Doing Business in the New China - Research Paper Example

 Introduction China has one of the largest economies in the world and always attracts interest from other countries in terms of investment. The country’s cheap labor attracts investment from around the world and most American companies; for example, dell has started assembling its product in China. This also benefits the final consumer who can get products for a much cheaper cost Important Findings Summary The main purpose of this research paper is to find out how China is shaping up the world through its economy and its impact to other countries. Cultural and Religious Differences China is a nation comprising of about 60 ethnic groups and exhibits a great culture through these different nationalities. China’s culture has been shaped up by the three most dominant religions that are Buddhism, Confucianism and Taoism. These philosophies preach almost the same teachings and so the culture is more or less the same in china[WAY98]. Most foreign organizations doing business with or in China make their employees take a cross cultural training program. Chinese are very particular about the way they conduct business and these programs help foreigners to understand the culture prevailing in China. Mostly these cultural programs teach individuals to maintain the proper decorum in China. The Chinese code of conduct includes communicating without pointing fingers at someone. So if, they point out at something they do it with their hands open. Older people are treated with respect and the Chinese believe in maintaining space in between while communication takes place. It is not considered appropriate to communicate by standing at close range[Tin98]. It is very important to greet the person you are either introduced to or meet every day in your daily business routine. A slight bow is much appreciated because that is the way it’s preferred in Confucianism. Even a strong handshake helps to create a bond, and trust to further do business with. To adhere to Guanxi, which means a relationship, is what that is required in China. It refers to a relationship built on trust and if that trust is broken than one might lose that entire relationship. Different organizations have different principles for Guanxi and it must be maintained and followed[Won01]. Legal forms of Owning Business in China The first legal step is to take approval of a company name. To do this, a form has to be downloaded and filled. The form will include the basic questions like the type of business (a sole proprietorship, partnership, joint venture etc) and the amount of capital the company looks to invest. The form together with the company’s license and other required certificates will have to be submitted[Tur00]. The next step involves opening up a bank account in China and deposit the money agreed with the franchise and the authorities. The investor will receive a receipt of deposit as his assurance[Tur00]. The company will then have to apply for a certificate which will be given by the quality and technology bureau after registering for national and local tax. The organization must abide by all the rules and apply for a license within a month[Ala03]. Verification from the police force is must, and the company will have to make a company’s seal with their help. The company will then receive the organizational code certificate once they have paid for the seal[Ala03]. The company will then have to set up a formal business bank account and shift the required money to carry out the business. The company would also have to register itself with a career service provider within a month after setting up the business[Tur00]. China import and exports China mostly exports small and heavy machineries ranging from auto to factory equipments, cotton products, iron and steel equipments and also medical equipments. In the year 2010, the amount of exports was almost worth $1.5 trillion. In the same year, it made imports worth $920 billion. A large chunk of the money went to import oil. Other than oil it also imports chemicals and plastic materials[Fun06]. The subtleties of the culture in China The Chinese culture is not very hard to understand, but like every other culture and religion; it also has its superstitious beliefs. Chinese are not very outgoing. They do not socialize with someone they do not properly know. Social contracts are a very important part of their culture. Drinking is also a very essential part of China, and most business deals are done and celebrated with drinks[RBa99]. Manner Food manners are very important for the Chinese people. They are very formal about the way they conduct and dress up for office, and they also take food manners very seriously especially people of higher status. The sticks have to be rightly placed on the plates, and if they are can never be placed upright. Normally, the Chinese never force anyone to eat, but if they do then it is always good to politely say no[CEl01] One of the practices in China is to take care of the face and a terminology called mianzi is used for it. The face is a concept that most westerners find it hard to comprehend. It simply means to be present for someone in need. For example, if someone is going out and wants someone to take care of his children then he is looking for a favor. If the person refuses to do that favor then he will lose ‘face.’ This term involves trust and faith from someone. In the western world, it might be a little easier to decline ones favor as compared to face in China[CEl01]. Customs It is not advisable to give a green hat to someone in China because it means his wife has been disloyal to him. Daily gifts are exchanged as part of business in this country so one has to be very aware of what he/she gives. Similarly, it is also not advisable to give someone a clock as it indicates that he is waiting for him to die. It is also not advisable to touch someone on his head and sit on a pillow[CEl01]. Communication Communication is the key to business in any part of the world. Misunderstanding in communication results to its break down so it’s very important to know how a society pertaining to a particular culture communicates. The Chinese like to communicate leaving space between them. They do not prefer someone standing directly on the face and speaking to them. Differences in ways of communicating can often be a source of misunderstanding. They do not admire people talking on a heavy and loud tone. Chinese also rely on body language while communicating. They are not very vocal and use emotions to express and understand feelings and what others are trying to tell them[Zin04] Monochromic and