Bridging the cultural gap between the United States and China

Global business is one of most emerging and popular terms in the current business scenario. This is due to the reason that in the current era of the globalization, majority of the business organizations are either operating or opting to have their business in different countries around the world. This is in order to cope up with the high level of competition in the market and to increase the sales revenue. However, in doing the global business, there are different factors should be considered by the businesses in order to have the maximum effectiveness. One of the major factors is cultural differences. Each of the countries across the world is having different cultures and it is important for the business organizations to adhere to the cultural factors in their host country (Popescu, 2013). In addition, leadership effectiveness also plays an important in the global business due to the fact that characteristics of the global leader are different from a national level leader. The entire concept of doing business in the case of global market is completely different to that of business scenario prior to the globalization.

This report will discuss about the major differences in doing business between the host and home countries by considering the examples of China and the United States. In addition, a prominent global leader will be identified for discussing the key characteristics and how they differ from others. The trend of business in the developed and developing countries will also be discussed along with the critical evaluation of the view of Milton Friedman’s business responsibility.

  From the perspective of the vice president of a MNC from the United States, there are number of problems to be faced in doing business in China. The major difference will be the political system of China, which being a communist type is more closed economy compared to the open economy of the United States. In terms of culture also, there are number of differences to be considered. Hofstede’s cultural dimensions will be used to identify the cultural differences between the two countries. One of the major problems will be in case of power distance as the power distance is huge between the two countries. The ranking of both the countries is denoting that authoritative style is more being followed in China while the hierarchy level is less followed in the United States (Jackson & Wang, 2013). Thus, in bridging the gap between the two countries, the more problem will be to align the home countries employees in following the strict hierarchy in China. On the other hand, Chinese employees will also not be comfortable enough in working without having the authority. Thus, it will be difficult for the managers in managing the employees from both the host and home countries and maintain coordination among them.

Characteristics of a global leader

Another major cultural difference between China and the United States is the extent of individualism in the society. It is identified that China is more collectivist society compared to the individualist society of the United States. Thus, it will be a challenge for the business organizations from the United States to have their operation in China due to the reason that society plays an important role in influencing the preference pattern of the customers in China. Hence, the American firm will have to design their organizational as well as marketing strategies in respect to the social trends in China. In addition, it will also be important for the American firm to focus more on the personal relationships with the employees. This is due to the reason that in the American culture, employees are more self oriented and they are not getting influenced by the external social forces (Ozer, Zheng & Ren, 2014). On the other hand, in the Chinese culture, personal relationships are being given major concentration and thus it will be difficult for the American business organizations to adhere to these changes. In addition, bridging the gap will involve implementing the individualistic approach in the Chinese operation, which will lead to de-motivation of the employees due to the reason that Chinese employees cannot be motivated by their existing approaches.

It is also identified in the Hofstede’s cultural dimensions that China is having high scoring in terms of long term orientation and this is denoting that Chinese society is more vulnerable to rapid changes. This will also be a major challenge for the American business organization due to the reason that the more frequent will be the changes in the social trends and patterns, the more will be the difficulties for the business firm in coping up with it. In bridging the gap, the American firm will have to increase the flexibility in their organizational process, which will be in against the culture of the host country culture. Thus, they will have to initiate different approaches in different countries.

In the current business scenario, one of the most prominent figures is Elon Musk of Tesla. In the recent time, he has gained an immense popularity due to his innovative and out of the box thinking and disrupted the entire automobile industry. One of the major characteristics of the global business leader is deep self awareness (Coccia, 2017). This refers to the skills of having the better understanding about own beliefs and knowledge and trying to adhere to the global standards. In the case of Elon Musk, he is known for his innovative and creative thinking and knowledge and he is also having the ability to influence the opinions of others. There are number of instances, where it is seen that public opinions are being gathered in order to develop products by Tesla such as Tesla semi (Anderson & November, 2013). This is one of the major characteristics of Elon Musk to have the ability of adhering to the global standards and trends with having the deep self-awareness.

