Doing business in China, Cuba and Saudi Arabia

Any country's dominant cultural elements have a direct impact on international investment. It's crucial that we carefully evaluate the cultures present in the nations where we aim to invest in our business plan.
Despite the diversity of the Chinese communities, there are some aspects of the immensely complex Chinese culture that are shared by all of them. The shared Confucian ideology between them is what accounts for the parallels.
The culture in China is Confucian. Their conduct is governed by the Confucian set of social laws. These qualities must be displayed in order for a firm to prosper in China. They include; courtesy, loyalty, courtesy, and diligence. This may not be the case with the Western culture. Some of the Confucian teachings about culture are in conflict with the western values. For instance, according to Confucius, stability in society is based on unequal relations between people, whereas the western culture equality to be a very important virtue. Furthermore, the Americans emphasizes on individualism, while the Confucian teachings emphasize on how crucial is the family regarding how the society should be organized (Kermeliotis, 2011). China is a Stalinist-Leninist-Maoist society and therefore socialist in nature and therefore their view of the market and entrepreneurship isn’t the same as that of the western capitalism.

Business in China is relationship driven society. For you to be able to do a transaction in China, you have to develop a relationship unlike with the American culture whereby you can do a transaction and then develop relationship. The Guanxi, which is a network and interaction, is very crucial for business. According to Guanxi, before any business transaction, interpersonal relationship should be established. To start and operate a business in China, the company should build on Guanxi and this helps in minimizing risks, setbacks and failures that are normally associated with failure of adopting to some cultural principles.

According to Geert Hofstede cultural dimensions, china has a significantly high (80) Power distance ranking as compared to the world average of 55. This shows the high level of inequality of power and wealth in the society. Other important cultural values of the Chinese society are; the hierarchical structure, the importance of family, social life, emphasis on hard work, morality and self-restraint ("Dimensions - Geert Hofstede", 2017).

With China being an emerging economy, it offers a lot of market opportunities for any foreign investor. While entering the Chinese market, caution must be taken due to the cultural differences that exist between this country and the western countries.

Cuba

Cuba has a harsh business climate because of the socialist economy that the government of this country has adopted. It’s the mandate of the Cuban government to control all factors of production i.e. manufacturing, distribution, energy projects and access to domestic capital (Alonso, & Lee, 2016).

Cuba has a challenging business culture. Due to the tough laws of owning business in Cuba, many Cubans are being involved in the illegal black market activities and therefore making it very hard for the legitimate business to operate and compete effectively.

In Cuba, there is the culture of confiscatory tax rates and burdensome regulations that are a very big hurdle for business. Due to these regulations and taxes by the government, make it difficult to run a business in this country.

In Cuba, businesses are not legal entities. Cubans work together as contractors. Though they may work together in the same work place, work under a single brand, or collaborate, but they usually don’t have a legal standing as a corporate entity. Furthermore, the Cuban society relationship driven and therefore, people must ensure good relations.

Saudi Arabia

Saudi Arabia is a strictly Islamic country, and therefore, for one to be able to do any business in this country, they should be observant of the Islamic laws and practices. The way of life in this country is the Islamic law and the Arabian culture. With the Arabian culture, face to face meetings are preferred. Friendship and business are closely related and based on mutual trust and benefits. Businesses in Saudi Arabia are hierarchical in nature and the decision making is normally done by the senior level management.

The Saudis have communication styles which are courteous and often indirect, with great importance placed on preserving someone's dignity by avoiding disagreement or refusals. Saudi Arabia can be a very nice place for the western investors if they can handle the cultural differences well.

Use of US management in these countries

It’s very difficult to have US management styles in these cultures. The Cuban and the Chinese society are socialistic in nature while despite the Saudi Arabian culture being capitalist; it’s greatly influence by the Islam, which is the state religion. In Saudi Arabia, business is not distinct from the government and the religion while in the US, business, religion and the government are separate entities with little control or influence over one another. These management styles are normally ideal for individualistic and capitalistic economies. Therefore, for the US companies to invest in these countries, they must undergo some modifications to suit the cultural, social and political market requirements in these countries. This would work in minimizing the conflicts that would otherwise lead t business failure.

China being a communist country, it has a socialist market economy whereby it is based on the dominance of state-owned sector and an open-market economy. This system is largely seen as a form of state capitalism. The government has a tight control over the economy. This type of economy usually has shortcomings in that it encourages unfair trade practices such as local favoritism, theft of intellectual properties and cooperative protectionism.

Cuba has adopted an economic system whereby the economy is dominated by state run enterprises. The country has a dual economy whereby two different systems operate simultaneously. The first system is the socialist peso economy whereby the government provides Cubans with free education, health care and other socially important services. The second system operating in Cuba is the free-market dollarized economy which operates in the tourism sector, the international and export sectors. Despite the Cuban government embarking on a plan to reform its economy, two-thirds of the economy is still controlled by the government (DeSilver, 2015).

Saudi Arabia has an economy which is based on oil. Though the economic system in Saudi Arabia is open and capitalist in nature, the government has a strong control over the major economic activities in the country. The government has been encouraging the growth of the private sector in a move to diversify the economy and reduce the unemployment rates in the country. Foreign investors who are interested in Saudi Arabia are given access to regional and international financial programs ("The World Factbook — Saudi Arabia", 2017).

Taking into consideration the different cultures and the economic systems in those countries, we should move forward with the business plan and implement it in both china and Saudi Arabia. These two countries have an environment that is conducive for foreign investors. It’s quite risky to invest in Cuba due to the strict government controls in the economy and therefore our investment in that country may fail to materialize. Having the knowledge about the cultures will enable our company avoid cultural missteps and thereby facilitating our operations.

References

Alonso, P., & Lee, A. (2016). The Potential and Pitfalls of Doing Business in Cuba. Harvard Business Review. Retrieved 30 May 2017, from https://hbr.org/2016/03/the-potential-and-pitfalls-of-doing-business-in-cuba

DeSilver, D. (2015). What we know about Cuba’s economy. Pew Research Center. Retrieved 30 May 2017, from http://www.pewresearch.org/fact-tank/2015/05/28/what-we-know-about-cubas-economy/

Dimensions - Geert Hofstede. (2017). Geert-hofstede.com. Retrieved 30 May 2017, from https://geert-hofstede.com/national-culture.html

The World Factbook — Saudi Arabia. (2017). Cia.gov. Retrieved 30 May 2017, from https://www.cia.gov/library/publications/the-world-factbook/geos/sa.html

Kermeliotis, T. (2011). Doing business in China: Five tips for success. CNN. Retrieved 30 May 2017, from http://edition.cnn.com/2011/10/21/business/china-business-investors-culture/

The World Factbook — Saudi Arabia. (2017). Cia.gov. Retrieved 30 May 2017, from https://www.cia.gov/library/publications/the-world-factbook/geos/sa.html