Essay by mampillyUniversity, Master's September 2008

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Business Culture:The business culture existing in the host country plays a key role in doing business successfully across borders. The Chinese culture of business practice, 'guanxi', based on reciprocal exchanges of favors (Christopher, 2007), has contributed immensely towards the country's economic growth over the years but also had a share of doubts of its practice being ethical . However, because of widespread importance and practice of guanxi, Australian, North American and European firms operating in China often face a tough task in adapting to the norms of Chinese business culture at the same time continuing to honor company policy (Orfield, 2008).

It's not enough to have a good business plan. You need to understand and respect the culture. Overcoming the cultural hurdles, however, can be a major challenge. For example, Western companies want to strike a deal very quickly, while Chinese prefer to negotiate and seek concessions (Orfield, 2008).

Lack of infrastructure & variable Legal System:Gore, the senior vice president global purchasing for Spectrum Brands, formerly Rayovac, points out doing business in China is not a piece of cake, due to its lack of infrastructure, especially legal and banking infrastructure.

"The laws change region by region. The government looks at rules as works in progress. So, business decisions based on rules may not be correct a couple months later," he said. Also, he notices the labor costs are going up (Orfield, 2008).

Violation of labor rights & doubtful product quality and safety:China has been one of the destinations where many U.S. Multinational Companies (MNC's) and their expatriate managers are assigned because of its large and continuously growing domestic market. As a result of increasing foreign-invested enterprises (FIE's) and foreign direct investment (FDI) to China, the past two decades have witnessed numerous US MNC's going to China outsourcing production and jobs...