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China Case

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Executive Summary

China had become an eye-catching prospect for many Multinationals because of the potential the country showed for hosting foreign direct investments. Electronic Communications Ltd. (ECL) decided to embark upon a lucrative venture in the global market however ECL faces several difficulties in China. As a diverse and multicultural organization, Electronic Communications Ltd. must implement a specific culture that places emphasis on its key beliefs and goals. The following literature will discuss the cultural issues, identify, analyze, and recommend communication and conflict resolution strategies and negotiation skills required for management to successfully establish a healthy corporate culture which will facilitate successful organizational processes.

Problem Identification

Organizations continuously seek ways to improve and grow their business in an ever evolving global business market. As a global leader in providing integrated communications solutions and embedded electronic solutions (Wong & Ho, 2001) ECL decided to build a home in China because it presented a large, diverse market. Operating in the global market presents challenges of various facets and ECL is faced with managing these issues to ensure its success in China.

One of the main problems that ECL faces is the cultural differences that exist between Chinese and American culture. The company is faced with determining whether to adapt their management practices to Chinese culture or to implement ECL's global management practices in China (Wong & Ho, 2001). Traditional Chinese culture, practices obedience and humility (Wong & Ho, 2001) which differed significantly from that of western culture and this further presents the issue of employees' ability to be proactive. In Chinese culture there is a hierarchical business structure where leaders are looked upon for direction as they are perceived to have natural authority.

Differences in communication styles presented another problem for the company. Chinese were more adept to using indirect communication rather than direct communication as was the practice of Westerners. This gap in communication could fuel conflict and hinder the integration process. As one expatriate pointed out, saying a direct no to a Chinese partner could negatively affect the personal relationship (Wong & Ho, 2001) and could be detrimental to team cohesion.

Teamwork is required for ECL to achieve a successful presence in China however; Chinese focus more on individual performance and lack teamwork capability (Wong & Ho, 2001). As discussed in Engleberg & Wynn (2010) a study commissioned by the American Association of Colleges and Universities found that teamwork and collaboration skills were critical in diverse groups. Expatriates credited the Chinese educational system for this due to the emphasis placed on testing individual abilities (Wong & Ho, 2001).

Approaches in negotiation were another issue ECL recognized in China. The Western approach placed significant emphasis on specifics whereas it was the custom of the Chinese to focus on clarifying objectives and achieving mutual understanding (Wong & Ho, 2001). Due to the level of emphasis placed on building trust and establishing relationships internally and externally the Chinese way of business is viewed by expatriates as inefficient. On the other hand the Western system management style which allows them to delegate tasks is viewed as inefficient because of the perception that the decision-making process is delayed (Wong & Ho, 2001).

Expatriates were sent to ECL China to facilitate the establishment of the company and the integration process. However the problem is that these expatriates were not given enough decision-making capabilities to stay abreast with the market. In addition to maintaining a steady pace in the global market ECL was faced with the challenge of finding and retaining competent employees. Wong & Ho (2001) informs us that as a result of the reform, demand for competent employees exceeded supply.

Situation Analysis

In Chinese culture there is a clear hierarchical structure and subordinates do not take initiative to make decisions but, rather seek direction from authority. Employees view actions of making decisions without instruction from top managers as out of line and possibly anticipate consequences. This is a result of China's high power distance cultural dimension. Engleberg & Wynn (2010) state that high power distance accounts for the acceptance of inequality among members. Expatriates view the qualities of obedience and humility as less proactive and may possibly regard their Chinese business counterparts as lazy. The qualities of obedience and humility that the Chinese possess are perceived by the expatriates as lazy and negatively affect employees being proactive.

The success of ECL's endeavor to establish a home base in China is dependent on an effective communication climate between expatriates and employees. Engleberg & Wynn (2010) tells us that the use of and reaction to communication methods create a unique group climate. As mentioned by Wong & Ho (2001) indirect communication was the practice in Chinese culture whereas Western culture practiced a more direct approach. The use of criticism - a direct Western approach - is used to highlight areas that need improvement and to facilitate a proactive attitude however, this may be conceived as demeaning and embarrassing and my not have the effect that expatriates expect. This could possibly create a defensive climate. Engleberg & Wynn (2010) indicates that a defensive



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