Asian Management System and Global Challenge - Assignment Example

Introduction Culture is one of the most important ingredients of the successful management in global business environment. As the business grew and expanded into new areas culture became one of the most dominated factors that basically outlined the manner in which managerial practices were to be exercised. With the rise of the Asian firms on the international scene, it has become more important that culture shall be taken as one of the important factors which basically contribute towards the strategic success of a firm. Japanese style of management emerged out of the need to have more critical insight into the cultural factors which can offer a firm sustainable competitive advantage in the market. Since World War II East Asian economies including the economies of China and Japan have dynamic economies of the world with a unique business model which focused on culture as one of the essential ingredients of the success in the market.(Campbell& Burton,1984). Emergence of China is an example for the rest of the world to follow a model of competitiveness that has focused on developing strong family based businesses with international orientation. Most of the successful businesses in China started as family businesses and owners carried forward the cultural and family values into their businesses too. This paper will attempt to explore how cultural factors basically contribute towards achieving the relative efficiency and competitiveness of the Chinese Business at Regional level. This paper will not focus on the individual company and assess the impact of culture on its competitiveness rather culture and competitiveness will be explored in larger context of the Chinese Economy as a whole. Asian Management Systems The Anglo-Saxon Capitalism is mostly practiced in English speaking countries and as such it is practiced in a manner that makes a clear distinction between the business and personal relationships. Typical Anglo-Saxon capitalist thinking does not allow inter-mingling of business and personal relations. Further, the role of regulations, government as well as taxes is minimal in this mode of capitalism however; Asian economies are relatively different from this mode of capitalism. One of the distinguishing characteristics of Asian economies is the relative role of governments in supporting the enterprises in their pursuit to achieve the economic freedom. After the Second World War Japan emerged as one of the strongest economies in the world and dominated the world economic scene. Japan is still considered as the second largest economy in the world following a unique business model of competitiveness and success. Apart from Japan countries like Korea, Taiwan, China as well as Hong Kong emerged as the best performers in the region owing to their rapid rise to the economic success. As a result of this success, four important management systems in the region including Japan, Mainland China, China overseas and Korea emerged as the best practices for the management. (Chen,2004). It is also significant to note that the management system in mainland China was mostly based on the State owned enterprises and somewhat bureaucratic in nature whereas the management style that was adapted to portray China in global markets was relatively more unique and provided clear and definite competitive advantage to the Chinese firms in international market. (Tran, 2003). The influence of culture on the Chinese business or rather Asian business systems has remained significant as owners of the firms kept their organizations intact by imparting strong cultural and family values whereas on the other hand, collectivist norms of the culture were introduced into the very fabric of management style too. (Chen, 2004). Chen (2004) therefore considers the management practices adapted by the Asian business and rest of the world as collectivist capitalism and individual capitalism. This collectivist approach is also carried forward in technological innovation also as many empirical studies revealed that there are significant differences between the Asian firms and other firms to manage the technological innovation. Any technological innovation require partners such as suppliers and customers to commercially launch a product and as such the overall networking and forging of personal relationships play a significant part in creating such linkages between the various stakeholders in swift manner. (Hellman,1996). Thus one of the critical aspects of Chinese management is the assumption that business relationships shall not be impersonal in nature and rather culture and personal values shall also become part of the business practices. This also requires that the relationships at each stage i.e. with the employees and other stakeholders must be formulated in personal manner rather than keeping a distance between the business and personal lives.(Hamilton,1996). This assumption also outlines the need for forging relationships between different agents on the basis of how closely one can relate himself to the group. (Lee,2005).The Japanese style of management or other management systems in Asia are mostly based on this basic assumption of relating oneself with the group and how closely one reflects the overall characteristics of the group. For example, Tata industries in India is considered as one of the most successful family business in the country owing to the fact that it has deeply established itself as someone who cares about its local environment and people.(Chang & Chang, 1994). By participating in the community building activities, family businesses like Tata tend to generate their competitive advantage. According to Chen, there are certain conceptual differences between both the forms of capitalism however; they still retain the unique characteristics of the capitalism. What is however, different between the two is the essential orientation of both the systems and how they individually evolved over the period of time. Chinese overseas model of business largely emerged as a result of the rise of the family businesses which risen to the galore in pursuit of wealth maximization. However, the rise of family business in China brought with it the necessary encroachment of local culture into business practices. The family values which formed the core of a Chinese family were also trickled down into the business and business practices were modeled according to the local culture. (Kao,1993). The element of bringing in the culture into the business therefore allowed Chinese businesses to become more flexible and develop their networks to generate the sustainable competitive advantage. As discussed above that the Chinese capitalism is collectivist capitalism therefore it allowed the development of informal networks between the businesses which were mostly modeled on the basis of forging long term family relations. The emergence of family businesses also allowed easier succession planning as next generation of the family often undertaken the business with much more refined frame of mind and business ideas owing to the fact that next generation of Chinese businessmen often completed their business education from top business schools of the Western world specially US based business schools. Networking in Chinese Business Guanxi is the word which is used in Chinese Business world that denotes the inter-linking relationships between the different individuals who support each other in business. This word also indicates as to how the Chinese businesses work thus one of the most important aspects of culture in Chinese business is the emergence of networking. Networking is considered as the “fundamental source of competitiveness” for Chinese businesses.