Culture refers to the shared norms and way of doing things among individuals (Cole, & Bradley 2018, p12). People with shared culture tends to have the same view approach to decision making. In spite of this, culture is a diverse factor as it differs from one location and community to another. What may be culturally acceptable in one community may not be acceptable in another. In this study, the focus is on the cultural challenges that organizations from the United Kingdom are likely to encounter as a result of initiating their operations in China. A theoretical framework on culture is presented in the study as well as past cultural failures of companies in China. In particular, the potential challenges that a UK company Lotus Leisure Limited which is involved in the provision of cab services would face in a joint venture with Didi Chuxing Technology company which also provides ride-sharing service would face. Recommendations are also provided on how to address these cultural challenges. It is worth noting that for firms to operate successfully in the international markets, they need to have a full understanding of the problems that they are likely to face in such markets as well as identify ways of mitigating these challenges.
With the increase in the levels of globalization, China has emerged as one of the companies in the East that firms from Europe are investing in. The problem of cross-cultural management, as well as communication, has become a key issue that firms that are investing in China have to address. The cross-national businesses are faced with cultural differences that they can use to gain a competitive advantage in foreign markets and in many cases, such challenges have emerged to be a barrier to effective management of the business in such countries. Cross-national companies from the United Kingdom of Britain operating in China have in the past years recorded significant losses due to their failure to understand the Chinese culture (Cole, & Bradley 2018, p66). Such UK firms in international markets lose a total of 48 billion pounds annually as a result of poor cultural understanding. With the increased importance of China as an investment destination, many companies from Europe and elsewhere are exploring business opportunities in the company. Many of these firms from the UK are entering China via joint ventures. They are also doing so through mergers and acquisitions. Nevertheless, they are faced with different levels of commitment from the Chinese business partners and transaction costs and mode of negotiation equally differs significantly from what such firms have been encountering in the United Kingdom.
Hofstede five dimensions of culture are used in analyzing the cultural differences that exist between the united kingdom of Britain and China. The five cultural dimensions are:
A comparative table for China and the United Kingdom of Britain is as summarized in the graph below
Source: Hofstede Insights (2019, p1).
Power distance indicates the extent of inequality in society. China has a higher score when it comes to power distance as compared to the united kingdom of Britain. This indicates that people in society have no issue with power distance (Hofstede Insights 2019, p1). A company entering the Chinese market will thus not have to worry about any challenge that a hierarchical structure of leadership may pose in the organization.
The fundamental issue that is addressed under this dimension is the extent to which individuals in society are interdependent. In collectivist societies, people identify with groups and group success as opposed to seeking success at the individual level. At the score of 89, the United Kingdom stands out as one of the most individualistic countries around the world (Hofstede Insights 2019, p1). This has implications in businesses. It implies that employees in an organization are likely to emphasize individuals success as compared to that of the group. At the firm level, the implications are that the firms are expected to focus more on maximizing the wealth of its shareholders as opposed to meeting the needs of all of its key stakeholders. The route to personal fulfillment us the one that is mostly taken by the companies and individuals in the UK. Companies entering China from the UK are likely to suffer a significant blow if they try to adopt this approach to operations. China scores 20 when it comes to individualism. The implication is that the individuals and business look forward to the group and societal success as opposed to merely pursuing strategies that benefit only a limited number of people (Dolan, & Kawamura 2015, p88). Firms that engage in activities that though boosting profits are resulting in reduced welfare of the society are likely to be opposed in the country. In the organization, UK based expatriates to China may focus more on increasing their productivity to raise the level of bonuses assigned to them as opposed to focus on team-based bonuses. On the other hand, the Chinese focus on group production and rewards. UK expatriates would thus be viewed as selfish and self-centered and are likely to be segregated by their Chinese counterparts. A company such as Lotus Leisure Limited would, therefore, need to ensure that its UK employees learn to cooperate with locals
A high score on the dimension of masculinity implies that society is driven by competition for achievement and success. Winning is the ultimate goal of individuals in society (Hofstede Insights 2019, p1). On the other hand, a low score, which is associated with a feminine society implies that the main values in such a society are caring for others and the enhancement of the quality of life of everyone. In the UK work environment, competition and organizational politics are common. People employ different tact to gain promotions or better earnings. Competition for power is also common. UK expatriates are thus viewed as dominating and uncaring as they focus on individual success rather than the success of the group. They would thus find it difficult working with the Chinese where their goal is the well being of everyone rather than individual gain and promotions.
