Please read the case study below and answer the following questions briefly.

1 How do you assess the situation?

2 Do you think Gunawan was being unreasonable?

3 Do you think the Western consultants did not understand the Indonesian context and culture?

4 How much were the clashes caused by cultural differences as opposed to commercial ones?

Relations Engaging Importance given to . Most Asian countries prioritize the persu establishing personal engaging in business transactions relationships in business Contracting Importance given to . Legal contracting is the norm in the USA while br overall agreement on agreements are considered satisfactory in Japan principles versus details Competing Advantages Product technology . In China, connections (guanxi] are still a very important factor in versus personal competitive advantage connections as a source of competitive advantage Supplying Preference given to . In Asia the notion of 'extended families' implies that preferential friends and families in treatment will be given to families/friends for supply contracts. supply contracts MINI-CASE 3.1 Working across cultures: the engineering consultants' clashes In mid-2005 Gunawan Wiboto (Gunawan), an Engineer, 'The rapport was excellent. They ethnic Chinese Indonesian entrepreneur and treated us as personal guests, and we did the founder of the Ramayana Group, decided to build same when they came to Surabaya'. a steel mill incorporated as a new company: PT The first ripples of disturbance appeared Hanuman Steel. His team began the search for an when a team of specialists from John Smith trav- experienced engineering consultant for the pro- elled to Indonesia for on-the-spot investigation. ject. The company approached several consulting On matters related to engineering work, the firms reputed for their engineering services. The relationship between the two firms remained difficulty, as they quickly discovered, was finding good. It was the financial side, and specifically a consultant who believed they could do it their the construction budget and the overall cost of way and be successful. the project that caused the first rifts to appear. The required services fell into four stages: When Hanuman Steel looked at Smith's costing, basic design, detailed engineering, procure- they found they were 'way out - they were engi ment, and construction. Representatives from neers, not commercial people'. If the design side four selected reputable international consultants went well, the commercial side proved far more submitted their proposals. On 3 January 2006, contentious; the relationship finally foundered the John Smith Engineering Consultant Corp., over budget disagreements concerning the three headquartered in Melbourne, was awarded the remaining phases. Smith's estimated cost for the contract for the basic design development phase. procurement and the construction of the mill was US$100 million. Hanuman Steel estimated it at John Smith and the basic design US$50 million. Smith's schedule for completion of development phase the project was 36 months, Hanuman Steel's was 18 months. The John Smith team began work quickly and efficiently. According to Hanuman Steel's Chief At this stage, Gunawan concluded that his interests were no longer being served , and , as3 GLOBALIZATION, SOCIETIES AND CULTURES cultures the basic design phase of the project was coming to an end, he decided to opt for a different con- ground in deciding who should do what; what sultant for the following phases. should be Hanuman Steel's responsibility and what Brown's, and what they should do jointly. A failed attempt: Lars Corp Shortly after, Brown's president, Tom Brown, accompanied by the man who would be in Gunawan and his Chief Engineer visited Stock charge of the project, flew to Surabaya to sign ntacts before holm to sound out Lars Corp, a Swedish firm that a letter of understanding. In February 2007, a had already worked on the preliminary blueprint cross-cultural seminar organized by Hanuman ush of the project. Lars was selected for the phases of Steel's two European consultants took place in detailed engineering, procurement, and construct Pittsburgh, attended by people from Hanuman tion. At the end of November 2006, draft contract Steel and Brown's. The practical outcome, it was in hand, Hanuman Steel negotiators went to hoped, would be to resolve problems before they Stockholm to finalize the agreement. Negotia- arose and forge a team spirit. actor in tions were difficult because Lars adopted a very Despite these efforts, a feeling of uneasiness legalistic approach. But finally an agreement was began to surface on the Hanuman Steel side dur- reached and Gunawan flew to Stockholm to sign ing the early meetings to prepare for the supplier the contract. A celebration dinner was held. The negotiations. Hanuman Steel found that Brown's erential next morning, Gunawan discovered that Lars' was 'building in safety feature after safety fea- ture, which gave us serious doubts about the tracts. president had left for the USA. However, before leaving he had drawn up a letter of understand- eventual cost of the project'. The breaking point ing, signed it and sent it to the hotel. Inserted came over a much more important issue. Brown's in this document, Gunawan found a clause con- had agreed to give Hanuman Steel two almost cerning performance guarantees that was 'totally unconditional bank bonds which it could cash if against the spirit of everything we had discussed' the project failed. However, Brown's appeared The clause, which had not been previously seen to have second thoughts about the bank bonds, or discussed by the Hanuman Steel people, had and its failure to issue them turned into a serious 'turned a fixed price contract into an open con problem. Hanuman Steel then withdrew its team tract'. Other clauses, already agreed, had also and sent Brown's a letter noting that 'under the been changed. To Gunawan, the message was circumstances, we feel we cannot work together. clear - it indicated a lack of trust in him and his Thank you very much' company. Utterly frustrated by this development Gunawan had learnt his most important les- lent. They Gunawan refused to sign the document and flew son: 'Even when you have everything in a written re did the directly to Pittsburgh to meet Tom Brown , a contract, it doesn't mean you will get it'. These shortlisted US consultant. problems had been exacerbated by the cultural appeared gulf between the two sides. Gunawan's entre- mith trav- Another try: Tom Brown preneurial approach and determination to keep his budget adjusted for local conditions, coupled estigation Shortly after Gunawan's visit to Brown, a meet- with the Indonesian preference for keeping their work, the ing was held between the staff of the two financial plans flexible and in shades of grey, remained companies. On Hanuman Steel's side, concern was diametrically opposed to the European and pecifically centered on the juxtaposition of low costs and North American desire to play safe - to have eve- all cost of high quality, and achieving the right balance. rything set in concrete down to the finest detail, to appear. The director of engineering at Brown's was 'a with every guarantee possible and every contin- s costing polished, very polite and persuasive gentle gency allowed for. As Hanuman Steel eventually vere engi man'. He and the Hanuman Steel team discussed discovered, what they were asking for was out- sign side the project in Pittsburgh for two weeks, aided side the experience of the conservative Western far more by visits from Gunawan and the Brown direc- consultants. It created a clash of two very differ- oundered tor's boss. Between them, they covered all the ent cultures . the three Questions st for the 1 How do you assess the situation? mill was 2 Do you think Gunawan was being unreasonable? ated it at 3 Do you think the Western consultants did not understand the Indonesian context and culture? pletion of 4 How much were the clashes caused by cultural differences as opposed to commercial ones? eel's was Source : Based on author's own work