthetwopotentialnations.China,forexample,

inalabor-intensiveeconomyandhasenjoyedalonghistoryoftextileproduction.Hence,itcanproducelargequantitiesoftextileproductsatamuchlowercostthansomeothercountries.Inotherwords,Chinahascomparativeadvantagesintheproductionoftextileproductsandthuswillbenefititseconomybyexportingthesegoodsorexchangingthesegoodsfortheproductsofothernations.Inaword,transactionsareconcludedmainlyforeconomicbenefits.Whenthedomesticmarketisunabletohelpthetradersgeneratemoreprofitsorwhentheyarenotsatisfiedwiththebenefitsfromthedomesticmarket,theytendtoopenupnewmarketsinothernations.

3.PoliticalReasons

Governmentregulationsaresometimesthemotivatingfactorforinternationaltrade.Countriesmaywishtogetcloserbondsculturallyandpoliticallyandthiscanbedonethroughtrade.Bythewayofforeigntrade,countriescandefendtheirnationalinterestsanditssocial-economicsystem,andbuildaninternationalandregionaleconomy;countriescanincreasethestrengthofinternationalandeconomicstruggles,andimprovethecountries’politicalanddiplomaticrelationsaswellastheinternationaleconomicenvironment;andcreategoodexternalconditionsforitseconomicdevelopment.

4.OtherReasons

Otherreasonsmainlyinvolveinvisibletradesuchastransportation,insurance,andtourism.Asanexampleofinvisibletrade,Braziliancoffeeisusuallytransportedbyoceanvesselsbecausethesesteamshipsarethecheapestmodeoftransportation.NationssuchasGreeceandNorwayhavelargemaritimefleets,whichcanprovidethesetransportationservices.Whenanexporterarrangesforthiskindoftransportation,herentsspaceinthecargocompartmentofashipforonevoyage.Theprudentexporterpurchasesinsuranceforhiscargo’svoyage.

Whileatsea,acargoisvulnerabletomanydangers,onemostobviousofwhichisthesinkingoftheship.Inthisevent,theexporterwhohaspurchasedinsurancewillbereimbursed.Otherwise,hemaysufferacompleteloss.Thus,insuranceisanotherserviceinwhichsomenationsspecialize.Britain,becauseofthedevelopmentofLloyd’sofLondon,isaleadingexporterofthisservice,earningfeesforinsuringothernation’sforeigntrade.

2.1.4ClassificationofInternationalTrade

1.ExportTrade,ImportTrade,andTransitTrade

Accordingtothedirectionofcargoflow,internationaltradecanbeclassifiedintoexporttrade,importtrade,andtransittrade.

Exporttrademeanstotransportthegoodswhichareproducedandprocessedinadomesticmarkettoaninternationalmarketforsale.Ontheotherhand,importtradeismadeinthereversedirection.Itreferstothetransactiontotransportthegoodsfromforeigncountriestodomesticmarketsforsaleoruse.Ifgoodsaretransportedfromtheproducingcountryviaathirdcountry’sborder,thisiscalledtransittrade.

Transittradecanbefurtherdividedintodirecttransittradeandindirecttransittrade.Directtransittrademeansthegoodsarenotplacedinthebondedwarehouseofthethirdcountry,butfurthertransportedtowardoutsidealongthedomestictransportationlineunderthesupervisionofthecustomsofthethirdcountry.Incontrast,indirecttransittradereferstothefactthatfoodsarefirstplacedinthebondedwarehouseofthethirdcountryandthentransportedfurthertotheimportingcountrywithoutanyadditionalprocessing.

2.DirectTrade,IndirectTrade,andEntrepotTrade

Fromthenumberofparticipantsinvolved,internationaltradecanbeclassifiedintodirecttrade,indirecttradeandentrepottrade.

Directtrademeansthatgoodsaretransporteddirectlyfromtheproductioncountrytotheconsumingcountry.Inthiscase,onlytwopartiesareinvolvedinthetransaction,namelytheexporterandtheimporter.

