Lesson 1: International business having offices in China
Based in the US, Nike is a world leader in designing, marketing, and distributing sports equipment and apparel, and athletic footwear. It has evolved to be an international company over the decades since its inception in 1964. It is present in China since the 1970s because of the low cost of labour which is a significant determinant of the cost of production of any product. The vast consumer market in China also paved the way for Nike to enter China in 1981 as a consumer brand. It has done a lot to promote sports in the country and is among more prominent sponsors of sports leagues and teams around the country.
Positive and negative factors affecting Nike in China
The vast consumer market of China has always beneficial for Nike in the country.
With a rapidly growing economy of China, consumers are also becoming wealthier, and a large of people around the country can afford to buy Nike products.
With the advancement in technology, consumers have also become conscious of the latest technologies in every product they use. Nike uses the most exceptional technology in its product, and its constant changes in the technology it uses are well-appreciated by the consumers
Cultural barriers are among the most significant negatives for Nike in China. The company follows the same strategy as of Europe to sponsor football leagues and teams, and Chinese culture is not a big of this sport. Also, Chinese culture is more focused on academic achievements than sports.
Healthy competition from Adidas has also played a role in affecting Nike negatively in China. Adidas has positioned itself more as a fashion brand in China than a sports brand and has gained a lot of ground in China over Nike. Local brands have also caused damage to Nike in many ways.
Non-efficient inventory management by Nike manager in China is also affecting the company and its International Business negatively in the country. The raw material for product manufacturing is not ordered as per consumer demand; instead, this order is based on the guessing game by inventory employees.
Lesson 2: Successful and Failed inward FDI in China
Unilever is among the most successful and most prominent group of companies around the world. China has always been an attractive market for brands around the world. Unilever could not resist Chinese market and made an entry in China in 1986. It is a tremendous success as far as foreign investments in China are concerned since the day it entered the country. Its revenues are on a gradual since then. For its successful and sustainable business, Unilever China was the finalist of the Sustainable International Business Award and won the award in 2012 and 2016. Its success in China is evident from these facts.
Walmart is an example of failed foreign direct investment in China because of its International Business model. Walmart is a global brand which is known for big stores and selling low-margin products. Chinese market behaves differently, and big stores do not work there. Big stores and absence of high-margin products in stores has made Walmart a failed investment in China.
Lesson 3: National Economic Systems
National Economic System of China
The national economic system of the Peoples Republic of China is the socialist market economy. This kind of market economy is controlled by the state through public ownership of resources and state-owned International Business and enterprises. This system is primarily based on the Marxist ideology of the market economy, which opposed capitalism to a greater extent.
Global Competitive Position of China
According to 2019 Global Competitiveness Report, China ranks at number 28 in the list of 140 most competitive nations around the world.
Trend of Improvement
China’s position has been consistent since the year 2015, and there is no trend of improvement so far, according to most recent reports.
Areas to pay attention to improve competitiveness
China needs to focus more on the number of labour and their overall health as the labour force is becoming old, and the birth rate is not that rapid to catch up.
Millions of people in China are still living below the poverty line, which is a hindrance in the way of competitiveness as poverty reduces labour productivity. China needs to eliminate it as soon as possible.
China lacks adequate protective measures of the intellectual property rights of individuals and firms which hinder investment in the country. This area also needs more attention from the authorities.
Lesson 4: Culture and International Business
Cultural differences between China and the UK
There is a big difference in the culture of power distance between the two cultures. Chinese society and cultures believe more in power distance than British culture. China ranks at 80, while the UK stands at 35 in the power distance index.
British culture believes more on individualism, and it teaches to individuals at a very early age to think for themselves and find the personal direction of their lives. Meanwhile, in China, people think and work for a collective interest of the group.
Long Term Orientation:
Long term orientation is the connection a culture or society tends to maintain with the past while dealing with the challenges of present and future. Both Chinese and British society have different approaches to dealing with problems. The Chinese believe in adapting to changes quickly to deal with the contemporary and future challenges through knowledge and education. The British culture, on the other hand, has an ambiguous approach in this context.
Every society and culture has a different way of socialization and a way of raising children, which determines the extent to which people try and control their feelings, emotions, and impulses. A high score in this cultural dimension means less control over emotions and vice-versa. Chinese culture scores way less than the British culture, which means that Chinese society is restrained and has more control over their desires because of their social norms. These societies tend to enjoy life lesser because of restrained feelings and emotions. British society, on the other hand, scores high in this domain and is more fun-loving, and tends to be more expressive in terms of feelings and emotions.
Cultural similarities in China and the UK
Masculinity is the dimension of a culture which give rise to a tendency of competition in society, and makes the individuals be the best in any field of work. The opposite of this is Femininity, which gives rise to values of caring for others and liking what you do. Both Chinese and British cultures are driven by values of masculinity. Both cultures are success-oriented and believe in competition in every walk of life.
