According to Yoo, Donthu and Lenartowicz (2011), there are five major dimensions that can be used to describe and understand the culture of a country. These dimensions include power distance, individualism, masculinity, uncertainty avoidance, pragmatism, and indulgence. Globalization and proliferation of multi-national business organizations has brought individuals from different cultural backgrounds in the same workplace (Onea, 2012). Countries are also engaging more in trade partnerships to boost their economic performance. One of the perfect example of international trade partnership is between New Zealand and China. China has emerged to be the largest trade partner of New Zealand; however, there are significant cultural differences that impact trading activities between these two countries. One of the major differences is that China is a collectivist while New Zealand is an individualistic society. Individualism and collectivism refers to the degree of interdependence that exist among individuals in a given society (Catlin-Legutko & Klinger, 2012). With regards to this, individualism refers to the existence of weak interdependence among members. In this regard, there are significant differences in the business culture between this two countries as discussed below.
Discussion and Synthesis
Teamwork and Collaboration
In China, which is a collectivist society, there is a strong sense of teamwork among employees within a given business organization (Srivastava & Nandan, 2010). Employees are grouped into teams to complete specific tasks within a business organization and this ensures high performance and productivity. On the other hand, teamwork is less embraced within business organizations in New Zealand. Most of the tasks are completed by individuals within organizations because people are self-reliant.
In China, businesses depend on one another for success while in New Zealand business do not depend on one another. In China different business owners collaborate with one another to exchange information and business ideas to facilitate industrial growth (O'Rourke, 2010). This form of collaboration also exist among different large companies in the country. Conversely, business owners and business companies in New Zealand do not embrace collaboration in their business activities (Reynolds & Valentine, 2011). Business owners distance themselves and high level of privacy is maintained as there is no exchange and sharing of information with rivals who are viewed as competitors. However, despite this, there is a significant difference in the level of growth and development in the two countries, whereby China has recorded a higher and faster growth rate in the past decade as compared to New Zealand. According to Wilton (2011), the economies of the countries that embrace collectivism grow faster as compared to those that embrace individualism.
In China, there is a concept of shared responsibility among businesses, for example, business from the same industry have come together to form partnerships to carry out social responsibilities in China (Reynolds & Valentine, 2011). On the other hand, there is a practice of self-reliance among businesses in New Zealand, whereby businesses in the country engage in corporate social responsibilities single-handedly.
On this basis, business managers from New Zealand can learn to employ team work among their employees to facilitate individual productivity organizational output (Wilton, 2011). They can also learn to embrace partnerships and the exchange of information between businesses to facilitate business performance and the country’s economic growth.
Implications & Recommendations
The first implication of the trade partnership between these two countries is that both countries will become a hybrid of both collectivist and individualist societies (Reynolds & Valentine, 2011). This is because of the cultural exchange that will take place between the two countries during trade activities, and as a result, China will embrace some elements of individualism while New Zealand will embrace elements of collectivism in their culture.
Another implication of this partnership increased trade activities between Asian and Western countries (O'Rourke, 2010). China will act as an opening door for the Western countries into the Asian region which has proved to be a major market destination for western products. Similarly, New Zealand will also open doors of western markets for China and other Asian countries.
In this regard, it is recommended that Eastern and Western economies should embrace collaboration to facilitate the economic growth of both regions (O'Rourke, 2010). New Zealand should focus on engaging in forming strong trade partnership with other Asian countries such as China and Japan because they are other strong emerging markets in the East that will facilitate New Zealand’s economic growth and regional integration.
It is also recommend that both Eastern and Western countries should eliminate all the trade barriers such as tariffs and import, and export duties to facilitate trade activities between these two regions.
A free trade agreement (FTA) refers to the cooperation among countries that have agreed to eliminate trade barriers such as tariffs and import duties in order to facilitate trade activities between the countries involved (Cui & Jiang, 2012). FTAs are instrumental strategies of opening foreign markets as it reduces barriers to trade. To facilitate regional and global economic integration, countries enter into FTAs to promote trade activities. To promote her trade activities, New Zealand has pursued FTAs with many countries in the Eastern region; however, China has been her major trade partner. The FTA between New Zealand and China has brought about numerous benefits to the country; however, it has also come along with several drawbacks to New Zealand. This essay is going to discuss the benefits and drawbacks of the New Zealand-China FTA, and highlight some of the improvements that were made to the FTA in the recent March 2017 negotiations.
Benefits of the New Zealand-China FTA to New Zealand
New Zealand saves millions of dollars when exporting products to China because the Chinese government has removed tariffs on more than 96% of New Zealand’s exports to China (Sandrey & Grinsted, 2008). This has increased the volume and the number of products that New Zealand can export into China. The FTA has also opened new markets for New Zealand products in China. In this regard, New Zealand has been able to earn more revenues from exporting dairy and other agricultural products to China.
