Country Differences Global Business Today MKTG 471-50 Submitted To: Professor Al Ruggero Submitted By: Ann Marie Veneziano Student Number: 820-312-304 Due Date: Tuesday, October 9 th, 2012
Before global businesses enter a foreign market, they spend a considerable amount of time researching and learning about it. By doing so, the business itself creates an understanding and appreciation of the country s differences within the political, economic, and legal systems, as well the national culture. For the purpose of comparison, the countries chosen for analysis outlining similarities and differences between the two are China and Italy. Although the analysis will be focusing on the political and cultural systems of the two countries, it important to note that the political, economic, and legal systems are not independent of each other. Therefore, there is information present of the political economy provided since they interact and influence each other, which affects the level of economic well-being in a country. 1 Through the use of the World Wide Web, there are a number of reputable sources that businesses can use as a powerful resource in order of learning about the country of interest and whether or not the market profile is attractive or has too many implications. The following is an illustration of the kind of information that businesses should and are interested in knowing before entering another country, expanding their business internationally, and whether the benefits outweigh the costs. 1 Hill & McKaig, 2012, p. 44
The Political System The System of Government in China and Italy Country: Capital: China Beijing Government Type: Communist State Important Date(s): October 1 st, 1949 People s Republic of China established 221 BC unification of Qin Dynasty President: Hu Jintao (since March 2003) Vice President: Xi Jinping (since March 2008) Political Parties: Chinese Communist Party (CCP) National Symbol: Dragon 2 In China s political system, they emphasize collectivism rather than individualism. Therefore, this system stresses the primacy of collective goals over individual goals and that society as a whole is more important instead of individual freedoms. Also, China is one of the few countries in the world that still practises communism and they are part of a totalitarianism government. This form of government is where one person or political party exercises complete control all spheres of human life including freedom of expression and organization, free media, and regular elections, to name a few. 3 Country: Capital: Italy Rome Government Type: Republic Important Date(s): March 17 th, 1861 Kingdom of Italy proclaimed 1870 Italy unified 2 CIA. (2012, October 8 th ). East and Southeast Asia: China. The World Factbook. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html. 3 Hill & McKaig, 2012, p. 47
President: Giorgio Napolitano (since May 2006) Prime Minister: Mario Monti (since November 2011) National Symbol: White, five-pointed start 4 Unlike China s political system, in Italy they exercise individualism believing that every individual should have their own freedom when it comes to political and economic pursuits and the interests of individuals should override the interests of society. This is a very common practise in Italy since people are more concerned about their well-being and that of their immediate family s rather than caring so much about society. Also, the form of government that is run in Italy is Republic. This is neither like democracy or totalitarianism, but it basically means that the state is not ruled by one individual power, but a group of educated individuals that represent and impact the people of the country. This is still quite common around the world and continues to be another form of government exercised today. 4 CIA. (2012, October 8 th ). Europe: Italy. The World Factbook. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/it.html.
