Comparison between China and USA
Business in China and America
Countries operate around different political regimes with unique policy formulation, implementation, and review that affects business environment. These policies are aligned by policy makers towards self interest protection and profit optimisation. At micro and macro levels, these protectionist policies have merits and demerits in short and long-term business engagements.
Notably, business related policy formulations in specific market environment have weaknesses capable of attracting conflict of interest especially when the same policy functions in the international trade market scenario.
Since the beginning of the new millennium, China has become an economic powerhouse in terms of aggregate investment portfolio and economic growth. The systematic and consistent rise is attributed to political and economic policies which also double as source of tension between America and itself.
Located in the heart of the Asian continent, the Democratic Republic of China is founded on the principles of Communism and ruled by a single party government. Despite capitalism dominating business environment across the globe, China has managed to hold firm on the Marxist-communist foundation and has struck a balance between the science of politics and communist business system.
Characteristic of a communist system, the government of China is active in monitoring and directly intervening in major sectors of the economy. Due to deep rooted culture of concentrated power in the hands of the politically established government, who have liberalised its market and facilitated internal investment by foreign investors, China offers attractive investment incentives and waivers on taxes to potential investors.
Comparatively, then ne-liberalist system controlling business environment in the states of America is equally developed. Reflectively, this system is based on the ideology of totalitarian democracy in which decisions on business and other matters of public interest are made by a democratic republican or democrat government elected by the majority. Despite consisting of three political parties, that is republican, democratic, and independent, the first two are dominant in the economic, social, and political spheres of America.
Aiming to start a medium shoe making business with relatively sketchy market network, the first choice of business location is in the Democratic Republic of China, especially in strategically located town of Shangai.
This choice of location is as a result of the large untapped market of China and regions surrounding it, the friendly communist regimes with direct intervention in business activities, massive cheap and readily available labour, and friendly business regulation policies on investment and business functioning based on acculturation. Despite being at the same level in comparative analysis, China plays a bigger role as a retail business leader and industrialist.
According to Markus 2007,
China is not just the World Factory, most booming market for resources and consumer goods and the fastest growing economy in the world with an average GDP of over 10% in the past decade. It is also the most attractive destination for foreign investment since China opened its door to foreign businesses in 1978. (p.23)
Within business organisation and practise, labour is vital especially in balancing over head cost of doing business. Reflectively, existence of abundant, cheap, and sustainable labour supply gives a business an upper hand in the competitive market and ensure its survival and sustainability in long run. China has a skilled pool of cheap labour.
This aspect is attractive in doing business within its territories. The population of China is ethically aligned and appreciate the essence of commitment and hard work towards achieving greater heights. Comparatively, America’s labour market is expensive, highly structured and professionalism work ethics have been internalised by the labour market same as that in China (Jonathan, 2006).
In order to gain from this comparative advantage, doing business in China saves resources that could have been directed towards training workforce since skilled labour is available and relatively affordable as compared to that in America where living standards are higher and minimum wage bigger.
In addition, the culture of Chinese people promotes self discipline and appreciates excellence in service delivery as a means of making the economy better. In the process of achieving this, the self motivating culture facilitates competence and combines skills with loyalty to give positive result. Thus, this would give China an upper hand as a preferred choice for retail business location since cheap labour would translate into more profits (Ambler, 2000).
To meet the demands of its population, China has successfully transformed the economy and economic systems from traditional agricultural dominance into advanced and reliable service industry system consisting of international banking systems and liberalised private sector through its business policies.
These banking systems make credit available for entrepreneurs in the private sector and facilitate public borrowing. Subsequently, the economy has been expanded and series of opportunities are available for internal and international investors. As noted by Rainer (2007), interactions between banking sector and private businesses in China have made it a hub for entrepreneurship and emergence of wide market.
Thus, to gain from this advantage, retail trade investment in China is more viable than the vulnerable market of America which often fall a victim of market swings (Rainer, 2007). Interestingly, from the study on number of investors for the two countries carried in 2006, Rainer (2007) noted the following:
For the first time, China attracted more foreign investment than the United States. The world’s fastest-growing economy is the second largest behind the United States, and by mid-century, it is expected to be number one. (p. 67.)
According to Ambler (2000), China has rich resources which have managed to ensure success of companies such as Gamble and General Motors which were established in the terror back in the late 1980s. Reflectively, despite series of swings in global economy characterised by periodic inflation and deflation, China’s economy remain stable following the acquisition of membership certificate from World Trade Organisation.
