How and people, as well as natural resources and

How cultural differences impact international
business

 

History

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One of the most
outstanding events of the late 20th and early 21st century is the sudden

emergence of
China as a leading player on the global scene. China is the most heavily

populated
country on earth(with over 1,300 million inhabitants)meaning that between them
they account for around 40% of the world’s population. They are also the second
world largest economies in terms of purchasing power parity, with recent years
seeing GDP annual growth rates of over 6% in China

The global
consequences of this spectacular boom in China are profound and far-reaching
and affect not only the product market but also flows of savings, investments
and people, as well as natural resources and the environment.

China already
had much higher standards of living and many more scientific and technical
inventions.

China’s
religious and philosophical contributions include Taoism, Confucianism and the
development of Buddhism.

However, as of
the early 19th century China suffered a long decline and was eclipsed by Europe
and the US. By the mid 20th century they were subject to high levels of
poverty.

The change of fortune
in China began in 1978 when Deng Xiaoping came to power and implemented
market-oriented economic policies, market-oriented path.

China in
particular – have received a great deal of attention in the literature
concerning business and management of international companies

I aim to provide
a comparative approach to the reality of China as regard to the impact of
cultural and behavioral aspects on global and international business. Following
this introduction, I will outline the main points of convergence and divergence
in the development policies adopted in recent years, after

which we will
examine the key factors for success in China, with a particular focus on negotiating
with Chinese companies and on the attraction of these destinations for foreign
investment. We will then compare the various entry modes that could be used
within the existing legal framework, before taking an in-depth look at the main
business opportunities available to foreign firms.

 

The first point
of convergence  of China can be found in
the fact that the economic boom was preceded by a series of political changes
the Chinese miracle began in the 1980s, when policy became more open and less
authoritarian with the introduction of various measures such as the creation of
an environment more favorable to private property;

 

The people’s
republic of China has an authoritarian political system controlled by a one-party
state that has been ruled which is the Chinese
Communist Party.  

 

 

 

 

 

 

Culture:

·        
Power Distance – Power distance is the extent to
which less powerful people in an organization will accept and expect power to
be distributed differently. China ranks 80 on PDI which is very high. This
means there is a lot of power distance between subordinates and superiors, but
that it is accepted and normal.

Collectivism – This is whether
people think with the mentality of “We.” meaning that they are highly
collectivistic and think as a group .This can be seen with the high amount
of in-groups and out-groups.Masculinity–China has a
masculine society.Chinese are very driven by successful, competition, and
achievements. The Chinese will often put work before family or leisurely
activities. This dimension can be seen in the fact that Chinese workers
will leave their families to go work at factories for 11 months out of the
year, proving how important work truly is to them.Uncertainty Avoidance -Chinese
accept ambiguous situations and are not deterred by them. It may seem like
China has a lot of rules and regulations in place to avoid ambiguous or
uncertain situations, however they are willing to bend and changes the
rules as situations require it. The Chinese language is also very
ambiguous; the Chinese characters are hard to interpret or understand if
it is not your native language.Long-term Orientation– The
Chinese rank extremely high on long term orientation at 118, meaning they
focus on persistence and perseverance, and that they will dedicate however
much time is required to achieve their goals. This is seen in the very
time consuming Chinese negotiation process, the time required to build
trust and long-term relationships, and their focus on long term results
versus short term goals.

Below
are the highlight points of convergence and divergence in the developmental
patterns of

China

Convergent
practices and customs in China

·        
Reserved business practices,
hierarchical relationships and a highly formal style of communication

·        
Respect for superiors, family
commitments, loyalty to friends, sincerity and courtesy

·        
Natural paternalists; age is highly
respected

·        
Probable avoidance of saying “no”
directly, out of respect for guests

·        
Consciousness of favours received and an
ever readiness to reciprocate

·        
Desire to extend the utmost hospitality
to guests; great insistence upon giving and receiving generous gifts, often
refusing the gift several times before accepting

·        
Capacity to apologies for any
discrepancy or disagreement

 

Divergent
practices and customs in China

·        
There is no room for individualism

·        
Trust and personal relationships are
vital .These are also valued, although to a lesser degree

·        
There is a tendency toward a long-term
view There is an increasing tendency toward seeking a quick profit

·        
Silence is used as a sign of respect for
the wisdom and experience of others, and meaning is often expressed through
non-verbal communication

·        
The Chinese are quieter and more
reserved, especially when talking of others

·        
There is a tendency to exaggerate
affirmations and little sense of privacy (no hesitation to ask personal
questions), plus a tendency to “wash dirty linen” in public

·        
Chinese women are more open and
participate in the professional and business world

 

China is reputed
to be a haven for the piracy of intellectual property, and business is
fundamentally conducted through relationships and interpersonal connections – a
cultural construct known as guanxi .

