The following case study is a compilation of facts and data based on a real or hypothetical business situation. The main objective of this exercise is to enhance your ability to solve business problems. Using a logical framework apply the concepts you have learned in this course to answer the following questions. Please do not ignore the qualitative and quantitative data.
Global Business Environment and Cultural Considerations
Steeping in opportunity.
Twelve Trees is a Canadian company that imports loose teas from China. They receive the tea in bulk from independent Chinese farmers, and package the tea in 400g, 2000g, and 5000g portions for distribution among their retailers, for the price of $110.00, $410.00, and $1,180.00, respectively. Their suppliers reside in the Lingnan area (comprising the Guangdong, Guangxi, and Fujian provinces), and they specialize in Wulong tea, although some of their suppliers also grow green, black, and white teas. During the past fiscal year, the number of retailers interested in purchasing their product in bulk has increased by 37 percent. Twelve Trees attributes their product's rise in popularity to an increasing interest in alternative health treatments, particularly among young and middle-aged women, and to the fact that the teas are certified organic and grown in a socially responsible manner. While they are excited about the prospects of increased business, Twelve Trees is struggling to find enough Chinese farmers to fill their orders.
There are several guidelines Twelve Trees requires their suppliers to meet. First, the tea must be grown in a way that maintains the long-term fertility of soils without using artificial inputs such as chemical fertilizers or insecticides. Second, the tea should be grown on an agriculturally diverse farm, a farm on which tea is not the only plant being produced. Third, the employees at the farms must be paid competitive wages, enough to sustain a decent standard of living. This final point is dependent on the location of the farm - a ‘decent' standard of living is relative to the market forces of the region in which the farm is located. These three principles are ensured through regular visits to the farms by independent observers. By virtue of these inspections, Twelve Trees is able to guarantee an organic and socially responsible product to their consumers in Canada.
Diversification and cooperation After speaking with some of their independent suppliers in China, Twelve Trees discovered a cooperative of small tea farmers in the Southwest area of China, which includes farmers from Yunnan, Guizhou, Sichuan, and Tibet. This area produces mainly black and green teas, and specializes in Pu'er tea, which has been used in China for hundreds of years as a cleansing and detoxifying drink. The cooperative is called Defang Hezuo'She, and it meets the three principles Twelve Trees insists upon to maintain their socially responsible and organic brand, and allows Twelve Trees to diversify their product offerings. An added bonus of Defang Hezuo'She is that all of the participating farms have been growing tea for centuries, adding a rich historical background to the product.
Twelve Trees is interested in securing a long-term contract with the cooperative, but in order to do so, they need to travel to the Yunnan province to inspect operations and to create a stable relationship with the cooperative's executive members. Twelve Trees does not currently employ anyone fluent in Mandarin. They have managed their previous Chinese business through an interpreter. Twelve Trees decides to continue using interpreters to begin contract negotiations with the Chinese cooperative. After a detailed negotiation process, Twelve Trees and Defang Hezuo'She successfully agreed upon contract terms, and the cooperative is now preparing its first major tea shipment to Canada.
Case Study Discussion Questions
1. What are some actions Twelve Trees can take with regards to their interpreter, to ensure the success of their business deal?
2. China is considered a ‘high context' society. What qualities of such a culture have the potential to affect an international business relationship?
3. Although no one on the Twelve Trees trade mission team can speak Mandarin, they can each pay close attention to non-verbal communication in order to ‘read' the general reception they are being given. List some non-verbal communication techniques, and explain why it is important to read and understand these symbols.
4. What steps can Twelve Trees take to ensure that the agreement they have with Defang Hezuo' She continues to be profitable and stable well into the future?