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INTERNATIONAL

BUSINESS
Task 01

Module Leader: Mr. Prasanna Perera


Date: 30/10/2014

Introduction
According to the task we were given, we had to answer the following questions.
1. The business practices of these two countries
2. The buying behavior of consumers of these countries
3. The future economic developments of these countries.
We have chosen USA and China as culturally different countries and studied the economic as
well as the business behavior of those two countries.
This report contains the analyzed and studied information in relevant to the above mentioned
questions.

The business practices of China and America


In order to elaborate on the business practices of China and America, it is necessary to first
understand their cultural diversities and the business etiquettes of these two countries.
The cultural orientation of China and America are very different from one another. Chinese have
their cultural values taken very seriously. Such as Guanxi (it implies that if I scratch your back,
maybe youll scratch mine), and Mianzi (meaning face-giving/ saving strategy). Their decision
making, punctuality, & building up relationships has a huge influence on their cultural values and
sayings.
On the other hand, The Americans culture is based on Judeo-Christian and Western sociotheological principles, they prefer to deal with the underlying truth, what makes most sense, &
what is right and wrong. Americans culture does not have much influence over sayings.
China and America views the world in two different ways. Therefore, this affects the business
practices carried out in these two countries. For example; businesses in China relies heavily on
personal relationships, meanwhile in America business relationships are based upon written
agreements and does not necessarily last long.
Lets look at the differences of Chinese and American (European) business etiquettes:
The business etiquettes

America (Western countries)

China (Eastern countries)

Thinking patterns

Takes the situation into


account in rule interpretation.
Disagreement expressed by
silence.

Expression of self
Time sense

Rule based (under laws and


regulations).
More argumentative.
Expresses oneself thoroughly
without hesitation.
Wants to have rights, and are
usually self-ruled.
I oriented.
Be on time and end on time

Conflict results

Win or lose.

Type of logic

Casual relationships (Linear).

Expression of agreement &


disagreement
The individual

Group duty.
We oriented.
Flexible. Does not have to be
on exact time.
Does not have to be win or
lose. No perception of two
states.
More subtle (Spiral).

Even the people who speak the same language fail to understand each other. Like in the story
told by Winston Churchill, about a misunderstanding that happened between the Americans and
British during WWII. The British wanted to table it meaning deal with it now, Americans
thought it meant to delay the matter until later.
Looking at the previous table its clear how diverse these two cultures are. So its best to
understand the cultures before dealing to avoid frustrations and distrusts.
Americans quickly build up business relationships, but are usually shallow and not always long
lasting. Although if developed tends to last very long.
Making a first good impression is essential. Especially when dealing with a foreign country it is
best to understand their basics, and greeting rituals. In china, a first positive impression is not
enough. The Chinese have their own business etiquettes such as gift giving, greeting rituals,
when to display emotions, how to use intermediaries, meeting custons and conduct, & time
perceptions, guest-host relations.
So to sum up about the cultural diversity, there are five principles (5 Ps, by Mark Buchman) one
must keep in mind before dealing with a different culture. These are:

Plan. (There has to be something written which all parties will agree on.)
Persevere. (Hold on to the business. Dont just give up.)
Patience. (Its going to take time. The business wont blooms instantly.)
Personal relationships. (Communicate, build relationships. Its essential in business
especially in Asia.)
Perfection. (Learn from the mistakes.)

Buying Behavior of Consumers


There are two types of buyers in the society. They are:
1. Consumers (who buy to use by themselves)
2. Industrial Buyers (who buy for business purposes)
Buyer decision making process can be shown as follows.

Problem
Recognition

Information
Search

Evaluation of
Alternatives

Purchase

Post Purchase
Behavior

Although this method is applicable to any sort of buyer in the world; the method of using this
process could be different from one person to another. Especially if we compare two people from
two countries such as United States of America and China, their methods are different from
another.
Culture, attitudes, principles, beliefs are the main factors which affect to differentiate the buying
behavior of USA and China.

