Internal component 2

Case study solution

Submitted to: Submitted By:

Ms.Priyanka Upadhyay Virag Shah
1. Explain the business & cultural relationship between the China & Africa

China's fast development has changed its association with Africa. Industrialization has supported
China's import interest for oil and minerals (that is, press metal, bauxite, nickel, copper), which
Africa can fulfill. China is currently Africa's second biggest exchanging accomplice after U.S; two-
sided exchange with Africa came to $114 billion of every 2008, from $65.9 billion out of 2007. The
legislature's "going worldwide arrangement", which urged Chinese organizations to end up multi-
nationals, has upheld an ascent in China's Foreign Direct Investment (FDI) in Africa to $5.4 billion out
of 2009, up from an irrelevant sum only 10 years back. The present China-Africa relationship could
be portrayed as "products for-framework", in spite of the fact that a move to more extensive
collaboration on advancement is currently clear. In demonstrate hatred for Africa – China
relationship, there has all the earmarks of being society related contrasts which should be
considered for more prominent common comprehension.

The globalization of the world economy, on one hand, has made colossal open doors for worldwide
collaboration among various nations (Levitt, 1983); then again, nonetheless, it has likewise made a
novel arrangement of issues and issues identifying with the powerful overseas organizations with
various societies. It can likewise be watched that a large portion of the disappointments looked by
cross-national organizations are caused by disregard of social contrasts.

With the expanding significance of the China advertise on the planet economy, numerous specialists
hurried into China to investigate business openings. It was accounted for that the considerable
boundaries caused by social contrasts like trouble of correspondence, higher potential exchange
costs, distinctive targets and methods for participation and working strategies have prompted the
disappointment of numerous Sino-outside collaboration ventures. Here are a few issues "on the
most proficient method to comprehend China" and "how to settle business" with Chinese
individuals.

Vulnerability shirking catches how much people in a culture feel undermined by questionable,
indeterminate, or new circumstances. Societies are portrayed as either high or low on vulnerability
shirking (Prime, 1994). While low vulnerability evasion societies lean toward positive reaction to
change and new opportunities, high vulnerability shirking societies incline toward structure and
steady normal.

Last, Africa has a transient introduction while China has a long haul introduction. It must be specified
here that Chinese begins to design today for whatever they need in fifty years ahead. Likewise called
"Confucian dynamism", this last measurement surveys a general public's ability for tolerance and
postponed delight. Long haul situated societies (China and Hong Kong) tend to spare more cash and
show more persistence in harvesting the aftereffects of their activities.
2. How the cultural difference impact on business relationship of different
country?
Impact of culture on international business:

A business cannot simply rely on its current method of conducting business when it decides
to take its business at international level. Every country has a set of different variables
which can be new for an offshore company e.g. rules and regulation, taxation, different
currency, different holiday periods etc. Most important consideration in this regards is the
difference in culture.

In a study on international negotiations between organisations,Korobkin, R. (2000)

maintains that successful negotiations not only require technical proficiency i.e.
communication technique, but also needs to understand the context in which those
negotiations are being done in order to secure profitable contracts.

Business expansion into international territories can be either through internal growth or by
mergers and acquisitions. There can be a cultural mismatch In the case of internal growth
and the decision to set up a base in a new country from scratch because it takes time learn

the culture and adopt its traits. A merger or an acquisition of an already established
company is more beneficial method of growth internationally as the parent company can
gradually learn the norms and beliefs of the target company through the acquired unit
which is being operated according to the local cultural preferences. (Morosini, 1998)

Lee et al. (2011) studied the impact of culture in international organisations in the context
of expansion into newer regions with different prevailing cultures and concluded that it is
vital for any such organisation with the intention to move into new areas that the cultural
differences are understood and mapped in order to bridge the gap between business units
performing in multiple cultures. The study further proves that a multinational company with
presence in many different cultures will have a smaller cultural gap than an organisation
which is operating in a few different cultures; the reason of this abridged gap is the learning
factor from working in different cultures. The results of Lee et al. (2011) study are not
similar to Morisini (1998) as it is shown in the study that multinational organisations prefer

to have new business establishments than acquisitions or mergers.

There can be many similarities in two cultures along with the obvious differences. The levels
of similarities between cultures vary for different countries.According to international
business theory, multinational organisations try to expand into countries which have more
similarities and fewer differences in two cultures so that cultural mismatch can be avoided.
(Bilkey & Tesar, 1977)

It is hard to make an outright assumption that expansion into territories with higher cultural
differences will adversely affect the performance. There is no conclusive evidence in this
regard.In fact some researches have shown positive performance as a result of moving into
countries with greater cultural differences. (Pothukuchi, et al., 2002)

Knowledge of organisational culture is vital for managers and should be considered in the
process of feedback, intrinsic and extrinsic rewards etc. E.g. the relation between level of
pay and job satisfaction is strong in the US but weak in Japan, so an international manager
will find it hard to motivate staff through increments in Japan. (Money & Graham, 1999).

