The Strategies of Straddling Cultural Difficulties for the Joint Ventures in China

Abstract: During the current globalization and internationalization process, many global companies have established joint ventures in China due to its increasingly economic entity and huge market. However, the cultural difference between the China and the Western is a main problem to hinder the collaboration. In this paper, the cultural difference between the China and the Western is first investigated in details. Next, the impacts of the cultural difference on the business are also studied. Last, three

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strategies of straddling cultural difficulties are provided, including to identify and understand cultural differences, to provide cross-cultural training for employees in the multinational corporation,  to establish common business values ​​and corporate culture, and to localize management

 

  1. Introduction

Nowadays the world is in the trend of increasing globalization and internationalization. While the European Union and the US suffered economic recession since 2008, China became an important economy in the world. For example, China surpassed Germany in 2009 to become the world’s largest exporter (The World Trade organization, 2010). As for the GDP, China has surpassed Germany and Japan in last several years, and today China is the second largest economy behind the US (Barboza 2010; CIA World Fact Book 2010). With the increasingly economic entity and huge market, many global companies have established joint ventures in China. However, mostly, to their surprise, the outlook of such collaboration is not simple as expected; the first thing they meet is the cultural difficulties between the Western and China.

Culture has been defined in many different ways, reflecting the points of the views that can be observed. The qualitative definition for culture by learned researchers are too numerous to count, while each one describes an aspect of culture in a meaningful understanding of the terms. Olie discusses over 164 different definitions for culture collected up until 1951 (Olie 1995, 128). A Dutch cultural anthropologist Hofstede himself defined the “national culture” as “the collective programming of the mind which distinguishes the members of one human group from another … Culture, in this sense, includes systems of values; and values are among the building blocks of culture (Hofstede, 1984).” Moreover, culture contains many levels as follows,

  • Language

ù verbal

ù nonverbal

  • Religion
  • Values and attitudes
  • Manners and customs
  • Material elements
  • Aesthetics
  • Education
  • Social institutions

Adaptation of these elements for an international company depends on its level in the market participation. In the popular opinions, culture has multi dimensions. Presently, two theories of cultural dimensions are mainly applied in study: the first one is Hofstede’s (Hofstede 1996), which has conducted extensive empirical work across employees of IBM; the other Dutch culturalist is Trompenaar (Trompenaars, & Hampden-Turner 1998). His aims to develop a guide to managers in organisations. It is relevant to international managers doing business in individualist or collectivist cultures.

In Hofsted’s theory, culture is consisted of five bipolar dimensions, respectively power distance, individualism, uncertainty avoidance, masculinity, and “Confucian dynamism” or “long/short term orientation” (Hofsted 1996), which was an attempt to fit the uncertainty avoidance dimension into the Asian culture. Moreover, Hofsted found that in each dimension different countries have demonstrated different (bipolar) attitudes. For instance, both Malaysia and Mexico have a large power distance, while New Zealand and Denmark have a small power distance. Furthermore, in the aspect of the individualism, some western countries such as the US, Australia, UK emphasize the individual’s benefit; however, other countries such as Venezuela, Indonesia are collectivist where the group’s interest overweighs the individual’s benefit. In addition, Hofstede has pointed out, that for companies, culture more often leads to conflict than synergy; cultural differences can be a nuisance at best and potentially a disaster.

Different from Hofsted’s theory, in Trompenaar’s theory, culture is measured mainly by three dimensions: respectively, in relationships with people, attitudes to time, and attitudes to the environment. Specifically, the measures are classified into several aspects: universalism vs. particularism, collectivism vs. individualism, affective vs. neutral, specific vs. diffuse relationships, achieving vs. ascribing status.

Undoubtedly, culture plays an important role in business activities. Actually businessmen are more like to collaborate with and agree with people with a similar culture. When businesses operate internationally, they will need a clear understanding of national cultural differences. Moreover, the cultural difference in business will affect the relationship between the partners and even the employees in a same branch. The interaction between the social culture and the business is a two-way. On the one hand, social-culture has impacts on business. These impacts include the effects  of culture on business meetings, negotiations and contracts, the management of  personnel, products they produce, and methods used to market their products, and even  costs,  levels of productivity, poor sales and profits; on the other hand, business impacts on culture and society.

Differing from the western culture, Chinese culture has demonstrated complicated and a bit mysterious impact on business. In China, the core of culture in business is called guanxi. It is defined by reciprocal exchange of favours and mutual obligations among participants in a social network in China. Guanxi is very important in business networks – It can involve customers, suppliers, competitors, partners in joint ventures, and other forms of alliance, research institutes, politicians and civil servants.

