Country Analysis: China and India Assessment - Assignment Example

COUNTRY ANALYSIS: CHINA AND INDIA By (Name of Student) Course Code: Course Title Name of Professor Name of University City, State Date of Submission Table of Contents Table of Contents 2 Executive Summary 3 1.Introduction 4 2.Analysis 4 2.1`Country Analysis: China 4 2.1.1 Political Challenges 4 2.1.2 Legal Challenges 5 2.1.3Cultural Challenges 6 2.1.4 Negotiating with Chinese People 7 2.2Country Analysis: India 8 2.2.1 Political Challenges 8 2.2.2 Economic Challenges 8 2.2.3 Social Factors 9 2.2.4 Technological Factors 9 2.2.5 Legal Challenges 9 List of References 11 Executive Summary This paper sought to evaluate two lower cost countries (India and China) to determine the best location to expand the company s manufacturing base. The outcome of the evaluation indicates that the political, economic, legal, technological, social-cultural and business environments of India are more conducive than India. China has a broad range of legal and political challenges which may not be conducive for Medium-sized Australian snack Food Company producing a new range of corn chips for its international markets. This paper recommends that the company invest in India as opposed to China. 1. Introduction Multinational companies wishing to invest in foreign countries must conduct a comprehensive evaluation of the political, economic, legal, technological, social-cultural and business environments of those countries because making an informed decision whether to invest in those countries or not. This paper sought to evaluate two lower cost countries (India and China) to determine the best location to expand the company s manufacturing base. 2. Analysis 2.1`Country Analysis: China China is arguably regarded as the factor of the world. It account for at least 13% of all the manufacturing globally and is predicted to overtake the United States as the number one destination for manufacturing (Jiang 2006). The country offers access to cheap labor and low cost materials, which is increasingly attractive to western manufacturing firm. Western firms can either outsource to China via wholly owned subsidiaries or contract manufacturers. of their parent western companies. There is a broad range of challenges faced by western companies when it comes to outsourcing their production to China. 2.1.1 Political Challenges For many decades, China has been under the communist party and the party exercise absolute authority and power over legislations as well as cultural and economic institutions. China regulations and rules are not absolute and transparent and this is contrary to western economies where their government facilitates and promotes transparency for doing business. Multinational firms wishing to expand their operation in China can increasingly come under a broad range of bureaucracies and regulations (Jayaraman 2009). China advocates and promotes a kind of social network referred to as “guanxiwang”. The “guanxi” is the relationship between the entities and individual of the network. As a result of corruption and lack of transparency, the social network with individuals from the community party can assist western firms avoid bureaucracy and red tape. As opposed to western economies where building relations has less significance as a result of strict regulations and a culture that increasingly support contractual obligations in China, western companies whishing to invest in China must depend its social network. Comprehending social network is a challenging process for western companies and building social network is in most cases time consuming process. Therefore, it would be wise for western firms to recruit the right individuals with the appropriate social network with the aim of overcoming these challenges. 2.1.2 Legal Challenges In Western economies, strict patent and regulations protects both foreign and local companies. However, in China, the legal system is loosely defined and therefore, it give to rise to a broad range of loopholes in law. Since China entered World Trade Organization, it has brought with it the inclusion of international patent rights amendment and business regulations and rules, but is increasingly common to see technology being stolen by either a Chinese competitor or the employees of the outsourced company in China (Jayaraman 2009). China embraces a copycat culture and the culture has increasingly become an integral component of the Chinese culture. The Chinese society is predominantly Confucian and Confucian promotes people’s sharing what they develop or create with the society with the aim of promoting and enhancing harmony. To this effect, anything from cell phones to shoes are copied and sold openly in various markets across China (Jiang 2006). Chinese laws and regulations are vague when it comes to wordings and can be interpreted in a broad range of ways. Laws on taxation, labor. Intellectual property rights, and trade are in most cases refined which result to intricacy or complexity when it comes to interpretation of the laws. Consequently, local lawyers in China are given the room to manipulate the laws. It is therefore important for western companies wishing to invest in China to understand these legal challenges. 2.1.3Cultural Challenges China, as argued out by (0), ha evidenced many years of traditions, culture, and history. The manner in which Chinese individuals behave today is the outcome of its historical changes, which is very different the changes witnessed by western societies. To this effect, the modern Chinese is significantly difference from the cultures of the west. Chinese’ cultural aspects are immensely reflected in the business world (Jiang 2006). Where in China, a Chief Executive Officer is in most cases looked upon as the sole executor and decider of strategies, a CEO in western economies is usually looked upon as an a person who discusses and debates strategies with their employees or a consensus builder and then executor of strategies. The business culture in western economies is not strictly hierarchical as is the cases with Chinese business culture. In China, the face culture is an important component of doing business and it assists Chinese people to maintain the social networks. Therefore, there are hidden consequences by making a Chinese employee look bad in front of other employees (Jayaraman 2009). Three main components associated with face culture include losing face, saving face, and giving face and therefore, western businessmen and businesswomen are anticipated to construct or building a form of culture sensitivity with the aim of handling face culture when they plan to outsource their production in China. China values individuals with strong moral values and good character and therefore it is considered unacceptable or weak when western managers lose their integrity in front of their Chinese counterparts either by demonstrating aggression, grief or anger. 