Management of Organizations

Group Project

Prepared by:
R.D EMBULDENIYA - 09153063
N.K JAYASINGHA - 09151486
M. MUSHAF MUNAS - 09152113
H.R NUGAWELA - 09152687
M.S.C. PERERA - 09154558
L. RANASINGHE - 09153012
W.R.D. Fernando

Supervised By
Prof. Aidan Kelly

National Institute of Business Management

Colombo 07

29th August 2010

Acknowledgement

We would like to take this great opportunity to express our sincere gratitude to our
beloved lecturer, Prof. Aidan Kelly who gave his continuous support and guidance in
preparation of this assignment. Without his valuable guidance, all our efforts could have been to
no avail.

We owe quite a lot to our families who provided us the chance to fulfil our career
objectives and for the support throughout our studies. We would like to express our sincere
gratitude to our parents for helping us throughout the assignment. We would like to dedicate this
Group assignment to them as an indication of their significance in this study as well as in our
lives.

Besides, we would like to thank a number of friends who had always been around to
support us morally.

TABLE OF CONTENTS

2
Acknowledgement......................................................................................................2

TABLE OF CONTENTS...........................................................................................2

Executive Summary...................................................................................................3

Introduction................................................................................................................4

Critical Analysis for Social Factors............................................................................................9

Economic Aspect........................................................................................................9

Critical Analysis of Economical Factors...................................................................................16

Political Aspect.........................................................................................................17

Critical Analysis for Technological factors..............................................................................23

3. SWOT analysis of China......................................................................................30

Conclusion.................................................................................................................32

Executive Summary

We have been given the opportunity to do an assignment for the module which requires
examining a culture of a particular country in detail and understanding how those factors will
affect the management of organizations. We have chosen China, as it expands their business
operations in international level, radically. We have identified and understood how the cultural
environmental aspects influence the organizational context, and any other cultural dimensions.

3
 In this report we will be circumspectly examining the Cultural aspects through the help
of some management tools, to identify the possible language, religion, markets, norms and other
cultural dimensions of China. This will assist the understanding of various aspects in the
Chinese culture which currently we have very little knowledge of. In this assignment we will be
focusing on to following areas, which provides a detailed analysis of cultural aspects of China.
• Carry out a Cultural Environmental Analysis of china.

• Risk analysis and critical evaluation of the aspects

• Hofstede’s Model Analysis

• SWOT analysis.

• Selecting an appropriate mode of entry to china.

• Selecting the best industries to enter to china.

Introduction

Every country in this world has its own unique culture that has developed through the
centuries, making the backbone of their lifestyle. With the effects of globalization taking its hold
on business enterprises worldwide, the level of interaction between these various cultures has
become very high. Although an average human being is familiar with only one or two cultures,
it has become necessary for them to adapt and experience several other cultures in day to day
activities. It is absolutely necessary to respect other cultures and their lifestyles which will also
give you a definite, unprecedented advantage when it comes to building a good, strong
relationship.

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 There are countless factors that affect the culture of a country and also a countless
number of factors that are affected by the culture. So when looking to understand the culture of a
particular country, considering these factors would be of extreme help.

The country we have selected for this study of culture is China, which is one of the most
rapidly developing economies in the world. It is a country which boasts of a very colourful and
diverse culture, rich with traditions which have developed through the ages. This makes the
study really interesting and enjoyable. So, we will be looking at various aspects to get a
comprehensive idea of the Chinese culture.

Social Aspect

Consumer attitudes and opinions

In the middle of the economic crisis China has shown a higher elasticity in its economy.
Chinese are less likely to believe that their lifestyle has changed during this economic crisis, but
27% of their population considers that their life style has been impacted by the financial crisis.
(Bharat Book bureau, 2009)

67% of consumers in china look for higher quality. Products have higher sales in their
grocery shopping. This is an indication of the emerging attitude in consumer culture, and the
demand for high quality and strong brand image products. (Bharat Book bureau, 2009)

5
Law changes affecting social factors

China’s first labour law was passed in July 5th 1994 by the National People’s Congress.
These laws shaped labour relations of the china’s ongoing economy; these laws have an
impact on all the aspects of the employment relationship and the workplace. (Bayar.edu,
2009). Today these legislative trends and systems have a greater social impact as the legal
network of the country affect the lives of the people.

