Taiwan Market Analysis - Coursework Example

Introduction In an age of globalization, organizations across the world are trying to explore and make use of new international markets in order to expand and more importantly to utilize cost benefits, expertise and other factors tariffs in order to remain competitive. In such an environment, it is imperative that expanding into international markets is a long term strategy for survival and growth. One of the most important factors that need to be considered is cultural diversity. Business organizations have now taken this aspect very seriously and attempts to educate host country personnel to understand and work in a diverse cultural environment. This paper attempts to review all the relevant factors that need to be considered with regard to starting a business in Taiwan for a foreign company. In the process it will also take into consideration other factors like demography, religion, ethics, the level of corruption, and any other relevant factor that needs to be considered for an American company to start operations in Taiwan. Thesis statement Taiwan can be seen as an attractive destination after considering, understanding, and adjusting to the country’s cultural, social, demographic, and political environments. Brief background of the market Formosa was under the jurisdiction of the Dutch government for 38 years. The Portuguese people however are the ones responsible for giving the island its name Ilha Formosa which translates to “beautiful isle.” This island is more popularly known by its Chinese name which is Taiwan. It was in 1683 that it came under the rule of the Chinese government via the Manchu dynasty. Taiwan is just one of the countries in Asia that is being surrounded by water. This is one of the characteristics of Asian countries that make it appealing to other neighboring countries from other continents. Being under the governance of the Dutch, Chinese and Japanese, Taiwan held a very promising possibility for multinational companies to venture business in (Shackleton, 1-5). The importance of culture Geert Hofstede was one of the pioneers in understanding the importance of culture in an international environment. This critically acclaimed sociologist and researcher has laid the foundation for cross cultural studies, especially in the area of cross-cultural management (Phan, and Butler 231-260). The cultural environment of the country will be hence based on the cultural dimensions as studied by Hofstede. Other sociologists have also stressed on the importance of culture. Unless an foreign or different culture is understood, managers from other countries could experience what is known as culture clash or shock (Hofstede 20). This has to be avoided in order to bring about a smooth working relationship between diverse cultures whether in business or otherwise. Hofstede studies culture on four dimensions namely power distance, individualism/collectivism, uncertainty avoidance, and masculinity/femininity (Zhang, Sternberg, and Reyner 131-152). A fifth dimension, namely long term orientation was added later based on Confucian philosophy (Samovar, Porter, and McDaniel 24). A chart or graphical representation of the dimensions of Taiwan and the United States is given below. (Hofstede) PD = Power distance IDV = Individuality/collectivism MAS = Masculinity/femininity UAI = Uncertainty avoidance LTO = Long term orientation The above graphs is based on the comparison between the two countries according to the Hofstede study. Power Distance The key term for this dimension would be equality. This would be expressed when institutions and organizations in a specific country would be less supposing and more accommodating in the idea of equal power distribution (Hofstede, 79-84). Power distance denotes how hierarchy is viewed by a particular society. In the chart (given above) that has been presented by Geert Hofstede, Taiwan rank 60 (Hofstede, “Cultural Dimensions” 81-99). In other words, Taiwan does not view power as a serious constraint in business. But American managers should take into consideration that Taiwan is marginally higher in power distance. Since the level is not that high, it only means that the country’s organizations and institutions are not as conservative thinking compared to other Asian counterparts. This proposes that if a multinational business would invest in the country, power struggle would not be an issue. People can coexist and aim for a unified goal which would be beneficial to all parties involved. Power Distance for Taiwan ranges 50-60 (Hofstede, “Cultural Dimensions” 81-99). The United States has a power distance of 40. Hence this will not be a major factor for an American company to operate in the United States. Individualism This is the dimension that will measure how a person would be deciding on certain matters. Individualist would not be influenced by an organization or a society where they do or do not belong. This is important in making business decisions since this would protect ideas and keep the confidentiality of materials. High levels of individualism mean that an employee after work goes about his or her own interests. It simply means that a society with high levels of individualism tends to be selective in choosing a company after work. This trend could also be apparent in an informal way within the workplace also. Here, owners or managers of multinational businesses would gain confidence in investing more knowing that their properties and rights are protected not just by law but also by integrity of people; that it would