Term Paper: International Business 5 Pertinent Topics

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This article clarifies the differences between China and the West, using Hofstede's four cultural dimensions and Bond's fifth dimension. Hofstede explained that culturally-based values systems were made up of four dimensions: power distance, individualism/collectivism, masculinity/femininity, and uncertainty avoidance. Bond added a fifth "Eastern" dimension called long-term/short-term orientation. By these measurements, Western countries seem to be generally lower than China in power distance.

In terms of individualism, Western countries are generally much higher than China. Western countries also have a much shorter-term orientation vs. China's longer-term orientation. China and the U.S. appear to differ greatly in nearly all the aspects examined here. It is clear to see that these cultural differences have already had, and will continue to have, a great impact on Sino-American business relationships. Where Chinese managers tend to favor cooperative strategies, American managers believe strongly in contractual safeguards. Chinese managers are more likely to use indirect forms of influence, involving assistance from a third party, to resolve conflicts, while Americans gravitate toward direct and open forms. Chinese managers will err on the side of making a less risky decision, whenever possible, than will American managers. Chinese mangers will also utilize a much more non-participatory approach to decision-making than their American counterparts. The Chinese spend much more time building social and interpersonal relations than do Americans. Chinese managers are much more motivated by being part of a group than by individual achievement, which is the hallmark of American managers.

Analysis

China and the U.S. are vastly different in terms of their economic systems, political systems, social values, and laws. U.S. managers rely heavily on individualism in making decisions. They prefer to work alone and are reluctant to cooperate because they view cooperation as a sign of weakness and loss of control. The Chinese manager will depend more on groups or institutions to govern what do and will definitely emphasize loyalty to the group. The Chinese value system honors duty to the group and harmony among members. The pursuit of personal goals is a negative concept in China. There appears to be a great divergence between Chinese and American managers in their attitudes toward taking risks. Chinese managers usually not make immediate decisions if they feel the circumstances are at all uncertain, while American managers are more likely to consider risks as natural.

When Chinese managers face conflict, they prefer to use negotiation and compromise, whereas American managers prefer to use the tactic of confrontation, rational arguments, factual evidence, and suggested solutions. American managers are reluctant to take the time that is needed to enlist the help of other people. Chinese managers tend to pay more attention to relationships than contracts, preferring to use indirect forms of influence to avoid losing face and damaging guanxi (social and interpersonal relationships).

Chinese managers will spend time to build guanxi before ever entering into a business relationship. American managers focus on the task rather than the relationships, in order to build confidence. Americans put great emphasis on individual achievement. In contrast, Chinese managers believe a sense of belonging and devotion to the group is more important. Many American managers are not patient enough to build personal relationships with Chinese partners when they invest in China. They do not seem to understand how important these relationships are to the Chinese and their business.

Political Issues Affecting International Business

Why China is Making the Valley Fret by Cliff Edwards, Jim Kerstetter and Bruce Einhorn.

A in Business Week, 29 Mar 2004.

Description trade dispute between Intel and China erupted onto the front page on March 10, 2004.

Intel Corporation announced that it would not comply with the Chinese government's deadline for Wi-Fi chips. These specialized chips allow PCs and various other electronic devices wirelessly connect to the World Wide Web.

Beijing has demanded that its own standard for wireless security be incorporated into any chips sold in China by June 1, 2004.

The problem for Intel and other chip manufacturers is that compliance with this rule could require them to give proprietary technology to one of 24 Chinese government sanctioned companies. This situation illustrates a concern in the Silicon Valley that China is actually motivated by a desire to boost its own chip industry, which is still in its infancy. China denies that allegation and maintains that its purpose is solely to ensure the security of any Wi-Fi technology used in China.

U.S. technology executives have asked the U.S. government to step in and negotiate a compromise. Underlying all of this is a fear that Chinese companies will use take this Wi-Fi technology and build the internal expertise required to eventually become major competitors on a global scale. The issue of how much technology to share with Chinese companies has been debated for years. The example of the cell phone industry further raises concerns. In the late 1990s, nearly all cell phone handset sold in China were made elsewhere. China closed that market to new foreign entry and today, after sharing technology with Chinese "partners," American companies are finding themselves with new rivals. Technology companies do not want to give away trade secrets, but to ignore China's demands raises the risk that a fast-growing market may be closed to them.

Analysis

China's policies in this instance seem to be mainly political in nature. The closed trade attitude that pervaded China until recently still motivates much of how China does business internationally. Many technology-driven businesses have suffered over the years from China's weak protection of intellectual property. Both Microsoft Corporation and Cisco Systems, Inc., have cried foul over software counterfeiting and copying of hardware, respectively. China has limited some of its more blatantly anti-competitive activities since it joined the WTO two years ago. However, Chinese legislation designed to protect intellectual property remains vaguely worded and difficult to enforce. This move to force chipmakers from outside China to share Wi-Fi technology is suspiciously timed. It is hard to deny the political flavor of this rule coming out just as China is beginning to try to boost its domestic chip industry.

To help things along, the Chinese levied a 17% value-added tax on all chip imports, while domestic chipmakers pay only about a 3% tax. To counteract this action, U.S. tech companies lobbied Washington to file a WTO complaint. China has countered by saying that U.S. companies are over-reacting.

China claims that an improved standard will help to promote greater public confidence in Wi-Fi technology. However, it appears that there is a more politically motivated reason, which is the Chinese fear depending on suppliers from outside the country for crucial encryption technology. The Information Technology Industry Council, National Association of Manufacturers, and SIA are currently all contending that China is violating WTO rules, with U.S. trade experts agreeing. China's mandated technology transfer may be illegal under WTO rules since member states are not allowed to treat foreign companies differently from domestic ones.

U.S. chipmakers are hesitant to involve the WTO, not wishing to alienate China. They are working behind the scenes to convince China to either kill their standard, or to allow the international standard to be used.

Regional Economic Integration and International Business

North America's Second Decade by Robert A. Pastor in Foreign Affairs, Volume 83, Issue 1, Jan/Feb 2004.

Description

The North American Free Trade Agreement (NAFTA) was put in place on January 1, 1994. This was accompanied by fears of job losses in the U.S. And revolutionary rhetoric in the south of Mexico. In a single decade, Canada, Mexico and the U.S. have managed to build a market larger than the 15-nation European Union. Trade and investment levels have almost tripled, and the three countries have enjoyed very high degree of social and economic integration. The term "North America" is finally more than just a geographical designation. NAFTA was really only the first draft of an economic constitution for North America. It was lean, intended only to take down the many barriers to trade and investment. No one planned for its success or for the crises that have confronted it. While it pushed for continental integration, it did not actually provide guidance as to how this was to be achieved. While the EU has created too many institutions, North America created virtually none. Two crises, the Mexican peso devaluation of 1995 and the terrorist attacks of September 11, 2001, have nearly destroyed the integration experiment, as a result. During the first 10 years of NAFTA, the U.S. has enjoyed the largest growth in jobs in its history. Canadian investment in the U.S. grew even faster than U.S. investment in Canada. Environmental standards in Mexico have improved quickly. U.S. trade with its neighbors has increased at a rate nearly twice that of its trade with the rest of the world. U.S. exports to Mexico grew four times over, and exports to Canada doubled. Travel and immigration among the three nations also increased. NAFTA has also failed to deal with some of the challenges of… [END OF PREVIEW]

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