London Metropolitan University

Bachelor of Business Administration Top-up

Cover Sheet

STUDENT LMU ID NUMBER 1 9 0 3 0 0 8 3

MODULE CODE MN6P00
DEADLINE 07/06/2020
MODULE TITLE Business Without Frontiers
ASSIGNMENT NUMBER 02
TUTOR'S NAME MRS. SACHINI KARIYAWASAM
TEACHING BUILDING COLOMBO BRANCH
STUDENT NAME SIVATHARSHI RAGUPATHY
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Contents
1.0 Cultural Background ................................................................................................................. 3
Eye contact ........................................................................................................................ 3
Relationship with boss ....................................................................................................... 3
1.1 Overview of Tea ......................................................................................................................... 4
2.0 Environment Analysis ............................................................................................................... 4
2.1 SWOT Analysis ............................................................................................................. 4
Strengths .................................................................................................................................. 4
Weaknesses .............................................................................................................................. 4
Opportunities ........................................................................................................................... 5
Threats ..................................................................................................................................... 5
2.2 PESTLE Analysis ............................................................................................................ 6
Political Factors .................................................................................................................. 6
Economic Factors ............................................................................................................... 6
Socio-cultural Factors......................................................................................................... 6
Technological Factors......................................................................................................... 6
Legal factors ...................................................................................................................... 6
Environmental Factors ....................................................................................................... 7
2.3 Hofstede’s cultural Dimensions .................................................................................... 7
2.4 Marketing Mix Model ................................................................................................... 8
3.0 Potential issues and challenges face by organization and employees in China ........................ 9
3.1 Personal issues ........................................................................................................... 10
Communication/Language issues .......................................................................................... 10
Food and feeding habit issues ................................................................................................ 10
Values and norms .................................................................................................................. 10
3.2 Organizational issues .................................................................................................. 11
Staffing Policies ...................................................................................................................... 11
Supply side Issue .................................................................................................................... 11
Demand side issues ................................................................................................................ 11
4.0 Conclusion and Recommendations ......................................................................................... 12
References ...................................................................................................................................... 15

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The following report will explore a strategically and commercially viable pathway to the
managers who are trying to work in China for exporting Sri Lankan Ceylon tea to China. To
give an overview, this report will provide a summary of the industry and the current status of
the Tea Market, from US $ 46.392 Billion (Allied Market Research, 2017) to US $ 49.4 Billion
annually (Statista, n.d).

1.0 Cultural Background

Chinese culture is one of the oldest cultures in the world. Key elements of Chinese culture
include ceramics, architecture, music, literature, cuisine and religion. However, the Han
Chinese are by far the largest group.

Eye contact

In China eye contact isn’t important in fact eye contact is avoided especially when you are
talking to someone that is superior to in the workplace or in general and eye contact is avoided
with opposite genders and people who don’t belong to China because in China as a whole eye
contact is rude and disrespectful. .

Relationship with boss

In China employees and boss’s share a very stiff relationship where the boss isn’t like a friend
instead the boss is more superior to them, where communication about anything is limited. In
this kind of work environment, it’s important that employees are result orientated and are
working hard to achieve good results.

(Contributor, 2020)

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1.1 Overview of Tea

From ancient times until now, tea has been brewed for its medicinal properties; It has also been
reported to have health benefits in many respects, such as fighting cancer, reducing
hypertension, improving insulin sensitivity and reducing risk factors for diabetes (Stote & Baer,
2008; Yang & Landau, 2000; Goldbohm, Poppel & Brants et al, 1996).

2.0 Environment Analysis

2.1 SWOT Analysis

Strengths

• One of the biggest strengths is that tea crop can be harvested throughout the year due to the
humid tropical condition in Sri Lanka.

• As a country we have a good relationship with China and the shared religious and cultural
values strengthens it.

• Sri Lanka’s tea prices at the recent Colombo auction rose sharply and this was due to the
drop in the global supply because of unfavourable weather conditions and the covid-19
outbreak in most of the black tea exporting nations.

Weaknesses

• Cost of production in the Sri Lanka tea industry goes up every year.

• And there are labour issues we see always on news about daily wagers. Therefore, workers
tend to leave the tea industry based on economic and low pay reasons.

• Another weakness is that we do not have the geographical indication for Ceylon tea in the
world. So, this has caused delays and increase in operational costs.