Over the past five years NCP and its Standing committee have passed laws concerned to
individual income taxes, traffic safety and personal property, all of which creates a huge debate
among the public and lawmakers. (China. Embassy.org 2009)

Ethical issues

China wants to become the driver in the field of ethics international business industry. In
fact they can be the driver of ethics as china is emerging as the economic powerhouse of the
world. Chinese do not want to adapt to the western culture. When making strategy of ethics it
should have less influence on the western culture, it should focus on the job of the Chinese.
However Chinese will never accept the external code of ethics, unless it is developed by them.

Schulman. M. (2008).

Demographics

Population - 1,338,612,968 (July 2009 est.)

Age structure - 0-14 years: 20.1%

15-64 years: 71.9%
65 years and over: 8% (2008 est.)

Population growth rate - 0.629% (2008 est.)

Birth rate - 13.71 births/1,000 population (2008 est.)

6
Death rate - 7.03 deaths/1,000 population (2008 est.)

Net migration rate - 0.39 migrant(s)/1,000 population (2008 est.)

Ethnic groups - Han Chinese 91.5%, Zhan, Manchu, Hue, Miao, Uyghur, Tulia, Yi, Mongol,
Tibetan, Buy, Dong, Yao, Korean, and other nationalities 8.5% (2000 census)

Religions - Daoism (Taoist), Buddhist, Christian 3%-4%, Muslim 1%-2%

Note: officially atheist (2002 est.)

Languages - Standard Chinese or Mandarin (Putonghua, based on the Beijing dialect), Yue
(Cantonese), Wu (Shanghainese), Minbei (Fuzhou), Minnan (Hokkien-Taiwanese), Xiang, Gan,
Hakka dialects, minority languages.

(CIA, 2008)

Population shifts

China’s population has increased more than any other country in the world. The
condition of China is further complicated by the low level of education and fast development in
urban areas and migration.

Care giving model of families are changing, and with the government restriction on the
one child per family will control the population growth to some extent. (APPR International,
2009)

Education

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 In china, all the students have to complete the primary school program and the junior
school program. Those who have successfully completed the above education can go to the
Higher education. Students must pass an entrance examination to enter to senior middle
school or middle- level technical school. After that the students have to go through the
national college entrance examination for admission to university.

Literacy definition: age 15 and over can read and write

total population: 90.9% - male: 95.1%, female: 86.5% (2000 census)

(CIA, 2009)

Living standards

For the past five years the living standards of china has increased drastically. 55 million
urban jobs have been created, Urban per capita annual disposable income was 7,703 Yuan in
2002 while it increased to 13,786 Yuan in 2007 (China. Embassy.org 2009). The Rural per
capita annual net income also increased from 2,476 Yuan to 4,140 in year 2007. The poverty
was drastically reduced in china by assuring social safety for both rural and urban areas each
year. (ibid)
Leisure activities

The Chinese government, Chinese society and the chances education system have
realized the importance of leisure activities for a healthier generation of youth for 12 years now.
They do various funds and investments to strengthen their leisure time activities constantly.
The new generation has a more sophisticated understanding of the leisure time activities; they
participate in more activities today. (china youth federation, 2009)

Management style
(WorldBusinessculture.com, 2009)
In china the relationship always depends on the seniority. The older person should
receive respect from the younger. Therefore all the relationships tend to be unequal in china.
As a result, the management system in china tends to be directive. It’s a method of senior giving
instruction to their junior and then it passes on down the line. Subordinates questioning from the
seniors are not accepted in their culture, as it’s considered as disrespect.
8
Critical Analysis for Social Factors

The social reforms of China have resolved through the vast economical changes that
occurred during the past decade. There are few fundamental issues which causes the social
changes in china mainly the positive economical growth and the increasing social cost of the
economic growth. Then the enormous pressure of economic growth gives rise to a number of
political reforms, and also the high international investment give a sense of insecurity to the
citizens.

Signs of changes have occurred everywhere in China due to the expansion of its
economy. The western impact on China created a massive changes on social factors in China
however the Chinese still have their own code of ethics when it come to an establishment of a
new business venture. Throughout the years China has reduced the gap between the rich and the
poor by providing occupation to citizens in the urban areas, and thereby bringing down the
unemployment rate to 4% in 2008. Reducing the unemployment rate has increased the standard
of living in the urban areas. The increasing number of population also has a greater impact on
the social reformers in china. The population growth has being limited by having the law of one-
child policy for a family. This reform creates an individualist society. Currently the society has a
low rank of individuality according to the Hofstede’s model. Low individuality means more
focus towards family. By within two decades of time china will completely turn into a high
individualistic society where the concept of “we” will disappear.

