China’s rich culture and traditions are famous all over the world. China is a country filled with colors, culture and tradition. It follows collectivism and the family culture whereby giving importance to all those products that provide the family-feel to them. Now, China is famous for its products. Almost every product imaginable is made in China. Various leading worldwide brands are outsourcing production to Chinese manufactures. Where multinationals gain competitive cost advantages as a result of this trade off, China continues to expand its wings across the global market in almost every industry. There are various reasons that account for this. The economic stability in the country, the low cost of labor, team work culture, production efficiency and good infrastructure all account for the high demand of Chinese manufacturer.
Predominantly being an agricultural country, China has progressed radically over the last few decades as a global trader of industrial goods, consumer electronics, food, apparel and various other industries (Hu and Khan, 1997, pp.8). It has stepped into every major global industry and offers threats to foreign companies. The biggest global competitive advantage that China enjoys is the low cost of production. Labor in China is available at a very cheap rate. For this reason the labor market in China has caught attention of manufacturing firms and retailers all over the world. China’s economic growth has risen which is attributable to the growth in the various industries that China has stepped into, rising standard of education that the government has invested tremendously in, growth in domestic businesses as well as multinationals operating in the country (Hu and Khan, 1997, pp.9).
China has been seen to welcome various multinationals every year and the main reason behind this is the favorable market conditions that exist in the country (Hill, 2009, pp.123).
It has been reported by economists and analysts that rise in international trade by a country results in economic growth of that country in return. When a country liberalizes trade and opens up the economy, economic growth results. More specifically, international trade influences the economic growth through the following effects. China’s success in terms of economic growth is attributable to its trade liberation. It has reduced import duties that result in rise in foreign exports that come into the country (Hu and Khan, 1997, pp.8).
When firms trade with other countries they contribute towards overall global competitiveness. Domestic companies make them competitive, induce efficiency in their operational activities and equip themselves through investing in improving human capital and research and development for the global competitiveness (Whitelock, 2002, pp.343).
Globalization has resulted in global integration of business activities that has contributed towards an increase in the number of entrepreneurs in the economy that make use of advancements in technology that increases efficiency and thus, productivity that helps the country in fuelling the economic growth. In a way, global competition invites and increases level of innovation that is required for economic growth (Hill, 2009, pp.316).
China acceded to the WTO in 2001 whereby removing all protectionist trade barriers and encourage free flow of foreign goods (Hu and Khan, 1997, pp.8). China is liberal for trade and not protectionist for exporting its products to other countries and importing products from other countries end with better foreign trade returns that contribute towards economic growth. Developing countries take more protectionist policies for trade than developed nations so as to defend their growing domestic industries from foreign competition and anti-dumping of foreign imports in the country (Kuo and Yang, 2008, pp.599).
Developed countries import apparel, textiles, and other labor intensive goods from developing countries that sell these products to them at cheaper costs. Mostly retailers in UK purchase fiber and cotton from countries like India and Pakistan as it costs them cheaper to purchase these raw materials from developing countries than buying them from their local suppliers. This fuels their total output and finished goods for sale. Developing countries earn export revenues in return that benefits their economy. For developed countries, importing cheap supplies results in more output and lower costs of production and more profits that are used in investment projects that eventually contribute towards economic growth of the country (Hill, 2009, pp.341).
International trade results in generation of excess financial resources for a country, those that are earned from exporting goods to growing markets and importing cheap supplies to support production to further export to earn more revenues (Foreman-Peck, 1995, pp.312). Companies equip themselves via advancements in technology to improve quality in products and introduce innovation in products, improve human capital and invest more in research and development to create demand for their products in foreign markets that could allow them to export more and thus, earn revenues in returns to fuel their economic growth (Kuo and Yang, 2008, pp.602).
Cultures have various underlying forces and elements such as high or low context, individualism or collectivism, low or low uncertainty avoidance, masculinity vs femininity, etc that shape communication, behavior, intentions, attitude, opinion, and to a great extent relative individual performance in the context of the organisational culture (Williamson, 1992, pp.134). The dilemma that comes to the limelight is the extent to which change should be imparted or adaptation should take place to the local culture when a company enters a new market with regard to the organisational culture (Ferraro, 2010, pp.245). To resolve this dilemma, two important viewpoints that fall under Neoliberal context of cultural theory, provide support. The one important concept which should be understood before any argument is that there is no one best answer or one best cultural framework with regard to the level of adaptation, internally or externally. Context is an important determinant of the best type of culture which could be in either form of adaptation or change imposition onto the external environment (Mooij, 2003, pp.311). This context can be for example “customer-centered” or “people centered” approach of the company and also “nationalistic” or “liberal” approach of the company that could be used to determine the level of adaptation needed with the local culture or the level of change needed to be imparted onto the local culture to bring in line with the organisational culture (Ferraro, 2010, pp.125).
Not best, but ‘excellent’ cultures are ideal for organisations that promise high organisational performance as a result of close link with customers, high productivity, and value-driven environment within the organisation, specialisation as well as multi-tasking and flexibility to adapt and respond to changes (Gabriel and Lang, 2006, pp.103). This is evident in the culture that exists in China.
Chinese culture is deeply rooted in hospitability, collectivism and team work and efficiency. These traits translate into a friendly business atmosphere and acceptance from consumers. China for this reason has become a favorite location to do business in the contemporary business environment (Gabriel and Lang, 2006, pp.142). Despite of the fact that a highly masculine and power distant culture exists in the country, the trend is towards team work and barrier free communication. This results in effective coordination between the locals and the foreign brands (Ferraro, 2010, pp. 265). This is a source of production efficiency and higher performance outcomes, that foreign manufactures benefit from.
One of the biggest hurdles that multinationals face in penetrating across emerging markets in developing countries and successfully and effectively reaching all target segments, is the improper infrastructure. Improper infrastructure in the form of lack of built roads that aid in distribution by trucks or trains. In China, however, owing to the technological advancements, the infrastructure is something to thrive on to conduct efficient business. The infrastructure compliments the fast lifestyle of the Chinese business men and consumers (Hu and Khan, 1997, pp.6).
Chinese production output far exceeds the volume produced by global giants hailing from the Western market. This is attributable to the efficiency that manufacturers in China enjoy. This efficiency is achieved because of the economic growth in the country. The country as a whole presents an ideal market for global companies to outsource production. The country is host to favorable market conditions, trade liberation, favorable legal environment, and cheap labor, favorable socio-cultural environment as well as standard infrastructure required for a multinational to access the market and reach the consumers with ease. The market conditions are favorable in China because of the economic growth in the country, rising disposable incomes and technological advancement. Rise in employment has resulted in a rise in disposable income, where improvement in education and infrastructure has resulted in rise in entrepreneurial activity and commercial activity in the country. This has not only invited foreign companies to enter and expand across the country but has improved the domestic business environment tremendously. There is intense rivalry in the country as a result which only evokes a high level of innovation that each firm brings to the market to counter the threat from competition. The result of this comes in the form of a high level of efficiency in production that allows China to produce products for almost every market of the world.