International Management Review

Vol. 2 No. 3 2006

Researching on Cross-Cultural Management of Chinese Corporations

Youli Wang School of Management, North China Institute of Science and Technology, China Xiongyi Li Dept. of Business and Administration, Zhongyuan Institute of Technology, China

[Abstract] With the increasing rate of integration of the world economy, transnational

corporations are playing a more important role in the world economy. Chinese enterprises transnational operating activities are also a trend in the development of the Chinese economy. This article analyzes the current situation, the reasons for multi-cultural contradiction and conflict of transnational corporations in China, and sets up the steps and strategies of crosscultural management according to the cross-cultural theory. It contributes to help the healthy development of Chinese transnational corporations in the world economy.
[Keywords] transnational corporation; culture; cultural conflict; cross-cultural management; integration, Chinese enterprise

With the rapid development of the world economy and technology advances, transnational operations become the evident trend in world economy. Worldwide, multinational enterprises integrate their own capital, technology, market, and research and development (R&D) with human resources, natural resources, and market scales in host countries. Using the transnational culture advantage, transnational operation, and interchanging advantage resources worldwide are the main form of enterprises international operations. Transnational operating activities in Chinese enterprises are also thriving. Transnational operation activities became Chinese enterprises main goal in the competitive world economy. These activities can help enterprises realize effective resources collocation, and participate in and make good use of international markets to promote their international competitive abilities. Because of different cultural backgrounds and regional environments, transnational enterprises have more opportunities and challenges than before. Effective cross culture management can ensure successful transnational operation of international enterprises in the multi-culture and region. It is, especially, practically significant for those Chinese enterprises that are syncretizing into world economy. 1. Theoretical Perspective
1.1 Cross-cultural Management Define

Cross-cultural management is the management of people and things that involve a different culture background. Cross-culture management studies teach how to overcome conflicts of the heterogeneity culture and actualize effective management. Its aim is to design a feasible organization structure and management mechanism across the different culture backgrounds and rationally collocate enterprises resources, especially exert potential value of enterprises in the most degree (Li, 2000).
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International Management Review 1.2 The Significance of Cross-Cultural Management

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In the 21st century, Chinas huge market will attract more and more foreign investment. Chinese enterprises will also invest abroad more. Statistical data indicates that China is second in foreign investment. With the increasing investment in foreign enterprises, China introduced not only capital and technology but also management. The different value conception, operation thought, management method, thinking mode and moral and behaviors criterion conflicted and collided while foreigners took part in manufacture, operation management and technology, and quality supervise. Currently, China invests in many foreign countries and regions and its foreign investment shows an increasing trend. When Chinese enterprises abroad or the foreign enterprises communicate in different culture levels, it inevitably brings friction and contradiction, and influences the normal operation of enterprises severely. Therefore, Chinese enterprises need a better understanding of foreign countries culture and need to implement cross-culture management theory to reduce the harmful effects produced by culture conflicts in transnational operations to a minimum. This is very important for the sound development of Chinese transnational corporations and constant development of national economy. 2. The Present Situation of Cross-culture Management in Chinese Corporations
2.1 Problems of Cross-Cultural Management in Chinese Transnational Corporations

Because of reform and opening the Chinese market, Chinese transnational corporations made a rapid development. One of the reasons for the success of Chinese transnational corporations is that the corporations introduced capital and technology with a management system and an innovative ability to research effective management model for joint venture. Under the condition of multi-culture, culture deviation and exclusion that resulted from different political systems, different economic conditions, and different culture are called cross culture problems. Joint ventures are the production of capital, technology, and management of different countries, and the production of culture diversity of different counties and nations. Data shows that the rate of successful joint venture management was only 45%. One of the important reasons is the historical thought of operation, management ideas, and methods and stuff behaviors in Chinese transnational corporations. Cross culture problems are discussed below.
2.1.1 Diversity of Culture Value Idea

Thought conception difference Chinese traditional culture lasted thousands of years, influenced every corner of society, and formed the special unit culture in the organization. It is not a simple right and obligation relationship among organization members but almost a patriarchy-system, ethic, management relationship. The character of seeking steady and firm in Chinese tradition culture makes people conservative in business activities. Chinese managers in joint ventures have a stronger fogeyish sense and weaker risky spirit, so they are often conservative in decision-making and often miss opportunities in the intensely competitive market. Western managers, on the other hand, are risk-takers, innovative, and take the initiative to use new technology and exploit new markets.

