Role of Communication in Business - Essay Example

?Communication in Business Executive Summary The businesses in West outsource their operations to low cost countries with the motive of scaling down costs. In terms of availability of skilled human resources at low costs the name of China is the first to crop up. The country is second most sought after destination for outsourcing operations on account of its cheap labour. There are some issues that bother the outsourcing companies like cultural differences, language barriers etc. However, once the companies learn to use these differences to their advantage and with adequate training programs they can make their business plans in China a success. Table of Contents Executive Summary 2 Table of Contents 3 Terms of Reference 4 Overview of the situation 4 Analysis of situation 7 Solution &Recommendation 9 Forecasts and outcomes 11 Conclusion 12 Reference 13 Bibliography 15 Terms of Reference This assignment relates to the outsourcing operations performed by a Chinese company A Ltd for a US based multinational company. The US Company outsources its back-office operations and CRM (Customer relationship management) services to A Ltd. The American company finds the labour costs to be exceedingly high in US and hence gets its work done through the Chinese company A Ltd. This enables the former to save on the exorbitant costs arising from getting the work through indigenous sources. It works to the advantage of the Chinese company in the sense that new employment opportunities are created. China is the fastest growing country in the Asian region. However the country faces stiff competition from the companies involved in the outsourcing operations in India. In fact presently India is the favourite destination of the American and UK companies with regard to outsourcing of operations. There are various reasons that explain the preference of India over China. What attracts the western countries to this region is its talent pool. Moreover the cheap quality of labour that is available in these places makes it a win-win situation for the outsourcing companies (United States Agency for International Development, 2009). Overview of the situation China is fast emerging as an important outsourcing destination and is soon expected to give stiff competition to India in a matter of few years. The cost advantage that the clients can generate from outsourcing their work to the country is estimated at 70 percent of the salaries that the company has to shell out in US. However, there are things that a company has to consider other than the labour costs. This includes efficiency, reliability, work quality, communication skills, flexibility and issues relating to culture which are equally important in framing an outsourcing strategy. With this the macro factors like geopolitical risks are also considered at the time of formulating an outsourcing strategy. China is often hailed as an important outsourcing destination on account of its low cost. In fact China is considered to be cheaper than India. In the words of Bryan Huang, Bearing Point Great China’s President, the service of an engineer costs approximately $4000 per month in US whereas this amounts to merely $500 per month in China. In fact in some places like Dalian or Xian the salary is close to $250 per month. In other words the cost is merely one-sixth or one- eighth in China. China is still in the nascent stage when it comes to its position in the outsourcing industry. The availability of talent pool is also a risk factor in the country. Even though there is abundant supply of cheap labour in the country the quality of the labour force is a serious issue. This is mainly due to emerging nature of the industry in China. In fact the companies face difficulties in hiring people having an experience in the sector. In terms of Individualism ranking the country is placed at 20, which is the lowest among all the other Asian countries. This implies that the people of the country prefer to live in ‘groups’ which indicates their preference for commitment and closeness. This has a positive as well as negative aspect. It is negative in the sense that the BPO culture does not go down well with the close-knit families. The people in such companies are often influenced by Western culture which might not be liked by the elders in the family. This might make such companies less attractive to the people. In terms of Power distance Index the country ranks at eighty as compared to the worldwide average of fifty-five. This signifies high levels of in equal wealth distribution in the society. But the people have accepted this as a cultural heritage. This is quite contrary to the situation in US where the level of inequality is far less. By way of this the people have their own space and do not work as per the dictates of an authority. On the other hand the communist government in China often comes in the way of efficient business functioning. Moreover all the activities in the country are carried out in the form of a hierarchy which may not match with the cultural practices in US where the natives enjoy democratic rights. They enjoy the freedom of speech which is a far cry in China. This implies that even the functioning of the businesses might get affected by the dictates of the Chinese government. On the other hand U.S. has a capitalist economy which enjoys far more freedom and is free from unnecessary political interventions. Therefore initially the companies might find it increasingly difficult to adjust to the political environment in the country. During an interaction with an American customer the Chinese employee is required to speak in American English more fluently. However the people in the country are more fluent in the local language which often comes in the way of effective communication. This can be improved by imparting the necessary training in language skills. But this cannot be entirely overcome as the local people are deeply rooted in their traditional values and customs. In fact English is considered as an impediment