Indirecttrade,ortradethroughintermediatecountries,ontheotherhand,occurswhengoodspassthroughanintermediatecountryotherthantheproducingorconsumingcountry,remaininginthatcountryforsomelengthoftimebeforeshipmenttothedestination.Threepartiesareinvolvedinindirecttrade:theexporter,theimporter,andtheintermediateparty.

Entrepottradereferstothetransactionwhichinvolvesimportinggoodsfromoverseasforfurtherprocessingorassemblingandthenre-exportingthegoodsabroad.Entrepottradeinvolvesonlyoneparty,whoistheimporter,theprocessorandatthesametimealsotheexporter.

3.VisibleGoodsTradeandInvisibleGoodsTrade

Accordingtotheformofthegoods,internationaltradecanbeclassifiedintovisiblegoodstradeandinvisiblegoodstrade.

Visiblegoodstrade,alsoknownastangiblegoodstrade,referstotheexchangeofphysicallytangiblegoodssuchasbooks,computersorcarsbetweencountries,involvingtheexport,importandre-exportofgoodsatvariousstagesofproduction.Itisdistinguishedfrominvisiblegoodstrade,alsoknownasintangiblegoodstrade,whichinvolvestheexportandimportofintangibleitems,usuallyservicesandtechnology,suchaseducationorinsurance.

Asmostofthetradeintheworldtodayreferstotheexchangeofvisiblegoodsratherthaninvisiblegoodsandmanyrules,regulationsandconventionsconcerningtradeintheworldsuchasIncoterms,UnitedNationsConventionsonContractsforInternationalSalesofGoods(CISG),andUniformCustomsandPracticeforDocumentaryCredits(UCP),areallmadetodealwithvisiblegoodstrade.

4.BarterTradeandFree-LiquidationTrade

Fromthesettlementinstrumentsinvolved,internationaltradecanbeclassifiedintobartertradeandfree-liquidationtrade.Bartertradereferstothedirectexchangeorserviceswithoutaninterveningmediumofexchangeorbybargaining.Itisthoughttobetheoldestformoftrade.

Free-liquidationtrademeanstheexchangeofgoodsorserviceswithaninterveningmediumofexchangeormoneyaccordingtoratesofexchange.Cashtradeisoneformoffree-liquidationtrade.

2.2TradeBarrier

2.2.1WhatisTradeBarrier?

Companieswillbefacedwithseveralobstacleswhentryingtoenterintotheinternationalbusinessmarket.Someobstacleshavealreadyexistedbecauseofthenationaldifferenceswhileothersareintentionallyformedbygovernmentsororganizations.Controllingtheinflowandoutflowofinternationalbusinessisoneofthemostcommonreasons.Thus,tradebarrierisdefinedasagovernment-imposedrestraintontheflowofinternationalgoodsorservices.

2.2.2TypesofTradeBarriers

1.TariffTradeBarriers

Tariffs,whicharetaxesonimportsofcommoditiesintoacountryorregion,areconsideredasoneoftheoldestformsofgovernmentinterventionininternationalbusinessactivities.Tariffsmaybedesignedtocollectforthegovernmentortoprotectdomesticindustriesagainstforeigncompetition.Therefore,theprimaryfunctionoftariffsasthemostcommontradebarrieristogeneraterevenueforthegovernment.Inordertomaximizetariffsrevenuewithoutcausingmarketinstability,governmentshavetosetupanacceptablerateoftariffs,whichthenisviewedasatraderegulationtoolratherthanatradebarrier.

?MajorTypesofTariffTradeBarriers

Tariffscanbeclassifiedbasedonwhatisbeingtaxed:

(1)Importtariffs:animporttariffisataxplacedbygovernmentsoncommoditiesthatareshippedintoacountryfromaforeigncountry.Thesetaxesareoftenawaytodiscourageacountry’sconsumersfrombuyingproductsfromanothercountryandtosupportdomesticproductsandservices.

