Our guest blog this month comes from Csaba Toth MA, MSc, FCMI, Managing Partner of ICQ Consulting and an expert in International Culture.
With the globalisation of world business, China has become an appealing market for foreign investors. The problem of cross-cultural management and communication arise as the cooperation between China and its culturally different Western partners continues to increase at an unprecedented rate.
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 What is the biggest barrier in doing business in the world market, “cultural differences” ranked first!
It can also be observed that most of the failures faced by cross-national companies are caused by neglect of cultural differences which costs the UK £48 billion a year according to UKTI. 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 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. It was reported that the great barriers caused by cultural differences like difficulty of communication, higher potential transaction costs, 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” have occupied the minds of international business people who are planning to enter China.
General Cultural Differences between the West and China
To clarify the differences between China and the West, we will refer to Hofstede’s 5 cultural dimensions. 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 five dimensions: power distance, individualism/ collectivism, masculinity/femininity, uncertainty avoidance and short/long term orientation.
This dimension deals with the fact that all individuals in societies are not equal – it expresses the attitude of the culture towards these inequalities amongst us. Power Distance is defined as the extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally.
At 80 China sits in the higher rankings of PDI – i.e. a society that believes that inequalities amongst people are acceptable. The subordinate-superior relationship tends to be polarized and there is no defense against power abuse by superiors. Individuals are influenced by formal authority and sanctions and are in general optimistic about people’s capacity for leadership and initiative. People should not have aspirations beyond their rank.
The fundamental issue addressed by this dimension is the degree of interdependence a society maintains among its members. It has to do with whether people´s self-image is defined in terms of “I” or “We”. In Individualist societies people are supposed to look after themselves and their direct family only. In Collectivist societies people belong to ‘in groups’ that take care of them in exchange for loyalty.
At a score of 20 China is a highly collectivist culture where people act in the interests of the group and not necessarily of themselves. In-group considerations affect hiring and promotions with closer in-groups (such as family) are getting preferential treatment. Employee commitment to the organization (but not necessarily to the people in the organization) is low. Whereas relationships with colleagues are cooperative for in-groups they are cold or even hostile to out-groups. Personal relationships prevail over task and company.
A high score (Masculine) on this dimension indicates that the society will be driven by competition, achievement and success, with success being defined by the winner / best in field – a value system that starts in school and continues throughout organisational life.
A low score (Feminine) on the dimension means that the dominant values in society are caring for others and quality of life. A Feminine society is one where quality of life is the sign of success and standing out from the crowd is not admirable. The fundamental issue here is what motivates people, wanting to be the best (Masculine) or liking what you do (Feminine).
At 66 China is a Masculine society –success oriented and driven. The need to ensure success can be exemplified by the fact that many Chinese will sacrifice family and leisure priorities to work. Service people (such as hairdressers) will provide services until very late at night. Leisure time is not so important. The migrated farmer workers will leave their families behind in faraway places in order to obtain better work and pay in the cities. Another example is that Chinese students care very much about their exam scores and ranking as this is the main criteria to achieve success or not.
The dimension Uncertainty Avoidance has to do with the way that a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? This ambiguity brings with it anxiety and different cultures have learnt to deal with this anxiety in different ways. The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these is reflected in the score on Uncertainty Avoidance.
At 30 China has a low score on Uncertainty Avoidance. Truth may be relative though in the immediate social circles there is concern for Truth with a capital T and rules (but not necessarily laws) abound. None the less, adherence to laws and rules may be flexible to suit the actual situation and pragmatism is a fact of life. The Chinese are comfortable with ambiguity; the Chinese language is full of ambiguous meanings that can be difficult for Western people to follow. Chinese are adaptable and entrepreneurial
Long Term Orientation
This dimension describes how every society has to maintain some links with its own past while dealing with the challenges of the present and future, and societies prioritise these two existential goals differently. Normative societies. which score low on this dimension, for example, prefer to maintain time-honoured traditions and norms while viewing societal change with suspicion. Those with a culture which scores high, on the other hand, take a more pragmatic approach: they encourage thrift and efforts in modern education as a way to prepare for the future.
China scores 87 in this dimension, which means that it is a very pragmatic culture. In societies with a pragmatic orientation, people believe that truth depends very much on situation, context and time. They show an ability to adapt traditions easily to changed conditions, a strong propensity to save and invest, thriftiness, and perseverance in achieving results.
Written by Csaba Toth, Managing partner of ICQ Consulting
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