As an American Chinese, the cultural profile of a country that I am going to choose is China in this assignment. This is because the rate of GDP growth was strong in China in 2010 with an estimated 10% year-on-year growth. This means that it is benefits to the investors who are going to invest or expand business in China. Before U.S. companies decided to expand business into China, they must understanding the cultural profile of China in order to make profit on their business. To be clear about the China’s cultural profile, Hofstede’s five dimensions of culture are being applied into this assignment.
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Every country has their cultures. Therefore, here are the explanation about subject of cross-cultural management, explanation of culture, and characteristics of culture to provide a theoretical background for this report.
1.1 Cross-cultural management
Basically human races came with different background. “Cultural background”. When people from one cultural background, meet, understand, interact and deal with people from other cultural background. That is a cross-cultural management.
In recent years, with the increase in globalization and diversity in the workplace, cross cultural management has become an important element of organizational life. Cross-cultural management is the study of the behavior of the people in organization located in cultures and nations around the world. It focuses on the description of organizational behavior within countries and cultures, on the comparison of organizational behavior across countries and cultures, and, perhaps most importantly, in the interaction of peoples from different countries working within the same organization or within the same work environment (Nancy J. Adler, 1983).
1.2 Definition of culture
“Culture has been defined in a number of ways, but most simply, as the learned and shared behavior of a community of interacting human beings”(J., & Useem, R,1963). According to English Anthropologist Edward B Taylor, culture is that complex whole which includes knowledge, belief, art, law, morals, custom, and any other capabilities and habits acquired by man as a member of society.
Culture gives us an identity which makes us unique and different from people of other cultures. The culture of the society becomes the dominant culture and those of the immigrants from the subculture of the community, when people with different cultures migrate and settle in another society. People usually settle in other nations imbibe the new culture; while at the same time strive to preserve their own. (Deepa Kartha, 2000-2011).
1.3 Characteristics of culture
There are different characteristics or qualities of cultures throughout the world.
First characteristic of culture is that “culture is learned”. Culture is not inherited; it is acquired through learning and experience. People can learn behavior patterns including language and many other attributes if they grow up with that particular culture.
The second characteristic of culture is that “culture is shared by a group of people”. We can consider a thought or an action as a culture if it is commonly shared and believed or practiced by a group of people. It can be considered as their culture when a group of individual share and believe with each others.
The third characteristic of culture is that “culture is cumulative”. The knowledge of culture can be passed from one generation to another generation. As time passed by, more and more knowledge is added in the particular culture. It may work out solutions of problems in the life as the particular culture goes with time.
The fourth characteristic of culture is that “culture is dynamic”. This is the characteristic of culture that stems from the cultures cumulative quality. As there is no culture remains on the permanent state, culture is considered as changing frequently as added in new ideas and new techniques to change the old ways.
The fifth characteristic of culture is that “culture gives us a range of permissible behavior patterns”. Culture has structure and is integrated as a change in one part will bring changes in another. It tells us how to dress based on gender, statue, occasions, and many more.
2.0 Cultural profile of China
China is located in eastern Asia. China is formally known as ‘The People’s Republic of China’ (PRC). As the world’s population is approximately 6.7 billion, China represents a full 20% of the world’s population so one in every five people on the planet is a resident of China. China’s population growth has been somewhat slowed by the one child policy, in effect since 1979 (Matt Rosenberg, 2010).
Confucianism is a system of behaviors and ethics that stress the obligations of people towards one another based upon their relationship. The basic tenets are based on five different relationships in China which are ruler and subject, husband and wife, parents and children, brothers and sisters, finally, friend and friend. Confucianism indicated the duty, sincerity, loyalty, honor, filial piety, respect for age and seniority (Mandarin Today, 2005).
2.1 Geert Hofstede’s five cultural dimensions
In this part, Geert Hofstede’s cultural dimensions have been used to introduce cultural profile of China. He had analyzed about the way of culture influence working relationships in a multicultural environment along five dimensions which are power distance, individualism, masculinity, uncertainty avoidance, and long-term orientation in China. Below is the diagram of USA vs China by hofstede’s five dimensions.
Figure 1: USA vs China by Hofstede’s five dimensions
According to figure 1, China has long-term orientation in the highest ranking factor and lowest individualism than United States. And also, it has high in masculinity, power distance and low in uncertainty avoidance culture compared to United States.
