The Impact of Cultural Differences on the HRM of Foreign Companies in China - Dissertation Example

This incongruity between, for instance, Western management values and those of employees in China can create difficulties in establishing effective human resource management policies and systems. Economic globalisation has created the necessity for MNEs to expand overseas and thus is creating fierce competition. Many companies that have expanded into China whilst still maintaining their host operations overseas seek to exploit their human capital as a means of gaining competitive advantage effectively over their competing companies in similar markets.

Because the human capital is considered one of the most important and crucial elements of establishing this advantage, it becomes extremely necessary for businesses to understand how to bridge cultural and social differences in order to build loyalty, motivation and productivity with individuals in China. China is a country that is ruled by rituals that often express significant differences in status at the social level. Those with higher resources often do not exploit or display their material wealth in order to illustrate their superiority over the lower or middle class citizens (Bell 2008).

However, significant changes to social policy in the 19th Century had the wealthy citizens in China driving lower class citizens from their land and poorer people grew increasingly angry over their exploitation by the wealthy (Bell). Because of this, individuals who fit the lower and middle class categories of citizens and workers have had it instilled into their social systems and mindsets that one must constantly fight to gain economic freedom by amassing wealth. Generation after generation have found that material wealth is the most important method to gain influence and social freedoms and continue to fight to gain this type of prestige through finance (Creative Media Applications 1999).

Why is this important for the study? Chinese management have a