Cross-Cultural Management of Australia and China - Essay Example

Cross Cultural Analysis of Australia and China Executive Summary China is quickly becoming the investment destination of choice for most international businesses. However, to succeed in this new climate, foreigners ought to understand Chinese culture and theirs, as well. Holden automobile is considering this market, but would find differences in every element of the Hofstede index since collectivism and power distance are high in China. Differences in business culture would also be evident as the Chinese make decisions on the basis of social relationships while Australians focus on individual credibility. Negotiation styles are also affected by these cultural differences; Australians are relaxed but straight forward in meetings, the Chinese prefer to get to know their prospects and often use several rituals to achieve this. The Australian company should familiarise itself with these cultural values in order to foster success in China as a new target market. Outline Outline 2 Introduction 2 1.0 Language and culture 3 2.0 Customs and protocol 5 3.0 Business Culture 6 4.0 Business etiquette 7 5.0 Negotiation technique 7 6.0 Meeting protocol 9 PEST Analysis 9 Conclusion 10 Appendix 12 Introduction An Australian automobile firm -Holden invest- is considering China as a new market for its products. In order to increase its chances of success, it is imperative to do a cross-cultural analysis of these two countries. This will enable managers and stakeholders from Holden to first understand themselves and their own cultural perspectives. Thereafter, they may also understand the values of the Chinese partners that they plan to do business with. China is now Australia’s largest trading partner; this indicates that the automobile firm under consideration could draw a lot of lessons from other Australian’s experiences in China. 1.0 Language and culture Primary languages spoken in both countries are radically different since most Chinese speakers use Mandarin while Australians speak English. A number of Chinese residents have learnt the English language; however translation difficulties may arise due to colloquialisms in Australia. In China, Confucianism dominates religious thought, and has political connotations. This explains why religious tolerance may not be firmly adhered to. On the other hand, Australians are predominantly Christian, but resolutely believe in the separation of religion from politics. Many individuals consider Chinese people as rule-followers who fear breakage of rules. This stems from their fear of authority as well as the severe repercussions they might face if they do not abide by them. Conversely, Australians are rule makers and usually speak openly about their discontentment about certain issues. An analysis of culture ought to consider Hofstede’s five cultural dimensions; uncertainty avoidance, collectivism versus individualism, masculinity index, power distance and long term versus short term orientation. The Chinese have lower uncertainty avoidance than their Australian counterparts. They tend to be comfortable with ambiguous situations and believe that future can never really be controlled, so they embrace it (Pan & Zhang, 2004). Chinese people are adaptable and highly entrepreneurial regardless of how difficult circumstances may be. Australians have a moderately high uncertainty avoidance that stems from their belief in their own ability to control the future. China is a collectivist society, where a lot of emphasis is given to social relationships. Because the Chinese value interpersonal relationships so much, it is likely that they take credit for their work. Many of them may attribute success to the people around them. Conversely, Australian managers are individualistic in nature. They encourage competition and personal development. Workers are often encouraged to take responsibility for results. The target country has a high masculinity index because members are competitive and quite concerned with achievement. These value systems are evident in the late work hours one is likely to observe among small businesses. Additionally, job seekers often leave their families in the rural areas to look for work in cities. Students strive to excel in exams as this is a strong measure of success. Conversely, Australians have a high femininity index since they value quality of life over standing out from the crowd (Hutchings & Murray, 2003). Power distance in China is quite strong compared to Australia. A strict distinction exists between subordinates and superiors. Formal authority is highly respected, and workers often seek content from their superiors before making decisions. Conversely, Australians have low power distance. Workers often hold aspirations that are beyond their rank. Finally, the Chinese have a long term orientation while Australians have a short term one. This implies that the Chinese tend to focus on the big picture; they are more restrained in business. Conversely, Australian managers need to see immediate results for their effort. 