Challenges and Recommendations for UK Companies in Establishing Successful Partnerships with Chinese Companies: A Case Study of CafePod Coffee Co. and Luckin Coffee Inc.

This presentation highlights the challenges faced by CafePod Coffee Co. while contemplating a joint venture with Luckin Coffee Inc. in China. The challenges include market access, governmental and political rules, foreign exchange control, fierce business competition, human resources, language and cultural barriers. The presentation also discusses various intercultural communication theories and provides recommendations to enable better business communication and set a successful partnership.

PROJECT 2

INTRODUCTION
 In this era of globalisation of world business and economy, China is one of the most appealing
markets for people who want to globalise their businesses as it is among the best economies of the
world. Many western countries are trying to cooperate with China but face several issues related to
cross-cultural communication and management.
 In this presentation, various challenges faced by a UK company name as CafePod Coffee Co.
trying to contemplate a joint venture with a foreign company based in China name as Luckin
Coffee Inc. will be outlined. The different aspects of cultural challenges that are faced by the
British companies who are planning to expand their business in China will be discussed.

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 The challenges to establish successful communication and partnership with the new Chinese
partners will be highlighted. These will be supported by applying relevant intercultural
communication theories along with various examples. Further, recommendations and
solutions to enable better business communication to set a successful partnership in the form
of British and Chinese joint venture will be given based on the cultural difficulties and
challenges identified.

MAIN BODY
 China has risen from being one of the least developed countries to the second largest economy in the world, this in
itself is considered an economic miracle. Hence, it attracts many companies to expand their business in China and
also enormous amounts of Foreign Direct Investments are being made in the country after its economic reforms.
 This has greatly contributed in the country’s overall economic growth. These foreign companies have many
opportunities in China as it is the fastest-growing and very large domestic market, the quality of human resource is
improving, the institutional environment is ever improving, infrastructure is better, the special economic and high-
tech development zones which are centrally and regionally controlled have several policies that are quite investor
friendly and thriving digitalisation.

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 The sheer market size in the country is the part that most attracts the foreign investors. But, the
companies from western countries face many challenges and issues while expanding their business
in China. Globalisation, along with providing great opportunities for businesses also create various
problems and difficulties in effective management of partnerships with countries and companies
having different cultures.
 Cultural differences have been ranked as the biggest barrier in globalisation and businesses
expanding in the foreign markets. UKTI observed that UK has to face around £48 billion in a year
due to neglecting the cultural differences that lead to failures of cross-national companies. Hence,
people are now focusing on understanding China, its market and the ways to successfully do
business with Chinese people.

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Some of the main challenges that companies face in Chinese market are-
 Market access – The Chinese market is very difficult to access as local distribution networks, the regulatory
requirements, buying habits of the customers, etc. are difficult to predict than other economies of the world which
makes taking the first steps difficult for the businesses. The consumer preference has also changed drastically over
the past few decades and has become more diverse now. The companies have to take into account the consumer
preference in the Chinese market to survive or it can become a great challenge for them.
 Governmental and political rules and challenges – The interference of government can be a problem for many
businesses trying to set their foot in the country. There are several rules that state the procedures and requirements
related to design, manufacturing process, selling and even disposing the products which should necessarily be
followed by the companies. This can become a big challenge for many companies.

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 Foreign exchange control – The foreign companies have to get comprehensive knowledge about the
foreign exchange regulations in China as without understanding it, they can face legal problems and
operational challenges as well. China’s foreign exchange market is overseen by State Administration of
Foreign Exchange (SAFE) which follows very complicated administrative procedures and strict
policies.
 Fierce business competition – Many domestic companies in China are now focusing on improving the
quality of their products and services and many foreign companies have also or are intending to enter
the Chinese market. This makes the competition very fierce mainly with the domestic companies as they
have more knowledge about the local market and are also more favoured by the government as they
tend to get regulatory protections, subsidies, etc.
 Human resources – The demand for trained and professional employees in China is exceeding the
supply which makes it difficult for the companies to hold their staff, as the employers have to increase
their wages repeatedly for them to avoid shifting to other jobs.

