The Chinese business culture is vastly different to the Western one. The cultural differences present a serious barrier to entry. However, if handled correctly, the Chinese market offers an excellent field for expansion. The most important task at this point is to ensure understanding of the local culture and society in order to enter the market smoothly.
Hofstede Value Dimensions for China
According to the data from The Hofstede Centre, the Chinese society has several key differences compared to the Western societies. The first thing to note is the high power distance rating. It means that Chinese are generally accepting of others’ authority and are not used to questioning it (The Hofstede Centre, 2014). In the intercultural communication context, it means that Chinese administrators are not used to having their authority questioned and might react negatively to it. The other distinct point is the collectivism, characteristic of many Asian countries.
Chinese tend to focus more on the interests of the group instead of personal gain. Combined with the low indulgence rating, it means that many employees and managers work obsessively, sacrificing leisure time and personal interests for the sake of their company which they treat in many ways like a second family (The Hofstede Centre, 2014). That is why it is extremely important to build close relationships with the Chinese partners. If our company is treated as a part of their group, it will ensure the most fruitful cooperation. Another thing to note is an extremely high long-term orientation index which signifies the focus on the future and high adaptability of the Chinese society. That is important to keep in mind because it means that the Chinese companies are likely to change their practices if we manage to demonstrate them the merits of our way of conducting operations. That fluidity can be highly beneficial in the later stages of market immersion.
Suggested Market Entry Strategy
As Chinese Business Review suggests the joint ventures are by far the top entry strategy for the Chinese market (Nelson, 2013). It is hard not to agree with that statement. The laws and the bureaucratic relations in China are incredibly hard to navigate for the foreign company. And the most important part of starting a joint venture with a Chinese company is understanding the culture. Den Leventhal, a market entry strategist with over 30 years of experience in the Chinese market, states that the most important part of the strategy is preparing the executives for what they are about to face (Huber, 2015). In the West, most deals are very to the point – hard and defined terms, quick resolutions and little personal interaction between parties.
The Chinese prefer a more fluid and adaptable approach, characteristic of the pragmatic nature of their nation. The administrators who will work in China must understand that they will have to work to establish personal relationships with partners and gain their trust through social activities before any serious deals can be struck. And most of the deals will start with almost no paperwork – a letter of intent is considered to be enough of a start and further terms will be discussed on the fly (Huber, 2015). Working in such conditions will require the managers on the ground to be well-prepared. Every executive going to China should be made aware of these differences and provided with the materials explaining them in more detail. The other advice given by Leventhal is to accept the differences and embrace them. If the company is willing to play by the Chinese rules, the partners will grow more accepting of the Western rules we want to follow. Patience and understanding are key to the successful market entry (Huber, 2015).
References
Huber, E. (2015). How One China Strategist Leapt His Own Great Wall.China Business Review. Web.
Nelson, C. (2013). Developing a Smart Approach to Market Entry for American SMEs.China Business Review. Web.
The Hofstede Centre. (2014). What about China? Web.