Business Culture in India and China

Introduction:

With much of the world watching the emerging economic power of china, there are two things often overlooked. The first is that India is undergoing an equally dramatic economic evolution. The second is that this growth will have big implications for the meetings and exhibitions sectors that we all operate in (Buckeley, 2006).

Undoubtedly, both India and china will emerge as economic power by 2050 (approx) but they are very different from each other in many aspects. It has also been seen that strengths of India often becomes weaknesses of china & strengths of china often becomes weaknesses of India. For e.g. India is knows as service industry and china is known as manufacturing industry (Buckeley, 2006). By 2030, India’s population overtake population of china. As Chinas population will see a drop by 2030 because of gender imbalance that is caused by “one child policy” (Buckeley, 2006). Also favoured by male preference syndrome. This in-turn will cause many problems, which will have impact on population distribution. China has got developed in the past 5-7 years because of infra structure funding from its central government. As per the survey done by ICCA 120 world-class convention centres are expected to be in operational by 2040 (Buckeley, 2006). Besides this, Beijing Olympics (2008) and world expo (2010 shanghai) will prove as a legend in the development of China. On the other hand, India has constructed many conference and exhibition centres in the major cities of India that are New Delhi, Kerala, Mumbai, Kolkata, Bangalore and Hyderabad. But both of these countries are very different from each other in terms of airports, highways, railways and other public amenities in which china is far ahead of India (Buckeley, 2006).

Indian culture is distinct in its own way which further has an impact on business culture followed in India. Dealing the Indian business counter-parts in their way is highly appreciable. Some examples on how to deal with Indian business counter-parts are – “Namaste” is used to meet & greet each other (it is done by bowing the chin and placing the folded hands underneath of chin). Instead of this, these days educated people in India prefer to shake hands to greet each other (Trade Chakra, 2008). Adequate knowledge of Indian business etiquettes is significant to carry out a business successfully in India. Indian hospitality is famous in the world therefore; business travelers can feast the Indian hospitality. It is not baffling if appointments are cancelled, re-scheduled or postpone. Patience is the key to success in India. Indians are quite proficient in English language. Organization structure follows from top to bottom in which decision-making is generally done at top level (Trade Chakra, 2008).

Chinese culture is distinct in its own way which further has an impact on business culture followed in China. Chinese greeting is special in its own way. Thus, it forms an important part in making a first impression. As said, “first impression is last impression”. In china people are greeted according to their position or status, which means person at top level, is greeted then it’s followed to middle and then to bottom level (Ingram, 2009). Trend of exchanging business cards is in bulky. Exchanging gifts is yet another important aspect of doing business in China. People are formally dressed in China during business meetings, conferences. Formal behavior at professional level is appreciated. Punctuality at meetings, appointments are pretty essential (Ingram, 2009).

As per World Business Culture (2010)

India in Figures:

Land Area: 3, 287,263 sq km

Population: 1,081m

Population density: 329 sq km

Life expectancy: Men 63 yrs

Women 67 yrs

Adult literacy: 61%

Average per household: 5.3

Divorces per 1,000: Unknown

The Economy:

Currency: Indian Rupee

GDP: US$ 691bn

GDP per heads: US$ 640

Employment (% of total): Agriculture 60%

Industry 17%

Services 23%

Unemployed 4%

Main Exports: Type: Engineering goods

Jewellery & gems

Textiles

Chemicals

Agricultural goods

Destinations: (% total) USA 20%

China 8%

UK 5%

United Arab Emirates 8%

Main Imports: Type: Petroleum & product

Capital goods

Gold and silver

Electronic goods

Gems

Main countries of origin: USA 7%

Belgium 6%

China 6%

Singapore 5%

As per World Business Culture (2010)

China in Figures:

Land Area: 9, 560,900

Population: 1,313m

Population density: 136 sq km

Life expectancy: Men 71 yrs

Women 75 yrs

Adult literacy: 91%

Average per household: 3.5

Divorces per 1,000: 0.8

The Economy:

Currency: Yuan

GDP: US$1,932bn

GDP per heads: US$1,470

Employment (% of total): Agriculture 50%

Industry 22%

Services 29%

Unemployed 4%

Main Exports: Type: Office equipment

Clothing

Telecoms equipment

Electrical machinery

Footwear

Destinations: (% total) USA 21%

Hong Kong 17%

Japan 12%

South Korea 5%

Germany 4%

Main Imports: Type: Electrical machinery

Petroleum products

Professional & scientific instruments

Office equipment

other machinery

Main countries of origin: Japan 17%

Taiwan 12%

South Korea 11%

USA 8%

Germany 6%

Background to business in India and China:

In terms of area India is far bigger than Europe with a population of more than 100 billion. India is 7th largest country in the world. It is divided into 29 states and 6 union territories. With this kind of structure India forms a big market for foreigners to invest in Indian market and to mint profit out of it (World Business Culture, 2010). Apparently because of large population, disposable income in India is huge. Therefore, which in turns increases the spending power of people. Also, India enjoys favourable geographical location in the world, which proves to be boon for industries in various aspects (World Business Culture, 2010). Nevertheless, existence of caste system structures hierarchy in India business where boss is the supreme power and is actually a BOSS whereas when 21st century started, the peoples Republic of China found that social, economic, and cultural transition is on swing (World Business Culture, 2010). The old certainties, which had an autocratic type of rule during the rule of Mao Zedong, substituted by Deng Xiaoping who had more liberal policies. But, those policies were unclear. As per world business culture (2010) “The pursuit of profit is no longer ‘counter-revolutionary’ and business people have long since ceased being viewed as enemies of the people. Yet the Communist Party is still in power and shows little appetite for any of the political reform so much clamored for by the West.” (World business culture, 2010).

Business Culture in India and China:

Relationship building is very important factor in India esp. at professional level. In India trend of giving ideal deals to known person is followed. Therefore, more you maintain the cordial and friendly relations more it is useful (Business maps of India, 2010), where as Chinese follow very formal relationships in business. It is not that they are not humorous but might because of language problem; humor at times can become rude. Also, while doing business there, you should always establish a contact with a person who can act as an intermediator. This will help in solving problem of language, bureaucracy and legal system networks (Kwintessential, 2010).

In India meeting are to be re-scheduled well in advance and are supposed to be fixed either in writing or on phone. Once you are in meeting room, the initial conversation starts with some favourite topics like cricket, business news or some latest happenings. In the terms punctuality Indians lag behind. They would expect punctuality but they themselves wont be punctual. Delay in scheduled time by 1 hour or 2 hour is normal (Business maps of India, 2010), on the contrary in China, in the terms of scheduling a meeting, it is advisable to schedule a meeting prior in advance. Also, it is required to provide with some prior literature to introduce the company. Well, punctuality is utmost important factor. Once meeting is started then the initial talks should be based upon your experiences in china so far. Always send an agenda of meeting prior to meeting, as it’ll help in controlling the flow of meeting (Kwintessential, 2010).

Process of decision-making is pretty slow in India esp. if some business deal has to be finalised on the basis of some prior negotiation or meetings or some discussions. Top-level management does the decision-making. You can expect the favourable decision by building the friendly relations with person concerned (Business maps of India, 2010). But, the process of business in China flows in hierarchy. Chinese are consensus players in terms of business. They lay cultural emphasis on group orientation along-with individual desires and needs. People are generally inclined towards family despite they belong to various other groups (World Business Culture, 2010).

The decision-making process is quite slow in India. Indians don’t solely rely on presentations, good work or statistical data. They also depend upon with beliefs, customs or inner conscious. Usually the major decisions are taken by top level and day to day life decision are taken by middle or low level management (Business maps of India, 2010). On the contrary process of decision-making is slow in china. You have to be patient and should never show expression as it’ll have negative impact on Chinese business counter-parts. It is said that you should show your ‘best poker face’ before negotiating with them. In case you show your weakness, there are strong possibilities that they’ll exploit you. Decisions are not taken in urgency because simultaneous negotiations are going on with other competitors (Kwintessential, 2010).

During any part of negotiation if the Indian business counter-parts comes to conclusion like we’ll see, we’ll try or something like that, then it surely indicates ‘no’. As Indians don’t directly say NO. They tend to make various excuses (Business maps of India, 2010), whereas Chinese are famous for their negotiations skills. They mainly lay stress on concessions. While making the strategy for doing business in china, it should be always be kept in mind that you are able enough to show little compromise and ensure that Chinese negotiators have gained some concessions. The famous strategy of Chinese is to show themselves as weak and vulnerable so that they can expect some huge concessions (Kwintessential, 2010).

The custom of gift giving is a vital part in Indian business. Thought it is likely in a way that the instead of person receiving gift say thanks, it is the person who gives gift say thanks. Though it sounds absurd, but it is like that. You should always be cautious while gifting something like never gift beef to Hindu, alcohol to Muslims or tobacco products to Sikh’s (World Business Culture, 2010). In the comparison with china the custom of gift giving is in vogue in china. Gifts are exchanged for celebrations. Gifts act as a sweet favor to Chinese business counter-parts. However, Chinese wont mind if you ask them what kind of gift they want. But, you should always keep in mind that same gifts are to be presented to the people of same level of hierarchy in an organization. Top-level people are supposed to given the gifts in the first instance (Kwintessential, 2010).

The major problem in china is of language. In china large number of people speaks Mandarin as well as it is an official dialect. English language level is poor in china. No doubt, English speakers are there in china but there ratio is very less also there command over language is not very good. Therefore, communicating in china is troublesome which can cause misunderstandings and mistranslation. Thus, it is always advisable to hire a translator for doing business in china successfully (World Business Culture, 2010), whereas in India the situation is not as bad as of china. In India large number of average people have good command over English language. English has become 2nd language in India after native language of India i.e. Hindi. All the official correspondence is made in English. Therefore, in India you can do business without a translator.