The uncertainty avoidance dimension deals with risk. The future is always uncertain. Some people opt to take actions that guarantee a stable future as opposed to taking actions that are highly uncertain even if they would be profitable (Hofstede Insights 2019, p1). Both the UK and China have a low level of uncertainty implying that investors from both countries are willing to take the risk in business. The implication is that when it comes to risk-taking, the entity will not be faced with significant challenges when dealing with its Chinese counterparts.
Nevertheless, at 35 for UK and 30 for China, it is evident that China is a more risk-taking country as compared to the UK. This is evident in their business negotiations and contracts. Chinese contracts are often broad-based and lack of details (Godev, 2018, p44). This creates room for future alterations which in some cases may be to the disadvantage of the other negotiating partners. Contracts made in the UK, under the common law are often detailed. UK firms operating in China are thus likely to encounter challenges with contracts made with the Chinese and should thus emphasize that such contracts be detailed and done in writing. Verbal business agreements are common among the Chinese.
The long term dimension describes how a society may connect its present to the future (Hofstede Insights 2019, p1). Countries that focus less on the future often relies on short term planning. The same happens for firms that have a low orientation to the future. China has a very high long term orientation. The planning among Chinese is often done for extended periods as compared to the UK which has a very low level of orientation to the future.
Indulgence refers to the extent to which people controls their desires. Weak self-control results in indulgence (Hofstede Insights 2019, p1). Cultures that are inclined towards indulgence are characterized by people who spend a lot, especially on luxury. Their marginal propensity to the consumer is usually very high. At score 69, it implies that the United Kingdom is highly indulgent as compared to the Chinese who scores 20. UK firms entering the Chinese market should not focus on nonessential elements based on impulse buying.
Source: Henson (2016, p66)
Organizational culture is firm-specific. It is based on the shared traditions and history of the organization. The shared traditions of a company tend to demonstrate the culture of people where it operates. For instance, the UK organizations internal environment depicts the unique culture of the Britons. Similarly, the culture in Chinese companies depicts the Chinese culture (Hofmann, & Scordis 2018, p336). An organization focusing to engage in a merger with a Chinese company is thus likely to be faced with challenges in harmonizing the international culture. For instance, when the emphases of Chinese employees is on cooperation at work and pursuit of the organization goals and objectives as a team, individualism is high in the UK. Harmonizing these two cultures will require cross-cultural training of both the Chinese and the UK expatriates who will be operating in China.
Another indicator of organizational culture us the level of procedural formalities. In China, communication, as well as contracts, are done in a casual way. This is unlike in the UK where official communication follows the right channels and details are provided. An organization that merges with a Chinese company might find it difficult harmonizing communication in the workplace. A casual approach to communication may end up limiting the level of commitment of the UK expatriates. It would thus be important that this challenge is addressed if the organization is to run smoothly. A company such as Lotus Leisure Limited would thus encounter communication challenges in its efforts to invest in China.
National culture will have an effect on the organizational culture. For instance, while many Chinese operating in firms from the UK understand English, they may result in excessive use of Chinese language in the office. This has may result in misunderstandings and suspicion between Chinese employees and UK employees. Establishment of policies on the official language may help in mitigating of this challenge. The norms of communication between the Chinese and the UK expatriates may nevertheless not be easy to change and harmonize as the respective employees have been using them for years.
The mission statement of an organization provides the entity stakeholders with a common direction. When firms are merging, each usually tends to have its own mission and values. Failure to harmonize these values and mission to a shared set of values would end up limiting the success of the organization in the market. It may also result in conflicts in the organization.
Finally, the management of the organization influences its success. When two firms engage in a merger, there are high chances that they may not readily agree on leadership and power-sharing. The UK employees are likely to push for self-interest and dominance over the rest as compared to the Chinese whose culture focuses on common gain. Power struggles by the US employees would end up raising suspicion among the Chinese counterparts something that would adversely affect the success of Chinese firms in the market. There is thus a need for proper negotiation on how the positions of power would be shared in the organization. This will eliminate the risk of conflict and increase chances of cooperation between the local and foreign employees, enhancing the operations of the organization.
Doing business with the Chinese is a big challenge when it comes to the language barrier. Majority of the companies from the united kingdom of Britain that initiates their operations in China often fails to understand English. This necessitates the services of an interpreter. Besides failing to understand the language, the Chinese often fails to communicate directly. As a result, there are high chances of such information being misinterpreted. The Chinese do not like simple answers such as no or yes even though their explanations are not to the point. The organizations operating in the country may thus demand that such countries such as China provides a better explanation of what they are communicating to the stakeholders that they deal with in China.