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Behaviors method differences Foreign managers behaviors are straightforward, but Chinese managers behaviors are implicit. Foreign managers are always good at planning, but Chinese lack a sense of planning. Management style differences Foreign management systems are procedural and numeric, but Chinas management systems have less consummate system and procedure, often ignoring the effect of statistics while depending on experiential judgment. Management system differences Management systems differ in the areas of performance assessment, personnel prompting, and making decision. Foreign management systems pay a lot of attention to actual performance and the result, and not to the process. Chinese management systems not only emphasize actual result but are also concerned about a persons moral thought, behavior criterion, and work process. Decision-making differences Chinese and foreign managers conflict in the decision-making process when the decision is risky. Occidental emphasizes ego, the individual and straight expression of thoughts. They are good at empowering and recognizing efficiency. They might believe that asking peoples for suggestions to solve problems and then making a decision is a clumsy and low effect method. The effect of tradition hierarchy system forms the big distance of power between top manager and subordinates in China enterprises. The ranking system of management is strict top managers have special power; and subordinates are attached to their superiors. Chinese top managers have more power than their western counterparts, however middle and first line managers are much less empowered than their western counterparts. So, Chinese middle and first line managers are not good at making decisions. Influenced by the concept of peace is priceless, Chinese managers often expect their decision to be labeled as coming from people, so they spend much time in seeking the recognition and approval of decisions from people. This is the so-called democracy and collect postpone the decision process (Yan, 2000).
2.1.2 Governed by Law and Governed by People Difference

The concept of governed by law includes rational thinking, habit, and a fair sense of play. It is embodied in the social system of western culture and is integrated into enterprise operation activities. First, the system is the result of rational thinking, analyzing workflow, employees motivation, and the enterprise economy environment. In addition, realizing the real fair sense of play and indiscrimination to employees depends on a system that is the object standard. Because of this culture idea, western enterprise systems are always perfect and have complete written system documentation that governs from every position job analysis to a complete set of scheme. In this aspect, America enterprises are good examples. However, Chinese managing thought is governed by people. Managers seldom pay attention to the establishment of system and
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procedure, or think about the sustainable development of enterprises. Governed by people was cultivated in the two important traditional characters of Chinese culture: concept of hierarchy and people relationship. Because of history and culture reasons, the phenomena of governed by people will exist in daily life for a long time.
2.1.3 Lacking Definite Development Aim and Corporation Spirit

Lacking definite development aim and corporation spirit, members in transnational enterprises have no suitable value tropism for their behavior. Pursuing short benefit became the unique goal of some enterprise, and breaking game rule events became frequent. These are important reasons of joint ventures frustration and failure. 3. Constituting Cross-cultural Management in Chinese Enterprises
3.1 Strategic Steps

Recognizing and introjecting culture difference American anthropologist Edward. H classed the culture in three categories: normal criterion, nonnormal criterion and technology criterion. Normal criterion is the basic value idea and criterion. It can resist the forces that try to change it from the outside, so the friction produced by normal criterion is not easily removed. Nonnormal criterion refers to peoples habit and custom. Communication can overcome the friction produced by nonnormal criterion for a long time. Technology criterion is required while study knowledge and technology, so it is easy shift. Obviously, culture friction and difference produced by different culture criterion are different in degree and styles. When culture difference is recognized, we can introject it then. Cross-cultural training Cross culture training is the effective method to resolve culture differences. Culture sensibility training is the main type of training, especially for non-indigene people. The four main forms of culture sensibility training are as following: 1. Culture education. Experts introduce host country culture and guide employees to read books and material to prepare for their work in the new environment. 2. Environment simulation. This involves simulating the host country environment. Simulations of the possible problems and difficulties in employees work or life help employees learn how to deal with these situation and difficulties. The simulations also try to make employees to think and act in the host countrys way. 3. Cross culture study. Organizing members discuss and study the host countrys kernel, and its influence on managers thinking process, management style, and decision method. This is performed by seminar and as part of an academic study. This training method can promote employees understanding of host countrys culture and improve their ability to resolve difficulties in culture integration. 4. Language training. Language communication is the effective way of improving ability to adapt foreign culture. Language training enables employees to learn the host
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countrys language and knowledge. Employees must be familiar with expression and communication methods, like gesture, signal, ritual, and custom. Educating common value ethic, establishing enterprises general culture. According to condition and enterprises strategy requisition, transnational enterprises should establish the enterprises common operating idea and vitality organization culture. The new organization culture should be comprehensive and innovative because of the deep and lasting effect of the original culture. The new organization culture is the internal request of transnational enterprises development. The new culture inherits the characters of the parent companys culture and the local culture at same time; it is the integration of two kinds of culture. Therefore, it strengthens the culture syncretic ability of international enterprise and builds up the good reputation of transnational corporation competition advantage in international market.
3.2 Strategic Method 3.2.1 Native Localization