Another major characteristic of a global leader is lifelong curiosity. This refers to the desire of learning and attaining new ideas and concepts. In the current business scenario, this is important to order to have the competitiveness of the business among the competition. In the case of Elon Musk, he is known as one of the most innovative and disruptive global personas in the recent time. The continuous desire for attaining new goals and ideas is helping his company Tesla to create disruption in the market and this also resulted in having electric yet practical cars in the market (Setili, 2015). Thus, it can be concluded that this characteristic of the global leader is also getting matched with that of the qualities of Elon Musk. Global leaders should have the ability to think from the global perspectives involving diverse factor considerations. This is important due to the reason that a leader can be termed as global only when he will be able to initiate strategic decisions globally. However, in this case of Elon Musk, this characteristic is not present due to the reason that his business approach is still concentrated in the United States and Canada. Even though, it is identified that Elon Musk is mulling to expand his business in China, Australia and some other countries but still now Tesla is having limited presence. In addition, the product strategy for Elon Musk is also not according to the different customer segments around the world with having very limited product portfolio. Thus, this characteristic of a global leader is not applicable for Elon Musk (Weick & Jain, 2014).

Another major characteristic of a global leader is patience. This is also important due to the reason that in the global business scenario, each of the strategies and decisions to be taken by the leader should be patiently taken after determining the global business trends. In the case of Elon Musk, he is more impatient in taking decisions and such announcement of the mass market electric car Model S without having the proper infrastructure to meet the market demand. This is causing huge waiting period for the customers and growing dissatisfaction. Thus, it is important for Musk to be more patient and in the future global expansion of his business and only then he will be termed as a global leader. Global leader should have a certain aura and charisma to make their presence felt. Elon Musk is one of the most communicative and expressive CEOs in the current time with his extensive presence in the social media platforms. In addition, by representing Tesla from the front, he has created a distinctive brand image of own he is further helping in future branding activities (Mariama-Arthur, 2018). Tesla is having limited presence across the world but the brand image of Elon Musk is well penetrated he is known in each of the countries around the world. Thus, in terms of global influence, Elon Musk can be termed as a global leader with having charismatic persona.

With the advent of the 21^st century environmental and social issues are triggering into a rapid pace. One of the major reason was the reluctance and lack of understanding on behalf of the business organizations are related to the importance of healthy social and environmental situation. Based on this, the laissez faire ideology was no longer the only aspect on which the business organizations put their entire focus. A number of different paradigm has also come around subsequently that connote a more significant part to play for the business organization. Protecting the environment and society is considered to be the major factors in this (Czinkota&Enke, 2014). This practices usher a new phase for the organizations to get accompanied with the importance of protection of environment. In other words, it paves the way for a new paradigm that is identified as sustainability. The term sustainability does not restricted itself to point out the role of the business houses to protect the environment rather it serves the interests of both sides in terms of both the companies as well as the environment. As a matter of fact, it can be stated that the purpose of sustainability measures is to cope with the interests of the organizations with the help to make a better world where people can live healthy and happy.

Globalization has changed the modern scenario where the companies are aiming to entering untapped markets and cultures.  However, in majority of the cases, it is the tendency of the marketers to wrongly identify and interpret a new culture. The marketers in the western country have minimum knowledge about countries in the east and vice versa.  It has been seen, major companies like Tesco failed in China miserably and were forced to form a partnership with the local leaders in the market in order to sustain the losses (Hopkins, 2015). This was due to the lack of understanding of the foreign market and even the attempt of localizations in China failed miserably. The company was forced to partner with China resource enterprise keeping a stake of only 20 percent in the market (Hopkins, 2015).