Operations by firms from the United Kingdom in China may be guided by the universal tenets of ethics. For instance, through honesty, there is increased trust between the parties involved. Equally, transparency and accountability ensure that individuals take responsibility for their actions. These tenets are acceptable among people in both China and the United Kingdom and may help in easing cultural challenges that face firms in China. When a company such as Lotus Leisure Limited intends to make a joint venture with a Chinese company, it would be vital that it develops clear policies on how the official communication is to be relayed in the organization. This will eliminate any chances of confusion in the organization.
One of the companies that failed in China is Tesco. Since its entry to China, it only managed to capture a very small part of the market. Even its attempts to localize its stores in China did not yield the desired outcomes. In China, the organization tried to sell live turtles and toads in order to attract customers but it still failed. In 2013, it indicated that it would pull out its remaining one subsidiary from China. It opted to merge its stores with that of the China Resources Enterprise (CRE). During the period of a merger of these two organizations outlets, the CEO of CRE indicated that the organization would benefit significantly from the Tesco expertise while Tesco would significantly benefit from the good relations that CRE has with the government and the Chinese consumers. Cultural differences were a major cause of the failure of the organization. For instance, the organization had started using credit cards in the Chinese market. While this mode of payment was very popular among its UK customers, customers in China were not used to it. A key lesson that was learned by the retailer is that the Chinese market is quite complicated and capital intensive.
In the Chinese market, other companies have encountered significant challenges initiating their operations in China. In 20116, Uber London Limited the organization indicated that it is exiting the Chinese market by selling its stake to its rival in the market. As part of the deal, Cheng wei was expected to secure a seat in the Uber board of directors. Uber was to get 20% of the Chinese company and in return, the Chinese company was to take control of the Chinese market. One of the challenges that the organization was facing was its noncompliance with the state and the poor understanding of cultural expectation of the Chinese people on the services it was providing to its customers in the market (Li, & Ma, 2017, p45). Equally, the organization lacked understanding of Chinese geography. It was relying on Google maps in matching the customers with the cab drivers something that was not easy. Uber was also faced with the challenge of having to spend too much in its effort to attract drivers and customers. Exploitation of the organization by drivers who faked trips also led to losses by to the organization. These challenges were significant enough to prevent further expansion of the operations of the organization in China.
When a company such as Lotus Leisure Limited intends to engage in a joint venture with a Chinese firm, it will need to take a number of steps to mitigate the cultural challenges that has hindered the success of other firms that initiated their operations in the country in the past (Schulz, Sense, & Pepper, 2018, p47). The organization will need to limit indulgence of the UK expatriate employees in China as such lose spending is not supported under Chinese culture. Costs incurred in the operations of the organization should be objective and justified.
For the organization to operate successfully, it will need to push for clear communication in writing when it comes to important contracts. Chinese tends to engage in a contract in a less formal manner which may complicate the execution of such contracts in the future.
The language barrier will be eliminated by the organization making an agreement with the joint venture partners that the official language will be English in the organization among employees until they have a good understanding of Chinese (McRuer 2018, p88). This will limit the chances of conflict due to a misunderstanding of language. In a collectivist culture such as China, the organization will inform its employees on the need to promote teamwork as opposed to merely pursuing personal interest (Thorpe, &Yeh, 2018, p66). This will boost cooperation with the Chinese and increase the chances of success of the organization.
Universal tenets of ethics should be adopted within the merged organization. This includes honesty, transparency, and accountability. These are shared values that are shared between the individuals from the UK as well as the Chinese which are likely to boost their relations. Proper sharing of power is likely to boost the operations of the organization. As much as the UK people are individualistic and seek competition and winning, this should not extend to take all of the positions. The leadership positions should be shared equally in the merged organization so that each of the parties engaging in the merger feels equally represented.
UK companies entering in a joint venture with firms in China will need to consider the cultural challenges that are likely to affect their operations and identify ways through which they mitigate these challenges. In the past, companies such as Tesco have failed in China due to cultural challenges and failure to understand customers (Pendrous 2013, p1). To avoid such pitfalls UK companies such as Lotus Leisure Limited which are intending to initiate their operations in China should ensure that positive norms among Chinese and UK expatriate employees are retained in the organization while rules are made on barring actions that may hinder the success of the organization. Cooperation and strict approach to negotiations including proper documenting of written contracts will increase the chances of success of such UK firms that are investing in China.
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