Cultural differences between China and Europe
Factors to consider before investing in China
It is essential for any business hoping to enter into the Chinese market to have a comprehensive understanding of the country’s business environment, local culture, business practices and government policies. China has an immensely diversified culture, which means that the country has a fragmented market.
As such, for instance, a strategy for investing in Shanghai may not necessarily apply in Beijing. China is quite different from the western world; therefore a company should take into consideration the Chinese culture and societal values, before commencing operations. It is only through the understanding of the local culture that a business can establish strong foundations in that particular geographical area, which will ensure successful business planning.
A foreign business should also not assume what works in it’s home country will also be successful in another country. China has multiple cultures, unlike most western countries. Comprehending how the local people operate, and how their businesses operate could allow a foreign country to blend in quicker than time it would have taken to adapt without first having implemented a market research.
Significantly, it would be cheaper and more time effective to change a company’s policies in regard to the local environment, as opposed to changing the local culture to suit the company’s policies. Therefore, adaptability and adaptability to the local situation are crucial for business success in China.
Foreign management has to develop a close relationship (guan xi) with domestic partners, which will further the understanding of the Chinese market and business ties.
Strong relationships also prove useful in times of trouble, or when a company needs assistance. Some of the risks that may arise in China could be due to the political environment, financial crisis or labor disputes. Employing local management staff will be advantageous in the development of strong business partners, especially due to networking, which in turn help in mitigating potential risks.
The Chinese government’s regulations have a toll in market movements, and a hand in influencing foreign business’ policies. A strong relationship with government officials is an important factor to consider in doing business in China.
Although China could be considered to be a highly bureaucratic state, commitment to governmental policies ensures smooth business operations foreign business could benefit from employing local managers, who would form the basis of interpreting the country’s laws. Different regulations also apply to different provinces, which calls for different strategic policies when expanding operations in China.
Cultural differences between China and Europe
Western Europe is predominantly capitalist, meaning that there is an acceptable common concept of individualism. Individualism as a moral stance makes people behave in manners that promote the achievement of their own personal goals and interests.
There is a greater deal of independence and self-reliance in most European settings, where individuals opt to rebel against rules that come between them and their needs. People in the western world display more artistic and bohemian interests, and their lifestyles are directed towards self realization and shows of self expression. There are also displays of individualist anarchism, whereby people emphasize their needs over those of external bodies such as groups and society as a whole.
Individualism has not prospered in China, where conformity is the norm. The Chinese practice Confucianism, a concept that derives heavily on the logic behind harmonious relations.
There are five different bonds stressed in the society, which include the bond between a ruler and subject, husband and wife, parent and child, sibling and sibling, and friend to friend, for the smooth running of the society as a whole. These relations affect business practices, since they help in averting conflict within an organization. Chinese employees regard relationships, or guan xi, more than specific individuals.
Differences also arise in self expressions during communication. The Western European way is “I” oriented, where people relay information based on their individual perceptions, beliefs and experiences.
As such, communication can be said to be sender oriented. In China, on the other hand, there is more focus on teamwork. During sessions, communication is usually “we” oriented and individual interests come second to group objectives. People in China are receiver-sensitive in their queries, so they will choose words more carefully when addressing peers or superiors.
Conflicts often occur when people from low context cultures work with people from high context cultures. According to Chhokar and House (2007), most of the information in high context cultures is initialized in the person, while little is explicit. In contrast, much of the information is explicitly vested in low context cultures. Logic expressed in low context cultures is linear, meaning there is a direct relationship between elements in discussion, while high context logic tends to be more subtle.
Most western countries have low context cultures, in which everything has to be expressed in full and explicitly. In terms of direction, workers in high context cultures look to in-group members for communication purposes. Here, in-group members could include close workmates, family members and friends. In comparison, low context cultures rarely differentiate between in-group members and out-group members.
Communication in low context cultures is likely to be broad and diffuse in terms of quality. High context culture workers will be more intensive in their discussions, quantity difference, where communication will be based on different topics thus employees will be up to date on company matters. In the case of quality, employees discuss only relevant details or to the necessary extent in the work environment.
Key facts are discussed during meetings, and the resultant decision is made during the meeting. On the contrary, individuals in China discuss everything in conversations, quality difference, and discussions are made in advance before meetings. Generally agreed on decisions are subsequently announced during the meetings. This would mean that the Chinese are more efficient at work because of the free flow of information.
Differences between low context and high context cultures continue to affect interactions between people from these two different geographical settings. Outsiders to Chinese in-groups may have a harder time feeling accepted in the workplace due to the large diffuse connections. For instance, the Chinese may think that a westerner wants to make them feel inferior by stating obvious facts. A westerner on the other hand may feel that the Chinese offer no direction.
Low context cultures may experience breakdowns in communications, especially in the case where individuals assume that they share a common understanding while there is none. Low context cultures may not have a firm understanding of diversity, and tend to be more inward-looking. They may fail to comprehend why the Chinese are so secretive, or unforthcoming with information.