National Culture Different Culture Norms and Value Systems between China and Italy Flag Category China Italy Nationality Chinese Italian(s) Population 1, 343, 239, 923 61, 261, 254 Ethnic Groups Languages Han Chinese (91.5%), Zhuang, Manchu, Hui, Miao, Uighur, Tujia, Yi, Mongol, Tibetan, Buyi, Dong, Yao, Korean Mandarin and Cantonese are most spoken languages spoken throughout China, Shanghainese, Tawainese, Hakka dialects, and other minority languages make up 8.5% Italian (includes small clusters of German-, French-, and Slovene-Italian in the north and Albanian- and Greek- Italians in the south) Official: Italian German, French, and Slovene are spoken as well depending on the region Religions Taoist, Buddhist, Christian (3%- 4%), and Muslim (1%-2%) Christians (80% - Roman Catholics make up the majority), Muslims (~ 700,000 people and growing), Athiests and Agnostics (20%) School Life Expectancy (Primary to Tertiary Education) Males: 11 years Females: 12 years Males: 16 years Females: 17 years 5 5 CIA. (2012, October 8 th ). The World Factbook. Retrieved from https://www.cia.gov/library/publications/theworld-factbook/
It can be quite difficult to define what culture exactly is, but that is only because it has different meanings across different societies and for the people living in that society. In the 1870s the anthropologist Edward Taylor defined culture as that complex whole which includes knowledge, belief, art, morals, law, custom, and other capabilities acquired by man as a member of society. 6 The above chart illustrates a few of the important creations that made China and Italy unique from a number of factors that have influenced the two countries over time including politics, economic philosophy, education, language, and religion. When it comes to spoken language, Chinese is the mother tongue of the largest number of people, but English is the most widely spoken language in the world and is increasingly becoming the language of international business. 7 Usually when two people get together from two different countries, the language that is mutually spoken is English. When an individual is entering another country such as China, it is important to make an effort in learning to speak some Mandarin or Cantonese because they will take you doing business more seriously and will appreciate that you are trying to understand their language. 8 In Italy, it is more common for people living closer to the main capital to speak English and if they are ranked high in a company. When businesses look at the aspect of education, it is important to analyze how long individuals are in school and what is the current economic success of that country. This will determine how many skilled and educated workers exist in that country and to see if that country has a national competitive advantage. According to the chart above and the CIA World Factbook, there are people going to school longer in Italy then there are in China and in both countries, females are going to school for a longer time period. This is very important to note as there are more and more females obtaining an education and seen more working in high positions within corporations around the world. 6 Hill & McKaig, 2012, p.92 7 Hill & McKaig, 2012, p. 110 8 Michigan State University. (2012, October 6 th ). China: Culture. Global Edge: Your Source for Global Business Knowledge. Retrieved from http://globaledge.msu.edu/countries/china/culture.
Business Culture Different Business Culture and Etiquette between China and Italy Punctuality Category China Italy Book meetings at least one week ahead with full detail of who you are, what the meeting entails Be on time for meetings As a visitor, it is good practise to arrive on time However, punctuality is not a priority in this country. It is usual to be kept waiting between 15-45 minutes Business Hours Dress Code Conversation Monday to Friday 9am-6pm There is a 1 hour lunch break between 12-1pm Conservative suits/business attire is the norm Bright colours and accessories should be avoided Women should be covered up, it is frowned upon if women are showing too much skin Make-up can be worn, but nothing too strong Important to learn basic Chinese phrases and to have a knowledge of their history, they will take you doing business more seriously Small talk is welcomed during certain parts of the business meeting Small businesses, shops, and public offices In the north: Monday to Friday 8:30-12:30pm, 3:30-6:30pm In the south: 8:30-1pm, 4-7pm Saturday 9-1pm Known to be very fashionable and stylish, enjoy spending money on name brands Clothing is perceived as a reflection of your social standing and relative success Men always wear long sleeve shirts, even during hot weather Women usually wear more make-up when going to work, and it is normal to not wear pantyhose during the warm months Italians enjoy conversing and do not like silent moments during the conversation They enjoy talking about life and things that make them happy and like hearing anyone jump into the conversation, welcoming opinions Use hand gestures and like to express emotions
Other/Public Behaviour Do not like it when people use too many hand gestures, find it annoying Very reserved, smiling is not noticeable in China; rather repress emotion Try to avoid too much body contact, especially with women Public displays of affection are frowned upon Do not bite nails or take food from your teeth in public, looked down upon Italians use a lot of hand gestures and are extremely expressive in the way they talk and behave Personal space is quite smaller compared to northern Europe and even smaller compared to America Public displays of affection are the norm and even affectionate touching between friends There are a few gestures that wish bad luck or is a sign of contempt, so beware 9 Implications of Entering an International Market The Benefits, Costs, Risks, and Impacts of Expanding Business in China and Italy Due to differences found in the political economy and cultural practises, there are major implications that an international business faces and in turn could influence how attractive the market is. The business must know what the benefits, costs, are and risks associated with practising international business before the company decides to enter the market. If a business wanted to expand into China, the country is ranked 91 out of 183 economies for ease of doing business, but ranked 151 for actually starting up a business. There are approximately 14 different procedures to start your business and takes about 38-40 days in order to complete all the procedures. 10 China has come a long way in terms of allowing other businesses to expand into their country, globalize, being more business friendly, and allowing new opportunities for their economy to thrive. For example, Hong Kong and Taiwan have specifically made it easier to start 9 Michigan State University. (2012, October 6 th ). Global Edge: Your Source for Global Business Knowledge. Retrieved from http://globaledge.msu.edu/. 10 The World Bank. (2012, October 8 th ). Ease of Doing Business in China. Doing Business: Measuring Business Regulations. Retrieved from http://www.doingbusiness.org/data/exploreeconomies/china#starting-a-business.