2.1.1 Power distance
Power distance refers to the level of acceptance by a society of unequal distribution of power in institutions. The extent to which subordinates accept unequal power is socially determined. United States scores around 40 with low ranking power distance in figure 1. It indicates that there is a greater equality between societal levels, including government, organizations, and even within families in United States. This orientation reinforces a cooperative interaction across power levels and creates a more stable cultural environment (Geert Hofstede,1967-2009). However, the power distance remains high in China which scores around 80 in the diagram above. This means that the Chinese society is characterized by a very high level of inequalities in power and wealth, and that these are accepted by the individuals (Carletti Mathilde, 2008). Also, the individual representing the authority in any organization (family, undertaking, etc.) is highly respected, because that individual has the decision-making power. In China, there is a strong differentiation of roles, competences and respect due, according to the individual’s position on the hierarchic scale.
In China, individuals with power enjoy greater status and privilege than those without power, and subordinates are less likely to challenge or express disagreement with superiors (Matthew Earnhardt, 2009). In other words, the rank structure is clearly delineated between management and subordinates, and disagreement with management is frowned upon. Information control is one of the predominant sources of power in China. Critical information in China is selectively preserved instead of being distributed widely. It is quite obvious in e-government practices in China where branches of government purposely hold back some information and obstruct large-scale information sharing in order to keep their power and interests (Lucian E. Marin, 2010).
Individualism describes the relationship between the individual and the immediate community. The high individualism ranking for the United States (88) indicates a society with a more individualistic attitude and relatively loose bonds with others (Kimberley Roberts & Stephen Taylor, 1998-2008). However, low individualism is important for learning the Chinese way of thinking which scores 20 in figure 1. Interpersonal relationships and group affiliation are focused in China (Matthew Earnhardt, 2009). They will act with good manner at all the times and will not do anything that caused other people embarrassment in the public. It can be observed by the use of silence in structure meetings. A person will remain quite although a person disagrees with what another person says, rather than disagree publicly, This is giving respect to the other person, while speaking up would make both parties lost reputation.
In China, a collectivistic culture, individuals are willing to sacrifice personal goals for the good of the group (Matthew Earnhardt, 2009). This loyalty is promoted across all aspects of Chinese culture, including the workplace. Loyalty is a highly regarded trait in a society where relationships are strong and is, therefore, it is importance to most of the Chinese people (Simon Kriss, 2006). This links back to their high long term orientation above. The “collectivist” thinking of a culture, China tends to be extremely parochial, with people and businesses not changing suppliers lightly for fear of the impact on relationships (Simon Kriss, 2006). So, it is a good idea to select a good strong partnership that has potential to last a long time when doing business with others.
Masculinity refers to the role share between men and women, and the differences of equality that exist between the two genders. The highest the score the more assertive and competitive the culture (Masculine), the lowest the score the more modestly and caring (Feminine). The United States has score around 72.5 and China has score around 75 in the figure1. Therefore, China has high masculinity in their culture and has a strong role differentiation between men and women. Men hold most of the responsibility and power positions. The role of women in China is very limited, even though it seems to be taking more importance in the cities and more developed regions (Carletti Mathilde, 2008). Especially in the rural areas their status is inferior. The country is far from setting up men-women parity. This is the one dimension in which China most aligns itself to the rest of the world, and yet, it is often totally missed by businessman of United States, who think that the women in China are, for the most part, ignored (Piseth 2009).
2.1.4 Uncertainty avoidance
Uncertainty avoidance refers to the extent to which people in a society feel threatened by ambiguous situations. Uncertainty avoidance has many implications for leadership characteristics and leadership traits such as habitual, formal, cautious, and orderly is perceived as an outstanding form of leadership in some countries while a negative form in others (Matthew Earnhardt, 2009). A high ranking of uncertainty avoidance dimension in United States (45) is indicate that society has fewer rules and does not attempt to control all outcomes and results while doing business. It also has a greater level of tolerance for a variety of ideas, thoughts, and beliefs (Simon Kriss, 2006). But, China presents a low degree of acceptance of uncertainty which scored 30 is a characteristic of a society that does not try to take control of the future, and that is not afraid of unforeseen situations. It is also characteristic of a society that is more tolerant towards opinions, behaviors that are different from its own, and changes (Carletti Mathilde, 2008). It is a more meditative society which does not feel the need of controlling its environment.