The Difference between the China and the Western

Many western businessmen are puzzled by the huge cultural differences between China and the western countries. The differences exists in several aspects as follows,

  1. Social structure – The social structure in China is formal and hierarchical. Individuals know that they should fit in the structure and comply with their rules. They do not cross into other areas. In contrast, in the Western, such as the U.S., social structure is more loose and informal. See that the level of social interaction and understanding of each other is not uncommon. In their structure, there are very few community is not allowed to cross the line. If visitors do not know the culture clear, this may result in some problems in the business relationship.

  1. Confrontation/conflict – for a businessman, if he is planning to do business in China, it will be very helpful for him to know that the manners of most Americans are not the way in China. On the contrary, Chinese people do not like the direct way and they would like to use some methods to avoid the direct confrontation/ conflict. In China sometimes it is not necessary to tell the truth. To prove a point or to show one is right in business is even considered to be shameful, and should be avoided.
  2. Reputation –The reputation of individuals is very important in China. If an action would destroy someone’s reputation, it should be avoided. When the shame occurs, the people may sacrifice their jobs. In the U.S., reputation come and go overnight, and at the end usually does not matter. The end result is more focused.
  3. Self- Chinese looks more at the group’s collective than at individualism. In contrast, the United States has become a well-known collective individualism. This opinion has been regarded as a source of conflict to with other culture that emphasizes the collective.  One from China are more likely to find how their behaviors affect his/her behavior, rather than how it affects them. They are more willing to give up and sacrifice for the group benefits. American individualism has been the backbone and as the reasons for its success.
  4. Business relationships – when doing business in China, people need to prepare a lot of entertainment. Business becomes secondary as the parties get to know each better. If the delay of the contract, which is perfectly acceptable, as long as the allocation of the social time is correct. In the U.S., business partners are usually more detached. There may be some social gatherings, the business is more important and the socializing will be sacrificed to get the job done if needed.
  5. Ethics – Chinese society is high on people’s moral values. Marriage is not encouraged until the late twenties. In contrast, American culture is more relaxed, some even say that the need for more emphasis on ethics.
  6. Identification of the dead – one of Chinese long traditions is the recognition of the dead. Once a year, all members of a family visit to each ancestor’s grave, and pay their respects. Respect for ancestors is very important in Chinese culture. This is the most apparent contrast that most Americans know very little about most of their ancestors rest. This may be due to the fact that most Americans have lost a serious site or the information or locations in foreign immigration. Chinese culture has longer history, and the proportion of immigrants is far less.
  7. Humility – humility is a reserved virtue in Chinese culture. Successful business in the United States would like to praise their success. In business, the majority of Americans believe that humility is a sign of weakness. However, Chinese people would like to be humility.
  8. Time-sensitive – Crossing the corporate culture can be frustrating interference, when it and complete the work. Most Americans are very time sensitive when it comes to meeting deadlines. If the meeting is starting at 9:00AM, then all parties were at the time. However, China does not consider time as an absolute deadline, but as a suggestion. Similarly, they have different expectation on the time. For example, if a report is due to Friday, an American will wait for the report before the end of the business day. However, it is very normal in China they often receive the report several days after the due day.
  9. Respect – To be sensitive to the needs of another person is in is very important in Chinese culture. It is expected that one will respect other people, and they treat. Each encounter their needs are met.

The Impacts of the cultural difference on the business

The cultural difference has apparent impacts on the cross-culture business activities in several aspects shown as follows,

  1. In a joint venture established by global corporation, the cultural difference affects influence the harmonious relationship between the local staff and the multinational managers and even generate an “irrational response” In Chinese the word “management” is a combination of  “command” and “understand”. If the managers in multinational corporations do not believe in them, but only “control” or “command” them, it will result in damaging the relationship between the managers and staff. When the distance between the management and those employees is a rather large, the communication from top to bottom in the multinational corporation will be interrupted. Accordingly, the managers cannot understand the truth and the two sides go further away in different directions. If managers are not able to correctly deal with cultural conflict, to tread the staff with emotion or in non-rational approach, the staff will also take irrational actions, which will increase or upgrade the misunderstanding and conflicts.
  2. Cultural conflict leads to losses of multinational market opportunities and organizational inefficiencies. Because different values will inevitably result in that people in different cultural backgrounds will take different behaviors, it will produce cultural conflict at the same company. With the diversities of the cross-border company’s locations and staff’s citizenships, such growing cultural conflicts within the company will be reflected in the department managements and external operations. In the internal management, people have different opinions on values, life goals, and behavior specifications, which will also inevitably lead to increasing administrative costs, the difficulty in organizational coordination, or inefficient operation.  In the external operation, the presence of cultural conflict may not cause multinational corporation meet market competition in a positive and efficient organization.  It will make multinational corporations be in a passive status in the market competition, and even lose many good market opportunities.
  3. Cultural conflict will cause the global strategy of global corporations into troubles. Transformation from the general market strategies and resource strategies to the global strategies is the important steps for multinational corporations to improve their high economic efficiencies and enhance global competitiveness in the world. To ensure the implementation of global strategies, multinational corporations are required to have a considerable scale global organizations and scientific management system as a carrier. However, most current
    multinational companies have generally adopted the matrix organization. The cultural conflicts and the lack of collective consciousness lead to disorder of the organization process, information block, and misbehaviors of different departments. It will result in a complex multinational structure, ineffective operation,, insensitive to the market, and deteriorate the global strategy.