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 Language and cultural barriers – language and Cultural barriers is one of the biggest challenges for
the companies that are trying to set up their businesses in China.
 Chinese is a complex language system which has variety of dialects. Some have slight differences in
localism and accent but some are very different from each other. Thus, thorough knowledge of
Chinese language is necessary for business interactions and one cannot depend on basic
understanding of the language.
 In China, though many people are able to understand and communicate in English but it is neither
an official language in the country nor the business language. Lack of proper knowledge of Chinese
language can cause miscommunication among the foreign investor and the Chinese people which
can create cultural misunderstandings and this can become a very complicated challenge for these
foreign companies.

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 There are some Chinese people who are proficient in English but they do not necessarily understand the
Subtleties and details on the English language. Some might not be versed enough in both western and
Chinese culture which makes them hard to properly navigate the business negotiations which are
delicate and require proper understanding of both the cultures and languages.
 There have been numerous cases where the meetings between foreign companies and the Chinese
companies have been successful in the beginning, but as the business issues get more complex, both the
parties start to face difficulties in understanding each other and also in explaining things to each other.
 At times, the Chinese companies cannot properly communicate in an understandable way with the
western company about the unique and different business practices that are followed in China and this
makes the western companies to suffer losses and failures in the Chinese market. This often leads to the
failure and break down of the promising prospects for both parties involved due to misunderstandings or
miscommunication.

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 These misunderstandings are caused due to the intercultural communication which means sharing
of information and communication that can be verbal or non-verbal between people who have
different cultural backgrounds or are from different ethnic, educational, social or religious
backgrounds. There are many theories connected with the intercultural communication. Some of
these are –
 The social science approach covers certain theories that emphasizes on how communication is
influenced by the culture. It is very common to have two individuals different opinions on a matter
and hence conflicts may arise between them. Same is the case with people in western and Chinese
companies as they have different work culture and habits, difference of opinion is sure to arise.
Everybody has different ways to handle the disagreements and conflicts. The ways in which people
manage their conflicts are also influenced by their cultural. Every party involved in a conflict has
the intention of saving their face which generally is used as a metaphor for maintaining their public
image.

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 This is covered under the face negotiation theory. Various studies
conducted by Ting-Toomey and her team suggested that people
from places like US where people are generally from
Individualistic societies are concerned majorly about saving their
own image even by using dominating styles and ways for conflict
resolutions.
 But, people from places like South Korea, China, etc. who are
from collectivistic cultures try to use the resolve the conflicts using
obliging, avoiding or integrating styles as they are also concerned
about saving the image of other people too.
 This can be seen from an example where a Chinese company and
an American company were trying to finalise a deal. Everything
went well at first and the head of the Chinese company was invited
for dinner at evening.

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 One of the main reasons of misunderstanding in intercultural communication is the importance
people give to certain conversational constraints like clarity, effectiveness, consideration for other’s
feelings, minimising imposition and risking negative evaluation of the hearer. While some people
may give more importance to one aspect, the others may favour some different constraint. For
example, it has been seen that the people from individualistic culture are more focused on clarity of
the information shared while the people from collectivist culture tend to be place more importance
on the feelings of others and minimizing importations.
 There are times when people from different culture might use the same words and phrases but they
both do not share the same understanding of the particular phrase. A phrase which might mean
something else to a person might convey an entirely different thing to another person.

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 These differences are covered under the imperative approach. For example, when an idea is being
discussed in a company and the boss says “we can try that.” This might mean different things in
different cultures and countries.
 Like, in America, it will be assumed as approval from the boss. In Germany, it might be considered
as ringing endorsement of the idea which means strong approval from the boss. While in Japan,
this statement would mean complete disapproval from the boss. This is because people don’t
usually verbalize any negative feedbacks in some countries like China, Japan, Indonesia, Korea,
etc.
 Their lack of approval or outright rejection is assumed by lack of positive feedback. But in
America, for disapproving something, one has to say something negative about it. And in countries
like Germany, France, Denmark, Spain, etc. people are very direct and straightforward about
expressing their approval or disagreement.

