Icebreaker will still have the same unique advantage over nearly all other brands of offering high quality merino wool products. However Moon was unsure if this would hold as much value for Chinese consumers; would they simply see the ‘wool’ as inferior to the modern synthetic fibres. The majority of the consumers in Urban China will not use the outdoor clothing for extensive ‘outdoor’ uses like hiking or snowboarding like many New Zealand or America consumers do. This means the everyday fashion side of Icebreakers products could be brought to the fore meaning closer competition from less technical brands like Hugo Boss or PradaSport.
The Chinese market is saturated with another major competitor: counterfeit goods. There are ‘copycats’ of the major outdoor clothing brands, although it is not currently a major issue for Icebreaker. However was Icebreaker to enter China it would attract the attention of counterfeiters and likely see fake Icebreaker clothing in the Chinese markets and possibly worldwide.
A merino wool competitor has arisen recently in America called SmartWool. This is direct competition for Icebreaker and is growing in US markets. After starting with merino socks they have now expanded to a full clothing range, much like Icebreaker. The company was bought in 2005 by Timberland, which has the capital to be able to invest strongly in the Chinese market and gain a hold of the market. However brand loyalty is low in the Chinese technical clothing market (Delong et al, 2004) leading to an emphasis on brand image and high competition. Brand image has been a strong point of Icebreakers all along, however the current image may not suffice in China and along with the competition from many other brands, specialised outdoor brands, less technical, fashion based brands and counterfeiting companies makes the competitive environment for Icebreaker entering China very…competitive.
Culture Environment
Culture is defined by Geert Hofstede as "the collective programming of the mind which distinguishes the members of one group or category of people from another." (Hofstede, G. 1991. Cultures and organizations: Software of the mind. Berkshire, NJ: McGraw-Hill). It is also important to note that culture is learned and not inherited, and shared by people as members of a group, society or organization, and cumulative, passed down from one generation to the next.(Fisher, G., Hughes, R., Griffin, R., and Pustay, M. (2006). International Business: Managing in the Asia-Pacific (3rd Ed.). In other words, culture reflects a perspective of the world from a certain group. As a result, culture does become a factor that affects people’s behavior and therefore exert a subtle influence on its social, political, legal as well as organizational system. To successfully establish a business in China for Icebreaker, we have to look at the culture environment that will have an impact on company’s daily operation. In this section we are going to analysis the Chinese culture by using Hofstede’s Five Dimensions and other relative models.
We believe that a different culture in China will influence the organization both internally and externally. The internal here refers to the organizational behavior, such as human resources management, communication as well as company operational; whereas the external refers to Marketing strategy and relationship with the locals. Based on a study from Geert Hofstede, he indentified five dimensions along which people differ across cultures. They are Individualism, Power Distance, Uncertainty avoidance, Masculinity, and Long Term Orientation (LTO). He also believes that people from different cultures stay at every point on each dimension. (Geert Hofstede 1993,7(1):81-94. “Cultural constraints in management theories”) (See table in appendix 1)
From the research, we could compare and find out that Chinese culture is a lot different to the western countries especially compared with the USA, New Zealand and UK where the Icebreaker had its business in (see calculation comparison in appendix 2). Therefore neither of the strategy in those countries should not be copied and applied to China.
China is a country with more than a thousand years of history, and influenced by the Confucianism from a very early generation. As a result, Chinese people tending to look for long-term on their work and life, an average Chinese person is hard working, condescending, sparing, and do a lot of saving. They consider their children as the most important thing in their life, and to whom they are ready to sacrifice. This is very positive for Icebreaker to have their manufacturer in China by employing hard-working labors, and also cost efficient. Other indication is Chinese employees will always looking for a good and stable relationship with their supervisor or leaders. Therefore, to setup a harmonious working and staff environment for Icebreaker in China is important.