in the growth of the outsourcing industry in China. Even though some of the projects may not get impacted by the use of broken English but there are others where the use of bad English can have practical implications. Like the CRM business involving an interaction with American customer calls for good grasp over the language else this can result in loss of valuable customers for the company. Moreover the technical expertise of the Chinese people is behind their Indian counterparts (Walsham, n.d.). It is often said that the people in China lack the necessary technical prowess. But this does not mean that the country lacks skilled labour as the indigenous people may not be very advanced technically however this is made up by their intelligence. This is the reason the companies are setting their out-shoring units in the country. They know that given the intelligence level of the natives any shortcomings with regard to other factors can be made up through adequate training (MOFCOM, 2009). Analysis of situation The situation faced by the outsourcing industry in China has been explained by conduction a SWOT analysis. This examines the strengths, weaknesses, opportunities and threats faced by the Chinese outsourcing business. The main strength of setting up outsourcing unit in China is availability of cheap labour. This is the prime motive of the Western companies behind outsourcing their work. There is an intense competition in the job market. Chinese people have good intelligence levels and any shortcomings with regard to technical skills can be made up through training. In fact the industry is also getting tremendous support from the government. To improve the language skills of the people the schools have introduced the English language from the third standard. This will give them the right exposure and help in coping with the accent related problems that is encountered by many non-English speaking nations. Besides this the local government provides additional tax incentives in the form of zero duty on taxable IT related products and other such benefits. In fact some of the newly set up IT companies are not required to pay any taxes in the initial two year period of their business operations. However the support of the government has its own set of pitfalls. This can result in unnecessary government interventions as the local government is infamous for shutting down websites that are found to flout norms. The economic sector in the country is fraught with over-investment, bad debt and corruption that can come in the way of efficient allocation of valuable resources. The high power index in the country is a serious concern as it highlights that the people are used to an autocratic form of lifestyle. This may result in biases as people present at the top levels may not give due credit to their subordinates. The strong belief in traditional values and customs can act as a deterrent to the efficient performance of duties. This is coupled with the language barriers. The People in China are not very proficient in American English which can pose serious difficulties in the customer interaction. Together with the level of technical expertise of the people in the country is limited as compared to the other market players. The collectivist culture of China places ‘loyalty’ as paramount. Chinese society promotes strong relationships among individuals where each member takes the responsibility of the other group members. This works to the advantage of the outsourcing industry as work can be delegated to groups. This will ensure a successful completion of the task. Geert Hofstede analysis places China at the top in terms of Long-term orientation. This implies that the Chinese society exhibits an attitude of perseverance with the ability to overcome any difficulty with time (ITIM International, 2009). The cheap labour cost in China is an important factor that can put the country in an important position in the outsourcing operations. Low cost is the primary motive of the Western economies involved in outsource of business operations. This makes China the choicest destination of the outsourcing companies. Chinese outsourcing industry faces threat from the Indian outsourcing industry. India too has a large talent pool and there is a huge demand for the outsourcing jobs in the country. This gives the companies a good bargaining power over the employees. From the above discussion it is clear that the culture of China is markedly different from the Western culture. This gets reflected in the world of business as well. For instance a CEO in Western countries is seen as one who discusses ay new strategy with the employees before its execution. On the contrary a leader in China is viewed as one with utmost discretionary power and strategy executor. The business culture in China displays strict hierarchy quite distinct from the Western business culture. Face culture or mianzi forms an inherent part of conduction business in China as face is considered to be everything for them. For this reason the businessmen from the West are required to show sensitivity towards the face culture if they desire their outsourcing plans to be successful. The people in China give undue importance to moral values and good character. A display of aggression, anger or grief by the Western managers is regarded as a loss of integrity which is considered as a sign of weakness. The outsourcing businesses involve stringent deadlines and at times require an aggressive behaviour. This might not go down well with the Chinese people who consider this to be unacceptable. Hence establishment of an outsourcing company in China is riddled with cultural challenges and in order to be successful the Western businesses have to comply with the prevalent cultural norms (Jayaraman, 2009). Solution &Recommendation The companies can exploit the low individualism ranking of China to their advantage. Like the client company can appoint managers and delegate the necessary authority to them. Given the present hierarchical system prevailing in China a manager