International Business Management: Business in China

Introduction

This report analyses the various aspects of International Business Relations with reference to Chinese business culture. It also puts forward relevant recommendations based on findings of the impact of Chinese culture on international business. The literature under consideration for this report is an article titled Business in China: relationship building by Dalida Turkovic. The scope of this report extends to the impact of Chinese culture on foreign business houses that intend to expand their business and ensure their presence in the growing Chinese markets.

Subsequent to the boom in the Chinese economy in the late ’80s and early ’90s, numerous business houses saw a huge opening in the Chinese economic arena. Thus, international business firms started sending their delegations to China to set up their bases in the country. Their success was depended a great deal on understanding the Chinese culture and their way of doing business. (Dainton, 2005)

The Chinese Business Arena

Preceding the Privatization in China, businesses only subsisted in the shape of State-Owned Enterprise (SOE). The authorities of these businesses had and to some extent still have well-built political connections, typically linked by some family relationship with an affiliate of the regime. This class of closed organizational frameworks created huge differences amongst the authorities and employees with very little employee participation in the business decision-making process.

Habitually, a strong ethical ideology was a significant aspect in the firm’s executive decisions and staff motivation, although the degree of administrative financial endorsement available entailed that SOEs normally did not require intricate business awareness or appreciation of the market aspects. To a large extent, success was dependent on working up quality relationships – which in effect led to administrative financial patronage.

Following the economic development and growth in the Chinese markets during the late 80s and early 90s, overseas investors intended to make their presence felt there and thus began sending their executives to interrelate with the SOE business customs. They were offered grand packages in the form of incentives to recompense the tough local living environments. (Bradley, 1999)

Hofstede’s Five Cultural Dimensions

We now analyze the Chinese business arena by means of Hofstede’s Five Cultural Dimensions, a theory that is thought to be an excellent international business culture and relationships analysis tool.

In this global age, business collaboration amongst countries having vastly diverse cultural backgrounds has become a very common happening. This brings about teaming up of individuals having dissimilar cultural orientations and shows increased levels of communication amongst them. However, this might be as intricate as it is interesting. Apart from just building relationships, there are also other aspects such as inspiring the workforce, configuration of projects and developing policies. A psychologist, Dr Geert Hofstede subsequent to a decade of investigation and several interviews developed a model of cultural dimensions which has come to exist as a globally recognized standard.

The model brings forth five cultural dimensions on which a country is rated on the basis of several surveys. The higher the score for a particular dimension in a certain country, the greater it is revealed in that society. The Five cultural dimensions are:

1. Power/Distance (PD).
2. Individualism (IDV).
3. Masculinity (MAS).
4. Uncertainty/Avoidance Index (UAI).
5. Long Term Orientation (LTO) (Hofstede, 2005).

Power Distance Index (PDI)

Which the less influential affiliates of organizations and associations acknowledge and anticipate the fact that authority is spread asymmetrically to the degree. This symbolizes inequality, but is characterized from the lower level and not from the higher echelons. It implies that the followers to the extent of that by the privileged approve a community’s intensity of inequality. Authority and disparity, evidently, are the very elemental facets of any community and anyone with some overseas experience would understand that not all cultures are the same.

China has an appreciably elevated Power Distance rating of 80 as contrasted against other Asian countries’ mean score of 60, and the world average standing at 55. This signifies a high degree of inequity of supremacy and wealth within the society. This status quo is not essentially enforced on the populace, but to a certain extent is acknowledged by the people as their cultural legacy.

Individualism (IDV)

It is the degree of cohesiveness in society, i.e., the extent to which people exhibit collectivism in groups. On the individualist part, it is observed that societies incorporate individuals with loose interpersonal ties. Each person is likely to watch over him/herself along with his/her direct relatives. On the collectivist part, it is observed that societies incorporate people who are traditionally integrated into sturdy, unified groups, frequently complete families (with uncles, aunts, grandparents and cousins) which go on defending them in return for absolute faithfulness. The lower the IDV score, the higher is the degree of cohesion observed in the society. (Selmer, 2004)

The term ‘collectivism’ here does not have a political significance. It is relevant in terms of group and not in terms of the realm. Yet again, the aspect attended to by this dimension is a particularly elementary one, concerning all cultures across the globe.

