Political Opportunities and Challenges - China - Case Study Example

Global Business Environment Student’s Name Institutional Affiliation Date Global Business Environment Introduction The global business environment is increasingly becoming fragile and competitive which presents the need for businesses to understand various aspects of the environment that they operate in (Kolk, 2016). Australia and New Zealand (ANZ) bank is the fourth large bank in Australia regarding market capitalization. In this bank, the retail and commercial banking was the one which was dominating. ANZ is considering running subsidiaries in China. Before doing this, it would be critical for the manager of ANZ to evaluate the international business environment regarding the opportunities and challenges of extending its operations to this country. In doing this, the paper will focus on the evaluation of the political, economic, social-cultural, and technological opportunities and challenges that confront ANZ Bank when setting up its operations in China. Political Opportunities and Challenges This section will focus on critically discussing the political opportunities and difficulties which confront ANZ Bank as they seek to running subsidiaries in China. One of the key political opportunities within China for ANZ Bank, in my opinion as supported by Bergh, Dackehag & Rode (2017), is that the government of China has strived to develop guidelines which focuses on the implementation of steady monetary policies as well as financial policies which are aimed at adjusting the structure of the economy of China. This then means that there are high possibilities for further economic expansion for China which will welcome other institutions to run in that country steadily and actively (Bergh, Dackehag & Rode, 2017). As ANZ Bank intends to establish its operations in China, it will benefit by working in a country which has a robust economy and it being a financial institution, it will possibly run smoothly and efficiently in China. Consequently, ANZ will manage to maintain a strong bond with all its subsidiary while at the same time realizing individual growth in China. In my opinion, as it has been supported by Tuominen (2016), a further political opportunity which exists for ANZ in China is the dedication of that government to create an attractive and fair business environment for the foreign investors. This is evident as China is a member of World Trade Organization (WTO), and as such, this country is needed to enhance its investment and business environment while bolstering its legal system so that it can meet the requirements of WTO (Tuominen, 2016). These will, therefore, be an opportunity for ANZ in that there will be significant efforts by the Chinese government to ensure that they are not disadvantaged them being a foreign company, as compared to their local counterparts. In contrast, Antonio, Mattia & Elisa (2016) argue that the key political challenge which will confront the ANZ manager in China is the instability of the exchange rate policies. This would then mean that ANZ will be affected by this instability following that it offers financial services. Instability in the policies of exchange rates may then result in instability in their income and profits which may then create high levels of uncertainty which is not good for business. Additionally, the instability and devaluation affect Multiplex’s profits especially, for example, if they have a debt which will be financed by a foreign currency. Another political challenge that may face ANZ in China is that the regulations in that country have a history of not being implemented strictly. In every country, it is highly expected that various legal as well as illegal actions may be experienced which may have a significant effect on the operations of a new entity like ANZ bank in that country. Although China has laws which offer protection from some of these illegal actions from affecting new foreign entities, there are high cases of disobeying these laws (Antonio, Mattia & Elisa, 2016). Therefore, ANZ may be facing a political risk being subjected to some illegal actions which may consequently result in the inability of ANZ to maintain a sustainable economy which is crucial for a financial institution like ANZ newly operating in China. Economic Challenges and Opportunities In my opinion, an economic business opportunity for ANZ in China is the fact that it has the reduction in the inflation levels (Davidson et al., 2017). This is something that has created a stable macroeconomic business environment in China. With China having a stable macro environment, ANZ will benefit by experiencing fewer restrictions regarding international trade transactions and expansions which will then be associated with fewer trade disputes (Davidson et al., 2017). Also, the Foreign Direct Investment (FDI) has significantly enhanced China’s economic level. This then presents an opportunity for ANZ in that it will be likely to earn more profit from the investment that it intends to make in China itself. For example, they can easily earn these profits through shares, charities and funds which translate to it having high investment returns. Another economic opportunity for ANZ in China is that the country has been recently striving towards transforming their economy which has over time been leaning towards the marketing sector (Iyer, 2016). China is currently working towards developing a reform package which will bring on board the private and international firms. This is among the reasons as to why the country is creating a favorable and stable macroeconomic environment to attract foreign investors (Iyer, 2016) like ANZ into that country. This will be beneficial for ANZ as it will enable it to reduce their operational costs and make maximum profits out of this project. However, on the downside of these economic opportunities, China has strict rules regarding the intellectual property rights as well as the rules of origin (Gouldson et al., 2016). This poses a major challenge for ANZ especially because the firm is likely to be significantly dependent on resources from outside countries which may probably result in reduced opportunities for income generation. Additionally, ANZ is tightening their regulations on labor and environmental protection which would increase ANZ’s costs as they are needed to uphold CSR regardless of the sector or industry that a business is in (Gouldson et al., 2016). Sociocultural Opportunities and Challenges Individualism Individualism is a dimension which is utilized to describe the strengths of the bonds which people have with one another and the society (Clemens et al., 2016). In China, there are low levels of individualism which then means that people prefer living and working as a group. Most of the Chinese are brought up being taught the valuable lesson and importance of being morally upright, strengthening their social relationship, as well as being