Cultural Effects on International Trade - China and Australia - Case Study Example

Cultural Effects on International Trade Name Course Tutor Date Abstract International trade is a central component of globalization. At the same time globalization is influenced by very factors including culture. The Asia-Pacific region is not left out in the process of globalization. Its cultural diversity has its own effects on how international business transactions are carried out in the region. The region includes key market areas such as China, Australia, Japan, the sub-continent of India and Korea among many more. Basett notes that the markets have strong trade, economic, cultural and social ties (Basett 2004). These diverse factors influence the way business and especially international trade takes place. These markets have investors from across the world. International companies from the European Union, Africa, and Canada and to a large extent the United States have huge investments in the region. The region is one of the world’s biggest economic zones considering the fact that nations in that region have international companies as well. This paper centres on China and Australia as the countries that will be analysed. The multi-cultural set up of these two countries influences the way businesses are conducted. This paper seeks to analyse the cultural effects of the people Asia-Pacific specifically Australia and China on international trade in their zone, the role of the governments in the two nations on international trade. Introduction It is important to understand various cultural perspectives of various communities because culture influences businesses in a number of ways. Culture among people is used to outline what they consider noble and acceptable from what they feel is unethical and therefore unacceptable behaviour. The creation of cultural values is influenced by among many factors including the environment within which people live and the overall education system that the community implements among its people (Chhokar, Brodbeck & House 2007). Participation in international trade requires that an investor studies the trends of the particular zone of interest. Some economic zones for instance the Asia-Pacific have multiple cultural beliefs. This needs a clear understanding of those beliefs developing a method to coordinate the diverse culture so that the investment becomes successful. China and Australia for example have different languages, their culture sometimes collides and all these have impacts on the way international business is conducted in that region. Research by Hofstede indicates that Australia and China have different national attitudes (Hofstede1980). There are however, a few similarities that exist among communities of these two countries. There are several cultural factors that influence the way business flows in Australia and China (Chen 2003). Among the factors that influence business are language that can either be nonverbal or verbal, ethical issues that include values and attitudes, religious beliefs, philosophical ideologies that stipulate manners and behaviours that are customized and aesthetics. The impact of culture can also manifest itself through material elements, the structure of social; institutions and education systems. International companies trading in Australia and China or wishing to carry out business in these two countries have to adapt to these elements. The challenge brought by these factors affects the way companies participate in the regional markets. Cultural analysis of these two countries shows how culture strongly affects international business. Among other areas it affects planning decisions of international companies (Dunn, Kamp, Shaw, and Forrest & Paradies 2010). The socio-cultural environment in China and Australia has far reaching influences on international business in the region much more than the political and economic factors. Australia and China have very stable political forms of administration and even the political campaigns do not raise heated tension such as it does in other parts of the world like the United States (Chhokar, Brodbeck & House 2007). It could easily be passed that everything comes to a standstill when the U.S.is conducting presidential elections. This is not the case in Australia and China. That is why socio-cultural aspects are more significant in these countries on international business matter. International companies doing business in Australia and China can be seriously affected if they do not conduct the necessary research on the influences of religious, ethical and philosophical principles on international trade (Hofstede1980). In China for instance, a simple mistake by a company can lead to a scenario whose failures cannot be recovered from as it could lead to huge losses or expulsion from carrying out business in the country by the government. Cultural Background in China China is a country with ethical and philosophical ideologies called Confucianism were developed by great philosopher called Confucius. At one time, Confucianism became the official state ideology though it has undergone development since it was first developed. The ideology has been preserved by the Chinese for as long as it has existed. It has changed from being an ethical-socio-political teaching through to being a metaphysical and cosmological element and now it is an ideology of ethical and philosophical system (Freytag & Thurik 2010). The ethical and philosophical stand of the people of China is humanism. Confucianism holds that anything done by humanity is for the world and family. This clearly shows it values strong family and interpersonal ties in all the endeavours of the