Cultural Influences on Consumer Goods Marketing in China

Content

List of Abbreviations

List of Figures

List of Tables

1 Introduction

2 General Conditions in the Chinese Business Environment: An Introduction to the Chinese Market
2.1 China’s Economic Development from 1949-1978
2.2 China’s Economic Reform
2.3 China’s Market Today
2.3.1 Bilateral Economic Relations with Germany
2.3.2 Threats and Opportunities
2.3.3 Population

3 Principles of Marketing
3.1 Definition of Marketing
3.2 Marketing Strategies and the Marketing Mix
3.3 Evaluation of the Marketing Mix
3.4 Types of Marketing
3.4.1 Three Levels of a Product
3.4.2 Distinction between Goods and Services
3.4.3 B2B Marketing and B2C Marketing

4 The Importance of Culture for Marketing
4.1 Definition of Culture
4.2 Connection between Culture and Marketing
4.3 Cross-cultural Implications for Marketing Management

5 Chinese Culture
5.1 Hofstede’s Cultural Dimensions
5.1.1 Appraisement of Hofstede’s Cultural Dimensions
5.1.2 Power Distance
5.1.3 Individualism vs. Collectivism
5.1.4 Masculinity vs. Femininity
5.1.5 Uncertainty Avoidance
5.1.6 Long-Term Orientation vs. Short-Term Orientation
5.2 Mianzi: The Concept of Face
5.3 Mandarin: The Chinese Language, Calligraphy, and Communication Behavior
5.4 Hall’s High-Context and Low-Context Cultures
5.5 Confucianism: The Pursuit of Harmony
5.6 Guānxi: Interpersonal Networks
5.7 Political and Legal Environment
5.8 Culture in Transition

6 Strategic Marketing Implications
6.1 International Marketing vs. Global Marketing
6.2 Standardization vs. Adaptation
6.3 The Search of the Optimal Adaptation Degree
6.4 Market Segmentation

7 Operational Marketing Implications: Adjusting the Marketing Mix
7.1 Product Decisions
7.1.1 Consumption Patterns and Product Features
7.1.2 Buying Decisions
7.1.3 Differentiation Strategies
7.2 Pricing Decisions
7.2.1 Price-Influencing Trade Barriers
7.2.2 Purchasing Power
7.2.3 Price Sensitivity
7.2.4 The Luxury Goods Market: A Particularly Challenging Market Segment
7.2.5 Pricing Strategy
7.2.6 Financing Services
7.3 Promotion Decisions
7.3.1 Legal Conditions, Cultural Norms
7.3.2 Appropriateness and Suitability of Advertising Styles
7.3.3 Advertising Channels
7.4 Distribution Decisions
7.4.1 Traffic Infrastructure
7.4.2 Distribution Channels

8 Conclusion

9 References

10 Appendix
10.1 Basic Information on China
10.2 Major Market Segmentation Variables

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

List of Figures

Figure 1. Development of the Chinese Population 2004-2014 (in Millions)

Figure 2. Categorization of Marketing Objectives

Figure 3. Definition of Marketing Objectives Related to Potential, with Respect to the Marketing Mix

Figure 4. Three Levels of a Product

Figure 5. Business Areas of Marketing

Figure 6. The Iceberg Model of Culture

Figure 7. International Marketing Blunders and Their Possible Causes

Figure 8. Cultural Dimensions of China and Germany

Figure 9. Hall’s High-Context and Low-Context Cultures

Figure 10. Examples for Estimated Standardization Degrees of Applied Marketing Mix Elements

Figure 11. Regional Tiers in China

Figure 12: Creation of Value for Targeted Customers

Figure 13. Status Motives in Different Cultures

Figure 14. Porter’s Generic Strategies

Figure 15. Differences Regarding the View Between Analytic and Holistic Cultures

Figure 16. Chinese Legal Standards

Figure 17. Average Incomes per Household in 2012 (in CNY)

Figure 18: Annual Expenditures Per Capita in 2012 (in thousand CNY)

Figure 19: Advertising Styles in Different National Cultures

Figure 20. Expenditures on Mobile Advertising 2011-2017

Figure 21. Distribution of Goods Transportation on Chinese Means of Transport

Figure 22. Direct and Indirect Sales Channels

List of Tables

Table 1. Differences between B2B and B2C Marketing

Table 2. Cultural Aspects Based on Artifacts, Sociofacts, and Mentifacts

Table 3. Characteristics of Low-Context and High-Context Cultures

Table 4. Market Segmentation Variables

Table 5. The Five Chinese Elements and Their Cultural Meaning

Table 6. Chinese Translations of Western Brand Names

Table 7. Total Media Ad Spending Share in China, by Media, 2013-2018

Table 8. Internet User Metrics in China by Age, 2013-2018

1 Introduction

In recent years, China has witnessed the most skyrocketing economic growth in history. The impressive economic data of the People's Republic are a clear sign of the country’s economic power: In 2013, China's GDP amounted to USD 8.9 trillion (Germany: USD 3.7 trillion) and USD 6,569 per capita (Germany: 45,446) (Auswärtiges Amt, 2014; GTAI, 2014).

For Germany, China has become the third most important trading partner after France and the Netherlands, and the largest trading partner outside the European Union. In 2014, the trade volume between the two countries totaled USD 154 billion, divided into USD 79 billion of German imports from China, and USD 75 billion of German exports to China (Statistisches Bundesamt, 2014).

There are countless internationalization motives and reasons for German companies to invest in the Chinese market, but they can be categorized into two groups. First, internationalization offers the chance to reduce threats; e.g. by stabilizing total sales amounts and balancing the competitive situation by following competitors abroad. Second, internationalization allows companies to realize sales opportunities that could never have been achieved in the domestic market. Moreover, economies of scale, lower wages and other local aspects increase profit margins (Homburg, 2013). Every global company that wants to stay competitive must invest in China in order to not be left behind, but it is an extremely thin line between success and failure for foreign companies in the Chinese market. An internationalizing firm will face both great opportunities on the one hand, but also great challenges on the other. Former Siemens Manager Heinrich von Pierer stated that “the risk of not being in China is greater than the risk of being part of it” (Handelsblatt, 2004, n.p.).

Especially for German key industries like the automotive branch and mechanical engineering, the Chinese market has become vitally important (Süddeutsche Zeitung, 2014). In 2013, the Volkswagen Group China achieved a profit of 4.3 billion euros, representing more than one third of sales of Volkswagen vehicles in all other markets combined (Manager Magazin, 2014). On the other hand, many companies that are successful in Germany like Media Markt and Obi entered the Chinese market with big ambitions, but quickly withdrew from it again (Handelsblatt, 2013; FAZ, 2011). In 2004, only 23 of the 30 DAX-listed companies reported having made profits in China (Tank, 2005).

