Cross cultural encounters in International Business

Ensuring successful expansion for Philips in China

F. Abi Morhsed, S. Jongerden, Y.Tian
Department of Engineering and Policy Analysis (EPA), Delft University of Technology, Delft, Netherlands

Abstract: In recent years, because of rapid economic development, increasing number of international organizations have
regarded China as an important overseas market with huge potential. International businesses, like Philips, are currently
expanding into China and are facing marketing and management issues due to cultural differences. Therefore the purpose of
this paper is to assist Philips in becoming more successful in China by enhancing its cross cultural competence. The analysis
was performed by means of an exploratory research that is based on a literature study. This literature study concluded in two
case studies which were the foundation for the findings. From these two case studies the results indicate that the Hofstedes
dimensions have a large influence on how an organization should adapt to a new culture. Philips needs to adapt its marketing
and management strategy according to these dimensions to ensure international success.
Keywords: Culture, Hofstede Dimensions, Cross Cultural Management

1. Introduction
Since China joined the World Trade Organization
(WTO) in 2002, China gradually transferred from a
low-cost factory and raw materials exporter to a
growing market with huge potential (Fang, Zhao &
Worm, 2008). Nowadays, China has become the
frontier of international business and the new gold
fields for the multinational corporations all over the
world, including Philips.
Philips is the largest manufacturer of
lighting equipment in the world, and one of the
leading companies in the market for health-care and
consumer lifestyle equipment. Philips had a revenue
of 25.42 billion in 2010, making it one of the largest
electronics companies in the world. It employs about
114,500 people across more than 60 countries.
Recently, Philips claimed to adapt its operation
mode, by establishing two market-leading
companies in lighting solutions and in Health Tech.
It combined Healthcare and Consumer Lifestyle, not
only to build on its existing market leadership in
LED lamps, luminaires and connected lighting
systems & services, but also to bring new vitality in
expanding the business in Healthcare and Consumer
Lifestyle aspects.
As for the relation between China and Philips, there
is no doubt that China will always be one of the key
markets for Philips. According to the Philips annual
sales report of 2013, the sales for the growing market
(of which China occupies a large percentage) was
8.5 billion, a figure larger than the sales in North
America and Western Europe. Nowadays, this
number is still increasing rapidly. In addition, China
is more than just a promising market, it is a market
with cutting edge research and manufacturing. In
2010, Philips announced the development of a local
market in China just as in the Netherlands by
establishing a complete supply chain including

market research, product development, processing

production and commodity marketing. In fact,
Philips has already made remarkable achievements
in China, such as the ownership of the largest market
share (28%) in air purifiers in China and has been the
leading lighting supplier in China for many years.
However, Philips is facing or has already
confronted many challenges and problems in China,
such as the shortage of highly qualified local
workers, poor sales because of different
consumption habits and the increasing competition
with local companies (Cindy, 2005). Taking the
high-quality employees shortage for example, when
Philips just entered China, even though having
established more than 100 offices across Asia, it still
struggled to gain credibility as a top-notch employer
among China's recent university graduates. The
reason behind this could be that the Chinese culture
focusses more on long term orientation (Hofstede,
2001). Behind these similar problems, there will
always be a trace of cultural differences (Hofstede &
Geert, 1994). Hence, addressing the challenges and
problems caused by cultural differences is one of the
most important keys to expand Philipss business in
China.
The purpose of this paper is therefore to
assist Philips in becoming more successful in China
by enhancing its cross cultural competence. To
achieve this purpose, this paper will try to answer the
following research question:
How can Philips address the challenges and
problems caused by cultural differences when
expanding business in China?
To be more specific, this paper will first research the
definitions and characters of cross cultural
competence, cultural distance and institutional
ethnocentrism by means of a literature review.

