As the Partners in a leading Management Consultancy in London, a report about the People's Republic of China is required by the Senior Partners. This report can be used as a useful tool to analyze the market in China so that the company can reduce the risk and problem which can be faced in China.
Generally, there are many issues within China must be under analysis. However, it is difficult to classify all the matters clearly as some of the issues can only be found when the office already opened. Moreover, innovation is taking place quickly day by day and no one can know what will happen tomorrow. Therefore, the information provided in this report may have its limitation.
This report aimed at discussing about China. Firstly, an environmental analysis will be provided which includes political, economic, technological and legal factors that believed to have their impact on the new office. Then, base on the Hofstede's cultural dimensions theory, an analysis of cultural issues will also be addressed in addition the advices to minimize the cultural problems as much as possible. Last but not least, there is a description of the lifestyle and difficulties in China which expected to encounter.
II. Environmental analysis:
Today, the People's Republic of China which stood at the second position behind USA in purchasing power parity (PPP) term is considered as one of the largest, heavily populated and most economically forceful countries in the world (Central Intelligence Agency (CIA), The World Factbook - China, 2009). Hence, it is important to create an environmental analysis of China before setting up any office there.
1. Political factors:
According to Francis (2009), China is the country which has more contiguous neighbour than any countries in the world which makes it to have a long-standing and complex relationship with other Asian countries. Through many historical events, a strong conception of national dominion and an overriding anxiety of security, social stability and protection of sovereignty are among the fundamentals of China's regional policy today.
Regards to the general foreign policy of China, Francis (2009) stated that China has the strategy as being 'to safe and form a security, economic and political environment that is favourable to China focusing in the growth of economy, social and policy. Furthermore, there are four original concepts concerned to China's general foreign policy listed by Zhang & Tang (2005): Help China to regain its great power, guarantee China's defence, training self-restraint and 'behave as "a responsible great power". In Zhang and Tang' points of view, Chinese political way is based on upholding "an energetic great power negotiation", cultivating friendly relations with its neighbours, cooperating more in regional economic dealings than in binding regional security engagements, and being discerning in assuming international responsibilities.
2. Economic factors:
Friedman (2002) stated that despite the recession and sluggish performance of the world's economy, China's economy with its consistently sustained high economic growth still not only stands out but also continues to rise quickly with an annual real GDP growth rate of 8 per cent for the past 30 years. Besides, the economy of China during the last quarter century has moved from a centrally planned system that was mainly closed to international trade to a more market-oriented economy which has a rapidly growing private sector and is a player in the global economy. Furthermore, according to Minxin (2009), China is on this way to surpass Japan as the world's second-largest economy this year. China, stands as the regional economic heart, is now motivating Asia's economic integration. Beijing, the capital city of China, also has its diplomatic affects expanding as well because of its newfound soft power.
However, regardless of the truth that China will become Asia's strongest country by any measure; there are some inherent limits that it has to face. Especially, after China's entry into the World Trade Organization (WTO) in 2001, its government has to solve several economic development challenges: (a) to provide adequate job for tens of millions of workers laid off from state-owned enterprises, migrants, and new entrants to the work force; (b) to protect the country from corruption and other economic crimes; (c) to contain environmental damage and social strife related the economic rapid transformation (CIA, 2009). Hence, China's economic growth is not guaranteed after all (Mixin, 2009).
3. Technological factors:
Jacobson (2007) argued that China's capabilities are changing so swiftly nowadays that it is predicted to make a perfect move from China as being the manufacturer of the world into China as a source of innovation with knowledge-intensive, high value-added products. China is on its way to catch up with some major industrialized countries like Japan, the USA and some parts of Europe which still remain leaders in technology development and innovation. China as an important nation in scientific developments now becomes an attractive place for foreign direct investments (FDIs) in research and development (R&D). As examples of fast changing in China's capabilities in science and technology, there are number of scientific papers published by Chinese scholars in international journals, the amount of investment in R&D, the number of patent applications by Chinese citizens and organisations, etc.
However, the ambition of China to become a leader in innovation has not always had the expected pay off (Li-hua, 2007). China has a heavily investment in local scientific development with more than 10,000 of government, university affiliated and non governmental research-oriented enterprises. However, the results of that investment somehow don't meet the expectation. Furthermore, it is said that the innovative capabilities of China today are still too heavily depending on foreign multinationals: the trade off it made by opening its market so as to get update information of technology, has not always had the expected and required result.
4. Legal factors:
With its important position in the world market, China's law construction has also become an international concern. Jiangyu (2004) confirm that China is still on its way to search for its soul in the legal construction in spite of its cautious praise abroad and national pride. He said that after the 15th National Congress, the ultimate goal of China in its legal construction which was proposed by the Chinese Communist Party (CCP) is to understand "yifa zhiguo" or "fazhi". "yifa zhiguo" or "fazhi" can be known as ""ruling the country in accordance with the law."
