Asia Pacific Business China and Australia

A Contrast and Comparison

The purpose of this paper is to:

Compare and contrast the characteristics of industrial and institutional environments in one of the nine (9) Asia Pacific countries identified by Lasserre and Schutte with those of Australia; and II. Further this work will discuss South Korea in relation to their adoption of a similar business system and institutional framework which is the same as that applied successfully by the Japanese.

“In the international financial institutions (IFI), governance takes places under explicit sets of binding rules. Key to any discussion of any international institution is the question of what rules members use to organize and operate the institution. Voting procedures in international institutions can be structured in a variety of ways. The United Nations General Assembly, for example, utilizes the logic of one nation, one vote. Other international assemblies explicitly grant some members more influence”

In terms of the organization and its’ operational and strategic orientations it has been suggested by Lasserre and Schutte (1995) that a “satisfactory fit along four dimensions (strategic, organizational, resources and cultural) must be achieved.”

The four dimensions are those listed as:

Strategic: Includes a level of compatibility between the partners and their strategic objectives.

Organizational

Resources

Cultural

Review of Case Study:

A study conducted and the results are still current has made identification of differences of a significant nature between Australia and China. Stated in the study is that: Sharing the same business logic is a requirement for cultural fit. However, in relation to principles in management there are vital differences between Australia and China and it is clear that “such differences have the potential to cause considerable problems managers need to be aware of, and resolve.”

There are four archetypes of organizational forms existing in Southeast Asia which are those of:

1. Colonial Business Groups

2. Family Business Groups

3. Government Linked Enterprises; and

4. New Managers.

The decline of colonization as well as industrial growth and other factors of the cold war, privatization and the free-trade blocks creation are not elements that are nationally contained but are global in the impact with the effect of stimulation responses on a national basis. While there are differences in the response to forces on a global level there are also very important commonalities across the spectrum of societies.

Differences between Australian and Chinese practices in management include the:

“Use of rank, extent of confrontation and assertiveness, information sharing and communication and also in management principles in particular status/achievement orientations, philosophical assumptions about employees and extent of internal/external control

Further differences were identified between Chinese and Australian motivators: Chinese managers are significantly more motivated by economic security, independence and control in contrast to their Australians counterparts. “Significant differences were also identified in the direction of management commitment.” Australian managers are significantly more committed to ethical principles and less committed to business objectives regardless of means, organization, results, and work compared to Chinese managers. Further differences were identified in operational and strategic orientations: Chinese organizations are generally more control oriented than Australian organizations, with Chinese managers happy with this situation. In contrast, Australian organizations appear to be more people oriented than Chinese organizations, with Australian managers believing this to be significantly more ideal than Chinese managers.”

It is suggested by Kabanoff, Jimmieson, and Lewis (in press) that ‘Command and control’ style organizations endure and thrive in a relatively stable, predictable and undemanding environment.” The belief they hold is that Australia possibly made provision for a ground of fertile growth for this type of organization in the twentieth century.

The Government regulations have an operation that is under central control with the environment of industrial relations that is under protection from foreign taxes or competition rendering a “comfortable, bureaucratically controlled existence.” Stated in the case study is the fact that: “However, as these conditions have ceased and, are unlikely to return in the future, Australian managers’ belief of a continued control orientation raises questions about the efficacy of changes to organizational structures, policies and practices (Dunphy and Stace, 1990), reportedly designed to move organizations away from a ‘command and control’ approach.”

During the year of 1978 the reforms implemented in China have resulted in unheard of changes in management for the Chinese (Zhu 1997). The move is away from the commonly referred to ‘rice bowl’ methods of management with the results of reduction in lifetime employment. The economy of Australia depends greatly on the future health of the Australian economy although a large extent depends on the competent nature of its enterprises inclusive of the companies “ability to efficiently produce and export both elaborately transformed manufactures, and services.

The 1995 Karpin Report made identification of the developing international competitive enterprises stating that this is the:

“fundamental means of achieving improvised living standards for Australians and the ability for manage issues affecting international standards for Australians and the ability mange issues affecting international business is paramount to Australian managerial and business achievement … By extending our understanding of the impact of national cultures and social systems upon both organization and management, Adler (1997) and Teagarden et al. (1995) argue that management practices from developed countries can be appropriately adapted and transferred to emerging countries.”

The study states further that while some of the research has made an examination in major forms of business enterprise that the countries used for basis in the research in Asia, most of these studies have “utilized a prima facia criteria, country of origin, as the basis for their categorizations. Such an approach is ill suited for the identification of shared characteristics among organizations from different nations because an explicit or implicit objective is to relate organizational characteristics to particular institutional structures and/or cultural phenomena

(Hamilton and Biggart, 1988; Hall and Xu, 1990; Whitely, 1992). Such research has made many important contributions to our understanding of East Asian business forms (Lowe, 1998). However, in emphasizing the salience of social and cultural determinants of corporate organization, these perspectives may overstate differences between organizations within the larger regional context. Moreover, such approaches may also understate the influence of economic incentives and market forces (Wilkinson, 1996).”

