By Dianne Hofner Saphiere

Newly industrializing nations have long been the source of low-priced, questionable quality merchandise—think Japanese goods in the 60s and 70s, or take a look at the “manufactured in”labels in the clothes we buy—the ones we need to be careful to wash separately so they don’t bleed their color, or wash by hand so the buttons don’t all fall off. To the casual observer it would seem to be a stage of global economic development, one nation serving as the cheap labor and manufacturing resource for another, whose population enjoys the ability to consume in heavy quantities. Ideally the symbiosis leads to true economic development on the one end, and no harm done on the other.

In recent years it has been China’s turn to experience astonishing export growth, as industrialized nations have jumped to take advantage of the opportunities in China. The country produces 80% of the world’s toys, according to the BBC, in over 10,000 factories. But, in 2007 nearly three-quarters of a million toys bearing such trusted and well-known names as Barbie, Big Bird, Elmo, Polly Pocket, SpongeBob SquarePants, Thomas the Tank Engine and Winnie the Pooh have been recalled. China’s reputation has been considerably damaged, as have the reputations of the brand-name manufacturers, the subcontractors, and even the stores that sell the products (JC Penney, Target, Toys R Us). How have we arrived at such a cross-cultural quagmire? Who is to blame? And, the purpose of this column, what role has culture played in this US-China interaction? China has a huge population that is very willing to work at very low-by-US-standards wages. The US has a huge hunger for the low-priced goods the Chinese labor force can produce. It would appear to be a match made in heaven. But it is also an unfortunate snapshot of what happens when capitalism runs wild.

During a recent training I conducted in Dallas, one of the participants, a Chinese national, told me his family’s story. His father is a company employee who has had a good, stable and lengthy career that provided his family comfort. The real financial success has been his mother. She started a bakery some years ago. The business grew, and it was her good fortune to get WalMart as one of her major clients. That enabled her son to attend a prestigious US engineering school and sign on with a top-tier multinational technology company. But his mother, a lifelong entrepreneur, closed her business last year and took a corporate job. WalMart’s demands for ever-lower prices had made it just too difficult for her to stay in business. She didn’t feel she could adequately pay her employees with such low profit margins, she couldn’t afford the maintenance of the facilities, and she knew she couldn’t skimp on product quality to meet the low price demands. She decided it was better to get out now and take a job where someone else had the headache.

So, what is happening here on a cross-cultural level? Well, Chinese and US Americans value monetary success, be it capitalism in the case of the US or prosperity in the case of China. Chinese generally find it difficult to say “no” to a customer; they are eager to work hard to maintain the relationship, and would hesitate to “argue” their case with a major customer. US customers have no such qualms. The objective is cheaper prices for consumers, and better profit margins for stockholders. Though both sides are driven by similar values, their differing communication styles create a potentially dangerous dynamic.

Another factor is the role that the law plays in society. US society is very rule-driven. It is assumed that laws exist to be obeyed (though of course such is not always the case)—FDA standards must be met, lead paint absolutely must not be used, if the rules are not followed there is risk of injury or death to the consumer. The average Chinese may have difficulty understanding such rigidity of the law, being more accustomed to managing their relationships with and thereby the capricious whims of local officials.

Such a focus on relationships can be clearly seen in the case of Lida Toy, the subcontractor to Mattel whose owner, Zhang Shuhong, hung himself in mid-August. Lida Toy factories have been abandoned, putting 5000 migrant workers from China’s poorest provinces out of jobs. The last thing Mr. Zhang did before killing himself was to make sure his employees received their final paychecks. Mr. Liu, a Lida manager, was quoted in Reuters as saying that Mr. Zhang’s best friend was the owner of the company that supplied the leaded paint to Lida.“Zhang was ruined by his evil-hearted best friend,” Liu said. I doubt many Americans would personalize business realities in such a manner.

The recalls themselves illustrate cultural factors as well. Mattel found the problems through their own internal testing (self-reliance), and revealed them in an attempt to be “open, honest and forthright with consumers.” They assumed responsibility by exercising control—they audited all their suppliers and began inspecting all toy shipments from China. Control is another core value in the US; we can see it reflected in the demands to bring outsourcing home, for increased controls and safeguards over imports, and in the demand for an “import czar.”

The Chinese responded to events by quickly revoking Lida’s manufacturing license. It took a bit longer for China’s General Administration of Quality Supervision, Inspection and Quarantine to issue new toy recall rules, and they also appointed Vice Premier Wu Yi head of a 19-member committee to improve product security. These responses reflect the Chinese value on hierarchy, in this case the leadership of the central government. China also has quite loudly complained about the campaign to discredit its reputation, claiming it to be a form of protectionism, reflecting the importance of national pride.

Finally, in an interesting turn of events, in September the importance to the Chinese of saving face seemed to motivate Mattel to apologize for its over-zealous recall and for “Mattel’s design flaws, not manufacturing flaws in China’s factories” (Fox News, Sept. 21, 2007, quote attributed to Tom Debrowski, Executive Vice President for Worldwide Operations for Mattel). To me this is a terrific example of cross-cultural competence. Rather than blaming the other guy, Mattel stepped up to take its share of responsibility for the mishaps, realizing that its designs must explicitly include all minimum specifications. The Cultural Detective series emphasizes that strong and long lasting cultural bridges require two-way bridging. As long as Mattel follows its apology with improvements in its internal design processes and its communication with and management of vendors, I very much applaud their demonstration of cross-cultural competence in the face of such unfortunate recent events.