However china is driven by a high power driven society, where it’s quite visible in
organizations, seniority is given a major priority in any organization. Disrespecting an adult is
not under their social norms.

Economic Aspect

China’s Economic Situation.

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 Today China is the world third largest economy after US and Japan, with a GDP rate of
4.4 trillion year (2008), the average growth rate has increased more than 10% for the past 30
years. During these three decades china has drastically reduce the poverty, while raising the
income inequality. The per capita income of the country is maintained according to the world
standards, at about US$ 3.180 in 2008. (International Monetary fund, 2008).

How the current economic crisis affect china.

The reaction for the financial crisis by the Chinese government has being to the right
path. As they have being investing and expanding in their infrastructure programs, investing on
social protection programs, and promoting job creation for unemployment for new graduates and
rural migrant workers. Since there’s a finical crisis it’s difficult to create jobs through domestic
sources. But the current economic crisis has forced the government to create more “labour
intensive and environmentally- friendly growth model’’. (Ling.Z, 2009)

10
 Main economic indicators throughout four years
2005 2006 2007 2008
1,303.72 1336311
1,311.02 1,318.31
Population, total (millions) (The world (OECD, 2009).
(ibid) (ibid)
bank, 2009)
0.6% 0.58%
Population growth 0.6% 0.6%
(The world (OECD, 2009).
(Annual %) (ibid) (ibid)
bank, 2009)
GDP - purchasing power $ 3.45 Tril $6.473 tril $7.315 tril $7.973 tril
parity. (OECD, 2009). (CIA, 2009) (CIA, 2009) (CIA, 2009)

2,235.91 2,657.88 3,205.51 3,720.00

GDP (current US$) (billions) (The world (The world (The world (The world
bank, 2009) bank, 2009) bank, 2009) bank, 2009)
10.4% 11.6% 13.0%
GDP growth (annual %) 9.8%
(The world (The world (The world
(refer appendix) (CIA, 2009)
bank, 2009) bank, 2009) bank, 2009)
3.8% 3.6 % 7.4% 7.2%
Inflation, GDP deflator
(The world (The world (The world (world bank,
(annual %) bank, 2009) bank, 2009) bank, 2009) 2009)
23.6% 23.6% 19.9% 8.4% (The
Exports of goods and world bank,
(The world (The world (The world
services (% of GDP) 2009)
bank, 2009) bank, 2009) bank, 2009)
13.4 % 18.6% 13.9% 3.9%
Imports of goods and
(The world (The world (The world (The world
services (% of GDP)
bank, 2009) bank, 2009) bank, 2009) bank, 2009)
4.2 % 4.1% 4.0%
4.0%
Unemployment rate (WTO, (WTO, (WTO,
(CIA, 2009)
2009) 2009) 2009)

GDP/ GNP and per capital income in China

China’s GDP per capita in 2008 was 32.4, and the GNP per capita was over US$ 3000,
which is the standard set by the World Bank. Therefore china has been classified under middle-
income country. The disposable income of an urban resident increased up to 15,000 Yuan, while
the net income of rural resident increased by 4761 Yuan. (Quarterly update, 2008)

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Figure 1: GDP growth

12
Inflation information of China

Due to the scarcity resources in china, there’s a fluctuating inflation rate in the country.
(Trading economies, 2009)

Figure 2 : China Inflation Rate

Figure 3: Inflation rate fluctuation

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General taxation

China wants to make a natural internal tax system, unifying the enterprise income tax
system, so that Foreign Entrepreneurs and domestic enterprises are placed on an equal tax
footing. (WTO,2009). In 1.1.2008 china introduced a new corporate tax rate as 25%, which
applies to both domestic and foreign companies established in china. The new tax rate replaces
the previous tax rate of 33%. Companies who activated their business before 2008 were able to
enjoy this for a short period of time. (Worldwide tax, 2009).

