Discuss about the Cultural Challenges That Influence Multinational Operations In China.
There is a rapid and fast development in the economies of many countries. There is also an increase in the globalization of the multinational industries as they are becoming more prevalent. These multinational firms are facing a competiton and intercultural communication problems. It is a challenge for the managers to maintain the cultural diversifications. Many MNCs who are planning to develop and expand their business are facing this cross-cultural challenge.
In the present study, there is a concept of cultural challenge that China is facing as it is a developing country. We will also look forward to the issues that the multinational firms confront while doing business in the international markets. There are many types of barriers that are faced by companies to build their empire in offshore nations. Such challenges help the companies to experience the market scenario of the country. It is noticed by many of the researchers that the variations in the culture, eventually affect the performance, communication and also the management. These changes have both effects; negative and positive. The negative influence is when the company is unable to survive in the cross cultural environment. The positive impact is when the companies overcomes all the challenges and make it possible for it to survive and grow in the challenge world.
Under this study, the learners will understand the importance of study of culture for the companies. We will discuss about the culture of china and the impact of MNCs on china’s culture. There is a brief description about the various challenges that are faces by companies when they allocate their business in international market. Many types of suggestions and advices are given to cope up with the problems faced by the companies. It is important for the management of the organization to understand and study the diverse culture of country before set up of business. It should be initiated I the countries whose culture is least diverse.
The culture of China is an imperative in nature that directly or indirectly affects the multinational operations. People from various places and countries (Ahuja, 2014) have different traditions and demeanor to the business and its operations. China is a country that has an amazing society that is homogeneous in nature that has a strong history, language and culture. There are three philosophies on which the Chinese believes: Buddhism, Confucianism and Taoism. The Buddhism teaches them the fortune of individuals; Confucianism teaches the relationship among the individuals and (Chanida Jittaruttha, 2015) Taoism is famous for dualism principle. . They both are very different and still interrelated to each other. It helped Chinese people to orient the process of thinking of the individuals and also their behavior. It also guides the principle of commitment, believe on each other, maintenance of strategic distance, etc. while doing business in China, MNCs notice that the people are very implicative an transient. These three theories are the bases of Chinese culture that are playing an imperative role to do business and decision making.
Multinational organizations are the companies that are distinctive in nature and they are highly skilled. They also have good knowledge of technical skills, infrastructure, scientific research, etc. China tries to elevate to different nations so that they can collaborate to various nations. Many multinational corporations are investing the money in China’s companies that is contributing to the markets. This country is involving in the development of economies through foreign capital, domestic endeavors and unites of multinational organizations (Kurian, 2015).
The strength of China’s multinationals development is the strong currency of the country. The Yuan is the currency of China that has kept on putting off the competition in opposition of the dollar. When the Yuan is high, it depicts that the sales in current year in China is a worth to many companies. The United State is proceeding with a magnificent system at the rate of $85 billion every month. Not only this but also the bank of Japan increasing its trust into China’s economy. The free monetary policies, banks, etc. helps to have less access to the capital (Craft, 2016). It assists to develop interest in the nations like china can offer more prominent returns of the investment and probably less interest rate on loans. China is a developing nation that might need a sector to help in selling, developing and managing the goods and services to the developed nations.
The culture of China is different from the other country’s culture as they are not open to adopt MNCs in their country. Before 1970, no company other than China can enter into their market. This will affect the economy of it. As they are unable to do transactions with globalised companies and earn foreign direct investment in their country. Gradually, they start inviting MNCs to run their business in the markets of China. Globalization, privatization, and liberalisataion takes place in the economy of china that resuys in open market for all the MNCs. It results in a very positive manner as the China is enjoying the production and investment done by them. Individuals of China are accepting the products and services manufactures by the MNCs. They are giving equal importance to the goods of other companies then China.