2.0 Customs and protocol The Chinese are very formal and pay special attention to protocol during interactions with one another. Conversely, Australians are down to earth and do not pay as much attention to matters of status. It is for this reason that Australian managers at Holden must familiarise themselves with these seemingly stringent rules of etiquette. The Chinese prefer to be introduced to new persons while Australians have a more direct approach. People in the target market often stand when being introduced and will even applaud an individual. Australians pay little attention to such formalities and instead appreciate sincere greetings. A handshake is enough for them while the Chinese may bow slightly. First names are used in initial meetings by Australians, yet the Chinese prefer the use of titles and last names. When carrying out conversations, Chinese people may ask personal questions about one’s marital status, income or family life. These questions may be considered rude by Australians. On the other hand, Australians have a propensity to give direct praise. This approach is considered offensive by some Chinese who often downplay their accomplishments (Hutchings & Murray, 2003). Social distance is highly valued in Australia with many of them valuing their personal space. In China, a person may stand too close to another; even though, this may seem invasive to Australians. Gift giving is a culture that is common to both Australians and the Chinese. However, tipping is rare in this Asian country. While Australians open their gifts upon receiving them, the Chinese prefer do so privately. Gifts are a primary component of business relationships while these aspects are reserved for family members, neighbours or friends in Australia. Communication in Australia is direct, colourful and often humorous. These elements can be confusing to Chinese business partners who tend to have their own complex language interpretations. 3.0 Business Culture Businesses in China are highly affected by the concept of “guanxi”. The term refers to a network of relationships that guides people’s life. Chinese businessmen forge relationships with all the people they trade with. This may occur in the form of giving jobs to influential people’s children, offering free food to government health inspectors or exchanging favours with police officers. Such a concept may frustrate Australian Holden managers who rely on the rule of law and honesty of partners to carry out business (Chaney and Martin, 2004). It may be useful for the automobile firm to establish relationships with potential stakeholders in China before they start engaging in formal exchanges. When entering into business with the Chinese, one must be aware of their need to maintain harmony or to save face. This implies that a boss is unlikely to confront an employee in front of others. Instead, many prefer to use intermediaries to deliver bad news (Wang & Clegg, 2002). Conversely, Australians have a more direct approach, which may disturb harmony in the target country. Finally, Chinese entrepreneurs may often be perceived as evasive in business transactions. An Australian representative may talk extensively about the service and products that they are selling in these meetings. Conversely, the Chinese partners may make a lengthy speech about the business council, and offer very little information about how they perceive the information. Such indirectness can lengthen transactions and bother many Holden managers. Both the Chinese and Australian business persons do not value the involvement of emotions in business. It is best to focus on facts and figures for Australians even though the meetings are relaxed. Chinese businesspeople do not appreciate excesses when making presentations, as well. 4.0 Business etiquette Presentation of business cards is a serious ritual in China, yet one may not even get a business card in Australia if the other person lacks this document. Therefore, Holden company managers may need to familiarise themselves with these rules. Cards are presented using both hands in a direction that faces the person receiving them (Liang & Whiteley, 2003). This process should be followed by the formal greeting “How are you?” Normally, Chinese business persons expect their partners to place cards on the table as this is regarded a sign of respect. Likewise, Australian businessmen often exchange business cards when meeting for the first time, but no elaborate rules accompany this process. Silence is common in Chinese business meetings as this a virtuous quality. Many Australians may be tempted to interrupt that silence, yet this could be offensive to their adversaries. It is better to wait it out and exercise patience here. Both China and Australia have a preference for formal dressing and punctuality in meetings. However, the manner in which these meetings take place may differ substantially. Australians expect hosts to take care of themselves while Chinese hosts do the exact opposite. 5.0 Negotiation technique Business transactions in China rarely take place without an intermediary, who is known as the Zhongjian ren. Distrust of strangers is rife in China; therefore, is best to deal with someone who has already earned trust from the prospective party (Lin and Miller, 2003). Australian negotiators require no such thing, but could find that they also benefit from the arrangement. After making a proposal to the prospect, an Australian businessman may want to get feedback from the recipient about their perception of the same. A Chinese respondent may claim that they will think about it. However, the intermediary can act as an intermediary that tells the Australian negotiator what the Chinese prospect really means. This turns them into readers of culture. They could have ties to the negotiator by sharing the same hometown, school or previous business relationships. Only such persons can read the intonations and body language of the Chinese respondent. In top-level business negotiations, it is unlikely that Chinese executives will take charge of the negotiation. Conversely, Australian executives may encourage meetings of equals in order to encourage cooperation (Thomas, 2006). High-ranking Chinese officials often have lower level personnel to speak on their behalf. Therefore, Holden leaders ought to take note of the real brains in a negotiation. Most negotiations in China are lengthy and elaborate. This stems from the principle of “Renji hexie” or