The Chinese society ranks lower than all other Asian societies in the Individualism (IDV) at 20 in contrast to a mean score of 24. This can be ascribed partially, to the high intensity of importance of a Collectivist culture accentuated by the Communist regime, as evaluated against the one of Individualism. The low IDV score is marked by a close and dedicated member of a ‘group’, which may be a family, extended family, or extended association. Faithfulness in a collectivist society is fundamental. Society encourages strong bonds where each person shoulders responsibility for associates in their group. (Thomas, 2002)

Masculinity (MAS)

This pertains to the extent to which society adheres to and values, conventional male and female responsibilities. High Masculinity scores are observed for states in which men are anticipated to be strong, assume the role of the provider, be self-assured and be tough. If women operate beyond residential boundaries, they choose professions different from those of men. These societies demonstrate a gap between men’s values and women’s values. Low MAS scores do not imply a reversal of gender responsibilities. In those societies, the roles are basically indistinguishable. Women and men collaborate uniformly across many lines of work. It is acceptable for men to be receptive and women can endeavour for professional accomplishments. (King, 2007)

China’s score stands at 50 a little below the average for other Asian countries, which implies a mostly male-dominated society but women to some extent can take up the role comparable to that of men.

Uncertainty Avoidance Index (UAI)

This dimension concerns a community’s acceptance of dubiousness and ambiguity. It eventually talks about man’s pursuit of Truth. It signifies the amount to which a society programs its constituents to feel uneasy or else at ease in amorphous circumstances. Amorphous circumstances are novel, unfamiliar, surprising, and unusual. Cultures that seek to evade uncertainty, curtail the likelihood of occurrence of such circumstances by enforcing firm rules and regulations, protection and security procedures and on the theoretical and spiritual level by faith in absolute Truth.

Such societies are in addition more poignant and influenced by internal nervous energy. In the opposite category, the uncertainty tolerant civilizations are more open-minded in terms of attitudes dissimilar from the usual. They have very few stringent rules, and on the rational and spiritual level, they are relativistic and permit various currents to flow simultaneously. Individuals belonging to such societies are more phlegmatic and reflective and are not anticipated by their settings to display articulate emotions.

The Chinese UAI score is comparatively lower than the Asian average or as a matter of fact the world average. This signifies that the Chinese culture is quite tolerant to dubious situations and can adapt itself to such circumstances. (Schmidt, 2007)

Long Term Orientation (LTO)

This dimension relates to the extent to which a society appreciates long-standing – in preference to short term – customs and values. This dimension was added in the 1990s subsequent to observing that Asian states with a strong association with Confucian philosophy behaved in a different way as compared to western cultures. Rendering on social responsibilities and circumventing a “loss of face” are thought to very essential in societies with high LTO scores. (Cooper, 2007)

Geert Hofstede examination for China reveals that it exhibits a Long-term Orientation (LTO) score of 118, which is its highest-ranking factor and is true for all other Asian societies as well. This score is symbolic of a culture’s time perception and an approach of being resolute i.e., prevailing over impediments with time, if not with resolve and power.

Analysis of the Literature

The author Master coach Dalida Turkovic, in the article Business in China: relationship building elucidates the conditions of the Chinese business culture and offers vital suggestions on business protocols required to earn the reverence of Chinese equals. International business investors often want to capitalize on the environment of the Chinese markets which are conducive to international business operations as evident from the appreciably low UAI scores. She advocates that doing well in negotiations depends on structuring an understanding that bridges the lingual and cultural disparity since the Chinese mode of operating in business is all about building relationships. China exhibits a very high LTO score. Thus establishing a well-nurtured bond with the people of the society becomes imperative. (Turkovic, 2007)

She suggests that the key norms for outsiders to be flourishing in the cultural relationship building in the business arena were dependent on their understanding of the following four aspects while attending banquets:

1. How to ‘fake’ drinking (and not get drunk);
2. How to recognize who is a decision-maker;
3. How to impress Chinese counterparts by speaking a few Chinese phrases;
4. How to use chopsticks and understand meal etiquette;

Fake Drinking

Owing to high MAS scores people in Chinese societies believe males should be tough and strong. Thus male foreign business delegates are often faced with the challenge to imbibe baijiu, the white spirit. This deadly spirit is characterized by a strong flavour and contains 50% to 70% alcohol. Women, on the other hand, are not put under such demands of drinking heavily. However, the author suggests that a woman delegate should ensure that she is escorted by a Chinese person who holds a more influential position in the firm, and is ready to assume the drinking role on her behalf for of the evening, which is so critical in instituting good business relationships.

She recommends that the simplest approach not to get drunk is to pour water into the drinking cup when no one is watching and make certain it is always full. Taking the initiative for regular refills of everyone’s drinks soon leads to the initiator receiving the designation of ‘Lao Han’, which translates as an honourable Chinese. Dalida recommends that it is a good idea to fake being slightly drunk too, in order to avoid arousing any suspicions.

Recognizing the Decision Maker

The Chinese society also records a high Power Distance rating. Thus acknowledging the influence of a powerful individual is quintessential. The author points out that all formal meals are provided on circular tables and it is difficult to identify the most influential people. However, she also reveals that there are some indications. She recommends foreigners to pay attention to the following aspects:

1. The guest of honour is presumably seated facing the entrance
2. Fish is the mark of affluence and it is expected to incorporate fish preparation in the banquet menu.
3. The head of the fish is habitually positioned in front of the individual with the highest status in the group.
4. The equal is often sitting directly opposite.
5. The people positioned on the right and left hands of the most powerful individual are the two next significant executives in terms of importance.

Using Chinese Phrases

The Hofstede analysis reveals that the Individualism score for the Chinese society is very low. This means that it is closely knit in a group and values the traditions and cultures of the group. The author reveals using a few Chinese proverbs and phrases during conversation acts as an advantage for an outsider. She explains that the Chinese tongue is comprised of expressions known as ‘chengyu’. The nearest translation for chengyu is ‘proverbs’. The author recommends the use of dictionaries with an assortment of the most often used chengyu. Ensuring the application of a chengyu at the apt time captures the attentions of other people present there and the outsider receives considerable respect from the aboriginals. (Mindtools, 2009)

Comprehending Meal Etiquettes

As stated earlier, the Chinese value their customs and traditions largely. Thus adhering to their standards and conventions gains a considerable advantage for foreign business delegates and works in their favour.

The author, in her article, points out various dos and don’ts at the meal table to explain Chinese meal etiquettes. She recommends practising the use of chopsticks beforehand as their use is the preliminary step of meal decorum and also puts across the point to the Chinese that the outsider is eager to gain knowledge of and acknowledge their approach in life. Next, she points out that holding the drinking cup at a lower level is a mark is a sign of respect for the counterpart and putting up a contented face post-meal is necessary. (Bergeron, 2005)

The Future

The openings in the Chinese economic arena are relatively new. Foreign marketers try to observe the cultural traditions and practices and apply them in their behaviours making an attempt to build a lasting relationship and to woo the Chinese people in order to establish themselves in Chinese markets. However, with the passage of time after the establishing phases, interactions and communication is slated to increase amongst people having various cultural orientations and the Chinese. A mixed culture is bound to emerge from this and the stringent Chinese traditions would give way to a much more relaxed work environment although to a certain extent. (Xu, 2004)

Recommendations

China records a high PD score, with regards to that recognizing the power of influential people is essential. Foreign business managers should be conscious that of the hierarchy of society.

With respect to the low IDV score, the Chinese society exhibits international business authorities should display deference towards age and cognizance. They should restrain from the display of beliefs and sentiments in order to achieve synchronization in work culture. Displaying reverence for traditions and cultures is important in Chinese society and alterations in approach should be inducted gradually.