Chinese Buying Behavior


China is an Asian country which owns the second highest economy in the world. Yet due to the
global financial crisis occurred in 2009 China too faced a slow in economic growth.
Culture has influenced the buying behavior of China immensely. According to Chinese cultures
(mainly Taoism and Confucianism) their main focus is family. Older people and children are
given a special place when recognizing a problem or a need.
Although there are number of ways to get information (personal sources, public sources,
commercial sources and experiential sources) about a product or service; Chinese prefer to gain
information through their acquaintances (word of mouth).
Chinese people show a low level involvement while purchasing something for themselves. But
they show a high level involvement when buying something for others; which shows the world
that they expect others to think that Chinese people are rich and generous.
If the Chinese customers experience a negative product, they will eventually switch brands. If
they have a positive experience; those consumers will repurchase from the same brand.

With the globalization; above mentioned Chinese consumer behavioral patterns also have
changed. With the high technology usage people in China are following individualism instead of
collectivism they used to follow earlier. With the birth control introduction in 1979 (Dusheng
generation only one child per a family) Chinese have become more self-centered and
individualism has expanded. Currently; China has the worlds largest e-commerce market with
210 million online shoppers.

Consumer Behavior in United States of America


United States of America owns the worlds largest economy. Currently they own 17.5 trillion US
dollars GDP. USA too faced the global financial crisis in 2009 and they too are still repenting for
the crisis.
Unlike China, USA has a unique consumer behavior which is even different from western
countries such as United Kingdom.
United State of Americas culture is very much different from the Chinese culture. Americans
value the freedom and they highly think of the individualism. When recognizing a problem
Americans tend to think about themselves at first.
Americans do not take much time to search information regarding a product or service.
Nowadays they tend to purchase branded products to satisfy their needs and wants.
Like Chinese people, Americans too change their brands if they happen to face a negative
experience regarding a product. If they are happy about a product they will continue with the
same brand.
Globalization has made it easy to sell and buy the products or services all over the world through
online business. Americans are much fond of doing business via distributors such Amazon,
Alibaba, etc... America has a e-commerce users of 170 million which becomes second only to
China.

Future economic developments in China and USA


China and USA are two different countries due to their cultural and geographical differences.
These factors are affected to their economy as well as future economic developments, their
national GDP growth, inflation, and etc In this report we are discussing Chinas and USAs
cultural and geographic difference with one another, secondly what are their buyer behaviors in
China, and thirdly comparison of USA with those differences.
China recorded a GDP rate of 5.9 trillion US dollars, and its considered as worlds 2nd largest
economy in 2010. Main figures are Agriculture- 10.9%, Industry 48.6%, Services- 40.5%.
Under the Labor force are agriculture -39.5%, Industry- 27.2% and Services- 33.2%.

GDP growth rate in China


1.4
1.2
1
0.8

GDP growth rate (annual %)

0.6
0.4
0.2
0
Category 1

Category 2

Category 3

Category 4

year
Series 3

Chinas GDP increased from $1.1 trillion to $1.6 trillion from 2000 to 2004, $3.43 trillion in
2007, $ 4.33trillon in 2008 $ 4.9trillon in 2010.
Chinas foreign exchange reserves more than $ 200 billion in 2004 to reach $609.9 billon, $1.5
trillion at the end of 2007 $2.8 trillion in 2010,$3.2 trillion 0n July 2011.