The Australian economy has seen significant changes in the past fifteen years. The government in Australia initiated a series of macro and micro-economic reforms. These reforms were inclusive of phasing out tariffs, waterfront, shipping and air freight reform, financial deregulation, floating of the dollar as well as the freeing up of the labor market gradually. Stated ‘key elements’ of the reform agenda on the micro-economic scale is that of public sector reform and privatization. (ACIRRT 1999)

Policy reforms in Australia have taken the shape of a new ‘post industrial settlement’. Australia’s old smokestack industries have been replaced by the ETMs, or the elaborately transformed manufacturers and the service sector economy. (Burrell 1999) There exists in the Australian economy trends that reflect a global tendency for national economics to propel ahead into a free market system. The market in China is the fastest growth economy in Asia. One of the world’s quickest growth and fastest developing economies (Wright,

Mitsuhashi & Chau, 1998) as well as being one with a large and growing middle class, China is representative of a potential market and opportunity in the future market. This presents a challenge for the Australian firms and their managers who desire to do business in and with China specifically because the cultural differences are markedly different that the Western cultural elements.

The economic growth in China is accredited to the direct foreign investment which after the opening of the economy in accepting such the joint ventures with partner organizations oft he Chinese as well as multinational corporations. (Lindholm 1999)

Direct and committed investment from Australia into China was for the total of 5 billion dollars in Australian dollars and the realization of Australian direct investment in the country of China was for an approximately total of 1.55 billion dollars (Austrade 2000) The fifth largest investor in the special economic development areas of shenzen, guangzhou and Zhuhon of China is Australia. (Harris 1994) India has become a fast growing market for the goods and services of Australia. ETM exports coming from Australia have increased approximately $20 million in the late eighties to the amount of $190 million in the years 1998 and 1999.

Current investment covers 100 companies and is in excess of the amount of $1 billion compared to the approximate total of $250 million combined in 30 joint ventures in the early part of the decade of the nineties. The businesses in Australia are expanding into the countries of South Africa via investments that are into the nature of foreign direct investments and exportation in the branches or foreign subsidiaries, joint ventures and strategic alliances.

Companies in Australia are not as bound in relation to regulations of government are the Chinese. Union influence is not appreciated in Australia. Another factor in the Australia industry and institution is that the organizations have less fear in terms of taking risk in comparison to the Chinese. Furthermore the organizations in Australia are of diverse opinions as compared to the Chinese and the organizations in Australia hold to the belief of harmony on ethnic issues and are more integrated into the thought-process in diversity.

There exist the factors of motivation by autonomy and uncertainty in employment for the Australian manager than for the Chinese. Australians are also more achievement motivated. In comparison to the Chinese independence and control are much less factors of motivations for the Australians as well as being less motivated by security on the economic level. Finally Australians are less motivated by ambition.

“Compared to their Chinese, Indian and South African counterparts, Australian managers indicate a significantly higher commitment to ethical principles with lower commitment to business objectives regardless of means, and a lower commitment to organization, results, work and relatives.” “The management in the Australian business are said to have a “higher internal and lower external locus of control than Chinese..[as well as having] a higher commitment to maintenance of ethical principles.”

Differences between the Australian and the Chinese practices in management include the “use of rank, extent of confrontation and assertiveness, information sharing and communication and also in management principles in particular status/achievement orientations, philosophical assumptions about employees and extent of internal/external control.” Kabanoff, Jimmieson, and Lewis (in press) suggest that ‘command and control’ ‘style organizations endure and thrive in a relatively stable, predictable and undemanding environment.”

They believe that Australia may have provided a fertile breeding ground for this type of organization, as for much of the twentieth century; Australian organizations have operated in a centrally controlled industrial relations environment, protected from foreign competition by high tariff barriers and benefited from high prices for exported commodities. And as a result, Australian organizations have enjoyed a comfortable, bureaucratically controlled existence. The current study pointed out differences that exist between Australia and the Chinese and South African organizations operational and strategic orientations.

The study states that:

‘Sharing the same business logic is a requirement for cultural fit. Yet in terms of management principles, significant differences existed in all of the items between Australia and China, India and South Africa, and 6 of the 8 management practices. Clearly, such differences have the potential to cause considerable problems managers need to be aware of, and resolve.”

It is widely accepted that the future well being of the Australian economy depends to a large extent upon the global competency of its enterprises, including their ability to efficiently produce and export both elaborately transformed manufactures, and services. The Karpin Report (1995) identified the development of internationally competitive enterprises as the fundamental means of achieving improved living standards for Australians, and the ability to manage issues affecting international business is paramount to Australian managerial and business success.

It is argued by Adler (1997) and Teagarden et al. (1995) that management practices from developed countries can be appropriately adapted and transferred to emerging countries.

