Corrs High Vis: Episode 11 – Doing Business with Asia (Part One)

David Hastie: Commentator

Part 1 - Celeste Koravos: Corrs Chambers Westgarth – Senior Associate, Construction

Part 2 - Jonathan Mackojc: Corrs Chambers Westgarth – Casual Paralegal, Construction

DAVID: Hello and welcome to Corrs High Vis – Corrs Construction’s podcast series. My name is David Hastie, lawyer with Corrs Construction’s Practice and I’m joined by Corrs Senior Associate, Celeste Koravos, a member of Corrs’s Japan Business Group, and Celeste also sits on the committee of management of the Australia Japanese [Australia-Japan] Society of Victoria. And we’re also joined by Jonathan Mackojc in part two of today’s podcast who is a member of Corrs’s China Business Group and Corrs’s International Arbitration Group. Today we’ll be taking a look at the crucial role Asia plays and will continue to play to Australia’s construction market. And from a practitioner’s perspective crucial to this relationship is the awareness and cultural sensitivities that must be observed when doing business with our friends from Asia. In part 1 we will take a look at Japanese cultural values, business etiquette and negotiation styles. And in part 2 we will look at the Chinese high level cultural values. Celeste and Jonathan, welcome.

CELESTE: Thanks, David.

JONATHAN: Thank you David.

DAVID: Celeste, I might start with you. Can you give us some context about the relevance of Asia to the Australian construction industry and give us a flavour of why Australian companies might be interested in learning about Asian business culture.

CELESTE: Sure. Well the industry continues to be a popular choice for Asian investment although the focus has shifted from mining more towards traditional construction and transport and renewables. And this isn’t a surprise. Australia has optimal investment conditions. We have one of the fastest growing populations in the world, a triple A credit rating, steady unemployment and historically low interest rates.

DAVID: That’s obviously attractive factors for any sort of company looking to our shores, surely.

CELESTE: That’s right. And the population growth in particular means that we have an infrastructure gap and there’s plenty of room for Asian value-add in terms of know-how technology and capital. So we see a lot of potential here for Asian investors to make market-led proposals, providing innovative technological and infrastructure funding solutions.

DAVID: So – I might interrupt there. So what are our Asian clients telling us?

CELESTE: Well, we’re hearing that they’re hungry for information and introductions. So they want transparency around project opportunities and they want the early invitations to join bidding consortia. And we’ve actually seen many examples of successful Australia-Asia collaborations over the last few years and just recently on 2nd March, Kajima Constructions announced its purchase of a majority share in Cockram Constructions so we will be interested to see how that goes.

DAVID: Definitely. Watch that space. So, Celeste, we might start with Japan. So obviously you’ve got quite a background there and you’ve worked in Japan and speak fluent Japanese. Feel free to converse with me in Japanese – not that I’ll be able to respond. But, so, in light of that background, let’s talk about what Australian companies can do to increase their chances of successful partnerships with Asian companies.

CELESTE: Sure. And what I would say about Japan and what I’m sure Jonathan would say about China too is that today we’re only providing generalisations and within each of those jurisdictions there’s a broad spectrum of cultures. But in general, what we can say about Japan is that it’s borderline hierarchical. So foreigners might see Japan as being quite hierarchical but really decision making takes place at all layers within an organisation. There’s no top person making a decision. So we see for example when Australian companies have been taken over by Japanese companies there is a push towards change being initiated from the bottom up. Japan is also an uncertainty avoiding country and that’s often attributed to the constant threat of natural disasters. As you might know, David, “tsunami” is a Japanese word, so -

DAVID: I know that word.

CELESTE: As a result, everything in Japan is proscribed for maximum predictability. So incorporate Japan we see things like a focus on feasibility studies and working out risks long before a project starts. And we see a ritual such as business cards and seating rules. Japan’s also very long term oriented. There’s a high rate of investment in research and development, even in economically difficult times. And companies are generally there with a view to serve society for generations to come rather than to serve the shareholder in the immediate term.

DAVID: That’s interesting, isn’t it. It’s quite different, I guess, to maybe what some of the western expectations might be in those realms.

CELESTE: That’s right.

DAVID: So, Celeste, I might turn to business etiquette because I always find that an intriguing one. We know that Japan has, I guess, a very unique and historical business culture. Can you let us know some of your – I don’t know, your top tips for acting in accordance with appropriate etiquette and essentially not causing offence to our Asian friends.

CELESTE: Sure. If in doubt, I would say always be polite and formal. That’s really your starting point. But some of the more specific things are business cards. People are always curious about Japanese business card exchange. Business cards are really seen as an extension of your body; an extension of yourself. So when you get a Japanese person’s business card, don’t write on it and don’t just chuck it in your bag or your pocket. Always have a business card case with you. I really like the business card culture in Japan because it’s a nice way to introduce yourself every single time you meet someone, no matter the context. Whereas in Australia I think we tend to exchange business cards when we see a future prospect with a person or think that we might get something out of the relationship.

DAVID: Well, I suppose it’s not even that, Celeste. It’s almost a mere formality, isn’t it? It’s “here’s my card, I’ll take yours” bang, straight in the suit pocket, get down to business.

CELESTE: Never to be seen again.

DAVID: Yes – don’t say that. Don’t be so cynical.

CELESTE: So I might recommend to listeners to watch some YouTube clips on how to exchange business cards properly but basically you need to turn your business card around so that the recipient receives it the right way up for them to read it. You need to use two hands and always put your hands below those of the person you are exchanging with to show respect to them. And when you receive the card, spend a little bit of time studying it. Make some polite comments about it. And as a general rule, I wouldn’t shake the Japanese person’s hand unless they initiate it first.

