The Business Culture In China

Culture is a complicated concept to define due to its multi-dimensional attribute and the existing disparity in evidence on diverse cultural facets. Understanding culture is a key issue in the development of cross-cultural relationships and is one of the main issues facing multi-national enterprises (MNEs) both internally within the human resource team and externally such as relationship with buyers & suppliers from different countries. Culture is also a vital factor that needs to be considered when a firm is expanding internationally, mode of entry to a foreign market, foreign direct investments and also during international mergers & acquisitions. In this essay we will discuss first about culture in general, then we will discuss about various dimensions of culture proposed by Hofstede and Trompenaars and then highlight about the business culture of china as per Hofstede’s cultural dimensions. Further to this we discuss about a couple of US MNEs international behaviour in Chinese market and conclude by discussing on the implications of Chinese business culture on doing business in China

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Review on culture

Culture is a very complex topic and has many definitions. Kroeber & Kluckhohn (1952) were able to collect more than 160 definitions of culture. Hence, it is vital to comprehend culture in different perspectives. Its impact on business has been discussed from various perspectives (Möller & Svahn 2002). Goodenough (1971) sees culture as a set of beliefs or standards, shared by a group of people, which help the individual decide what is, what can be, how to feel, what to do and how to go about doing it. Hofstede (2001) defines culture as “the collective mental programming of the mind which distinguishes one group or category of people from another”. Culture has also been defined as a multifaceted and organized set of elements, comprising understanding, beliefs, values, arts, law, manners and morals, and all other kind of skills and habits acquired by a human being as a member of a particular society (Usunier 1996). Culture is the system of shared values that differentiates the members of one group from another (Hofstede, 1980; Mueller & Thomas, 2001). Thus, national culture acts as the “common frame of reference or logic by which members of a society view organizations, the environment, and their relations to one another” (Geletkanycz, 1997). The sources of culture have been divided into the following categories: language, nationality, education, profession, ethnic group, religion, family, sex, social class and corporate or organisational culture (Usunier 1996).

A vital component in culture is language, especially for international business. But not only verbal communication is of significance, also the messages given through non-verbal communication; gestures, gesticulations and attitudes are significant. Eye contact, touching, space and privacy are understood and used differently in different cultures. At least 75% of all communication is non-verbal (Trompenaars and Hampden-Turner 1997). Nationality and national culture is often considered a cornerstone of culture.

Dimensions of culture

Hofstede (1980, 1984), Hofstede and Bond (1988) and Trompenaars (1994) all proposed cultural dimensions by which diverse national cultural patterns can be evaluated. In this essay, we will be discussing more about the Hofstede’s Cultural dimensions as they are extensively cited in the literature. Cultural dimensions simplify the judgment practice by highlighting the core elements on which national culture can be compared. These ‘elements’ are universal across all national cultures. National culture pertains to the culture of a sovereign country not to the different sub-cultures that exist within each sovereign country.

Trompenaars (1994) proposed seven cultural dimensions and clustered them beneath three major headings: those arising from relationships with other people, those involving the passage of time and those emerging from our attitudes towards the environment. The seven dimensions are: attitudes to time; universalism vs particularism; individualism vs collectivism; emotional; specific/diffuse; achievement/ascription and internal environmental control/external environmental control.

Hofstede (1980) highlighted four cultural dimensions: power distance; masculinity/femininity; individualism/collectivism; and uncertainty avoidance. In addition to the original four cultural dimensions, Hofstede (1990) suggested the fifth cultural dimension, called Confucian Work Dynamic. The Chinese Culture Connection (1987) conducted a Chinese Value Survey (CVS) based on traditional Chinese cultural values and recognized this non-Western cultural dimension. Three of the four factors were concurrent with Hofstede’s (1984) work-related cultural dimensions. Only one factor, Confucian work dynamics, was not related with Hofstede’s (1984) cultural dimensions. Hofstede (1990) espoused this eastern cultural dimension as the fifth work-related cultural dimension in his book, Cultures and organizations: Software of the mind. Hofstede (2001) renamed this cultural dimension as Long-Term Orientation (LTO).

Power distance (PD)

This dimension states the level of reception of inequality in a society. Inequality is found in all societies, and is visible at all levels: physical, social, material, political and legal. PD also indicates to the power disproportion between superiors and subordinates.

Uncertainty avoidance (UA)

This dimension conveys the outlook towards anxiety over the unknown. Some societies show more anxiety than others in their ways of handling with uncertainties. In high UA organizations, there are more written set of laws in order to lessen uncertainty, whereas in low UA firms, there are smaller number of written regulations and practices. In countries high in UA, employees are expected to abide by the leaders without inquiring leaders’ intentions and judgments (Hofstede, 2001).

Individualism/Collectivism

This dimension refers to the socialization an individual receives, either as an individual who stands on his or her own merit, a person whose well-being and happiness will result from his or her own doing, or, as an individual who primarily stands as a member of a group. Masculinity/Femininity

Masculinity/Femininity conveys the tendency for some countries to practise qualities conventionally ascribed to women, and which are the quests of social concord, quality of life, and nurturing of relationships. Societies putting more stress on the pursuit of such qualities are called feminine. In contrast, masculine societies, stress the pursuit of qualities often related to manly conduct, such as valuing work over social pursuits, and the accrual of material wealth, over social harmony and quality of life (Hofstede, 2001).

Confucian dynamism or Long-term orientation (LTO)

According to Hofstede (1991), long-term orientation relates to a positive, dynamic, and future oriented culture linked with four ‘positive’ Confucian values: ‘persistence (perseverance)’; ‘ordering relationships by status and observing this order’; ‘thrift’; and ‘having a sense of shame’. This dimension has not been well received by the researchers globally.

