Australian Businesses in China: Strategies to Overcome the Cultural Gap

Australian Businesses in China: Strategies to Overcome the Cultural Gap

Mona Chung (Deakin University, Australia) and Jane Menzies (Deakin University, Australia)
DOI: 10.4018/978-1-4666-0276-2.ch002
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Abstract

This paper indentifies a main barrier when doing business with China, the cultural gap, and provides the strategies that companies can use when entering the Chinese market. This empirical study examined 40 Australian organisations in their activities when entering the Chinese market. Alarmingly after 30 years of attempting to do business in China, companies are still not addressing the issue of cultural differences. Companies are also caught by surprises due to lack of preparation how large the cultural gap is between Australian and Chinese business culture. The findings of the study have important implications for businesses considering entry to China, and for Australian businesses already doing business in China. The strategies investigated include human resource strategies, dealing with Chinese staff, relationship building, getting outside support (employing consultants), learning about the culture, and adapting to the culture.
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Introduction

Since the open door policy in 1979 China has seen an influx of capital in the form of foreign direct investment (FDI) (Yeung, 2000). In 2005 and 2006, China received 70 billion worth of FDI (Davies, 2007), and is becoming one of the world’s principle destinations (Bellabona & Spigarelli, 2007). According to the Department of Foreign Affairs and Trade (DFAT), China has become Australia’s 21st largest investment destination with $3 billion being invested by Australian businesses in 2006 (DFAT, 2007). However, China is not a straight forward market to invest in (Chung, 2008). Among many influencing factors, the cultural differences have been a challenging area for foreign investors. Previous research by Chung (2008) has identified that a key reason for business failure is not recognising the cultural differences. This paper addresses the questions:

  • 1.

    What is the cultural gap that Australian businesses experience when entering and operating in China? and

  • 2.

    What are the strategies that Australian businesses can use to overcome the cultural gap?

This paper will first investigate the cultural distance by examining literature in the area, and then examine the strategies Australian businesses use to decrease the gap, through an empirical investigation.

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The Distance Between Australian And Chinese Culture

Hofstede (1984, p. 21) defines culture as “the collective programming of the mind which distinguishes the members of one human group from another. Given this definition, the programming of the mind determines the differences of behaviours which are generally formulated over a long period of time under the influence of cultures. Previous research by Chung (2008) has identified there is a large cultural gap between Australian business and Chinese business.

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