China, as a traditional Asian country, also features very collectivism, rather than individualism. Chinese people view themselves as a member of the whole society. They concentrate on the collective harmonious and stability, emphasis on group thrive rather than individual achievement. The foreign company in China should be aware of relationships among the employees, and it will be a good motivation for Chinese employee with a healthy atmosphere within the organization. A good sign is that Chinese employees consider the company reputation and its brand to be very important things.
With a long history of Caesarism, the Power in China, is been highly valued and respected, compare with most western country. Chinese people are willing to accept and respect the decisions or mandates from people who is on a higher-level position within an organization. People in the Chinese company consider that “to be told and to listen” is important as a staff. Chinese people also spend a lot on pursuing dignity and power. A suggestion for Icebreaker motivating its Chinese employee is to provide a promotional opportunity and delegating to the jobs.
In terms of Uncertainty Avoidance, Chinese people are behaving more standard. Within the company, Chinese are not only looking for a stable job contract, but are also considering competition, challenging and training development. In conclusion, an environment with a challenging, positive competition and personal development will encourage your Chinese staff to stay and working hard.
Another interesting result from the Hofstede’s study is Chinese people behaving in both genders in their life correspondent to the situation. Most people in china today are working hard in order to get rich and exchange a better lifestyle. Just as everyone we see today, people tending to buy luxury brands, and driving Mercedes. Meanwhile, they are also trying to keep good relationship with their colleague.
Hofetede’s Culture-Dimensions is a very influencing model to analysis one’s culture since the 1990s, however, it is not yet sufficient to comprehend the Chinese culture today. We believe that Icebreaker has to consider more factors before getting a full picture of Chinese culture. Here we are going to introduce a 7P model to summaries the Chinese culture.
A 7P model from the Chinese Professor Yu Kai Cheng suggests that when a foreign company deal with local Chinese enterprise or employees, should also consider other factors (see diagram in appendix 3) (Yu Kaicheng & Charles Chen, “ The organizational Behavior - Cross culture organizational behavior management. 2004: p579-580.). As learnt from the model, Chinese are considering themselves as a whole family, a concept from the communism. People believe that they are working for the goal of the company/team, and the company meanwhile should take care of its member in terms of living and working. Chinese also have a great deal of patriotism which can result in the protection of their own products/brands. Icebreaker should be aware when promoting and sending the right information to the market. Chinese are also polite and condescension. It is well- known that Chinese are aware of someone’s face all the times. To establish a good relationship in China is not easy and you have to always look after the politics-orientation, it is been called “Guan-Xi”. Keep a good contact with local governors will always been important and beneficial in China.
The Social structure and lifestyle of the Chinese also has a great impact on Icebreaker when setting up the marketing strategy. With 1.3 billion people in China, but only $1,230USD average annual income by the end of 2004. (Statistic China, website, ). Based on the statistics, there is less than 10% of Chinese Population is in the middle class with annual income more than of $15,000 USD. The Icebreaker is supply products especially for the outdoor sport activities, how many potential customers are there in China today? A study from Institute of National Sports, shows that not more than 7.4% of Chinese are frequently joining any sport activates every week and with only less than 7.0 million people involved in outdoor sports (including hiking, cycling, kayaking, skiing, etc). (China Institute of National Sports, Website: ). We therefore could conclude the type of potential customer for Icebreaker in China has to be an outdoor sport fans with annual income more than $15,000USD. We therefore conclude that there are only few million people in the market. Another interest culture affect in China is “to be fit and sporty” is not an identity of the rich and successful.
In conclusion, Hofetede’s Culture-Dimensions indicates how the Icebreaker would operates its company in China and how to manage its Chinese employee. The 7P model tells us more on how to establish a positive relationship with local supplier, customers, as well as government. Nevertheless, a unique social structure and lifestyle of Chinese people is most important for Icebreaker at this stage, which determined how the company should enter the market. We suggest the Icebreaker should extend its product type to fit the general demand rather than specific in outdoor sports wear if wants to enter the Chinese Market now; After all, China is still growing at this field, at this time.