world (Suen, Cheung & Mondejar 2007). International business is not an exception. Self-cultivation and creation are the fundamental ways through which humanity can be improved, corrected, taught and perfected. This development is meant to inculcate virtues in people and help them to maintain high standards of moral ethics. China is a deeply cultural country and her people really hold ethical values with high pedigree. The driving force behind China being a communist state is it deeply being a cultural nation. One aspect of Confucianism dictates how the Chinese should behave when it comes to property ownership. International business involves the creation of wealth which includes property ownership. There are particular challenges that come with doing business and in China and such companies have to learn the varied cultural impacts. The impact of Confucianism spreads across other countries in Asia-Pacific for instance Singapore that has predominantly people of Chinese origin (Giannakis & Chen 2012). It is imperative for the people engaged in international business in this country to know that Confucianism has been fully embraced and its principles have been adopted as prevailing complementary guidelines for ideologies and beliefs that control the day-to-day running of activities. Affected areas include communism, democracy, trade, capitalism, and religion (Chhokar, Brodbeck & House 2007). Religion cannot be separated from globalization and so is international trade. Tracing from ancient China, religion in this country has been associated with pluralism. Religious practices in China are closely connected to the family. This puts it very close to ethical and philosophical beliefs that centred on family ties. This shows that ethical, religious and philosophical ideologies are interrelated and sometimes it is very difficult to separate the three into individual elements (GU, Hung & Tse 2008). A case in point is when it becomes difficult to categorize Tao and Buddhism as either forms of religion or culture. The biggest advantage here is that religion is part of culture so whether Tao and Buddhism are religious or cultural practices is swallowed when analysing the cultural beliefs of the people of China since all of them will be included. Notable forms of religion is China include Taoism, Chinese ethnic religion, Buddhism, religious Confucianism, Abrahamic religions and non-religious groups. All these forms of religion are however, united by one thing. They all embrace principles of Confucianism as complementary guidelines to operations of humanity in areas inhabited by these communities. Cultural Background of Australia The size and shape of Australia tells a lot about how diverse its cultural dimensions. The country takes up a significant share of the world’s bottom half. Australia exists in different world religious groups. It is however important to note that Australia is itself a strongly secular nation (Misra &Yadav 2009). Australia is increasingly a multicultural country. The culture of Australia is shaped by a wide mixture of religions, societies and ethnicities. It brings together various customs, social values and traditions. The culture is predominantly western owing to the fact the country was colonized by Britain. Australia is inhabited by various multi-ethnic communities. These together with its unique geography are elements that flavour the culture. The Language is essentially English, it has democratic systems that draw a lot from Britain, Christianity is the most followed religion, and it combines the federalist and constitutionalist systems of the United States. The culture of Australia is distinct following the diversity of the citizens. The popular sports are rugby and cricket. Australia does not have an official national language but due to the high number of people speak English, it is perceived to generally the official language. Its accent is Australian. It is however, closer to British English rather than American one in terms of spelling and accent. Eighty percent of Australians speak English with other languages being Chinese and Italian. As stated earlier, Australia is mainly a secular and as such it does not have a state religion. Constitutionally, Australians have freedom worship and the government is barred from engaging or interfering with religious activities (Hofstede1991). However, more than half of the population are Christians with a total of about twenty percent being non-religious. This means that the people of Australia operate mainly on the foundations of the teachings on Christianity. The irreligious group tends to operate from the civil golden rule doctrine. Therefore analysis of the cultural background of the people of Australia is more of Christianity with the other part taken by people who believe in God but do not participate in religious functions. They are therefore likely to live from a humanity point of view. The Effect of Culture on International business in China Cultural variance affects business activities anywhere in the world and China is not an exception. The prevalence of cultural miscommunication is an area of concern when conducting business in China. A case in question is when international companies such as Coca-Cola were forced to go back to the strategy table after names for some of their products sounded very vulgar and unethical in Chinese and had to be withdrawn and changed. Certain aspects of Chinese culture are outstanding (Misra &Yadav 2009). They include Beijing’s old architecture, Feng Shui, traditional dances, paintings, Tai Chi Chua and cuisine cooking. Among the fundamental elements of cultural aspects that influence businesses is Confucianism. Its relevant values on