Cross-cultural challenges when doing business in China.
1. Cross-cultural challenges when doing business in China.
Abstract
With the globalisation of world business, China has become an appealing market for foreign
investors. The problem of cross-cultural management arises as the cooperation between China and
its culturally different Western partners continues to increase at an unprecedented rate. This paper
presents an understanding on the general cultural differences between America and China by
applying the cultural dimensions Cultural dimensions are the mostly psychological dimensions, or
value constructs, which can be used to describe a specific culture. These are often used in
Intercultural communication-/Cross-cultural communication-based research.
See also: Edward T. Â of Hofstede and Bond. It also discusses the impact of these cultural
differences on their management practice from five aspects: cooperative strategies, conflict
management, decision-making, work-group characteristics, and motivation systems.
Key words: national culture; individualism/collectivism; cross-cultural management.
**********
The 21st century is an era of the globalisation of world economy. Cross-national business is facing
great challenges in cultural differences. In one survey entitled en·ti·tle Â
tr.v. en·ti·tled, en·ti·tling, en·ti·tles
1. To give a name or title to.
2. To furnish with a right or claim to something: Â What is the biggest barrier in doing business in
2. the world market, cultural differences ranked first in all eight items including "law, price
competition, information, language, delivery, foreign currency, time differences, and cultural
differences. Hofstede (1993) believes that the spread of businesses onto the global stage brings the
issue of national and regional differences to the fore. "There is something in all countries called
'management', but its meaning differs to a larger or smaller extent from one country to another"
(Hofstede, 1993).
It can also be observed that most of the failures faced by cross-national companies are caused by
neglect of cultural differences. The globalisation of the world economy, on one hand, has created
tremendous opportunities for global collaboration among different countries; on the other hand,
however, it has also created a unique set of problems and issues relating to relating to relate prep -
> concernant
relating to relate prep -> bezüglich +gen, mit Bezug auf +acc  the effective management of
partnerships with different cultures.
With the increasing importance of the China market in the world economy, many international
companies rushed and planned to enter China to explore business opportunities. They enter the
huge market by forming joint ventures or participating in mergers and acquisitions. This has spurred
the need for cross-cultural research in China. It was reported that the great barriers caused by
cultural differences like difficulty of communication, higher potential transaction costs Transaction
Costs
Costs incurred when buying or selling securities. These include brokers' commissions and spreads
(the difference between the price the dealer paid for a security and the price they can sell it). ,
different objectives and means of cooperation and operating methods, have led to the failure of many
Sino-foreign cooperation projects. The questions like "how to understand China" and "how to do
business with Chinese people The following is a '''list of famous Chinese-speaking/writing people.
Note in Chinese names, the family name is typically placed first (for example, the family name of "Xu
Feng" is "Xu"). " have occupied the minds of international business people who are planning to enter
China.
General Cultural Differences between the West and China
China, as the largest market and possibly the most appealing market in Asia, is entering into global
collaboration with a wide range of foreign partners. As can be seen from Figure 1, apart from the
foreign direct investments, FDI FDI
See: Foreign direct investment , from Asian countries Noun 1. Asian country - any one of the nations
occupying the Asian continent
Asian nation
country, land, state - the territory occupied by a nation; "he returned to the land of his birth"; "he
visited several European countries" , the second and the third largest investors are from North
America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi
(24,346,000 sq km), the northern of the two continents of the Western Hemisphere. Â and Europe. It
seems necessary to investigate the cultural differences between China and its international business
partners in North America and Europe.
[FIGURE 1 OMITTED]
3. To clarify the differences between China and the West, we will refer to Hofstede's four cultural
dimensions and Bond's fifth dimension. Among researchers who have given a variety of definitions of
culture, Hofstede is one of the first to adopt a pragmatic problem-solving approach in the field and
relates culture to management. He defines culture as a kind of "collective programming of the mind,
which distinguishes the members of one category of people from another" (Hofstede, 1980). He
explained that culturally-based values systems comprised four dimensions: power distance,
individualism/ collectivism collectivism
Any of several types of social organization that ascribe central importance to the groups to which
individuals belong (e.g., state, nation, ethnic group, or social class). It may be contrasted with
individualism. , masculinity/femininity, and uncertainty avoidance. Further research by Michael
Bond Michael Bond, OBE, (born January 13, 1926 in Newbury, Berkshire) is an English children's
author. He is the creator of Paddington Bear and has written about the adventures of a guinea pig
named Olga da Polga. Â (1989) identified a fifth "Eastern" dimension called long-term/short-term
orientation.