Although the demand for products and services amongst Chinese customers is constantly getting higher, it cannot keep up with the high supply caused by the increasing number of competing providers. Many products such as color TVs have reached market saturation for a long time (Zinzius, 2006). In addition, higher standards of living have shifted the focus of customer expectations from meeting basic needs to advanced product features. The shift from a seller’s market to a buyer’s market with an excess of supply over demand is accompanied by extreme competition between countless suppliers, which forces competing companies to implement efficient and effective marketing strategies in order to acquire customers. However, marketing only provides the opportunity for a company to assert itself against competitors if cultural circumstances are taken into account.

Cultural factors in China and Germany differ so much that they affect the entire success of business. They act as invisible barriers that must be overcome, not only in order to build competitive advantages, but in order to be competitive at all. When entering the Chinese market, foreign firms must consider that they will operate in a completely different culture, in which perception, communication, norms, values and other aspects cannot be compared to their respective German counterparts. Since cultural aspects cannot be measured and quantified easily, their impact may go ignored or even unnoticed. As this thesis will show, many foreign firms fail in the Chinese market due to their inadequate altercation with cultural specifics, an unwillingness to adapt their strategy to the cultural environment, or a product-market mismatch based on cultural dissimilarities.

In order to implement marketing strategies flexibly and effectively in a completely different environment for a completely different target clientele, it is indispensable for German marketers to learn about Chinese culture mindfully.

Therefore, the main objective of this work is to prepare German marketing professionals for conducting marketing activities in the Chinese market by demonstrating the impact of culture on marketing, making German marketers more familiar with Chinese culture, and by providing useful advice for their marketing strategies.

For this purpose, Chapter 2 provides an introduction to China’s economic history and its current market conditions. Chapter 3 defines the scope of consumer goods, introduces the marketing mix model, and explains further marketing aspects that are important for understanding the subsequent chapters. Section 4 discusses the importance of culture for marketing, before specifics in Chinese culture are explained in Chapter 5. Based on these findings, Chapter 6 draws conclusions for general strategic marketing decisions. Based on the marketing mix, Chapter 7 provides advice for concrete operational marketing decisions that are suitable for the Chinese market. Chapter 8 draws a conclusion and summarizes the main findings of the thesis.

Regarding the scope of this work the following limitations can be drawn:

This thesis was written from a business perspective, therefore all recommendations that are part of this thesis solely aim at business success. Ethical and moral aspects such as working conditions in Chinese factories will not be considered. It is the responsibility of the respective companies if and how they will take measures in this regard.

In addition, it is important to note that this master’s thesis explicitly addresses German companies that are planning to do business in China and want to set up a marketing strategy for the Chinese market. This means that this thesis does not include an equally weighted comparison between both countries, but instead focuses on an investigation of Chinese cultural specifics from a German perspective.

In this context, it is important to point out that neither the German nor the Chinese culture are superior or inferior in comparison to one another. Therefore, the aim of this work is not to encourage assimilation between Germans and Chinese people. Instead, I intend to teach cultural basics that facilitate a successful implementation of marketing operations in the Chinese market. In addition, cultural comparisons are always generalizations referring to a specific group of people, which makes them not necessarily applicable to all individuals within an examined group.

2 General Conditions in the Chinese Business Environment: An Introduction to the Chinese Market

In order to create a successful business and marketing strategy for the dynamic Chinese market, it is vital for foreign managers to develop a keen sense for potential opportunities and threats. For this purpose, they can learn from the past. Thus, they need to be informed about both the history and the ongoing development of the rapidly changing economic environment in China. The following subchapters will briefly describe China’s economic history after the Second World War, its rise as an industrial superpower, as well as current conditions in China’s national economy.

2.1 China’s Economic Development from 1949-1978

In the founding year of the People’s Republic of China (PRC) in 1949, the country’s economy was clearly based on agriculture: 89.4 percent of the Chinese population was living in rural areas, and at the same time only 12.6 percent of the national income could be ascribed to the sector of the industry (Lin et al., 1996). After China’s participation in the Korean War in 1950, the United States and other Western countries isolated China’s national economy by imposing an embargo on it (Cain, 1995).

In the 1950s however, the chairman of the Communist Party of China and head of state Mao Zedong decided to enforce a “heavy-industry-oriented development strategy” (HIODS) (Lin et al., 1996, p. 203). For this purpose, five-year-plans have been developed by the government to produce consumer products and military goods. Private companies were nationalized to ensure that the profits would be used in compliance with the objectives of the five-year-plans. In accordance with these plans, the industry sector received 45 percent of all state investments in the period between 1953 and 1985, while the agricultural sector was forced to get along with only 8.9 percent, although more than 75 percent of the Chinese was working in the agricultural sector (State Statistical Bureau, 1987).

The governmental provision of basic needs such as clothing and low-priced food facilitated the implementation of low nominal wages. Along with low interest rates and low prices for raw materials, as well as high exchange rates, the low wages supported the transition towards an industrialized national economy (Lin et al., 1996).

Finally, the Chinese government achieved its HIODS goals but had to deal with two other serious problems that led to a very poor total factor productivity: first, the planned economy, favoring the industrial sector, prevented efficiency regarding the allocation of resources. Due to its lack of capital and its high amount of workers, China’s comparative advantage was in the labor-intensive sectors. Automatisms of a free market economy would have led to investments in labor-intensive sectors. By the diversion of financial resources in the industry, however, there was an inefficient allocation of resources.

Second, restricted freedom of action for workers in combination with low wages had a negative effect on the motivation of Chinese workers. Since planned allocation also regularly prevented resource allocation in due time, and because earnings did not indicate the level of efficiency anymore, workers were deprived of their motivation to use resources as profitably as possible (Lin et al., 1996).

2.2 China’s Economic Reform

In 1978, two years after Mao Zedong’s death, his successor Deng Xiaoping initiated an economic reform with the aim of increasing China’s low total factor productivity (TFP) by implementing elements of a market economy without narrowing down the power of the Communist Party of China (Li, 1997; Holtbrügge & Puck, 2008).

