Management Practices of Cross-National Businesses in China

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Do cultural barriers affect management practices of cross-national businesses in China?

Over the decades academics and practitioners have been intrigued by the idea of cultural barriers challenging the management practices of cross-national businesses. The globalization of the world economy, on one hand, has created tremendous opportunities for global collaboration among different countries; on the other hand, it has also created a unique set of problems and issues relating to the effective management of partnerships with different cultures. 

China remains a hot topic for researchers over the past two decades, which is demonstrated by the substantial number of published articles focusing on doing business in China( Zhang 2004).

My paper will aim to test Hostede’s model using US firms that incorporate western cultures and norms in business strategies and practices as they enter the Chinese market. I hope to discover whether my findings are in line with literature or whether the disparities of the dimensions are out-dated due to China’s more open economy since Hofstede’s study was conducted.

Within China, rapidly changing demographics, rising incomes, increased consumer spending and an increasingly open business environment have all helped to make the Chinese market increasingly attractive to Western businesses across a variety of industries. Similarly, declining sales in their home markets has forced many US and European companies to relocate their businesses to China in order to implement their long-term global growth strategies. As companies grow and begin their expansion adventures they quickly realise the major rewards of entering an emerging market like China, whether it be for manufacturing purposes or selling products in this quasi market economy. A worthy example of this was the highly controversial relocation of manufacturing outlets of Pacific Brands to China in 2009 which ultimately lead to the success of the company. China has shone a light onto the world, battling to become the number one economy in the world, with an economic growth rate of 11% in 2010, and is predicted by 2013 to have a larger economy then USA, measured by the real purchasing power by citizen. (Niu et. al. 2011).

However, the literature also refers to numerous difficulties relating to cultural dissimilarities when entering the Chinese market by Western based firms. Westerners are generally unaware that in China, social relationships may mean much more than what Westerners intend because they are so fundamental to the Chinese national character (Vanhonacker, 2004). (Chung 2006) among other researchers have highlighted the impact of cultural differences on market strategies of Foster’s Chinese operations that were a result of numerous failures in corporate strategies due to failure to integrate with Chinese culture appropriately.

Hence, when entering into collaboration with a Chinese company it is crucial to prepare for cultural and economic differences.

When doing business in China many researchers have found Guanxi to be a source of sustainable advantage, as personal relationships are central to every aspect of Chinese society, including business. By developing personal relationships, firms can enhance their marketing effectiveness and efficiency (Lee, 2001), (Murphy, 1996) and (Vanhonacker, 2004). Guanxi means good connections, and is defined as "friendship with implications of continued exchange of favours." It implies preferential treatment to exchange partners in the forms of easy access to limited resources, increased accessibility to controlled information, preferential terms including the granting of credit and protection from external competitors, special government relationships and networks. (Lee 2001). It is a requirement when wanting to speed up processes and get approvals to do business in China. Nothing happens in China without a relationship, because the Chinese have a high degree of innate distrust and...
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