business include cultivation of morals, strong interpersonal relationships, creation and enhancement of harmony and avoiding conflicts (Hofstede & Bond1988). When engaging in scheduled appointments, the Chinese culture puts more emphasis on time management. This is considered the biggest sign of respect and must therefore be held in high esteem. The culture also stipulates that when taking part in negotiations including business transactions, people should keep off blunt conversations that are abrupt and direct. It is essential that people should avoid awkward conversations. In China people are encouraged to suppress emotions and therefore actions such as smiles are very rare. Temper is supposed to be controlled and gestures are very minimal. This is in contrast to other parts in the world where gestures such as handshakes are the order of the day (Chhokar, Brodbeck & House 2007). Most businesses in the world are characterized by handshakes yet this is unusual in China. Facial expressions that are signs of happiness across the world are rare features in China making it very complicated for international business investors who want to trade in this country. The complication of running business in China is increased when areas of negotiation are analysed. In this country, when entering into a business meeting, entrance into the conference room must follow the hierarchy of protocol. Business cards are given selectively and caution is taken when issuing them. During the conferences or business meetings, official salutation is supposed to be followed for instance Mr. Chairperson, Mr. Secretary and Committee Member among many more (Giannakis & Chen 2012). In etiquette, giving room to other people to seats, first, go through the door or taking any other position is a sign of great respect and is highly encouraged. The person considered to be the host should be the first to take a seat during meals. He should also be the first to start eating and meals begin by drinks. Some of these cultural activities are very different from what happens across the world. It should be note that China is deeply cultural country and therefore cultural activities are held in high pedigree. Miscommunication can easily lead to expulsion even by the government. China has not been affected by the western culture to a large extend. The country is still bound to its traditional synergy. It is a crime to give gifts in China. Officially such an action is considered an act of bribery (Hofstede1991). When sufficient evidence is produced in court and one is proved to have engaged in bribery activities he or she is sentenced to death. This shows the degree of the influence of culture in business. However, in order for a Chinese to accept a gift or any token, he or she will reject it three times. This is meant to proof that it is not a bribe and that one is not greedy. This is contrary to most parts of the world where gifts and tokens are considered forms of appreciation and are very common. All the activities explained above affect the way business activities are carried out in China. It is therefore important for interested investors to learn the cultural diversity before or during their business life in China. The Effect of culture on Business in Australia The official business language in Australia is English and officially it is called the Commonwealth of Australia. Australia’s multiculturalism and the diverse population have far reaching effects on business. The country has an egalitarian culture where the society avoids creating differences based on any status. The society encourages modesty, mutual respect and parity (Freytag & Thurik 2010). This culture affects the business sphere. Citizens do not prefer referring to their academic achievements and business success. Australians conduct their daily activities with utmost openness and fairness. They are very often and do not shy away from addressing issues that seem confrontational. In the business world they are open new ideas and policies. Business culture in Australia does not encourage use of titles and in most cases people are informal. They prefer using their first names even in business operations. Titles that are common include Mr and Mrs. Handshakes are a common feature during meetings with women getting the preference to offer hands for a hand shake (Hofstede1991). Australians are more aggressive and direct in their discussions however sensitive the topic of discussion is. They are good at sticking to the company policies all through their business engagements. They are very cautious when making decisions are have no issues taking time to arrive at all-inclusive decision. Trust is established by maintaining a god eye contact during discussions, exaggerations are not allowed especially when discussing business dealings and personal life is not supposed to be brought into business matters. The role of Australian government in International trade The Commonwealth government of Australia uses Austrade to deal with the international trade matters. The agency assists Australian companies to grow. The agency does this through the Export Marketing Grants program and the Trade Start Scheme. It gives direct assistance to help in foreign direct investment and promoting the nation’s education sector internationally (Basett 2004). The agency also supplies the right information to the education investors with interests in foreign investment. It also advises the government on international trade policies. The Australian trade commission uses its offices in more than 50 countries to give the necessary assistance to Australian international investors to expand their business investments. It helps in processing passports and