Before the reform took place, Chinese enterprises were controlled by government officials and charged vague percentages of their earnings. New laws however reduced the centralized control in favor of decentralized local governments that were then able to claim earnings by local companies. These local authorities had to give a fixed amount to the central government in Beijing, but had to pay low taxes on profits exceeding their target earnings. Thus, property rights of the centralized government have been transformed to provincial agencies. This ultimately created incentives for an efficient use of resources and the profit maximization of Chinese companies. In addition, the government was able to harmonize the interests of the companies’ owners and their staff by restructuring the Chinese enterprise governance. These changes included the transfer of decision power from governmental institutions to the firms’ managers and workers, as well as the introduction of financial incentives, mainly in the form of bonuses depending on the firms’ economic performances (Li, 1997).

By delegating decision competencies to local public institutions, China’s formerly monopolistic economy, which was once completely owned and controlled by the government, turned into an economic environment consisting of a multitude of competing conglomerates. Furthermore, bureaucratic burdens were successively dismantled, which allowed direct investments from abroad and the development of the Chinese market by foreign companies, especially if they embarked on international joint ventures (IJVs) with Chinese companies (Naughton, 1999).

By allowing firms to sell production volumes that exceeded their planned amounts at market prices, a “dual-track” system was created, which enabled the coexistence of planned economy and market economy (Li, 1997, p. 1084). This approach granted the Chinese economy impressive and stable growth rates (Prasad & Rajan, 2006). According to a study conducted by Li (1997), 87 percent of the TFP increase between 1980 and 1989 could be achieved through revised resource allocation, a reinforced competitive environment, and, lastly, higher incentives for workers.

After many long debates amongst the political leaders, China finally confirmed the model of a socialist market economy at the national congress in October 1992. This system still claimed all production factors to be public property, yet it allowed them to deviate in part from the target amounts and economic plans under the principles of conventional market economies. The transformation of China’s economy was based on two major changes: first, the opening of the financial markets for private entrepreneurs, and second, the attraction of foreign investors (Holtbrügge & Puck, 2008).

2.3 China’s Market Today

In Chinese, China is called Zhōngguó, which translates to “Middle Kingdom” and reflects the confident Chinese self-image. While it had taken a rather subordinate role in world politics and economics during the 20th century, China is currently on the way to justifying its name.

One major reason for the ongoing boom in China is its elaborate construct of protectionism. High import tariffs hinder foreign companies’ access to the lucrative Chinese market. Thus, they are forced to bypass the high import tariffs by outsourcing their manufacturing processes, founding local subsidiaries, or starting a joint venture business relationship with a Chinese firm. Foreign companies thereby take part in the development of a modern infrastructure, which in turn will help to satisfy the domestic demand. This pressure for indirect subsidization of Chinese infrastructure is accepted by foreign investors because it is outweighed by the enormous market potential that they expect (Zinzius, 2006).

2.3.1 Bilateral Economic Relations with Germany

More and more Chinese firms have high international ambitions and are entering foreign markets. Brands like Lenovo, Haier, and Huawei became popular in many countries worldwide. At the same time, more and more German firms - predominantly industrial ones like Volkswagen, Siemens, and ThyssenKrupp - push into the Chinese market (AHK 2014).

China and Germany have an economic alliance that is supported by close political bonds. As described in the introduction, China is one of the most important key markets for German companies. The German government therefore strengthens German-Chinese economic cooperation through its dedication to social issues; for example, in environmental matters and the further development of the legal system (Auswärtiges Amt, 2013a).

In addition to bilateral economic and political relations, a cultural exchange is promoted by both governments. For instance, the Goethe Institut in Beijing, which is financed to a large extent by the German Department for Foreign Affairs, offers language and intercultural courses for Chinese (Auswärtiges Amt, 2013b).

2.3.2 Threats and Opportunities

Sieren (2006) referred to China as a kind of a monopoly, because there is no other country able to compete with regard to its potential. Therefore, China’s government is in the ideal position to dictate its own economic rules.

In some areas, like the low price segment or in establishing an efficient distribution system, German companies cannot compete with their Chinese rivals. Therefore, they are forced to focus on their own strengths: i.e., production efficiency, research and development, and especially brand image, which requires an excellent marketing strategy (Kaufmann et al., 2005).

Because of large cultural differences, it is also extremely difficult for German companies to create an effective marketing program. Sino-German joint ventures might help to complement each other’s strengths and compensate for the weaknesses of independent firms. However, they are tied to governmental restrictions and constraints. For instance, the Chinese government is recently increasing its investments in the economic improvement of underdeveloped regions in central and western China. For this purpose, it demanded Volkswagen to build a production plant in the western Chinese city of Urumqi in Xinjiang province in exchange for the licensing of a factory in the lucrative eastern city of Foshan (Mattheis, 2013). Considering the regular political clashes between Han Chinese and the local Uighur minority, it becomes clear that the plant in Urumqi only serves as a means to an end from the Volkswagen perspective. Thus, a VW spokesman emphasized the use of the factory as “development aid” in the desert province (Manager Magazin, 2013).

How difficult the cooperation in a Sino-German IJV can be was demonstrated by DaimlerChrysler in 2006. Although the Swabian car manufacturer held 50 percent of the shares of their Chinese partner BAIC, they contributed 80 percent of the costs and were allowed to make a maximum of 20 percent of the decisions (Sieren, 2006). But similar to the construction of the Great Wall that was built to protect the country against menacing Mongolians, China established an economic protection system. For instance, the financial system and the real estate market remain in state hands (Sieren, 2006).

Despite all these threats and risks, globalization and outsourcing have turned China into an indispensable economic market for German companies. However, it is not only the current figures that make China the most attractive market in the world, but also the fact that economic development continues to advance steadily. An end of the boom is not in sight. The Chinese market is simply indispensable for multinational corporations. The investment risk in a country with unstable environmental conditions is still much lower than the risk of leaving this attractive market to the competition.

Volkswagen is a suitable example to demonstrate the dependence of large industrial corporations from the Chinese market: 45 percent of its cars are sold in China (n-tv, 2014). According to a forecast for the year 2025 by the University of Duisburg- Essen, one in three new cars will be sold in China in 2025.Thus, seven out of ten new production plants by Volkswagen will be built in China by 2018. The German car manufacturer will invest EUR 18.2 billion in order to implement this plan (Bay, 2014).

2.3.3 Population

With a total amount of currently 1.37 billion inhabitants, China has the highest population of all countries. Despite China’s one-child-policy (OCP), which was introduced in 1979, and its net outward migration to the amount of nearly four million in 2014, its population is still growing by 6.7 million people annually (Countrymeters, 2014), mainly due to exceptions regarding the OCP. For instance, couples are allowed to have a second child if the first child is disabled, and families in rural areas are generally allowed to have a second child after five years (Hesketh, 2005).

The graphic below illustrates the demographic development during the last decade. It can be seen that the population has increased by almost 68 million people from 2004 to 2014 (Statista, 2013a).

