P3
Describe how the environment and culture of another country affects HG’s business operating. You are asked to present a PEST (L) analyse on both the Netherlands and China. How does doing business in these countries affect the operation of the multinational HG
Environment:
The importance for organizations to be aware of the foreign business environment when they are considering investing overseas. When a business decides to operate abroad it will be investing large sums of money , so the risk needs to be reduced by ensuring the necessary research into the business environment takes place.
The most popular method for researching the external environment that a business operates in is the PEST analysis, which helps to identify the opportunities and threats that may exist in the external environment. The PEST and SWOT analysis are the basic framework for making strategic management decisions that will help a business to adapt more quickly to the realities of a new business environment, and take advantage of changes.
HG for example has to adapt to the Pest analysis of China, to do business in that country.
Hg, as a multinational, has also has to adapt to other countries they want to do business with.
Let’s look on the business environment in China, and examples of cultural differences that affect international business.
China is among the most attractive locations in the world. It has also grown to become one of the strongest powers. This rise boosted international business. The legal system too has been improved. Foreign investors seek business in China mainly because of 3 things.
They are:
1. Size of the market.
2. The very low cost of labour
3. China’s growth potential
Together I can say that China has become increasingly integrated with other parts of the world. It opened itself to an array of cross- border economic activities. It is not easy to manage international business in China. You will read about some of the factors which impact China as I conduct a detailed PEST analysis of China below.
PEST analysis is an essential management tool which assesses the macro-environmental factors. It is generally conducted for businesses and projects. The analysis helps decision-making and other management processes. It studies many elements under the following factors:
Political Factors
Economic Factors
Social Factors
Technological Factors
The main challenges for businesses in China are:
a. Attaining strategic objectives of cost reduction
b. Local differentiation
c. The strengthening of core competencies in certain areas and business activities
You are perhaps aware that China is a formal member of WTO. While China’s entry into the world market benefits its national economy, it also boosts global economic growth.
POLITICAL FACTORS
Political factors which impact China are:
Government regulations
Both formal and informal rules, which firms must abide by, impact the country. Many people claim that the political force is the most unsettled force. Over the past few years, the government focused on the development of e-commerce.
Legal issues
The legal framework for e-commerce is still in its early stage. China has little experience for drafting e-commerce legislation for topics like intellectual property rights protection and tax. There aren’t any regulations supporting the privacy, recognition of digital signatures, consumer rights and validation of electronic contracts yet.
ECONOMIC FACTORS
Over the past five years, China’s economy experienced significant GDP growth rate. Reports suggest that if China continues to excel at this rate, it ill surpass US GDP soon. Some factors which might help are:
a. Sigh rate of savings
b. Abundant and skilled labour
c. More export business
Potential urban growth
Any economic development could have a major impact on the SMEs and their actions. China’s GDP rate suggests that each citizen is adding more and more values to the society. This is in turn increasing consumers’ purchasing power. The labor cost in China is extremely low. This is why leading companies like Apple are inclined to hire workers from the country.
The growth rate is impressive, but it can slow down. Some of the worrying trends in China are:
1. High inflation rate
2. High property prices
The People’s Bank of China has increased interest rates. The reserve requirement for commercial banks is also nine times higher now. Moreover, the central bank is urging banks to lend less and impose limits on home purchases.
SOCIAL FACTORS
The social and cultural aspect of China plays an important role as the demographics constantly change. For example, population growth and age distribution fluctuate. These can alter social trends and cultural values. Family size and social behaviours often impact how decisions are taken. Other social factors are consumer lifestyles, education, religion, and emigration. China is a collectivistic culture, based on Geert Hofstede’s value dimensions.
The literacy rate in China is over 90%. China emphasizes on education and majority of the nation are literate.
There are 420 million Internet users in the country. As there is internet access, Chinese people often shop online. Taobao is the largest local e-commerce website, and many people spend a lot of their things from the site. Boston Consulting Group predicts that the volume will increase in near future.
E-commerce has changed how local consumers see shopping. However, there is still a group who wish to avoid the perceived risk associated with online shopping. They prefer physical shopping and like the face to face contact.