From 1st January 2009, there was a considerable change in the china’s business tax laws.
Earlier the tax was imposed on territorial base; the services that were provided within the
Chinese territory were liable for business tax. But from 1st January 2009 the services are liable
for tax if they are either the customer or supplier located in China. (ibid)

Tariffs
China’s business tariffs are a part of the regulation on the Import and Export tariffs. The tariff is
set by the Tariff Commission, In 2006, tariff revenue accounted for 3.3% of total tax revenue.
(ibid)

Bound tariff rates.

In 2007, the average bound rate was 9.9%; 15.3% for agricultural products and 9.0% for non-
agricultural products. Bound rates vary from zero to 65% for agricultural products, and from
zero to 50% for non-agricultural products. (WTO, 2009).

Specific industries

Automobile - The automobile industry is on a fast track with an anticipated growth rate set to
30% in 2003.

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Computer and Software - Computer hardware and software industry has grown by rise by 40%
in year 2002.

Petrochemical Industry - This sector has increased by 9% in year 2003.

Iron and Steel - Iron and steel industries in china is rising each year. The price of steel is
increasing in the world market has an effect on china. The price of the iron products will
fluctuate.
(Genera Pacific Corporation, 2009)

Critical Analysis of Economical Factors

The Economy of the People’s Republic of China has prospered over the past decade, by
upholding the living standards of the citizens drastically. Today china has become the
powerhouse of the world’s economy. The economic development of china has illuminated the
nation mean while brining an exacerbated host of economics, such as income inequality, social
political problems, environmental pollution, corruption which have brought grievances to the
nation. For a long time the government of China have been struggling to overcome these
problems.

Since the development of the economy, it has changed from the central plan to a market
oriented economy by vastly expanding the service sectors and rapidly developing the private
sector. This has now become the major player in the economy.

Nevertheless during the early parts of 2008, the economic growth had a moderate
economic growth with the slowing down of the global economy where it brought about the
continuous price rise, increase in real exports and imports. In 2009, china’s economy
experienced the impact of the global economic crisis, while there was a decline in the global
trade activates during the first quarter of 2009. For the past quarter of a century china the annual
GDP growth rate was above 10% but during the year 2008 it slightly fell down to 9.8%.

Signs of changes have occurred everywhere in china due to the expansion of its
economy. The western impact on china created a massive changes on social factors in china

15
however the Chinese still have their own code of ethics when it come to an establishment of a
new business venture. Throughout the years china has reduced the gap between the rich and the
poor by providing occupation to citizens in the urban areas, and thereby bringing down the
unemployment rate to 4% in 2008. Reducing the unemployment rate has increased the standard
of living in the urban areas. The increasing number of population also has a greater impact on
the social reformers in china. The population growth has being limited by having the law of one-
child policy for a family. This reform creates an individualist society. Currently the society has a
low rank of individuality according to the Hofstede’s model. Low individuality means more
focus towards family. By within two decades of time china will completely turn into a high
individualistic society where the concept of “we” will disappear.

However china is driven by a high power driven society, where it’s quite visible in
organizations, seniority has given a major priority in any organization. Disrespecting an adult is
not under their social norms.

Political Aspect

Trading policies

The main aim of China’s trading policies is to open up its economy to the foreign
markets. It wants to strengthen it multilateral trading system, and its free trade systems.

Free trade Agreements

• China – Chile FTA on 1 October 2006

• China – Pakistan FTA on 1 July 2007

• ASEAN Free Trade Area also entered into force on 1 July 2007

On the 1st of January 2008, a uniform enterprise income tax rate of 25% has been applied
to all enterprises.(WTO, 2009)

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Current Government, Government term.
The Sate is led by the one party socialist republic, the president of the state is Mr. HU
Legislature - under the Chinese constitution National People’s Congress (NPC) is the highest
organ of state power with a permanent body of Standing Committee. NCP and Standing
Committee carry out the Legislative power of the State. NCP has the power the elect end
remove the President and the Vice President of People’s republic of China. (ibid)
Jintao, and the head of the government is WEN Jiabao
The period of occupation of the President and the vice President are five years; they can serve
not more than two consecutive terms. (ibid)

Judicial System

China’s judicial system includes Supreme People’s court and the Local People’s court,
military etc. (ibid). This system comprises sub-systems for investigation, prosecution, trial
procedures, jails, judicial administration, arbitration, lawyers, public notaries and state
compensation. (www.GOv.cn, 2009)