Moreover, after China joined the WTO in 2001, its legal construction is said to be affected under the terms of accession. For instance, China has to carry out to initiate sweeping improvement measures "calculated to apply the WTO'S market access, national treatment and transparency standards, to protect intellectual property rights (IPR), to limit the use of trade-distorting domestic subsidies and to run other changes so that the legal structure of China will be in line with those of other WTO members" (Pitman, 2001).
Overall, with China's current political, economic, technological and legal situation, there is a lot of chance to gain advantage if setting up an office there.
III. Cultural Issues:
Geert Hofstede (1991) stated the 5 major cultural dimensions which included: power distance, power distance, individualism versus collectivism, uncertainty avoidance, masculinity versus femininity and time orientation. In case of China, Hofstede's cultural dimensions can be used as a useful tool to analyze the market.
1. Power Distance:
According to Hofstede (1991), power distance refers to the relationship between the superior and subordinate. Regarding to Chinese culture, it has high regard for hierarchy which means the individuals in superior positions are accorded a wide range of privileges and power over those below them (Bond & Hwang, 1986). Hence, the employees in China are more willing to obey the decision and demand of their superiors. The individuals in superior positions in China are thus required to be more intelligent so that poor leadership can be avoided. Therefore, it is important to appoint a good manager in the new office in China because any wrong decision making made by a poor manager would cause extremely damage to the company's benefit.
2. Uncertainty avoidance:
The second dimension in Hofstede's 5 cultural dimensions is the uncertainty avoidance. This dimension is the extent to which people try to reduce uncertainty versus the extent to which they are tolerant of ambiguity (Hofstede, 1991). He stated that the people from a weak uncertainty avoidance society tend to be more secure than people from a strong one where the level of anxiety is quite high. Furthermore, Husted (1999) also confirmed that the more the uncertainty avoidance, the more the corruption. In case of China, the uncertainty avoidance level seems to be higher than The United Kingdom; hence the corruption in China may cause most trouble for the any company from the United Kingdom to set up an office there. The company in London therefore has to consider this problem cautiously if it wants to yield benefit in China.
3. Masculinity versus femininity:
According to Hofstede (1991), masculinity relates to the importance given to achievement and high earnings meanwhile femininity concerns to relationship and caring. In the other way, masculinity can be described as the extent to which success is defined in terms of assertiveness, challenge and ambition rather than in term of caring and nurturing (masculinity). A society with higher "masculine" level is believed to pay its attention to success and recognition more than "feminine" society (Husted, 1999). However, in their researches, Buttery & Leung (1998) found that there are not many differences between China and Western countries like The United Kingdom in this dimension. They believed it is because of the quick economic growth in these countries and the fact that the China's management style has been affected a lot by the Western countries. Moreover, there are also chances for nurturing as well as assertive roles in Chinese society and Western society. Therefore, this cultural dimension may not be too important for the firm in London to focus with awareness.
4. Individualism versus collectivism:
This method concerns to whether the employees' oriented towards self interest or the interest of their group. Just like other eastern countries, Chinese culture has its emphasis on subjugating one's self interests to those of the group (Redding & Wong, 1986). The employees in China then tend to have an expressive confidence in and a moral involvement with their company. The organization therefore can be favoured by the sense of loyalty and duty binding. The firm from London can gain lot of advantages if it can understand carefully the differences between the employees' orientation in home country and the host country.
5. Time orientation:
This dimension is the extent to the long-term orientation in life versus a short-term orientation (Hofstede, 1991). In terms of this dimension, the Western country like The United Kingdom has the lower level of long-term orientation than China. The long-term orientation reveals the way in which Chinese cultures incorporate in their values and specify the importance of perseverance and thrift. China then can acquire the economic success. The consultancy firm in London must consider the differences between its time orientation and China's before setting up the office there.
IV. The lifestyle in Beijing:
In order to set up an office in Beijing, the capital city of China, the knowledge about the lifestyle in Beijing must be acquired. Beijing, like other countries in the world, has a multiform lifestyle which is very difficult to be known all by any foreigners. Hence, only some major parts of lifestyle in Beijing which may cause their influences in the company will be analyze.
1. Weather:
Unlike other countries, Beijing has four definite seasons. Among four seasons, spring and fall are the two shortest seasons with summer and winter being the longest ones (Asianinfo, 2009). Based on the season, the climate in Beijing is variety with autumn is the most pleasant time to stay as the skies are clear and the weather is very comfortable. Unfortunately, autumn only lasts for a short period, meanwhile, the 2 longest seasons are summer and winter will not have pleasant climate. Summer is rainy and hot with temperatures soaring above 100 degrees F (38 C) whereas winter is dry all the time and has its temperatures dropping below 5 degrees F (-15 C). Therefore, it may cause problem for the firm in London to set up an office in Beijing if it can not get acquainted with acclimatization.