Still in communication, most European countries tend to be argumentative. Individuals are likely to be more willing to express their disagreements verbally, but in China and other Asian countries, people find it more difficult to say no, or even express their disagreement verbally.
Through open expressions of disagreements, westerners may be viewed by the Chinese as being offensively blunt, and this may affect relations when criticisms are directed towards them by a European superior. In so doing, a European manager may distance himself from being in the in-group, if he/she wants to relate well on a personal level with the company’s employees. The Chinese therefore are less likely to speak out their minds, indicating that they will be inclined on being more subtle.
In terms of thinking orientation, most Europeans are used to following rules based on application of regulations or laws. Without these abstract principles, people would opt to carry out activities in their best interests. In China, however, people tend to take the current context into consideration, or observe the specific situation before interpreting the rule. Westerners find it hard to interpret these rules because they are set to apply differently to different situations.
Individuals in most countries in Europe have greater needs for rights that safeguard their autonomy and need for individual achievement. People here tend to act in ways that will clear the path for climbing the corporate ladder. Activities experienced may be selfish in nature, such as stealing credit for a valid business idea, as a result of the concept of individuality. People also join labor unions so that they can be protected from corporate exploitation.
In China, there is greater emphasis on group work. In a factory, for example, workers believe that it is the duty of each individual to ensure cleanliness and safety. People may not necessarily join unions, but there is a greater belief in working towards the attainment of organizational goals, than working for ones personal interests.
In China, relationship (guan xi) is stressed in business above all else. Business agreements rarely occur without a sound relationship between the two parties.
Relationships are hard to form and can take months before they are established, but the benefits of such business relationships is that they are long lasting. In Europe, business relationships are less important. To ensure performance for both parties, the agreement has to be put down on paper by signing contracts. Conversely, most business partnerships in the western world end on the expiry of the contract.
When conflict arises, most companies in Europe opt to settle their disputes in courts. Legal expenses tend to be high since these companies have contracts with law firms to provide legal services whenever they arise. The Asian way when handling disputes is quite different from that of Western Europe (Schultz, 2007). Companies in China rely on mediation from trusted third parties to settle disputes. Legal action is often considered after other alternative procedures fail.
The Chinese may take more offense if a person is late for an appointment. A person should therefore state well in advance in case being late is inevitable, so as to allow them time to re-adjust their time arrangements.
Most business hours are from 8:00 in the morning to 5:00 p.m. in weekdays, while store hours are from 9:00 a.m. to late in the evening, ranging from 7:00 p.m. to 10:00 p.m… In Europe, businesses stay open during the afternoon, although there might be a slow down in operations since some personnel could be out for lunch.
Holidays are often short, affecting at most two days. In China, however, business may “shut down”, during lunch hours, that is between noon and 2:00 p.m., and some holidays may take up to a week, such as the Chinese New Year, May Day or the National Day. Dates for these occasions vary from year to year, since there has to be official advice on such long holidays.
Meetings in Europe may start with a slight introduction, where seated people merely nod or raise a hand when their name is mentioned in most cases. The procedure could be unheard of in China, a land where meetings form the basis for strong business relationships. Meetings start with handshakes, and a small nod of the head.
A westerner should ensure to avoid a vigorous handshake as this may translate to being over aggressive. The Chinese also discourage physical contact, especially in business. A person who has not adapted to their culture should be keen not to put an arm around a Chinese individual in an official meeting. The body stance ought to be formal and attentive, as this illustrates that one has self control and is worthy of respect.
Significance on Human Resource Management
Cultural differences may bring about conflicts in the workplace, which could all be due to misconceptions. In instances of differences in opinion, Chinese employees tend to be reserved and operate more in silence. To a westerner, one may conclude that the employee is weak or afraid to speak out their mind. This perception may affect staff evaluations or promotion opportunities where the manager is from the west, say the UK, France or Germany. To the Chinese, being silent is one way of avoiding arguments, and could be a show of respect.
Performance appraisal should be conducted with caution, so as to preserve and build on ‘face’. Face, in China, implies the positive perception of each individual. Public reprimands lessen face, thereby decreasing motivation. Managers should be careful with their words as most Asians are sensitive people.
Instead, HR managers could restrain from using strong words when expressing discontent in performance, or criticizing an employee in public. Words of complement may help to build on face, which would go on to increase motivation in Chinese personnel.
Orientation of organizations
Ethnocentric
This orientation strategy is geared towards sourcing for nationals from the home country when an international firm starts operations in a foreign country. Companies that practice this form of orientation may have a belief that their nationals are more capable, or trustworthy, than local personnel.
This notion could be based on past experiences and current beliefs. The strategy is mostly practiced when an international firm opens a subsidiary in a developing country, and nationals often sought to fill in top managerial positions. Local employees are integrated into these firms, but in less powerful positions (Bartlett, Ghoshal & Beamish, 2008).
Policies used in these subsidiaries are largely based on headquarters tendencies and standards, which are meant to ensure performance or product quality in proportion to the home country levels. There is usually constant communication between the headquarters and the subsidiary, involving constant advice from the head office. Companies that use this strategy used a centralized approach. Training, recruitment and planning take place in the headquarters, making it harder for the company to adapt to local conditions.