An individual and a culture tend to feel threatened by unknown and ambiguous situations and try to avoid these situations. Both Chinese and British cultures almost the same in the uncertainty avoidance index, which is 30 and 35, respectively. Scoring low in this dimension means that both the cultures are happy with ambiguity in what is to come in the future. There are no such made in both cultures to change anything, and they tend to go with the flow.
Hofstede classification: correct or not? Why?
Hofstede classification is correct to a more considerable extent, and it has explained both cultures very well in terms of the differences of both the cultures. There is one dimension of the Hofstede classification I would like to disagree with, and that is the uncertainty avoidance of Chinese culture. I think that Chinese culture or people are not happy with ambiguity in their lives and the goals they set. As a society, China is more task-oriented and believe in building a better future through education and hard work. They would even sacrifice their leisure time to achieve their goals and be the best. My opinion might not be healthy and the Chinese culture may be happy with ambiguity because of them being more superstitious than British culture.
Lesson 5: Political Systems
The political system of China
China is a communist state which is ruled by a single party, and the only party has the right to form the government. As a unitary state, the People’s Republic of China is governed by the Central government of the Communist Party of China, which is the ultimate authority in this republic. All the resources are owned by the government, and people work for the government to achieve a common goal. On the other hand, as the government owns all the resources, it works for the people to achieve a common goal of all.
Describing the political system
The definition that may describe the political system of China can be, ‘A political system is composed of the members of a social organization (group) who are in power.’ I chose this definition to the political system of China because China is a unitary state which is governed and ruled by a single party which we may call social organization (group) as the country has a socialist market economy.
Lesson 1: International business in China
Starbucks in China
Starbucks, a US based coffee seller, is the world’s largest coffee house in the world with 22,000 stores around the world, according to 2015 statistics of Statista. Starbucks opened its first store in China in 1999 when the middle-class in China began to gain ground economically. It has expanded in more 140 cities in China and aims to expand further in the Chinese market.
Positives for Starbucks in China
- Vast consumer market.
- Educated middle-class who show love for coffee.
- Effective adaption of Chinese culture by the company.
- Negatives for Starbucks in China
- Chinese consumers as a tea-loving nation who view coffee as Western product.
- Growing competition from the local competitors.
- Rising prices.
KFC is among the largest and most famous fast food chains in the world. It is a US based fast food chain and now operates all over the world with hundreds of thousand franchises all-round the globe. It is the first Western fast food chain to enter China and has now become the largest of all. As of 2018, KFC has 5919 franchises in China. Studying KFC’s China story enlightens the readers that it is among the most successful Western FDIs in China.
Failed FDI: Amazon
Amazon and its success around world is remarkable because of it impressive services and rapid delivery. It is one of the other digital businesses which have failed badly in China despite trying so hard. Amazon could not even secure whole 1% of the Chinese e-commerce market after one and half decade of trying. Its logistics are considered responsible for its failure in China.
Lesson 3: National Economic System
National Economic System of China: Being a communist state, China has socialist market economy as its national economic system where state owns all the resources.
China’s National Competitive Position: In the national competitive index China is 28th most competitive nation around the world.
Improvement Trend: There is no recent trend of improvement in China’s position.
Areas of Improvement: a. Education has always been an effective tool to improve national competitiveness as it helps in providing knowledge and skills to human resource of a nation, and China needs to educate its population and focus more on the poorer regions of the country to educate those people. b. Also, despite rapid economic growth, still countless number of people do not have enough to eat and are living in poverty or below poverty. Chinese government need to frame policy to eradicate poverty in all corners of the country. c. China also needs to bring in skilled and knowledgeable human resource from other parts of the world so that the nation has diversity of ideas and excel more rapidly.
Lesson 4: Culture and Business
China and UK Cultural Differences
National culture is influenced by the region of a country to a greater extent. China and the UK have distinct cultures largely because they are in different parts and regions of the world. British population and culture train their children to think individually and plan their lives in their own way and for their individual selves. Chinese culture, on the other hand, is more collective in nature and the whole nation thinks and works collectively for one common group goal. Chinese culture believes in more power distance between a leader and the subordinates, while British culture works in an opposite manner and has less power distance in social and organizational setting. Also, British population is ore fun-loving and believe in enjoying the life more, but Chinese people are more reserved in terms of expressing their emotions and tend to enjoy their lives when compared to British people.
China and The UK Cultural Similarities
According to Hofstede classification, both Chinese and British cultures are natural believers of masculinity as both scored exactly the same in masculinity index in the classification. Both believe more in competition than cooperation. Also, both cultures are okay with uncertainty of future and ambiguity of their daily lives. They do not make efforts to avoid uncertainty.