By comparing some Western countries and China along these five dimensions according to
according to
prep.
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. Â their cultural dimension scores (Data source: Hofstede, 1991), some tentative conclusions may
be drawn. First, Western countries seem to be generally lower (United States of America UNITED
STATES OF AMERICA. The name of this country. The United States, now thirty-one in number, are
Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky,
Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, Â 40,
Canada 39, United Kingdom 35, Germany 35, and France 68) than China (80) in power distance.
Second, in terms of individualism individualism
Political and social philosophy that emphasizes individual freedom. Modern individualism emerged
in Britain with the ideas of Adam Smith and Jeremy Bentham, and the concept was described by
Alexis de Tocqueville as fundamental to the American temper. , Western countries are generally
much higher (United States of America 91, Canada 80, United Kingdom 89, Germany 67, and France
71) than China (20). Third, Western countries seem to have short-term orientation while China is
considered to be long-term oriented o·ri·ent Â
n.
1. Orient The countries of Asia, especially of eastern Asia.
2.
a. The luster characteristic of a pearl of high quality.
b. A pearl having exceptional luster.
4. 3. .
Among these Western countries, America is frequently investigated in cross-cultural research, partly
because of its economic power, partly because of its cultural representativeness. To a certain
degree, the United States United States, officially United States of America, republic (2005 est.
pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the
world's third largest country in population and the fourth largest country in area. Â is considered as
representing the so-called "Western culture". Therefore, a comparison between USA and China
seems to help clarify the cultural differences between the West and China and related cross-cultural
challenges.
China and USA differ greatly with regard to their economic systems, political systems, social values,
and laws, despite the substantial changes that have occurred in China during recent years. Table 1
shows the cultural dimension scores of USA and China (Data source: Hofstede, 1993). Some
differences can be found. First, in terms of power distance, the scores of China are twice as those of
USA, which indicates that China is centralised Adj. 1. centralised - drawn toward a center or brought
under the control of a central authority; "centralized control of emergency relief efforts";
"centralized government"
centralized  (though it has shown some tendency toward decentralised Adj. 1. decentralised -
withdrawn from a center or place of concentration; especially having power or function dispersed
from a central to local authorities; "a decentralized school administration"
decentralized  power) while USA is relatively decentralised. Second, USA ranks first in
individualism (strong individualism) while China is low in individualism (strong collectivism). Third,
USA has higher value than China in masculinity masculinity /mas·cu·lin·i·ty/ (mas?ku-lin´-
-te) virility; the possession of masculine qualities.
mas·cu·lin·i·ty
n.
1. The quality or condition of being masculine.
2. , which indicates that USA is medium masculinity while China is medium femininity Femininity
Belphoebe
perfect maidenhood; epithet of Elizabeth I. [Br. Lit.: Faerie Queene]
Darnel, Aurelia
personification of femininity. [Br. Lit. . Fourth, China has higher values for uncertainty avoidance
than USA, which shows that Chinese are relatively risk-avoiding while Americans are relatively risk-
taking. Last, USA has a short-term orientation while China has a long-term orientation.
It has been widely accepted that cultural differences greatly affect human thinking and behaviour
and thus business organisations in which people interact on the basis of shared values. Management
is embedded Inserted into. See embedded system.  in a wider societal so·ci·e·tal Â
adj.
5. Of or relating to the structure, organization, or functioning of society.
so·ci e·tal·ly adv.
Adj. Â setting, and is heavily influenced by local historical and cultural norms (DiMaggio and Powell,
1983). The significant differences between USA and China seem to affect some aspects of their
management practice.
Impact of Cultural Differences on Cooperative Strategies
Because entrepreneurs mature within a societal context, their attitudes toward cooperation are
likely to be influenced by the underlying values of their society (Weaver, 2000). As discussed, USA is
strong in individualism and medium masculine. They rely on their own view to determine what they
should do. They tend to work alone and are reluctant to cooperate because their individualism and
masculine culture view cooperation in general as a sign of weakness and place a high value on
independence and control. China is strong in collectivism and medium feminism
feminism, movement for the political, social, and educational equality of women with men; the
movement has occurred mainly in Europe and the United States. It has its roots in the humanism of
the 18th cent. and in the Industrial Revolution. . The Chinese depend more on groups or institutions
to determine what they should do and emphasise loyalty to the group. They are more likely to
cooperate with others to avoid risks and reduce responsibilities. Their value systems appreciate duty
to the group and harmony among its members while pursuing personal goals is viewed rather
negatively in China.