It is the most impactful challenge faced by the China’s companies. It is the major issue confronted by developing nations. Human resource management is a branch of an association that helps to fulfill the staff needs and created targets, goals, aims, objectives, etc for the same. After WTO recommendations, many national and international companies are entering into China’s market and making plans and policies to establish their own strategies according to the culture of china. Human resource management helps china to improve the e financial development. Though it is observed by, any researchers that it is very difficult to remain recruit qualifies administrative human resource in the diversified and troublesome economy of China. It is found that the hiring of skills and talented employees for managerial profiles is one of the major challenges for the multinational firms due to many reasons (Jing, 2015).
One of the major challenges in China is the arts major. For example, management is a policy and marketing is a language which in not come through practice. Here is a need to learn and study both of these aspects as they focus on the theory and perception and not on the science. In the universities of China, art major is the only subject to study. It is also found that arts is not related to other fundamental information like, information technology, mathematics, finance, accounting, etc. It is said that it is very easy for a student to pass the exams and completes the schooling with no theoretical and practical knowledge (Otmazgin, 2014). Generally in China, diploma courses are provided to the students. Addition to this, there is no training of students takes place that results in no basic knowledge. The student skills are not up to the mark and there is an absence of thinking and making decision. A survey was done on the candidates and their skills. It is observed that only 10% candidates are considered appropriate for work in the 9 occupations like doctors, nurses, support, qualitative analysis, accountants, finances, engineers, life science, researchers, generalist, etc.
The benefits to employees and framework for remuneration are a component that affects the HR management procedure of China for MNCs. A survey conducted by Watson Wyatt found that in China the local qualifies workers leaving their organizations due to superior paid work. After the emergence of WTO, the economy of china is encountering a quick advancement. The turnover rate China is also the most astounding in Asia. It has raise around 8% from the previous five years. From such incidents, the China has to understand the pay patter of the country and the development of pay rate. There is a very little remuneration and pay for the managerial staff in China and it depends on their execution in multinational organizations.
In the month of 2003, a company named as Alibaba was established by the top managers and programmers of China’s big companies. The company was e- commerce C2C Company. In that year only, eBay entered into the market of china leading to downfall in the market value of Alibaba. As we know that. eBay is known as the goliath of e-commerce world. It was very difficult for Alibaba to compete with that company. So the mission became impossible. Alibaba was just a start up and they did not have much knowledge about the cultures and markets of china. Hence, the company is still struggling to overcome. In this example, we can understand the need to study the culture and competition before stating any business.
Lenovo is a Chinese firm that has shaped itself according to the culture, working environment, and business strategies of China. The organizational structure of the company is in the form of hierarchy which is most suitable in China in which the flow of authority flows from top to bottom. The founder of Lenovo is very much fascinated by the culture of china. Hence, this can be seen in every part of the organisation. They focused on improvement to compete with the competitors. To meet the cross cultural deviations, Lenovo has studied a lot about the environment that can influence it. Cultural integration was brought by the company through increasing the cultural awareness.
Since 1970s, the view of Chinese for MNCs have drastically changed as they invite FDI (Foreign Direct Investment) and opened the economy and worldwide MNCs, players like 3M, Coca Cola, Volkswagen, etc to began their business in China. In the year of 1980, many diverse MNCs like Motorola, NEC, Philips, etc are introduced and accepted in the country. They initiated valuing the expenses of corporate and paid no obligations of the capital imports. Continuously, the country welcomed MNCs to their nations. The people over there are using goods and services produced by MNCs. These companies (Królik, 2014) are treated as localize firms. Customers do not make any difference between the products manufactured by domestic nation or MNCs. To do business in china, there are some points that must be remembered; business culture, negotiation process, convention, etc. they say that, “think worldwide, however, act locally”.
The meeting in China is initiated by hand shake and a little nodding in the head. But, they usually avoid the physical contact while performing business operations. During the time of meeting, they believe that there must be full concentration, formal behavior and attentive posture that depict self-attentiveness. No individual is allowed to be casual and keep away from humor. Unlike other nations, the exchanging of goods does not have any bad impact in the culture of china’s business. Even, they believe that gifts are a good symbol of initiating any relation whether business or personal or a sweetener for future.