The importance of cultural understanding in successful international companies is reflected

from their marketing strategies which are grounded in the cultures of the target industries.
Alternatively, a company with weak understanding of the target company’s local culture can
commit disastrous mistakes in developing the marketing strategy through designing
advertisements which offend people because of culturally unacceptable content.

Companies which do not completely understand the culture of target region’s culture often
devise marketing strategies which do not attract consumer’s attraction and fail right from
the start. There are many past examples of culturally incompatible marketing content e.g.
using an owl in an advertisement in India where it is thought to be a bad luck symbol and
animals wearing prescription and sun glasses in an advertisement designed for Thailand
market where animals are thought to be lower forms of life. (WinTranslation, 2014)
Greater cultural distance in international companies can have negative effects which hurt

the reputation of company and overall business in the long run. A cultural blunder can result

in loss of customers as they shy away; it can create problems for a company through
pressure groups and general public outrage, attracting negative feedback in the process.
Loss of customers means lesser revenues and eventually lesser profits;people offended by
cultural mistakes committed by companies can file lawsuits which can result in fines or
settlement pay-outs.

In a study about the cultural sensitivity and how it affects business relationship with special
reference to exports (Alteren, G. 2007) it was confirmed that having an adaptive business
model with an open minded approach is crucial for success in the case of operating in
different cultural territories, these traits facilitate flow of information to and from
customers.

The importance of understanding different cultural values and the methods to operate
effectively and efficiently in the bounds of those cultural values can be gauged from a
student survey which resulted in a lot of students demanding more learning material on
different cultures, most students maintained that they only learn about different cultures
and how to cope with the problems of new cultures through student exchange and
internship programs. (Calvert, 2007)

3. Define the cultural difference between China & Africa with reference to
Hofstede Model
China

If we explore the Chinese culture through the lens of the 6-D Model©, we can get a good overview
of the deep drivers of Chinese culture relative to other world cultures.

POWER DISTANCE

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.

INDIVIDUALISM

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.

MASCULINITY

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.

UNCERTAINTY AVOIDANCE

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. At the time of writing the majority (70% -80%) of Chinese businesses tend to be
small to medium sized and family owned.

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.

INDULGENCE

One challenge that confronts humanity, now and in the past, is the degree to which small children
are socialized. Without socialization we do not become “human”. This dimension is defined as the
extent to which people try to control their desires and impulses, based on the way they were raised.
Relatively weak control is called “Indulgence” and relatively strong control is called “Restraint”.
Cultures can, therefore, be described as Indulgent or Restrained.

China is a Restrained society as can be seen in its low score of 24 in this dimension. Societies with a
low score in this dimension have a tendency to cynicism and pessimism. Also, in contrast to
Indulgent societies, Restrained societies do not put much emphasis on leisure time and control the
gratification of their desires. People with this orientation have the perception that their actions are
Restrained by social norms and feel that indulging themselves is somewhat wrong.
AFRICA

If we explore the culture of South Africa through the lens of the 6-D Model©, we can get a good
overview of the deep driving factors of its culture relative to other world cultures.

POWER DISTANCE

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.

South Africa scores 49 on this dimension which means that people to a larger extent accept a
hierarchical order in which everybody has a place and which needs no further justification. Hierarchy
in an organization is seen as reflecting inherent inequalities, centralization is popular, subordinates
expect to be told what to do and the ideal boss is a benevolent autocrat

INDIVIDUALISM

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.

South Africa, with a score of 65 is an Individualist society. This means there is a high preference for a
loosely-knit social framework in which individuals are expected to take care of themselves and their
immediate families only. In Individualist societies offence causes guilt and a loss of self-esteem, the
employer/employee relationship is a contract based on mutual advantage, hiring and promotion
decisions are supposed to be based on merit only, management is the management of individuals.

MASCULINITY

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).

South Africa scores 63 on this dimension and is thus a Masculine society. In Masculine countries
people “live in order to work”, managers are expected to be decisive and assertive, the emphasis is
on equity, competition and performance and conflicts are resolved by fighting them out.

UNCERTAINTY AVOIDANCE
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.

South Africa scores 49 on this dimension and thus has a low preference for avoiding uncertainty.
Low UAI societies maintain a more relaxed attitude in which practice counts more than principles
and deviance from the norm is more easily tolerated. In societies exhibiting low UAI, people believe
there should be no more rules than are necessary and if they are ambiguous or do not work they
should be abandoned or changed. Schedules are flexible, hard work is undertaken when necessary
but not for its own sake, precision and punctuality do not come naturally, innovation is not seen as
threatening.

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.

