Cultural issues in business are a phenomenon born by globalization of the market where companies invest in a foreign country to bring the culture of the host country and the company’s culture into contact. Today, numerous international companies have rushed to invest in abroad to gain additional profits from worldwide customers. The market today is defined by global market that permits sharing of customers worldwide. However, during fierce competition, the market winners become the companies that who understand the Chinese culture.
Cultural human resource management is critic for international companies in such situation. The market globalization has resulted to multinational practices and enterprises for additional profit and opportunities. There is myriad literature on cross-cultural human resource management that guides international companies. Practically, some companies lost managing of cultural human resource which makes them fail.
Summary of the Case Study
In April 2003, top managers and programmers working for a start-up internet B2B company known as Alibaba in the south of Chinaware summoned by the company founder and given a secret mission.
They were told to develop a C2C Internet auction site within three months as a counter attack to the much-celebrated eBay entry into the Chinese market. The new company was named Taobao, to mean treasure hunting. Similarly, the mission was impossible. eBay became the goliath of the e-commerce world, with success recorded in the US and the prowess in the international operations and marketing (Hang, Wenjiang, Xing & Ziwei, 2013). Besides, the company is adequately armed in the pockets and developers.
Meanwhile, Alibaba was just an internet starting company and had less knowledge on international venture investors than the most of the consumers in china and is still struggling to overcome the aftermath of the dot com cash.
By the end of 2006, Taobao announced its possession of 30 million active account users, while it was estimated at 75% of the total C2C user markets in china. Besides, the total number of transactions exceeded 16 million RMB, estimated at $ 2.07. Conversely, eBay china announced in December 2006 that it would negotiate a joint venture with a local company (Hang, Wenjiang, Xing & Ziwei, 2013). Therefore, it transferred its C2C operation to the joint venture in exchange for a 49% stake is the joint company. At the same time, the C2C marketing had experienced explosive growth from 6 million users to 40 million users. The company stakeholders included the highly educated, professional elite and experienced employees, and executives experienced in western education and are hired worldwide. Besides, the stakeholders of Taobao included highly motivated college students who considered each as brothers and sisters in the company and were only promoted within the company. The executives were local graduates and most promoted from the local company.
The case study explores the question why the international internet firms suffered a setback and defeats in trying to grow in the emerging Chinese e-commerce market. Additionally, the essay offers some insights into how multinational firms could compete with the local companies. The case study is based on the two explore rivals in china: eBay and Taobao.
Cultural issues in business management are geared towards the establishment of the business goals through efficient and effective organizing, coordinating, planning, staffing, directing and controlling the resources of the organization. To detail, most business entities differ in a new environment for cultural management. Theoretically, the five culture dimensions clearly tell the similarities and differences in cultures of various countries. According to Professor Geert Hofstede’s research that was conducted on international business management, he concluded four culture dimensions. Individualism IDV, power distance index PDI, uncertainty avoidance index UAI and masculinity MAS, however, he later summarized with the long-term orientation LTO. The research was done to analyze the influence on cultural issues that affect international business.
The Context of the Theory
Power Distance Index
The PDI tells how much the less powerful country’s people respect and accept the uneven power distributed. The societal inequality if followed by the difference in people’s earlier life experiences such as norms and values. The PDI often connects to centralization of power, decision making and leadership in businesses. Companies with high PDI, employees and subordinates rely on their leader and high power distance is formed thorough the habits of obeying and relying of subordinates to the managers (Hang, Wenjiang & Xing 2013) . However, the less powerful employees will make efforts to bring down the gap between them and the manager. International business faces challenges of meeting various cultures with dissimilar power distance culture. The table below represents the analysis of the companies’ power distance index and the related problems that may exist.