a business by introducing and providing online business registration. They have also reduced the number of days it takes for start-up procedures, specifically for health, pension, and labour insurance. Also, China has relaxed some of their trade credit restrictions in order to ease the financial and economic crisis they have been dealing with for the past few years. Although they have made many changes, there are more costs and risks doing business in China currently rather than benefits. There natural disasters do not help the environment and any business, there is a surplus in industry and trade, there is high number of the population which is aging, and the banking sector has been weakened as well because of debt and non-performing loans. 11 Unfortunately, these kinds of economic and political risks override some of the strengths, such as a gradual move-up within the market, high corporate savings rate which funds investments, and accounts benefitting from competitiveness and industrial diversification. If a company wanted to expand their business into a country like Italy, they should be aware that the country is ranked 87 out of 183 economies for ease of doing business and ranked 77 for the ease of starting up a business. Unlike China, it is easier to start up a business and exercise your business in Italy, but overall it is more difficult to start up a business in China. There are 6 main procedures that one must complete in order to register and start their business and takes approximately 6 days to obtain. 12 In the last few years, Italy has been facing a major recession and bankruptcy, which has resulted in a poor financial situation for many businesses and weak growth potential for the economy since people are spending less. There is a high national debt which the banking sector has been weakened by, lower productivity, and many people do not have a high enough education to increase the economic growth this country needs immediately. This is definitely one of the economic risks that a business would face if entering the market at this time. The benefits of exercising business in Italy are that there is a high tourism potential. Every year there are thousands of people that travel to Europe (especially Italy) to visit and will tour the towns to visit small shops and markets, which means there is still money being fed into the economy and 11 Michigan State University. (2012, October 6 th ). China: Risk Assessment. Global Edge: Your Source for Global Business Knowledge. Retrieved from http://globaledge.msu.edu/countries/china/risk. 12 The World Bank. (2012, October 8 th ). Ease of Doing Business in Italy. Doing Business: Measuring Business Regulations. Retrieved from http://www.doingbusiness.org/data/exploreeconomies/italy.
government debt is predominantly held by the residents only. 13 Also, there are some product niches that Italian business is known for, such as household appliances, expensive apparel, machinery, and foods that are a delicacy; therefore, those products will always be a necessity in Italian culture and in demand for people that travel. 13 Michigan State University. (2012, October 6 th ). Italy: Risk Assessment. Global Edge: Your Source for Global Business Knowledge. Retrieved from http://globaledge.msu.edu/countries/italy/risk.
Bibliography CIA. (2012, October 8 th ). The World Factbook. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/ Hill, Charles. McKaig, Thomas. (2012) Global Business Today. Third Canadian Edition. United States of America: McGraw-Hill Ryerson Limited. Michigan State University. (2012, October 6 th ). Global Edge: Your Source for Global Business Knowledge. Retrieved from http://globaledge.msu.edu/. The World Bank. (2012, October 8 th ). Doing Business: Measuring Business Regulations. Retrieved from http://www.doingbusiness.org/.