1. The Trial System

2. Prosecution System
3. System Governing Investigations
4. Jail System
5. Arbitration System
6. Lawyer System
7. Mediation System
8. Public Notary System
9. System for Judicial Administration
10. State Compensation System
11. Legal Assistance

Legal structure and the legislative process

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 The Legislation in China includes the Constitution, laws, administrative regulations,
departmental rules, local regulations, and rules. (WTO, 2009)

The governament is continously reducing the poverty in the rural areas, the most recent
official estimate of rural poverty in China for 2007 puts the number of poor at 14.79 million, or
less than 2% of the rural population by the whole Population of 1,321,851,888, thereby they can
reduce the internal conflict that can occur due to high population. (ibid)

Government policies

• Due to the global economic crises china has reduced the number of policies that were set up
to limit for business to survive under the hard economic time. China reduced business taxes
by 1% during the year of 2008; they also cut down tax for commercial banks by 3% to help
them improve their capital (The Staits Times, 2008).
• Further the Chinese government reduced the rules and regulations on business during the
early stages of 2009.
One Child policy was created in 2004 as a result of the again population in china. This policy
would not change for another decade. (Global Times, 2009).

Trends in the Political System.

Initially china was concentrating upon textile trade and labour intensive goods, but with
the expanding competition chain has now moved in to electronic and IT goods. Today china has
become the owner of the biggest market share of iron and steel products. (ibid)
China's birth planning program had clear demographic goals: to limit the overall size of the
population by the year 2000 to 1.2 billion by reducing fertility. (BENT, 2004)
Government Structure

The government structure includes,

• National People’s Congress
• Presidency
• State Council

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 • Central Military Commission
• Supreme’s People’s Court
(www.GOv.cn, 2009)

The Chinese government has not proved its significant potentials in governing china
hitherto. The government has its pros and cons, the efficiency of administrative need to rise.
Rigorous or excessive adherence bureaucracy system still practice in china. Some locations and
departments in china still suffer from serious problems in corruption. Their main focus is
targeted to sustain the economic growth of the country. As a result of global economic crisis, the
global economy has slowed down. However, china has developed serious of policies and
measures to sustain as one of the world’s largest economy, though how hard they have been
attacked by the financial crisis.

The Significant milestone of china development took place during the past years. China
reformed its State own enterprises, such as the foreign trade and the economic cooperation,
financial system, taxation system. Through this china enter to a more stable open economy,
which encourage them to invest more on to the foreign trade. During the year 2007, china
reached 2.17 trillion dollars in export and import industry, which brought up china from the 6th
largest economy to the 3rd largest. When evaluating the progress of the last five years, they have
made a democrat and the legal system by enhancing law based government. The government has
also increased the standard of living of the people by reducing the rate of poverty, and creating
job there by reducing the unemployment rate of the country.

Technological Aspect

During the 1900 china had no technological background, but in 2001 “shenzhou II” the
first spaceship was lunched. The development of china’s technology since then is unpredictable.

Today over 60% of china’s technology have achieved the international advance level and
more than 25% have significantly grown. (china.ch.org)

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 China’s technological market has developed by 133.4 Billion Yuan in 2004.
Technological output and input today covers to 56% to 75% of the total market on trade.
(chinatoday.com 2009)

Research funding

China has found research and development as a driving force of development of their society.
China highly invests on R&D. China’s research and development reached 1.42% of the annual
GDP in 2006 from 0.6% in 1995. Therefore china intends to increase its R&D expenditure by
2% in year 2010. Each year, 39% of university graduates with degree in science and engineering
pass out.
(OCED, 2009).

Global Communication

China’s fast growing populations of web users have increased to 298 million, which have
passed the number of users in US in 2008. But china’s internet penetration is still low as 22.6%
having more space for future development.

There had been enormous number of registration for cell phone in 2009, with the
improvement to the 3G technology, 670 million uses of mobile phones was registered before
march 2009. Before the 3G service china had only 600 mobile users.

(chinaToday.com, 2009)

Innovations

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 Gun powder and Fireworks, Paper, Printing and Publishing, moldboards plough for
tilling farmland, Magnetic compass. These were the innovations of Chinese during the early
stages. There’s innovations today have enhanced china to be the number one of all the
technological devices.