The FTA has enabled New Zealand to significantly reduce the cost of exporting its products to China while at the same time reducing the cost of imports (Kang & Bael, 2013). In this regard, the country has recorded an increase in its profits margins, which is a positive impact on the New Zealand government revenues. According to Asia New Zealand Foundation (2010), for a country to earn more revenues and to record economic growth, the revenues generated from the exports should be more than the costs of imports. Therefore, the FTA has enabled New Zealand to import at a much-reduced cost from China, while exporting at a higher cost to other countries, and hence, generating more revenues (Cai, 2012).
The FTA has also enabled New Zealand to import goods at a reduced cost from China. Therefore, the consumers in the country have been able to gain access to and purchase products such as electronics, machines, and accessories from China at a much lower cost (Buckley, P. J., Clegg, Cross, Liu, Voss, & Zheng, 2007).
Drawbacks of the New Zealand-China FTA to New Zealand
The Chinese companies will also gain rights to operate freely in New Zealand, and this has resulted in stiff competitions in the markets. The Chinese companies that produce similar products to those of the local New Zealand industries have stormed and dominated New Zealand’s local markets by producing substitute products and services in the country (Antell & Wallgren, 2012). According to Durmaz and Tasdemir (2014), the presence of substitute products reduces a company’s performance, and hence, the Chinese companies have reduced the performance of New Zealand’s companies.
The FTA has also resulted in an increase in unemployment of the citizens of New Zealand. This is because the Chinese companies that have established themselves in the country have come along foreign employees from China and other countries (Ramasamy, Yeung, & Laforet, 2012). The importation of foreign workers into the country has multiplied the problem of unemployment in New Zealand, and this has negatively affected the country’s GDP.
Improvements of the 2017 Agreement
One of the improvements in the March 2017 agreement is the total removal of all tariffs on specific agricultural exports such as mutton, beef, and kiwifruits.
Another improvement in the March 2017 agreement is the upgrade to cover more economic sectors, for example, investment, service, and e-commerce to create more opportunities for the two countries.
Implications & Recommendations
The discussion above implies that in the next few decades, all the trade tariffs between China and New Zealand will be eliminated.
The discussion also implies that China will become the largest trading partner of New Zealand in the Asian region.
It also implies that New Zealand will find new market opportunities for its products in the larger Asian region.
In this regard, it is recommended that New Zealand should enter into more FTAs with other Asian countries such as India.
It is also recommended that New Zealand and China should eliminate all the trade barriers between them to facilitate a faster economic integration between them.
Foreign direct investment (FDI) is the flow of equity from direct investments into a country (KPMG, 2015). It also refers to the total amount of equity capital, earnings from reinvestment and other forms of capital that are invested in foreign countries. FDI is very instrumental in New Zealand’s effort to maintain its competitive edge across the globe because more FDI is necessary for economic growth. New Zealand exports are dominated by primary commodities like dairy, forestry, meat, wool, marine and horticulture products. In this regard an increase in FDI is required to sustain the distribution channels in new market destinations to ensure that New Zealand remains integrated with other countries (Lall & Narulla, 2006). To successfully achieve this, New Zealand has formulated and implemented FDI policies; however, the country has been criticized for non-progressive FDI policies (NZIER, 2016). This essay is going to discuss the FDI policies of New Zealand and conclude by highlighting some of the changes that should be introduced in the policies to facilitate capital inflow into the value adding industries in the country.
New Zealand FDI Policies
Authorization and notifications procedure: For general and sensitive investments, business proposals that are less than 10million New Zealand dollars does not require clearance, while the proposals for more than 10million dollars will require clearance (OECD, 1993).
Privatization: The government has tight restriction on the privatization of government properties in order to maintain the majority of New Zealand ownership of government assets. This has limited the arrival of foreign to take over and improve the performance of some of the government owned institutions that are not performing well. According to The State Council (2017), foreign investors positively impact public sectors through financing and highly qualified personnel from other countries.
Rules, regulations, and private practices: There are no strict regulations in New Zealand based on residence or nationality for a professional to enter into a private practice (OECD, 1993). However, an investor must have licenses, and qualifications that are nationally recognized across OECD countries.
Foreign investments on land and fishing activities are tightly controlled and restricted because of the economic importance to the economy of New Zealand (Doan, Mare, & Lyer, 2015). Therefore, foreign participation is limited in economic sectors such as fishing, mining, air and maritime transport, telecommunication and broadcasting. The export of primary commodities such as dairy and horticultural production are also restricted to because agriculture forms the backbone of the New Zealand economy (Antell & Wallgren, 2012). This has limited the inflow of capital in New Zealand because of the lack of sufficient investment into these critical economic sectors.