Well in India, business attire is generally formal wear. Men prefer shirt and a pant in summers and blazer or suit in winter while women wear saris or suits (Business maps of India, 2010), whereas Chinese prefers conservative formal business suits during formal meeting or conferences. Both men and women prefer them. During informal gatherings or during summer season they prefer wearing short sleeves shirts or t-shirts and jeans (Ingram, 2009).

China as manufacturing industry:

China has emerged itself as manufacturing excellence country. Thus, has become one of the largest exporters of the world. Gross Domestic Product of China has increased at tremendous pace and has become world’s 2nd largest economy based on purchasing power parity. This is all because of its manufacturing excellence. In the past exports of china has increased by 15% per year. As per Rowan (2003) ” China now makes 50% of worlds telephones, 17% of refrigerators, 41% of video monitors, 23% of washing machines, 30% of AC’s and 30 % of colour televisions (Rowan 2003). Key sectors of manufacturing in china are electronics and automotive components. Electronic Industry of china is famous all across the globe. China is the largest exporter of electronics in the world. China produces all types of electronic goods starting from household home appliances to semi-conductors. The various favorable factors have combined together and have led china onto the path of opulence. Preferential government policy i.e. china trade and industrial policy has added a comparative advantage to china. In most of countries government policies often has an adverse effect on business. But, in china it has proved beneficial. China government has taken several steps in industrialization of targeted industry by advancing them preferential loans, public research, trade promotion, sector specific financial incentives, selective government procurement and control on foreign participation (Linden, 2003). Also, china’s open door policy has attracted foreign direct investment, which has proved a boon. It has helped in building factories, creating jobs, linking china to international markets etc. local supplier network of china is also developing because foreign companies are investing time and money. China has laid its sole stress on building up superior infrastructure required for growth of manufacturing sector. It has strengthened its road and rail network to enhance transport facilities, which are required in transportation of goods. China has built 25000 kms of expressways. Also, has taken steps to reduce congestion on railway lines. China has also taken steps to ensure constant supply of electricity which is yet another important factor of production. Cheap labour in china has played a major role in development of manufacturing sector. Thus, has attracted many international companies to re-locate their manufacturing units in china.

India as service industry:

Service sector in India has sown a tremendous growth especially in last decade. Service sector in India means information technology sector. Information technology sector is further stretched onto four sectors – Information technology services, Information technology Information technology enabled services, software and e-business. These sectors combine for 2008 annual revenue forecast of $87B, (Embassy of India, 2010), with numerous analysts suggesting higher revenue. Highlighting the rapid growth of IT in India, software was a small $150MM industry in 1991, but grew to $5.7B in 2000, an annual growth rate of 50%. (Embassy of India, 2010). The way public and private sectors have contributed towards the growth of information technology sector in India is like an example for other developing countries. Many factors have helped India to lead success in service industry. Government played a passive role in growth of service industry. Neither government helped nor it interfered in growth of service industry. Like other industries in India, information technology industries had the same procedure for starting it (Farrell, 2004). Initially government did not expect this kind of growth in this sector. Later on even after when government realised the growth and government introduce the concept of SEZ’s to encourage IT industries, then also they were not able to attract foreign investors. Thus it can be said that IT sector in India grew despite of any effort by the government. Existence of large numbers of English language speakers has also showed a path of success. Also, it helped in making India a main destination for customer services like call centres and billing tasks. Thus, it can be said that India’s IT industry grew to business process offshoring i.e. BPO. Post independence, economy was not favorable to entrepreneurs. As the economy grew, number of entrepreneurs also increased at a tremendous pace because it was easy to set-up a technical service company as compared to other manufacturing units. Therefore, it gave a birth to IT industry in India. Many hi-tech areas were developed in cities like Bangalore, Hyderabad that in turn boosted the service industry in India.

Conclusion:

Inspite of so many cultural differences between both the countries and differences in various other aspects in the terms of land area, population, population density, literacy, GDP growth, employment, imports and exports both the countries are showing significant progress. Both, India and China are showing progress in different fields. China is further taking steps to grow their manufacturing sector. At the same time they are lacking in the growth of service sector. Similarly, India is also taking steps to enhance their service sector but not able to enhance the manufacturing sector. In order to enhance manufacturing sector India has to strengthen their infrastructure, development of human resources. Also, has to take necessary steps to attract FDI by providing them subsidies, easy financial services, development of infrastructure, easy FDI regulations etc. Likewise, China has to strengthen their service sector to support manufacturing sector. Till now, the software’s that are being produced in china are catering the need of domestic consumers. Therefore, China has to lay emphasis on export-oriented growth of service sector. Until now, china has targeted to grow service sector by various science parks. But, Prospective growth in service sector would be possible by encouraging entrepreneur and less government interference. Therefore, we can say that both the countries are taking crucial ladder towards the escalation to reach pinnacles.