Impact of globalization on the cultural environment of business China - Essay Example

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Impact of globalization on the Cultural Environment of Business in China Table of Content Executive Summary 3 1.0Introduction 3 2.0 The Phenomenon of Globalization 4 2.1 Globalization effect on Cultural Environment of a Business 6 2.2 Organizational Culture Theories and Models 7 2.3 Overview of Schein’s Model of Organizational Culture 8 2.4 The Impact of Globalization on Cultural Environment of Business in China 8 2.5 Changes in cultural environment of Chinese business due to Globalization 9 2.5.1 Change in vision, goal and mission of organization 9 2.5.2 Loyalty and motivational changes in employees 9 2.5.3 Business routines and rituals 10 2.5.4 Business hierarchy and flow of communication 11 3.0 Conclusion and Recommendation 15 4.0 Appendices 16 Appendix 1 16 Appendix 2 17 5.0 Bibliography 17 Critically evaluate the impact of globalization on the cultural environment of business in China Executive Summary The following study critically evaluates the effects of Globalization on Cultural environment of a business. China was a perfect economy to facilitate this kind of study because of its impact in global trade. An enquiry has been made of some of the theories relevant to the main topic. This includes The Cultural Manifestation According to Hofstede Model and Schein’s Model of Organizational Culture.. This study continues to focus more on changes in cultural environment of Chinese business due to Globalization. Four main changes are identified as namely; Change in vision, goal and mission of organization, Loyalty and motivational changes in employees, Business routines and rituals and finally Business hierarchy and flow of communication. The study concludes that globalization has both negative and positive effect to the cultural environment of business in China. The net effect is positive as seen by the continued growth in business. Finally, this in-depth study recommends that Chinese companies should employ training programs and strategies which can elevate the standard of working of their employees since this is the biggest hurdle associated with globalization. 1.0 Introduction China’s economy has shifted from being developing to being the fourth largest economy in the world. This is attributed to the high capital flows across its borders and hence, globalization. Globalization has had substantive impact on the business environment in Chinese organizations. The following paper critically investigates and analyses globalization’s impact on the cultural business environment in Chinese organizations. 2.0 The Phenomenon of Globalization Globalization is viewed differently by economists and business leaders. According to Lui (2004, pg.56), Anti-globalists views capitalize on the cons of this phenomenon which include employment insecurity associated by production shifts. Another major minus of globalization is pay cuts due to increased competition associated to opening up local markets to global competition. Lastly, global companies are associated with social injustices in their business practices and unfair working conditions such as slavery and mismanagement of the environment. Pro-globalists maintain a strong view that globalization lead to higher standards of living. They argue that competitive markets lead to more efficiency in resource utilization, elimination of monopoly markets and how it promotes democracy all over the world. To understand what net impact globalization has, it is vital to appreciate that globalization refers to a process based on the formation of a single market of goods, services and factors of productions, including capital, labor, technology and natural resources, covering all the economic regions of all countries. The two main aspects which led to the sudden transformation were sophistication in information technology field and innovation of internet. In this process, national and international markets are combined in to a single complex whole. In the world economy, globalization lead to an increased dependency on different economies of the world .From an economic perspective, globalization is seen as a positive process, since it contributes to the global prosperity. The modern innovations in the technological field have accelerated the globalization process tremendously. Globalization positively influences consumption and quality and also impact directly the cultural, social and economic environment of a country and its business. In the journal, Bartelson (2000,pg.180-196) writes that “So at the end of the day, globalization may well affect the attributes of states, yet without changing their basic identity or fundamentally disrupting their capacity to act” Trends in Globalization have led to business around the world and more employing cost cutting measures in order for them to remain competitive. Chinese companies have greater competitive advantage to other world businesses since they produce with high levels of efficiency and hence their pricing strategies beat many competing nations. Globalization has led to development of world brands and rise of global tastes and preferences after opening up of local markets to global companies. Increase competition as a result of globalization has led to improved quality of products and hence good value for consumers. 2.1 Globalization effect on Cultural Environment of a Business The Emergence of 21st century has unfolded a transition phase in to world in regard to technology, and business practices. The main phenomenon behind this transition is the globalization of international business. By transforming in to global market, businesses are altered in terms of their strategies, operations, management, and marketing, and their human and material resources services have changed as well. (pg.119) “Thus a globalization perspective on cultural environment of a business acknowledges increased interdependencies for organizations that are global in structure” Globalization influence the business to adopt values of interdependence, trust, ethical behavior, social responsibility , being exposed to diversity, and concentrating more on individual employees. To participate in global economy, organizations must support value of competitiveness, quality, customer orientation, and innovation. Globalization has led to technological advancement in the work environment of all businesses worldwide. The employment level of people has increased, the compensation and benefits have multiplied and skills of employees have become competent. As per ,Venkatesh(2011)“Globalization will impact HR managers by requiring new skills such as language capabilities. For e.g., in order to recruit employees from other cultures, HR managers will either have to learn new languages or else they will certainly have to have foreign speakers on staff”. The mission and vision of the organization have changed and their strategies have shifted to a global nature to meet the demand of global market. 