Figure 1. Development of the Chinese Population 2004-2014 (in Millions)

Abbildung in dieser Leseprobe nicht enthalten

Adapted from China – Statista-Dossier 2013 (p. 8), by Statista 2013a. Copyright 2014 by Statista. Adapted with permission.

The total fertility rate indicates the average amount of children born to a woman (Alkema, 2011), and increased from 1.53 to 1.66 in this period (Statista, 2013a).

More than 90 percent of Chinese people belong to the ethnic group of Han Chinese, while the rest of its population consists of 55 distinctive national minorities including Tibetans and foreigners with Chinese nationality (Holtbtiigge & Puck, 2008). A summary of general information about China's politics, economy, and society, can be found in the appendix.

3 Principles of Marketing

This section aims to impart basic marketing knowledge that is crucial for the understanding of the following chapters and the scope of this thesis.

3.1 Definition of Marketing

Marketing is a term that encompasses much more than just TV, radio, or print advertising. Selling processes only take place after a product has already been produced. Marketing, on the contrary, comprises processes that are triggered a long time before manufacturing. In fact, marketing flanks the whole product life-cycle: customer needs have to be identified and as detailed as possible; their intensity needs to be examined to decide if a promising business idea can be developed and implemented; commercials need to be launched that influence the buying decision of (potential) consumers, and an efficient product distribution system needs to be established (Kotler et al., 2011).

Moreover, in a globalized world with a market and price transparency that has never been greater, where nearly all products from all over the world can be ordered on the internet and are delivered within just a few days, where clients can choose between a seemingly endless number of providers of the desired product, customer relationships are getting more and more crucial for business success.

In conclusion, advertising and selling are just two elements of the promotion part of the so-called marketing mix that will be explained in Chapter 3.2.

Literature provides a high variety of different definitions for the term “marketing”. This thesis will refer to the term marketing as it has been defined by the Board of Directors of the American Marketing Association as follows: “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large” (AMA, 2013, n. p.).

In other words, marketing is a process in which companies generate value for their customers in order to create stable customer relationships, with the ultimate goal to increase market shares and profits through sales in return.

3.2 Marketing Strategies and the Marketing Mix

A marketing strategy is a plan to achieve marketing objectives (Homburg & Krobmer, 2009). Homburg et al. (2013) distinguish between three distinct functional marketing goals as illustrated in the graphic below.

Figure 2. Categorization of Marketing Objectives

Abbildung in dieser Leseprobe nicht enthalten

Adapted from Marketing Management. A Contemporary Perspective (p. 18), by C. Homburg et al., 2009, London: McGraw-Hill. Copyright 2009 by McGraw-Hill. Adapted with permission.

Marketing objectives related to potential focus on the development of optimal conditions for the creation of potentials and refer to prerequisites that are needed to trigger customer behavior. For instance, a good company image can raise customer loyalty and increase market shares, which are examples for marketing objectives related to market success. Thus, these objectives serve to realize potentials and are directly influenced by actual customer behavior.

Since marketing is one of several further business units, marketing objectives are subordinated to the company objectives, such as an increase of its shareholder value. This becomes clear by considering the third category of marketing objectives: financial marketing objectives.

These objectives relate to economic and financial variables such as marketing costs. The achievement of financial goals is largely dependent on the realization of market­ related objectives from the second category.

Concrete instromental objectives can be derived from these three functional goals, since the implementation of the strategic objectives described above requires an efficient application of marketing tools (Homburg & Krohmer, 2009; Homburg et al., 2013). Marketing tools are instruments of action a company can use to act or react in the market in order to implement strategies that serve to achieve company objectives. (Becker, 1998, as cited in Bernecker, 2013).

In 1960, Jerome McCarthy suggested to divide the marketing tools into four distinct categories (McCarthy, 1960). His model comprises decisions regarding the so-called “4 P’s”:

- Product
- Price
- Promotion (communication)
- Place (sales/distribution)

Kotler and Armstrong (2010) define a product “as anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need” (p. 248). Product decisions “are the result of all decisions related to the design of existing and future products of the company” (Homburg et al., 2013, p. 108).

Pricing decisions refer to the pricing of products, whereas promotion methods serve to provide information about a product through various communication channels to different interest groups, especially customers or potential customers (Homburg et al., 2013). Objectives of promotional activities include enhanced product awareness, the establishment of brand loyalty, and the improvement of guānxi relationships between customers and firms (Tank, 2005).

Finally, appealing products, a fine-tuned pricing strategy, and an attractive promotional approach are not sufficient for business: the products need to get to the customers to create sales and finally turn over profits. Distribution decisions deal with the physical distribution of goods and aim to ensure efficient logistics (Homburg et al., 2013).

The entity of marketing tools is commonly known as marketing mix (Bernecker, 2013). By designing the marketing mix, the marketing strategy of a firm is translated into concrete actions (Homburg & Krohmer, 2009). In contrast to macro- environmental factors like local laws, the marketing mix therefore only comprises variables that are controllable by marketers.

Concrete exemplary marketing mix goals based on objectives related to potential can be found in Figure 3 on the next page.

Figure 3. Definition of Marketing Objectives Related to Potential, with Respect to the Marketing Mix

Abbildung in dieser Leseprobe nicht enthalten

Adapted from Marlcetingmanagement. Strategie - /nstrumente - Umsetzung - Unternehmensfiihrung (p. 533), by C. Homburg and H. Krohmer, 2009, Wiesbaden: Gabler. Copyright 2009 by Gabler. Adapted with permission.

Marketers alter the proportions of marketing tools to use them in a way that best serves to market certain products. Therefore, there is no universally ideal strategy for the design of the marketing mix, which instead needs to be individually adjusted for each product (Hodder, n.d.).

3.3 Evaluation of the Marketing Mix

However, like all theoretical models, the marketing mix is also subject to shortcomings. For instance, Kotler (1984) argues that the marketing mix concept does not consider uncontrollable conditions of the macro-environment and consequently suggests adding two further P's: Political Power and Public Opinion. Lauterbom (1990) and Gromoos (1994) state that the conventional marketing mix focuses too much on product decisions instead of customer needs and relationship marketing. The disregard of services is also a frequently mentioned criticism (Rushton & Carson, 1989; English, 2000).

For the further investigation of the subject, at this point it is important to evaluate these frequently mentioned criticisms with regard to the topic of this thesis:

Kotler (1984) argues that the marketing mix does not consider external factors such as political and legal conditions that are influencing culture and consumer behavior. These aspects are crucial and must be taken into account by foreign companies doing business in China. Although they can barely be influenced by firms, and although the intention behind the marketing mix as well as the present thesis is to demonstrate how a company can practically use its marketing tools as efficiently and effectively as possible, these issues will be taken up and explained in a Chinese context in Chapter 5.7 because the legal framework determines the rules of marketing.

