Key Issues in Doing Business in China from a Cross-Cultural Perspective - Essay Example

?Introduction Historically, Russia identification revolved around the West-East axis; however, considering the asymmetry impact on the poles and the way the western presents challenges to the orthodox fundamentals of Russia, China offers a neutral environment in terms of its religious identity. Considering Russia’s place within the new global order within the 21st century there is need to address the cultural issue of the Russian- Chinese relations as the two nations strive for their economic development. The two nations have a different perspective to their economic development because China seems to be striving to become the number one global economy while Russia seems to struggle in regaining its stability. Nevertheless, since the collapse of the USSR the two nations significantly improved their relations because they managed to settle the issues of land border by creating cross-border cooperation, controlling illegal migration and setting up vital mechanisms. Background information China and Russia share various similarities but they also have marked differences; for instance, the two countries are large nations because China has a huge population and Russia has the largest territory in the world. The two nations are multi-ethnic and heterogeneous but they are dominated by one group like in China the Han and Russia the ethnic Russians. Currently, the two nations are essential in terms of their economic potential as well as military power; moreover, the two nations are taking pathways toward capitalism. The two nations lack sufficient regulatory environment and have been for many years under the rule of a communist party and in the case of china, the party considers itself above the law. In the two nations, the existing rules and regulations can easily be violated because some written contracts have little value since personal connection along with dyad-based reciprocity prove to be substitutes for reliable institutions. Besides there are differences between China and Russia because China is considered to be a rising superpower while Russia is believed to be struggling to capture the lost glory after being a superpower for more than 50 years. Moreover, the two nations follow different paths toward capitalism with china adopting incremental approach to market reforms while the Russians rapidly replaced central planning system with market-based mechanisms with the aim of developing new market institutions (Buck, Filatotchev, Nolan and Wright, 2000). China has been a renowned success story in implementing reforms and consistent growth because the nation’s annual growth rate in the past two decades exceed 10% and is among the highest in the world. In contrast, Russia changed its position as the second largest economy during the Soviet era to 12 position currently and the country’s GDP growth rate is among the lowest partly because of its stagnated private sector (Wilson, 2004). Over the years, China has come to be recognized as a moderately low risk nation that offers high rates of returns, while Russia risk throughout 1990s was the highest and offered low returns because of privatization of manufacturing firms. Cultural similarities between China and Russia In the Chinese society, family remains the cornerstone with reciprocal obligations being which are not limited to the family and kinship but rather extended to non-kin ties where individuals are expected to help one another fulfil their obligation to family members. In China, individuals tend to prioritize group interests than their own and make decisions that can be detrimental to an individual if the decision is collectively beneficial. However, through my experience collectivism in china has been misrepresented to be a negotiation for individual interests or well-being, which goes against the assumption that group interests are the best guarantees for an individual. Nevertheless, the Chinese society cultivates strong relations where everyone is responsible for other members within the group. As well, the Russian culture is considered collectivist with the nation’s long tradition that emphasizes the significance of unity and equality. Similar to China, in Russia individualistic qualities and behaviours have been considered undesirable thus suppressed (Kuhrt, 2011). Therefore, in Russia personal feats and achievements are constantly linked to achieving goals associated with social collectivism. In Russia, members of organizations identify various forms of collectivism including symbolic collectivism in enterprises, group identification of workers as well as collectivism in work group (Giacobbe-Miller, Miller, Zhang and Victorov, 2003). Both Russia and China have vertical collectivist cultures that include a sense of serving a group and sacrificing for the benefit of the group and performing as well as behaving as expected as a member of the in-group. The cultures within the two nations tend to prioritize welfare of in-group and subordinating individual needs, aspirations and goals to the necessities of the collective group. While individualistic cultures tasks relations regarding managers and subordinates are distinct from other dealings, in china and Russia interactions with others are part of the whole relationship. In China, familial relations are reproduced within the work situation because managers are often referred to as ‘uncle’ or ‘auntie’ to show the degree of respect they are given. Moreover, in Russia, the management culture is characterized by high level of paternalism because CEOs are often referred to as ‘fathers’ (Kuhrt, 2011). China and Russia have particularistic cultures; for instance, in China people aim at the uniqueness of the prevailing circumstances and make decisions based on