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When Wilamc takes the decision to go into either China or India Culture ought to be considered. Wilmac being a Caribbean originated company is highly motivated by the United States culture, with performance being main focus. However in India "organization compatibility" is more important on the other hand for China "Guanxi or relationship" takes priority (Bhattacharyya, 2010). Globalization has make "made in" principle less important to consumers. However, Wilamc has already embrace diversification and has done extensive research into this area of culture in India and China.
Variables of Culture
Bhattacharyya, (2010).There are 5 cultural variables these are National, Socio-cultural, Cultural, Attitude and Individual and Group employee job Behavior.
The national culture relates to the government ways of doing something in a country, China is a communist country and is known for its rigid laws and systemic ways of doing things. Contrary to them is India who is more chaotic in their approach to laws and restrictions.
Socio-Cultural deals with the way how people operate there believe customs and traditions. For India their main Believe is Hinduism while in China there is Buddhism.
Cultural This includes the everyday acceptable behavior within a culture for instance Wilmac would that in China Christmas is not a holiday as they do not celebrate Christian festivities. However, most MNC do not celebrate this holiday. While in India Christmas celebration was a legacy they inherit from being colonized by the British Monarch.
Attitude has to do with time, change and other aspects of culture. It is considered rude to arrive late for meeting or appointment in China and will be frown upon by Chinese managers. But in India an apology is acceptable and business continues as usual.
Individual and group employee job behavior these are forms of motivational style and methods. India adapts a western culture to motivate their workers while China is inclining to mentally shackle their workers.
Factors that Attracts International Organization in China and India
Factors that attract FDI
The above table done by (World Development Indicators, 2003) indicates that China has managed to attract more Foreign Direct Investment (FDI) when compared to India. With China having a higher Gross Domestic Product (GDP) per Capita this is a magnet for international foreign investors. China has a lower illiteracy rate which points to the fact that they have a more skilled work force than their Indian counterpart. Also China lending interest rate is lower than India, more families have access to telephone line than India therefore communication is easier accessible in China than India. According to Liu, Liu and Wei (2002) when labor is improved within a country it helps to "improve efficiency" in the country economy. With this in mind India has managed to outweigh China in "raising productivity" up until the 1990s. However, china has policies and practices in place to compete with best practices.
China and India GDP
For FDI who specialize i export China is the best port of call as their focus is on mass production this reduces cost per unit, as a result India cannot compete effective with China in this sector.
Table 3 shows the tax regimes in China and India with India leading in the "Special Economic Zones" and India does not discriminate between manufacturing and service industry.
The above diagram shows that telephone lines are 6 times more frequent in China than India; more families have access to television in China than their Indian counterpart. One is more likely to find more individuals owning a mobile phone in China than India. Internet usage is higher in China than India; although India is concentrating on developing technology and IT sector. This is because the infrastructure in China is superior to that of India.
Though Mandarin is the most frequent spoken language worldwide, English is the language of business, this is where India is ahead of China as most Indians can speak English at all levels.
One of India main attraction for International companies is the fact that most of their population can speak English and with being the language of business they have competitive edge over their Chinese counterpart. However China is quickly catching up and most Chinese middle manager can speak English, but the wider population needs to
Another attraction into India is their IT (Information Technology) facilities they are the leaders in this market and will continue to lead until China population learns English, as most contract are from the western world who only speak English. Therefore the knowledge of English will allow China to compete with India who has 43% of the world market while China has 5%.
In terms of transparency and capital market India is ahead of china. India companies can be listed on the Bombay Stock Exchange which operates at an international standard and is more stable than their Chinese opponent but China Shanghai and Shenzhen stock exchange though larger than Bombay stock exchange. On the other hand, most of China's organization is state-owned therefore it could be that their financial position could be over stated, while in India financial statement are published and open to public scrutiny. Therefore India economy is more transparent. (Runckel, C. 2007)
Risk of India
India like its counterpart China also have some risk when a international business seeks to set up business there some of these are:
Politically India is very democratic and this has led to wide spread corruption
Their outdated laws adds to the corruption has court cases takes long to decide.