The popular criticism of the lack of service consideration plays a minor role in this thesis, which explicitly refers to the marketing of consumer goods. Moreover, even the marketing mix opponent Grönroos (1994) thinks that an additional service dimension would be “disastrous” since it would assign customer service solely to the marketing department and detract service responsibilities from other departments (p. 5).

In spite of a multitude of negative reviews, the marketing mix approach is still the most popular and the most cited in economics literature. There are many different reasons for the popularity of the marketing mix concept.

As defined above, marketing includes a high variety of different tasks that cannot be handled as subtasks by other departments due to their quantity, complexity, and importance. The marketing mix clearly assigns marketing tasks to the marketing department of a company. As a result, experts take the responsibility for a company’s marketing functions and reduce responsibilities of other departments (Grönroos, 1994). The division of labor is in the end reflected in an increased efficiency.

Furthermore, the marketing mix ensures that a company does not lose track of its main objective of marketing, the creation of customer value, by aiming to fulfill product promises.

The main reason for its use is probably that the marketing mix clearly shows the comparative advantages of a product or a company. By adjusting the weighting and use of its marketing tools, a company is able to change its comparative advantages and strengthen its competitive position.

McCarthy’s model prevailed over decades until today and serves as the most suitable framework to examine the strategies that companies have chosen to implement marketing activities addressing Chinese target customers.

Nonetheless, the large number of proposals for adapting the traditional marketing mix shows that the marketing mix is not an all-purpose instrument. Its marketing tools, as well as its scope and extent, must always be readjusted according to specific and unique situations.

3.4 Types of Marketing

As explained in the chapter above, international marketing activities can be conducted in different contexts that have different conditions and requirements.

Two fundamental classifications that are crucial in connection with this thesis will be made in the following: Since consumer goods are a central part of the investigations in this master’s thesis, it is important to define and clearly delineate consumer goods from other products. In addition to this distinction, differences between end consumers and business customers will be pointed out.

3.4.1 Three Levels of a Product

The term “product” has already been discussed in Chapter 3.2. In marketing both, goods and services, are grouped under the general term “products” (Matys, 2007). Marketers need to consider products on three different levels, as illustrated in the graphic on the next page.

Figure 4. Three Levels of a Product

Abbildung in dieser Leseprobe nicht enthalten

Adapted from Principles of Marketing (p. 250), by P. Kotler and G. Armstrong, 2010, New Jersey: Pearson Prentice Hall. Copyright 2010 by Pearson Prentice Hall. Adapted with permission.

Customers do not purchase a product for itself, but for the benefits it is supposed to deliver. Consumers view products as bundles of attributes that create perceived customer value. These perceptions may vary between different cultures. The core customer value refers to product characteristics that ensure the functionality of a product and satisfy needs (Homburg & Krohmer, 2009). For instance, the core customer value of a car is its ability to transport people or goods from one place to another.

In a competitive market however, the same or a very similar core value is offered by many firms (Czinkota & Ronkainen, 2013). Meeting customer expectations and needs regarding a product is particularly important in the highly competitive Chinese market, in which public self-expression and status symbols are particularly important (Kovacevic-Konttinen, 2012). Therefore, the second level is about turning the core value into an actual product that stands out from competitive products; e.g. by creating a design that customers like best and prefer over others (Homburg & Krohmer, 2009).

Augmented product characteristics are also referred to as value added services. These services go beyond the ones that are presupposed by the customer (Homburg et al., 2013). For example, Starbucks is providing free Wi-Fi access to enhance the attractiveness of their core products, and to achieve ultimate customer satisfaction with their dining experience .

3.4.2 Distinction between Goods and Services

Although goods may involve services as augmented features, services are not the product’s core value. There are immense differences between services and goods that must be considered by marketers and thus strongly affect the marketing strategy of a firm. Since this thesis only refers to the marketing of goods, the main differences between goods and services as a core value will be described in the following. Four additional characteristics are attributed to services that distinguish them from products (Moeller, 2010):

- intangibility
- heterogeneity
- inseparability
- perishability

As being intangible, services can neither be touched, smelled, tasted, felt, nor heard (Zeithaml & Bitner, 2000). Heterogeneity refers to the great degree of customizations in services and the incidental difficulty of standardizing them (Edgett & Parkinson, 1993). Further, in contrast to products, services are perishable and cannot be stored, thus they must be consumed immediately (Kotler & Bloom, 1984). And fourth, physical products exist regardless of the presence of their source, whereas production and consumption of a service take place simultaneously and thus are inseparable from each other (Kotler, 1982).

The marketing strategy is also affected by different expectations from customers towards goods compared to services. A marketing concept of a car manufacturer offering a product differs greatly from that of a car rental company offering a service (Moeller, 2010). Although customer value is created by transporting the customer from one place to another in both cases, a buyer may attach more importance to the car’s long-term value stability, its prestige, and design. A renter in turn may appreciate a friendly and reliable staff of the provider. However, the markets for goods and services may overlap, as pointed out by Gummesson (2007) as follows: “Buying a car is classified as the outcome of goods marketing, renting a car as the outcome of services marketing. For each customer, however, value is created in his or her interaction with the car. It is driving to a desired destination […]. The car remains a value proposition whether it is driver-owned, owned by your employer, bought with borrowed money, leased, rented or owned by your parents” (p. 452).

3.4.3 B2B Marketing and B2C Marketing

Aside from the product type, marketers distinguish between two different categories of customers: According to Bernecker (2013), Business-to-Consumer (B2C) marketing aims at private end-consumers and households, whereas Business-to- Business (B2B) marketing refers to the marketing of industrial goods by one company to another.

Some economists argue that the distinction between B2B and B2C is unnecessary and state that whether selling a product to a private person or to a company, it will lastly always be people who make purchase decisions (Murphy, 2007). For instance, business people are as likely to see the same advertisements at a bus station or on their smartphones as private consumers are.

However, they may require different information. Moreover, the decision to buy a product strongly depends on whether a client spends his employer’s money or his own. Plus, the clients in a B2B relationship are experts of the products that marketers are trying to sell them, whereas in a B2C environment marketers try selling products to an anonymous crowd.

Table 1 on the next page lists some of the most important differences between B2B marketing and B2C marketing.