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Strategies of Straddling Cultural Difficulties

The implementation of cross-cultural management has the following main three aspects:

The first is to identify and understand cultural differences. Because cultural conflict roots in cultural difference, cultural differences must be analyzed for identification. According to the American anthropologist Edward Hull’s study: culture can be divided into three categories: formal specification, informal norm, and technical specification. Formal regulation refers to a basic human value​​, or to distinguish right from wrong standard. It can resist the power from external attempts to change its coercive. Therefore, the formal specification is often difficult to change dramatically; informal norms contain people’s lives habits and customs. The resulting culture clash can be overcome by longer time’s cultural exchange; specification refers to people’s knowledge, skills, experience, and so on. It can be learned by technical knowledge of people
Obtained, thus it is easy to change. From this theory, it can be seen that different cultural norms
caused by cultural differences and cultural conflicts are in different levels and types. The managers in joint venture must first correctly identify and distinguish cultural differences, and then take appropriate measures.

In addition, firms need to take into account varying national attitudes to hierarchy & power distance when considering entry to Chinese markets through exports, joint ventures, takeover or setting up completely new production facilities.

  1. The second strategy is to provide cross-cultural training for employees in the multinational corporation. Cross-cultural training is to increase the response awareness and adaptability towards the different cultural traditions. It can promote communication and understanding between people with different cultural backgrounds. Cross-cultural training mainly contains: learning the content of cultural knowledge, cultural sensitivity training, language learning, cross-cultural communication and conflict management, environmental simulation. Specifically, the specific purpose of this training is consisted of the following aspects:
  2. Reduce the cultural conflicts that overseas managers may face and help them adapt           

quickly to local environment and work properly;

  1. Promote local employees’ understanding on the company philosophy and customary

practices;

  1. Maintain good and stable relationships within the organization;
  2. maintain the smooth flow of enterprise information flow and the efficiency of decision-

making process;

  1. strengthen team spirit and company cohesion force.

Moreover, cross-cultural training, as other training, is regarded an approach to retain human resources in companies. This is because the companies spend money to provide training for employees, not only training is a work incentives for the staff’s excellent performance of the, but also shows the company’s long-term development of the sincerity for staff who are intended to work for long term.

The third is to establish common business values ​​and corporate culture. By acknowledging cultural differences and implementing cross-cultural training for employees to improve the employees’ cultural identification and adaptability. In basis of understanding of cultural common, the concept of co-operation and strong corporate culture are built according to the environmental requirements and the principles of corporate strategy development. This point is
essential since it helps to reduce cultural conflict and each employee able to put their thinking and behavior with the company’s business and purpose together. Moreover it strengths the combination of a subsidiary and the parent company more closely. While establishing a good reputation in the international market, it can enhance the country’s ability to adapt the cross-cultural changes.

The fourth is to localize management. Today more and more multinational companies have been aware of the localization of management and understood the importance of foreign investment success. In addition to including to hire local staff as much as possible and to develop their loyalty to the company, the most important thing in local strategy is to hire qualified local managers, which can effectively avoid cultural conflicts. Local employees are familiar with local customers, market dynamics and government regulations, and they have the capacity of easily reaching agreements with local consumers. Moreover, hiring local employees will undoubtedly facilitate the cross-expansion of multinational enterprises in the local market. At the same time, the localization can help reduce the expatriates of multinational companies, he high cost of cross-border operations, and cause local social and cultural integration. In addition, it can reduce the crisis mood of the local community to foreign capital.

Conclusions

While the world grows towards globalization and internationalization, many global companies have established joint ventures in China due to its increasingly economic entity and huge market,. However, the cultural difference between the China and the Western is a main problem to hinder the collaboration, which is especially apparent in the multinational corporation. In this paper, the cultural difference between the China and the Western is investigated in details. Furthermore, the impacts of the cultural difference on the business are also studied. In basis of this analysis, totally four 字典

Bottom of Form

strategies of straddling cultural difficulties are provided, which includes three points: the first is to identify and understand cultural differences; the second strategy is to provide cross-cultural training for employees in the multinational corporation; the third is to establish common business values ​​and corporate culture, and the fourth is to localize management.

 

 

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原文链接:International business environment