2.2 Organizational Culture Theories and Models There is need for critical evaluation of the term organizational culture in order to establish globalization’s impact on china’s cultural business environment. Organization culture refers to a historical system of assumptions, values, and interpretive frameworks that is created via communication in order for it to guide stakeholders in an organization in their activities of pursuing the objectives of the organization and tackling hardships of the business environment they are operating in. there are three common properties of an organization culture (Gupta & Wang, 2009, pg. 65). The nature of culture should be shared. It should also be intangible and lastly have an effect on human behavior. Culture being shared means that culture requires a passing it from one person to another in an organization. Culture cannot be culture if it is known or practiced by one person or a minority in the organization. Culture exists where there is a framework of understanding and sharing different organizational phenomena. Intangibility of culture refers to it not being physical. This is because culture involves values, assumptions, norms, and frameworks. Finally, Culture should also have an impact on human habits in that it creates human interaction dependent on behavioral characteristics of an organization’s members. Although the three above are the main characteristics of culture, there exists another two characteristics that are worth noting in a bid to understand the concept of organizational culture. These are namely the communicative way a culture is formed and the historical nature of culture itself. Culture is formed, preserved and affected by and through human to human interaction in an environment. Without communication, there cannot be existence or propagation or any organizational culture. Different intensity of culture is directly affected on the time it was developed. Generally, more solid cultures have longer historical presence since the day they were developed. Culture should not be expected to develop instantaneously but should be cultivated over time (Gupta & Wang, 2009, pg. 155). 2.3 Overview of Schein’s Model of Organizational Culture Culture is multi-level. In this perspective culture can be said to have three levels according to Schein. These are namely Artifacts and Creations, Values and Basic assumptions (See appendix 2). In Schein’s Model of Organizational Culture, the three levels are interrelated (Richter, 2005, pg. 99). 2.4 The Impact of Globalization on Cultural Environment of Business in China The globalization has brought about drastic changes in the cultural environment of businesses in China. In the uncertain environment of globalization Chinese’s business managers have been impelled to innovate, create, strategize, improvise their business practices. Wiping out the old system had been an important system in the aggressive enterprise reform in China. According to Overholt (2005), “China’s globalization has had numerous impacts on the U.S. Most obviously, China has become a vast market for U.S. goods”. In this point, globalizations impact on organizational cultural environment will be capitalized on and critically analyzed. 2.5 Changes in cultural environment of Chinese business due to Globalization 2.5.1 Change in vision, goal and mission of organization With the emergence of globalization, Chinese business enterprises have changed their style of doing business. The Chinese companies have changed the vision, mission and strategy of business to undertake a new course of action. The vision of the business has made flexible to encounter any change in business environment of the organization. The vision of the Chinese business is renovated in a way to motivate the employees towards achieving the global business goal. According to Char(2008)“ Currently it look as if the Chinese corporations are testing their capabilities in global marketing and acting as an extended family to American and other corporations, in the process of acquiring some exposure to real consumer world” 2.5.2 Loyalty and motivational changes in employees The wide expansion of business in Chinese economy due to globalization has given more employment opportunity for Chinese population. However, Globalization has turned the Chinese employees less loyal towards their company. The rate at which the employees change their job has risen significantly. They have more opportunities and switch companies as they find better options. Since China is one of the largest exporter and manufactures the potential for employment is large. This gives opportunity for the employees to get job as and when they prefer. Since Chinese companies have become more profit motivated they give less importance to employee satisfaction. Generally, cultural differences can be seen in National, Occupational and Organizational Levels (See Appendix 1). The quality of living of people has changed in China and all expect better compensation and benefits. In the era of globalization, the employees on onset of less motivation and compensation depicted a decline in loyalty and hence resigned the job without a second thought. The employees recognize that they lack opportunity to advance further in employment and sole means to survive is to switch jobs whenever situation demanded. This behavior even could be related to their exposure to global employment market (pg.98). “China’s competitive advantage in the Global economy includes abundant cheap labor, millions of well-trained yet relatively low –paid engineers, and good infrastructure”. Even the organization does not attempt to motivate employees as they are always in a search to recruit more competent employees. Globalization has made Chinese employees more selfish and thinks less about ethical values like loyalty, trust and dedication. 