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Opportunities

• One of the biggest opportunities is that the tea consumption has grown rapidly in China
where young consumers are the fastest growing segment.

• Even though China itself is a tea producing country, their large number of tea loving
consumers look for varieties. So, the demand for tea consumption and production is rising,
creating income opportunities to tea producing countries like us.

• Due to COVID 19 people have become more health conscious, being a good sign for tea
producers.

• According to China’s Internet Network Information Centre: 74% of internet users make
online purchases. Also, in recent years, there is an increasing number of cross-border
import emerging in the B2C e-commerce market in China. Which shows that online
purchasing has become a norm in China, creating a very big opportunity to us.

Threats

• One of the major threats is the climatic change, that impacts how and where tea can be
grown. Because tea production is highly sensitive to changes in growing conditions and
such changes will impact the product quality and prices.

• Another threat is that China has recently ordered 5 Million Kilos worth Kenyan Black Tea
as a complimentary to boost friendship with Kenya upon the “The Belt and Road Initiative”.
So, there is a risk as if Chinese consumer getting used to Kenyan black tea.

• Another threat is the shortage of high-quality logistics providers in China. This will bring
many issues such as lost packages, damaged goods; creating bad impression.

(Farooq, U,2019)

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2.2 PESTLE Analysis

Political Factors

Revision of advertisements and marketing strategies and the government’s international and
trade policies as many large brands are struggling to enter the Chinese market due to its high
import duties.

Economic Factors

• The increasing consumer purchasing power.

• The urban growth factor in China.
• The current inflation situation and the rise in property rates.

Socio-cultural Factors

• The Chinese culture that is deeply tied in with its Communist political setting.
• And the current wave of urbanization that moves towards internet-based buying in the near
future, as the literacy rate in China is over 90% and a huge portion of the population has
access to the internet too.

Technological Factors

• The internet usage, as there are almost 450 million internet users in China, and this shows
their purchasing patterns.
• E-commerce, that has aided the Chinese population’s purchasing power. For example: the
website ‘Taobao’ is China’s biggest e-commerce store and a huge percent of the population
accesses all their goods from this platform.

Legal factors

• The burning legal of China is the formation of e-commerce legislations: involving

intellectual property rights, consumer rights, tax policies, etc. Such issues are trade related
legalities, which is under constant change and is usually poised towards prohibiting the
establishment of a neo-liberalized economy.
• Anyway, it is expected that there will be a reduced import tax once the economy reaches
its full capabilities.

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Environmental Factors

• China is one of the most polluted countries in the world. As a result, extra precautions need
to be taken in securing environmental standards for production

• Also, more rain during the monsoon season has been shown to decrease tea yield of China.
This is an opportunity for us accelerate tea imports during these seasons.

(Farooq, U,2019)

2.3 Hofstede’s cultural Dimensions

Factor Score China Score Sri Lanka

Power Distance 80 Hierarchical 80 Hierarchical
Index society society

Wealthy and has political influence people are unequal to normal people in China.

Individualistic 20 Collectivistic 35 Collectivistic

Loyal to their families and society, work together.

Masculinity 66 Masculine 10 Feminine

Masculinity culture people they are strong, accepting challenges.

Uncertainty 30 Intermediate 45 Intermediate

Avoidance

Flexible with situation e.g.: COVID 19.

Long term 87 Long term 45 Intermediate

orientation

Preserve their tradition and make decisions for the future.

Indulgence 24 Restrained - Cannot be

determined

Maintaining order in the nation is emphasized in high amount.

Table 1: Hofstede’s Cultural Dimension of China and Sri Lanka (Hofstede Insights,2020).

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2.4 Marketing Mix Model

When it comes to the product the company has to consider which products that should be
offered to the customers, since not every product can be sold all over the world due to different
tastes and preferences that are determined by the cultural aspects of a consumer’s country. In
addition, the company also has to consider the brand name and the packaging of the Tea in
order to make it suitable for the China’s cultural preferences.

Price is another factor that the company has to consider because people in different countries
and in different cultures are more or less price sensitive. In China, people prefer a product with
a low price over the product that is higher priced, but at the same time has slightly better quality.
Whereas on the other hand people in some countries are prepared to pay more in order to
receive better quality.

