Research Proposal on "International Business Setting-Up a Business in Beijing"

Research Proposal 7 pages (1941 words) Sources: 7 Style: Harvard

[EXCERPT] . . . .

International Business

Setting-up a business in Beijing, China- an environmental analysis

Engaging in business relations and transactions in China requires two (2) important prerequisites: knowledge about its culture and society and knowledge about the formal and informal systems of conducting business in the country and its cities and provinces.

The first prerequisite, knowledge of Chinese culture and society, is a critical component inevitably dealt with when conducting business in culturally-different societies and areas. This is particularly important in China, where people are primarily culture-bound in their ways and values, and this translates to their everyday activities, which includes business transactions, be it within the formal business system, or as part of the informal economy of the country.

Success in conducting business in China, particularly in the city of Beijing, is hinged on the company's grasp of the essential aspects of the city's business culture. 'First contact' with the city's business culture would come from the company's representative, usually an expatriate ('expat') delegated to establish initial business undertakings with principal contacts and core groups essential to the formation of a solid foundation of the business in the city. The role of the expat is indeed critical to the success or failure of the company's business endeavor in a culturally-laden country such as China. It is through the expat-representative that Chinese business affiliates will be able to gauge the acceptability of the company -- particularly its people -- to the business culture and landscape of Beijing (specifically) and the country in general.

Erbacher et. al.'s (2006) study on expat success in China uncovered six (6) factors that influence an expat's effectiveness in accomplishing his/her role as business representative to a foreign company or organization. These factors are categorized into two groups: personal and situational factors. Under personal factors, an effective expat-representative is said to 'perceive his/her career path, willing to relocate, and has a degree of personal international orientation' (184). Situational factors that influence expat effectiveness in enhancing business relations and brokering transactions, meanwhile, are said to have 'cross-cultural skills/relational abilities, cross-cultural training for cross-cultural adjustment, has a clear understanding of his/her role, has significant level of support from company, strong relationship between the expat and the company, and performance management system of the company' (184-5).

It is important to understand the underlying factors critical to determine the expat's success in mediating business transactions between the company and its Chinese affiliates. While the expat is not part of the 'natural social landscape' of Beijing, he/she must be included in the company's environmental analysis since he/she will become assimilated as part of the business landscape that the company would eventually enter, should initial transactions prove to be successful for the company. It is through the expat that the company will be able to project itself against the Chinese business community, and Chinese society, in the long run. Thus, because the expat would inevitably become a part of the Chinese business landscape, his/her competence in 'getting the job done' more than satisfactorily will become the main gauge that the company will take into account as it embarks into greater and more business dealings with its Chinese affiliates.

Of course, looking into the movements of different industries in China is just as critical as sending the right representative (expat) to launch the initial groundwork for the company in Beijing. A thorough scan of businesses in Beijing reveals that despite the gradual relaxation in state control over businesses in the city, it still has a stronghold over these businesses, and are actually 'informally' and perhaps, 'invisibly' governing and indirectly controlling the regulations that ultimately determine the nature of transactions and determine the level of consumerism in the city.

Powers' (2005) study of the retail industry in Beijing reflected this state of affairs. Though the government has already relaxed its control over retail business in Beijing, the author reported that "[m]any domestic retailers are nevertheless still hindered by inefficient state-owned enterprise management structures" (10). This status of the retail sector is not uncommon in the city, and this is in this aspect that the state inevitably showed its 'stronghold' and indirect control over local businesses that are gradually growing and competing against foreign-owned and international businesses. However, further review of the statistics on the retail sector in the city shows an increase in growth in local and foreign-owned retail businesses, signaling that the seemingly inefficient way of managing businesses by the state are gradually being replaced by "modern management systems" and "experienced managerial staff from foreign retailers" (ibid.).

Management systems are just one aspect of the overall state of business in the city. Apart from organizational changes, companies entering the Chinese market and business landscape would have to confront problems that the city took on for many years, even before it opened itself to the free market and the world of capitalism. These problems include, among others, poor infrastructure in the country in general, particularly water resources, transportation, and energy; improvement of the quality of human resources (linked with improvement of management systems); establishment of corporate systems in large- and medium-sized state-owned companies (SEOs); and increase in foreign investment to stimulate business growth in key cities and provinces in the country (Gelb and Chen, 2004:10).

This analysis ends by integrating the two components needed to enter the Chinese business landscape: knowledge of local culture of Beijing, and knowledge of the formal and informal systems governing business in the city. From the first part of the analysis, it was established that the expat has the crucial role of being the 'representative' of the company/firm to Beijing. As such, he/she must be culturally competent to provide his/her company with the practical and correct cultural knowledge necessary to make business dealings go smoothly and efficiently for the company. At the same time, the company must include in its analysis the expat himself/herself, as part of the business landscape it would be entering when it finally decides to go ahead with a big business launch in Beijing. Complementing this internal analysis of the company's representative and his/her self-reports on the local business culture of the city, the company, in partnership with the expat-representative, must assess the market movements in Beijing and China in general. As explicated earlier, it is by monitoring these industry movements that the company would have an in-depth look at the issues that must be dealt with once the company starts operating in Beijing. As the retail sector example demonstrated, Beijing still suffers from poor management effects that the government left as a 'legacy' to its businesses all over the country (i.e., businesses that were previously state-owned). From the analysis conducted, poor management system -- lack of adherence to the modern corporate system -- was the common root of the problem why local businesses do not grow as expected in the gradually flourishing Chinese market, both domestically and internationally.

Conceptual Model of Intercultural Business Communication

Using the conceptual model of intercultural business communication, the company would best address the needs of the expat-representative, the critical element in the success of the business transaction between the company and its target Chinese affiliates. As discussed in the previous section, the expat would be most effective in his/her role if she will be culturally competent -- that is, he/she has the 'cross-cultural skills/relational abilities, cross-cultural training for cross-cultural adjustment' (Erbacher, 2006:185).

The hurdle that the company could encounter as it prepares for a full business launch in Beijing is to determine whether the business would be acceptable not only to the consumers, but to the business community as well. Further, if indeed the business is acceptable in the Chinese business landscape, the company would then need to ascertain its sustainability -- whether the business would thrive over time or not. To prepare for these eventualities, it is necessary to equip its foreign staff the necessary skills to make cultural adjustment easier and smoother than it could be for them. The intercultural business communication model makes use of the concept of "transactional culture," a context that is illustrated to happen "[w]hen two business people from two different cultures interact, they bring their own backgrounds with them, but they also step outside their own cultural and business environment and create a new context," that is, the transactional culture (Varner, 2000).

Introducing the concept of the transactional culture to the company's Beijing staff (including the expat-representative) would enable its local and foreign staff create a 'compromise' wherein cultural differences are suspended, if not altogether dismissed, by both groups. Moreover, the advantage of this context is that it gives both individuals (conducting a business transaction) a semblance of control over each other, without necessarily antagonizing each other because of each other's differences. By assuming the transactional culture, Chinese and foreign staff would be able to adjust to each other and the company's corporate culture more effectively and realistically, even though it operates under the Chinese business culture.

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