In addition, in the process of cooperation, Americans place greater importance on contractual
safeguards than the Chinese. They believe that contracts can ensure that their partners' tendencies
to focus on individual goals and aspirations aspirations npl -> aspiraciones fpl (= ambition);
ambición f
aspirations npl (= hopes, ambition) -> aspirations fpl  do not interfere with their own individual
goals and aspirations. But the Chinese don't consider contracts as seriously as the Americans. They
think there will always be changes and the contracts can be reasonably modified according to
changes. Instead, they tend to pay more attention to relationships than contracts.
The two phenomena seem to be consistent with Weaver's findings. In his study of a group of seven-
nation entrepreneurs about their attitudes toward cooperative strategies, he found that
entrepreneurs from societies that are masculine and individualistic in·di·vid·u·al·ist Â
n.
1. One that asserts individuality by independence of thought and action.
2. An advocate of individualism.
in  have a lower appreciation for cooperative strategies as compared to entrepreneurs from
societies that are feminine and collectivist col·lec·tiv·ism Â
n.
The principles or system of ownership and control of the means of production and distribution by the
people collectively, usually under the supervision of a government. Â in nature. He also found that
6. entrepreneurs from individualistic societies placed greater importance on contractual safeguards for
maintaining effective cooperation than did those from collective cultures (Weaver, 2000).
Impact of Cultural Differences on Conflict Management
The Chinese and Americans tend to resolve conflicts in different ways. Since the Chinese come from
a strong collectivism and medium feminine society in which harmony and personal relationship are
emphasised, they will try to use indirect ways to avoid direct and open conflict. When they face
conflict, they prefer to use authority to suppress it, or settle things in private. They prefer to resolve
conflict through negotiation and compromise. Individualistic and medium masculine American
managers are used to confronting problems directly and bringing things out in the open. To resolve
differences, American managers will prefer to use tactics that involve directly confronting others
with rational arguments, factual evidence, and suggested solutions (Ting-Toomey, 1985). It is also
consistent with the pragmatic short-term orientation and moderately low power distance in USA.
Chinese managers use those tactics less than American managers, because using the tactics will
provoke overt disagreement, which is considered highly undesirable.
In addition, American managers are reluctant to invest the time and effort required to enlist
en·list Â
v. en·list·ed, en·list·ing, en·lists
v.tr.
1. To engage (persons or a person) for service in the armed forces.
2. To engage the support or cooperation of.
v. Â the help of other people (Yukl, Falbe, and Youn, 1993), when they have conflicts or problems
with another party. In contrast, the strong collective orientation and uncertainty avoidance values in
China encourage Chinese managers to use indirect forms of influence that involve the assistance of a
third party (Bond, 1991).
To deal with a difficult or controversial request, indirect forms of influence are preferred by Chinese
managers to avoid losing face and damaging guanxi. When their Western partners propose to use
direct and open ways to deal with the conflict, they may feel embarrassed. On the other hand,
Western partners may get totally confused by the roundabout way the Chinese use to solve
seemingly simple problems. The different ways that Chinese and American managers resolve
conflicts seem to find support from Weaver's finding that feminine societies prefer to resolve conflict
through negotiation and compromise (Weaver, 2000).
Impact of Cultural Differences on Decision-making
Risk-taking/Risk-avoiding
Chinese and American managers differ greatly in the attitudes toward risks when they make
decisions for their different values in uncertainty avoidance. High uncertainty--avoidance Chinese
managers usually lack the adventurous ad·ven·tur·ous Â
adj.
7. 1. Inclined to undertake new and daring enterprises.
2. Hazardous; risky.
ad·ven  spirit and the sense of risks. They dare not make immediate decisions if they feel the
circumstance is uncertain, which may deprive de·prive
v.
1. To take something from someone or something.
2. To keep from possessing or enjoying something.
 them of the opportunity to compete in the market. In most cases, they would like to make
comparatively safer and less risky decisions at the expense of the business opportunity. In contrast,
low uncertainty-avoidance American managers are more likely to consider risks as natural and are
volunteer to take the risks, especially in terms of developing new products, open a new market and
applying new technology.
