1.New Zealand’s international business is increasingly relying on exports to Asian countries. China is now the largest trading partner with New Zealand. Given that China is a “Collectivist Society” and New Zealand an “Individualistic Society”, discuss critically how business culture differs in the two countries. Investigate the lessons to be learnt by New Zealand Business managers in interacting with Chinese managers.
2.This International Business course requires you to investigate regional and global economic integration. The New Zealand Government has pursued and negotiated “Free Trade Agreements” with Asian countries. Discuss critically the benefits and drawbacks of the free trade agreements between New Zealand and China. Investigate the improvements made to this trade agreement in the recent march 2017 negotiations.
3.New Zealand exports are dominated by primary commodities like dairy, forestry, meat, wool, marine and horticulture products. Discuss critically the New Zealand government policy on Foreign Direct Investment and changes you would recommend to facilitate more capital inflows into “value adding” industries.
Your reflection needs to be an analytic insight about the three essays you have written above and how you grew in knowledge, understanding and capability over the course.
The reflection will also include how you view the structure of the New Zealand economy and how that relates to the above three issues.
Business Culture Differences in China
The manner in which countries carry out business activities vary depending on their set cultures and the same applies to china and New Zealand. The way china does its business is quite different from how New Zealand conducts business and there is a lot that can be learnt by New Zealand even as it focuses on strengthening its business ties with the east especially china (Fang, 2012)
It is advisable to have a deeper insight of how china does its business for anyone who wants to operate in such a country considering this is a country that has done business for many years. Understanding china’s business culture as well as social etiquette enables one to avoid any misunderstandings which may ruin deals and destroy good working relationships. The concept of ‘face’ is one of the key aspects of the culture of Chinese (Huang et al., 2011). Face is described as a mix of perceptions that are public, the social role and self esteem and this has a lot of potential to either build business relationships or destroy them.
One can either give or lose face. For instance, a CEO can give face through the attendance of meetings, being sensitive to Chinese culture and accepting invitations. On the contrary entrepreneurs may lose face when they insult people in public or refuse invitations or just losing temper and these are acts of failing to have self-control. For the outsiders interested in doing business in china they may be impressive if they know some Chinese language, address people using their designation etc. the awareness of culture is an illustration of respect and an interest that is sincere. Some expectations related to doing business in china include; they expect one to have prepared well for any meeting, no use of colors’ in the presentations and use small talks at the beginning of meetings (Berry, 2011). They work towards establishing strong relationships before closing any deals, one is expected to maintain composure in meetings, they appreciate patience in discussing business deals and do not work with deadlines.
In china they enter meetings in a hierarchy manner they assume the first to enter the board room is the head. Their business hours are 8:00 am to 5:00 pm Monday to Friday. Best business schedules are done between April to June and September to October. They do not expect detailed answers to some common questions that require yes or no response. Do not mix political issues in business discussions and one is discouraged from giving negative statements in discussions. Once the meeting is over one is expected to leave before the Chinese counterparts (Lardy, 2014) However the Chinese respect the culture of other regions and do not expect all the westerners to be well informed of their business culture they are a pragmatic group and always welcome people with great business ideas.
Business Culture Differences in New Zealand
New Zealanders are in most cases reserved in nature but once they get to know you well they are very friendly and good to do business with. Some of the business culture in this region is; appointments are scheduled ahead of time. Business plans are made at least one week prior to the set date. One should arrive in the meetings on time and engage in small talks before the onset of discussions. Business cases should be presented with figures and facts. In the business climate emotions and feelings are discouraged (Eweje & Brunton, 2010). It’s important to maintain eye contact and take all meetings with the seriousness it requires however in a relaxed atmosphere. Avoid hype while making presentations. Negotiations process take long periods of time and one has to be patient. Negotiations should kick off with a realistic figure.
It’s not in their culture to bargain. Present your ideas in a direct manner and all points should be well stated in proposals and agreements. In business situations gifts are not encouraged but in home invite gifts are allowed unlike in china where they rarely embrace gifts (Friesen et al., 1997). Businesses in New Zealand can be extended to the weekend unlike in china where they are done only from Monday to Fridays.
Following the cultural diversities of the two countries in relation to business there are some lessons that New Zealand can learn from Chinese people on how they do business. For instance the kind of patience that the Chinese people exercise while striking a business deal with other people is something to be admired by many. With such patience the right deal is made and the success of much collaboration is felt. The Chinese mangers respect working times and take breaks seriously. The break from work that runs for two hours from 12-2:00 pm is observed by all the Chinese society. This is not the case with the New Zealanders. They at times extend work to the weekends and do not observe breaks as the Chinese do (Wang et al., 2013). The result of this is reduced productivity by workers due to exhaustion.
New Zealand has been the first OECD economy in concluding a free but comprehensive trade agreement with China. This is one of the biggest bilateral trade deals since the establishment of closer economic relations trade agreement with Australia some 25 years back. This agreement comes with a lot of benefits in relation to drawbacks. The agreement is meant to facilitate and liberalize trade of services and goods as well as the investment between the two countries (Song & Yuan, 2012). Among the many things the agreement contains some measures to improve the environment of doing business and also promote unity in a wide range of areas that deal with economics with mutual interests for both parties.