Secondly, this paper will apply that knowledge to

some specific marketing and managing cases. This
paper will try to find the cultural differences behind
the problems or challenges that Philips is facing in
these specific cases (using Hofstedes six
dimensions), and then come up with solutions to
assist Philips by enhancing its cross cultural
competence. Lastly, based on the literature review
and the results of the specific cases, this paper will
conclude how cultural differences may affect
Philipss business in China and explain effective
strategies that can be used to ensure a successful
expansion in China.

2. Literature review
The globalization wave that is happening all around
the world results in large changes in the business
environment of organizations that perform
International Business (IB). Not only because the
world is getting smaller each day due to
globalization, but it is especially due to the degree
and swiftness globalization is taking place (Czinkota
& Ronkainen, 2005). For example, Globalization has
resulted in the establishment of the North American
Free Trade Agreement (NAFTA), the World Trade
Organization (WTO), and the creation of a single
Europe with one currency. Increased global activity
due to these organizations and technological
development results in firms looking at new markets,
new resources and new (cheaper) production
methods outside the border of their own country
(Johnson, Lenartowicz & Apud, 2006). Cross border
relationships have resulted in management problems
due to cultural differences such as different values,
ideologies, organizational assumptions, work
practices and behavioral styles (Kanter & Corn,
1994; Arthur, 2001).
The term Cross Cultural Management (CCM)
implies: (a) procedures and policies relating to the
management of workforce with different cultural
backgrounds, and (b) moderating the impact of
cultural differences on the execution of

managements tasks (Sderberg & Holden, 2002, p.

103).
Even though the definition of CCM is clear and a
large amount of academic research concerning CCM
in IB exists, firms are still not doing enough to ensure
that managers are ready for the IB environment. It is
of course not new that cultural differences can create
havoc within the IB but it does stress the fact that
CCM is important, not only for the cross border
firms but also for the firms in their country of origin
(Sderberg & Holden, 2002).
According to Ricks (1999), a major factor
behind the failure in using CCM effectively was the
inability of managers to understand the culture of the
foreign country and communicate effectively with
these foreign managers. Based on a literature
review, Johnson, Lenartowicz and Apud (2006)
developed a model to assist firms in adopting the
cultural aspects which are deemed to be necessary
for successful CCM and defined Cross Cultural
Competence (CCC) as follows:
Cross-cultural competence in international
business is an individual's effectiveness in
drawing upon a set of knowledge, skills, and
personal attributes in order to work
successfully with people from different
national cultural backgrounds at home or
abroad (Johnson, Lenartowicz & Apud,
2006, p. 530).
According to the model (Figure 1) devised by
Johnson, Lenartowicz and Apud (2006), CCC is
based on the following aspects:
Cultural distance (Hofstedes dimensions)
Institutional ethnocentrism
Personal attributes
Personal skills
Cultural knowledge
In which cultural distance and institutional
ethnocentrism influence CCC in a negative manner.