The countries of the world work in different ways, and what works in one place does not
necessarily work in another place. We want companies to realize the complications that
different cultures can bring, and because of those carefully plan moves into new markets.

The promotion of the product also has to be designed to fit the China’s culture. Regarding the
promotional mix the company use to market themselves, it consists of advertising, sales
promotion, sponsorship, direct marketing, internet marketing and personal selling. The other
thing that also has to be tailored to fit the country’s culture is the message or the form of the
promotion, for example, humour in the business life might be accepted in countries like China
but it might not be accepted in France or Germany.

(Jobber et al., 2006).

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3.0 Potential issues and challenges face by organization and employees in China

When a company enters a new market, there are various problems it might encounter, such as,
cultural differences. The whole concept regarding culture is quite wide and rather hard to
comprehend. Companies have to take cultural differences into consideration, differences like;
languages, religions, social standards and demographics. If the company has the information
and knowledge it needs, the entering process and the cultural shock will be less painful. Mode
of entry is also a vital matter for companies, for example what mode of entry is the best to use
for the chosen market, and how to combine the mode of entry process with cultural differences.

According to Hofstede (2004), people tend to believe that all humans, no matter what culture,
deep down are alike when it comes to behaviour. They clearly state that this is not the case,
and a lot of bad business decisions are made, because managers act in the same way as they
would have done in their domestic culture.

Harris & Morran (1999), state that the most significant problems when it comes to cultural
differences involve; different languages, different values and different attitudes. When doing
business in a foreign market, communication is essential. A business relationship or deal can
easily be damaged because of misunderstandings that are based on cultural differences.

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3.1 Personal issues

Communication/Language issues

In China, “Chinese” is the native language and all of the citizens are familiar only with their
native language. So, when we are looking forward to establish our business there, Further,
Harris & Morran (1999), explain communication and language which is another category. It
involves both spoken and body language. There are many different languages in the world, and
these are spoken with different dialects in different parts of a country. Apart from dialects, a
language contains slang which can be difficult for foreigners to understand. Another major part
of communication is the body language, which differs between cultures. Body language is in a
way universal, but gestures and signals have different meanings in different cultures.

Food and feeding habit issues

In different cultures there are different food and feeding habits. For instance, many Chinese
people eat beef while this is strictly forbidden to Hindus and eat fork too and Muslims are
normally not allowed to eat pork. So, Food differs widely between cultures, but also the way
that food is eaten and served. In Sri Lankan cultures, food is eaten directly with the hands but
in China, people use wooden sticks. So, when we are looking forward to establish our business
there, it will be an issue.

Values and norms

Values and norms vary between cultures, and the need system looks different in different parts
of the world. In many places people are trying to survive to the next day, because of lack of
food and water, while people in other places are focused on increasing their living standards
through better jobs and material possessions. For instance, in China success is often measured
in wealth. A culture’s value system sets the norms of behaviour of the society. These norms
can for instance include work ethics and family structure. Even though there are differences
between cultures, globalization is creating more shared values and norms over the world (Ibid).

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3.2 Organizational issues

Staffing Policies

In the recent times, it has been observed that the management of MNCs expands their business
ventures by focusing on international markets. The factors that have generated this new
viewpoint is growing world markets and international customers along with global
competition, the increasing availability of managerial and technical know-how in foreign
markets, advancement of technology and telecommunications and various geo-political
considerations. (Lorentz et al, 1993). To achieve this universal trend, the MNCs need to have
appropriate personnel to run the subsidiaries for it to be a success.

Supply side Issue

The major challenge to traditional expatriate assignment is the supply side issue of availability,
this is one of the key strategic HR concerns confronted by MNCs (Scullion & Starkey, 2000).
Scarcity of international managers is an important issue faced by the international firms and it
also limits the execution of global strategies in these firms (Evans et al., 2002; Scullion, 1994).
Research signifies current supply for global managers is very less compared to the growing
demand (Caligiuri & Cascio, 1998; Quelch & Bloom, 1999).

Demand side issues

Due to the rapid growth of the emerging markets such as China, there has been a significant
impact on both the demand and supply of international managers. Some of the countries those
are identified as high potential sites for inward FDI in the period 2004-2007 are Central and
Eastern European (CEE), China by the UNCTAD (2004). As the market grows in these
countries, the demand for the competent IAs increases significantly to manage business in these
distant countries. It may also result in competition between MNCs for highly competent
managers with the context specific knowledge to conduct business in emerging markets
(Bjorkman and Xiucheng, 2002; Michailova and Worm, 2003).

