The document discusses cultural challenges faced by Chinese multinationals acquiring Brazilian companies. It notes Chinese companies have experienced 69% more employee turnover than other multinationals in Brazil due to failures to adapt managerial practices to the local context. To succeed, the report argues Chinese firms must learn from Western companies that have navigated cultural integration under mergers and acquisitions for decades. It advocates an "ambicultural" approach that distills the best of both Chinese and local management styles.

1. STORY TELLER
NEW KIDS ON
THE BLOCK
Companies from the BRIC countries are the
latest to experience international mergers and
acquisitions. What can Europeans learn from
how Chinese multinationals adapt to Brazil?
By Virgínia Drummond Abdala and Huiyi Gao
82
03/2011 COMMUNICATION DIRECTOR

2. STORY TELLER
A
s a consequence shown that Chinese companies have faced cultural prob-
of the globalised lems in the course of their internationalisation processes,
world in which and here we will concentrate on the Chinese and Brazilian
we live, compa- relationship in the wake of mergers and acquisitions, their
nies have become difficulties in building up long-lasting post-merger syner-
increasingly gies, and the ways in which they might be able to do so
involved in international market- in the future. For western companies that have been deal-
expanding operations such as merg- ing with these difficulties for a longer time, this portrait of
ers, acquisitions and other strategic cultural obstacles faced by two emerging countries’ mul-
alliances. In addition to the classic tinationals can help them to reflect on how their own ex-
Triad ‘countries’ – the US, the EU periences as European multinationals can be put into the
(represented mainly by Germany and service of these new global actors, and thereby constitute a
France) and Japan – and their for- useful competitive advantage in the near future.
eign direct investments (FDI) around
the globe, we can now witness a new WHEN EAST MEETS WEST Since 2009, we have been
phenomenon played out by emerg- closely observing an evolution in the relationship between
ing countries, particularly the BRIC our two countries, Brazil and China, through a European
countries (Brazil, Russia, India and perspective (we were both professors in France, working
China), who have lately consolidated within French institutions). Our interest was to grasp the
their position as major actors on the phenomenon beyond its economic aspect: as specialists in
worldwide stage. Thus, within our human and cultural issues, we realise that there is an inter-
current geopolitical context, Europe esting cultural connection to be analysed between China
and the US can no longer afford to and Brazil, which could develop into a solid and sustainable
remain uninformed about the steps bridge between the west (represented here by Brazil) and
implemented by these emerging the east (represented by China). We have concentrated our
economies intent on conquering new analysis of the two different cultural systems on the ba-
markets. In this article, we will take a sic identification of social mechanisms that could be used
closer look at the experiences of Chi- for construction of solid synergies for business, through a
nese multinational companies within process of identifying similarities in terms of social behav-
another emerging country, Brazil. It iour in both Chinese and Brazilian cultures.
is not a secret that an international Brazil and China’s relationship has reached a new, spe-
merger process implicates several hur- cific and increased relevance. While presenting a challenge
dles to be overcome, especially ones to European and American companies still suffering the
concerned with cultural integration. effects of 2009’s financial crisis, the year 2010 saw a con-
solidation of the presence on the world stage of Brazil and
A NEW ANGLE ON A FAMILIAR China, a wake-up call to the rest of the world heralding the
SCENARIO The question of cultural economic importance of their bilateral relationship. Never
integration during mergers and ac- before in the respective histories of both countries have the
quisitions is not a novelty in the world two had such a comparable visibility as they do today on the
of research; we could cite hundreds of globalised stage. In 2010, China became Brazil’s first com-
research studies undertaken in the last mercial partner with the total value of their commercial
20 years. The interesting fact is that, exchanges reaching 56.4 billion US dollars, as compared
for the first time in their lives as glo- to 2.3 billion in 2000. Nevertheless, Chinese foreign di- 83
bal actors, multinationals from coun- rect investments (FDI) were still very low in Brazil last
tries such as China, India or Brazil are year. But things change fast, and when Brazilian president
facing the consequences of decisions Dilma Roussef visited China in April 2011, the situation
made in the home countries from became much more complex and reached beyond imports
where policies must be elaborated and and exports. This confirmed the growing interest of Chi-
later widespread. Recent reports have nese multinationals in investing in a long-term relationship
03/2011 COMMUNICATION DIRECTOR