Figure 1: Johnson, Lenartowicz and Apud (2006) model for CCC for IB

2.1 Hofstedes Cultural Dimensions

To identify some common problems worldwide and
develop a vision on how the cultural dimensions
could be conceptualized to cover a wide range of
countries in an attempt to explain the problems,
many statistical analysis from various fields of
expertise were conducted. Those problems can exist
at a personal level in a certain group (micro level)
and at a larger level like groups within societies or
even among societies (macro level). Inkeles and
Levinson (1954), suggested that those problems are
either related to ones self-realization, own selfconcept (masculine or feminine), and indulgence or
to ones relationship with higher authorizing
sanctions like organizations, agencies, government
or boards. Although the solutions for those common
problems could differ, Hofstede conveyed six
dimensions with a scoring for each dimension that
allows relative measurements and comparisons and
thus clustering of similar cultures of different
countries. The six dimensions derived are: power
distance, individualism versus collectivism,
masculinity
versus
femininity,
uncertainty
avoidance, long and short orientation, and
indulgence versus restraint `
2.1.1 Power distance dimension
The first dimension is power distance and based on
three survey questions, it is defined by the peoples
level of acceptance of the unequal power
distribution, the perception of distance from their
boss, and managerial style which all together
compose the power distance index (PDI) (Hofstede,
Hofstede, & Minkov, 1991). Low power distance is
characterized as those employees who see
themselves independent from their boss and that the
employee-manager
relationship
is
more
interdependent, in the sense that consultation is
exercised by the manager before a decision is taken.
Conversely, high power distance is regarded as
subordinates being highly dependent on their bosses.
In these environments, expressing any disagreement
in any decision making process is likely to be
considered an intentional public humiliation of their
superior.
2.1.2 Individualism versus collectivism dimension
This dimension is identified by the level of feeling
attached or pertaining to a group or extended family.
In individualistic societies, one is expected to look
after himself only or his direct family. However, in
collective societies, one is considered, since birth,
integrated in some group who is responsible to take
care of him and in reciprocal he owes them eternal
respect and faithfulness. In collectivistic societies,
training stresses on the dependency of the employee
on the organization and the need to apply his or her
skills at work. Counter wise, in individualistic
societies, employees value personal freedom in

implementing their own approaches at work while

feeling challenged.
2.1.3 Masculinity versus femininity dimension
Gender roles are very distinctive between masculine
and feminine societies and thus attributed to
different emotional characteristics. If men and
women share similar aspirations like work security,
good relationship with their colleagues and manager
and caring about their well-being rather than
competition, then this society is considered
feminine. On the other hand, in masculine societies,
the gender roles are very distinctive. While the
women can be affectionate, modest, and caring about
the quality of life, conversely, the man is seeking
materialistic goals, competition, and success.
Nevertheless, this polarization in emotional roles can
have a huge impact on job pursuit. In feminine
societies, innate interests and passions decide the
field of majoring and type of job acquisition;
however, in masculine societies career prospects are
the real drive.
2.1.4 The uncertainty avoidance dimension
We all deal with the same ambiguous and
unpredictable future; however the degree of
tolerance, anxiety, and ways of dealing with
uncertainty differ among societies. There are
different ways of dealing with uncertainty by either
accepting it, adapting to it, or alleviate it by inducing
laws and regulations. The aftermath of the divergent
attitudes and levels of anxiety gave rise to the
uncertainty avoidance index (UAI) (Hofstede,
Hofstede, & Minkov, 1991). Weak uncertainty
avoidance is characterized with feeling at ease with
the unknown, curiosity to embark on the mysterious
future rides, and a let-go attitude. On the other hand,
strong uncertainty avoidance is characterized with
stress, wariness, stringent rules and a suspicious
attitude.
2.1.5 Long-term versus short-term dimension:
Long-term vision is associated with developing
countries having growing economies like that of
China, Japan, Hong Kong, Taiwan and Singapore.
Long-term orientation holds at its core patience,
endurance, the sense of saving and emotional
discipline and containment. Conversely, short-term
orientation is allied to on-spot satisfaction,
importance of leisure, stability and steadiness. For
example, long-term oriented societies feel less pride
about their countries but are more pragmatic to seek
betterment of their social status and level of
knowledge. In contrast, short-term oriented societies
are proud of their families or country and seek few
savings for reciprocated investments.
2.1.6 Restrained versus indulgence dimension:
By asking questions to grade happiness, life control,
and importance of leisure, Hofstede found out that
3

some societies feel free to disclose their feelings and

indulge in fun activities and actions; however, others
seem restrained by religion and norms that may
disdain any form of outspoken high levels of
happiness and leisure. Strict societies with formal
attitudes and serious solidarity tend to tolerate
indulgence less and thus moderate their feelings to
look more self-composed. The polarity of expressing
feelings is described by optimism at one end while
pessimism at another. In the light of that, optimistic
societies are less driven by discipline, they feel more
extrovert and less obsessed in perceiving life