2.1.4 Negotiating with Chinese People In order to negotiate with Chinese people, an intermediary is needed since western individuals are in most cases looked upon as outsiders and as such, the Chinese tend to trust each other more in the course of negotiations. In China, social status plays a critical role when it comes to the manner in which individuals are addressed (Jayaraman 2009). In the western economies, businessmen and businesswomen in most cases call each other with first names. However, in China, businessmen or businesswomen are in most cases addressed with their titles. It is often impossible to anticipate a straight no or a straight yes from the Chinese and this is not the case in the west. Terms such as “we need to study the case somewhat more” and “we will think about” almost means disagreement or refusal (Jiang 2006). In China, Chinese people seek harmony, trust, and stability and this is contrary in western economies where negotiations is an intricate discussion that is increasingly broken down into a broad range of components and negotiated separately and consensus or disagreement arrived almost quickly. Meeting involving Chinese people are often longer or lengthy and otherwise referred to “endless meeting”. The Chinese people like discussing the whole picture as opposed to breaking the negotiation into components or parts (Jayaraman 2009). 2.2Country Analysis: India Officially referred to as the Republic of India, China is one top ten largest countries globally by area. The country has at least 1.2 billion people and for the last few years, India has been experiencing remarkable economic growth, particularly with respect to its Gross Domestic Product (GDP). In the recent past, India has been opening its doors with the aim of attracting foreign firms and investors. In order to get an improved understanding of the business environment in India, this paper employ Pestle Five forces model. 2.2.1 Political Challenges India, as one of the largest democracies globally, runs a federal form or government. Some of the factors influencing political environment India include the ideologies of a several political parties, political interests, as well as, government policies. Consequently, India’s business environment is impacted by a broad range of political factors. India’s taxation is well developed and a broad range of taxes, including sales tax, service tax, and income tax are imposed by the India government. Additional taxes, including utilities and octroi are taken care of by local bodies in India. India encourages privatization and therefore businesses are free to conduct their affairs in the country. 2.2.2 Economic Challenges Over the last few years, the economic of India has been stable. The industrial reform policies that were adopted in India back in 1991 have played a critical role in boosting India’s economy. The formation of FIBP, the liberalization of foreign capital as well as industrial licensing has led to constant improvement and enhancement of India’s economy. In 2013, the India’s GDP was $5.07 trillion while in 2014; the country registered a GDP growth rate of 5%. This indicates that India has been experiencing constant economic growth over the last few years. 2.2.3 Social Factors Social factors entail any social changes or trends that could have a significant impact on businesses or business environment. India has a large population and this has resulted to significant increase in pension costs. Majority of India population are aged 15 years and above (Honorati 2007). 2.2.4 Technological Factors Technology plays a critical role in today’s business environment. For instance, technology introduces new cost-cutting process as well as product development. Just like most countries today, India is served with 4G and 3G technology which has increasingly facilitated a broad range of technological products (Ahmed & Alamim 2017). India’s IT sector has significantly grown over the last few years and the sector has increasingly promoted software upgrades, IT development as well as other technological advancements. India has in the recent past attempted to launch their satellites into space. 2.2.5 Legal Challenges Over the last few years, a significant number of legal transformations have been adopted in India. Some of these legal changes encompass disability discrimination Act, minimum wage increase, and recycling laws which have had a significant impact on businesses in the country. With respect to environment, urbanization and industrialization has greatly affected the quality of air in India hence leading to a broad range of health problem (Honorati 2007). To address this problem, India has adopted a broad range of regulations on waste disposal and control. Additionally, there are several noise controls and environment pressure groups that have played a critical role in ensuring the quality of air has significantly improved. 3. Conclusion Recommendations The outcome of the evaluation indicates that the political, economic, legal, technological, social-cultural and business environments of India are more conducive than India. China has a broad range of legal and political challenges which may not be conducive for Medium-sized Australian snack Food Company producing a new range of corn chips for its international markets. China embraces a copycat culture and the culture has increasingly become an integral component of the Chinese culture. The Chinese society is predominantly Confucian and Confucian promotes people’s sharing what they develop or create with the society with the aim of promoting and enhancing harmony. This paper recommends that the company invest in India as opposed to China. List of References Ahmed, F& Alamim, A2017, Business environment: India and global perspective, PHI Learning Pvt. Ltd, New Delhi. Honorati, M2007, Corruption, the business environment, and small business growth in India, Word bank Publication, Washington, DC Jayaraman, K2009, “Doing business in China: A risk analysis,” Journal of Emerging Knowledge on Emerging Markets, pp. 55-62. . Jiang, F2006, Chinese business environment, Edward Elgar Publishing, Cheltenham Lo, V, & Tian, X2004, Law and investment in China: The legal and business environment after China’s WTO accession, Routledge, London. Read More