3. with Brazil, as for example did the Taiwanese company
Foxconn, which invested up to 12 billion US dollars in or- EXECUTIVE SUMMARY
der to build plants to manufacture liquid crystal for Ap-
A game of mix and match
ple Ipads in Jundiaí, a suburb of São Paulo. During this
trip, Ren Zhengfei, the CEO of the telecommunication Over the past two years, Brazil and
company Huawei, revealed his intention of opening a re- China have consolidated their bilateral
search centre in Campinas, another suburb of sprawling relationship
São Paulo. All in all, this represented a total of 350 mil- International mergers and acquisitions
lion US dollars’ worth of investments. force companies to confront local con-
The main consequence of the growth of FDI, from and texts of the host country
within emerging markets, is the internationalisation of
Poor intercultural management and
their companies and a confrontation with the local contexts failed adaption of managerial practices
of the host countries – something that has dogged Euro- have resulted in 69 per cent more turno-
pean and American companies for over three decades. Ac- ver in Chinese companies than other
multinationals
tors such as CEOs, governments, managers, senior leaders
and investigators have been trying to answer the recurrent Ambicultural management distils the
question, “How can we maintain our global strategy and best of both worlds
obtain success in a local context at the same time?” Among
those attempting to answer this question, we could quote
the reflections of Guillen and Garcia-Canal (2009) on the
comparison of the American model of multinationals fac- According to the report, Chinese
ing new, derived models of multinationals from emerging multinationals have experienced 69
countries, including China and Brazil. However, we note per cent more turnover than other
that the previous investigations into China and Brazil are multinationals in Brazil, includ-
still limited to the economical success of the relationship, ing those from Europe and the US.
without entering in the context of communications, cultur- The main complaints of the Brazil-
al obstacles and adaptation of human resource practices. ian employees who quit their jobs
in Chinese companies are that the
DIFFICULTIES IN TAKING ROOT As in the case of any daily workload is too heavy; there
basic western merger or acquisition, Chinese multinationals is too much pressure for unrealistic
should be attentive to certain specificities of the local con- goals and deadlines; and that there
texts within which they are operating. It seems that Chi- is no room for negotiation. Brazil-
nese multinationals have much to learn from their western ians also report a perceived lack of
counterparts on how to deal with cultural differences when trust in the existence of “double
transplanting their global strategy from home to host coun- jobs” – in other words, the existence
try. This strand of knowledge, which the Chinese have not of two executives, a Chinese and a
yet acquired, can and should be valued by European and Brazilian, for the same job.
American companies (such as Renault, Siemens, and Coca-
Cola), who have been facing these problems for decades AMBICULTURAL DISTILLA-
during their own processes of internationalisation. For the TION Reading these testimonies re-
past six months, we have closely observed the difficulties minded us immediately of what was
faced by some Chinese multinationals in obtaining success written in a November 2010 issue of
in Brazil. As suspected, these difficulties have their roots the Academy of Management Per-
in poor intercultural management and unsuccessful adap- spectives magazine. Authors Chen
tation of Chinese managerial practices within a Brazilian and Miller commented on an inter-
context. The Brazilian newspaper Folha de São Paulo has view with Stan Shih, the CEO of
recently published a report providing a detailed list of the Taiwanese Acer, on the strong and
main difficulties Brazilian employees face when working weak points of the Chinese style of
for Chinese companies in their own country. management. According to the au-

4. STORY TELLER
thors, Shih attributed the success of der mergers and acquisitions for more than three decades.
Acer to its capacity to adapt manage- Not that they should replicate the western management
rial practices in an opportunistic way style, but in order that they learn from the experience of
from both hemispheres, thus recon- adapting global strategies to local contexts. An old chal-
ciling west and east in one distilla- lenge that western multinationals have been facing for a
tion of management, a distillation long time is now applicable to emerging countries’ multi-
he called “ambicultural”. According nationals, who are increasingly becoming major actors in
to Shih, the secret of Acer’s transfor- the global scenario. And the cultural challenges of those
mation into the second-biggest pro- news actors are far from being overcome.
ducer of computers in the world was
a positive combination of elements PICK AND CHOOSE Fi-
originating from both western and nally, returning to Acer’s
eastern cultures. In the interview, CEO, Stan Shih, the key is
Shih described what he “borrowed” in finding an “ambicultural”
from the Chinese management cul- balance between two different
ture, namely its holistic patience tendencies and, in addition to
and a communitarian, collectivistic this, identifying positive, sim-
orientation. He also described what ilar mechanisms in the other
he adopted from the western culture culture through an effort of
Virgínia Drummond
(principally the American style of mutual understanding.
Abdala
management): a bigger decentrali- For Shih, there are elements
Fundação Dom Cabral FDC
sation within the organisation and to be collected and elements
a bigger concession of autonomy or to be avoided in the Chinese Virgínia Drummond Abdala is
empowerment. management style. He advises a professor at Fundação Dom
the Chinese abroad (in Brazil Cabral FDC, Brazil. She earned
her Ph.D in management sci-
MAKING SENSE OF CULTURAL and elsewhere) to adopt an
ence from the Université Paris
CHALLENGES Cultures can be seen appreciation of the long term; Dauphine, France, and is an
as systems, in that they allow human to promote harmonisation by expert in intercultural and
groups to organise their collective life, means of granting collective crosscultural management and
HR development.
find solutions for everyday problems, interests more priority than
and develop and crystallise practices individual interests, as well
and behaviours which can often be as by promoting respect for
destructive or inefficient when trans- the experience of older, more
planted to another context. According senior managers. On the oth-
to Shih, the Chinese culture is still er hand, he warns Chinese
characterised by standards of com- companies to avoid aspects
munitarian behaviour and collective of their culture such as suspi-
attitudes that are deeply rooted in the cion, centralisation of powers,
China’s national unconsciousness, retention of information and Huiyi Gao
and which have been transplanted to exacerbated ethnocentrism. ESDES Management School
Brazil without any consideration for As seen in the analysis of the
the local context. This threatens its testimonies of Brazilian em- Professor Huiyi Gao is associ-
long-term chances of success. ployees within Chinese com- ate head of the International 85
Business Department in the
From this we can conclude that panies in Brazil, translated ESDES management school,
Chinese multinationals engaged in into a lack of communication University of Lyon, France.
mergers or acquisitions abroad have and transparency, these neg- Having earned her Ph.D in
Photos: Private
management sciences, she is
much to learn from their European ative aspects have been the an expert in strategic manage-
and American counterparts, who cause of widespread disillu- ment and international man-
have been dealing with cross-bor- sion, frustration and anger. agement.
03/2011 COMMUNICATION DIRECTOR