Project Report, 2011, 13 Pages
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The report aims to achieve three main objectives: the first is to determine the cultural differences between China and UK based on the fundamental theories of culture; the second is to analyze the issues related to functional areas such as Marketing and Human resources with theories of cross-cultural management and the third is to provide solutions and recommendations to managers involved in similar situations.
The scenario provided by the task has been identified by this report as the case of a cross-border M&A companies between UK and China, where the UK Company will be the parental group and China, the target. Cross-border M&A is defined as a project in which a firm from one country buys the entire asset or controls percentage of an enterprise in another country (Zhang & Wang, 2004).
When the cross-border M&A happens, it becomes the main task for the enterprise to combine resources and operations. Main goal of this report is to provide insights for managing cultural differences in order to reduce the costs of a lousy cross-cultural management and eliminate the conflicts caused from cultural differences in multinational enterprise.
2. Meaning of cultural integration.
Every organization has its own culture, principles and operating style, given their individual circumstances and external environment (Hill, 2006). The alleged “clash of culture” can arise from different companies, nationalities and countries. This paper looked in specific at those that originate from different countries, more specifically at China and UK.
When considering the purchase of a new foreign business, managers need to take into account that any interaction with the new company will make a certain meld of cultures. It is necessary to manage those differences in order for the meld to be as productive as possible for both companies to develop and create more competitive advantage (Huang and Zhanwen, 2007).
Huang and Zhanwen (2007) have identified four key issues that enterprise should resolve in cultural integration of cross-border M&A. First is to coordinate the cultural differences of people to promote understanding and communication between different groups within one enterprise so to avoid negative influences arising from the different thinking models, values and behaviors.
Second is the coordination of the individual companies heritage to remove barriers to leadership style, communication models, performance appraisal and social security benefits. The third is to determine the company core values by integration diverse culture and improve companies’ creativity and the latter is the integration of the operations (Huang and Zhanwen, 2007).
3. Cultural differences.
To identify the main cultural differences is therefore the main objective for achieving cultural integration. According to Kotler (2009), the buyer should respect the values of the target group and try to understand the culture. The company should not use fixed values to judge the other company’s culture, but should synthesize the company’s strategic importance with its culture.
This report has found many definitions for culture, for the basis of international management studies; it takes into account the Hofstede definition of culture as “…the collective programming of the mind which distinguishes the members of one kind or category of people from those of another” (1991). In terms of marketing, culture is “ a system of values and norm that are shared among a group of people and that when taken together constitutes a design for living.” (Doney et. all., 1998).
Communicating effectively with each other and understanding each other’s culture is the most effective way to stop cultural conflicts. Establishing a new culture after M&A is the combination of different cultures and need not have the intellectual imprint of a specific country or nationality (Huang and Zhu, 2007).
4. Core Cultural Theories and implications for managers
There is a wide range of literature about Eastern Chinese culture and Western British culture that managers should take into account when evaluating differences. One is Hall’s (1961, 1981, 1990) as quoted by Jiao in his article on “The influence of the cultural differences between China and UK on consumer buying behavior” (2009) with the concept of high and low context cultures and the other is Hofstede’s theory of dimensional culture.
4.1 Edward T Hall concepts and Hofstede’s dimension of culture theories.
Edward T Hall’s theory gives an explanation of each country different cultural orientation arguing that one of the main differences between them was the close relationship. High context culture has a tendency to cater towards in-groups (such family, friends and colleagues for instance) and information and knowledge is shared exclusively between them (Hall 1990). Chinese culture has been also identified a typical high context culture.
On the other hand, low context culture, like the majority of the Western cultures, have a tendency to cater towards out-groups, where people tend to share their personal networks, so family and friends and colleagues are all separate from each other and things is shared less exclusively (Jiao, 2007). Britain has been identified to be in this category.
Furthermore, one of the most influential frameworks in international management is the Hofstede metric of five cultural dimensions. According to his findings there are two main human societies: individualistic and collectivistic. In the first society, people are more self-centered and seek fulfillment of their own goal, typical of the British country (Hofstede, 2010). On the other hand, China according to Hofstede’s studies has scored exceptionally high on collectivism as shown on figure1.
Figure 1 Hofstede’s five aspects of Cultural Dimension: a Comparison
Between China and UK
4.2 Implication for managers
According to Hall’s and Hofstede’s theories, when Chinese consumers need to make a purchase decision, they are more likely to take into account the public opinions from their social networks such as members of families, friends and colleagues. This is the reason why celebrity endorsement in China is a salient execution, where national celebrities often endorse over 20 brands as stressed by Hung et all. (2010), in their latest article Assessing Celebrity Endorsement Effects in China.
Marketing managers will have to take into considerations the main motivations driving the collectivistic society such “seeking mutual accommodations” and “maintaining a group harmony” especially in their communication strategies. Whereas in a low context society like the UK, individuals are self-centered and strive to fulfill their own goal, they are likely to pursue their own personal preferences and are less concerned about public opinion (Chiou, quoted in Kotler 2009).
However, modern studies on Chinese consumers have shown that they are grown more sophisticated and individualistic (Berger, 2010). According to the think: act study conducted by the strategy consultant agency Roland Berger, the Chinese consumers are moving away from the traditional highly price-conscious shopper profile, who primarily looks for sales tag and bargain. They are now more concerned about the brand and trendiness of the product offering than about low prices (see Appendix).
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