Lessons that New Zealand Business Managers Can Learn from Chinese Managers
The agreement facilitates investment where New Zealand is set to benefit from the enhancement of protections for all the investments they make in china. There is also a provision that ensures New Zealand maintains competitive position while doing business in china compared to other foreign investors. New Zealand is also given access of binding arbitration procedures for third party in case provisions are breached by Chinese government. The FTA also has measures that improve business environment and also ensure business opportunities are available for New Zealand. Barriers of doing business between chin and New Zealand have also been dealt with in the FTA with various measures in place (Dent, 2010).Such barriers include technical ones related to intellectual property and trade.
A framework of cooperation is also established within this agreement and this creates more business opportunities for the two countries. It has a recognition agreement on electronics that is mutual and this facilitates conformity assessments of the electronics sold in the two countries. Dispute settlement mechanisms are well established in the agreement and have a provision for protecting both countries regulations and policies. A binding environment cooperation agreement has also been made between china and New Zealand as well as a memorandum of understanding which is also binding in relation to labor cooperation’s (Jiang, 2010). Such agreements are meant to enhance cooperation and communication on many issues and thus help in improving on the working standards and environment for the two countries.
Within the FTA there is a safeguard mechanism as well as the review mechanism that is midterm for some dairy products in which they are sensitive for china. There is some limited expectations to the practical effect of such mechanisms because they are only applicable when they are triggered (Freund & Ornelas, 2010)
Wood and paper products which account for around 4% of the exports that New Zealand makes to china do not benefit from the tariff liberation provided in the FTA.
There is maintenance of WTO tariff rate quota (TRQ) by china on most of the products and New Zealand does not export these products to china anymore.
A tariff quota which is country specific has been established by china for wool products whose initial quota levels are equal to close to 75% of New Zealand’s exports to china as this is not what new Zealand sought for (Thorbecke & Smith, 2010).New Zealand tariff on most of the imported Chinese products has been removed and this creates adjustment effects for some of the competing sectors for the imports. These effects have been mitigated in the FTA with provision of some protections. China has been given a provision in the FTA which is a bilateral mechanism for safeguard and can put some duties on the products from New Zealand in case they have any injury o the industries in china (Kehoe & Ruhl, 2013) Some of the commitments on the services in the FTA were not as a result of ‘negative lists’ as per the preference by new Zealand and china has limited commitments in this FTA.
Benefits and Drawbacks of Free Trade Agreements between New Zealand and China
These improvements were done following Premier Li Keqiang’s visit to New Zealand in March this year. The main aim was to make an upgrade on the FTA. They aimed at expanding trade between them so as to promote the balance in trade (Ayson, 2012). The upgrade was meant to cover areas such as e-commerce and investment and this means more business opportunities and promotion of bilateral trade to take a higher level (Amiri et al., 2013). The meeting also sends a great signal of maintaining free trade following the fact that the world has become a community where there is a lot of sharing of interests. Areas that have already been covered by the agreement were also meant to be enhanced such as the customs procedures and technical barriers. Newer areas are also meant to be addressed and they included electronic commerce and competition policy (Song & Yuan, 2012). All these improvements are meant to be made in the meeting that is to be held on 25-27 April 2017 in Beijing.
The attitude towards foreign investment by New Zealand is an open one and the positive contributions to the social and economic wellbeing of its citizen are well recognized. The regulations which govern foreign investments are liberal in relation to international standards and some foreign investment restrictions are well maintained by New Zealand especially in areas of critical interest (Friel et al., 2013). For instance, the overseas investments in the country are screened and especially if they are sensitive as stipulated in the overseas investment act 2005.
In this act three classes of assets are viewed as sensitive i.e. when one acquires 25% or more ownership interest on any business assets that are valued over $ 100 million, all the quota investments listed as fishing and any investment in land that is viewed as sensitive. Such sensitive lands include any rural land that exceeds 5 hectares of land or all the land bordering natural waters. Investors must pass a test referred to as an investor test in order to take part in any significant business. This test takes into consideration the character of the investor, their business acumen and the financial level of commitment. Any overseas investor interested in buying land that is listed as sensitive should opt to reside in New Zealand or prove that such an investment is of benefit to new Zealanders. All the assessment criteria are stipulated in overseas investment act and regulations of 2005 (Raziq & Perry, 2012). All the investments related to fishing quota should have the national interest at heart. With all these acts in place relating to foreign investment the country has not placed any restrictions on funds movements in or out of New Zealand neither has it done so on the repatriation of any profits. The foreign owned enterprises do not have any additional performance measures.
New Zealand Government Policy on Foreign Direct Investment
For the connections between New Zealand and the world to be efficiency then the details regarding political, domestic economic and some institutional relationships have to be well understood. These relationships need to reinforce each other for the creation of a foreign direct investment policy that is durable (Prince, 2010). All the policies regarding the economy of New Zealand have to be good enough and the political feasibility should be clearly brought out. The government should also improve on the quality of the institutions mandated with the responsibility of ensuring the FDI is operating well.