Health

Acupuncture, acupressure and herbal treatments are the oldest cure treatments in the
world which was originated in china. These treatments have been on practice for more than 2000
years. During the end of 2005, china had about 1,938,000 physicians (1.5 per 1,000 persons). In
2001 the fertility rate was 1.8 children per woman while the child mortality rate was 25.3 per
1000 births. China has invested 5.5% of GDP on the health expenditure. (Spain exchange.com,
2009)

Due to the high technological advancement, all the hospitals are on the process of
digitizing. This requirement is expected to expand the health IT market by 25% - 30% in coming
years. At the end of the year 2006, china’s investment on HIT has increased by 16%. However
china’s HIT industry is considered as its primary stage compared to the western countries 20
years ago. Nevertheless they are expanding their knowledge; they have the resources to expand.
(BUYUSA.GOV, 2009)

Transportation

Air ports : 477 (CIA, 2009)

Heliports : 35 in 2007 (ibid)
Railways: total - 77,834 km
standard gauge- 77,084 km 1.435-m gauge (24,433 km electrified)
Narrow gauge- 750 km 0.750-m gauge in 2008.(ibid)
Roads:Total: 1,930,544km
Paved: 1,575,571 km (includes 41,005 km of expressways).
Unpaved: 354,973 km (2005)
(ibid)

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 • In 2007 aviation industry in china gained transportation flights of 2.735 million hours.
Air plans owned by china also increased by 101 sets.
(friedlnet, 2009)

• In 2007 101,480 people have died in work place and transportation in

china. (China Today.com, 2009)

• In 2007 the high way fixed assets investment was 26%, where china was able to
gain the world’s largest passenger turnover, goods freight volume, transportation
density in railway transportation.
M-learning

China will soon allow its students to expand their knowledge in English lessons and
other new courses of oriental education through mobile phones. Mobile learners can access
course material by the mobile. China wants to go in hand with Nokia company to implement this
educational program. The learners will have to buy a newer model of a Nokia phone with
educational program already installed in it, and they’ll be allow to download all the course
materials on sites such as Moblie.edu and Koolearn.com.
(Chronocle.com, 2009)

Energy uses/sources/fuels

China with 1.3 billion of population is the world’s second biggest oil consumer after U.S.
China’s energy consumption is expected to grow by 150% by 2020 as china is undergoing large
scale manufactures of automobiles. Each year there’s an increase of 7.5 % of oil consumption
which is seven time faster than the U.S. oil consumption rate.

(Luft. G , 2009)

Critical Analysis for Technological factors

China has gone through dramatic changes in science and technology over the past three
decades since the time county has open up to its free trade economy. China has performed its
best in all kinds of technological innovation, mostly on spacecraft, electronics, computers,

22
chemistry and medicine. By all theses it is proven that china is in its highest peak of its
technological development compared to other countries.

As china’s population becoming richer, what they expect also changes. They demand for
quality products. Therefore high technological instruments are needed in providing a better
quality for their patients. China’s investment on research and funding has grown by 1% of GDP
after 1995, which depicts there’s a tendency for innovative products to come in to the market
very often. The numbers of people using mobile phone and internet have increased by millions.
M- Learning is becoming a new trend of learning in china, which helps the education system to
distribute all its course materials through a downloading system.

23
2. China in Hofstede’s model
(ITIM international, 2009)
Long term orientation -: china has long term Orientation as the highest ranking factor, this
factor analysis to the level of thriftiness and perseverance within a society.

Individualism -: Chinese have a very low ranked in the individualism. This shows that business
should always focus on the family.

Power Distance - : graph china has a significantly high power distance; this shows the high
power distance, and wealth with china.

Masculinity and femininity - china has more 65% of femininity, that means the more
competitive and assertive women are within that society.

China has 680,000 executives working in the main cities in china, and 36% of that is women.
(Chinatoday.com, 2009)

Uncertainty Avoidance -: china has considerably low uncertainty avoidance. People are more
contemplative and less emotional.

Social and Cultural Environment of China according to Hofstede’s Model

Chinese culture is one of the most complex cultures to analyze using a model. In fact
Hofstede’s model gives a vast over view of the culture of China in five dimensions. This is
explained below with the help of graphs. Small medium business entrepreneurs should focus on
the following criteria to identify the relevant market that they should promote their business.

