International Management: Business Environment of France and China - Essay Example

?International Management Table of Contents Introduction 3 Business Environment of France 4 Economic Environment 4 Fashion Retail Industry of France 4 Policy and Regulation 5 French Business Culture 5 Management Practices in France 8 Leadership Style of Managers in France 8 Cross-Culture Management in France 9 Business Environment of China 11 Economic Environment 11 Fashion Retail Industry in China 11 Policy and Regulation 12 Chinese Business Culture 12 Management Practices in China 15 Leadership Style of Managers in China 15 Cross-Culture Management in China 16 Conclusion and Recommendations 17 17 References 18 Appendices 23 Appendix 1: Management Practices of France and China 23 Appendix 2: Culture Surrounding Business of France and China 24 Introduction In present days’ business environment, culture has become one of the most significant aspects for organisations attempting to enhance the business in a foreign country. With the remarkable rise in the international trade, knowledge regarding conducting international business has become especially important for organisations. International business management comprises learning different cultures of the nations where a company intends to enter. Cross-cultural management helps to gain understanding about business tactics, human personality and leadership/management style that are significant for possessing effective business relationships with people in foreign countries (Bowie, 2008). The paper describes the business environment and culture of France and China for conducting business of a retail fashion organisation in the United Kingdom named River Island. The objective of the paper is to recognise the cross-cultural aspects of China and France with respect to leadership style and business practices which need to be considered by River Island in order to conduct business in foreign nations. Furthermore, the paper analyses the business environment and legal structure of both nations for assessing the suitability of conducting business. Business Environment of France France is regarded as the international cultural capital. It is one of the biggest and most diverse nations in Europe. France is also recognised as a modern nation among the European countries with respect to technology and business. France has always been the core of international business and trade. France is an extremely consolidated nation. Among many larger cities in France, Paris plays a significant part with respect to governmental regulations and business opportunities. France has advanced rail network and structured road transport system that offer smooth access to major capitals and metropolises (Nouel, 2005). Economic Environment France is known as the world’s fifth biggest economy with respect to gross domestic product (GDP). In the year 2007, the GDP of France was almost €1892 billion and inflation rate was about 1.5%. In the year 2002, France had accepted Euro as its domestic currency (Moore Stephens International Limited, 2009). France is also considered as one of the biggest exporters of the world. In the year 2008, France had exported US$767 billion worth of goods (MGI World, 2009). France not only has progressive industrial economy, but also is advanced in automobile industry, aerospace, information technology, electronics, chemicals and fashion industry. France is one of the significant members of G8 leading industrialised nations (MGI World, 2009). Fashion Retail Industry of France France plays a vital role in catalysing enthusiasm about fashion all through the nation. The fashion industry of France has acquired its acceptability from high-end and high creative sector. The brand management capability, affluence and commercial aptitude of France gradually dribbled over the mass fashion retail market segment by motivating the appearance of international brands (Girod, 2012). In the year 2009, the total income of French apparel retail industry was worth US$48,956.4 million which accounted for compound annual growth rate (CAGR) of 0.6% (Datamonitor, 2009). In order to succeed in the French fashion retail market, River Island needs to concentrate on the creative and unique facets which can attract customers’ responsiveness. France’s fashion retail market is characterised by strong competition and tempting global platform. Policy and Regulation France uses the “civil legal system” where law rises chiefly from written figures. In general, adjudicators do not create law, but construe it. France has two legal systems which are administrative and judiciary. Administrative system manages the arguments between government and individuals and judiciary system manages the public cases. France does not possess jury system; rather it has mixed tribunal system. The legal cases are perceived by numerous courts on the basis of severity of the alleged crime. The public offenses include small privileges, commercial arguments, disagreement over social safety, labour disputes, minor breaches or other serious crimes (MGI World, 2009). French Business Culture France has a centralised system of business. In spite of having a democratic society, the centralised viewpoint is invented from power and authority of the pervious rulers and remains an important portion of French premiership. In French business culture, the centralisation exists in the focused power that usually befalls with single person (Communicaid Group Ltd, 2009). Although the culture of France is quite