In business management, the cultural forces affecting business decision making, people management, and marketing, operational or even strategic formulation process are something cannot be ignored by careful businessmen. This is because, in different culture, the best practices or business system to be applied in the different cultural environment can be different. As argued by Hofstede (1993), as business management is ultimately about managing people, the business practices of philosophies that are successful in a certain nation may no longer be relevant in the other countries, where people simply have different social cultural background, beliefs, attitudes or lifestyles. Thus, it is very important, particularly for multinational corporations to understand the cultural differences between nations before they venture into a new marketplace with different culture.
In this paper, the business culture of China and the United States will be discussed. Both the countries are chosen as it is widely argued by the researchers or in literature that both of the countries are bound to be the huge economy power in the world in the future. Thus, it is worth to understand in-depth on the cultures of United States as well as China, as such understandings will enable business practitioners or strategists to formulate better and more viable business strategies or techniques in these countries. Besides, a better understanding on how the culture of these nations differ can also enhance our understandings if the best practices or the many business theories developed in the United States can be transferred to be used in countries such as China.
China, or more officially known as the People’s Republic of China, is the most populous country in the world. Today, it has more than 1.3 billion of population in the nation. There are many types of languages used in the countries, whereby the most common language used include standard Chinese, Mandrin, Cantonese and Wu. The currency of China is called Yuan (CNY), or is more commonly known as Renminbi (RMB). The capital of the nation is located in Beijing. Today, China is a fast growing nation, with the fastest growing economy in the recent years/ decades (Morrison, 2006). In the recent decades, it can be seen that the economic power as well as the political influences of China has been increasing, to the extent of challenging the superior economic or political power of United States. In the issues about Chinese culture, it is a country famous for its rich culture and ceremonies. In fact, it is very hard to characterized Chinese culture as single uniform culture, whereby there are actually many types of races, people of different religions and cultural settings living in the country. However, whenever the researchers referring to the Chinese culture, they are predominantly referring to the Han people, which comprise more than 80% of the population of China.
United States of America is a long super power, in terms of politics, economy and culture in the world. Currently, the country approximately has a population of 300 million people. The United States of America is also a country with rich culture (whereby a lot of subculture exists in the nation in different part of the nation), whereby many different people with various religious beliefs, culture, languages and lifestyles are staying in the nation. Among the most famously spoken language in the country include English, Spanish, and other Asian languages (such as Japanese, Korean or Chinese). Generally speaking, the country is rich in culture due to lots of immigrants from other nation to the country. Today, the United States is still the strongest country in terms of economy achievement, with the highest and Gross Domestic Products (GDP). The United States is a country famous for equality and democracy. Due to the rise of the United States as the world superpower in the last few decades, people around the world are affected the cultural beliefs and business philosophies bring forward by the multinational corporations from the nation.
In order to understand the culture of a particular civilization or people, many frameworks have been developed. One of the famously discussed and widely used framework to understand how culture may differ between countries are the cultural dimensions developed by Hofstede. According to Hofstede (1993), culture can be separated into four dimensions, namely: (a) power distance, (b) individualism or collectivism, (c) masculinity or femininity, and (d) high or low uncertainty avoidance. From another perspectives however, Hall (1978) add another dimensions to better characterize the differences of culture between countries or nation, which is the low or high context culture. In the following section, the business culture of China and United States will be discussed in accordance to these five dimensions. Apart from that, whenever relevant, the other differences, besides from these five dimensions, will also be discussed whenever relevant.
Low or high power distance. In this dimension, the power distance means how are the relationships between younger or elder people, or between the boss and the subordinates. In this dimension, a high power distance means that the subordinates or the younger people will keep a distance from the perceived more powerful boss or elder people. For this, it is found that people in China (as well as people in many part of the eastern culture) tend to have high power distance in the society. For example, the younger people tend to respect and obey the command and instructions of the elder people; or the employees will respect and more incline to follow the employers’ directions blindly. Generally speaking, the subordinates is less likely to question or challenge the decision making process or the instruction of the boss, as they perceive that they have no power to do so (Morrison, 2006). They perceive that the boss has the rights and power to do things in accordance to their preferences or desires. In contrast, people in United States tend to have lower power distance. This can be observed whereby people can more easily and friendly when talking to the boss. They are more likely to challenge the decisions of their boss, when they think they have better decisions or ideas. Open door policy in organization is not something uncommon.