Start up time is Resource consuming
It takes time to start up business there Wilmac should be patient with the documentation process in India. Extra time should be given and resources monitored.
Loss of Power supply
The main cost for production loss in India is Power supply and ought to be investigated by Wilmac. History of the factory location and available power supply must be analyzed before entry into India market, as one is likely to get power outage in India than China.
Risk in China
China has many attraction however there are some risk that Wilmac Shoes should be mindful of, below are some listed:
Collins and Block (2007: 97-100) The process of starting a business could take up to three months and the governments usually determine the limit of the business scope. The business must register with the following government department, State administration of industry and commerce, the tax department and the documents must be done in Chinese. Continuous reporting to government department can be monotonous enterprise as foreign 100% ownership is not permitted. This system is similar to that of Dubai. The foreign business scope is constantly monitored and any variance requires one to apply for a new license.
Although English is the language of business it is important to note that in China knowing the local dialects could be beneficial to the business as interpreters could be an additional cost to the business. However most Chinese top level managers can speak English though they choose to communicate in Chinese, although they understand exactly what English speaking foreigners are saying.
Guanxi means relationship, this culture is still working it is important to build relationship within China. They accept gifts and this is not seen as bribery. On the other hand foreigner business ought to be careful of being hustled by Chinese who claim to have connection within the government departments. Also note that building business relationship and trust takes time in China. According to Heide (2008: 11-17) the right Guanxi is very important to keep business in China she refers to the McDonalds case where they looses their lease to a business man because they lacks compatible relationship though the lease expires in 18 years time, it will not be renewed. There is question about the ethics of guanxi however ignoring it could cause business to be unsuccessful (Dunfee and Warren, 2001; Su et al, 2003).
Lack of democracy
Structure of Power
Lack of Legal Infrastructure (Intell, Property rights)
High regulated regime
Lack of transparency
Inability to cope with health care emergencies (SARS)
Unpredictable Government behavior
Regional Instability (Border Dispute with China and Kashmir conflict)
FDI - barriers (Despite WTO)
Unpredictable government behavior "license raj"
Aging population (one child policy)
Social tensions (Disparity in income, itinerant workers)
Social tensions (poverty, illiteracy, Disparity in income)
Loss of agricultural land
Shortages of electrical power
Lack of developed infrastructure
Pressure on Currency Policy
Cultural/ Ethical/ Religious
Hinduism (caste system)
Heide, M. (2008)
How Wilmac Shoes manufacturing can manage Risk in China and India
A thorough investigation ought to be done before entering China or India market. They have radically different approaches however as a FDI all decision ought to be taken on Facts and not stereotype. Legal documents should be read and understood before signed. Customs is crucial and should not be ignored especially in China where "guanxi" is important. Company strategy should be flexible to change to adopt to fit the new market.
Product or services, if focused toward middle class customers is usually successful. Local advertising agencies should be used to capture the culture and atmosphere of the country. Distribution system should be arranged in advanced of product.
Check power supply in the area of location as this could affect production, and all vital area of production should be where it can be sustained. Within each country used the consultants there, and make sure location is compatible to business example; manufacturing business should be set up near ports for easy access to exportation.
Wilmac should use managers that have experience of emerging markets, that is flexible to change and can function in "unstructured environment". Strategy should be customized to suit emerging market. China and India are huge competitive market that should not be approached without proper marketing research. There are risks in doing business in both country, but the profitability margin outweighs the disadvantages. So definitely Wilmac manufacturing department will be going soon to one of these markets.
China and India adapts different methods to economic growth but they are both successful countries which will continue to grow. India is way behind China in many areas like infrastructure and internet usage however economists are predicting a equality in most area by 2050.