Joint-venture in China - Sample Essay
FIAT is an Italian automobile manufacturer. It is the acronym of Fabbrica Italiana Automobili Torino which means Italian Motor Factory of Turin. This company is controlled by Agnelli family and has been created in 1899. FIAT S.p.A. group controls the brands Fiat auto, Fiat Professional, Alfa Romeo, Lancia, et Maserati, IVECO, Ferrari and Irisbus. But since 2000, FIAT faces some changes in particular in 2004 with the death of Umberto Agnelli and in 2003 it suffered an operating loss of 979 billion Euros and more than one trillion in 2004. This year was the worst in the century of existence of the company.
The situation rights itself in 2005 since its breakdown with General Motors 2004. Moreover, FIAT becomes successful thanks to the creation of two new models: Panda II and Grande Punto. This permitted a positive benefit and first dividends for five years. In 2007, the market shares of FIAT group were increasing in particular in the automobile sector with 32% in Italy, and 9% in Europe. In 1995, FIAT tried to break into the Chinese market which is very important. Indeed it is the first host country of foreign investments, so China is an inescapable market. FIAT made an attempt to introduce there with a joint-venture with a local firm: NANJING. Between 1958 and 1979, NANJING stayed almost in monopoly position in China, which testifies the fact that NANJING is a very big company as well as FIAT.
We could believe that such an association will be a success. Yet, the joint-venture has failed. The aim of this report is to analyse the cultural reasons and difference why this may have failed. Unknown author. (2008). Fiat. Available: http://fr.wikipedia.org/wiki/Fiat. Last accessed 04 December 2008. Differences of culture To explain this failure, we could firstly lean over the differences of culture. Indeed, the western and the eastern cultures are very dissimilar, so we can expect to a cultural shock because they are divided on everything: religion, artefact and behaviour, relation to individual etc.
First of all before talking about the cultural differences, we can say that geographically, the two countries are situated in two different continents: Europe and Asia. Italy is in Europe and belongs to European Union populated of 60 billion of inhabitants. On the other hand, we have China, 32 times bigger than Italy in surface area and Chinese people are 22 times larger than Italian people. The way of living can thus be explained by the religion which is the basis. Italy is a catholic country whereas the main religion in China is Confucianism.
These two religions are completely different regarding to the relations between people. In Italy (and Western in general), the individual comes first and has the priority. It is even a fundamental fact in the western society. In China and more precisely in the Confucianist philosophy, the group is more important. Chinese people have the sense of solidarity whereas in Italy, everyone is focused on themselves. In Confucianism, relationships are central and based on duty, loyalty and sincerity. We oppose collectivism of China and individualism of Italy.
Linked to that, the two cultures differ regarding to the traditions and behaviours. For instance, in Italy it is a popular custom to celebrate the saints. Every day is dedicated to a saint, this is what we call the saint’s day. In China this custom does not exist but there are a lot of examples which do not exist in the Western society. For example, a gift means a request of help. If the person accepts the present, it commits him to help the other. This may illustrate what has been said before with the collectivism. In Italy, people exchange presents for Christmas, birthdays it is common then.
The shock of cultures between China and Europe is flagrant in the communication style. In fact, Chinese people are more reserved in their relationships than Italian. For example to wave at a friend or a member of a family, they shake their hands or even it is normal to kiss each other. Not for Chinese because the physical contact is acceptable with difficulty and they need a larger personal space than Italian. The shake of hands is only common in business world.
The communication style is direct in Italy and indirect in China. In Italy, people talk all the time telling what they think and using hands to accentuate what they say. In China, the use of silence is common even if a person has another way of thinking. In a word, Chinese are more introvert than Italian. Moreover, in China it is more difficult for someone in the bottom to talk to those in the top. An author supports this. Geert Hofstede is a Dutchman psychologist inspired by culturalism. According to him there are 6 factors of cultural differentiation which are summarised in the table below:
With this table, we have the affirmation that Italy is individualist and China collectivist. We can see that Italy is also a masculine society which means that people are self-confident as they really know what they are capable to do and want to prove it. That is why Italy scored 70 in masculinity. Chinese is more insecure. Uncertainty avoidance points out the degree of tolerance accepted by a society facing the future and the worries it can bring. In view of their score, Italian people don’t like to be threatened by uncertain situations. Chinese are more confident in the future and are less worried than Italian.
Power distance means the acceptance of power inequality by those who are in the bottom of the scale. In China, it is a very hierarchical system. The distance is extremely marked; power and hierarchy are accepted and totally conventional. Italian is more reticent facing power. This is the similar idea than the one explained before, Chinese are silent and accept orders coming from the top. Italian will say what they think and even criticize if they want to. Hall is an anthropologist and specialist of the intercultural. He studied the context of a society and thanks to its research he confirms what Hofstede said.