is unlikely to face any opposition from the BPO employees. The group culture existing in the country can also be utilised in the favour of the company. This means that teamwork forms the essence of their work culture. This can be used to the advantage of the outsourcing company as work can be distributed in small groups. Working as a team tends to bring out the best in all individuals. It is also said that one member can make up in the event of any lapse on the part of another member. In order to motivate the employees the company can offer incentives on the achievement of a target. On a successful completion of a training program the employees can be awarded certificates. This can boost the morale of the employees and propel them to perform to the best of their abilities. Presently a major challenge faced by the outsourcing companies in China is ‘language barrier’. However, this can be improved by imparting training with respect to language skills and accent. Given the country’s high LTO (long term orientation) ranking of 118, the people in the country will be able to overcome this difficulty as well. The above average ranking of China in masculinity index shows that the society is male dominated. So if the company wishes to hire female employees it will have to make certain allowances. For jobs involving customer interaction the companies prefer female employees but given the societal framework this would require the companies to offer additional benefits such as working hour flexibility to the women employees. In short if a company wants its plans to be successful it must imbibe the local culture. Forecasts and outcomes The cost of labour is one-third in China as compared to India. No doubt the outsourcing companies are attracted more towards India. Considering the high rate of inflation and high training costs that the BPO firms have to incur in India the country is slowly loosing its sheen. This can work in the favour of China in the long run as the cost of labour is less as compared to India. It will give the country a competitive advantage over India (MPRA, 2008). The growth of outsourcing industry in China is advantageous from the point of view of the outsourcing company on account of low cost of human resources. At the back of an off-shoring activity is cost reduction. The country may be behind India in terms of earnings however the country possesses strong potential. As per the research conducted on China the IT outsourcing industry is expected to grow at the rate of 30% in a time span of less than a decade (Laozeng, 2010). Presently, Japan outsources most of its operations from the China. This is on account of the cultural similarities in the two countries. The low cultural differences facilitate better communication thus making China the choicest destination for outsourcing for the Japanese companies. However the presence of American and European outsourcing companies is not very dominant in the country. This is mainly doe to lack of fluency in English language. With time the country is expected to overcome this barrier. In fact the language barrier currently faced by the country is not something that is insurmountable. This is also reflected from the number of firms outsourcing their operations to China. There exist companies with able project mangers with high levels of proficiency in the language. A number of initiatives are being taken in the country to learn the language as is reflected fro the saying that the number of people learning English in China is more as compared to USA. Support is being generated from all the corners as even the Chinese government has invested funds for English education in the country. Conclusion The success of an outsourcing business in China is based on the extent to which the businessmen from the West are able to adapt to the cultural differences in the region. The cultural environment of China may be vastly different from the Western nations and this call for a sensitive approach of the Westerners towards the cultural values if they want their business plans to succeed. The outsourcing companies can take advantage of the low individualism ranking and high power distance ranking of the country. Reference ITIM International. 2009. Geert Hofstede Cultural Dimensions. Available at: http://www.geert-hofstede.com/hofstede_china.shtml [Accessed on January 20, 2011]. Laozeng. 2010. China Software Outsourcing Industry And Major Enterprises. Love Guangzhou. Available at: http://www.2gz.org/china-software-outsourcing-industry-and-major-enterprises [Accessed on January 20, 2011]. Jayaraman, K. 2009. Doing business in China: A risk analysis. Journal of Emerging Knowledge on Emerging Markets Volume 1 Issue 1. Available at: http://www.icainstitute.org/ojs/index.php/working_papers/article/viewFile/19/9 [Accessed on January 20, 2011]. MOFCOM. 2009. SPECIAL REPORT: Outsourcing to China. Available at: http://tradeinservices.mofcom.gov.cn/en/h/2009-02-08/67994.shtml [Accessed on January 20, 2011]. MPRA. 2008. Problems and Prospects of Business Process Outsourcing Industry: A Case Study of India. Available at: http://mpra.ub.uni-muenchen.de/9834/1/MPRA_paper_9834.pdf [Accessed on January 20, 2011]. United States Agency for International Development. 2009. MARKET DEMAND ASSESSMENT FOR OUTSOURCING SECTOR. Available at: http://pdf.usaid.gov/pdf_docs/PNADT051.pdf [Accessed on January 20, 2011]. Walsham, G. No Date. Cross-Cultural Issues in Global Software Outsourcing. Available at: http://www.almaden.ibm.com/institute/pdf/2004/Geoff_Walsham_1.pdf [Accessed on January 20, 2011]. Bibliography Daneshy, A. No Date. Outsourcing: Consequences of the People Shortage. Available at: http://www.spe.org/papers/pubs/tt/documents/v1n2_outsourcing.pdf Market Research News. 2010. SCM Market in China 2008-2012. Available at: http://www.salisonline.org/market-research/scm-market-in-china-2008-2012/ Taylor, N. 2009. India vs China: outsource what to where. EATG. Available at: http://www.eatg.org/eatg/Global-HIV-News/Pharma-Industry/India-vs-China-outsource-what-to-where Read More