Chinese expect their men to be tough and strong. Thus authorities must recommend men to evade talking about emotions or taking sentimental decisions or engage in emotionally charged arguments. However, it should also be ensured that job profiles and employment practices are not gendered biased. (Nelson, 1997)

A comparatively low UAI rating discourages enforcing regulations or structure pointlessly. Articulation of inquisitiveness when encountering a usual situation should be encouraged. In relation to a very high LTO score demonstration of excessiveness or lighthearted actions should be put off. Perseverance, faithfulness and commitment should be aptly honoured. Actions that could cause someone to “lose face” are a must avoidable scenario. (Luo, 2006)

Conclusion

The various aspects of Chinese culture in relation to the impact it has on foreign businesses have been analyzed in this report. Findings indicate that Chinese society is a very cohesive one. It has a social huge gap between the influential and their followers. Males of society are expected to be strong and sturdy.

The Chinese hold a high valued opinion about their customs, tradition and legacy but at the same time show tolerance towards the new and unknown. The foreigners who intend to prosper in the Chinese markets must keep all these aspects in mind and they should show a strong will to embrace their cultures and build a strong relationship with the Chinese in order to flourish. (Melkman, 2005)

Bibliography

Bergeron, Natasha & Barry H. Schneider; 2005; Explaining cross-national differences in peer-directed aggression: A quantitative synthesis; Aggressive Behavior; 31, 2, 116-137; University of Ottawa, Ottawa, Ontario, Canada.

Bradley, Thomas L; 1999; Cultural dimensions of Russia: Implications for international companies in a changing economy; Thunderbird International Business Review; 41, 1, 49-67; Reforming Economies Research Institute, 5060 Shoreham Place Suite 200, San Diego, Ca 92122.

Cooper, Danielle, Lorna Doucet, Michael Pratt; 2007; Understanding multinational organizations; Journal of Organizational Behavior; 28, 3, 303-325; College of Business Administration, University of North Texas, Denton, TX 76203-5429, U.S.A.

Dainton, Marianne & Elaine D. Zelley; 2005; Applying Communication Theory for Professional Life: A Practical Introduction; SAGE.

Hofstede, Gert Jan; 2005; Cultures and Organizations: Software of the Mind; Edition: 2, revised, McGraw-Hill Professional.

King, William R; 2007; A research agenda for the relationships between culture and knowledge management; Knowledge and Process Management; 14, 3, 226-236; Katz Graduate School of Business, University of Pittsburgh, Pittsburgh, Pennsylvania, USA.

Luo, Yadong & Seung Ho Park; 2006; Strategic alignment and performance of market-seeking MNCs in China; Strategic Management Journal; 22, 2, 141-155; School of Business Administration, University of Miami, Coral Gables, Florida, U.S.A.

Melkman, Alan & John Trotman; 2005; Training International Managers: Designing, Deploying and Delivering Effective Training for Multi-cultural Groups; Gower Publishing, Ltd.

Mindtools; 2009. Hofstede’s Cultural Dimensions: Understanding Workplace Values Around the World. Web.

Nelson, Gayle L; 1997. How Cultural Differences Affect Written and Oral Communication: The Case of Peer Response Groups; New Directions for Teaching and Learning; 70, 77-84; John Wiley & Sons, Inc.

Schmidt, Wallace V; 2007. Communicating Globally: Intercultural Communication and International Business; Sage Publications.

Selmer, Jan & Corinna de Leon; 2004. Organizational acculturation in foreign subsidiaries; The International Executive; 35, 4, 321-338; Wiley Periodicals, Inc.

Thomas, David Clinton; 2002; Essentials of International Management: A Cross-cultural Perspective; SAGE.

Turkovic, Dalida; 2007. Business in China: relationship building. JustThePlanet. Web.

Xu, Huang & Evert Van De Vliert; 2004. Where intrinsic job satisfaction fails to work: national moderators of intrinsic motivation; Journal of Organizational Behavior; 24, 2, 159-179; Department of Management, Hong Kong Polytechnic University, Hong Kong.