Reference
Delong, M. Bao, M. Wu, J. Chao, H. Li, M. (2004) Perception of Us Branded Apparel in Shanghai. Journal of Fashion Marketing and Management, 8 (2), 141-153
Fisher, G., Hughes, R., Griffin, R., and Pustay, M. (2006). International Busness: Managing in the Asia-Pacific (3rd Ed.). Pearson Education Australia: Frenchs Forest, NSW.
Geert Hofstede 1993,7(1):81-94. “Cultural constraints in management theories”, University of Limburg, Maastricht, the Netherlands Academy of management Executive.
Hofstede, G. 1991. Cultures and organizations: Software of the mind. Berkshire, NJ: McGraw-Hill
Kogut B. & Singh H.. The Effect of National Culture on the Choice of Entry Mode. Journal of International Business Studies, 1988,(3): 411-432.
Lassiter, J.B., and Heath, D. (2006) “Icebreaker: The China Entry Decision”, Harvard Business School case Nr. 9‐806‐195, Harvard Business School Publishing: Boston, MA.
Yu Kaicheng & Charles Chen, “ The organizational Behavior - Cross culture organizational behavior management. 2004: p579-580.
SmartWool. Retrieved March 30th 2007 from
https://www.smartwool.com/default.cfm
Hale, D. (2001). Economic Development in China. The International Economy, January 2001. Retrieved March 31st, 2007 from
Icebreaker, New Zealand. www. Icebreaker.co.nz
China National Statistics, Retrieved March 31st, 2007 from http://www.stats.gov.cn/tjsj/qtsj/gjsj/2004/t20060726_402340002.htm
China institute of National Sport, general sports information, Retrieved March 31st, 2007 from
www.wanfangdata.com.cn/qikan/periodical.Articles/zgtykj/zgty99/zgty9904/990402.htm
CIA - The World Factbook: China. (2006). Retrieved March 31st, 2007 from
Hofstede’s Culture Dimension- Appendix 1
(BY “Cultural constraints in management theories”, Geert Hofstede, 1993,7(1):81-94.)
Calculation Comparison - Appendix 2
From Kogut Bruce and Harbir Singh, the Cultural Distance among different countries can be calculated by using Hofstede’s culture dimension index. (Kogut B. & Singh H. “The Effect of National Culture on the Choice of Entry Mode”. Journal of International Business Studies, 1988,(3): 411-432.)
CDa = ∑ (Cia –Cib)2
- Compare China and USA, where a = China, b=USA
(Putting the index in to the formula above, we get result that the)
Cultural distance between China and USA = 122.07
- Compare China and NZ, where a = China, b=NZ
Cultural distance between China and NZ = 120.83
- Compare China and UK, where a = China, b=UK
Cultural distance between China and UK = 127.73
The 7P model – Appendix 3
A Chinese professor Yu Kaicheng, from DaLian University of Technology, surmised the Chinese cultural characteristics into this 7P model (Yu Kaicheng & Charles Chen, “ The organizational Behavior - Cross culture organizational behavior management. 2004: p579-580. )
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Patriarchal system – The Chinese managing style believes that a company is a kind of family, and should take care of his member or employees. In exchange the employees should work for best interests of this company/family.
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Principles first – before start any detail cooperation, Chinese people always propose some principles that agreed by both party at first.
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Patriotically sensitivity – a very famous chauvinistic culture for Chinese, due to a root history of been invaded.
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Politeness – Chinese behaves very polite when communicating with each other, and always take care of one’s face.
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Politics Orientation – “Guan Xi” a world famous culture in China. The Chinese always looking for an unofficial channel in communicating with each other.
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Patience – with all the factors above, Chinese sometimes are very low efficiency and bureaucracy. Sometimes you have to be extremely patient if you want do things in China.
- Petty producers’ mentality – with a long history of been a farmer, even today there are still a large proportion of people are farmers in China. This has a deep influence on Chinese leaders and labors today in its society.