Individualism or collectivism. One of the great differences between the China cultures to that of the business culture in United States is the issue of collectivism versus individualism. In China, the society is largely collective in nature. In workplace, people see team work as important, and work together in a team for team performance. In the workplace, people place high importance on harmonious relationships with each other. Conflicts will be avoided as long as it is possible to do so. In fact, this can be seen by the special “guanxi” culture in China, whereby business negotiation or deals are easier with people that have friendship relationships to the business decision makers (Morrison, 2006). In contrast, people in United States tend to place more importance on individual performance, whereby they will place less emphasize on team work on group performance. Employees can be motivated by individual or personal rewards, and achievements are recognized at the individual level. In order to achieve the missions or goals stated, people are tend to engage in conflicts with others, in order to solve the problems or to urge others towards completion of the goals. Overall, in the individualism oriented culture, people place more importance on achievement and goals, rather than on feelings and human relationships with each other.
Masculinity or femininity. In both the United States as well as China, people are both exhibiting masculinity culture. Thus, there is nothing much different from such cultural dimension. While from this cultural dimension, the women power and influence in the society is not the ideas related to this dimensions, it is worth to mention that women do have different position and power in business settings. In the United States, women have more power and position or roles to play, while the women in China have less.
High or low uncertainty avoidance. Both if the business culture of China and United States has low uncertainty avoidance, whereby it can be seen that people from these countries embrace changes. For this, it can be seen that businesses in the United States are creative, and indeed often are the leader of creative works or innovations (i.e., good evidence on the low uncertainty avoidance culture). In the similar way, the people in China have no problem embracing change, as they are often motivated to improve themselves and to move forward for better life in the future. Change is not perceived as something challenging or negative.
Low or high context culture. From another perspective, business culture can be characterized by the communication styles between the US and China culture. In the low context culture, the communication process can be reasonably relied on the words or the explicit messages communicated between people. In contrast, in the high context culture, people tend not to communicate all messages through words. Instead, other factors should be considered in communication, ranging from the situation of the communication process, the body languages, and even the implicit meanings of reactions from the counterparty (Li et. al., 2007). The people in United States tend to have a low context value, as all are communicated through words explicitly. This is because people in United States tend to be more task-oriented, as make everything very clear to each other. In contrast, people in China tend to have high context culture, whereby a lot of messages are not communicated verbally. The Chinese tend not to explicitly voice up their expectations or desires (Morrison, 2006), as doing so may sometimes be considered as rude. This is very difference with the situation in the United States, whereby even conflicts are dealt with in a very direct and open manner. The American will not hesitate to reject the demands of others, and they are straighter to the point in the communication process. This is different in China, whereby people tend not to say everything out explicitly, to ‘give face’ to the other in the communication process.
A saving versus the spending society. As China is still a developing country, the people tend to be thriftier while the people in United States tend to be more wasteful or willing to spent money. This can be seen as people in China tend to save higher proportion of their income compared on those people in the west. This can be seen as the Chinese consumers are generally more thrifty, and spend less then they earn. This is particularly true for the older generation of the Chinese consumers (Luo, 2009). In contrast, the people in the United States are more generous in spending (which is thereby giving rise to the consumerism society). Nonetheless, there are also some evidences that the younger generation of the Chinese consumers tend to have different habits, which is more likely to spend more with lesser savings in the recent years. From another perspective, there are also researchers the spending pattern of the consumers in both of the countries are due to the culture of the Chinese of being more conservative, while the people in United States being more aggressive. Such a view can be validated from the differences between how the Chinese communicate with each other. The Chinese generally like to hide their strong points of their talents when talking or interacting with other people (Walker et. al., 2003). This is because they believe doing so will benefits them in the long run, and they do think that to inform others on their talents is an act of rude and ego. In contrast, the people from United States are more willing to share their best talents, and to promote themselves in the interaction process with others.
Long term orientation goals vs. short term performance goals. It is widely known by academicians and practitioners that the time orientation between the Chinese and the American is different. The Chinese usually have very long term orientation. For example, in planning for business strategies, they are likely to take into account of the very long term possibilities and scenario into account (Lin, 2006). Indeed, in terms of family planning, the Chinese are also showing such culture, whereby they are more likely to plan for their children or grandchildren in their decision making process. In contrast, the American tend to have shorter time orientation, whereby they tend to plan for short terms goals and performances.