Nevertheless,
these differences regarding the existing regulatory framework encompass a series
of nuances , Although China has reduced tariffs and other trade for barriers,
liberalisation has been greater in China thus far. China has recently lifted
restrictions on retail trade and is undertaking huge investments to modernize
the sector.

A fact that translates
into highly complex indirect taxation and a slowing down due to internal
borders.

In any case, the
bursting of emerging economies such as China to the global scene has given
greater relevance to the institutional perspective as a third factor
determining international success, alongside business factors .

 

 

Economic
development model

The fact that
China began to implement its reform policies and to open in terms of economic
liberalisation. China is ahead with economic development, level of technology,
infrastructures,

production
capacity and quality of life.

Chinese exports
are greater exports and foreign direct investment (FDI) in China are larger in
numbers too .why has the Chinese economy grown faster? Experts have offered
various reasons.

Chinese
authoritarianism, which has allowed the government to quickly make unpopular
decisions that would be more difficult and time-consuming and the superior
Chinese infrastructures, which permit more efficient and sophisticated
investments

China’s economic
boom happened in the early 1980s, before investments were made in
infrastructures and before China opened up to the global economy.

 

The success of
China, on the other hand, has been founded on the high volume of

manufactured
exports. This is partly a legacy of communism, which promoted industrial output
and did not recognize the value of services, and it is also a consequence of
the huge volume of FDI received, which has been ploughed into large-scale manufacturing
plants.

China not only specializes
in textiles, clothing, toys, and footwear in recent years it has also increased
its overseas sales of advanced electronic and telecommunications products.

The internal or
external orientation of growth is another of the aspects that allow differences
in the development paths to be highlighted. China’s growth has been
characterized by a high level of family savings that has restricted internal
consumption and forced a solution to be sought in exports, thus generating an
enormous surplus in the current account. In short, China has followed a
traditional model of outward growth.

Making for more
modest results overseas and thus increasing the role played by domestic demand
in the country’s growth.

 

Closely related
to the above is another of the differentiating aspects of China.

 

China, on the
other hand, has created more opportunities for foreign investors with regard to
access to the export markets, in line with the model followed by other
Southeast Asian countries. Also, a high proportion of the FDI received by China
comes from the overseas Chinese in Hong Kong, Macao, Taiwan and Singapore.

China clearly
demonstrating a greater capacity for attracting FDI, Chinese statistics tend to
overestimate the amount of FDI received, particularly in terms of round
tripping(Chinese companies transferring resources to neighboring countries such
as Taiwan, Hong Kong and Macao, which are subsequently reinvested in China in
the form of FDI in order to benefit from the preferential treatment  fundamentally fiscal – applied to this
foreign flow).

A great deal
more capital is available in China thanks to its high savings rate, much of
this is in the hands of state-owned institutions, meaning that often small
businesses cannot access the funds they require.

Finally, another
factor that may soon determine economic development in China is their
demographic structure. The one-child policy in China mean that, by the mid 21st
century,The largest age group within the population will be the 55–65 year
olds, leaving many pensioners, dependents upon a decreasing workforce.

 

The determinants
of inward FDI in China the following results:

? Decisive
factors for inward FDI in China -market growth; lower
labour costs, policy liberalization, and the amount of exports from China  to each country of origin of the FDI.

? Factors
decisive only for inward FDI in China greater size of the
Chinese

market and
China’s strategic location in terms of geography and logistics; greater
borrowing costs in China relative to the home country (making FDI more cost
competitive than local capital); and the amount of China´s imports from each
home country.

Some Western
companies are reluctant to invest in China due to the difficulties caused by
cultural differences, the language, unfair competition or legal coverage. In contrast,
the Chinese can boast that, as a nation, they have shared a common culture over
a longer period of time than any other civilization. Their technological,
artistic and intellectual advances have meant they regard their country as a
self-sufficient centre of the universe. In fact, their name for China – zhong
guo – means “the middle country”.

The ancient
history of civilizations has gradually shaped the culture we can encounter today.
At first glance, the main cultural difference 
in China can be reduced to the following aspects.

 

Ethnic origin
and language. Chinese culture has evolved
independently of foreign influences and is more homogenous. The han ethnic
group represents 95% of the Chinese population and is the largest ethnic group
in the world. Chinese is also the oldest writing system on the planet, having
been in use, with its various developments,for over 3,500 years. Although there
are varieties of spoken dialects, the main one is Mandarin, whose 850 million
speakers make it the most spoken language in the world.