Table 1. Differences between B2B and B2C Marketing

Abbildung in dieser Leseprobe nicht enthalten

Note. Differences between B2B and B2C marketing. Adapted from “Marketing for B2B vs. B2C – similar but different”, by D. Murphy.In Masterful Marketing, April 6, 2007, Retrieved on October 30, 2014, from: http://masterful-marketing.com/ marketing-b2b-vs-b2c/. Copyright 2007 by Masterful Marketing. Adapted with permission.

It is difficult to draw a clear line between all these segments, e.g. TVs are also used in conference rooms in a B2B context, and tax consulting is made use of in both, B2B and B2C relations.

Despite many similarities however, all four categories feature significant discrepancies and different customer requirements as noted above. What might be applicable and useful for services marketing in a B2B context might be ineffective for the B2C marketing of consumer goods.

By combining products and the direction of marketing in terms of B2B or B2C, the matrix in Figure 5 as seen on the following page is formed, which provides an overview of four different divisions of marketing.

Figure 5. Business Areas ofMarketing

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Adapted from Marketing. Grundlagen - Strategien - lnstrumente (p. 25), by M. Beme-cker, 2013, Cologne: Johanna Verlag. Copyright 2013 by DIM. Adapted with permission.

While business services address other comparues and compnse services like professional IT trainings or tax consulting, end-consumer services such as hairdressing make an offer directly to private customers. Industrial goods like construction machines are mainly sold to other firms to produce further goods. On the contrary, consumer goods like cars or food are used by end-consumers (Oxford Dictionaries, 2014).

Since this thesis explicitly refers to consumer goods marketing in a B2C context, it may not necessarily cover aspects that might be crucial for other product types and contexts. With regard to consumer goods, Homburg et al. (2013) distinguish between consumables and durables. Consumables like food are capable of being used up and consequently cannot be reused, whereas durables like household aids like refrigerators or furniture maintain long-term usability.

Each of the above-mentioned product types holds specific characteristics and strongly affects purchase behavior, hence marketing operations must be adjusted to match the respective category.

4 The Importance of Culture for Marketing

When German or other Western people deal with Chinese people, they may feel irritated or uncertain about Chinese customs, traditions, and lifestyle. If marketers intend to create maximum customer value in China, they need to put themselves in the cultural setting of China and speak their “language”. Only by changing their own perspective by considering these cultural differences and using the “language” of Chinese customers will they be able to recognize aspects that matter to Chinese people, not to themselves, and adapt their marketing strategy accordingly.

The aim of this chapter is to identify the link between culture and marketing. For this purpose, it starts with a definition of the term “culture” before a connection to marketing aspects and conclusions for the marketing management are made.

4.1 Definition of Culture

Kim et al. (1996) claim that people’s behavior and hence their purchasing and consumption patterns greatly depend on their culture. Therefore, the right marketing strategy does not only depend on the characteristics of a product that were described in the previous chapter, but also on the unique set of cultural determinants of its target market, since cultural influences make people “see, interpret, and evaluate” things differently (Adler, 1991, p. 64).

Culture is a commonly used term that most people would probably claim to know, including its meaning. However, in the context of this thesis people were asked to give a brief definition of the term. Not a single respondent was able to answer immediately, and what is even more important: the responses were not alike and every answer included a different set of examples for cultural elements. Although these responses stem from an unrepresentative survey, they show that culture is a complex topic and conceptions regarding its meaning are inconsistent.

A unique and delimiting definition of the term is complicated because it is impossible to draw a clear line separating solely cultural factors from other macro- environmental elements such as the political and legal framework of a society, since they overlap and influence each other (Sekaran, 1983). However, there is a multitude of different definitions, varying in their content and scope that can be found in specialist literature.

Cavusgil (2012) characterized the term culture as “the learned, shared, and enduring orientation patterns in a society”, in which “people demonstrate their culture through values, ideas, attitudes, behaviors, and symbols” (p.124).

Renowned Dutch social psychologist Geert Hofstede on the other hand defines culture as "the collective programming of the mind that distinguishes the members of one group or category of people from another" (Hofstede, 2001, p. 9).

In fact, Olie (1995) described 164 different definitions for this vague term, thus it is not surprising that Nasif et al. (1991) stated, that “the word “culture” is open to interpretation” (p. 82).

In the context of this master’s thesis, the term “culture” will be referred to according to the following definition:

Culture refers to relatively stable, learned and commonly accepted perceptions of values and norms within a specific group of people. Cultural elements comprise everything influencing these perceptions, as well as collective ways of feeling, thinking, and acting.

This definition is based on appropriate literature and the definitions that were discussed above. Compared to Hofstede’s and Cavusgil’s definitions however, it is on a wider level and also explicitly covers aspects of the macro-environment, as suggested by Sekaran (1983). The reason for this is that it is important to point out that is not only the classic cultural elements such as religion or values, as for example mentioned by Cavusgil, that determine people’s behavior. Instead, culture also comprises components like politics, and technology, because they also affect human thinking patterns and actions.

This can best be explained by the relationship described by Huxley (1955) between artifacts, sociofacts and mentifacts.

Artifacts refer to material objects of culture that are made or produced by people to facilitate or improve their lives, e.g. abstract products like languages, or concrete consumer goods, such as food and clothing (Hilpinen, 2011). Sociofacts are cultural factors dealing with connections between individual persons and groups and the way these relationships are organized. They include for example family structures and monetary systems. Mentifacts are those cultural elements referring to conceptual aspects and include lifestyles, believes, and values (Gesler, 1987).

In combination, these three aspects form the basis for all of the following cultural aspects listed in Table 2.

Table 2. Cultural Aspects Based on Artifacts, Sociofacts, and Mentifacts

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Note. Cultural aspects based on artifacts, sociofacts, and mentifacts. Adapted from “Artifacts, Sociofacts, Mentifacts: A Sociocultural Framework”, by A. E. Fantini and B. C. Fantini, 1995, New ways in teaching culture, p. 59. Copyright 1995 by Tesol. Adapted with permission.

It must be noted that not all cultural elements affect the way people interact with each other; for example, political or legal aspects such as trade barriers. Furthermore, the reference and context in which the term “culture” is used are also important for its understanding. As stated above, the concept of culture refers to homogeneous groups. Accordingly, it can be applied to several differing levels such as an occupational or organizational level. When speaking of Chinese or German culture, this thesis will refer to the respective national cultures. As already indicated, national cultures consist of smaller groups that differ from each other and which are referred to as microcultures (Ballantine & Roberts, 2011). For instance, as seen with lederhosen and dirndls, Bavarians have a traditional dress unique to their region. They enjoy a traditional breakfast of white sausage served with sweet mustard, and have a distinctive Bavarian dialect. Most certainly they do not wear the traditional costumes of the Black Forest region, they do not eat as much fish as people from Hamburg probably do, and they do not speak the Saxon dialect.