In the previous section, the discussions are mainly concentrated on the cultural differences between China and United States. However, a wide volume of the literature also focus on discussing the business practices do and don’t in both these countries. From these literature, it is discussed the possible best practices of doing business in China and United State. All these are very valuable information to be learned and aware by managers. In this section, the best and viable business practices in China as well as United States will be discussed in the following paragraphs, respectively. Just for the information of the reader, many of the business practices are derived in accordance to the cultural differences and discussion for China and United States as presented above.
Best Business Practices in United States. In United States, it is said that it is very important to begin/ end the business negotiation or meeting process with a firm handshake. This is important to demonstrate a person sincerity as well as interest or respect to the other person. Besides, the business culture of United States used to view exchanging of business cards as important. The American is said to view the business cards as potential resource for future information (Matveev et. al., 2004). Besides, it is also mentioned that in most of the business discussion or negotiation process, it is perceived that the ultimate objective of the negotiation process is to reach a signed contract. In contrast to many of the East Asia countries, developing personal relationships are not something highly emphasized on. Thus, meeting can be rather formal, and time is spent by both parties to secure the best possible deal. Very often, the American perceives the negotiation process as a way for problem solving for mutual benefits. Besides, due to the individualism culture, personal competence as well as professionalism is crucial element in workplace. The employers as well as the employees place great importance on work ethics, and managers’ help are sought after only when the workers really need it.
Best Business Practices in China. In China, it is very rare that Chinese businessmen will deal with people that they don’t know or they do not trust. Trustworthiness as well as personal relationships is a must in the business dealing. Thus, before anything serious about business can be discussed, it is crucial to make someone presence comfortable, or to firstly strengthen the personal relationships with each other to ensure the ‘guanxi’ elements present before the negotiation process take place. Besides, it is found that the Chinese valued highly on long term relationships and mutual trust (Browaeys et. al., 2008), more than if any deals are secured or contracts are signed in the meeting. Hurried transactions of discussion for the sake of closing deal may not be relevant or preferred by the Chinese. In fact, the initial meeting should be schedule to know each other very well, and to build rapport, rather than an event for business discussion or negotiation. People may engage in small talk as well as understanding the personal matters of the counterpart, rather than talking anything serious about business (Chitakornkijsil, 2010). Besides, it is also important to note that the Chinese are very status conscious. Besides, it is important also to realize that the Chinese to have a low context culture. They may not directly reject a deal or to critique on other in order to ensure harmonious relationships between the people (Lin, 2006). Thus, it is often that the Chinese will exhibit warm relationships to foreigners in business meeting or negotiations. Such warm reactions and courteous greeting from the Chinese counterpart may not indicate positive outcome, nor does is means ‘yes, yes’ in the negotiation process. In contrast, in term of business negotiation, humbleness as well as politeness is more important factors leading to business success (Sivadas, 1998).
Some words of caution. In is worth to mention that all these recommendation serve only the generalized statements only. In fact, they are researches showing that the cultures of the Chinese are being affected by the culture of the west, which predominantly comes from the United States. Thus, it is not unreasonable to expect that in certain times in the future, the cultures of the Chinese and the American can become more similar, as people learn from each others in the interaction process. Then, in many instances, generalization on the culture of people from these countries may not work, because certain people may exhibit different behaviors and culture (Walker et. al., 2003). It is important to note that people from the countries are composed of many groups of ethnics as well as religions. There are many subculture exists within the nations, whereby these sub-cultures may differ significantly from those of the main culture of the nation as it is discussed in-depth in section above.
As we can see above, the culture of China and United States differ significantly, although in certain dimensions, both the nations share certain similar culture. However, in many of the instances, the cultural differences between the countries are so opposing and contrasting, whereby such a situation can cause cultural shocks or conflicts between people from these countries. As we have discussed above, the cultural differences can be discussed from several dimensions. For example, the Hofstede cultural dimensions framework is used for discussion purposes in this paper. Nonetheless, there are also other dimensions that is useful to characterize how the culture in these different nation differ from each other.
