Globalization has made several Chinese companies venture into new markets to fuel their growth. However, it is vital for companies to acknowledge the fact that cultural differences between the domestic country and foreign country would play a critical role in the ultimate success or failure of the company. Venturing into the American market would pose certain challenges to the Chinese company. Therefore, it is vital for the company to be proactive and anticipate the problems beforehand. This would help in the formulation of strategies that would help in solving the problems easily.
China has one of the fastest growing economies in the world. Demand for the country’s products has led to increased prominence of Chinese companies across the globe. Currently, there are many Chinese multinational companies that are market leaders in their industry. However, the globalization of Chinese companies exposes them to certain challenges that they must strive to overcome. Therefore, any Chinese company that intends to venture into the American market should consider the impact of cultural differences between China and the U.S. on its operations.
Hofstede’s Cultural Dimensions Model
Geert Hofstede developed a model that helped in analyzing the cultural differences between different countries. The model is referred to as the Hofstede’s Cultural Dimensions Model. The model details five cultural dimensions. These include individualism, power distance index, masculinity, uncertainty avoidance index, and long-term orientation. Analysis of the model would help in determining the problems that the cultural differences between China and U.S. would pose to a Chinese company that would like to venture into the American market. Below is a comparison of the Hofstede cultural dimension model of the U.S. and China.
Figure 1: cultural comparison between the U.S. and China
According to the Cultural Dimension Model by Hofstede, individualism is the degree of interdependence of members of a society. In an individualistic society, people usually look after only themselves and their own families. On the other hand, individuals in a collectivistic society usually belong to "groups" that take care of its members, who are in turn loyal to the "group".
A high score of on the individualism dimension implies that a society is individualistic. On the other hand, a low score implies that a society is collectivistic. The U.S. has a score of 91 on the individualism dimension. This implies that the U.S. has a highly individualistic culture. On the other hand, China has a score of 20 on the individualism dimension. This implies that the country is highly collectivistic.
Power Distance Index
The power distance index (PDI) dimension acknowledges the fact that all people in the society are not equal. PDI may be simply defined as the degree to which less powerful members of a society accept the unequal distribution of power.
The U.S. has a score of 40 on the PDI dimension. This implies that people in the American culture believe that inequality is not acceptable. Therefore, they always strive to prevent abuse of power by superiors.
On the other hand, the total score of China in terms of PDI dimension was 80. This means that individuals in the Chinese culture tend to believe that it is acceptable to have different levels inequalities.
The Hofstede Cultural Dimension Model argues that masculinity is the preference of a society to strive for achievement, heroism, and assertiveness. Cultures that are portrayed as having a high score on this cultural dimension are masculine. On the other hand, cultures that have a slow score are regarded as feminine.
The U.S. has a score of 62 on the masculinity dimension. This implies that the U.S. is a masculine culture. Americans strive to be the best they can be. On the other hand, China has a score of 66 in the masculinity dimension. This implies that the culture is highly masculine.
Uncertainty Avoidance Index
Uncertainty avoidance index determines the level to which a society tolerates ambiguity. This implies that it details how a society deals with the fact that it is impossible to know the future. The U.S. has score of 46 on the uncertainty avoidance index, which is below the average. This implies that Americans are willing to accept new ideas and try doing things differently. Americans are also more tolerant to the ideas and opinions of other people regardless of whether they agree with the ideas and opinions or not.
Conversely, China has an uncertainty avoidance score of 30. This means that the Chinese people are more comfortable with ambiguity I comparison to the Americans. This has also been highlighted by the Chinese language, where there are several ambiguous meanings that may be difficult for individuals from other parts of the world to follow.
Long Term Orientation
Long term orientation details how the efforts of the society to maintain some links with its past when tackling present and future challenges. Normative societies usually try to maintain their traditions and loathe change. A low long-term orientation score implies that the society is normative. Conversely, pragmatic societies embrace change.
The U.S. has a normative score of 26. This is highlighted by the fact that Americans usually check new information to determine whether it is true. In addition, American companies evaluate their performance on a short term basis. They issue their profit and loss statements quarterly.
On the other hand, China has a very pragmatic culture. It has a score of 87 on the long term orientation dimension. As such, people in the society believe that the truth is dependent on the situation, context, and time. The Chinese can easily adapt to changing situations.
Challenges That Chinese Companies Would Face due to Venturing into the American Market
The American culture is individualistic whereas the Chinese culture is collectivistic. Americans are used to doing business transactions with people they do not know so much. Therefore, Americans do not shy off from approaching their prospective business partners to seek information. The Chinese rely on close relations to do with other parties. Lack of close relations with any partner since the company is new into the market would pose a huge challenge to its ultimate competitiveness.
Differences in communication styles apart from the obvious language barrier would also pose a significant challenge to Chinese businesses that intend to venture into the American market. Americans usually try to close business deals early. On the other hand, the Chinese try to build relations before starting to talk about closing a business deal. The delay in closing business deals would make Chinese companies lose the opportunity to make a good business deal. In addition, the Chinese focus on non-verbal communications cues instead of what is being said. On the other hand, Americans focus on what is being said. Americans also show emotions when making business deals. It is common for Americans to joke when in business meetings. On the other hand, the Chinese show little to no emotions in business meetings. Joking is not acceptable as people may interpret the jokes differently.
The Chinese companies may find it difficult to interact with new business partners if they do not know them well. This is because relationships with various parties are not the major factors that determine the likelihood of success of a company. This may limit the growth opportunities of the companies. In addition, differences in the hiring and promotion decisions would pose certain challenges to the companies.
Differences in power distance index between the U.S. and China would also pose certain challenges to Chinese companies that intend to venture into the American market. It would necessitate Chinese companies that intend to venture into the American market to ensure that they treat their employees fairly to avoid any conflicts. In addition, the company should ensure that managers do not abuse their power as doing so would be detrimental to the ultimate success of the company. The Chinese company should also formulate strategies on how to treat American employees, who usually aspire beyond their rank. The company should ensure that it formulates strategies that would help them advance their careers. Otherwise, it would lose the employees to competitors.
Differences in long-term orientation would pose one of the biggest challenges to the Chinese company. The U.S. has a normative culture. As such, people would not be ready to accept the changes that would be introduced by the Chinese company. As such, they may reject the company's products.
Stiff competition in the American market would also pose to a challenge to Chinese companies in the American market. The Chinese companies may have been used to getting preferential treatment in the domestic market. However, in the American market, they would not get the preferential treatment. This would necessitate them to formulate strategies that would enable them counter the competition.
Chinese companies are usually managed by a small group of managers who have unconditional loyalty to the leadership of the company. The cohesion of the group enables it to make quick decisions. However, it may be difficult for the group to analyze a situation. This would necessitate a Chinese company that intends to venture into the American market to change its leadership style.
Cultural differences have a significant impact on companies that intend to venture into foreign markets. It is vital for companies to analyze the cultural differences. This would enable them formulate strategies that would help in overcoming the challenges posed by the cultural differences. The Hofstede Cultural Dimension Model is one of the most effective tools that organizations may use to determine the cultural differences.