loyal (Clemens et al., 2016). Thus, in my opinion, this is an opportunity for ANZ as in the banking industry, these values are important. Teamwork, loyalty, and professionalism are essential in thriving in China which are qualities that ANZ is likely to get when working with people from the Chinese culture. Long-Term Orientation This is a dimension which is a reflection of the perspectives of the Chinese people regarding their long-term goals; this can be life, work, or various other life aspects (Hoang, Abeysekera & Ma, 2016). The Chinese people are regarded as highly future-oriented individuals who like to have detailed plans for their future in whatever aspects of their lives. This is an opportunity for ANZ which needs to work with people who are focused, have plans, and goal-oriented. However, this may also work against them which means that if it would not manage to operate in that country for a long period or have sustainability issues, then most of them may opt to work in companies which are likely to be established permanently and sustainably in that country. Masculinity The Chinese culture is very crucial when it comes to masculinity and the role of women in business (Hoang, Abeysekera & Ma, 2016). This poses a challenge for ANZ primarily because it operates in various countries each with their cultural beliefs which need to be upheld if the business is to thrive there. The Chinese society broadly recognizes the role that the men play in the society which is a higher role as compared to that of women (Hoang, Abeysekera & Ma, 2016). The issue of masculinity poses a challenge for ANZ because they will be necessitated to allocate particular ‘higher’ roles for the men and ‘lower’ roles for the females if they are to be accepted in that cultural environment. Although there are pieces of evidence of low levels of gender discrimination, the ingrained differences in gender roles still exist which will need to be taken into consideration. Uncertainty Avoidance This is a dimension of the Chinese sociocultural aspect which stipulates the extent to which individuals are ready and willing to take business risks and their ability to adapt to changes (Truong, 2016). This also poses a challenge for ANZ because according to the Hofstede dimension of analyzing Chinese culture, they usually feel threatened by uncertain life situations (Truong, 2016). This means that they are more comfortable in selecting stable and permanent jobs as opposed to contractual jobs. Having in mind, most of them may shun working for ANZ because of the future uncertainties that they are subjected to because of the newness of the firm operating in that country which is then typically followed by instability and unsustainability issues. Power Distance Index This is a dimension which indicates that not all the individuals in society are equal. This power distance relates to the acceptance of every person regarding the position that they hold in a business environment (Brünjes & Diez, 2016). The Chinese society accepts the hierarchical order which means they are okay with taking the decisions that are made by the top management. Therefore, in my opinion, this is an opportunity for ANZ because the influence that the top management will have on its employees will be accepted positively which is a key aspect in the successful running of business, especially in an international platform (Brünjes & Diez, 2016). This respect for the power distance will probably work in favor of ANZ following the authority that they command in the internationally in the construction industry. Technological Opportunities and Challenges In my opinion, as it is supported by Xiao & North (2017) there is significant pressure to embrace information technology in the Chinese business environment especially following the fact that China is a highly technological country. The web technologies, as well as electronic commerce, have evolved rapidly in that country which presents an opportunity for ANZ. This being a leading international contractor, it has embraced the utilization of technology in various aspects of its operation with the aim of enhancing efficiency and outcome of their business structures (Xiao & North (2017). Therefore, as ANZ intends to run its operations in China, it can rest assured that China is a nation which embraces and empowers both private and public companies to utilize technology in various aspects of their business operations. Activities on Research & Development (R&D) are also a significant technological aspect for ANZ. However, most of the companies in China have enough capital to undertake only applied research (Pitelis & Teece, 2016). The government is, therefore, working towards the provision of enough capital which is channeled towards doing more research on the most appropriate forms of technology that could be utilized in the banking industry in that country (Pham, 2016). This poses a challenge for ANZ because there are highly competitive pressures from banking companies globally to use technology. Therefore, if the high quality technology is not found in China, they will have to incur more costs to research and establish their own so that they can be at par competitively across the globe. Conclusion The business environment is becoming highly competitive. ANZ bank is the fourth large bank in Australia regarding market capitalization. In this bank, the retail and commercial banking was the one which was dominating. Before doing this, it would be critical for the company to evaluate the various aspects of the business environment to know its suitability of it operating in China. Regarding the political dimension, the opportunities that exist include the country being a of China has strived to develop guidelines which focuses on the implementation of steady monetary policies as well as financial policies and its dedication towards creating a fair and stable business environment for all. The challenges include the government lack of strict regulation implementation and the policies regarding unstable exchange rates. The economic opportunities include the reduction in inflation levels and transforming the economy towards creating a stable macro environment. The economic challenge includes the strict rules regarding the intellectual property rights as well as the rules of origin. The socio-cultural factors have been evaluated on five dimensions including masculinity, individualism, uncertainty avoidance, power distance index, and long-term orientation. Finally, the technological opportunity for China is that there is significant pressure to embrace information technology in the Chinese business environment. The technological challenge is there are minimal R&D activities on technology in China. References Antonio, A., Mattia, T., & Elisa, B. (2016). Firms' characteristics and business environment constraints: Evidence from Vietnam. L'industria, 4: 587-612. 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