(2)Exporttariffs:anexporttariffisataxplacedongoodsthatisexportedfromacountry.Anexporttariffspecificallyincreasesthecosttoselldomesticgoodsoverseas.Thefunctionofexporttariffistoincreasetheeconomiccostofsellingcertaindomesticproductstoaforeignmarketbecauseitisassumedthattheexportationoftheproductswillhurtthedomesticmarketorleadtootherproblemssuchasnationalsecurity.

Tariffsmayalsobeclassifiedbytheirpurpose:

(1)Protectivetariffs:Tariffsleviedinordertoreduceforeignimportsofaproductandtoprotectdomesticindustries.Manytimes,thistariffisusedtoinflateimportpricesinordertoprotectthevalueofdomesticmerchandisethatcanbeproducedinthehomecountry.Thistypeoftariffisconsideredathreattofreetradebysomescholars,butothersclaimitsbenefitsaretwofold.Thefirstiskeepingdomesticmoneywithinitsowneconomy.Thesecondbenefitispreventinginexpensiveimportsfromdestroyingthelocalbusiness.

(2)Revenuetariffs:Tariffsleviedinordertoraiserevenueforthegovernment.

Tariffscanalsobeclassifiedaccordingtohowthedutyamountisvalued:

(1)Specifictariff:Ataxonimportsthatisspecifiedasamoneyamountthatisleviedperunitofimports.Forexample,aspecifictariffwouldbeafixed$1,000dutyoneverycarthatisimportedintoacountry,regardlessofhowmuchthecarcosts.

(2)Advaloremtariff:Ataxonimportsthatisspecifiedasapercentageofthevalueofthegoodorservicebeingtaxed.Thisisoneformoftradebarrierthatisintendedtorestrictimportsintoacountry.Unlikenon-tariffbarriersandquotas,whichincreasepricesandthusrevenuereceivedbydomesticproducers,an‘advaloremtariff’generatesrevenueforthegovernment.Forexample,a15percentadvaloremtariffonaTVsetworth$100wouldpayatariffof$15.Oneadvantageofanadvaloremtariffisthatitkeepsupwithchangesinprices(mostlyinflation).

(3)Compoundtariff:Tariffthatisacombinationofspecifictariffandadvaloremtariff.Forexample,acompoundtariffmightconsistofafixed$100dutyplus10%ofthevalueofeveryimportedcar.

2.Non-TariffTradeBarriers

Historically,nationssoughttoprotectdomesticindustriesfromforeigncompetitionbylevyingtariffsongoodsimportedfromothernations.Sincethe1970s,theglobaltrendhasbeentowardfreetradeamongnations.Becauseofthis,tariffsaroundtheworldhavefallendramatically.However,avarietyofnon-tariffbarriershaveincreased,asindustriesaroundtheworldcontinuetoseekprotectionfromforeigncompetitors.Non-tariffbarriersrefertoarangeofactions,otherthantariffs,thatgovernmentsapplytorestrictimportedgoods.

Oftenbureaucraticinnature,theintentionofnon-tariffbarriersistoraisethepricesofimportedproductstomakethemlessattractivetoconsumers,ortorestricttheiravailabilityinfavorofdomesticallyproducedversionsofthesamegoods.Althoughmostnon-tariffbarriersviolateWorldTradeOrganizationrules,theiruseisincreasing.

?MajorTypesofNon-TariffTradeBarriers

(1)License:Licenseisoneofthemostcommonformsofnon-tariffbarriersininternationaltrade(mostlyimporttrade).Thelicensesystemrequiresthatagovernment(throughspeciallyauthorizedoffice)issuespermissionsforforeigntradetransactionsofimportandexportcommoditiesincludedinthelistsoflicensedmerchandises.