Due to the cultural differences, it can be seen how difficult to transfer the business practices and system from the United States to China. Indeed, the best practices in United States may not longer a good business practices in China, although there are also some evidences that when the world is becoming more integrated (Schneider et. al., 2003), the culture between people are getting more similar as people learn up the good points of the culture of other. Nevertheless, as it is not hard to see how multinational corporations from United States faced with many troubles and problems in their business expansion to China (Sumantra et. al., 2002), it is reasonable to expect that the cultural differences are still prevalent and impactful against the business operations (wither from marketing, human resources management, financial management or operational management perspectives).
Thus, manager shall take the cultural differences into considerations, for effective cross cultural management in the different countries (Awang et. al., 2010). Perhaps the best way is for the businesses in United States to adapt or change their business practices accordingly to fit the China local cultural or social setting for a more relevant business system (Torres, 2011). This is definitely not something easy, but once the business organization able to discover the way to do business in a way that fit the Chinese culture; there are very huge profits potential to be reaped. After, China is the next coming economic superpower in the future, and inability to tap into the market may spell disaster for an organization, if the competitors successfully penetrate the Chinese market and use that advantage against to other industry peers.
Awang, F., & Roach-Duncan, J. (2010). Cultural differences and their effects on conflict resolution in business settings. Cultural Differences and Conflict Resolution, 27-26.
Browaeys, M-J. and Price, R. (2008) . Understanding Cross-cultural Management (1st Ed.).Pearson.
Canfei He. 2003. Entry mode and location of foreign manufacturing enterprises in China. Eurasian Geography and Economics 44, no. 6, (September 1): 443-461.
Chitakornkijsil, P. (2010). NEGOTIATING WITH THE CHINESE AND EMERGING DOMESTIC COMPETITION. International Journal of Organizational Innovation (Online), 3(2), 129-139.
Daniels, J.D., Radebaugh, L.H., & Sullivan, D. (2008). International business: Environments and operations (12th ed.). Upper Saddle River: Pearson Prentice Hall.
Dicken, P. (2007). Global shift: Mapping the changing contours of the world economy (5th ed.). London: SAGE Publications.
Fletcher, R. & Brown, L. (2005) International Marketing: An Asia-Pacific Perspective (3rd Ed.), Prentice Hall Australia
Griffin, R.W., & Pustay, M.W. (2007). International business: A managerial perspective (5th ed.). New Jersey: Pearson Education.
Hofstede, G. (1993). Cultural constraints in management theories. The Executive, 7(1), 81-93.
Johnson, G., Scholes, K., & Whittington, R. (2008). Exploring corporate strategy: Text & Cases (8th ed.). Harlow: Prentice Hall.
Lasserre, P. (2003). Global strategic management, New York: Palgrave Macmillan.
Li, X., and Putterill, M. (2007). Strategy implications of business culture differences between Japan and China. Business Strategy Series, 8(2), 148-154.
Lin, T. W. (2006). Lessons from China. Strategic Finance, 88(4), 48-55.
Luo, Y. (2009). Analysis of Culture and Buyer Behavior in Chinese Market. Asian Culture and History, 1(1), 25-30.
Matveev, A. V., & Nelson, P. E. (2004). Cross cultural communication competence and multicultural team performance. International Journal of Cross Cultural Management, 4(2), 253-270.
Mellahi, K., Frynas, J.G., & Finlay, P. (2005). Global strategic management, Oxford: Oxford University Press.
Morrison, J. (2006). The international business environment: Global and local marketplaces in a changing world (2nd ed.). Basingstoke: Palgrave Macmillan.
Schneider, S. & Barsoux, Jean-Louis. (2003). Managing across cultures (2nd ed.). Harlow: Financial Times Prentice Hall.
Sivadas, E. (1998, July). Watching Chinese marketing, consumer behavior. Marketing News, 32(15), 10.
Sumantra, G. & Bartlett, C., (2002). Managing across borders: The transnational solution (2nd ed.). Boston, Mass.: Harvard Business School Press.
Torres, J. (2011). Market Strategies, Analysis, Competitive Intelligence and Challenges in Entering the Chinese Market. Journal of American Academy of Business, Cambridge, 16(2), 39-46.
Walker, D., Walker, T. and Schmitz, J. (2003). The Guide to Cross-Cultural Success: Doing Business Internationally. U.S.A.: McGraw-Hill