China trumps this versatility with ease, if only for the reason that it has a population that is 17 times higher than the population of Germany and a surface that is more than 25 times larger. Accordingly, there is no “typical Chinese person” just as there is no typical German person. This thesis therefore offers an investigation into cultural specifics that are notably different between the German and Chinese national cultures from a broad perspective but are not applicable to each individual.

Although German marketers might acknowledge cultural differences, they may not be aware of all aspects of Chinese culture because some are observable while others are less obvious. The Iceberg Model of Culture illustrates the small number of cultural elements most people are aware of, because they can be recognized in daily behavior. The small, visible tip of the iceberg that comprises only a fraction of cultural elements contrasts with the huge part representing the unseen number of cultural elements that normally remains hidden under the surface.

Figure 6. The Iceberg Model of Culture

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Reprinted from International Business: The New Realities (p. 128), by S. T. Knight and J. R. Riesenberger, 2012, New Jersey: Pearson Education. Copyright 2012 by Pearson Education. Reprinted with permission.

In fact, Cavusgil et al. (2012) estimate that up to 90 percent of cultural elements are located under the surface and thus are usually unrecognized. Nevertheless, this percentage is of paramount importance, since it not only includes important “blind spots” in culture in terms of factors that are less obvious but also explains the visible aspects and behavior constituting the tip of the cultural iceberg. Accordingly, Bernier and Meyer (2010) explain that “the visible parts of culture are just expressions of their invisible parts” (p. 5).

The bigger part below the surface is the dangerous part that can make a ship sink, or a company fail, when it accidentally runs into cultural specifics without being properly prepared. Therefore, marketers are obliged to deal intensively with cultural aspects of the target clientele in order to generate customer value.

4.2 Connection between Culture and Marketing

After having defined both terms, this chapter will put culture in relation to marketing. As defined in Chapter 3, marketing aims to satisfy customer needs. These needs are influenced by cultural determinants that strongly affect purchasing decisions and therefore are of ultimate importance for a company’s marketing plans and actions (Doole & Lowe, 2008). Since people’s desires regarding a product are heavily influenced by their culture, marketers need to attain a proper understanding for a local market and for cultural influences that dominate the people’s minds in order to create customer value (Herbig, 2013).

Marketing communication deeply affects the profitability of firms, and cultural diversity has a great influence on its outcome (Tian & Borges, 2011). Tian and Borges (2011) rightly state that “whoever masters cross-cultural communication strategies and skills will win the competition” (p. 121).

It may be surprising that most of the misunderstandings and communicative problems cannot be attributed to the lack of language skills between interlocutors. Instead, they arise when situations are interpreted differently due to different cultural backgrounds of the people involved (Preyer & Krauße, 2009). This can be explained by the fact that people subconsciously expect that other cultures imply the same values; a phenomenon that is called self-reference criterion (Mueller, 1996). In addition, as the Iceberg Model of Culture has shown, people are often not even aware of cultural peculiarities. Thus, the discrepancies concerning the intention and the behavior behind communication can be explained with cultural disparity (Preyer & Krauße, 2009).

Another obstacle to intercultural understanding is called ethnocentrism. Ethnocentrism refers to a tendency that is shared by people from all cultures to view their own society as the center of the world and consequently set their own habits and standards as the norm. Judgments about other cultures are made based on this attitude. This makes people perceive their own culture not only as normal, but also as superior and leads to an in-group and out-group mentality that reduces the tolerance towards cultural diversity and, lastly, has negative effects on the quality of marketing programs (Ting-Toomey, 1999).

Global economic relations require an increased understanding of differences concerning cultural elements such as communication and language, taste, consumption patterns, and many more that strongly affect the design of marketing activities. It is important to make international marketers aware of the self-reference criterion and ethnocentrism. Furthermore, it is crucial for German and other international marketers to know about the vast impacts that cultural aspects have on the success or failure of internationalizing companies. Cross-cultural knowledge will help marketers to put themselves in the place of Chinese consumers and crack the “Chinese code”.

If a company’s personnel lacks cross-cultural competencies this will lead to misunderstandings, strained business relationships, and marketing blunders. Blunders are serious mistakes that are “caused by ignorance or carelessness” (American Heritage Dictionary, 2014, n. p.). Consequently, blunders are avoidable mistakes and often the result of a lack of cross-cultural awareness and skills. Severe cross-cultural marketing blunders might even result in a deterioration of international business activities.

Dalgic and Heijblom (1996) created a framework that serves to examine international marketing blunders. They distinguish between blunders as a result of a company’s external, macro-environmental factors including cultural aspects on one hand, and blunders due to poor strategies and management activities on the other hand. As illustrated in Figure 7 on the next page, the model’s outer circle refers to the first category and indicates environmental factors that must be taken into account for marketing operations, such as political and legal aspects. The inner ring of the model shows common strategic errors such as a mismatched marketing mix or faulty translations of marketing messages. The model thus offers both the opportunity to develop new marketing strategies, as well as to analyze marketing blunders in order to strategically counteract them in an appropriate way as fast as possible.

Figure 7. International Marketing Blunders and Their Possible Causes

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Reprinted from “International Marketing Blunders Revisited: Some Lessons for Managers“, by T. Dalgic and R. Heijblom, 1996, Journal of International Marketing, 4(1), p. 83. Copyright 1996 by the American Marketing Association. Reprinted with permission.

In the case of faulty or missing information on cultural specifics in a certain market, international marketers have high chances to cause blunders unintentionally. Additionally, managers should fend off the urge to simply transfer and apply successful strategies from their home market to another market abroad, since history has shown that this rarely works out well (Dalgic & Heijblom, 1996).

4.3 Cross-cultural Implications for Marketing Management

Marketing blunders described in the following chapters only comprise a fractional amount of similar marketing mistakes that can be found in literature and on the internet, but the message is clear: Companies need to understand how cultural factors influence the perception and the behavior of customers, and that culture in turn has a strong impact on the marketing strategy.

Blunders can probably never be completely avoided because marketing decisions are made by human beings, and people are not known for flawless behavior. Nevertheless, the risk of their occurrence can be minimized by honing personal cross-cultural skills and by learning from mistakes.