delivering Australian consular in addition to other services that are designated in the respective embassies and high commissions. The agency also uses the funds allocated to it by the national budget to help in funding direct investment projects into Australia. The cruise industry in Australia is presently the most improving market in the tourism industry across the world. The sector began humbling as an emerging market to the present status that it competes with the North American markets. The process of marketing the brand of Australia is purely a responsibility of the Australian Commission. The agency has done well in this as indicated by the reports from the Australian Bureau of statistics and now the country enjoys a double digit growth rate with an estimated one million visitors expected to go cruising by 2020 (Trewin2004). The government gets a lot of revenue from the sector and this success is owed to Austrade. The role of Chinese government in International trade The Chinese government strives to open up the economy to attract foreign investors while at the same negotiating for markets and contracts on behalf of its citizen’s abroad (Ministry of Culture 2003). The government regularly diversifies its currency to make it valuable while at the same time giving an opportunity to her investors to reap maximally from the value of the currency. It formulates trade regulations that are aimed at squarely having its companies making profit. The government is also committed to foreign direct investment policy. This is aimed at improving the overall international trade in that country. The government of China engaged in this process by joining the World Trade Organization in two thousand and one. The aim of this was to help expand China’s international trade. The Chinese investors are expected to utilize this opportunity that is provided by the company to grow. This is bearing in mind that China has a multifaceted economic development track. The report from the ministry of culture (Ministry of Culture 2003) outlines that the government negotiates on behalf of its investors to penetrate world markets such as Africa that cannot afford expensive products. By doing this, the investors are allowed to export cheaper products in to these markets most of them in developing and underdeveloped countries. These products range from imported consumer goods, intermediate goods and raw materials. The government opened up its economy allowing most companies from the West to invest in the country. The Chinese get some of these products cheaply, the companies offer employment and the development of secondary companies that supply the international companies with the basics that they need. All these are some of the roles the government plays to enhance international business. Conclusion International business has experienced rapid expansion in the Asia-Pacific region leading to the rise of initiatives that try to develop ways through which culture can be used relevantly to influence the growth of businesses. The region has different cultural dimensions that include ethical, philosophical and religious beliefs of the communities that live in the region. Cultural dimensions are the magnitudes through which people in a community, country or zone favour structuring their activities over mechanisms that they consider amorphous. It is clear from the analysis that people use their cultural beliefs to avoid uncertainties and this has far reaching effects on the way business activities are conducted. The degree with which people hold these beliefs are different and differ from one to community to another, country to country, and from one economic zone to the other. This is according to the report by the Australian ministry of culture (Ministry of Culture 2003). In other words, the cultural dimensions are magnitudes of inequality among people over what they consider standardized or structured. The standardized norms are used by people of a particular economic zone to enhance harmony and mental collectivism when they conduct their business activities. Different cultures are supposed to serve the same purpose. Australia takes compromise at ease while China does not because of it is a country whose culture is deeply rooted. Australians combine both compromise and collaboration in using culture to positively influence business. The Chinese have not allowed the penetration of the Western culture into their society which, many times is considered to be standardised ways of operations. According to GU, Hung and Tse, China feels that by doing this, the country will be safeguarding her population from exploitation by the west (GU, Hung & Tse 2008). The analysis also shows that the role of government in international trade does not mainly focus on the cultural perspectives. The only difference is that Australia has in recent years tried to market tourism and education sectors while China concentrated on opening her markets having operated a closed economy for many years. References Basett, P. (2004). Working paper series: Chinese and Australian Student’s cultural perception: A comparative study. Retrieved from http://vuir.vu.edu.au/383/1/wp9_2004_bassett.pdf Chen, J. (2003). Inside Chinese business: A guide for anyone who wants to engage the Chinese in cooperative endeavour. USA. Harvard Business Press Chhokar, S., Brodbeck, C& House, J. (2007). Culture and Leadership Across the World. New York: Psychology Press Ministry of Culture, (2003). P.R. China Confucian philosophy. Retrieved from http://www.chinaculture.org/gb/en_madeinchina/2005-09/27/content_73480.htm Dunn, M., Kamp, A., Shaw, S., Forrest, J., & Paradies, Y. (2010). 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