Polychronic cultures The Chinese generally like to take a fair amount of time in whatever they do and belong to the polychromic cultures. They take time to know people, built a relationship with them and then socialize. They do not take time into consideration when doing a particular job or completing a task. They do not work on the deadline view and take their time to complete things. They also work on more than one thing at a time. Their culture permits them to alter their plans depending how close they are to that person. For example, an individual has a meeting with some at around 5 then it is normal for the guest to show up one hour later at 6[MSt10]. Starting Point Of Business in China To be successful in this country, a company has to observe the Chinese market and study it. One cannot make conjectures and introduce products in the Chinese market that do not have any demand. The best way to study the market is by looking at the commodities china is currently importing. At the moment, they are importing agricultural products, chemicals and a lot of luxurious goods. The services in demand in China are financial institutions and international trade related transport. Once after accessing the consumer needs in china, a company can launch those products if they have the resources too[MSt10]. Small Scale Businesses in China Over sixty percent of the business belongs to small scale sector in China. They account for about 70% of the exports of the country. The small businesses are the ones that get them the foreign exchange and a positive balance of payments[Fun06]. Aggressive marketing The government of China is very encouraging towards its industries as it wants competition at the highest level. Tough competition brings the best out of producers who know that even a slightest mistake could cost them a large portion of market share. The biggest cement producers in China admitted making a profit of 40% more in 2010 and said that it was because of the lenient government policies towards the domestic industries[WAY98]. Western Atmosphere According to the United Nations, China will be the most attractive country to inject foreign investments till 2015. In 2010, the USA attracted around $140 billion in foreign investments will China attracted $98 billion. Though the government favors domestic industries more, foreign investors are investing in China as the returns are great. According to UNO, the foreign investment will increase to $2 trillion by the end of 2013[Zin04]. Competitive Pricing The products in China are very competitively priced. The main reason behind this is cheap labor. The labor force in China is very cheap because of high population and is mostly willing to work extra time. Other than labor, cost of raw materials like cotton is also low because they are home grown. The price of the final product is more than 50% less than the prices of the products in most American markets[Zin04]. SWOT Analysis Strengths More and more industries are created each year due to the lenient policies of the government and add value to the country’s gross domestic product. Due to its cheap labor, companies prefer to make investments in China which makes it balance of trade more positive by injecting foreign currencies. China has globally become one of the most independent and dominant economies. It is just behind the USA, but it is expected that it will soon overtake them in the near future. Weaknesses Inequality is rising in urban and rural areas of China. Majority of industrial zones are located in the urban side where the pay is more compared to the rural employees. Most rural employees have moved to urban cities making the cities over populated. Over population has also caused unemployment in urban areas. Globally, a lot of companies have shut down their operations as they cannot compete with the prices of Chinese commodities. This has further caused global unemployment in the Western world[WPe10]. Opportunity As there are a lot of resources in China for example, cheap raw materials and labor, there is an opportunity for more organizations to come in the market and compete with the existing ones. The government policies are also very encouraging for local traders to do business. China is currently importing agricultural products but is boosting industries to enter the agricultural and plastic sectors to make investments. Foreign companies are investing heavily; for example, all laptops including Dell, HP, and IBM etc. are being assembled in China[Yin05] Threats China is facing credit threats from within the country. There are some projects that have been stopped because of exceeding the credit limit. Globally it faces competition from Bangladesh that has emerged to be the cheapest supplier of cotton to the Western world in the past 2 years[WPe10]. What do Chinese think about doing business with Americans? Chinese do not like to do business on the phone. They like to do it on a personal basis and face to face. Secondly the Chinese are the kind of people who do not give deadlines, and this is where they disagree with the Americans. They believe that the Americans are very particular about timings that only create pressure. Moreover, the Chinese do work by building relationships and trust. They normally do not like to trust people from a different culture or society[Yin05]. What markets are the most profitable for a US business in China? The most profitable markets for US companies are the ones that are producing luxurious items. The designers clothing line for example, DKNY, branded colognes like Lactose and cosmetics products. These are non electronic commodities which China does not produce. The demand for these items is great in the country as people are making more money and want to switch to a better lifestyle[Yin05]. Is China a developed or third world country when it comes to conducting business? China is a developed country when it comes to business and that is the reason why they are doing so well in the foreign markets. Firstly China has both skilled and unskilled labor. Secondly the government is very supportive to the industries and thirdly they invest a lot in their research and development department and come up with the most inventive products. China has the potential to duplicate products and offer them in the market at half the price[WPe10]. Reference List WAY98: , (Gertmenian, 1998), Tin98: , (Ting-Toomey, 1998), Won01: , (Wong, 2001), Tur00: , (Turner, 2000), Ala03: , (Alan Cohen, 2003), Fun06: , (Fung, 2006), RBa99: , (Barmé, 1999), CEl01: , (Elliott, 2001), Zin04: , (Zinzius, 2004), MSt10: , (Steers, 2010), WPe10: , (Peng, 2010), Yin05: , (Yinya Li, 2005), Read More