2.2 Institutional Ethnocentrism

Ethnocentrism is a concept used to distinguish the
differentiation that is made between in- and outgroups of various cultures. It is the manner in which
a persons looks at a different culture and finds
aspects of that culture to be correct or incorrect
according to that persons own cultural standards.
Ethnocentrism is therefore defined as: "The view of
things in which ones group is the center of
everything, and others are scaled and rated with
reference to it. (Sinkovics & Holzmller, 1994, p.
3). For IB, ethnocentrism is therefore the manner in
which a manager from a different culture
institutionalizes the way of doing things according to
the home culture in his current position (Johnson,
Lenartowicz & Apud, 2006). According to the
research performed by Sinkovics and Holzmller
(1994), the level of managerial ethnocentrism
depends on the following antecedents:

Openness to the foreign culture

Patriotism: The devotion to ones own
country and concern for its defense
Conservatism: The opposition to change
and innovation
Dogmatism: Stubborn assertion of opinion
or belief.
Allocentrism: The focus on other people
rather than themselves

Institutional ethnocentrism has great influence on

how a manager operates and manages the employees
of an organization. It could therefore influence the
ability of an employee in a positive or negative
manner. The question that could therefore be stated
is whether institutional ethnocentrism is considered
to be a good or bad thing? In the model presented by
Johnson, Lenartowicz and Apud, (2006) a clear
distinction is made that institutional ethnocentrism
negatively influence the CCC but then the question
that could be stated is whether a low level of
institutional ethnocentrism is desired?
Concerning institutional ethnocentrism, one
could state that a lower value is desired since it
benefits the effectiveness of the manager within a
new culture (increases CCC); however, extremely
low levels should be prevented. Therefore, one could
state that a moderate institutional ethnocentrism is
desired. It is not possible to state that managers from
the Netherlands are more institutionally ethnocentric
than Chinese managers because the level of
institutional ethnocentrism depends on multiple
criteria which change over time. So a person could
either have a high level of institutional
ethnocentrism or not (Sinkovics and Holzmller,
1994; Scheepers, Felling & Peters, 1989).

3. Methodology
To answer the main question stated in the
introduction, insights regarding the cultural
differences between the Netherlands (Philips
origin) and China need to be determined. This
insight was created by means of an exploratory
research by using literature as the foundation. By
means of the literature sources, a literature review
was performed on the current state on cross cultural
competence and how to bridge cultural differences.
A better understanding lead to the discovery of gaps
between the two countries which were transformed
into two case studies. Based on these two cases,
advice is given on how Philips should adapt the
marketing and management strategies for further
expansion into China. Table 1 is the conceptual

Table 1: Conceptual Framework

Determinants

Hofstede dimensions (Hofstede,

Hofstede, & Minkov, 1991)

CCC for IB based on the

model devised by Johnson,
Lenartowicz and Apud
(2006)

Universal Leadership
(UL) by Jones et al. (2014)

Level of interpretation
Case 1: Growth market

Case 2: Managerial issues

Major insights/conflicts drawn

from Hofstede Dimensions
Marketing strategy

Management adaption

Recommendation for the

marketing strategy
Recommendation for the
management strategy

framework indicating the chronological order of the

level of interpretation followed against the different
determinants used.