low power distance Italian managers high power distance subordinates Chinese problem that may exist people with more and less power can be friends there is no friendship between the low and high power distance people the managers feel the challenge of getting close to employees managers seen as making decisions in consultation with the subordinates subordinates fear to disagree with the managers decision making styles are less good and cannot match people should rely on each other Source: [Hofstede, 2011: 351 – 360]
Referring to Hang, Wenjiang, Xing & Ziwei, (2013) cultures inclined in individualism and collectivism is mainly focused on a person’s values, needs, and serves their individual interest. The relations from other persons are regarded as less significant than oneself. In comparison with individualism, inclined business culture is focused on a combination of social organizations divided into outside and inside groups. Employees hope to be cared for by the people inside the group in exchange of their loyalty and can sacrifice for the group. Consequently, the individualist emphasizes on the importance to themselves in the business, and they hope to be watched by the stakeholders. The individualists, therefore, strive to do better and better and become the best, overvalue their ability and gaining strong upward mobility. The table below represents individualism in international business
definition of the self structure of goals emphasis on norms versus attitudes emphasis on rationality versus relatedness
Italian individualism managers autonomous and interdependent from groups priority to personal goals attitudes supersede norms emphasize on rationality
Chinese subordinates independent with others priority to in-group goals attitude equals to norms emphasize on
problems loss spirit of team work managers are seen not to care of the business objectives managers easily show attitude when norm employees make mistakes due to relationships
Source: [Hofstede, 2011: 351 – 360]
Masculinity shows the difference between the roles of different genders of the society. High masculine society’s men are tough, assertive and focus on material success; however, the women are expected to be tender, modest, and concerned with life quality. In this society, men have a responsibility to earn money for the family and work hard to be successful in the society. Women take care of the housework such as cleaning and cooking. This society is reflected in the market departments and business human resource management (Goddard 2005). The human resource management is responsible for recruiting correct staff and properly positions them so that the marketing docket can take good care of the human resources and make profits for the business. In feminine society, both men and women can go out and look for money for the family.
Masculinity Problems in the Company
high masculine Italian managers high masculine Chinese subordinates problems
life is for work life is for work consensus
achievement motivation achievement motivation consensus
greater value of difference between men and women for the same job greater value of difference between men and women for the same job consensus
Source: [Hofstede, 2011: 351 – 360]
Uncertainty Avoidance Index UAI
The human life is uncertain which leads to anxiety for human. The society has created procedures of avoiding uncertainty, for instance, the use of technology. Different societies have different mechanisms of adapting to uncertainties. In the business, the high uncertain avoidance society worries more on the future and any uncertainty, hence, more ways to defend anxiety. However, low uncertainty avoidance business society has fewer worried on the future and anxieties and develops fewer business rules. The table below represents the uncertainty avoidance for the case company.
high UIA Italian managers low UAI Chinese employees problems ask for more written rules adopt few rules Managers are seen as a timid individual and waste of company’s opportunity. time is money time is free employees are seen as loafers work hard hard work is not virtue employees lack upward mobility Source: [Hofstede, 2011: 351 – 360]
The long-term and short-term orientation describes the difference in values of future. Values inclined in long-term orientation are perseverance and thrift. The values associated with short-term orientation are fulfilling social obligations and respect for traditions faces. The long-term orientations in the case company may be represented as below
Italian bosses high LTO Chinese subordinates problems
cannot understand perseverance stubborn employees
cannot understand sense of shame is rampant unconfident employees
cannot understand relationships dictated by status blind obedience
Source: [Hofstede, 2011: 351 – 360]
Conclusion and Suggested Solutions for Culturally Based Problems in Business
The culture is never defined by developed or developing, inferior or predominant but instead, culture is historically old. It presents the people’s values, norms, thoughts, behaviours and habits. Therefore, international businesses, managers and employees in the foreign and local country must treat different culture right.
This is the principal method of eliminating conflicts of culture for effective cultural business management. It decreases culture conflicts the business may face. Cultural training enables businesses to maintain cohesion and spirit of the company, stable interpersonal relationships and strengthens team spirit (Goddard 2005). This includes local culture training and coming culture training for local managers and subordinates.
A god expatriate provides work geared towards the profitability of the business. The expatriates should be easily adaptable to changing cultural environment. Changing the working environment provides culture shocks. Bad adaptability will cause pain to the employees and cause job dissatisfaction. Changes in environment may also have health complications on the expatriate, hence the need for right selection.
Barnett, J. B. (2008). A study of the second career culture at Send International. Columbia, SC, Columbia International University.
Goddard, J. (2005). Institutional Management and Engagement with the Knowledge Society. Higher Education Management and Policy. 17, 23-44.
Hang, Z., Wenjiang, C., Xing, S., & Ziwei, W.(2013). Taobao vs. eBay: The fight between a local nobody and a global giant. In P. Ramburuth, C. Stranger, & M. Serapio (Eds.), Asia – Pacific Business Cases Dynamics of International Business. Melbourne Cambridge University Press
Hofstede, G. 2001. ‟s Consequences, p. 351-360