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4.0 Conclusion and Recommendations

Despite the lack of innovation, climate change and rising production costs, Sri Lanka's tea
industry is competitive because Sri Lankan tea has high demand and quality overseas. Hilal &
Mubarak (2013) lists five things that lead to competitive advantage, two of which, a new
demand and the emergence of a new market, are relevant to the recommendations of this report.
This report requires the implementation of a centralized difference strategy. The focused
differentiation approach requires attracting and meeting the needs of a very narrow market, so
it comes at a potential trade-off between sales volume and profitability (Ali, 1997).

Based on the Ethnocentric model was first developed by Perlmutter in 1969. This approach
according to Treven (2000) is strategy in which the home country policy prevails. The
headquarters make the important decisions, the staffs from the headquarters hold the key
positions in the subsidiaries and all the management practices are adapted from the
headquarters. Treven (2006) further states this staffing approach is consistent with all the
subsidiaries all over the world. This is why the managers are brought in from the headquarters
to develop the MNC’s practices and ensure this is constant in all their subsidiaries.

This study dates a while back and many other researchers have written on different IHRM
activities due to increasing and rapid internationalization, this has still failed to encompass
IHRM from emerging markets to emerging nations. We can therefore conclude that there has
been limited study on African multinational human resource management activities especially
when this involves the company moving into another emerging market. Studies done on the
staffing policy of multinationals have focused majorly on firms in countries going into
emerging countries.

IHRM is the management of organizational personnel in an international environment (Redman

and Wilkinson, 2009). According to Rugman and Collinson (2009), IHRM is the process of
selecting, training, developing and compensating personnel in overseas positions. Morgan as
cited in Dowling and Welch (2004) sees IHRM as the relationship between three dimensions
which are: human resource activities, the type of employees and the countries of operation.
IHRM is having critical knowledge about the important aspects of the global context of a
company’s operations and how effective human resources can make the company a success
internationally.

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China may have different work ethics and management styles that can collide with the
company’s corporate culture, So, the company has to devote time to research the work culture
in the company they plan to work with. Because if the company studies the work culture in
China, Managers may avoid problems related to cultural differences, in addition hiring
employees native to the country may ease the cooperation between the different corporate
cultures, as well as give the company knowledge of the new market (Jonscher, C and Ashley
Summerfield, 1994).

The definitions show that employees which IHRM affect are exposed to additional knowledge
and potentially have more responsibilities that their other counterparts in the headquarters due
to their international experience. The international managers also learn and understand the
culture, language and business operations of the location they are assigned to. This makes them
invariably global managers.

According to Tayeb (2005), the effective organization of HR internationally is a key

determinant of the success or failure of the MNC in international business. Schuler et al (1992)
say IHRM is important because the characteristics can facilitate or hamper the MNCs in their
attempt to achieve their goals and objectives. This idea is closely related to Ray (2007) who
states that: “the success and failure in cross-border business has been linked to effective HRM”.
IHRM can enable the MNC achieve the business objectives it has set out to accomplish.

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 Model Theory Relevance
Hofstede’s Five Dimensions Five factors of culture, that With this model we will
model can affect a company’s examine how the five factors
structure, hierarchy, strategy have affected the companies,
etc. in relation to what is stated in
theory, since all of them have
an effect on a company when
it is entering a new market
and its choice of mode of
entry
PESTEL It contains six different The important aspect of this
factors, which describe a model for our study is the
country’s category of social influences,
macroenvironmental since different socio-cultural
influences. factors are described in that
category. These factors may
have an effect on the cultural
differences between
countries and therefore on
the organization’s
competitive environment.
Marketing Mix model Displays what tools of We will use this model in
marketing that a company order to see if it may reveal
may use to market their any other issues caused by
product. cultural differences that have
not been revealed by the
other models. Therefore, this
model may help us to further
analyse how cultural
differences can affect these
four aspects, regarding for
instance price sensitivity,
mode of entry and marketing
strategy, and what
companies have done to
solve these issues.
Table 2: Relevance of issues by models and theories (Author Developed).

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