2.1.5 Long-term orientation in China
The fifth dimension, long-term orientation specify the extent to which a culture is devoted or not devoted to “traditional, forward thinking values” (Hofstede, 2001). High or short-term orientation predispose countries to resist it or accept to change. In countries in which people display high long-term orientation suggests that the country has long-term commitments to tradition and fosters a strong work ethic as a plan for future rewards outweigh the need for rapid change. Cultures with a short term orientation focus on values such as ‘saving face’ and respecting tradition while cultures that focus on the longer term tend to focus on thrift and perseverance. The US has a scored around 29 in this dimension. China has the highest ranking for long-term orientation which scored around 110 in figure 2.1.
China slow and steady wins the race for business deals compare with United States. China is having a building strong, reliable, lasting relationship which is the key for the Chinese (Eric Yee, 2008). A certain amount of trust must be gained before any decision is met. The Chinese prefer to deal with people they knew and trusted before starting to conduct business with others (Vincent Lo, 2011). It may take three to four times the length of time to finish the business deal after finish meeting. So if do not come to a fast agreement, don’t be discouraged, make the client feel comfortable and show patience to Chinese. The Chinese never like to rush into things. The company has to maintain the relationship if want to do more business with Chinese.
3.0 Challenges and recommendations expand business to China
To be successful in the China’s market, the United States companies need to have an understanding of major practical challenges they may face in China. China has a different culture because the way they implement their business tends to differ from US. China market is a complicated filed to those companies that are familiar to the Chinese culture would be able to move around in the market. Hence, cultural differences are always the barriers between foreign companies and the locals. For a successful partnership, both parties need to learn more about each other culturally and their business styles (Starmass International 2001-2011). Below are the challenges that foreign company may face in China.
There will be a failure business if misunderstanding happened when communicate with China’s companies. Therefore, language barrier is the biggest challenges for many U.S. companies when they want to enter into the China market. Although there are an increasing number of China’s people learning English, but there still have majority of locals are unable to communicate in English and also many foreigners are unable to speak Chinese. The way they written and verbal English spoken is totally different with Western countries.
Individuals need to understand what the other party wants before start to conduct business with Chinese people. By this, they have needed to spend money for hiring person who can carry the responsibility to interpret and as an effective translator to communicate with the locals. Individuals are required to provide their interpreter the relevant information which can effectively execute their task in work. It is better to spend some time to discuss with the interpreter what an individual want to achieve out before each of the meeting to avoid any negotiations.
3.2 Differences of business culture
Foreign investors unfamiliar with the business culture in China are the second major reasons that they failed to enter the China market. To be succeeded in the China, the U.S. investors cannot simply apply their own business models into China market. Due to the culture difference, many of them do not always adapt to accept China’s standard.
As Chinese are very respectful to others, they tend to carry out their business according their beliefs and values. Chinese would like to seek others opinions and advices before making any decision but that take longer time. If the investors do not respect Chinese, there will not have deal between both parties. Hence, U.S. investors need to respect them while talking or having meeting with Chinese.
The U.S. companies should take more time to do research on the China’s business culture with fully understanding it. This action may help them to do business with Chinese people in the long-run. The investors have to understand that the Chinese are not indecisive but rather respecting the view of others in doing business. Hence, they must be more patient when dealing business with Chinese. But once they decide to move ahead, the investors must get ready for it because Chinese may expected to proceed it immediately.
3.3 “Guan Xi” (Relationship)
China likes to build strong relationship in their business compare to United States. It is an important element in achieving successful business in China. However, many U.S. investors may think that it is wasting time in socializing but to the Chinese, it is all the part of the business. Chinese more prefer to work with someone who more familiar with them to reduce disagreement and conflict. Thus, they need to develop wide interpersonal relationship with Chinese.
The company would benefit in many different ways with buildup good relationship in China. First, a trust would be able to establish between U.S companies and locals. Thus, they would be very comfortable working with each other. Second, good relationship may helps to resolve any problems if a company would to encounter any problems in any field.
The investors must learn how to socialize like sing karaoke, having drinks and so on. It is important when entertain or having fun with Chinese. It does not matter whether you are a gifted singer or not. Besides that, the investors must learn how to drink. If you hear “ganbei” that means Chinese expected you to empty your cup and have fun with them. There are a good places and better ways to build up relationship with them.