A low score of 34 on this dimension means that in South Africa the culture is more normative than
pragmatic. People in such societies have a strong concern with establishing the absolute Truth; they
are normative in their thinking. They exhibit great respect for traditions, a relatively small propensity
to save for the future, and a focus on achieving quick results.

INDULGENCE

One challenge that confronts humanity, now and in the past, is the degree to which small children
are socialized. Without socialization we do not become “human”. This dimension is defined as the
extent to which people try to control their desires and impulses, based on the way they were raised.
Relatively weak control is called “Indulgence” and relatively strong control is called “Restraint”.
Cultures can, therefore, be described as Indulgent or Restrained.

With a high score of 63 it is clear that South Africa has a culture of Indulgence. People in societies
classified by a high score in Indulgence generally exhibit a willingness to realise their impulses and
desires with regard to enjoying life and having fun. They possess a positive attitude and have a
tendency towards optimism. In addition, they place a higher degree of importance on leisure time,
act as they please and spend money as they wish.

4. Why it is important to understand culture of other country. Justify with the

example of China & Africa’s business relationship.

v The Importance of Knowing a Foreign Country's Culture When Considering Business

There
Culture influences how people interact with each other. In the business world, culture guides
decision-making, behavior, thinking patterns and values. It is, notes Michigan State University,
one of the least understood aspects of international commerce. Each country has distinguishing
national and regional cultural characteristics. The success of any prospective foreign business
partnership hinges on awareness of and respect for those distinctions.

• Business Relationships
Although culture encompasses more than etiquette, manners assume heightened importance on
the international stage. Handshake practices, expected dress standards and acceptable physical
distance during conversation require sensitivity to avoid misunderstandings. Attitudes toward
humor, punctuality and gestures, when unknown, can create deal-threatening confusion.
Differences in forms of address and name order can lead to unintended insults from greeting
people incorrectly, notes business etiquette author Terri Morrison in a USA Today article. Small-
business owners and executives who learn the business etiquette of a foreign country strengthen
their odds for success.

• Marketing Implications
Being well-versed in a country's culture goes a long way in preventing expensive marketing
errors. Consumption patterns and buyer behavior reflect cultural influences and attitudes that
differ country by country. They must be considered when interpreting market research used to
make decisions on design, color, packaging, distribution and promotion. The act of naming a
product, service or company could, if language implications are ignored, derail a promising
business venture.

• Negotiations
Negotiating challenges a business person's communication skills at home. The process becomes
more complex when dealing with parties from a different country. Developing trust requires
cross-cultural understanding helped by some ability to speak the language. Risk-taking and
decision-making customs that steer negotiations relate to status and, at times, religious beliefs.
Familiarity with a foreign colleague's cultural background enables a negotiator to understand how
he arrives at a conclusion and what he considers to be important. The negotiator can avoid
misunderstandings by learning how people in a country use body language, time and protocol to
communicate unspoken messages.

• Gifts
The practice of gift-giving varies from country to country. Some cultures, such as Japan, place
significance on exchanging gifts. Many western European cultures such as Belgium and
Germany, find it unnecessary. Some view gift-giving as a form of bribery to be avoided. Gift-
giving protocol must be understood to avoid cultural mistakes, such as arriving empty-handed or
presenting a gift in front of others when the cultural norm calls for a private exchange. Executives
can enhance their business-building diplomacy by knowing the importance of using the correct
color of wrapping paper, the proper hand for presentation and which products make
unacceptable gifts because of religious beliefs.
China-Africa Culture & Religion

It is evident that Chinese who live and own businesses in Africa are often misunderstood
simply due to the fact that there are few mechanisms in place to ensure that Africans have a
proper understanding of their Chinese counterparts and the reasons why they are in Africa
in the first place. Many Chinese people who are employed in Africa are highly skilled and
have academic degrees from institutions of higher learning and yet most are working in low
skilled jobs or running their own businesses. In general, China has highly developed human
capital yet they do not have the necessary know-how that would allow them to easily
integrate into African society. Chinese thus have to work harder when they are in a foreign
country in order to better understand their new surroundings. Chinese are often perceived
as extremely hard working when in fact they are merely trying to get up to speed with the
way of doing business in the country in which they are operating.

It is also challenging for the Chinese to employ local labour in African countries mainly due
to the language barrier. The fact that the locals have families and religious practices, while
the Chinese working in Africa do not have any religious obligations or often don’t have
family members with them, poses further challenges. These factors contribute to Chinese
often being perceived as racist and prejudiced.

One of the ways in which the Chinese could be more easily integrated into African society
would be if greater efforts were made by both Africans and Chinese to understand their
cultural differences and to take these differences into consideration. This has been a major
stumbling block thus far as there has not been a formal mechanism or platform under which
this integration exercise can occur.

Patronizing approaches and attitudes should be avoided on both sides. The Chinese - African
relationship should instead be based on reciprocity in order for it to be sustainable and
mutually beneficial.