The shock of cultures between China and Europe is flagrant in the communication style. In fact, Chinese people are more reserved in their relationships than Italian. For example to wave at a friend or a member of a family, they shake their hands or even it is normal to kiss each other. Not for Chinese because the physical contact is acceptable with difficulty and they need a larger personal space than Italian. The shake of hands is only common in business world.
The communication style is direct in Italy and indirect in China. In Italy, people talk all the time telling what they think and using hands to accentuate what they say. In China, the use of silence is common even if a person has another way of thinking. In a word, Chinese are more introvert than Italian. Moreover, in China it is more difficult for someone in the bottom to talk to those in the top.
An author supports this. Geert Hofstede is a Dutchman psychologist inspired by culturalism. According to him there are 6 factors of cultural differentiation which are summarised in the table below:
Source:
With this table, we have the affirmation that Italy is individualist and China collectivist. We can see that Italy is also a masculine society which means that people are self-confident as they really know what they are capable to do and want to prove it. That is why Italy scored 70 in masculinity. Chinese is more insecure.
Uncertainty avoidance points out the degree of tolerance accepted by a society facing the future and the worries it can bring. In view of their score, Italian people don’t like to be threatened by uncertain situations. Chinese are more confident in the future and are less worried than Italian.
Power distance means the acceptance of power inequality by those who are in the bottom of the scale. In China, it is a very hierarchical system. The distance is extremely marked; power and hierarchy are accepted and totally conventional. Italian is more reticent facing power. This is the similar idea than the one explained before, Chinese are silent and accept orders coming from the top. Italian will say what they think and even criticize if they want to.
Hall is an anthropologist and specialist of the intercultural. He studied the context of a society and thanks to its research he confirms what Hofstede said.
Low context
Switzerland
Germany
Scandinavian cultures
Unites States
France
England
Italy
Spain
Greece
Arab cultures
China
Japan
High context
Source:
According to its research, China is a high context society. This means that most of the time the communication is nonverbal, the relationship is more important etc. Italy is a medium level context society. Conversely, there the communication is explicit and the relationship is a second-rate data.
Li, jenny, 2001, Passport China: your pocket guide to Chinese business, customs and etiquette. Available at: . Last accessed 05 December 2008.
Gioseffi Claudia, 2001, Passport Italy: your pocket guide to Italian business, customs and etiquette. Available at: . Last accessed 05 December 2008.
Susan C. Scheider and Jean-Louis Barsoux (2nd edition 2003). Managing Across Cultures. Essex: Prentice Hall. 94, 71, 73, 68, 70. Last accessed 06 December 2008.
Differences of management
Now that we have seen the differences in these two cultures, we could lean on the consequences in a company and the effects on the way of working. The dissimilarities between the two kinds of management may explain the reasons of the failure in the joint-venture.
For the management, we can use again the Hall’s theory. Within the framework of work, the Chinese worker is more compliant and will express less than an Italian one.
Moreover, Chinese people would work in group whereas Italian people would prefer to have a task to do alone.
Let us focus on the both kinds of organisation: FIAT and NANJING.
In FIAT, the staff would prefer to work in their own with special objectives in mind. The only concern is to reach these goals without changing the habits. Whereas in NANJING, they like better being concerned in the work and to keep them up-to-date of what’s happening in the company. They prefer the benefit of the team than their own comfort with the routine. The workers of the two companies respect also the superior, but the hierarchy is felt more strongly in the Chinese business.
As FIAT and NANJING are from and succeed in two different countries, maybe they had to match to the culture of the country in which they settled down. But we can wonder if the culture of the country was the only influence that the companies had. The environment is an important aspect then. We can quote two aspects.
In one hand, the first characteristic is the cultural spheres.
- The national or regional spheres include the environment of the company: the country, the city, the language, the religion etc.
- The industry sphere represents what the company fabricates, the used resources and technology, how they advertise it, the competitive advantage etc.
- The corporate sphere takes account of the founder and the heritage he brings with him, the team leader, the nature of industry etc.
- The functional sphere contains the whole external environment, the whole staff.
- The last sphere is the professional one which takes in the different education, trainings, diplomas, social level of each employee.
Source: Susan C. Scheider and Jean-Louis Barsoux (2nd edition 2003). Managing Across Cultures. Essex: Prentice Hall. 52.
On the other hand, Johnson & Scholes created the concept of cultural web which is the second aspect. The schema is below. It shows how each sphere influences each other.
- The paradigm in the middle is the core of the business, the values of the company, its mission, etc.
- The routine represents the relationship between people who work in the company and the running of the company thanks to the collaboration of departments for instance.
