Moving to China

Two articles from today's New York Times highlight deals from Western companies to access markets in China. The first comes from Wal-Mart:

Wal-Mart Said to Be Acquiring Chain in China
By DAVID BARBOZA and MICHAEL BARBARO

SHANGHAI, Tuesday, Oct. 17 — Wal-Mart Stores, the largest retailer in the United States, is laying the groundwork to become the biggest foreign chain in China with the $1 billion purchase of a major retailer here, according to people briefed on the deal.

The move represents a large step for Wal-Mart’s strategy in China, allowing the American retailer to more than double its presence in a country that, despite its size and growing middle class, remains largely untapped by foreign retailers.

Though the size of the acquisition — of a Taiwanese-owned supermarket chain called Trust-Mart — may be modest for Wal-Mart, it is a critical one because the Chinese market is becoming much more pivotal in the retailer’s overall international strategy. For Wal-Mart, China represents an opportunity to tap a vast and fast-growing market abroad at a time when the company’s sales are lagging elsewhere and it has run into obstacles to expansion at home.

“China is the only country in the world that offers Wal-Mart the chance to replicate what they have accomplished in the U.S.,” said Bill Dreher, an analyst at Deutsche Bank Securities.

The second involves Viacom:

Viacom to Provide Content to Leading Chinese Web Site
By DAVID BARBOZA

SHANGHAI, Oct. 17 -- Viacom, one of the world’s biggest media companies, said today that it had struck a deal to provide television and music video content to Baidu, one of China’s biggest and fastest-growing internet companies.

The alliance between Viacom’s MTV Networks and Baidu.com, one of the world’s most trafficked web sites, is the biggest effort so far to introduce American television and entertainment programming into China.

The deal comes just two months after MTV Networks -- which produces the MTV music video channel as well as Nickelodeon and popular cartoon programs like Sponge Bob Square Pants -- formed a similar alliance with Google to distribute ad supported clips over the internet.

Viacom officials say they are moving aggressively to digitize their entertainment content and funnel it onto the internet, mobile phones and other devices, putting its entertainment at the fingertips of people in every part of the globe.

“This is an extraordinary milestone for us,” said Bill Roedy, the head of MTV Networks International. “This gives us an amazing opportunity to tap into a new market. This is a direct link to the No. 1 portal in China.”

I have no idea how good these deals are on the merits, based on their business models and terms. Time will tell. But as I emphasize with my negotiation students, deals operate on two simultaneous levels: 1) the structural and strategic merits and exigencies of the situation, and 2) the human, cognitive and emotional realities of the player(s) involved.

From a cross-cultural relations perspective, I'll be interested to see how well these very different cultures are able to work together through the operational complications of strategic alliances. In the West, we are not as good at building and sustaining business ties through relationships as they are in China, and we rely more on contracts and the law to encourage compliance and commitment. Once the negotiators are done, and the operations people must make this work in order to derive sustainable value from these joint enterprises, mistakes and miscomminications are more likely to occur.

As I say, time will tell.