Levels of Participation in Decision-making
Managers from an individualistic or a collectivistic col·lec·tiv·ism Â
n.
The principles or system of ownership and control of the means of production and distribution by the
people collectively, usually under the supervision of a government. Â country prefer different levels
of participation in decision-making. Another related cultural dimension is power distance.
Individualistic American managers prefer making decisions individually or deferring to their
supervisors instead of consulting with others. They come from a low power distance culture, and
they value personal equality and believe in decentralisation n. 1. same as decentralization.
Noun 1. decentralisation - the spread of power away from the center to local branches or
governments
decentralization
spreading, spread - act of extending over a wider scope or expanse of space or time  and
empowered subordinates. But the situation in China is a little complicated. Some researchers
propose that decisions are typically participatory in collectivistic-high power distance countries
(Smith et al, 1994). Other researchers think that employees in those countries should readily accept
decisions handed down by their supervisors, and even resist participation in decision-making
because of their unquestioning attitudes toward their supervisors (Graf et al, 1990).
In fact, the second phenomenon described by Graf et al (1990) predominates in Chinese society
while the first opinion is also true to a certain extent. That depends on many factors, the most
important of which is "what kind of decisions are going to be made". Many Chinese managers,
especially those in state-owned enterprises, adopt the nonparticipatory approach to decision-making.
Final decisions are usually made by higher level superiors without consulting their subordinates.
Since some characteristics like high formality formality, in chemistry: see chemical equilibrium;
concentration. , low disclosure and openness as well as centralisation n. 1. same as centralization.
8. Noun 1. centralisation - the act of consolidating power under a central control
centralization
consolidation, integration - the act of combining into an integral whole; "a consolidation of two
corporations"; Â are common in most companies. Chinese employees seldom have the chance to
really participate in the decision-making process. Fortunately, things are getting better after 20
years of reform in China. Participatory decision-making is beginning to be adopted in a number of
modern Chinese companies Chinese owned companies can be defined as enterprises within
mainland China, Hong Kong, Macau and the Republic of China (Taiwan):
List of companies in the People's Republic of China
List of companies in Hong Kong
List of companies in Macau
.
Impact of Cultural Differences on Work-group Characteristics
China is a relational-oriented country in which people place great importance on personal
relationship. Chinese managers may initially focus more effort on building social and interpersonal
in·ter·per·son·al Â
adj.
1. Of or relating to the interactions between individuals: interpersonal skills.
2. Â relations (guanxi) before entering into business or contractual relationship. They would like to
spend time developing and maintaining guanxi during the process of interaction and consider it as a
prerequisite pre·req·ui·site Â
adj.
Required or necessary as a prior condition: Competence is prerequisite to promotion.
n. Â to do business. In contrast, American managers may encourage their group members to learn
from each other, to focus on task rather than on social and interpersonal relations, and to build the
confidence required for superior performance (Sosik and Jung, 2002). They place a much higher
importance on the task or business deal and hope to focus very quickly on specific business matters.
They are achievement oriented, that is "work first". They don't think establishing personal
relationship is necessarily involved in the work.
Living in a collectivism society, the Chinese view people differently as "in-group" and "out-group".
They have much higher confidence in "in-group" members than "out-group" members. But the
passing of time, and the development of guanxi, the out-group members may turn into in-group
members. If American managers want to do business with Chinese managers, they should give their
Chinese partners enough time to know themselves and develop a personal relationship with them.
Only when Chinese managers believe that they can trust their partners and consider them as part of
the in group, will the business deals follow smoothly.
9. In contrast, individualists who exercise short-term thinking place more emphasis on pursuing
hedonistic he·don·ism Â
n.
1. Pursuit of or devotion to pleasure, especially to the pleasures of the senses.
2. Philosophy The ethical doctrine holding that only what is pleasant or has pleasant consequences is
intrinsically good. Â goals and may be unwilling to commit to long-term relationships developed
through group interactions (Shamir, 1990). Many American managers are not patient enough to
build personal relationships with Chinese partners when they invest in China. They cannot
understand how important the relations are to the Chinese and their business.