Some of the advantages of this strategy include more efficient communication and control of the subsidiary. Programs that brought success for the home country may also bring the same fortunes for the local branches. The major disadvantage of this strategy is that the company fails to grasp the main reality in the host country due to lack of efficient adaptation.
This could be due to poor feedback from the subsidiary since most of the communication is top-down. The subsidiary will also lack flexibility due to the structure in place, hence may fail to ensue quick responsiveness in case of market changes. Cultural differences may result in inefficiencies when dealing with staff, or when forming business relationships.
Polycentric
An international company that employs a polycentric approach believes that different strategies should apply to different geographical regions. As such, these companies prefer local talent to ensure appropriate strategies to deal with local market conditions.
A common belief is that it would be difficult and costly, to learn, adapt or change the local culture, thus individuals should be left alone as long as they work efficiently and in a profitable manner. Local personnel manage most of the key positions if not all, and are in a better position to employ other locals to fill in vacant positions.
This approach has several advantages, for example, local staff will be more motivated thereby increasing productivity. By use of local expertise, companies are able to better exploit local markets from managerial strategies based on local experience, which may result into an increase in sales. Companies will also be in a more informed position when planning for local products, increasing success chances in the process. Also, firms that use this orientation approach enjoy more government support in the host country.
Disadvantages could be brought about by duplication of resources, where subsidiaries try to emulate local companies. In so doing, the subsidiaries may lose their identity and appeal in the local market. Another disadvantage is that the firm as a whole may fail to achieve the advantages of economies of scale, since there is lack of global coordination between the subsidiaries and the headquarters.
Lack of coordination also discourages the sharing of knowledge between subsidiaries; therefore knowledge that could be beneficial to all branches is lost. The headquarters loses control of subsidiaries; hence it becomes difficult to implement strategies geared towards global growth.
Geocentric
A geocentric approach is more world-oriented than the above mentioned management models. This approach does not favor or home country personnel, but rather highlights on strategies that will guarantee the achievement of company objectives. Therefore, management source for personnel best suited for each individual position regardless of their geographical background.
This goal of this orientation is to make the subsidiary more competitive both in the host country and internationally by uniting the head office and the subsidiary. Business activities most suited for this approach include research and development, and marketing.
Benefits of the geocentric approach include more integration between the head office and subsidiaries, while the increased synergy makes the company more powerful and resourceful. Through global research, the company will be more capable of developing competitive products and services.
By targeting the world as a whole, resources will be utilized effectively in the aim of attaining higher global profits, and achievement of global objectives. Disadvantages include higher communication and travel costs between head office and geographically dispersed subsidiaries. The decision making process will be slower because strategies have to be agreed on across the board.
The China situation
Since Gamescorp is a relatively new company in China, it should first use a polycentric approach when entering the market. An ethnocentric model would be costly due to the time taken to adapt to the local culture.
Such as approach could be suitable when expanding within the European region, but given the vast differences in culture between the East and the West, another model would be more appropriate. China’s economy is on of the highest growing in the world, which means that the country has a highly qualified workforce.
Chinese personnel have a far more understanding of the local market conditions, and their own culture. In a country where first impression matters a lot, UK nationals could fail to establish business relationships by engaging in activities that may be perceived as offensive by their Chinese counterparts.
Local talent could fasten the development of business relationships by taking advantage of their networking capabilities. Chinese employees will also have a more clear understanding of the Chinese customers, thereby eliminating costs that would have been incurred on hiring a marketing consultant. As Gamescorp grows in the Asian region, more local personnel from those areas could be infused into the company.
Recommendations
Policies that could be used in running the Chinese subsidiary should be general in nature, in a manner that does not tie the hands of local management. Before engaging in any employment practices, Gamescorp should first seek professional advice on the translation of China’s labor laws.
Such laws could include provision of written contracts to all employees, failure of which can result into stiff penalties. Secondly, Gamescorp should clearly define its company culture, development strategies as well as an employee development plan. This would assist local potential staff to grasp the company’s background, and the job descriptions.
If Gamescorp decides to operate in China through a representative office, then it can only hire local employees via government backed agencies. The company would not be required to use such staffing agencies if it intends to operate as a joint venture or as a foreign direct investment, but it could save time and costs by outsourcing recruitment and HR services to these agencies. These agencies could therefore be the most appropriate since they have more expertise in China’s human capital market.
References
Bartlett, C. A., Ghoshal S., & Beamish, P. W. (2008). Translation Management: Text, Cases and Readings in Cross-Boarder Management. 5th edn. New York, NY: McGraw-Hill.
Chhokar, J. S. & House, R. J. (2007). Culture and leadership across the world: the GLOBE book of in-depth studies of 25 societies. Essex, UK: Routledge.
Schultz, A. (2007). Chinese Business Culture- Theories, Examples, Figures. Saarbrücken, Germany: VDM Verlag Dr. Mueller e.K.