availability or lack of acquaintance with others. Rules are insignificant compared to personal relations because individuals are not managers or even representatives of remote institutions but rather are of unique significance with exceptional claims on emotional involvement. Core to the particular culture in China is the interpersonal connections that have their origin in the Confucian philosophy and personality principle on which people make decisions based on their connection to significant others in the relationship network. This structure of relation permits every activity of life for the Chinese people through politics, business and society with familial relations at home being replicated within the workplace and management practice being a product of personalism. The Chinese context notion of one-way loyalty develops a legitimate and informal power for managers and subordinates, which creates a successful organizational life based on maintaining appropriate relations with managers (Chow, Deng and Ho, 2000). Managers in China have the ability to behave in an inconsistent manner making decisions based on relations to subordinates while the subordinates are expected to bear with such decision in order to maintain the particularistic ties. Moreover, because of the relations, when conflict goals arise between managers and the organization, subordinates have to behave in particularistic manner choosing whom to be loyal to and they end up choosing their managers instead of the whole organization (Michailova, and Worm, 2003). In Russia, specialists responsible for making the techno-structure generally hold advanced degrees and are aggressive pursuing professional credentials by undergoing through postgraduate and industrial education. Although in Russia managers are usually well educated, they ascend the hierarchy through personal networks and the particularistic ties determine opportunities within an organization. Therefore, like the Chinese, Russians favour strong personal relations where there are shared values and norms. Legal systems in modern Russia and China are considered to be in embryonic stage of their development; therefore, culturally bound particularistic relations substitute the rule of law; hence, everything becomes possible because connections ensure possibility and business is conducted based on acquaintances. In addition, business judgments are based on whether individuals have trust in others as well as the positive qualities ascribed within the particularistic manner to members within the organization (Michailova & Hutchings, 2006). Due to the mutually dependent relations within groups in China, individuals are concerned with saving their face and are motivated to safe their face for the group members. Being a member of a group is considered to offer identity, loyalty and protection and in protecting the loyalty; knowledge is shared in the group although it is withdrawn from people believed to be outsiders. These characteristics can be grounded to a large extend in China’s collectivism that originates from Confucianism that affected the nations since the 5th century. In the Chinese culture, there are significant threads within the culture that survived many years, which include weariness of foreigners, pictographic language, agrarianism and morality (Michailova & Hutchings, 2006). Although group is considered essential in Russia, Russians strive to have a leading position within a group instead of being anxious of group harmony. Russians struggle for dominance within a group, which seems to be a natural thing in the world and seems to be the essence of human relationships. The significant difference between China and Russia regards the level of collectivism because Chinese seem to value their collectivism more compared to the Russians. For instance, before the 1990s in China 85%-90% of all businesses in the country were collectively owned. Within the Chinese Confucianism, an individual is considered to be a social being with its identity derived from the social network; hence, the Chinese take serious consideration of what other imagine of them and anticipate from them. In china, this notion is perpetuated through family socialization among other things because the family is considered to be the most significant social unit in the country. The Confucian virtues in China are bound by the concept of harmony that involves looking for the middle path rather than go to the extremes and looking for compromises instead of going into conflict. The Chinese consider their individual actions as essential contribution to the groups’ well-being and harmony (Michailova & Hutchings, 2006). The thinking of competitive orientation remains an essential part of the Russian mentality because business people in Russia make decisions individually instead of doing it collectively. Therefore, in Russia there is increased individualism because Russian managers within joint ventures and private-owned entities are increasingly becoming individualistic. Being Russian, it is common for Russian managers to place high value on conformity as well as self-determination instead of the unusual combination of collectivist and individualistic characteristics shown by the Chinese culture (Triandis, 2002). The absence of fully developed regulatory environment in China ensures that interpersonal connections are and remain integral to conduct of business. The repercussions of sharing knowledge that can be politically sensitive means that Chinese learnt to keep knowledge within trusted groups and protecting members in the groups from members outside the groups. Therefore, international managers have to invest time and resources in setting up organizational cultures with high level trust for individuals to feel safe in discussing with others. Although at the onset of