2. Food:
The food in Beijing is a mixture of different area varieties namely Hebei, Shandong, Lower Yangzi River area, Inner Mongolia and Xinjiang (West-meet-East, 2009). Beijing foods are cooked with the local product such as garlic, ginger, leeks, pork, spring onions, and different spices, chillies … Moreover, the people in Beijing usually use wheat products like noodles, bread and dumplings in their meals. Those foods are delicious, but the tastes are quite different from the Western foods. Besides, most Chinese use chopstick when they eat in stead of fork and knife like Western people. Thus, people from the company in London must try to adapt themselves to the food and eating style in China if they want to stay and work there.
3. Verbal and non-verbal communication:
A survey stated that in the main land of China (exclude Hong Kong and Macau), there is only 0.77% of its citizens are the English speaker (Wikipedia, 2009). Furthermore, there are also many kinds of language used in China such as Cantonese and Mandarin… Therefore, it may be a problem for a foreign company to open an office in China without knowing the local language.
Besides, knowledge of the non-verbal communication in China is also necessary for the firm. The non-verbal communication contains facial expression, tones of voice, gesture, and the eye contact (kwintessential, 2009). The non-verbal communication in China sometimes is more powerful than the verbal interaction; most Chinese therefore maintain an impassive expression when speaking. Hence, the people from The United Kingdom's company need to know not only the local language but also the non-verbal communication in China so as to improve their business effect.
4. The gap between the rich and poor:
The growing gap between the rich and poor in China is now considered as one of the worst in the world (Topren, 2009). The website Topren indicated that the people in the city earn 2.8% more than ones who live in rural areas. This issue may not have an important impact on the firm's strategy. However, a brief understanding about this situation is still useful.
V. Conclusion:
The three major points about the People's Republic of China required by the Management Consultancy in London were provided in this report. The environmental analysis, the cultural issues and the lifestyle in Beijing together with some advices for the company in London to avoid difficulties were greatly stated. In general, the purpose of this report was fulfilled. However, this report only can help the company to reduce the troubles somehow; real problems may come to the company when it comes face to face with reality. A good decision making made by good manager will be more useful for the company.
VI. References:
Asianinfo (2009), "Beijing", available at <http://www.asianinfo.org/asianinfo/beijing/beijing.htm>, viewed 5 August 2009.
Bond, M., K. Leung & K. Hwang (1986), The social psychology of Chinese people, In The Psychology of the Chinese People, edited by M. Bond. Hong Kong, PRC: Oxford University Press.
Central Intelligence Agency (2009), "The World Factbook - China", available at <https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html>,viewed 5 August 2009.
E. Alan Buttery & T.K.P. Leung, Bradford: 1998, European Journal of Marketing, Vol. 32, Iss. 3/4; pg. 374.
Francis Snyder, New York: Feb 2009, Journal of World Trade, Vol. 43, Iss. 1; pg.1, 57 pgs.
Friedman, C. (2002), "Executive Summary: Demographic Profile of China", Population Resource Center, Washington, DC.
Jakobson, L. (Ed.) (2007), "Innovation with Chinese Characteristics", Palgrave Macmillan Publishing, New York, NY.
Jiangyu Wang, Singapore: DEC 2004, Singapore Journal of Legal Studies, pg.347, 43 pgs.
Hofstede, G. (1991), "Cultures and Organizations: Software of the Mind", London: McGraw-Hill.
Husted, B.W. (1999), "Wealth, Culture, and Corruption", Journal of International Business Studies 30(2), 339-360.
Kwintessential (2009). "China-Language, Culture, Custom and Etiquette", available at < http://www.kwintessential.co.uk/resources/global-etiquette/china-country-profile.html>, viewed 5 August 2009.
Li-hua, R. (2007), "What is technology", Journal of Technology Management in China, Vol. 2 No. 3.
Minxin Pei, Washington: Jul/Aug 2009, Foreign Policy, Iss. 173; pg. 32, 6 pgs.
Pitman B.Potter (2001), "The Legal Implication of China's Accession to the WTO", 167 The China Quarterly 592, 603.
Redding, G., & G. Wong. (1986), The psychology of Chinese organization, In The Psychology of the Chinese People, edited by M. Bond. Hong Kong, PRC: Oxford University Press.
Topren (2009), "The China culture: lifestyle", available at <http://topren.net/travel/culture/lifestyle/index.htm>, viewed 5 August 2009.
West-meet-East (2009), "Beijing food", available at <http://www.west-meet-east.com/fdbeij.htm>, viewed 5 August 2009.
Wikipedia (2009), "list of countries by English-speaking population", available at <http://en.wikipedia.org/wiki/List_of_countries_by_English-speaking_population>, viewed 5 August 2009.
Zhang Yunling & Tang Shiping (2005), "China's Regional Strategy", in Power Shift: China and Asia's New Dynamics, ed. David Shambaugh (Berkeley: University of California Press, 2005): 48-68 at p. 48.
