Red Dragon Enterprises:
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Red Dragon Enterprises:
A failing Chinese joint venture
Trust is very important thing doing business in China. A very good example of it is Rexs contract with Tsang. In this country entire relationship should be based upon trust and a contract only represents “paper trust” which is meaningless. People in China do not want to recognize a formal agreement. They dont like contracts and business relationships in China are based on trust and “face” more than legal documents. It is not good, because a low is very important thing in all the world. And signing contract without a paper and just with “trust” is like contradictions of business rules.
Other interesting aspects of Chinese culture are their belief and religiousness. For example, when Tsang visited a fortuneteller and asked her about joint ventures success or his belief in the meanings of names. He also thought that anything else would “encourage evil spirits” like the name of Red Dragon Enterprises.
Chinese people are very united nation as well. They like to have many contacts and connections with others. It is important for them and maybe it makes sometimes them proud. Moreover, their English knowledge is not very good, so it is difficult to communicate with them.
So, these aspects of Chinese culture caused some of the difficulties when Rex and his firm wanted to enter into a joint venture with a Chinese manufacturer in order to reduce production costs. When Rex was trying to make a contract with Tsang he felt uncomfortable, confused and uncertain of their business success, because these aspects of Chinese culture made him to feel so.
Rex Adams didnt take culture differences between running business in China and Australia seriously. He was aware of some aspects of the Chinese business culture but he handle them incorrectly. The biggest mistake he made was the agreement, which was too general. He knew that in China the partnership should be based upon trust, so he agreed on a simplified contract. He should have insisted on making a detailed agreement. This is always the basic rule of starting a joint venture. It should contain responsibilities of each side, deadlines and consequences of delays as well as detailed information about amount of capital investment. Well prepared agreement could have at least allowed Rex to take legal actions against Tsang and get some of capital back. With so general contract it is probably impossible to regain any money.
Another serious mistake of Rex Adams was that he trusted his partner too much, although he hardly knew him. People from communist countries are often used to cheating in their working places. It is quite normal that they for example steal inventory from the state-owned plants or that they dont work efficiently. Even though the situation in China has changed recently and private sector is not illegal anymore, the mentality of people cant be changed so quickly. They dont respect private property as much as people from western countries. Therefore, Rex should control the actions taken by Tsang from the beginning. First of all, he should send there his managers, who would control the situation all the time and not only occasionally. One possibility was to send there his manager from Taiwan, Chen Wah. He is a trustworthy person and he comes from the Asian country so he might be aware of culture differences. Besides, Rex should for example hire his own translator if he felt that Tsangs translator might not translate correctly.
Moreover, there was lack of control of