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 This can also be seen in an example where a Dutch moved to UK for his job. He made a report and
submitted it to the manager for feedback and the manager said that the report was fine. But later
on, the employee got to know that the manager was not satisfied enough as there were some
changes to be made in the report. This was because of the differences in their communication
culture. In UK, when people say something is “fine”, it means that it is not upto the mark and
needs improvement while the Dutch employee took the literal meaning of “its fine”. This created a
confusion between them.
 As suggested in the Standpoint theory, an individual’s style of communication and understanding is
also affected by his/her knowledge, experiences and the social groups they belong. This means that
a people see and understand things from their own standpoints and perspectives. The social and
political experiences shape an individual’s perspective. This creates a difference of opinion and
understanding among them. This is often associated with Feminist standpoint theory.

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 Both men and women are now getting equal opportunities in almost every field. Women
are also working shoulder-to-shoulder with men. But, it has been seen in some cases that
the ways in which women express and communicate are different from that of men.
 Genderlect theory covers this aspect of intercultural communication. In business world,
both men and women interact with each other. This can also be a reason for the
confusions among the parties.

RECOMMENDATIONS
 In order to avoid the challenges and difficulties in intercultural communication between both the
parties to successfully enable the partnership, both the parties especially the UK company should
take care of some points like –
 The UK personnel who are supposed to communicate with the Chinese team should properly learn
the etiquettes of the Chinese culture as the Chinese people are very particular about and respect their
etiquettes. The familiarity tokens used to address people of different positions should also be learned
well in advance.
 Using of confusing words or slang idioms and saying should be avoided as it may be difficult for
them to understand fully and they might get confused by understanding only a few words out of it.
One should also be careful with humour as many people are quite strict and prefer behaving
professionally and do not appreciate humour and jokes in business. Sarcasm should also be used
with utmost cautiousness.

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 The conversation speed should be slow for the Chinese people to hear clearly so that they can
properly understand what is being said. Along with modulating the pace of talking, proper
pronunciation and speaking clearly is also very important. The UK people can also politely ask the
Chinese team to slow down if they feel that they are talking too quickly or their accent is difficult to
understand.
 The use of words should also be made wisely. Simple and easy words should be used that are
understandable to people who even have basic knowledge about the English language. The main
focus here should be to keep it simple and clear.

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 Another basic strategy to follow for better communication is active listening. Focus only on what
the other person is trying to say, make sure that everything is clearly understood and if not,
questions should be asked politely.
 Even in case of disagreements, do not try to cut the other person while talking. Take turns while
talking and try to deliver short messages that are easy to understand.
 While discussing large figures, one must ensure that the figures stated are the same in both
countries. For example, one billion in US is written as 1,000,000,000,000 but in UK, it is written as
1,000,000,000. In case of any confusion, one must write down what they mean so that things can
be clear for both parties.
 One must always prefer asking open-ended questions so that the other party can answer the way
they want and the required information is aptly shared. Avoiding closed questions is a smart way to
be respectful for others. Both the parties must hire efficient and the best possible translators who
are proficient in both the languages so that no confusion arises due to incomplete translation.

CONCLUSION
 As joint-ventures require frequent interactions and communication between both the parties, there
can be many difficulties in establishing a successful communication and smooth decision-making
process due to the cultural differences.
 The report highlighted the problems faced by two parties from different cultures and countries
while getting into business deals and corporations. In this report, various aspects of cultural
challenges that a British company can face in China to successfully communicate and develop
partnership with Chinese people were discusses.
 All these challenges and difficulties were supported by applying the relevant intercultural
communication theories and some examples for the same were also given. Lastly, some
recommendations and solutions to enable a successful partnership were given for the underlying
problems and challenges in intercultural communication.

REFERENCES
 Books and Journals
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communication. Chichester: Wiley Blackwell.
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on ideology, theology and sociology. International journal of linguistics, literature and culture. 5(5).
pp.29-35.
 Ferri, G., 2018. Intercultural communication: Critical approaches and future challenges. Springer.
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 Hua, Z., 2018. Exploring intercultural communication: Language in action. Routledge.
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 Kononov¹, L. A. and Glinskaya, I. Y., 2019. Intercultural Communications In Migration Processes:
Problems And Solutions. Functional Aspects Of Intercultural Communication. Translation And
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 Presbitero, A. and Attar, H., 2018. Intercultural communication effectiveness, cultural
intelligence and knowledge sharing: Extending anxiety-uncertainty management
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 Klyukanov, I. E., 2020. Principles of intercultural communication. Routledge.
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
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 Theories of intercultural communication. 2022. Available through:<
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