China had about $4.5trillion during 2010 under personal savings and a saving rate of close to
50%.
In World Bank figures they explained above figures with more explanations. China is the worlds
leading producer of steel, copper, aluminum, cement and coal since several years. And past
decades as a consumer china surpassed Japan in 2005 as the globes second larger petroleum
importer. In 2006 China again surpassed the Japan as the worlds number two auto market with
total sales of 7.2 million vehicles and production of 7.3 million. In 2009 China surpassed US
auto market and also in 2010 Chinas car production and sales reached 18 million respectively.
In 2006, the number of overseas tourists grew by 3.9% to 125 million and foreign exchange
earnings increased by 15.9% to USA dollars 33.9 billion.
According to the world tourism organization china remained 4th most popular tourist destination
in the world. (Behind France, Spain, and USA)
As an owner of the 2nd largest economical country, China now experienced their 12th five-year
plan goals (from 2011 to 2015) since 2011. Their obligatory targets to reduce the use of water
(per unit of value added 30%) environmental protection, energy reduction, and land
conservation.
They achieved 11.2% GDP growth through 2006- 2010 (last five year plan). China plays most
vital role in worlds economy. But also they have experienced problems like corruption,
intelicethal property rights violation, pollution of the environment, contaminated foods and stuff
for example, injecting water into meat to increase its weight, and contaminated baby milk
powder with melamine. Also, they are experiencing other problems as well. Coastal region and
hinterland, the rich and the poor, the urban and the country side Housing price, Education, Social
security (rapid aging of the populations will mean pay as young pension schemes will become
unsustainable)
These type of questions are affected to the Chinese economy. But the economic reform since
1978 is a great success through social system re-organizing, dual wheel driving under the
structural factor, market mechanism: replacing the plan, governmental intervention: human and
institutional capabilities under the transitional and traditionally they changed formal and
informal relations. The prospects for continued rapid growth of the Chinese economy are
excellent. Still there are some trends and challenges to China. They are promoting domestic
consumption, urbanization, financial reform and addressing income disparity. Yet, China has a
long way to go to become really economically powerful country in terms of per capita income.
When considering USA, they have an advanced mixed economy. Which includes a variety of
private freedom, combined with centralized economic planning and government regulations.
USA has a high income and is a developed country. Their top 3 trade partners are Canada, China

and Mexico. Top industries are steel, motor vehicles, telecommunications, chemicals,
electronics, food processing, and consumer goods.
USA recorded current GDP rate of 1.876% in year 2013. GDP country rank is number one. They
achieved this much of GDP per capita with agriculture-1.25%, services-78.6%, industry-20.15%
and manufacturing-12.9%.

GDP coposition in USA


18
16
14
12

GDP annual growth rate %

10
8
6
4
2
0

year
Series 2

Column1

Even USAs economy will face major challenges. There are the pressures built in health care,
monetary, housing problems, immigration policies, and national or international security threats
such as terror of wars affecting the USA.
Because of that, USA invested 3 trillion dollars over 17% of total GDP under the health activities
during the past decade. With immigration they are eventually introduced red card facility, which
is facilitated with two years work permitted. Also the congress and the President introduced
home loan facilitate in USA.
Monetary or the tax reforming is still a major challenge to the USA economy and its
discouraging investments in USA. That is a reason to lower the productivity and reduce wages.
Yet the President has failed to address this problem.
Regardless those mentioned factors, as a country USA is one of globes number one biggest
economy owners.

References
Yan Luo, (2009), Analysis of Culture and Buyer Behavior in Chinese Market
http://www.ccsenet.org/journal/index.php/ach/article/view/361/290 [Accessed on 27th October
2014]
Helen Wang, 2012, Five New Trends of Chinese Consumers
http://www.forbes.com/sites/helenwang/2012/12/17/five-new-trends-of-chinese-consumers/
[Accessed on 27th October 2014]
http://www.chinainternetwatch.com/2186/new-buying-behavior/
http://www.bauer.uh.edu/kacen/documents/kacenlee_impulsebuyingjcp.pdf
http://www.universalconsensus.com/services/private-sector/american-consumer-behavior/
http://www.legacee.com/the-global-leader/chinese-businessculture/#sthash.W1efdypR.XoZ1JRP0.dpbs
http://middlekingdomlife.com/guide/mianzi-guanxi-china.htm
http://www.forbes.com/sites/languatica/2012/03/15/want-to-capitalize-on-china-youbetter-have-good-guanxi/
http://www.tradecommissioner.gc.ca/eng/document.jsp?
did=107932&cid=512&oid=32

Xiaodong Zhu, Understanding Chinas growth, Past, Present and future


Chongwei Wong. (2013), Introduction to Chinese economy
Fernald et al, The future of economic growth

Participation of the group members are as follows:


(a) Business practices of these countries
-Nipunika Adikari (BSC-PLY-MGT-13.1-001)
(b) The buying behavior of consumers in these countries
-Udani Rajapaksha (BSC-PLY-MGT-13.1-043)
(c) The future economic development of these countries
-Dilmi Kaluarachchi (BSC-PLY-MGT-13.1-133)
- Ravindu Pallegedara. (BSC-PLY-MGT-13.1-031)

I ensure that each group member participated equally as mentioned above, to complete this task.

____________________________
Group Leader