(2)Subsidies:Asubsidyisaformoffinancialorin-kindsupportextendedtoaneconomicsector(orinstitution,business,orindividual)generallywiththeaimofpromotingeconomicandsocialpolicy.Asubsidymayhaveseveralforms:outrightcashdisbursement,taxexemption,preferentialexchangerate,governmentalcontractswithspecialprivileges,orsomeotherfavorabletreatment.Fromthedescriptionoftheforms,wecanconcludeoneofthemainfunctionsofsubsidyistobuildupacostadvantagetotherecipientcompanybygrantingpreferentialpoliciestothem.Thus,itisanindirectformofprotection.Forinstance,theUnitedStatessubsidizestheproductionofsoyandcorn.Thisassistanceallowsfarmerstosellthesecommoditiesatacostlowerthanthetruemarketvalue.Consequently,foreignagriculturecompaniescannotcompetewiththeartificiallylowpriceofferedbyUSfirms.

(3)Embargo:Anothernon-tarifftradebarrierisanembargo.Anembargoisthecompleterestrictionofaparticulargoodorservice.Forexample,CubancigarscannotbelegallyimportedintotheUSbecauseoftradesanctionsagainstCuba.Inthiscase,theembargoistoprotestCuba’spoliticalactions.TheUSplacesembargoesonpotentiallydangerousitems,suchasnuclearweapons,andproductsthatharmtheenvironment,suchasivorytusksandendangeredanimals.

(4)ImportQuota:Anotherbest-knownnon-tariffbarrieristheimportquota(orquota),whichmeansalimitationinvalueorphysicalterms(say,quantity),imposedonimportandexportofcertaingoodsforacertainperiod(forinstance,ayear).Importquotaisakindofquantitativemeasuresoftraderestrictionsoncertaingoods.Ifaquotaissetbelowthefreetradelevelofimports,itiscalledbindingquota.Onthecontrary,ifaquotaissetatorabovethefreetradelevelofimports,itiscallednon-bindingquota.

(5)VoluntaryExportRestraint(VER):AccordingtotheOECD,voluntaryexportrestraints(VER)arearrangementsbetweenexportingandimportingcountriesinwhichtheexportingcountryagreestolimitthequantityofspecificexportsbelowacertainlevelinordertoavoidtheimpositionofmandatoryrestrictionsbytheimportingcountry.Thearrangementmaybeconcludedeitherattheindustryorgovernmentlevel.

(6)Anti-Dumping:Accordingtothe‘AgreementonImplementationofArticleVIoftheGeneralAgreementonTariffsandTrade1994’,dumpingexists‘iftheexportpriceoftheproductexportedfromonecountrytoanotherislessthanthecomparableprice,intheordinarycourseoftrade,fortheproductwhendestinedforconsumptionintheexportingcountry’.So,dumpingisactuallyanabnormalandundesirablepriceadvantageofaforeignproduct.However,alowpricestrategyisusuallyamarketpenetrationstrategywhenacompanywantstoopenanewinternationalmarket.Aretheyallunfaircompetitions?Theanswerisobviouslynegative.

Accordingtoitsexplanation,theWTOagreementallowsgovernmentstoactagainstdumpingwherethereisgenuine(“material”)injurytothecompetingdomesticindustry.Inordertodothatthegovernmenthastobeabletoshowthatdumpingistakingplace,calculatetheextentofdumping(howmuchlowertheexportpriceiscomparedtotheexporter’shomemarketprice),andshowthatthedumpingiscausinginjuryorthreateningtodoso.Manycountrieshaveanti-dumpingregulationsthatusuallyinvolvearemedialorpunitiveanti-dumpingduty.Therefore,itissometimesconsideredascovertprotectionagainstforeigncompetition.

(7)ForeignExchangeRestrictionsandForeignExchangeControls:Thetwobarriersoccupyaspecialplaceamongthenon-tariffregulatoryinstrumentsofforeigneconomicactivity.Foreignexchangerestrictionsconstitutetheregulationoftransactionsofresidentsandnon-residentswithcurrencyandothercurrencyvalues.Inaddition,animportantpartofthemechanismofcontrolofforeigneconomicactivityistheestablishmentofthenationalcurrencyagainstforeigncurrencies.