Impact of Cultural Differences on Motivation Systems
The method of distributing pay to motivate employees may also depend on cultural values (Leung,
1997). As Aguinis (2002) stated, employees can be rewarded according to their performance
(principle of equity), equally (principle of equality), or based on their needs (principle of need). In
general, the equity principle is common in individualistic cultures while the equality principle is
widely used in collectivistic cultures.
According to Triandis (1995), the basic distinction between collectivism and individualism is based
on four universal dimensions. One is that the definition of the self is independent in individualism
and interdependent in·ter·de·pen·dent Â
adj.
Mutually dependent: "Today, the mission of one institution can be accomplished only by recognizing
that it lives in an interdependent world with conflicts and overlapping interests"Â Â in collectivism.
Another is that personal and communal goals are not aligned in individualism but closely aligned in
collectivism. These two may account for the great difference in motivation systems generally
preferred by American companies and Chinese companies, pay for performance in American
companies, and pay equity in Chinese companies.
In American value systems, great emphasis is placed on individual achievement, and they are
expected to achieve success only by their individual efforts. They value competition, achievement
and personal goals, and therefore, desire to have plans that recognise individual contributions. They
generally see success as contingent upon Adj. 1. contingent upon - determined by conditions or
circumstances that follow; "arms sales contingent on the approval of congress"
contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on,
contingent  their own efforts, so they prefer "pay for performance" systems which imply that an
individual is solely responsible for what he has accomplished even though he may have had help
from others. They consider these systems as effective means to motivate employees. The talents and
job performance of employees will be considered first by their superiors for salary increases and
promotion.
Collectivistic cultures emphasise cooperation, interdependence in·ter·de·pen·dent Â
adj.
10. Mutually dependent: "Today, the mission of one institution can be accomplished only by recognizing
that it lives in an interdependent world with conflicts and overlapping interests"Â , and group goals,
and thus prefer plans that support group harmony (Aguinis, 2002). The Chinese believe that the
sense of belonging to the group and devotion to the group are important. They hold the view that
one's success is mainly based on group work, so one cannot claim the reward just for oneself. In that
case, the equality principle is reflected in the motivation system. When setting salaries, Chinese
managers will pay more attention to the working experience and academic qualifications of
employees. In terms of promotion, one's political quality, history, and interpersonal relationship This
article or section may contain original research or unverified claims.
Please help Wikipedia by adding references. See the for details.
This article has been tagged since September 2007. Â are given primary consideration.
Conclusion
By applying Hofstede's and Bond's cultural dimensions, a cultural comparison between America and
China is made. The two countries differ greatly in nearly all the aspects. Based on the cultural
differences, inferences are postulated pos·tu·late Â
tr.v. pos·tu·lat·ed, pos·tu·lat·ing, pos·tu·lates
1. To make claim for; demand.
2. To assume or assert the truth, reality, or necessity of, especially as a basis of an argument.
3. Â on the impact of Sino-American cultural differences on some aspects of management is made in
terms of cooperative strategies, conflict management, decision-making, work-group characteristics,
and motivation systems. There are several findings from this cultural comparison. First, Chinese
managers are more likely to favour cooperative strategies than American managers and American
managers place greater importance on contractual safeguards than Chinese managers. Second,
when faced with conflicts, Chinese managers tend to use indirect forms of influence that involve the
assistance of a third party while Americans prefer to use direct and open forms. Third, Chinese
managers tend to make less risky decisions than American managers. They tend to adopt the
nonparticipatory approach to decision-making. Fourth, the Chinese pay more attention to build
social and interpersonal relations than Americans. Last, the equity principle is common in American
companies while the equality principle is widely used in Chinese companies.
Table 1: Cultural Dimension Scores of United States
and China
Cultural Dimension Scores
Power Individualism Masculinity
Distance
United States 40 91 62
China 80 20 50
11. Cultural Dimension Scores
Uncertainty Long-term
Avoidance Orientation
United States 46 29
China 60 118
Table 2: Cultural Differences Between America and China
Cultural Dimensions USA China
Individualism/Collectivism Strong Strong
Individualism Collectivism
Power Distance Medium Centralised,
tendency toward
democracy
Uncertainty Avoidance Risk-taking Risk-avoiding
Masculinity/Femininity Medium Masculinity Medium
Femininity
Long/short-term Orientation Short-term Long-term
Orientation Orientation
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Pan Fan
Zhang Zigang
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