not be influenced by other factors and will keep everything on a professional basis (Hofstede, 209-12). Taiwan’s individualism is within the range 20-25. Individualism in the United States is very high. It means that the average American worker is attuned to his or her personal world after working hours. This could again be a surprise for American managers working in Taiwan. They should be prepared for informal grouping among workers outside and inside working environments. Uncertainty Avoidance In a world that is full of uncertainties, this dimension is the most critical and cannot be controlled. Countries can make all the necessary precautions but still cannot make any assurance that these uncertainties would not be experienced (Hofstede, 145-60). Societies with high levels of uncertainty avoidance need strong leadership. The United States scores higher in this regard and managers who are assigned to work in Taiwan should be aware of this fact. They should be able to guide Taiwanese managers at least in the preliminary stages of their career. In Hofstede’s chart, the higher the uncertainty avoidance, the better is the country’s economic services in the market. This would be beneficial for businesses that deal more with technology. Taiwan does not belong to the top 5 countries in the list. It still stands in the middle of the pack which can mean that it is not just a good location for technology-based market but also for state-of-the-art merchandises (Hofstede, “Cultural Dimensions” 81-92). With regards to uncertainty avoidance, the score is approximately 70, while the United States stands at around 55. This difference is not much and American managers can adjust to this employee attitude without too much difficulty. Masculinity/femininity Masculinity, in this case, is being related to career success as femininity is to the quality of life. The higher the number is on the chart the more masculine the country is (Hofstede, “Cultural Dimensions” 81-92). Taiwan used to be under the governance of China which is noted to be very conservative. This would be in the sense that men are more dominant than women. However, in the chart that was presented, Taiwan did not rank as high as expected. This just means that Taiwan is opening up its windows of opportunity to its female population. A multinational business often looks for locations that would be more open in accepting ideas to change. This would include accepting females in the money making industries. With regards to this dimension, Taiwan will rank 30. Long-Term/Short-Term Orientation Long-term orientation will see how a location would persevere in aiming for success. While the short-term will see how one will act order to achieve a specific goal. This orientation would still favor the traditions. Here, Taiwan would still be on the short-term orientation. Considering all the dimensions, Taiwan is still way behind the United States. However, it is in the middle of the pact and is capable of overtaking countries that are ahead of them. With openness to changes and innovations, Taiwan will also be open to opportunities for businesses that would want to expand their business in the country. In this instance, Taiwan is ahead of the United States. It means that Taiwanese people are culturally able to save money, are persistent about a particular task, and self-conscious about their character. This again is an aspect that American managers should take into consideration. Religion: Taiwan is a Buddhist nation and the common language is Mandarin (The World Fact Book 2012). But this has not apparently been a block in attracting international business. It could be said that American managers could do well to understand and respect this aspect when dealing with Taiwanese businessmen. Language: The language spoken in the nation is Mandarin. It would be worthwhile to have local personnel at managerial level who can understand English and be able to communicate in Mandarin as well. Corruption: According to Transparency International, Taiwan ranks 33 as the least corrupt nations. This is a big bonus for foreign business organizations to start operation in the country. It can be said in this regard that Taiwan is a country where ethics is given priority. Conclusion: Taiwan is poised to attract international investment and is a ripe market for American Companies. The country does not apparently have any political issues or upheavals. The market apparently provides skilled labor at much lower costs when compared to the United States. taking into consideration all the above factors mentioned above, Taiwan can be seen as an attractive market for international business organizations. References Hofstede, Geert. "National Culture." . ITIM, n.d.. Web. 11 Apr 2012. . Samovar, Larry, Richard Porter, and Edwin McDaniel. Communication between cultures. Cengage Learning, 2007. 24. Print. Zhang, Li-Fang, Robert Sternberg, and Stephen Reyner, ed. Handbook of intellectual styles. Springer Publishing Company, 2012. 131-152. Print. Hofstede, Geert. Exploring culture. Intercultural Press, 2002. 20. Print. Hofstede, Geert. Cultures Consequences: Comparing Values, Behaviors, Institutions, and Organizations Across Nations. California, USA: SAGE Publications, Inc. 2001. Hofstede, Geert. “Cultural Dimensions in Management and Planning.” Asia Pacific Journal of Management. January 1984. Phan, Phillip, and John Butler, ed. Theoretical developments and future research in family business. Information Age Publishing, 2008. 231-260. Print. The World Fact Book 2012, Taiwan, CIA, Viewed 09 April 2012 Read More