Similar is the case for Starbucks that failed to capture market in Australia. Starbucks was unable to compete with the local companies in Australia. Starbucks were too aggressive with their strategy and the expansion was too rapid that the consumers were unable to cope up and accustomed with the brand. Australian coffee culture has proved to be challenging for Starbucks and they were unable to tap into the market in Australia which is booming in nature. The company started 90 locations very rapidly but in their first 7 years, they were forced to close 61 of their stores due a loss of $105 million (Turner, 2018).

Walmart, being of the giants of the industry in United States have failed miserably in South Korea and were unable to replicate their original success (Hunt, Watts & Bryant, 2018).  The company did not take into account the preferences of the local people of buying small packages and similar problems caused failure of the company in Germany.

This shows that companies from developed countries are unable to evaluate and take into consideration, the important of the culture in the target market. There are multiple instances where famous brands have not been able to compete and sustain in Asian countries. This is due to the lack of ability of the marketers of to identify key factors and buying behaviour of the consumers. It should be noted that this should be the nature of the modern marketers to consider cultural differences while making an entry into foreign markets.

The major focus of the business have changed in the recent terms and countries like China and India are growing at rapid rate. Globalization has changed the marketing scenario where the untapped markets seemed more lucrative for majority of the investors. The market in developed countries have become highly saturated and there is minimal growth in the market as they have reached their maturity stages. Therefore, it has been difficult for companies to maintain competitive advantage in markets like United Kingdom where there are large number of global company’s competition for increasing the market share. The retail industry in the United Kingdom has become highly saturated where companies are forced to use innovation and creativity to change strategies to increase their short term sales volumes.

On the contrary, markets like India and China are booming and growing at rapid rate. The growth of the economy is very high which is reflected from the foreign direct investment in the country.The foreign direct investment is the countries is the highest and having the largest population in all over the world, the marketers have the opportunity to cater to a larger population. The growth of the economy in countries like China and India have increased the disposable income of the communities where the people are aiming for luxuries so companies using effective strategies will be able to sustain in the these markets (Holmes, 2018).  The infrastructural development, availability of cheap labor and availability of the resources, workforce skills, business value chain development and productivity are the reasons that foreign investors have trust in the businesses in China.  The transaction cost in China is lower when compared to the already grown economies.  The availability of cheap labor having sufficient skills, labor cost and necessary aptitudes are there, which makes the country more attractive.

The political and economic stability of China is also another factor and the regulatory environment of the government is as such that it facilitates foreign investors. Stability means that there will be opportunity and predictability in the market which will provide bright opportunities in the future growth of the businesses. Economic instability results in hyperinflation whichmakesthe market obsolete (Holmes, 2018).  The growth prospects and the size of the country is one of the most endearing features that makes it more trustworthy for business as economy is still developing in this country and it will grow even further due to the unparalleled demographics of the country. The size of the market and the availability of FDI is one of the major reasons that the market is considered to be lucrative.

Similarly, in case of India, the situations are similar to China where the growth of the country is even higher. The amount of FDI investment has increased considerably due to the demographics and the growing nature of the economy.  The cheap labor is one of the most important factor for the investors and the population of the country is younger and 47% of the population are below the age group of 25 which means that the country will remain young for quite some time and it ensures availability of cheap labor form the market (Awasthi, 2017). This is one of the factors in which India has taken over China where the labor has started to increase in the past few years. The size of the population and the availability of the youths employed in the foreign market is one of the major factors responsible for making it more attractive for the foreign investors. It is expected to grow by7% in the next year. The foreign direct investment in the country increased by 17% which estimates to about $25 billion during the first quarter of the financial year (Awasthi, 2017).  The majority of the countries such as United States, United kingdom and Germany are already developed countries and economies where there is labor shortage and the costs are much higher when compared to the markets like India and China that are among the top five economies in the world but still are developing nations with ample opportunity of growing into this market (The Economic Times, 2018).