3.4 Government Regulation
China’s government placed heavy restriction on foreign investment in the retail sector. Under the restriction, investors must make concessions on the size and independence of their business to access China’s market. However, the investors must go through stricter licensing procedures compared to other domestic competitors. They could apply approval only from the government to establish business in China. The investors must first obtain a business license from MOFCOM and then registration approval from the State Administration for Industry and Commerce (SAIC). The licensing process is also opaque and can be slow and inconsistent, adding extra costs and burdens for the investor. In recent years, pushed by foreign business communities and governments, MOFCOM and SAIC have delegated certain approval authorities to local governments and streamlined the licensing processes for foreign retail investors (US-China Business Council (2010).
A strong government relationship remains an important factor to do business successfully in China as China’s government plays an important role in influencing market movement and administering foreign investments. There are unnecessary procedures and delays if the foreign companies have good relationship with the government officials. This is because China is not a free-market economy and it has an authoritarian communist government. While they employ some of the same terms and strategies as full-fledged capitalist markets, political control is everywhere (Ehow, 2011).
3.5 Legal Environment
Before enter into China market, U.S. investors have to be familiar with the China market laws. The china laws may be frustrating as they seem to be very complicated. In China, the wording of contract may look relatively vague compared to what you are used to. If any dispute arises, consider the contract as a guide, but do not expect it to offer much protection legally.
Interacting with the locals would allow a better understanding of the Chinese culture and laws and it will be useful in doing business. Hence, a lot of foreign companies would undertake a local company as partner to help them with the registration process and negotiation with the Chinese.
3.6 Local Competitors
One of the challenges that U.S. investors need to be faced are the local competitors. However, one must not overlook small local companies in the China market as the Chinese have a very strong national pride thus they tend to be more supportive towards their local products.
U.S. companies would really need to do a detailed market and consumer research if they want not only enter the China market but also market their products to the local market. The investors can also seek for the outside help when trying to get into the China market. The Chinese culture would help tremendously when approaching familiar with the China market as they would know the tactic on how to handle any problems.
3.7 Local Pride
In addition, U.S companies do not really know what are the preferences and needs of the Chinese consumers in China. Chinese consumers often prefer to deal with local, Chinese-run companies rather than western enterprises. This also extends to favored treatment from political officials, and it can influence bids on projects and other ventures. Carrying out a consumer research may not be very useful as the information collected may not truly reflect the true responses as the Chinese may not be comfortable giving out information to foreign researches.
There are normally more reliable if companies engage a local research company to carry out the market analysis research. As low cost of material and labour in China, the products that the U.S. companies offers must at the cheaper level to compare with the local products.
3.8 Business Partner
It is not an easy task for foreign investors to find a good business partner to build up business. A good business partner shares your vision and enthusiasm, bringing expertise in the areas in which you are inexperienced. It’s someone who understands the legal and financial responsibilities endemic to sharing a business. Most importantly, it’s someone with whom you get along.
Most of the U.S. companies are not well in network of China because they are unable to find reliable business partners in China markets and meet a lot of bureaucratic problems as they are unfamiliar with the laws of China. Therefore, it is important to choose a right business partner. He or she as a business partner in China must be able to speak well in both English and Mandarin. Having enthusiasm for the company’s products, strong relationship with import and export agencies and also appropriate storage of the company’s products are the factors as a reference for the foreign company to choose a good business partner. In addition, a strong and stable financial background is the most important factor for the company to make sure individuals are able to be a responsible business partner with them.
In this section, I would like to conclude that it is important to understand others cultural profile before start doing business with them. Geert Hofstede five cultural dimensions in China which are long-term orientation, individualism, masculinity, power distance, and uncertainty avoidance are important elements for the foreign investors to understand cultural profile of China. Once they started to understand the Chinese culture, the foreign investors can have a good cooperation with the locals and succeed to develop their enterprise in China.
Maintaining good relationships in China is very important to help foreign investors to success in the China market. Chinese are making business deal depend on how much they see your personal relationship with them. Being respectful and do not make others lose their reputation in the public are the ways to build relationship with Chinese. Besides that, collectivist dimension of Chinese culture where the group is more important than the individual.
From this assignment, I learned how it is essential to understand the different culture in an unfamiliar country. And also, I had understand to the Chinese culture or “ways to doing things” in their business dealing. Besides that, communication tools and skills to face the challenges are learned through this assignment.
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