Taxation of inbound direct investment: In this country, there are two types of taxes that are imposed on inbound investment, namely, NRWT/AIL and the company tax (Inland Revenue, 2017). These forms of taxes are impost on direct investors who venture in the New Zealand economic sectors. New Zealand imposes high amount of taxes on FDI and this discourages away potential investors in the valuable industries that produce the primary products that compose the larger portion of the country’s exports.
Changes that Should be made in New Zealand FDI Policies
To facilitate the inflow of capital in the valuable industries, the following changes should be made on New Zealand FDI:
Taxes on inbound direct investments should be reduced in order to attract more foreign investors in the country (The State Council, 2017). According to the discussion section, it is apparent that the high rates of taxes that are charged on the inbound direct foreign investment is the major discouraging factor that keeps away the foreign investors from venturing into New Zealand. Therefore, even a minimal reduction in tax rates will play a major role in attracting more foreign investors, and hence, increased inflow in capital.
The government should minimize the strict regulation on privatization of government properties to allow more foreign investors to come and boost the performance of industries such as maritime and forestry. This is because the total control that the government of New Zealand has taken over public properties bars foreign investors from taking over them and inject more capital to improve their productivity (The State Council, 2017).
Regulations that limit the amount of foreign ownership of valuable industry such as horticulture, dairy production, meat, and wool will boost the performance of these industry. This is because the arrival of the foreign investors will improve the quality and volume of production in these industries. Consequently, the volume of export of these products will increase, hence, increased capital inflow in these valuable industries.
Reflective Learning Journal
The completion of this assignment has been a great learning experience for me. The three essays above have enabled me to grow in in knowledge, understanding, and capability over the course in various ways. The first assignment has helped me to learn the vital role that culture plays in business. I have been able to understand how culture shapes business practices in a given society, and in particular, how the cultural dimension of collectivism vs. individualism shapes the business culture of a country. I have understood that collectivism refers to a high degree of interdependence among the people in the involved society. Some countries are known to have a higher degree of interdependence than others. This difference is due to the cultural beliefs and practices among the members of the involved society. This assignment has enhanced my capability of carrying out a cultural analysis and linking it with the prevailing business practices in a country. For example, how the culture of collectivism influences teamwork and collaboration among businesses in China and individualism contributes to self-reliance and creates competition among businesses in New Zealand. This is what has led to inter-industrial collaboration where business organizations from different industrial sector come together to share information and exchange ideas to facilitate the growth and development of the Chinese economy. This has also helped me to understand the existence of stiff competition among businesses in New Zealand as compared to those in China.
The second essay has enabled me to grow in knowledge and understanding of the important role of FTA in regional and global integration for economic growth and development. This essay has enabled me to understand how FTA brings about economic growth, for example, through the elimination of trade barriers. FTAs are very instrumental in boosting trade by opening up new markets for products from other countries. In this regard, it is now clear to me why countries focus on the formation of FTAs with other foreign countries, specifically with regards to New Zealand-China FTA. This essay has made me get into in-depth research of the New Zealand-China FTA. By studying its terms and condition, I have learned a lot regarding the benefits and drawbacks of FTAs for the countries involved. I have understood that despite facilitating and boosting trade between the involved countries, FTAs can also cause significant disadvantages to the partners. For example, as evident in the New Zealand-China FTA, domination of the local markets by foreign products or companies may negatively affect the performance of the local industries. It may also create unemployment because the foreign companies may bring in workers from other countries.
The third essay has given me an in-depth understanding of how FDI policies affect the inflow of capital in the major economic sectors of a country. I have learned that FDI has a direct impact on the economic performance of a country, and therefore, to promote economic growth in valuable industries of an economy, favorable FDI policies should be formulated and established to attract foreign investors. Studying the New Zealand FDI policies has enabled me to understand that the country has several unfavorable FDI policies. New Zealand restricts foreign investments, and this has limited the performance of the valuable industries that produces her exports.
This assignment has given me an in-depth understanding of the New Zealand economic structure. The country’s economy is reliant on the service industry and agricultural products that are exported to generate revenue (NZ Treasury, 2012). However, the literature review in the discussion has demonstrated that the government of New Zealand has not taken advantage of the valuable primary products that make up the major portion of the exports. To improve the country’s economy the government should inject more capital and invite more investors into the service and agricultural industry (The State Council, 2017). The country depends on trade partnership with other countries, and this is evident in the discussion in essay one and two, where New Zealand has entered into a partnership with China. I have learned that trade partnerships are instrument in regional and global integration. Integration among countries is not only important for economic growth, but it is vital for regional and global peace that is needed for global prosperity. New Zealand’s economy is also reliant on exports, for example, the export of products such as dairy, forestry, meat, wool, marine and horticulture products, and hence, it has formed FDI policies that regulate and promote trade with other countries. To maximize the inflow of capital, the government of New Zealand should diversify the agricultural sector.
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