Realizing that native localization needs to abide by the principle of thinking globalization and activities localization. Employing native employees is very helpful because they know local customs and habits, market trends, and government law. They have common sense with the consumer. Hiring local employees helps to expand and take possession of the market. It also lowers the cost of sending abroad personnel to the host country and decreases expenditures of the transnational operation. Employing native employees also make it easy to amalgamate with the local culture and to abirritate the hostility of foreign investment invasion. When appointing host country manager, transnational corporation should mainly consider employees ability and select them to fill the right position.
3.2.2 Culture Pervasion

Culture pervasion is a long process of observation and cultivation. Because of huge differences between the parent company culture and the host country culture, transnational companies cannot attempt to force local employees to obey the parent companys human resource management model. The advisable process to follow is culture pervasion. Culture pervasion induces host country employees to adapt the parent companys country culture gradually. Developed countries economic mightiness ensures their culture domination. The host country might lag behind in the economy and culture for the time being, but the distance will decrease with the development and advancement of the developing countries. The investment countrys culture cannot dominate the enterprises culture management immediately but to carry through culture pervasion step-by-step.
3.2.3 Third Kind Cultural Strategy

Because of the huge culture difference between the parent country and the host country, transnational companies cannot be seasoned with the operating environment in the host country in a short time. It is wise for transnational corporations to use a neutral or third kind culture that can be cultivated in third place and reach some commonality with the parent company to govern subsidiary companies in the host country. This strategy can avoid a
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country culture conflict between the parent company and the subsidiary company.
3.2.4 Competitiveness of Culture Diversity

Different cultures have their different culture values. When cultures integrate together, the useful culture value will be draw, crasis, and exertion. This is the integration of culture diversity into the process of competitiveness. Different cultures have their own individuality and commonness, independence and particularity, and universality and communication. When different individual cultures appear in the same place, a cultural gene must be attracted and coordinated, and eventually gather into one new culture from form to contents. Different cultures have different value aims, value tropism, and function because of their different origins and characters. With social flux and increasing demands on workforce, different cultures must be coordinated, modified, and integrated to build up new corporation culture system. Because of new contents, characters, and functions, a new corporation culture system possesses competitive advantages and suits the needs of corporation development. Cox and Black speculated that competitive advantage comes from the diversity of culture. It is shown as follows: Market: enhance the ability of meeting local market cultural predilection Obtaining of resource: enhance the capability of obtaining local human resource Cost: reduce the cost of hiring foreign managers Creativity: coexistence of cultural diversities enhances the corporation creativities Management flexibility: elevate the flexibility of dealing with the change of market demands (Source: Adapted from TH Cox and SBlake (1991) Managing cultural diversity: Implications for
organization competitiveness, Academy of Management Executive, 5(3), pp. 45-56.)

4. Conclusion Basing on understanding native culture and foreign culture, Chinese transnational enterprise managers should conform to the trend moving from a single culture management to cross culture management. The managers must be cognizance of the disadvantages and advantages of cultural difference in the enterprises activities, select a suitable cross-culture management model, form the enterprises core competition, and build up good reputation in international market.

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References Li, W. (2000). Discuss on cross culture management China: Sichuang University Transaction philosophy and social science, (1) (pp: 15, 20 [2] Jiang, Y. (2000). The intercourse, conflict, and correspond of foreign and Chinese enterprises culture. China: Industry and Enterprises Management, (6), pp. 122-126 Zhang, de (2000). Receive the challenge of cross culture management . China: Chinese and Foreign Enterprises Culture, (1), pp. 5 Sosan, C., & Seniden, J-LuisBaerskx. (2002). Cross culture management. Beijing: Economic Management Press Song, Y.F. (2001). International enterprise management. Beijing: Center Broadcast and Television University Press Kolun, J.B. (2000). Multi-countries management strategy. Machine Industry Press Zhu, Y.S. (2000). Cross culture management: cooperation in conflict. Guangdong Economic Press House

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