TECHNOLOGICAL FACTORS
Some common technological factors studied in PEST are:
-New products being developed
-New purchasing mechanisms such as the intranet and extranet
-New production technology
-New distribution mechanisms like Internet
-New methods of working like mobile telecommunications
A major technological problem in China is that the development of the B2C industry does not have a safe and stable online payment system. As Chinese buyers are on high Uncertainty Avoidance level and Long-Term Orientation, the problem is strengthened.
What is more, based on figures from 2005 there had been only 1 percent credit card penetration in China suggesting that the most widely used payment method had low acceptance in China and the payment system to support online credit card transaction is also facing low usage. And the lack of safe online credit card payment system is one of the key reasons for this low usage and penetration.
In conclusion, China is a flourishing market with the need for some small changes. Companies will benefit if they can understand the external macro-environment in which they function and will operate in the future. The rapid economic growth and stable political conditions make the e-commerce industry lucrative to investors. There are risks like lack of trust. Other risks include lack of stable and secure online payment systems. Also, there isn’t proper legal protection. All of these create uncertainties and challenges to the market players.
Let’s look at the example in the assignment:
The sales agent of HG in Taiwan Goodland Enterprise Co., Ltd .reports great difficulties in China. China has stopped a large amounts of trade for HG at the borders. The labelling was supposedly insufficient for the Chinese market. Of course the people in the Netherlands know that is not the real reason. In the WTO negotiations the Chinese are in a battle with the European union about the use of a kind of plasticizer in the toys from China. A huge amount of toys are stopped at the European borders. According to the Chinese government the European Union is protecting their home toys industries, although the European commissioner denies the allegation. But in fact the European Union has a bad reputation for defending their own industries. . Especially for agricultural products foreign products are taxed at high rates. But why HG experiences the problems?
As stated in the analysis of China, the culture is one of, that all other cultures outside of China are inferior to them. It is hard to swallow for the political top in China, that
Europe, has set rules for the use of plastics in products from China. In order to take sort of revenge, you could expect that similar measurements will be taken on European products. Since HG uses a lot of plastic and plastic labels, the Chinese government will let Europe show, that they also have the power to refuse products.
After a while, problems will be solved, due to the economic loss of China.
Next is an overview of the Pest analysis of the Netherlands .
A development in the Netherlands that is important for understanding guidance policy is the establishment of the project directorate learning and working. This directorate is a joint activity of the Ministry of Education, Culture and Science and the Ministry of Social Affairs and Employment. The Action Plan 2005-2007 had two basic principles: 1. Lifelong learning is required to maximise participation of citizens in the knowledge economy and society. In addition to a professional career, citizens have a learning career. These careers should alternate and enhance each other. The Project Directorate applies these principles to three programme themes: dual pathways (learning on the job), the establishment of regional learning and working information counters and the promotion and innovation of eliminating obstacles. The practical approach of the Project Directorate was continued in an action plan 2008-2001 See for background Project directorate Learning & Working, 2008. Accreditation of Prior Learning (APL) and regional cooperation structures, both reinforced by the Project Directorate are covered as strength and opportunity respectively in the SWOT analysis.
Weakness
The potential weaknesses of the Dutch guidance system are :
(a) The limited attention attached to career guidance, and particularly to contacts with the labour market, within the general education part of the education system.
(b) More generally, the fragmented nature of the guidance system as a whole: arguably, it is not currently a system at all, in any meaningful sense, but a series of disconnected entities.
(c) The lack of accountability, monitoring and quality assurance: this is particularly evident in relation to schools, but is an issue in all sectors.
(d) The lack of clarity regarding the role of government within a decentralised and marketised system.
Seven years later it can be concluded that these weaknesses still stand very strongly.
Strengths
Strengths of the Dutch guidance system:
1. The extent and quality both of labour market information and of consumer information, for use in guidance.
2. The formal affirmation within the vocational education system of the central importance of the student’s career path.
3. The emergent market in career guidance and information services created by the policy of decentralisation and marketization: still limited and fragile, but with potential for development.
