Part 1: In this part, the reader would be able to understand certain aspects of the Chinese culture that are necessary for the foreign direct investment in the country.
China is in a big territory located in Eastern Asia and with a population of 1.3 billion people, it means that one-fifth of the world´s population live in China.
Image taken from: Topnews
Inside China there are different ethnic groups: 90% are part of the ethnic Han Chinese, there are also the Tibetans, Mongols, Uighurs, Zhuang, Miao, Yi and many other small groups. In terms of language, the spoken Chinese has a high level of internal diversity and there are several regional groups of Chinese, but the most spoken is Mandarin.
Chinese culture is highly influenced by the Confucianism, which is a religious, intellectual and political tradition from the teachings of Confucius. The teachings are based on the importance of the virtue, the respect for the elders, close family bonds, and more spiritual aspects that shape the Chinese culture.
Chinese culture is important for businesses, because it is a culture that accepts the change; Chinese people realized that the economy is changing and the globalization exists and can be used for companies in order to help the country’s economic growth. Therefore, organizations internal culture is focus on learning and adapting into the globalization by also using all the Confucianism teachings. China major cities as: Shanghai, Beijing, Hong Kong and Guangzhou, among others; have developed important industrial bases, expanding their services and supporting the county´s economic growth.
In the other hand, there are countries as Bangladesh that at first sight can be a good market for direct investment, because the labor costs are lower than in China. But this factor is not enough to receive foreign direct investment, because the country has a culture in which change is difficult to achieve and internally in organizations any change in a process have to be well explained and totally clear for all the employees, which do not feel comfortable with change because they are more traditional.
In conclusion, China is a country with a deep national and organizational culture based on spiritual teachings and a mentality of change that attract high quantities of foreign direct investment, which depends not only on the labor costs but also on management and cultural behavior.
Part 2: According to the text: “Is Guanxi still working, while Chinese MNCs go global? The case of Taiwanese MNCs in the UK” by Chen, I Chun Lisa and Easterby-Smith, Mark. It would be explain the relevance of Guanxi and the existence of Chinese business networks as supporting factors to the internationalization process of Chinese companies.
Guanxi is an essential part of the Chinese social system; it focuses on the good relations based on co-operative behavior between members of the community, which are based on reciprocity and the objective is to build harmony. When two people have a guanxi relation means that they are totally committed to each other. A person in order to develop guanxi relations needs to be responsible of its obligations, be loyal, do favors and have a good reputation; in that way the person will have a good image: “face”, which is another important component of the Chinese social system.
Inside families, with friends and in businesses, guanxi is used in order to avoid conflict and achieve harmony. Guanxi plays an important role on businesses, because it is used that business contacts or new employees are personally known by the boss and are introduced by a person that the boss knows and trusts. Therefore, personal trust is the most important principle that makes guanxi work. But new employees or business contacts need to gain the trust of the boss demonstrating achievements and good results.
Chinese Multinational Companies are moving into Western countries by using co-operating strategies based on personal relationships. For example when Chinese companies invest in South East Asia, Chinese businessmen and top politicians of the host country develop personal relationships. But when Chinese companies enter into Western countries it is less important to develop network resources because institutions that facilitate internationalization exist.
Image taken from: CNN Expansion.
During an internationalization process, Taiwanese managers try to socialize with their customers in order to build a special business relationship based on face-to-face communication, although it is difficult to maintain this guanxi because for example British customers don’t have this tradition. Also, Taiwanese investors in United States create business alliances in order to be more competitive. When a company is looking for a partnership with another company, guanxi relations are also very important. The two major bosses need to build trust and have a co-operative relationship.
During internationalization processes Taiwanese managers trust in (for example) British managers who first need to gain the trust of the Taiwanese superiors, because trust is the base of a good relationship.
In conclusion, guanxi is a key factor in the internationalization of Chinese Multinational companies because for Chinese managers the personal relationships should be based on trust, face and reciprocity in the home and the host country.
BIBLIOGRAPHY:
Chen, I Chun Lisa and Easterby-Smith Mark. 2008. “Is Guanxi still working, while Chinese MNCs go global? The case of Taiwanese MNCs in the UK”. Human Systems Management 27: 131-142.
ChinaToday.com, “culture and tradition”, [Online] Permanent URL: http://www.chinatoday.com/culture/a.htm. Last accessed: March 13, 2010.
CNN Expansion, (May 23, 2007 ), “4 secretos para obtener empleo”, [Online] Permanent URL: http://www.cnnexpansion.com/midinero/4-secretos-para-obtener-empleo/secreto-4-apegate-a-lo-seguro. Last accessed: March 13, 2010.
TopNews, (December 17, 2008 ), “China arrests two for "paint egg" attack on national, party flags” [Online] Permanent URL: http://www.topnews.in/china-arrests-two-paint-egg-attack-national-party-flags-299354. Last accessed: March 13, 2010.
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