Long term Orientation

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 Power
Distance

Long term Uncertainty

orientation Cultural Avoidance
Differences

Masculinity
Individualis
/
m
Femininity

Figure 4: Hofstede’s Model

Figure 5: Long term orientation

(Ronngren, 2008)

According to Hofstede’s model, china has long term Orientation as the highest ranking
factor, this factor analysis to the level of thriftiness and perseverance within a society (ITIM
international, 2009). Hofstede explain that a lower LTO means the society has a short term
orientation, which presents “respect for tradition, fulfilling social obligations, and protecting
one’s face”. The higher the score, the more a society is prone to saving and planning for the
future. (Ronngren, 2008)

Individualism

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 Figure 6: Individualism

(Ronngren, 2008)

The higher the score on individualism, lesser the strong ties between people, which is
categorised as the individualism, when the individualism ranking is very low, often the society
has a strong bond, and people expect to help each other and protect. (Ronngren, 2008).In the
above graph the Chinese have a very low ranked in the individualism. This shows that business
should always focus on the family.

Power Distance

Figure 7: Power Distance

26
“The less powerful members of organizations and institutions accept and expect that power is
distributed unequally." (Ronngren, 2008) In the above graph china has a significantly high
power distance, this shows the high power distance, and wealth with china.

Masculinity or Femininity

Figure 8: Masculinity and Femininity

(Ronngren, 2008)

This is a measure of the distribution of roles between genders. The higher the
Masculinity score, the more competitive and assertive women are within that society. Whereas
in lower score countries, men tend to take on the more "feminine" qualities of caring and
modesty (Ronngren, 2008) According to the graph china has more than 65% , that means the
more competitive and assertive women are within that society. ]

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Uncertainty Avoidance

Figure 9: Uncertainty Avoidance

(Ronngren, 2008)

Uncertainty Avoidance (UAI) is a measure of how comfortable society is with

uncertainty and ambiguity (Ronngren, 2008). Low rank of this category People are more
contemplative and less emotional, and more towards religion. High ranking society will
socialize people to be comfortable in an unstructured situation, they are more emotional.

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3. SWOT analysis of China

Taking the aspects and models that were discussed above into consideration, we can
summarize the features and results through a SWOT analysis. It will give a clear picture of the
strengths of the culture and also the weaknesses. It will shed light on the opportunities that exist
and threats that need to be avoided when it comes to the Chinese culture.

Strengths

China has become the third largest economy in the world. Free trading polices will allow any
company to invest in china or to start up a business. The pool of labour is another advantage on
china as they attract new business ventures to the market. China has the large consumer base and
the cheap labour cost will attract business. Surplus citizens in china have given jobs and
developed their living standard. There are fewer conflicts and no war problems in china that is
also a great strength of china for the business planning to invest on china.

Weakness

High consumption level of energy due to the automobile manufacturing plants in a weakness as
it will cost china to import. The increasing number of population is a weakness as it affects the
business venture. Ethical issues are high in china as it is a low individualistic country with a
high influence on different religions. The management style of china has it draw backs as it has
a high power distance which makes the company a tall structure one.

Opportunities

The advanced technology in china can help it increase productivity, high productivity provides
high prices. It is easy to target the market as china has a developed transportation system from
road to maritime, and highly developed global communication system which allows to
companies to have a regular contact with its buyers and suppliers. The country as a whole has a
well developed economy which is an opportunity to endure the success of a business. The free
trade system allows the countries to continuously carry out their businesses. The tax reduction
due to the global financial crisis is an opportunity for business for a short period of time.

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Threats

Policies and reforms of china make it quite difficult for business to make money. Rapid internal
changes in Chinese society will affect the businesses as the country will be exposed to the global
market. International business entering in to china will create high competency.

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Conclusion

After analysis all the PEST analysis SWOT analysis, the cultural aspects and all other
dimensions seems to prove a positive impact. The following reasons are the preferences that can
be summarised.

• Political and economical stability of china helps to lead a good life style for the citizens
and make the foreign investors attract to invest on china easily.

• Manufacturing industries have a positive impact in china due to the high advancement in
technological

• The values and norms in culture are in threat in china, due to the vast population and the
different types of religions.

• There’s a high economic growth rate.

• The Standard of living of the country is comparable high.

• The taxation and tariffs are low due to the global economical crisis.

• There a high quality in the infrastructure and the transportation system in china.

• It also has an effective global communication system.

• There’s a huge room for research and innovation in china, as they encourage innovative
products.

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