Nevertheless, taking risks must be in an appropriate relation to potential earnings. A major threat for companies lies in the fact that dangers are often not detected before it is too late to put changes in motion that help the company to recover in time. Widespread knowledge of all chances and risks is an important prerequisite for a fortunate marketing strategy. Therefore, a company’s management should seek to create an organization that is capable of bypassing entrepreneurial crises by considering cultural differences and by observing the market so that they will be able to interfere and reduce damage as fast as possible. This is even more important in the hierarchical, consensus-based culture of China, in which making or admitting mistakes is seen as a weakness and causes a loss of face, as will be explained in Chapter 5.2. Moreover, decision processes are very slow and ritualistic, and might last too long to keep the company alive (Mittelstaedt, 2005).

Of course, the most effective solution to avoid blunders is to make decisions with predictable consequences. However, Mittelstaedt (2005) claims that in a capitalist environment, reducing risks also minimizes the chances for success. He argues that entrepreneurs are rewarded when they know how to manage risks appropriately and are willing to learn as much from failures as from success. This view is shared by Mohiuddin et al. (2014) who assume that companies will face threats to their existence if they avoid contesting international markets with their competitors. Volkswagen is a suitable example for this attitude, having demonstrated a keen sense of the possibilities attended by internationalization. Being the first foreign vehicle manufacturer to enter the Chinese market in 1985, Volkswagen has exploited its first mover advantage and held by far the largest market share to the amount of 20.9 percent in April 2013, ahead of its American competitor General Motors (10.4 %), and the Korean automaker Hyundai (6.6 %). The German competitors BMW (1.1 %) and Daimler (0.6 %) who entered the market in 2003 must now catch up (Geinitz, 2013).

As more and more foreign companies flock to the Chinese market and domestic competitors come up with comparable products, marketing is gaining in its importance. Thus, diversification and a sophisticated brand management will be key elements for business success (Kaufmann et al., 2005).

5 Chinese Culture

As the previous chapter has shown, everyone who strives to be successful in doing business in China needs to be prepared by acquainting oneself with Chinese culture. This chapter will introduce the reader to fundamental specifics of Chinese culture. Figuratively speaking, this chapter serves to allow the reader to dive below the surface that surrounds the cultural iceberg described in Chapter 4.1 in order to become more familiar with Chinese culture.

5.1 Hofstede’s Cultural Dimensions

Efficient marketing activities and processes require accurate cross-cultural research. Cultural frameworks are valid instruments to examine differences and similarities between cultures, since they describe and analyze different aspects of culture.

The most influential cultural framework in specialist literature was developed by Geert Hofstede. Although Hofstede’s study was originally intended to be applied on human resources management, it is often used in marketing studies as well (Soares et al., 2007).

Hofstede published the results of a large-scale study on national cultures, which was based on a total amount of about 117,000 surveys filled out by IBM employees from 40 different nations (Smith et al., 1996). According to Hofstede (2014c), cultural diversity between countries can be explained with the aid of five diverse dimensions of national culture. This section will explain these dimensions in a Chinese context. Figure 8 on the next page provides a visual and numeric overview of the Chinese values for the dimensions of national culture. As cultural studies only become useful through comparisons (Hofstede, 2014c), and the cultural dimensions of Hofstede allow for comparing similar cultural elements, Germany serves as a reference to illustrate cultural differences and similarities.

Figure 8. Cultural Dimensions of China and Germany

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Adapted from geert-hofstede.com, by G. Hofstede, 2014, Retrieved November 2, 2014, from: http://geert-hofstede.com/china.html by Geert Hofstede. Adapted with permission.

5.1.1 Appraisement of Hofstede's Cultural Dimensions

Even though Hofstede's framework of cultural dimensions is often praised as the most important large-scale study on culture and has reached tremendous popularity (Yeh, 1988), it is not flawless and features limitations and weaknesses. The most important criticisms will be depicted in the following.

In 2002, the Human Relations Journal published an article by Brendan McSweeney, explaining key points of criticism on Hofstede's cultural dimensions.

A major point of criticism is the choice of instrument for the measurement of cultural differences. McSweeney (2002) questioned the suitability of questionnaires to discover cultural values by stating that answers also depend on other cultural aspects like a person's first language or religion that lead to different answers, as explained by Schwartz (1999). Further, he points out that the sheer quantity of the surveys is not necessarily an indication of quality and assumes that manipulations and inaccurate assumptions might have led to fallacious data. He also argues that five dimensions are not enough to conduct proper cultural investigations. Furthermore, he criticizes that only IBM employees have been interviewed, arguing that they could not function as representatives for entire national cultures, and that nations were not an appropriate level for cultural studies (McSweeney, 2002).

Hofstede (2002) took a stand against these criticisms by McSweeney: He admits that questionnaires should not be the only instrument to investigate cultural differences. Regarding the assumed lack of cultural dimensions and suitability of nations as object of cultural investigation, Hofstede encourages researchers to add extra dimensions and explains that nations are “usually the only kind of units available for comparison and better than nothing” (p. 2).

In addition to these rather methodological criticisms by McSweeney, there are also studies that are inconsistent with Hofstede’s findings: Phatak et al. (2009), for example, point out that the implementation of the German tendency to place high value on the quality of products naturally requires long-term planning. Moreover, the adherence to rules and predefined procedures result in rather slow decision-making processes. Thus, these aspects contradict the low score of only 31 in Hofstede’s cultural dimension of LTO.

Since models represent simplifications of complex correlations, they always come with certain restrictions. Thus, Hofstede’s framework of cultural dimensions itself cannot escape criticism. For sure, it does not constitute a perfect instrument to depict cultural differences. However, such a perfect instrument would not be possible anyway, if only for the reasons that the term “culture” is open to intrepretation and automatically leads to stereotypes regarding certain groups or societies that cannot be prevented.

Nevertheless, the majority of studies proved a relatively high accuracy of Hofstede’s dimensions (Søndergaard, 1994). Despite the multitude of valid criticisms against Hofstede’s cultural dimensions, it is still perceived as the most appropriate approach for cross-cultural comparisons because its limitations are outweighed by its benefits (Smith et al., 1996).

Researchers have proved the high relevance of the five dimensions for both consumer behavior and the marketing activities of international companies (Soares et al., 2007). For example, the PDI influences service performance and communicative behavior (van Everdingen & Waarts, 2003).

In conclusion, Hofstede’s cultural dimensions have among researchers “far more” supporters than critics and therefore the model “remains the most valuable piece of work on culture for both scholars and practitioners” (Jones, 2007, p. 1; p. 7). In consequence, Hofstede’s framework is still the most popular model for examining and characterizing cultural differences. It contributed to ground-breaking results in research and is the most cited in specialist literature (Bond, 2002).

Thus, it is a suitable framework for introducing cultural differences and similarities between Germany and China before focusing on cultural specifics in the Middle Kingdom.

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