To improve FDI in New Zealand some key policies are worth pursuing further and they include housing and fiscal policy. These two policies ensure exchange stability. The impact of fiscal policy on the exchange rate is of two ways and it’s through the subtraction or addition from the demand in the country’s economy. This impact directly on the inflation rates within the country. Scare resources can be absorbed by the government spending in its economy and this takes them far away from the uses that are more productive especially from the tradable sector (Kelsey, 2015). Investing more in the fiscal policy thus helps to stabilize the rates of exchange.
For the housing policy, if the responsiveness of housing supply s improved, the price pressures can be alleviated.
Some policies are also not worth pursuing basing on the assessment of the current situation of FDI. Some of the policies especially those that were related to lending and housing are just problematic and are deemed to complicate issues as well as create distortions that are significant. Among them is the mortgage interest levy, migration policy, stamp duties (Fang & Faure, 2011). There has been high exchange rate variability in New Zealand and this interferes with its business international relationships. Some policies such as housing and fiscal policy are important if pursued and they are likely to have some good impact especially on the troughs and peaks of the cycles of exchange rates. Some policies also could have a positive impact on the variability in the exchange rate however they are very costly (Bruce and Andrew, 2014). The governance policy in New Zealand ensures that all the interests of any shareholders of a company are well represented basically through the board of directors. The main area of interest by the stakeholders are the assurance that the strategy is followed to the later, the corporate strategies are set out well and dealing with the risk management issues.
The monetary policy of New Zealand has been performing poorly for many years and yet it is the one with the principle responsibility of maintaining general levels of prices that are stable (Blanchard et al., 2010). It therefore needs much reconstruction so that its objective is well felt and the prices are not compromised by some international conditions.
From the three essays it’s clear that the two countries seem to be relating well in terms of doing business together. However the business culture in the two partner countries seem to vary but not to a large extend. This is because they have some common things when it comes to the business environment. It’s seen that in both countries some principles are necessary when one is preparing for a business meeting. They both require some etiquette of high degree and some seriousness during the discussions. In both countries business meetings are planned close to a week earlier and one is expected to arrive in time for the negotiations.
They both exercise patience while striking a deal and do not work on timelines until both parties are satisfied. However Chinese people do not value gifts as much as the New Zealand’s and in fact don’t take them whatsoever the situation. Unlike the New Zealanders who may accept gifts in a house setup but not business negotiations. In china working hours are strictly Monday to Friday 8-5 pm unlike the New Zealanders who work till Saturdays. This is a reflection of how china is doing well when it comes to business since it values employee’s time people do not work overtime in china. All in all the Chinese people appreciate the culture of other countries are very willing to work with potential investors.
For matters relating to the free trading agreement, New Zealand benefits a lot from this agreement in the sense that in a summary the agreement ensures business interest of each partner are well protected and there is little exploitation of New Zealand. The agreement also creates a good environment for New Zealand to engage into business within the Chinese borders without fear of being outcompeted by the other foreign investors. However this agreement has some drawbacks that are not clearly stated, unless this is done with much scrutiny. This is because most of the drawbacks are hidden in the protections that are provided within the agreement. For instance china has made the agreement in such a way that it’s the biggest beneficiary of the FTA. For instance China has maintained a WTO tariff rate quota on many of the products that are no longer being exported by New Zealand.
The government policy on direct investment is one of the most protected one by the government since it values the contribution made by the foreign investment on the economic and living standards of its residents. The overseas investment act is given much interest since these investments are the ones that contribute a huge potion as part of foreign investment. However for the government policy to work and be effective in New Zealand some changes are recommended and these are in regards to pursuing and investing much resources in some polices and reducing much focus on others. For example the fiscal and housing policies are quite relevant in the contribution to the foreign earnings and should be given much focus and investment because they directly affect the inflation rates in the country.
In all these assessment it’s evident that the economy of New Zealand is not doing badly in the global business market. If the country has managed to strike business deals with china and engage in several collaborations then its better placed business wise in the world. This is also a reflection of the country having good negotiation skills if it can attract such business giants to enter into collaborations. Considering the collaborations this is a clear reflection of where the country is headed to in terms of economic growth. There is no doubt that it will experience tremendous growth and even attract more collaborators on board. This is also a clear indication that New Zealand operates on free market principles. New Zealand is one of the countries that have shown tremendous growth in its economy and this is because it has embraced the culture of opening up to business collaboration with some of the world’s renowned business giants such as China. It’s flexible in its negotiations and ready to accommodate the other investors’ suggestions. This is part of the reason as to why its deals with china went through and they eventually signed an agreement of doing business together.
All said and done New Zealand should work at reinforcing its business relationships with china and even venture into more collaboration. However it should be keen while entering into such collaborations and ensure the benefits are mutual. It should work towards ensuring it has not need exploited in whatever manner by their partners. In doing so, it will increase its benefits from such collaborations and its citizens will be freer to carry out business in foreign countries. To ensure this exploitation is done away with, New Zealand should send experienced experts to such round table negotiations who understand the provisions of the agreement.
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