Managing and making a business grow is not entirely about profits, revenues, dividend yields, and return of investments. Although the financial aspects of a business are not to be considered as a minor consideration only, over-focusing in such aspects could be as disastrous as not focusing on them at all in the long run. There are literally lots of factors that could affect the way how a business could survive or thrive, especially in a highly volatile market environment that the world has today. This is definitely true for large-scale international businesses that have regional branches scattered in different countries. Even though entry to the international market could definitely be a big profit booster, generally because larger market equals larger potential profits, cultural barriers and differences in political systems can be a potential corporate handicap. In this paper, cultural, economic, and political similarities and differences between two countries, specifically, the United States of America and People’s Republic of China will be discussed. This paper will focus on these factors’ possible impact on current and prospective businesses and business operations in the country.
Culture, Economics, and Political System in the United States
The United States currently holds the crown as the largest economy and the most powerful country, in terms of military might, in the world. Perhaps this award can be primarily attributed to the fact that the U.S. is a confederation of 50 independent states. Each state is technically individual countries. However, they are more like provinces because they are under the jurisdiction of the federal government of the U.S. The U.S. economy is largely fueled by abundance in natural resources and good scores in economic success indicators. U.S. unemployment rate is 7.8% as of the third quarter of the year 2012; GDP growth rate is at 1.3% as of the second quarter of 2012; Average inflation rate of products and commodities is at 1.7% between the year 2011 and 2012; and poverty rate is at an abnormally high level of 15.1% since 2010.
The United States is also the world’s largest and the second largest exporter of goods. All of these economic indicators and proofs basically serve as strong evidences of what American businessmen can do with their businesses. The U.S. federal government, in cooperation with the senate carefully reviews the currently available acts and laws that may have negative and positive effects on investors and businesses and revises them as necessary. Although not all of them get revised soon enough to save Small Medium Enterprises from bankruptcy, it is still worthwhile to know that the U.S. government is walking on the right tract. Employee wages and business taxes in the United States are among the highest, mainly because it is already a highly industrialized and developed country. This is actually one of the major reasons why most businesses, even those who became first known in the U.S. decide to establish branches in countries with substantially lower wages for employees and business taxes such as China, Thailand, and Vietnam. Despite this major blemish, what investors like in the U.S. is the protection and support for businesses from the government, and the conduciveness of the U.S. market for business and other economic activities.
In terms of politics, the U.S. is one of the oldest governments with a confederation model that survived. The U.S. Federal Government has three main levels, the local, state, and the federal government—arranged from the lowest to the highest form of government. The Federal Government can be subdivided into three divisions namely the Legislative, Executive, and the Judicial Branch. What is pertinent to know about this is that the Representatives and the Senators are the ones responsible for passing bills and acts that can either positively or negatively affect economic activities in the country. These two groups of politicians work under the legislative branch of the U.S. federal Government.
Business operations in the U.S. are usually done through bilateral agreements between the stakeholders, usually in contract form. Also, according to literatures, American businessmen are more prone to commit mistakes in important decision-making processes because they are more used to a dynamic and fast-paced business environment. It could be that some businessmen are not given enough time to think about the positive and negative impacts of a decision once it is already made. In terms of pliability to change, studies show that Americans are not so resistive to change compared to their European and Asian counterparts. They tend to adapt to changes, especially in technology, rather quickly.
Culture, Economics, and Political System in China
China or what is more formally known as the People’s Republic of China—PRC, is the world’s most populated country and therefore, the country with the biggest market for economic commodities and services. China comprises roughly 20% of the world’s population which is over 7 billion people. China, in the middle ages up to the early to late 20th century has one of the struggling economies. However, due to industrialization and foreign investments from international companies, majority of which are from the manufacturing sector, China emerged as the world’s second largest economy in terms of nominal GDP worth 8.25 trillion USD.
Unlike the U.S., China is not composed of a numerous states but rather a collection of provinces, autonomous regions, municipalities, and special administrative regions.
Business culture in China can greatly vary with that of the U.S.’s. It is true that opening business branches in China could be a practical move because of its huge population which also equals a high probability of success. However, there is more to it than that. Simply making a business move click in this socialist country—although the country still houses a significant number of communism principles, can be very complicated.
China, characterized by an authoritarian form of government, features restricted access to the internet, freedom of assembly, press, freedom of religion, and even reproductive rights. Restricted access to internet and freedom of speech and assembly is one of the major reasons why the private Information Technology industry in the country has been held back for already quite some time. Aside from the IT industry, other industries such as the marketing and advertising industry can also be affected.
Labor expenses and business-related taxes in China are extremely lower when compared with other countries’. This is mainly the reason why large international enterprises flock to this country in an effort to lessen their burdens in taxes and employment salaries. However, despite this tempting benefit, what most businessmen do not know is that China can be the more restricted place compared to the country where they came from.
Business operations in China are conducted and completed through contacts rather than contacts. Deals can be hardly closed by a businessman who does not have any influential contacts in the Chinese market or in the industry he just plunged in. Professional relationships with the locales are essential in conducting a business in this culturally rich country. As long as mutual trust and respect, and a professional working relationship are present, the only problem left then would be the government restrictions. However, this problem is definitely smaller compared to getting the locale’s trust and respect as a businessman. Language barriers can also be a great hindrance for business activities. Most people in China are not that proficient with the use of Business English compared to other countries. One practical way to address this would be to recruit a business associate that could double as a Chinese to English—and vice versa, translator. Chinese businessmen tend to be a lot slower in making business-related decisions compared to their European and American counterparts. This is because they take their time before making any significant decision. All in all, conducting business in China could be like a downhill battle as long as professional relationship and influence, government restriction, and language and cultural barriers are addressed. Bills and Acts that protect intellectual property rights from piracy and patent stealing are not so effectively enforced in China. This is actually one of the biggest problems in the country. As a result, businesses that rely on intellectual properties for profits become discouraged as establishing partnership with a country with extremely high levels of piracy and IP theft could really be devastating.
For a businessman, being able to compare cultural, economic, and political differences between his native country, and a prospective country where he will expand would really be helpful. It enables one to foresee what the challenges and problems in the future would be like. By doing so, he would have more time to think of a way how to overcome such and to make the necessary preparations, should he still want to pursue the company’s plans of expanding to that certain country after finding out the possible challenges.
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