America on the other hand, has similar flexible business policies that promote trade (Ambler, 2000). Moreover, the results of the American Chamber of Commerce survey indicates that of 450 American companies in China, nearly 69 percent have directly benefitted from substantial profits more than their counterparts based in America (Jonathan, 2001).
This success is attributed to existence of investments opportunities, ready market, and competitive advantage as a result of consistence in service delivery, insurance efficiency, and reliability in the banking system, and flexibility in retail industry (Xiaowen, 2001).
Markus (2007) states the prevailing positive economic climate in the economy of China offers unlimited opportunities to sellers to expand market territory from small streets to upmarket with ease (Markus, 2007). In an attempt to capture attention in the global market, China adopted the strategy of maintaining relative advantage through exportation of goods and services tagged with competitive price as a policy (Curran and Acker, 2010).
Over time, this strategy has paid off in the continents of the global market where China has created market for every brand of its products irrespective of economic classes in these markets. Besides, the population of China consisting of nearly a third of the world population and offer ready market, labour, and services in every industry irrespective of its size.
According to Harvard University article (2004), as a substantial proportion of the middle class experience upward mobility, demand chains are created periodically to sustain continuously production and supply. Therefore, creation of an international market within the boundaries of the republic of China can reap relative advantage of the expansive market for its products and a channel of accessing related markets at global level (Harvard University, 2004).
In the global business arena, China predominate large scale manufacturing of competitive goods and delivery of affordable services. Mass production of cheaper goods is due to its ability to balance overhead cost by use of highly skilled, readily available, and cheap labour in the manufacturing industries as compared to America’s expensive labour market.
According to Xiaowen (2001), over the last decade, China has made substantial investment in product development and research. Consequently, gains from intellectual capital have created expansive opportunities for marketing. These opportunities act as incentive for global investment in China (Xiaowen, 2001).
China is endowed with natural resources same to America. As a matter of fact, availability of raw materials is the basis of viability in investment planning. As a result production resonates on the periphery of low-cost. According to Jun (2006), the dynamics of cheap raw materials and their availability can be attributed to quality and dominance in international trade by China more than American market.
For instance, mass production of textile and toy in mega factories in China is as a result of availability of cheap raw materials. Subsequently, the low cost of production encourages mass manufacturing and boosts the cumulative profit gained from a bundle of production units (Jun, 2006). Though America is more strategically located, market for shoes would be higher in China which consists of a third of the world population (Bucknall, 2000).
American market has more or less same advantages as China. In fact, democracy and total market liberalisation policy in America is advantageous to business set up and operation. Generally, America is better off in business organisation. However, its market has reached its peak leaving little room for rapid expansion. Besides, competition for shoes product is very stiff as compared to the same in China.
Conclusively, it is apparent that China is better off as a strategic location for establishing business as compared to America. Among other reasons for the better position can be attributed to cheap labour, ready market, government commitment, and the spirit of entrepreneurship.
Generally, America is better off in business organisation. However, its market has reached its peak leaving little room for rapid expansion Thus, as a potential investor in shoes manufacturing business; I prefer the town of Shangai in China as the location for my business because of its untapped market, political stability, and strategic location.
References
Ambler, T. (2000). Doing Business in China. Economic Policy Journal, 11(3), 25-41.
Bucknall, K. (2000). Cultural guide to doing business in China. (3rd ed.). London: Butterworth-Heinemann.
Curran, G., & Acker, E. (2010). Business and the politics of globalisation: after the global financial crisis. Alabama: Pearson Education
Harvard University. (2004). Harvard business review on doing business in China. Boston : Harvard Business School Pub.
Jonathan, N. (2006). Developing Business Ethics in China. (2nd ed.). New York: Palgrave Macmillan.
Jonathan, S. (2001). China uncovered: what you need to know to do business in China. London: Pearson.
Jun, L. (2006). Entrepreneurship and Small Business Development in China. London: Emerald Group Publishing Limited.
Markus, B. (2007). Business Success in China. (2nd ed). London: Pearson.
Rainer, T. (2000). Business China: a practical insight into doing business in China. London: Business & Professional Publishing.
Xiaowen, T. (2001). Managing international business in China. Cambridge: Cambridge University.