4. The Chinese management culture

According to institutional ethnocentrism definition,
a manager should be capable of institutionalizing his
management style according to the home culture.
Moreover, the level of managerial ethnocentrism
depends on the openness to the foreign culture. To
achieve this, a manager should be well
knowledgeable about the Chinese culture and the
factors influencing the Chinese behavior. The
Chinese culture is characterized by the Emphasis on
Harmony, Respect for Hierarchy, Emphasis on
Context and Dynamics, Face-giving and
Reciprocity, Long-term Perspective, Emphasis on
Tactics, and Socialist Ideology and Maos (Ding,
1996).
Face-giving and Reciprocity:
The Chinese culture is hierarchically structured and
there is substantial focus on face-giving and
reciprocity. Face-giving is being kind to others
and less assertive when conflicts occur. Similarly,
reciprocity is seeking consensus and compromise
when handling conflicts. Chinese people are very
keen on reciprocity and investing in relationships
that can lead to mutual benefits.
Long- Term Perspective:
Chinese people focus on long term relations and try
to satisfy the other party because this may lead to
long term benefits. Inspired by the Confucian
philosophy, Chinese people believe that todays
investments govern tomorrows results.
Emphasis on Harmony:
He wei guei, or harmony is very precious in the
Chinese culture. As Confusionists state Ji shu by
yu, wu shi yu ren, one should not impose on other
what you cannot bear. It puts the emphasis on
maintaining the harmony relationships between
people and the external world.
Respect for Hierarchy:
Respect for hierarchy refers back to a large power
distance. In the Chinese business culture, when
conflicts occur between superior and subordinate,
the superior will take a more competitive approach
while the subordinate will accept and comply with
the wishes of the superior.
Emphasis on Context and Dynamics:
Chinese people are influenced by Taoism,
understanding that the world is dynamic and that
everything is interconnected. This results in the
avoidance of dealing with particular issues in
isolation but takes into account the interrelationships

between the issue and its surrounding, ergo focusing

on totality.
Socialist Ideology and Maos Teachings:
China has been a socialist country since 1949 and has
had since then mainly a one party system. This party
plays a large role and has an impact on every part of
life. The socialist ideology, characterized by
Marxism and Mao Tse-Tung Thought, has served as
the basis guidance of thinking.
Emphasis on Tactics:
The Act of War have had large impact on the
Chinese way of thinking regarding competition and
rivals. The emphasis is on putting the rivals in a
disadvantage to ensure a winning position. It comes
down to knowing oneself and knowing the rival.

5. Chinese market analysis

Based on the analysis of cross cultural competence
in the third section, this chapter presents case studies
on the cultural difficulties Philips may come across
when expanding in the Chinese market. Second it
will analyze how the cultural dimensions are
becoming a barrier and therefore prevent expansion.

5.1 A case study of cultural conflicts in the

Chinese market
Case 1: Growth market
According to the recent Chinese market surveys,
Philips sales of electrical toothbrushes in China is
favorable. But considering the large Chinese
population, its market penetration is still very low,
which means that electrical toothbrushes have a huge
market potential.
To successfully expand the business on new
high-tech products like electrical toothbrushes in
China, Philips has to focus on two main cultural
differences which are: the restrained versus
indulgence dimension and the individualism versus
collectivism dimension. Firstly, it is widely
recognized that Chinese people are conservative in
consumption, especially when buying products they
are not familiar with. So the conservative
consumption character may greatly impede the
growth of new customers. Secondly, China is a
typical collective society where people are more
inclined to follow the behavior of others. So it is less
likely that someone will buy an electrical toothbrush
when everyone else is still using normal
toothbrushes. However, this can lead to a virtuous
circle, in a positive sense. Namely, when the market
penetration is dramatically increased, the growth
speed of sales will also be greatly accelerated.

Case 2: Managerial issues

Based on the research conducted on the cultural
dimensions, it can be recognized that the cultural
differences between China and the Netherlands are
significant. Therefore it is a challenge for managers
of Philips to deal with the problems caused by
cultural differences in China, such as the conflicts
between local employees and expatriates caused by
the collectivistic character and the inadequate means
of communication between employees and managers
because of the high power distance.
A Dutch company like Philips, following
the MBO (Management by objective) method to file
any complain and close complains effectively to
keep the focus centered at the objective, can be
implemented in China but the high power distance
relationship could impede its efficacy. However, a
blind exportation of new methods and ideas that
proved to be previously successful in some context
and culture could turn to be unsuccessful in the new
setting, especially if neither training nor tailored
refinement was undergone to pave the way for its
transplantation. On the other hand, bringing in new
methods that have proven to be effective is only part
of the story to success, the other part is utilizing the
local strengths that exist in the Chinese corporate
society and culture.