3.CulturalBarrierstoTrade

Withtheprocessofglobalizationandincreasinginternationalbusinessactivities,itisunavoidablethatdifferentcultureswillmeet,conflict,andblendtogether.Cultureisdefinedasanintegratedsystemoflearnedbehaviorpatternsthatarecharacteristicsofamemberofanygivensociety.Businesspeoplefromdifferentculturesfinditisnoteasytocommunicateandnegotiatenotonlyduetolanguagebarriersbutalsolotsofculturaldifferences.Despitethelanguage,otherculturalbarrierslikelifestyles,values,anddecision-makingcustomsareoftenconsideredasbarriersforacompanyattemptingtonegotiateorevenestablishcontactwithaforeignpartner.

4.CulturalConflictsinNegotiation

Negotiationisacriticalbusinessactivitythatgoesthroughoutthewholeprocessofinternationaltransactions.Ininternationalbusinessnegotiation,businesspeopleneedtobeawareofculturaldifferences.Becausewhentwopartiesfromdifferentcountriesarenegotiating,twoculturesareconflictingandaminormistakeormisunderstandingmayendupwithadeadlockorbreakdowninnegotiation.Inaddition,thereare56nationalitiesinChina,andbasicChineseculturesaresharedandacknowledgedbyallcitizens.However,meanwhile,everycultureofeveryminorityalsohasanobviousdifference.ThecomplexitymakesdoingbusinessinChinamoredifficult.

Thegoalsofnegotiationmightbedifferent.Toreachanagreementisthecommonobjectiveofallnegotiationpartners,however,theremightbesomeothergoalsfordifferentnegotiatorsfromdifferentcultures.Forexample,duringtheintroductorypart(smalltalksonnon-businessrelatedtopics)ofbusinessnegotiation,Europeanstendtobeinformalandbrief.Usually,discussionwillmovetobusinessafterfivetotenminutes.InChina,thisphasecanbemuchlongerbecausetheChinesenegotiatorwantstogetfamiliarwiththebusinesspartnerandbuildalong-termrelationshipratherthanjustfocusingonthetransactionathand.

Thedecision-makingprocessmightbedifferent.Incross-culturalbusinesscommunication,whethercommunicatorscanachievetheobjectivesdependslargelyonthewayofdecision-making.Understandingdifferentwaysofmakingdecisionsindifferentregionsorcountrieshelpsbusinessnegotiationsgosmoothly.Inalow-contextcountry,decisionsarebasedonends,whichmeansthecompaniesarefocusingonresults.Whileinahigh-contextcountry,thecompaniesaimtobuildrelationshipsandtryveryhardtokeepharmonywithbusinesspartners.

Problem-solvingstrategymightbedifferent.Inadditiontodecision-makingprocess,problemsolvingtakesonthesameimportanceinnegotiation.Low-contextcultureviewsconflictasadisagreementandapartoflife,whichiscommonandhappensallthetime.Themostimportantisthatconflictissomethingoutsidebusinessrelations,anditdoesnoharmtobusinessrelationshipsbetweentwoindividualsorgroupseventheyhaveconflictsregularly.However,thehigh-contextcultureholdstheoppositeviewabouttheseproblems,regardingconflictasnegativeinfluenceonthebusinessrelationships.Ifanyconflictcomesout,theyjusttakeitoutinthelow-contextcountrieswhilehigh-contextcountriestrytoavoiditandevenwillnotmentionitinordernottounderminetheharmoniousrelationshipsbetweenbusinesspartners.

5.CulturalConflictsinMarketing

Understandingculturaldifferencesisalsocriticalforacompanytodevelopitsmarketingstrategyabroad.Companiessatisfytheneedsoftheirforeigncustomersbymodifyingproductsandapproachestoappealtothepopulationatlarge.Despitethein