- The rituals include the ideals wanted by the company and all the ways to reach these ideals: trainings, promotions, assessments etc.
- The stories are the symbol of good communication between the staff. How they relate the important events in the company.
- The symbols are what all the things which identify the company (logo, slogan).
- The control systems are all the mechanisms which allow controlling the final work and the performance.
- The power structures: where the power is located and where the decision is taken. This is linked to the assumptions and beliefs.
- The organisational structures: how the company is ordered.
Source: Johnson & Scholes, 7th edition 2006. Exploring Corporate Strateg.
All these points are divergent in the two companies. Such a differentiation may have an impact on the failure of the joint-venture.
Susan C. Scheider and Jean-Louis Barsoux (2nd edition 2003). Managing Across Cultures. Essex: Prentice Hall. 52, 133, 101. Last accessed 06 December 2008.
Johnson & Scholes. 7th edition 2006. Exploring Corporate Strategy. Last accessed: 05 December 2008.
Problems
Now in view of the two concepts and the differences of culture and management, let us see the real problems that the joint-venture met.
The first one is the problem of organisation. The two countries don’t have the same structure of work as you can see below:
CHINA ITALY
Source: Susan C. Scheider and Jean-Louis Barsoux (1997). Managing Across Cultures. Essex: Prentice Hall. 101.
For the success of the joint-venture, it is necessary to make the two businesses come to an agreement. It is a tricky issue given that the two structures are strongly different. In China the system is highly hierarchical whereas in Italy each department has an equal power. So for Chinese staff, that means more independence and autonomy but they are not in the habit of having it.
There is then the management style. Chinese companies have long-term objectives but Italian companies are especially interested in the immediate interests. The point of view is divergent as for the aims to reach, so logically the way of working is also divergent. Moreover, FIAT took its decisions without referring to the government contrary to the Chinese companies.
At level of the employees, Chinese workers were not happy about the remuneration which they find too low in comparison of their work. Besides, the management style changed very frequently so it created confusion and uncertainty for the staff.
The both countries wanted to have the control, this created misunderstanding problems because they tend to forget the aim of this alliance and confuse the joint-venture with a political partnership.
Probably the main problem in this alliance is the lack of confidence in the partner. Indeed, FIAT did not trust NANJING because given that the Italian company reduced the number of models given to the Chinese one for of stealing. The most important in business for Chinese people is the trust. Without it, it cannot work.
There is too an ethical problem. Given that the recent troubles between China and Tibet, the advertising of FIAT was not accepted because of the presence of Richard Gere. In fact, the latter was for the Tibet independence and had called for a boycott of the Olympic Games of Beijing. It was a bad advertising for FIAT. This is due of the lack of communication between the two companies.
All the points quote above lead to troubles. Of course, these conflicts have to be resolved, but even for this, there is a divergence. The way to tackle conflicts is not the same in Italy and China. In the collectivist society, the will try to continue with the problems whereas the individualist one will avoid them. With such a difference of opinion, the problems were growing up and they didn’t find the way to resolve them. The last solution contemplated was to end the joint-venture.
Susan C. Scheider and Jean-Louis Barsoux (2nd edition 2003). Managing Across Cultures. Essex: Prentice Hall. 42, 101. Last accessed 06 December 2008.
Bin Chen, 2008, Fiat issued an apology statement to Chinese people for advertisement
Sun Bin, 2006, Fiat is in trouble
Solutions and conclusion
The main problem is the lack of confidence. To build a good joint-venture over a good basis the most crucial is to trust each other (this is the guanxi). Thus, the two companies could communicate easily and talk about possible problems in the aim to resolve them.
A good environment for the employees is important. They need to feel in a stable context and they want to be rewarded for their work. It is a factor of motivation consequently the staff will be more enthusiastic.
About the organisation, they don’t to choose the good structure (FIAT or NANJING) but just to find the structure of the joint-venture so the FIAT-NANJING structure. As they both are high context society, they should divide the power and take the decision together. Any company must get upper hand.
I would conclude by saying that a joint-venture is not easy. The main problem was that the two companies were thinking only about their own interests and have never considered themselves as a real association. This is due to the high context. They forgot the interest of the entry in the Chinese market for FIAT. Besides Chinese culture is very different, the best would be to respect the rules like the guanxi which is very important in business.
So to resume, in the beginning they both were optimistic but after few months, frustration replaced optimism. A good business cannot be build over frustration. This advice is valid whatever company which decided to break into another country.
Susan C. Scheider and Jean-Louis Barsoux (2nd edition 2003). Managing Across Cultures. Essex: Prentice Hall. 236. Last accessed 06 December 2008.
Liu Xia, 2007, Fiat faces an uncertain future.
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