This classification of both the nations and their cultures is correct to a greater extent. The dimensions considers in this classification are the most important ones and define a culture or a society in the best possible way. I believe that this classification is correct because both the cultures value and flaunt about their history a lot and most their values and norms are defined by their history and historically both cultures have been almost the same as defined in this classification.
Lesson 5: Political System
Political System of China
- China is communist country where state controls and owns all the resources.
- It is a unitary state and is controlled by a Central government in Beijing.
- It has one party system and only party has the right to form a government.
Definition of Political System
‘A political system is composed of the members of a social organization (group) who are in power,’ describes the political system of China because it has only party which has the right to form government and rules the country.
Lesson 1: International business operating in China
International business in China
McDonald’s is the leading fast food chain of the world with thousands of franchises and outlets in more 180 countries. It generates a revenue of billions of dollars from around the globe. It entered the mainland China in 1990 and became a huge success in the country despite different from the traditional Chinese cuisine which is already rich in variety and taste. Quality and customer services became the major reasons for its success in China.
- Positives for McDonald’s in China
- Recognition as a global fast food chain.
- Vast consumer market which is the biggest attraction for every business to enter China.
- Continued expansion of middle-class in China who like to dine out of home.
- Challenges for McDonald’s in China
- Rising local and international competition in mainland China.
- Shifting consumer preferences from fast food to healthy food.
- McDonald’s global strategy of changing brand image and rising prices.
Lesson 2: International Trade
Successful FDI in China
Coca-Cola is among the leading soft drinks and beverages companies of the world. It entered China in 1978 and was unlikely to be a successful investment because of its anti-communist campaigns. Despite all the difficulties and a very healthy and strong competition form the local competitors, Coca-Cola is growing a very rapid pace in China and has become among the most successful international businesses in China. It has been named as fastest growing fast-moving consumer goods brand in the 2019 Brand Footprint Report.
Failed FDI in China
Among the biggest example of failed international businesses in China is Google. Google is the most famous and world-leading search engine with the most impressive services. It failed miserably in China because Chinese authorities asked the company to censor most of the search results consumers used to search for. Excessive censorship made the consumers to wait too long for the search results on Google and caused it to fail in China. The company had to leave China in 2006.
Lesson 3: National Economic System
Chinese National Economic System
China has socialist market economic system being practiced as its national economic system where state controls the economy through state-owned enterprises and government-owned resources.
- National Competitive Position
- China is at number 28 in the world in terms of national competitiveness.
- Improvement Trend
- There is no trend of improvement in China’s national competitive position.
- Areas to improve competitiveness
China needs to overcome the shortage of labour in the near future as working class is becoming older and birth is not enough to catch up.
Adequate policies to allow secure private ownership of business.
Many people in China are not productive because they are either uneducated or living below the line of poverty. China need to make this right to improve competitiveness.
Lesson 4: Culture and Business
UK and China cultural differences
Individualism: British culture is more individualistic than Chinese culture as it believes in independent and individual achievements of a person, while Chinese people believe in working collectively for a group goal.
In China people firmly believe that all people in a society and all employees in an organization are not equal and there is distance and difference between them, while this tendency is less in the British culture where they believe more in equality then the Chinese culture.
Long Term Orientation:
It is the tendency of a nation to hold on to their past and history while deal with present and future. Chinese culture is less
oriented to long past and these people believe in finding modern solutions for modern problems. British people on the other hand are indecisive in this dimension, according to Hofstede classification.
British people are more indulgent then Chinese people which means that British people have less control on their emotions and impulses and tend to act as they feel at a point in time. Meanwhile, Chinese people are less indulgent and have restraint on their emotions. They have more control on their feelings and tend to give up on their feelings and emotions at times.
UK and China cultural similarities
Uncertainty avoidance means how much an individual or a society tries to avoid ambiguity or uncertainty of a situation. Both Chinese and British cultures tend to try less to avoid uncertainty of the future or ambiguity of any situation.
Masculinity: Masculinity of a culture means the tendency of a nation to drive competition. The opposite of it is Femininity which means to care for others and cooperate with other in achieving a goal. Both Chinese and British cultures, according to Hofstede, believe in masculinity and competition and train individuals to be the best in any field.
Comment on Hofstede classification
This classification is true for both cultures to a greater extent. I have an objection on the masculinity of Chinese culture in Hofstede classification as it claims the Chinese culture to be more inclined towards masculinity, which means they care for others less and believe more in competition. On the other hand, Chinese culture is claimed to be more collectivist, which means that those people work for a common goals and believe in collective achievement through cooperation. These two dimensions are contradicting in each other.
Lesson 5: Political System
Political System of China
China is unitary state with a central government ruling the whole country. It is a communist country with the Communist Party of China governing the state and controlling all the resources. The country exercises one party system with only party having all the rights to form government.
Definitions of political system
As China is ruled by one party and the definition which best describes its political system is, ‘A political system is composed of the members of a social organization (group) who are in power.’