 

The han ethnic
group represents

 

Social
structures. Chinese society derives from the same basic root
and has had a traditional structure. There was no defined dividing line between
the elite and the masses, and social mobility was possible and common.

Religious
influences. Traditionally, the Chinese have been relatively
free from religious influences. Taoism and Buddhism have exercised a certain
influence, but it is Confucianism that has had the most profound and lasting
effect on Chinese society. Confucianism promotes harmony through moral principles
at all levels of human relationships, particularly as regards family and
nation. Consequently, a collectivist social order has been created as well as
an agnostic attitude toward the supernatural.

 

In China,
business is not just business. It’s social.

The classic example of this is eBay, the successful
American C2C ecommerce in 2004, the San Jose online auctioning giant that
copied its American model to China and got completely destroyed by local competitor
Taobao. After all, they
had dominated other countries’ markets. Why not China’s?

Why did Taobao win? Because Taobao understood that
in China, shopping was a social and personal experience. People were used to
talking and even haggling with the people they bought things from, and building
relationships with them. To help make online shopping feel more like real
shopping for Chinese net users, and to help assuage their concerns about being
scammed, Taobao had a chat feature that allowed customers to easily talk to
shopkeepers over instant-messaging, giving them a chance to establish a
personal connection, Ebay had user reviews, but it lacked the personal
connection that Chinese shoppers were used to, eBay did not.so it failed. . A
local competitor, Taobao, went on to take over 95 percent of the local market
share.

Today, eBay says it has learned from its
experience. The company has refocused away from the domestic market, toward
helping Chinese sellers market directly to consumers abroad.

Google: Running afoul of the government

The very beginning of its China venture of Google
which was Launched in 2006, Google.cn was a bare-bones search engine, with no
Gmail, blog software, or YouTube; the company refused to keep its servers in
China, for fear of having to turn over user data.

Especially when it comes to the internet, China has
one rule that towers above all others: it’s the government’s way or the
highway. Both foreign and Chinese companies can and do push the envelope from
time to time, but any direct challenge to the government, or refusal to abide
by its directives, is going to lead to a one-way ticket home.

Google is a classic example of this. Although the
company had other problems in China, too, what ultimately proved its undoing
was its failure to get along with the Chinese government. Politics was what
killed Google. The backstory here is long and complicated (and involves some
alleged hacking on the part of Chinese authorities), In 2008, Beijing demanded
that Google more thoroughly censor its auto-fill search suggestions. In 2009, Google
detected a breach of its servers that the company traced to China. The
attackers not only stole corporate secrets, but also rifled through the
personal accounts of dissidents and activists related to China and Tibet. By
2010, Google’s chiefs had had enough. They decided that they would no longer
comply with Beijing’s demands. The endgame came when Google decided to stop
censoring search results in China, which meant shutting down its mainland China
search engine entirely. Since Google left China in 2010, its services are
consistently either blocked or throttled to the point of being near-useless
there. When a foreign company takes on the Chinese government, there can only
be one winner, and it won’t be the foreign company.

It moved its servers to
Hong Kong. Its market share dipped from 30 percent to 3 percent in 2013.

While
there are a number of ways to define culture, put simply it is a set of common and accepted norms shared
by a society. But in an international business context, what is common and
accepted for a professional from one country could be very different for a
colleague from overseas. Recognizing and understanding how culture affects international business in three
core areas: communication, etiquette, and organizational hierarchy

Communication

Effective communication is essential to the success of any
business venture, but it is particularly critical when there is a real risk of
your message getting “lost in translation.” In many international companies, English is the de facto language of business. But more than just
the language you speak, it’s how you convey your message that’s
important. Understanding the importance
of subtle non-verbal communication between cultures can be equally crucial in
international business.

These cultural
characteristics are present in the business world and translate into a series
of practices and customs that the executives of foreign companies must take
into account when doing business with the Chinese.

Multinational
and cross-cultural teams are
likewise becoming ever more common, meaning businesses can benefit from an
increasingly diverse knowledge base and new, insightful approaches to business
problems. However, along with the benefits of insight and expertise, global organizations
also face potential stumbling blocks when it comes to culture and international business.

By working
hard and towards one goal as a nation and their culturual and political
background by having a single communist party to rule over the Chinese they as
a country are well focused in contributing to the fastest growing economies in
the world.very soon China will have the leading and largest economy in the
world.

if there’s a lesson, it’s this: Before you go in
big in China, do your homework. Companies need to be flexible, adaptable, and
responsive to Chinese tastes.

References.