standardised, French business people, particularly young generations are typically experienced in cooperating and conducting business with companies from other cultures. However, it does not imply their broad-mindedness, because in terms of business, French people prefer to expect business affairs to be conducted in their way. For River Island to conduct business in France, it is significant to demonstrate respect to the nation’s history and importance. The attitude of French people might seem conceited or egoistical towards foreign organisations, but any indication of disregard or denial to approve has great influence on business association (Katz, 2008). Developing long-term and trusting association is significant and critical for the success of business goals in France. The French people generally concentrate on long-term goals rather than short-term objectives and expect to form strong association over the way of commercial activities. Appropriate manners are the key to develop relationship, for instance early sociability can appear as distrustful and over casual manners can appear as invasiveness towards French people (Katz, 2008). Commercial associations in France exist in both personal and organisational level. The French people generally desire for conducting business with people upon whom they have belief and preference. In French business culture, the respect of a person relies chiefly on the level of education, reputation and accomplishments. French people give value to the cultural difference and thus prefer to establish relationship with people whose knowledge and concern are different from French natives (Katz, 2008). Management Practices in France After the World War II, France had emerged as a vital component in European community with strong feelings of superiority and legacy. In present days, the business structure of France draws ranges of global investors. France is a vital world merchant of industrial products. France also establishes high rate of economic development in European region. Organisations that want to enter in the market of France must have understanding about country’s culture (Communicaid Group Ltd, 2009). Appendix 1 describes the management practices of France which must be considered by River Island to conduct business. Leadership Style of Managers in France French managers are less likely to be like other European managers. French managers view their work as a knowledgeable challenge which requires rational and logical power. Attitude of this type of managers is based on understanding, intelligence and wisdom rather than business exercises. French organisations have centralised organisational structure and they focus on hierarchy of determination, and admiration for legitimacy of authority. French managers have complete authority over business decision making and control over organisations. They consider that their job position is the consequence of personal intelligence and they are conscious of everything which is in the business structure. Managers perceive reports of all activities so that they can regulate the business. Therefore, they resist to the flexible organisational structure, because in flexible organisational structure providing report to numerous organisational heads is challenging for a business. Smartness, mightiness, managers’ expectations towards juniors, respect for managers are significant for running successful business in France (Taleghani & et. al., 2010). The managers of France generally do not follow the participatory methods in decision making. Insight and elegance are the most important principles for leadership in every business areas of France. French managers tend to apply their instincts rather than going with examined believes. The personal style of leadership is to function with energy, passion and emotional countenance. French people are loyal towards their organisation and they refer to the superiors in major decision making. French people are less comfortable in management position, and put less focus on taking blame and more focus on taking guidance from others, thereby making and appreciating close sustainable relationships (Taleghani & et. al., 2010). Cross-Culture Management in France Culture is ubiquitous, multidimensional and complex which need to be managed carefully in order to make a successful venture in a foreign nation. The cross-cultural management has essential value for international business. In cross-cultural management, the Hofstede’s model is one of the most extensively accepted theories for understanding the cultural differences. According to Hofstede’s cultural dimension, the cooperative thinking of mind differentiates the people of one social group with other. Hofstede has distinguished four dimensions of culture which are power distance, individualism versus collectivism, uncertainty avoidance and masculinity versus femininity (Zheng, 2010). Power Distance: Power distance is the level of inequality of power in the country. France has high level of power distance and French society accepts disparity. The authority is highly centralised in France. In terms of management, the attitude towards managers is more official and information flow is hierarchical. The information control and power is inequitably disseminated (Hofstede, n.d.). Individualism versus Collectivism: Individualism is the level which individuals wish to live along with the sense of personal distinctiveness. France follows individualism where personal opinions are considered. In the work