interpersonal relationships. An Australian stakeholder may want to dive into the issues under discussion directly. However, Chinese prospects may engage in lengthy negotiations that extend for days or even months. They could invite an Australian to dinner, sporting event, among other things in order to build harmony and trust. Once negotiations begin, they often rely on these interactions to make their decisions. A number of them focus on good faith rather than written down deals in contracts. The Chinese have a strong saving culture that comes from their ability to haggle over prices. Australian businessmen may quote a certain price, but often make it realistic. Chinese negotiators may quote unreasonable prices and are usually reluctant to make concessions. They often employ a number of techniques, like silence, in order to get foreigners to buckle to their demands. It is best for Holden managers to ask them questions about how they came up with the price and other related details (Zhu and Ulijn, 2005). 6.0 Meeting protocol Prior to commencement of meetings, it is advisable to send details about it to the Chinese party. They make take long to confirm the meeting, as this is common practice. Members of the target market expect a person to send a representative to meet them outside the building. The host should be waiting for their guest in the meeting. The most senior guest ought to enter the meeting room as other members follow in that order. Once this has taken place, greetings and business card exchanges need to occur before getting down to business. The most important Chinese guest ought to sit on the host’s right side. These chairs should be placed opposite the door. However, large conference tables require the guest of honour to seat in direct opposition to the host (Ma, 2006). Sometimes all the Chinese negotiators may seat on one side. Meetings often begin with small talk and then proceed to other serious matters. They are highly structured and interjections are quite unwelcome. PEST Analysis The political situation in China is not as stable or favourable to business as it is in Australia. The communist philosophy often has restrictions on foreign investment. Political authorities make decisions on who enters the country and the nature of products they can sell. The nation has a number of rules concerning how to operate business in the country. Regardless, Australia has already entered into agreements with China concerning mutual trade between the two countries. It also has certain mechanisms to encourage foreign investment. Economically, China is a robust area for doing business. It has become the production capital of the world. Several countries have outsourced industrial manufacture to the country. This emphasis on trade makes the economic growth rate in the country quite impressive. However, development is not equally distributed, so emphasis should be given to urban areas. Holden may want to consider relocating production to this country as it has the infrastructure, resources and manpower needed to do it. Socially, China has the largest population on earth. This implies that the Australian firm can find many buyers for their products. Furthermore, Chinese consumers tend to place a greater premium on foreign-owned or foreign-made products. This would be an advantage to the motor vehicle company. In terms of technology, China is keen on adopting new production technologies. Many inventions have emanated from the country, so the area would be critical in providing production techniques for the Australian manufacturer. Young Chinese consumers are using the internet more often and have become highly informed. Therefore, quality of information should be given greater emphasis when selling products to them. Conclusion Chinese culture is substantially different from the Australian way of life. Australians tend to value direct negotiation, casual introductions and adherence to business matters. Conversely, the Chinese have elaborate rules of etiquette that place great value on rank and seniority. Furthermore, their collectivist nature may make transactions confusing to Australians. However, because of the promising nature of this target market, it may be advisable for Holden to do business in China. Stakeholders simply need to familiarise themselves with the underlying cultural values that drive business in this Asian nation. References Chaney, L.H. and Martin, J.S. (2004). Intercultural Business Communication. Upper Saddle River, NJ: Pearson Education, Inc. Hutchings, K., & Murray, G. (2003). Family, face, and favours: Do Australians adjust to accepted business conventions in China? Singapore Management Review, 25(2), 25-49. Liang, S., & Whiteley, A. (2003). Australian businesses in China: Searching for synergy. Asia Pacific Business Review, 9(3), 41-60. Lin, X. and Miller, S.J. (2003). Negotiation approaches: direct and indirect effect of national culture. International Marketing Review, 20, 286-303. Ma, Z. (2006).Negotiating into China: the impact of individual perception on Chinese negotiation styles. International Journal of Emerging Markets, 1(1), 64-83. Pan, F., & Zhang, Z. (2004). Cross-cultural challenges when doing business in China. Singapore Management Review, 26(1), 81-90. Thomas, D. C. (2006). Domain and development of cultural intelligence: The importance of mindfulness. Group & Organization Management, 31(1), 78 Wang, K. Y., & Clegg, S. (2002). Trust and decision making: Are managers different in the People’s Republic of China and in Australia? Cross Cultural Management, 9(1), 30-45. Zhu, Y. and Ulijn, M.J. (2005). Introductory essay: new horizons in cross cultural management. Cross Cultural Management: An International Journal, 12(3), 4-13. Appendix Chinese Hofstede index Read More