the 21st century there were no grounds for considering China a possible enemy to China, China has all the makings of a formidable rival. The last half of the 20th century and the first few years of the 21st century saw China transition from socialism following the collapse of the community party and subsequent continuous economic development due to the exposure to business practices from the western nations. In China, values and business ethics changed because of social transformation as people try to familiarize with the social, economic and political circumstances of the nation. Confucian influence significantly affects the Chinese business practices and ethics; for instance, in spite of the communist rule, successful Chinese enterprises adhere to Confucian values in developing corporate culture with unique Chinese characteristics; hence, CEO styles are characterized by a combination of paternalism and collectivism (Ardichvili et al, 2012). As opposed to the criticism of the Confucian influence portrayed by democracies, the significance of Confucian is its moral principle regarding trustworthiness. By keeping the Confucian principles, businesspersons in China rely on less on formal contracts and fancy use of informal contracts and personal assessment regarding trustworthiness in business partners. The significant difference between Confucian concept of trustworthiness and western concept of trustworthiness is that in Confucianism there is no blind adherence to rules and prior arrangement that is equated with trustworthiness. Confucianism in China allows people to break prior agreement, if the individual’s presence was required elsewhere in helping others in need. In Confucianism such an individual is considered more trustworthy because the individual showed good sense of judgment; moreover, in the Confucian concept their no way of assessing trustworthiness in others. Interpersonal relations play a significant role within the entire Chinese value system because the rules of the relations claim that the humble can never assail the noble, neither can the distant overrun the closer nor an individual override the group. However, when an individual violates the rules of interpersonal relations, the individual faces serious damage with regard to social reputation, lose face and even get humiliated. Interpersonal relations create environment for members of the group as well as non-members and within the groups enables managers to acquire necessary resources, information as well as other supports in substituting formal institutional structure. Interpersonal relations in China offer privileges to members of the groups through favouritism and personal gains by discriminating individuals who are not members of a certain group. Therefore, interpersonal relations applied in China take precedence and are capable of skewing the judgment of a manager when making decision. Hence, it is sometimes difficult especially for westerner in distinguishing reciprocation and corruption if unethical conduct is propelled by interpersonal relations (Bhagat et al, 2002). Ethical practices within Chinese organizations rely on the indicated cultural values like paternalism, collectivism and interpersonal relations; hence, in China manager together with the employees are likely to employ situational and particularistic criteria as opposed to the universal criteria. Ethical behaviour in China is shaped by emphasis on informal contracts instead of formal networks of support in reciprocal exchange of favours. Therefore, from a personal view I have noticed that it is normal for businesses in China to rarely have official code of ethics. Moreover, in case business ethics exist, they are influenced by focus on the personal assessment of an individual’s trustworthiness as well as the leader’s benevolence (Wright, Szeto and Cheng, 2002). Despite the cultural diversity in the two nations, it is evident the two nations significantly share some similarity in business ethics and practices. The nations are characterized by paternalism and concentration of power within business entities ethical decisions are likely to be particularistic and context specific as opposed to being universal. Moreover, from personal experience allegiance or loyalty to organizations in some circumstances override the consideration of ethical norms. Nevertheless, the two nations have a long history of centralized bureaucracies which enable business entities develop ways of overcoming and circumventing rigid rules. The two nations have informal practices that are considered to work as alternative to the formal business contracts (Curanovic, 2012). Conclusion It is clear that the two nations tend to have a similar culture of doing business; however, the Chinese appear to be more reserved in nature because their life philosophy that encourage them to be humble in character. The Chinese social and political systems focus mainly in the values as well as needs of the community instead of an individual thinking often propagated by the Russians. Moreover, from an individual perspective when Chinese say something, it immediately is considered in the public domain and beyond individual control. Although, the two nations have significant cultural similarities, the Chinese have been exceptional in combining the western concepts and the cultural concepts in doing business. Reference Ardichvili, A, Jondle, D, Kowske, B, Cornachione, E, Li, J, & Thakadipuram, T 2012, 'Ethical Cultures in Large Business Organizations in Brazil, Russia, India, and China', Journal Of Business Ethics, 105, 4, pp. 415-428. Bhagat, R. S., Kedia, B. L., Harveston, P. D. and Triandis, H. C. 2002. ‘Cultural variations in the cross-border transfer of organizational knowledge: an integrative framework’. 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