atmosphere, the association is deal oriented and high concentration is given on fulfilment of tasks. The communication is direct and each person is permitted to express their feeling. In an organisation, the recognition for performance is expected by individuals (Hofstede, n.d.). Uncertainty Avoidance: Uncertainty avoidance signifies to the aspect in which individuals wish to be directed by the rules, regulations and typical working procedures and admit improbability or anonymity to any newly developed scenario. France avoids any kind of uncertainty and responds actively in such situations. France wants strict management structure, rules and safety. France supports making plans, showing proficiency in business and any alteration in strategies is stressful for people (Hofstede, n.d.). Masculinity versus Femininity: Masculinity and femininity signify the level of forcefulness, competition and accomplishment in a country. France is considered as a feminine nation, because it provides more emphasis on quality of life rather than accomplishing success. The competition among co-workers usually does not occur in French working culture rather, people show compassion towards the co-workers. The management is supportive and is open to discussion to resolve conflicts (Hofstede, n.d.). Business Environment of China After economic renovation, China has become the second biggest economy in the world with respect to purchasing power parity (PPP). The government of China adopts a dual economic system which has grown from collectivist, centrally arranged economy to a market based economy with collective features. China has accomplished quick industrial development through augmented technological improvements and massive foreign direct investments (Fogel, 2010). Economic Environment After the year 1978, China had launched numerous economic reforms and also developed four special economic zones (SEZs) in order to entice foreign direct investment. Other additional improvements in economy resulted in decentralised financial policymaking in numerous segments especially in business. In the year 2007, the total business of China was US$262.2 billion which made China the third biggest trading nation in the world (PricewaterhouseCoopers, 2008). Fashion Retail Industry in China China is considered as one of the biggest industries for fashion apparel items. The majority of Chinese attire imports are from Japan, Hong Kong and the United States. The fashion retail industry in China was worth RMB 400 billion in 2010. The spending of fashion items among the people of China is almost RMB 1150 per annum. It is predicted that the Chinese fashion retail market will increase to above RMB 1.3 trillion by 2020. Several global brands have small trails in Chinese fashion apparel market. For example, Zara has 70 retail stores, Benetton with 25 retail stores and Gap has only 5 retail stores in China. Several retail brands such as Nike and Adidas have gained significant success in retail industry of China. The fashion retailing industry in China is different than any other country in the world. Thus, it is important for River Island to first understand the competitive forces that have shaped the market and act accordingly to take advantage presented by any opportunity (Lui & et. al., 2011). Policy and Regulation The legal environment of China replicates in the political system, i.e. the country is still apprehensive of the foreigners and thus supports national business at the expense of foreign business. In China, the ‘National People’s Congress’ and ‘Standing Committee’ are authorised to practice judicial activities. ‘The State Council’ is also authorised to implement governmental rules and measures in line with the constitutions and laws. Central government also accepts local rules. The People’s Courts are legal structures of the state and the judiciary is capable of putting independent authority according to the law. In China, the Supreme Court is the highest unit for legal system and is responsible to National People’s Congress and its permanent board (PricewaterhouseCoopers, 2008). Chinese Business Culture China is one of the most populated nations in the world. China is noticeably recognised as a nation of custom and rituals. The exclusive characteristics of Chinese culture are constructed on a robust feeling of pride in their ancient history. For River Island to enter in the Chinese market there is need for recognising elementary Chinese cultural, moral and business standards (Communicaid Group Ltd, 2004). One of the central concepts of Chinese culture is relationship or association. Chinese people believe in expanding relationships and encouraging faith and collaboration. These are the major ways for achieving regular business activities. Developing a genuine and loyal relationship on the basis of shared admiration is a central feature of Chinese business culture. In business periphery of China, having right business relationship is crucial for certifying minimisation of problems and hindrances which are often faced by organisations (Communicaid Group Ltd, 2004). China has reserved business culture. In order to open business in China, first there is need to establish business deals. In this context, tours to China are best for opening business for River Island. Understanding Chinese method of thinking is much helpful for evading problems and misinterpretations and helps to keep good connection with Chinese business associates. Personal relationship is one of the biggest factors in accomplishing