The psychology of the consumers in the emerging economies is more distinct than in the developed countries. This means that companies will face difficult situations if they are unable to understand the cultural aspects and buying behaviors of the consumers in developing countries. The growth of the market is expected to be optimistic and the foreign marketers are aiming to increase the amount of investment (The Economic Times, 2018). These are the following reasons due to which there has been increase in the trust of among developing countries ad decrease in trust in the developed countries. The developed economies have stabilized and there is limited scope of growth in market like this while on the contrary, the availability of talents and skills at low cost is expected to remain in the developing countries for a longer time which has caused the investors to be  more trustworthy and hopeful of the current situation. Globalization had a key role to play in this as it has reduced the barriers of entry into different markets and free trade has facilitated in availability of markets that have remained untapped for quite a long time.  Moreover, the growth of the economy and the current data points make it more optimistic for the foreign investors to be more positive about the growth of the markets in India and China than in developed economies. The countries like United States, Germany and United Kingdom still remain top markets to entry but it comes off with high risk and high cost of entry in the market.

According to the corporate sustainability theory given by Milton Friedman, business organization is only responsible for maximizing the profit in ethical manner. Thus, the concept social responsibility for the business organizations is not being considered by him. However, in the current business scenario, social responsibility also plays an important role for the business organizations in gaining their competitive advantages (Orlitzky, 2015). According to Servaes and Tamayo (2013), meeting the social responsibility is not mandatory for the business organizations but it can help in gaining added advantages for them. This is due to the reason that social responsible activities of the business are having positive impact on the firm value by enhancing the goodwill among the customers. Thus, the more will be the positive word of mouth in the market, the more will be the market potentiality for the business. On the other hand, it is stated by Flammer (2013) that social responsibility should be treated as a major objective for the business. This is due to the reason that business organizations are maximizing their profits by utilizing the resources from the environment and nature along with the surrounding society. Thus, it is the responsibility of them to pay the value for it by means of corporate social responsibilities. In addition, it is also being stated by the authors that business organizations should have the major two objectives with one being the profit maximization and another one is social responsibility.

Even though these authors have stated about the importance of the social responsibilities, Ioannou and Serafeim (2015) stated that initiation of the corporate social responsibilities will involve added cost for the organizations. This is due to the reason that social responsibilities will involve funding without having any immediate outcome. Thus, as per the authors, it will be not a profitable venture for the business organizations to initiate social responsibilities. In addition, it is also being stated by the authors that initiation of the social responsible activities will lead to the negative impact on the financial performance, which will in turn reduce the profitability for the shareholders. Thus, as per the authors if the economic viability for the business organizations gets reduced then it the initiation of the social activities should not be considered as business objectives.

Cho, Lee and Pfeiffer (2013) stated that it is the responsibility of the government and social establishments to look after the social welfare but business organizations should not indulge in added responsibilities. This is due to the reason that business corporate is not experienced for the social works and they are only oriented towards their economic goal. Thus, it will be more effective if the business organizations are not getting involved in the social welfare activities rather they are focused on their internal matters. It is also being stated by the authors that there are number of instances where it is seen that business organizations are getting indulged in different unethical activities in relation to the social responsibilities. Thus, the core objective is not getting fulfilled even after the involvement of the business organizations.

Therefore, it can be said that Milton’s theory cannot be agreed due to the reason that even though it is causing added cost for the business but it is also having positive outcome in the long term. In addition, business organizations may not initiate social welfare activities as the government, but they should also have some sort of responsibilities for the resources they are using. Hence, business organizations should also have the objective of socially responsible along with the core objective of profit maximization.

Conclusion

This paper concludes that initiation of the concept of the global business have changed the entire scenario of doing business. In this paper, the major cultural problems to be faced by an American firm in doing business in China are being discussed and identified. There are number of problems being identified. Characteristics of Elon Musk are discussed in this paper in respect to the ideal features of an ideal global leader. A few negative and positive points are being identified. In addition, the critical analysis of cultural responsiveness is also being done based on different journals. It is also identified that corporate sustainability theory being given by Milton Friedman is not applicable in the current business scenario. There are number of reasons being discussed in this paper for disagreeing with this theory.

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