Business Culture of China

The most vital depiction of Chinese culture is its high collectivism and power distance. The majority Chinese leaders have a high power distance, and only rely on the one they know or who are close to them. They won’t give the power to anyone not in their group or party, and it’s hard for subordinates to gain high levels of trust from their leaders (Casimir et al 2006). Various Chinese original concepts, such as face, harmony, guanxi (interpersonal links), renqin (kindness), and paternalistic leadership, can be sketched to these two broad cultural dimensions. Chinese are reasonably low in Uncertainty avoidance, which means that they are not worried by uncertainty and ambiguity. Chinese are also recognized for their stress on hard work and thrift, an attribute explained as Confucian dynamism by Bond (Chinese Culture Connection, 1987) or long-term orientation by Hofstede (2001). Fascinatingly, China is considered as high in Embeddedness (e.g., protect my public image and social order), Hierarchy (e.g., humble and authority), and Mastery (e.g., successful and ambitious) based on Schwartz’s values at the culture level (Schwartz, 2006). Embeddedness and hierarchy appear to match to collectivism and power distance, respectively, but Mastery is a comparatively novel depiction of Chinese people in the cross-cultural literature. The Chinese Culture Connection study (1987) depicted 40 values that can be ascribed to Chinese culture. These Chinese values are shown in table 1.

Table 1: The 40 Chinese values in the Chinese value survey

(Source: The Chinese Culture Connection 1987)

Let’s discuss about Motorola and Microsoft, both are US MNEs and their journey to enter Chinese market (Gao Y 2007). Motorola entered China in 1987 and now it is one of the most successful foreign companies in china. Microsoft also entered China in 1992 but its journey to China has been bumpier compared to Motorola. The presidency of Microsoft China has been changed five times after the establishment. Various methods used by these firms to make a smooth sail in China were: 1) Lobbying or “Gongguan” in Chinese and to lobby, a firm should build high-quality guanxi (relationship) with the government. Here lobbying means like building guanxi with Chinese government officials. The president of Motorola visited dignitaries of the Central Government of China to assemble their views on the entry of Motorola before they entered China. In order to get a constructive impression from Chinese government, Motorola donated cell phones to Chinese government officials. Microsoft also used the ways that Motorola adopted but has not been enough successful. Firstly, Bill Gates came to China for the first time almost a year after Microsoft’s entry into China, Chinese government officials believed that Gates looked down on the Chinese market. 2) Code of conduct – Every MNE has its own code of conduct, but China also has its business game rules and amalgamation of the business game rules of China with the codes of conduct of MNEs decides the victory or collapse of MNEs in China. Motorola demonstrated an excellent fit between its own codes of conduct and the business game rules of China. Firstly, it abides by the laws and regulations of China, and makes substantive deal and sets up joint ventures with Chinese enterprises as per the request of Chinese government. Secondly, it respects Chinese culture, and tries to acclimatize its organisational culture to Chinese culture. Thirdly, it shows an excellent understanding of Chinese political context. In 1992, Motorola went ahead to set up branches of the Communist Party of China (CPC) and Motorola also announced that members of CPC have the priority to get jobs from it. Comparatively, Microsoft also has its own codes of conduct, but it doesn’t bother about incorporating it with the Chinese business game rules. Firstly, Microsoft was reluctant to set up joint ventures with Chinese companies. Secondly, Microsoft organisational culture is not acknowledged by the Chinese government and NGOs but Microsoft doesn’t want to amend it. Thirdly, In 1999 Microsoft also blamed Chinese companies of piracy, which showed that Microsoft didn’t comprehend the business game rule in China.

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Here I also want to bring some personal information about the Chinese culture, my younger brother works for ZTE in India, one of the major telecom firms of china. I was having a discussion with him and asked him about the Chinese culture that prevails in ZTE, he also emphasised that Chinese believe in relationship (guanxi), that’s how their business runs. Chinese also expects others to respect their society and culture and they believe in hierarchy and the employees who are old in the organization ought to be respected. Although due to the influence of western culture, Chinese culture is changing towards individualism but overall they are more collectivistic and give more importance to group rather then individual.

Culture is perceptibly not stationary. As societies become affluent, the need for interdependence is diminished, leading to individualism. This reckoning suggests that Chinese should turn into more individualistic over time, and Chinese in more affluent regions are expected to be more individualistic. China may be changing toward individualism; it is still on the collectivistic part in the worldwide pitch. Even Hofstede suggested that value transform does happen, but a number of values possibly will change gradually that may take several decades to discover.

China’s hyper economic development has boosted living values upward speedily, leading to a significant change in the social norm about money and materialism and its acceptance by the Chinese society (Abramson & Inglehart, 1995; Fang, 2006). A study by Chen (1995) showed that Chinese desire a merit-based incentive scheme even more stoutly than Americans, perhaps reflecting the change in Chinese culture.

Implications for International Business in China

None of the MNEs can overlook China, because of its massive market potential and its low cost configuration. MNEs need to analyze critically about the Chinese market and the prevailing culture to be successful in China. China is complex and diverse with changing paradigm in culture. Knowing guanxi is definitely useful, but one cannot presume that this information is valid to all the Chinese people that they come across. Multinationals have to be insightful about the dissimilarity between the social and economic apprehensions of Chinese people. Provided the popularity of materialism in contemporary China, many management practices as participative management, empowerment, job enrichment, knowledge management and total quality management may necessitate a high degree of inherent motivation for them to be successful. Regardless of the fact that Chinese may be more long-term oriented, based on the yin/yang principles, Fang (2006) has presented a dialectical outlook of culture, which proposed an account for an array of ostensibly inconsistent behavioural patterns in various cultures. Thus, it is not astounding that Chinese may be long-term oriented in a few contexts, but are short-term oriented at work.