(Redding,1996). This has been mostly a result of the strong socialization within the Chinese family traditions. Most of the overseas Chinese businessmen shared a common heritage wherein their upbringing as well as grooming was done in a manner that allowed them to remain flexible and easily formulate the networks with others. The influence of Confucius seems to be relatively stronger on the Chinese collective thinking and their business patterns. The ideas of Confucius required the creation of an orderly society based on the health social relations within the members of the society. Resultantly Chinese are more inclined towards forming relationships that are based on strong socialization and networking. This simple methodology was carried forward into the business practices also wherein the socialization remain main element of interaction between the employees as well as the employers. Above all, the respect for authority is such that superiors were automatically ranked as superiors out of their position within the organization. This element of culture therefore inculcated into the minds of Chinese entrepreneurs as well as employees a certain sense of respect for the authority, care and respect for others. This therefore transformed itself into forming stronger relations between the employees as well as the entrepreneurs wherein both owners and employees became part of one family and working for a common cause. Trust is another important factor that leads to the development of important business relationships between the entities. Forging trust is one of the important characteristics of the Chinese culture and this has been carried forward into the business practices too. Various empirical studies have suggested that one of the success factors for the Chinese companies have been the presence of mutual trust between the employees, employers as well as the firms. (Hamilton,1996). It is also argued that the trust not only exists within the personal relationships but also its focal point is outside the personal relationships too. Most of the Chinese businessmen have strong faith and trust into the political as well as legal system of the country. This type of trust which is often called system trust clearly indicate that the notion of trust within Chinese society is not only present in the personal relations but also indicate the complete faith of the people in their own system. Chinese overseas businesses such as in Hong Kong have strong trust in their civil system without showing particular allegiance with any political leader. This also means that the businesses do not rely, for their competitive advantage, on the exclusive government support but rather they derive their strength from within the system which reflects the cultural values of the society as a whole. This means that the firms will no longer become too much reliant on the certain political leaders but rather are flexible enough to work with the different political administrations. Religion is another critical factor which ethically binds the Chinese entrepreneurs to carve out their relationships in a manner that it allows them to develop close knit relationships with others. The Buddhist ideologies of care and compassion for others are essentially the most important thing that provides an inherent advantage to the Chinese firms to develop the long term relationships with their employees.(Bucknall,2002). It is because of this reason that the employees develop a long term association with their firms and overall loyalty is relative much higher as compared to other Western businesses where labor force has essentially became portable in nature. Like Japanese style of management which emphasized on the development of long term relationships with the employees, Chinese, influenced mostly by their culture and religion, tend to form the similar type of relationships with their employees. As discussed above that the according to the Confucian ideology, a superior is always a superior and a natural respect emerge for him therefore when employees are being cared for they reciprocate the same by submitting themselves to their employers and attempt to develop their long term association with their employers.(Martin & Larsen, 1999). Apart from this, it is also critical to understand that Chinese industry is clustered into particular geographical regions and as such the culture of those regions also influences the business practices of the firms working in that cluster. Further, the moral connectedness that is heart of the Chinese businesses further consolidates that bond between the various stakeholders.(Hamilton, 1996). It is therefore concluded that the Chinese family businesses are strongly influenced by their family values and local culture and they inculcate the same into their business practices also. Conclusion Culture is one of the most important characteristics of doing business in China as Chinese businesses attempt to generate their competitive advantage from their culture and its influence on the businesses also. Mostly driven by the Confucius philosophy, Chinese firms tend to engage themselves into practices which are largely shaped by their culture. Such factors include care, formation of long term relationships as well as networking. Trust is another important factor that leads to the development of important business relationships between the entities. Forging trust is one of the important characteristics of the Chinese culture and this has been carried forward into the business practices too. Various empirical studies have suggested that one of the success factors for the Chinese companies have been the presence of mutual trust between the employees, employers as well as the firms. On the whole it can be concluded that beside other factors such as cheap labor as well as improved technology, culture is one of the dominant factors that allow Chinese firms to achieve the relative efficiency to compete in the international market. The influence of culture is higher in overseas Chinese businesses as compared to the mainland Chinese Businesses therefore firms in regions like Hong Kong and Taiwan are relatively better positioned as compared to the firms operating in the mainland China. References Books 1. Bucknall, K (2002). Chinese Business Etiquette and Culture. New York: C&M Online Media, Inc. 276. 2. Campbell & Burton, F (1994). Japanese multinationals: strategies and management in the global Kaisha. London: Routledge. 3. Chang, C, Chang,N (1994). The Korean management system: cultural, political, economic foundations. Greenwood Publishing Group: California. 4. Chen, M (2004). Asian management systems: Chinese, Japanese and Korean styles of business. 2nd ed. New York: Cengage Learning EMEA, 5. Hamilton, G (1996). Asian business networks. London: Walter de Gruyter. 6. Hellman, J (1996). Business networks in Japan. London: Routledge. 7. Tran, V (2003). Competition policy and global competitiveness in major Asian economies. London: Edward Elgar Publishing. 8. Redding, G. (1996). Asian business networks. In: Gary G. Hamilton Weak Organizations and Strong Linkages: Managerial Ideologies and Chinese Family Business Networks. London: Walter de Gruyter. p28-36. Websites 9. Kao,J. (1993). The Worldwide Web of Chinese Business. Available: http://hbr.org/1993/03/the-worldwide-web-of-chinese-business/ar/1.[ Last accessed 21 March 2010.] Journals 10. Lee. T (2005). Development of management philosophy for Chinese business environment. 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