5.2 Analysis of the Hofstedes cultural

dimensions
5.2.1 Analysis of Power Distance Dimension
While analyzing the high PDI for China (rank 80)
and low PDI for the Netherlands (rank 38), some
major insights can be drawn. Those insights can be
considered as future conflicts between the Chinese
employees and Dutch managers who perceive
emotional distance differently, the former may favor
dependency and
the
latter
may
favor
interdependency for a better decision making.
Chinese employees seeking moderation and minimal
aspirations may be justified as a lack of interest or
initiative by the Dutch managers who opt for
adaptability and integration.
At Philips, this aspect could provide room
for subordinates to exercise extreme emotional
reverence or disdain to their superiors and thus, in
the case of disdain, result in a feeling for compliance
instead of commitment to their jobs. Moreover,
characterizing a boss-employee relationship with
emotional attributes is not the best sought kind of
relationship. Intellectual affiliation could be highly
more effective in business atmospheres where they
share a common professional goal.
5.2.2 Analysis of Individualistic versus
collectivistic dimension
Since China and the Netherlands are the focus of
interest for this case, it is important to notice the vast
discrepancy in the countries indexes - China scored

20 while Netherlands scored 80. In consequence, in

China, employees may expect to be treated on moral
terms rather than on business quantifiable terms and
thus there is a room for opposing expectations
between Dutch managers and Chinese subordinates.
Moreover, a disagreement is likely to occur over
what is considered ethical. For example, impartiality
between customers may be considered ethical by
Chinese employees who favor in-group customers
over outer-group ones while Dutch managers may
heavily disapprove such immoral act. On the other
hand, and because of those differences, Dutch
managers should win the trust of Chinese business
men before attempting to do business with them.
5.2.3 Analysis of Masculinity versus femininity
dimension
China scored 66 for the masculinity index (MAS)
while Netherlands scored 14 and this vast variance
signals a lot of differences in the workplace. For
instance, Chinese people aspire for winning a
conversation while Dutch employees aim for
consensus. Those different pursuits in problem
solving can build a lot of tension and lack of
productivity. Nevertheless, Chinese subordinates opt
for challenges and look forward to be rewarded for
their ambition; conversely, their Dutch feminine
executives are inclined towards solidarity rather than
competition and thus different motivation themes
may drive them apart.
5.2.4 Analysis of the uncertainty avoidance
dimension
Although the uncertainty avoidance index (UAI) is
not that high for the Netherlands (53); however, it is
still higher compared to China (30). At work, Dutch
managers feel self-contained with an organized
structure of rules and regulations; however, Chinese
people may consider such rules as an exaggeration
and thus underestimate their sacredness.
Nevertheless, Dutch people with considerably high
uncertainty avoidance are fond of punctuality and
pursue meticulous details at work and would rather
expect the same from Chinese employees who are
less fastidious. Such opposing contemplation will be
sufficient to raise clashes.
5.2.5 Analysis of the short and long term
dimension
China ranks highly in terms of long orientation (87)
and the Netherlands ranks relatively high (67) but
still falls back in comparison to China. For the long
term oriented Chinese people, circumstances govern
the relationships and the definition of good or bad.
In contrast, Dutch executives are more universal and
consequently this could impact their relationship
with the government and other entities that hold part
of the stake.

5.2.6 Analysis of the indulgence versus restrained

workplace
While China scores very low on the indulgence
versus restrained index (IVR) (24), the Netherlands
scores very high (68) which could lead to difficulty
in negotiations and understanding intentions.
Chinese employees, being morally disciplined and
less outspoken in sharing their opinion or feedback,
could provoke ambiguity or misinterpretation from
Dutch managers who are less composed and upfront.