4. The network of Public Employment Services, in Dutch since 2009 ‘UWV Werkbedrijf’ (formerly known as CWI), alongside the werk.nl website and the proposed customer support centre.
The Centres for Public Employment Services have an important role in providing vocational and work based information. However, they have a limited role in providing guidance to citizens because their main objective is getting people to work as soon as possible. Typically guidance is provided by private institutions which have contracts with UWV Werkbedrijf. In recent years UWV Werkbedrijf has established Competence Test Centres (CTC) as one of its services which does allow guidance of citizens. More detail on the CTC can be found in van Ham, 2006.
Accreditation of Prior Learning (APL) is also strongly developed in the Netherlands. One of the aims of the 2008-2011 action plan of the Project Directorate Learning and Working is to establish 90,000 work-based training programmes (APL and work-based trajectories). The priority areas within these work-based training programmes are the sectors in which personnel shortages will arise (care and technology), working youth without basic qualification and jobseekers or the people that are threatened to lose their job through the economic crisis. Since 2007 a tax refund (€300) has been initiated for APL candidates. In light of the crisis, citizens without basic qualification who lose their job can get a 50 percent subsidy for APL.
In view of the considerable advantages of Accreditation of Prior Learning (APL) for all parties, its broad implementation should be stimulated by an independent organisation. This was the reason for the establishment of a Knowledge Centre APL (Kenniscentrum EVC1), contracted out to CINOP. Nowadays, the Centre is financed by Dutch Government (the Ministries of Education, Culture and Science and of Social Affairs and Employment).
The Knowledge Centre APL aims to collect and share knowledge and good practices on validation of prior learning in the Netherlands. It aims to stimulate the use of APL practices by developing a sustainable infrastructure for the application of APL in education and the labour market, in regions and in sectors. The Knowledge Centre APL developed a quality framework which aims to enhance the quality of the APL procedures. This framework is based on the ‘Common European Principles for the Validation of Non-formal and Informal learning’ and can be used to assess procedures, create more transparency and set a minimum standard for APL procedures.
Furthermore, the centre brings together APL specialists to develop new practices and bring APL forward in national and international perspective.
The Knowledge Centre APL maintains close contacts with the important stakeholders in APL, including government, social partners (trade unions and employer organisations), employers (large companies and small & medium-sized companies and its national representative bodies), citizens (employed, job-seekers), educators (publicly and
privately funded), local governments, branch and sector organisations, regional intermediary organisations, centre for work and income and reintegration companies.
Opportunities
Regional cooperation structures
As mentioned earlier the Project Directorate Learning and Working is stimulating regional cooperation structures. This is done by establishing regional and sectorial covenants. Regional partners are stimulated in cooperating together to meet the targets. These regional cooperation structures differ from region to region. Typically the Centre for Work and Income is involved, companies as well as educational institutes. Furthermore regions establish in this structure Learning Working Desk in which citizens can get information on learning and working issues. These cooperation structures are invaluable not only to meet the targets agreed with the Project Directorate but also for further economic and social cooperation.
Sectorial career guidance
During 2004-2005, a project was carried out in the construction and infrastructure sector. In it, career development and education were linked per sector. Employers and
employees supported the project. The link was shaped by trajectory advisors trained
especially for the purpose. They worked from ‘one-stop-shops’ in different regions.
Existing career instruments have been integrated in the trajectory. The experiences with the pilot are so positive that the sector has decided to turn the ‘one stop-shops’ of trajectory advisors into a structural national facility. New trajectory advisors have been recruited and trained. Other industries have started comparable projects.
Mobility Centres
The concept of mobility centres can best be explained by a recent note from Minister Donner from the Ministry of Social Affairs and Employment2:
At present, we are talking mainly about guiding workers who lose their jobs as a result of the financial crisis. A month ago, I opened this country’s first employment mobility centre in the neighbouring town of Eindhoven. The aim of mobility centres (which is what we call job centres or career change centres) is to prevent unemployment by helping employees faced with redundancy to find new work in good time or second them to another employer. Thirty of these centres are being set up at present. This is being done in close cooperation by all stakeholders in a region, both public and private. I do hope our foreign guests have noted the name of the national organisation that is involved on the skating suit of Shani Davis, a speed skater who won the world long-track sprint championships in Moscow this month: Werkbedrijf is the name of the organisation concerned.