DAVID: Very interesting. I suppose there’s also etiquette around seating, isn’t there?

CELESTE: Yes. So there are very extensive rules for seating based on hierarchy and they cover not only meetings but restaurants, taxis, trains, even who operates the buttons in an elevator. A general rule is that the highest ranking person in a room sits the furthest from the door or sits with a nice view looking out, for example on a cityscape or a piece of art. And if in doubt, just wait to be shown to your seat. Don’t sit just wherever.

DAVID: Very interesting. And also I note gifts and wrapping.

CELESTE: Yes.

DAVID: There’s etiquette around that. Please explain.

CELESTE: That’s right. So a classy Australian souvenir will be well received if you’re meeting a Japanese ex-pat in Australia or Japanese people in Japan.

DAVID: I’m intrigued. Just enlighten me. What is a classy Australian souvenir? I’m picturing a koala or something like that. Clearly not.

CELESTE: Koalas can be okay, if it’s in the right context. Generally I’d start with something made in Australia and make sure it’s high quality. So things like produce, wine and wooden articles go down well.

DAVID: I was just thinking of a nice bottle of big Barossa shiraz that would probably impress no doubt.

CELESTE: That’s an excellent gift but if you’re going on a business trip to Japan you might be limited in how many you can bring over, especially if you’re meeting a lot of Japanese so -

DAVID: You wouldn’t want to disappoint then, obviously. Maybe a few cases then.

CELESTE: That’s right. And wrapping is just as important as the gift. So it’s really useless to give a gift that’s not well wrapped. It won’t be received as highly as it should be. So spend the time getting quality gift-wrap. I’ve even been told by someone in Japan that their estimation of me increased because I had good quality gift-wrapping so it is important. And one final thing I would add is appearance. So go formal and conservative in the Japanese business setting. For women this means your make-up and nails should be natural. No bright colours although there seems to be a loophole for Japanese nail art which is quite fun. And for men, and I might have some of our hipster listeners crying into their Matcha lattes, please make sure your facial hair is groomed; no overgrown beards; and no crazy socks like we might see in corporate Australia.

DAVID: So then a few of our colleagues might be in a bit of trouble then.

CELESTE: They might be.

DAVID: Some of those socks – I don’t know about – I think the facial hair would get a tick but the socks – might have to reassess. That’s very interesting Celeste. So I might move on. There’s something – I should say there’s sometimes a perception that negotiating with the Japanese can be tricky because they are not as direct, say, as us Australians and are restricted in their ability to make on the spot decisions. So, I might ask you perhaps, can you give us some advice for successfully negotiating with a Japanese company and the employees of that particular company?

CELESTE: Sure. Well, the starting point is to be conscious that English is a Japanese person’s second language generally and this will apply to many Asian cultures and I’m sure Jonathan would agree. So what you need to do: speak slowly and clearly; use simple words and expressions; don’t use Australian-isms; and be careful with jokes. They’re very common in Australian business culture but they might get lost in translation. You should also provide written materials where possible so an agenda is always appreciated. Copies of any presentations that you make. Pre and post meeting follow-up emails and generally confirming things in writing is an excellent practice because the written language is often easier to follow than the spoken language.

DAVID: Interesting.

CELESTE: You also need to be conscious of indirect cues during negotiations. So if you get a nod from a Japanese person, don’t assume it means “yes”; it just means they’re paying attention. And a smile might not mean acquiescence with what you’re saying; it might simply mean that you’re not understood. And keep in mind that a “no” will rarely be given by a Japanese person directly. They might say something like “that could be difficult” or avoid responding to your proposition. So don’t expect a “no” even if the intention is “no”. And generally respond promptly to every communication but know that you might not get a prompt response in return.

DAVID: Sure. What about decision-making, you know, considerations around that?

CELESTE: Yes, so earlier we talked about Japan being borderline hierarchical in that decisions are made by the various layers in an organisation so that’s something to take into account in negotiations. Even minor decisions are rarely made on the spot at meetings. Decisions are made in a group, often using the Ringi process so -

DAVID: Can you describe this Ringi process?

CELESTE: Ringi.

DAVID: Excuse my pronunciation.

CELESTE: Sure. So decisions usually need to be approved by a certain number of people and often this is done through a document that is circulated from the bottom of an organisation through to the top and this can take a very long time. So in a negotiation make sure you don’t have any surprises for your Japanese counterparty or last minute changes. Their decision making process might not allow for last minute changes. And as a general rule allow more time for negotiations than you might normally expect to cater for this process.

DAVID: So is this commonplace?

CELESTE: Yes, that’s right. And I guess this can be a challenge when we’re looking at the construction industry because you’ve often got a tight tender timetable. So one thing we encourage our Japanese clients to do is develop governance principles that allow a degree of autonomy by Australian management to respond to local market conditions without needing head office approval. But I guess the positive out of all of this is that your patience will pay off because the Japanese decision will always be strategic and made for the long term which is exactly the sort of mindset you want in a construction project.

DAVID: Fantastic, Celeste. Well that’s – that’s extremely comprehensive. How about we finish on some tips for our listeners. Maybe, let’s be concise, three top tips.

CELESTE: Sure. Firstly get your business cards right. So buy yourself a case, stock up on business cards and learn how to exchange them properly. I’d say also understand the complex decision making process in Japanese companies and finally, if in doubt, always go with a position of showing respect.

DAVID: Fantastic, Celeste. Thank you very much for that.

CELESTE: Thanks, David.

DAVID: My name is David Hastie. Thank you for listening. We look forward to you joining us for part two of our doing business with Asia series where we will look at Chinese high level cultural values.

This podcast is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice about your specific circumstances.