business objectives in China. In China, business relationship has critical importance because majority of commercial contracts depend more on the faith between parties rather than complete enunciated legal enforceable agreements. It is therefore important for River Island to influence the Chinese customers through moral character, rather than attempting to influence them with the virtues of product quality. Lenience, truthfulness, morality, genuineness and humour are important features for River Island to generate a steady, constant and long-standing working relationship with Chinese business companions (Hu & Xu, 2006). Management Practices in China China has experienced communism and Maoism and even liquidation in its long historic economic development. After opening door for foreign direct investment, China has gone through enormous political and economic transformations. In present days, with the entry of China in the World Trade Organisation (WTO), it provides enormous market for investment and sales for foreign companies (Communicaid Group Ltd, 2004). Appendix 1 describes the management practices of China. Leadership Style of Managers in China In China, political association and family regulation are common in most of the business organisations. The people of China are influenced by Confucianism in their opinions and personalities. Chinese culture is expressively effective in leadership style. The dominant characteristic which is demonstrated by Chinese organisations is centralisation system. The managers have less faith in juniors and refrain from assigning authority to them. Illiberalism and silence nature result in less involvement of juniors in management activities concerning workplace (Taleghani & et. al., 2010). In China, the managers are expected to control the businesses and they do to permit the juniors to involve themselves effectively. Decisions regarding major business aspects are developed by considering the benefits of decision makers and the beneficiary groups, and most people who belong to primary groups are enforced to remain silent. The business organisations of China generally follow hierarchical relationships, thus the development and promotion of employees relies on their association with top level management with great political authority rather than individual job (Taleghani & et. al., 2010). Cross-Culture Management in China Power Distance: The power distance is quite high in China, i.e. Chinese culture accepts the disparities among people. The manager and the subordinates’ relationship diverge and there is low resistance against power misuse by managers. People are swayed by official right and do not have desire beyond their position (Hofstede, n.d.). Individualism versus Collectivism: China follows collectivism, where people perform with the concern of social group rather than individual desires. Collectivism impacts on the employment and the promotion. The obligation of employees towards organisation is quite low and association with the co-workers is supportive (Hofstede, n.d.). Uncertainty Avoidance: China places low importance on avoiding uncertainty. The faithfulness of Chinese people towards rules, regulations and laws are flexible and they can adjust themselves with real situations. Chinese people are adaptable with regard to uncertainty (Hofstede, n.d.). Masculinity versus Femininity: China is considered as a masculine society which highly concentration on success. Chinese people frequently compromise the holiday activities for work, as quality of lifestyle is not so significant for them (Hofstede, n.d.). Conclusion and Recommendations Culture is significant for explaining the differences in management behaviour and organisational system. Nowadays, due to globalisation, it has become common for organisations to go to different nations in order to conduct businesses and perform in socially acceptable way. For conducting businesses in China and France, the common factor that must be considered by River Island is the respect. It is recommended for River Island to learn the uniqueness of different cultures and use it while communication, negotiation and appearance. In comparison to France, China has several cultural barriers and both countries are different with respect to management style and leadership. Conducting business in China requires developing strong relationships in order to build trust which is a significant element for success in business. In China, possessing right connections and manners and understanding the moral and the business standards are important for conducting business. On the other hand, France is more task-centric and requires more formal relationship rather than personal relationship. 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Appendices Appendix 1: Management Practices of France and China Management Practices France China Organisational Structure Strong Vertical Hierarchy Strict Hierarchical Rank Working Practice Highly organised and well structured Punctuality and trust Work Relationship Long-term relationship Certain difference between commercial and individual life Business Practice Formal business practices Modesty and patience Appendix 2: Culture Surrounding Business of France and China Cultural Aspects France China Power Distance High High Culture Individualism Collectivism Work Style Emphasis on quality of life Concentration on success Rules and Regulations Strict Flexible Employee Attitude Compassion towards the co-workers Supportive behaviour towards co-worker Read More