2.5.3 Business routines and rituals As a part of globalization, the Chinese companies have set some core values for the efficiency of their business. The rites and rituals of a business refer to the desirable behavior expected by a company from its employees. Chinese corporate have set harmony as a primary goal and shared this mission will all the members of the business. Harmony is set as the basis of ethical human relationship within the corporation and beyond. There should be also harmony of other values and beliefs. Moreover, socializing as a part of business dealing became more habitual and constituted a more prominent role in Chinese business cultural environment. Discussing business agreements and contracts over evening banquets is a most usual activity in Chinese business. As per Mente (1994, pg. 130), “Where protocol is concerned, many foreign businesspeople tend to be intimidated by the rigid ritual of Chinese banquets and business meetings” The Chinese companies also emphasized more importance on communication process. As a result business meeting and conferences became an integral part of the business firms. The Chinese business meetings also got sophisticated with the use of advance technology and business tactics. The business activities of the Chinese firms have blended with western tactics and projected more efficiency and global standard. Chinese business regarded business contracts with their western counterparts more valuable and sustained them with loyalty. Wagner (2011) believes “Chinese businessmen find the relationship between businessmen to be paramount in their transactions. They generally believe that a written agreement is secondary to the relationship”. 2.5.4 Business hierarchy and flow of communication With the emergence of Globalization, the Chinese firms observed a high level of concentration on the rank of the business managers. As per Gallant (2010) “Chinese management styles are authoritative and directive, and managers are expected to make decisions on behalf of the group. Unlike Japanese organizations, instructions are always delegated from the top down”. The individual employee is subordinate to the business officials who are at the higher level order. Chinese are very conscious about their status and the business officials enter the meeting according to the hierarchical order. The business negotiations are led by senior leaders and employee at low level has a minimal role to play. The business firms in China are highly influenced by western hierarchical pattern and departmentalization is widely practiced throughout organization. The departmental heads are placed according to geographical area and their authority is centralized. The integration of activities which are differentiated throughout the business is the key to organizational performance and design of Chinese firm. However with globalization, the flow of information from lower level to higher level has often become overloaded. There can be seen lot of friction between mangers and staff and also responsibilities of staff get overlapped. The responsibilities and organizational structure in Chinese firms got more complicated as a result of globalization. The poor professional and technical skill of Chinese managers has also led to problem in business atmosphere. In the website Ibm, (2005) claims that “Chinese companies are struggling to develop a senior management team with the skills necessary to operate effectively on a global scale – such as familiarity with foreign markets, foreign language skills and experience managing global operations”. The globalization has demanded the Chinese managers to be highly qualified and technically knowledgeable. Changes in cultural environment of Chinese business due to Globalization by intensity Type of change Magnitude relative to other changes (%) Change in vision, goal and mission of organization 41 Loyalty and motivational changes in employees 35 Business routines and rituals 10 Business hierarchy and flow of communication 8 Others 6 (Source: Lui, 2004, pg. 166) Bar Graph: Changes in cultural environment of Chinese business due to Globalization 3.0 Conclusion and Recommendation Globalization is a global business issue. It has its advantages and disadvantages. The net effect it has on China and its business environment clearly supports its course. Many Chinese companies have had great success with globalization of two forms. The first is winning global markets through affordable exports. The second is acquisition of rights in use of natural resource and other assets in mainly Africa, Australia, and Latin America. However, Chinese firms and culture face many challenges amid globalization. The cultural environment of Chinese businesses has transformed significantly to match the global business arena. Although, the employees and managers of Chinese firms are in a transitional phase, they need more information of the markets they enter in and business development strategies to progress further. China has recently been seen to emerge as one of the largest economy in the world, and this can be contributed to their adaptability to the cultural diversity brought about by globalization. Chinese companies need to employ training programmers and strategies which can elevate the standard of working of their employees. Nevertheless, the cultural environment of China has upgraded with better employment opportunities, high technology and communication and sophisticated business etiquettes. 4.0 Appendices Appendix 1 The Cultural Manifestation According to Hofstede Model The model of Hofstede has been used to understand the implication of globalization on the organizational structure of Chinese firms. The model below shows the effect on values and practices on a particular organization due to external environmental changes. Level Place of Socialization Family Nation Occupation School Organization Workplace Appendix 2 Schein’s Model of Organizational Culture As mentioned earlier, Culture is multi-level. In this perspective culture can be said to have three levels according to Schein. These are namely Artifacts and Creations, Values and Basic assumptions. Artifacts and creations represent physical things that can appeal to human senses which connect creations to values. Values on the other hand relate to that sense of what should be the case as opposed to what is the case. Five basic assumptions include human nature, activity, relationships, reality and truth and finally the relations between humanity and nature. 5.0 Bibliography Bartelson, J, 2000. Three Concepts of Globalization. International Sociology, 15/2, 180-196. Char, S.V.2008. The Globalization of Chinese Enterprises: Transformational Politics, Business Strategies and Future Paths. [ONLINE] Available at: http://www.bwpi.manchester.ac.uk/resources/Working-Papers/bwpi-wp-4808.pdf. [Accessed 08 December 11] Chan, A, 2001. China's workers under assault: the exploitation of labor in a globalizing economy. 1st ed. New York: M.E.Sharpe Inc Fung, H.G., 2006. China and the challenge of economic globalization: the impact of WTO membership. 1st ed. New York: M.E.Sharpe Gupta,A.k,Wang,H. 2009. Globalization Challenges Facing China Inc.. 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