South Korea & Japan:

Consumers in South Korea have a hangover from credit card borrowing binge however, according to the Finance and Economics report the banks have pretty much recovered netting 1.68 trillion split between the 19 domestic banks for the first quarter of this year. The profit however was only a minimal amount due to the bad consumer debts which dropped earning by 63% in 2003. South Koreas economic structure was a manufacturing industry along with the agriculture, forestry and fishing industry. The GDP expenditures are reportedly “extremely high in proportion of gross fixed investment.”(The Economist June 2004)

Labor reforms in South Korea have caused quite the outcry and the policy makers work is cut out for them while exports have been hit by the “collapsing microchip prices and reduced per-capita productivity”

Japan has been dealing with the same problem and despite the legendary animosity that exists between Japan and South Korea the two countries have comparable models of economic development that is government led. In the early 1990 Japan managed to bring business groups to set up production facilities in the country and throughout Asia and turbocharged the forming of the Japanese manufacturing sector.

However, it is stated in and Asia Week report that a “prolonged recession has forced many companies to dismantle their lifetime employment systems, retrench workforces and introduce promotion based on merit more than seniority. Meantime, the position of dynamic small and medium-sized firms, which normally play second fiddle to the behemoths, has received a boost from the shakeout.” (Asia Week News 2004)

Korea faces similar transitions in the country during its own labor reforms. However Korea has not got the win-win option because any decision on the economic level that effectively cuts wages has heavy social and human impacts as the middle-aged, white collar class will be the most devastated. Korea must transition away from the “managed economy’ toward one that is more liberal and expediency is the call word in the implementation of the new economical and trade system in the country. The public in Korea is skeptical at best and the government is in the position of very urgently needing to explain this to the public in a way that they are able to understand that the choice is not an optional one if the economical outlook for Korea is one with hope in the future.

In Economist Online News Report

stated was that: another news report it was stated that: “The union protests that erupted after the quick fire passage of a controversial labor reform bill on Dec. 26 may signal the crumbling of Korea’s trusted economic model. The new law makes it easier for firms to lay off staff and use temporary or seasonal labor, without incurring big extra costs. Companies that face bankruptcy, or are restructuring to boost competitiveness, will no longer have to defend the legality of their decisions in court every time they dismiss employees. Legislators of the ruling New Korea Party (NKP) were well aware their move could have explosive consequences. Long resisted by oppositionists and union leaders, the reforms threaten one of the central tenets of contemporary Korean culture: the lifetime employment used to reward its workforce’s loyalty. NKP lawmakers convened an early-morning parliamentary session to pass the bill, without the knowledge of opposition MPs. The proceedings took just six minutes. The popular outcry came within hours. As labor leaders condemned the changes as a fillip for powerful business groups at workers’ expense, Korea was wracked by nationwide stoppages, clashes between strikers and police — and a sit-in by opposition MPs at the National Assembly.”

Multiliberalization of trade along with the balance of payments and the restrictions imposed would have a huge impact on trade. When the restrictions on trade are decreased along with the relaxation of the policies in the developing countries and among all countries to the lowest possible level a resulting 14% increase has been projected. (World Economic Outlook 2002)

One of the results of the involvement by the Korean state in the economy was the emerging new and successful chaebol and as results of the state economic plans for development in January 1962 many large enterprises were established just before the sixties. The continuous military conflict that involves Japan and South Korea plays a leading role in society in these countries and the involvement of multinational companies has been minimal at the most to none. The original organizational policies established in South Korea were done so by the government of the state of Israel who set up the economics of the country in a fashion that did not promote normal economic development but did however, promote development. In the 1960’s and 1970’s South Korea received large quantities of funds in financial resources from other countries and they became less dependent on direct foreign investment. Local business people played a part in the development and were able to gain a foothold without the presence of the multinational organizations.

The dominant present feature in the South Korea economy are the business groups. A Common factor in Japan and South Korea is that both plans for ‘democracy’ were borrowed from other governing states.

Bibliography:

Manufacturing stabilizes Economic structure (2003) From the Economist Intelligence UnitSource: Country Profile [Online] at: http://www.economist.com/countries/SouthKorea/profile. cfm?folder=Profile%2DEconomic%20Structure

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Jones, Janet T. et al. (nd) Managing People and Change: Comparing Organisations and Management in Australia, China, India and South Africa SCHOOL OF COMMERCE RESEARCH PAPER SERIES: 01-5 ISSN: 1441-3906 [Online] located at: http://www.ssn.flinders.edu.au/comme rce/researchpapers/01-5.htm

Ibid.

Ibid.

Ibid.

Ibid

Ibid.

Ibid.

Jones, Janet T. et al. (nd) Managing People and Change: Comparing Organisations and Management in Australia, China, India and South Africa SCHOOL OF COMMERCE RESEARCH PAPER SERIES: 01-5 ISSN: 1441-3906 [Online] located at: http://www.ssn.flinders.edu.au/comme rce/researchpapers/01-5.htm

Ibid.

Better Medicine, Though Painful South Korea’s Labor Reforms (2004) Asia Week Online

Manufacturing stabilises Economic structurev (2003) From the Economist Intelligence UnitSource: Country Profile [Online] at: http://www.economist.com/countries/SouthKorea/profile. cfm?folder=Profile%2DEconomic%20Structure