The culture of any country also plays a major role in deciding the marketing strategy of the forms. If the market is certain then it is easy for the firm to study the marketing conditions and vice versa. The certainties of the market decide the input and output of the firm. A company can maximize its profits and sales margins trough an effective marketing strategies. That is directly related to the good analysis of the culture (Nguyen & Aoyama, 2014). It also affects the financing policies f a company aboard. The areas which have higher certainties are good for the form. While the lower certainty area means low funding. Culture helps to determine the management structure that a company adopted in their organization. The highly certainties areas depict decentralization of authority while lower certainty area depict centralization of authority in the firm. Government of the country also affects the culture of any nation. Every country has some government intervention regarding doing business. It can either be hospitable or hostile that totally depends on the culture. Government policies may and may not be negative or positive to the organizations (Khanna & Karandikar, 2013).
Culture And Firm Marketing Strategies
The firm marketing strategies are highly influenced by the culture. It happens because a fir always desires to maximize it sales and (Titisari, 2012) profit levels so it should tap into the market as much as it can. It will takes place by understanding the needs of the people in which you are performing your business. It must adopt all the elements of the culture that are considered in the market of china. The marketing strategies help to decide the production capability of a firm as it affects the status of the industry. If the marketing policies and strategies are poor then the demand for the goods and services will tend to fall. Therefore, a firm should concentrate on the marketing strategies which are also cost effective in nature to maximize the profit (Savitz, Shackman, & Fitzgerald, 2016).
When a company goes multinational, then the top level of management decides the type of management they want in the organization. Culture helps to penetrate the type of market in which the firm is dealing whether it is hard or easy for the management to tackle. The management comprises of internal and external management like information of marketing and economy, cultural and social factors, legal restrictions, tariff and non- tariff, etc. management styles are also varies depending on the nature and type of production in which the organization involved. It can be formal and informal, lie or staff, centralized and decentralized, chain or line, etc. (Ramos, 2014).
The cultural values of a country highly affect the production of any organisation. It is mandatory to fulfills the demand of the localize customers. The objectives of purchasing goods and services always changes according to the changes in the culture of a country. There should be direct relation (Hudson Jr., 2016) between the production of the firm and the demand of the customers. If there is a perfect match between these two variables, then the company can captures a good volume of the market (Huynh, 2016).
From all the possible markets, a firm has to choose a best market for its products and services. The expectation of any firm is to minimize the cost of production (Ramzy & Eldahan, 2016) with an increase in the sales and profits of goods and servies. It will be calculated through the rate of return. The organization analyses the entire details including the size of firm, competitors, resources, etc. The determinant factor of this evaluation is dependent upon the cultural background o the market of china. The investment should be done before analyzing all the aspects related to the same (Hock, Clauss, & Schulz, 2015).
The role of the government is vital for the organizations as they are dealing with foreign countries. It is because the policies, rules, regulations, laws, etc changes I accordance with the government. These (Kansal, 2015) all laws play an important role in making wise decision for the organization. The management should make all the transactions within the legal boundaries of a country to avoid critical situations (Dutta & Pundir, 2015).
Conclusion
To conclude, there are various type of problems and challenges that are need to be considered while starting business. A culture has many important points for any entrepreneur who would like to venture into cross culture or foreign market as culture has a great significance on the profits and sales of the organization in the new markets. The managers must study the aspect related to do the business , its culture, analyze them whether work out in other country will be profitable or not.
They also have to study the return on investment that an organization gets after an investment. A proper study of market helps to calculate the risk les in foreign business. When the culture is very diverse culture which means a complicated culture, then the company will not invest much in that country. In such countries, firms enter through intermediaries who are already layers of that country. In contrast to it, the country whose culture is less diverse and less risky, firms generally enters as a joint venture or subsidiaries.
At last we can conclude that a culture is a pivot according to which the decisions making of an organization takes place. Whether to manufacture or not, how much, where, entry, exit, market, etc. it s said that the better the understanding of culture, better will be the future of that organisation. Hence, culture is the most important aspect for any business.
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