6. Results
6.1 Marketing strategy
As Doole and Lowe (2012, p.7) stated: The social
and cultural influences on international marketing
are immense. Differences in social conditions,
religion and material culture all affect consumers
perceptions and patterns of buying behavior. It is
impossible for an organization to develop a
successful business abroad without adjusting its
marketing strategy to match with the cultural
differences of the foreign countries markets (Hamel
& Prahalad, 1996).
Based on the analysis of Hofstedes cultural
dimensions and the Chinese market situation, it is
recognized that even though all the six cultural
dimensions are important for Philipss business
growth in China, the restrained, collectivism and the
long-term orientation dimensions have the most
significant influences on commercial activities and
therefore the marketing strategy.
Firstly, Chinese show strong restrained
behaviours when purchasing new high-tech
products, mostly because these products are more
expensive than the similar products they used to
utilize (just as the example of electrical and normal
toothbrushes). The proposed suggestion to solve this
problem is to lower prices by reducing additional
functions or to offer the potential consumers free
experience service. As a result, when people get
familiar with these products, they are more likely to
purchase these products.
Secondly, China is a typical collective
society. In other words, Chinese are more likely to
follow the public opinion and are more easily
influenced by mass media. So strengthening the
publicity and brand effects by advertisement is an
effective and efficient method to market new
products to the Chinese population. In view of the
increasing number of Chinese citizens utilizing the
internet, the internet advertising channel will be a
provident alternative to enhance Philipss publicity
in China.
Thirdly, there is a distinctive concept which
is always regarded as a symbol of Chinese business
mode guanxi. Guanxi refers to the personal
relationship which is widely used in commercial

activities in China. Usually, guanxi is regarded as an

evident reflection of collectivism, but it can also be
analyzed in a long-term orientation view. Chinese
society values relationships that are built slowly over
time and one step at a time. It is thus critical to have
a long-term plan to build a trustworthy business
network in China and reinforce it gradually over time
(Min & Patrick, 2014). So in the case of Philips, it is
better to build guanxi with Chinese business partners
and the local government steadily and consistently
rather than an uneven approach of stop-and-go.
On the other hand, when adjusting the marketing
strategy according to the cultural dimensions, Philips
should pay attention to maintaining their original
image instead of excessively localizing its products
in China. Excessive localization can harm Philipss
business even more than not changing its market
strategies at all. Chinese like foreign products that
have unique brand effects and can be regarded as
luxury products. If Philips loses its foreign brand
effects in China, its products will become very
similar to the local unbranded products with less
competitive prices. In consequence, when expanding
in China, Philips should carefully strike a balance
between adjusting its marketing strategy and
maintaining its foreign brand effects.

6.2 Management adaption

If an organization wants to successfully expand into
a different international market, this organization
must focus on how managers can interact with the
local workers and consumers (Jones et. al, 2014).
This in in line with the CCC model, as in order to
become CCC, managers must have the knowledge
and skills to work successfully with people from
different nationalities (Lenartowicz & Apud, 2006).
Therefore, in order for managers to be successful
they need to be trained before a manager is sent to
the country of operation (Fan & Lai, 2014).
Regardless of the country of operation, the person
assigned for the management function must be
selected properly. Research by Fan and Lai (2014)
indicated that people with a high level of selfefficacy the belief in ones capabilities to meet
with given situational demands are more
successful in cross cultural operation. Therefore, the
first step is to select potential cross cultural managers
with a high level of self-efficacy (Fan & Lai, 2014;
Jones et. al, 2014).
Second,
regarding
institutional
ethnocentrism it could be stated that the same
selection should take place here. Based on research
performed by Sinkovics and Holzmller (1994) and
Scheepers, Felling and Peters (1989) it can be
concluded that people with a moderate institutional
ethnocentrism are best used since they combine the
best from both worlds (being open for new
experiences but still preserving the thoughts of the
country of origin). People that have moderate
7

institutional ethnocentrism are, according to

Scheepers, Felling and Peters (1989), around 40
years old, economically conservative, have neutral
economic civil values and are culturally
conservative.
Third, for a manager to become CCC the
cultural distance needs to be bridged. The cultural
distance is based on the important Hofstedes
dimensions that need to be covered for operation in
China. The expectations from leadership vary per
location, but the research performed by Jones et al.
(2014) indicated that the expectations coalesce
around common success constructs. These
constructs combined, resemble what is described as
Universal Leadership (UL). UL consists of Ability,
Adaptability, Ambassadorship and Awareness (self).
All these constructs are required to be an effective
leader, but there is no single construct superior to the
other because they vary, based on the priority and
needs for a specific situation or country. For Philips
expanding in China, this means explicit training in:

Adaptability (covers PD, IDV, MAS)

Be open to suggestions made from people
living in the country; Understand why
they do and what they dont do (Jones et.
al, 2014, p. 252).
Ambassadorship (covers UAI, LTO and
Institutional ethnocentrism)
Ambassadorship
is
about
communicating the vision for the
assignment, while engendering local
support for corporate expectations,
Ambassadorship provides a bridge
between the goals and culture of the host
company and corporate. Success can
only be achieved when both sides can see
the same vision (Jones et. al, 2014, p.
253).

Awareness (covered by self-efficacy) and Ability

(covered by the management skills) are constructs
that are already required before the training for CCC
begins. Simply, managers that do not have the
awareness or skills are not the right candidates to be
Table 2: Training examples Bruins and Scherle (2014).
Preparation

Support in China

Learn the Chinese way of

negotiation ("The art of
War", Sun Tzu)
Learn the language

Local contacts in
China for support

Plan a "Look and see Trip"

Involve the family in all

decisions
Complete an intercultural
training

Assistance by a
mentor
Finding the balance
between the Dutch
straightness and the
Chinese indirect
meandering ways

selected
for
cross
cultural
activities.
Managers should first be pre-trained and afterwards
trained on the spot. This manner seems to be most
effective according to Fan and Lai (2014). Some
examples (Table 2) from pre-training and the
continuation of training are described by Bruins and
Scherle (2014).

7. Recommendation
Philips would like to expand into China due to
market potential in the high-tech equipment market
but is facing some cultural difficulties. Therefore the
purpose of this paper was to assist Philips in
becoming more successful in China by enhancing its
cross cultural competence. Based on the analysis of
the cultural dimensions and the Chinese market, the
following recommendation can be stated for the
marketing and management strategy:
Recommendation for the marketing strategy
1.
Because China is a restrained (IND), but
also long term oriented (LTO) society, the
products that are presented to the Chinese
market should match with these cultural
dimensions, without Philips losing its
original image. This implies that Philips
should address the mid-range high-tech
consumer goods market with a focus on
products that have effective functionalities
and a high durability.
2.
Philips should market these products to the
uncertainty avoidant (UAI) Chinese
population by means of internet publicity
and advertising channels.
3.
When the product is on the market, Philips
should provide aftersales support to ensure
that the customers stay satisfied while
guanxi is built over time. This will results in
mouth to mouth advertisement in the highly
collectivistic (IDV) society and further
expand the sales.
Recommendation for the management strategy
1.
Managers should be selected based on their
level of self-efficacy (Awareness), Ability
and moderate level of Institutional
Ethnocentrism.
2.
Managers should be pre-trained before they
are sent to the country of operation in
Adaptability and Ambassadorship to ensure
that these managers are able to overcome
the cultural distance.
a.
Managers
should
prevent
hierarchal control (PDI) of the organization
and thereby prevent complacency and
misunderstanding by the employees.
b. Managers should treat employees based
on moral terms and performance (IDV,

3.

IND) and focus on building a long term

relationship with customers (IDV & LTO).
c.
Managers
should
provide
gratifications to employees that are
performing (MAS).
d.
Managers should not hold on to the
rules as tightly (UAI) as in the country of
origin, Chinese employees might find such
rules
an
exaggeration
and
thus
underestimate their sacredness.
Managers should receive support in China
so that they can find the balance between
the Chinese and Dutch way of doing things.

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