2 Januari 29 2009.
Bron:
http://internationalezaken.szw.nl/index.cfm?fuseaction=dsp_document&link_id=161054
So far these mobility centres are succeeding in transferring workers faced with redundancy to other job opportunities. For this purpose they adopt a customised approach. Some employees will be placed directly with new employers, while others may need to undergo refresher training. The common denominator for all concerned, is how to get people back into work as quickly as possible. The experience of previous economic downturns is that employees who start by sitting home after becoming jobless, eventually have a smaller chance of finding an adequate new job. And since experience is something you get the moment after you needed it, we had better put previous experiences to good use now, because the experiences from the present crisis will come too late to be useful.
CH-Q
In many cases in public guidance provision there is no ‘deep’ guidance provided. CH-Q, the Swiss method that is increasingly applied in the Netherlands, may be a way of improving career guidance. CH-Q follows the approach of the pupil or employer rather than the other way round. The instrument is subordinate to the objective. The method was developed for individual career development which fits well together with a guarantee of quality with regard to advisors and instruments. The construction of the CH-Q training programme and qualification also contribute to the call for genuine renovation of the training of career guidance advisors and assessors put forward by the OECD that training for career advisors must improve and based on modern criteria. A Dutch CH-Q foundation is recently established. A major boost might be that 40.000 employees of the navy will be offered a CH-Q training.
Threats
If we compare reports on workforce development and preparation from the Netherlands in the past four years with the guiding principles of the 2008 Council Resolution, we can see that:
•The first of these principles – citizens’ acquisition of career management skills – is not yet on the education, training and employment policy agendas
•Limited moves are being made to improve physical access to guidance services for adults through the use of Work and Income Centres and to improve virtual access by means of telephone and internet
•A minimalist approach to quality assurance of schools guidance provision is a proposed action strand in the Career Orientation and Guidance report
•Significant cooperation is reported between different ministry directorates within and across the education, training and labour market sectors, and with the social partners at regional level.
•Joining parties involved in life long guidance in the Netherlands could evolve to a new ‘talking group’, without concrete actions.
Threats follow logically from this and from the fragmented nature of the Dutch guidance system. The risk is that politicians are looking for short term solutions or are looking for attractive looking solutions without real insight into efficiency or effectiveness. These might be solutions the citizen does not really need.
1.To establishing a lifelong guidance system to support workforce preparation and workforce development. Policy makers are happy for the existing fragmentation of career guidance services to continue.
2.To eliciting citizen views of the types of career guidance services they need and want and how they would access them. Policy makers are happy that the views of the major stakeholders, the general public, should not be taken into account.
3.To promoting greater diversity in the ways that guidance services are delivered, for example, by providing a national career guidance telephone helpline with user-friendly opening hours which would support in particular (i) parents to assist their children’s choices (workforce preparation), and adults to help them choose learning pathways in order for them to up-skill, improve their employability, and/or move to a different occupational position (workforce development). Policy makers are happy that the existing services and the manner in which they are provided nationally are adequate to meet the needs and circumstances of the population.
4.To developing a common approach to a quality assurance system for guidance services in the education, training and employment sectors, in which the views of the users are taken into account in a significant manner. Policy developers are happy that the existing career guidance services are of a quality that the public (youth and adults) deserves.
5.To making the acquisition of career self-management skills a key lifelong competence to be learned in education and training programmes at all ages and levels. Policy makers are happy that young people and adults already acquire these skills through the existing learning experiences that they have and to a sufficient level.
6.To including civil society, user/consumer groups in the structures for career guidance policy and systems development at national and regional levels. Policy makers are happy that existing structures achieve very well without the involvement and participation of such groups.