Joint venture between European and Chinese companies

Mercedes entry to Chinese market
This paper aims at discussing the possible problems that can arise when a European multinational company enters into a joint venture with a Chinese company. To better understand this issue, a case study of Mercedes entry to Chinese market will be used. The cultural examination will a apply Hofstede’s framework of cultural dimensions, and the Guanxi tradition of the Chinese people. After establishing the possible cultural problems that are bound to arise, the paper will offer possible strategies that the multinational should implement to resolve the problems.
Explaining the cultural web: Factors and elements
It was Gerry Johnson (1988), who formulated a cultural web, where he identified six aspects that can be applied to explain organizational culture. These aspects are underlined below:
The paradigm: this explains the basics of the organization, in terms of its activities, mission, vision and values.
Control systems: the mechanism implemented to check the operations of the organisation. An organization with a role culture will heavily depend on rules and regulations.
Organisational structures: these comprise the hierarchies, reporting ranks and the manner in which work runs through the organisation.
Power structure: explains how decisions are made within the organization, whether it is made at the top or spread throughout the organization.
Symbols: they entail organisational logos; though as well include symbols of authority for example, executive washrooms.
Rituals and routines: entails how management meeting are carried, board reports and other meetings, they maybe more routinely than required.
Stories and myths: they give past account of people and events aimed at telling others the values that are important within the organisation (Johnson, 1988).
1? National culture and business culture of Chinese
Corporate culture National culture Business culture Problem
People oriented Confucian People-oriented management style
Interpersonal relationship Personal relationships may interfere with business operations
Power culture (power is at the top) High power distance High respect for the authority, thus managers is fully obeyed. It is difficult to initiate changes in such an organisation
Constructive culture. (people perform tasks as a group) High uncertainty avoidance Communication is pensive and intuitive. change is not easily accepted Leads to ineffective communication or miscommunication
Group culture (the success of the all employees is stressed) collectivism Social relationships and welfare are highly valued when doing business. People do not take Individual responsibility or initiatives
Role culture (work is clearly delegated to employees) femininity Social roles are clearly defined and men are expected to take leadership in business dealings. It is difficult for women to be promoted and advance their careers
The likely issues that will need to be addressed to ensure integration of the two
1. The issue of collectivism and individualism dimension
To begin with, based on Hosfstede’s framework, and looking at the collectivism and individualism dimension, China is highly a collectivistic society (Hosfstede, 1980). This stems from the Confucian culture followed by the Chinese people. According to Morrison (2006) Confucian values include, loyalty, obedience to those in power, and hierarchy. These values remain crucial aspects in the development of social fabric in China, and it’s still applicable in Chinese business culture even today. the Chinese people value so much social relations as well as group well being, this implies that individual efforts are expected to be directed towards achieving the common good (Morrison, 2006). On the opposite, western cultures, for example Germany, are highly individualistic, stressing individual realization. Thus, the Chinese collectivism culture and Germany‘s individualistic cultures create a direct conflict between these two cultures.

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