Analyzing Shandong Company through Chinese and Canadian Culture Differences

The Company Shandong
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The Company Shandong
Business organizations are fast pursuing internationalization as a primary strategy to stay competitively sustainable in their operational environments. As globalization expands, more businesses are attempting to operate in more countries. Operations in different countries accord businesses an opportunity to create new markets for their goods and services besides opening avenues for more human and material resources for such business entities. The challenge of operating at a multinational level is that the rules of operations change with every nation. Aspects such as politics, culture, and legal factors change as soon as businesses advance their activities beyond a single geographical area. Hence, business managers must understand their targeted markets and operational settings before venturing. Still, it is important to venture strategically into a new setting, or the business entity can face challenges that most new entrants face, such as difficulties to adapt to the prevalent culture. Company Shandong is an organization attempting to expand its operations from China to Canada. The Canadian business operational environment is different from the Chinese, a prospect that may require Shandong to approach the move strategically. In this paper, the analysis delves into Shandong and its proposed operations in Canada through the lenses of environmental analysis, culture analysis, and competitive analysis. Any business organization that intends to stay competitive in a foreign operational environment must conduct an insightful environmental and cultural analysis before delving into its competitiveness to validate the move.
Case Summary
Company Shandong is a business entity that is on a positive trajectory considering its intent to grow into the Canadian mining sector. In May 2020, Shandong announced its intent to grow its operations by signing an agreement sanctioning its TMAC Resources acquisition. TMAC is a publicly listed Canadian company that mines gold. Shandong, in the signing, announced that it would acquire 100% of the equity in cash. With such an acquisition, Shandong would pursue some of TMAC’s strategic resources, such as the Hope Bay gold project that has stalled since 2017 due to challenges, including the difficulty navigating the hostile polar environment and the lack of financial and technical resources to execute the plan. Shandong has shown that it has the financial ability to explore the stalled project. However, it still requires the inputs of the Canadian workforce and technology in such a hostile environment, something that it will find challenging. Canada is also a unique country when it comes to mining. The country is subdivided into ten provinces, with each province accorded jurisdiction over its mining activities. In the Northwest Territories, such as Nunavut, exploration rights and mining rights are governed by different laws. Also, there are different surface land rights and underground mineral rights. Negotiations with the indigenous people and the acquisition of land entry permits are some of the challenges in this region for private mining companies. While the agreements with the indigenous people can be conducted efficiently, Shandong still faces a range of risks by operating in such a mine, including market and foreign exchange risks, cultural difference risks, project operation risks, and uncertainty approval risks. Overcoming the risks will mark the primary step in Shandong’s success in Canadian operations.
Environmental Analysis
The first step in advancing operations in an international environment is through conducting a comprehensive environmental analysis. A business organization that intends to operate in a unique and competitive environment must understand its internal and external operational environments to proceed (Bird et al., 2010). PESTLE is a business external environment analysis tool that has been vital to understanding various operational environments. The PESTLE tool explores the political, economic, social, technological, environmental, and legal factors that surround business operations relative to a specific environment. For Shandong, the PESTLE analysis should be conducted as follows:
Political Factors
The political environment is among the least predictable operational environments for any business entity. Democratic countries such as Canada have to pursue re-election after every few years. New political regimes come with insightful changes in the political factors that affect businesses (Jackson, 2016). Besides, political leaders have different tastes in their diplomatic relationships. One regime could support the relationships between China and Canada, while the next regime could be against such a tie. To a business organization, it is valuable that operations are structured to adhere to the inputs of the reigning government.
The relationship between China and Canada is unique and could affect the efficiency in business environments. In essence, China and Canada have a working relationship. The Chinese-Canadian relationship is longstanding and was established back in 1970. An embassy in Beijing represents Canada. Canada also has consulates general in Shanghai, Hong Kong, Guangzhou, and Chongqing. The extent of the relationships indicates that both nations are committed to supporting the political and business course of one another (Jackson, 2016). However, the political environment changes fast. Presently, China is engulfed in a trade dispute with Canada over canola oil. Politics marked the onset of the dispute with the Chinese government accusing the Canadian government of holding a Huawei executive on a US fraud charge. To retaliate against the move, China banned canola oil exports from two Canadian companies. Such a move triggers a challenge in the relationship between the two nations. Nobody understands what Canada could do to the Chinese firms operating in its territory in retaliation to the canola oil trade dispute.
Shandong should be wary of the unpredictable political temperature between China and Canada besides emphasizing the Canadian political factors as it forges its operations. If the dispute between Canada and China continues, the chances are high that Chinese firms targeting Canadian raw materials such as Shandong will be the first to face the impacts. Canada can also change its political environment to foster more into ills such as trade tariffs, trade control, anti-trust laws, employment laws, competition regulations, tax policy, and government stability-related changes that can all affect the operations of an organization such as Shandong (Barker, 2017). Traditionally, Canada has shown stability in its political environment, which should motivate Shandong. However, politics is highly unpredictable, steering the organization into insightful operations.
Economic Factors
Economic factors bear no direct relations with businesses even though they impact the investment value in the future. Every business setting should develop an operational environment that befits value creation for businesses (Yang, 2016). One of the factors that companies must assess in their venture into newer operational environments is the interest rates. In Canada, the interest rates have marked a continued debate with the Bank of Canada (BoC), emphasizing the strategies to re-stabilize the rates. BoC has a target for the overnight rate at 0.25%, in line with forecasts and to maintain its forward guidance, which sees a rise in the overnight rate sometime in the middle quarters of 2022 (Canada.ca, 2021). The Canadian interest rate changes are also poised to change relative to stable growth in inflation rates at a minimum of 2% (Canada.ca, 2021). So far, Canada has shown a steady trajectory in its interest rates. However, the stability of the changes could be questionable, especially with changes triggered through the prevalence of COVID-19. With unstable interest rates, businesses cannot efficiently predict their return on investments. The other aspects of economic stability that Shandong must emphasize include the exchange rates and tax rates (Aycan et al., 2014). So far, Canada has not indicated any motivations for unstable taxation strategies. However, the unpredictable economic environment could steer countries into unforeseen changes.
Social Factors
Social factors constitute the normal human interactions and perceptions about businesses and their operations. Businesses need people to operate efficiently in their designated operational environments. To business organizations, it is remarkable that the social environments change as they penetrate the markets more. Some of the social factors that businesses must assess before venturing into some cultures include attitudes towards foreign firms, goods, and services, age distribution and life expectancy rates, immigration and emigration rates, as well as the population growth rate. Canada is among the most socially diverse nations in the world (Deardorff, 2009). As of 2020, the immigration numbers to Canada stood at 300,000 individuals. That number is higher than any nation in the world. The number also implies changes in the Canadian labor market, with companies more likely to acquire cheap labor. Shandong is among the organizations whose operations will be influenced by social factors such as population growth rates or attitudes towards foreign companies. Presently, there is an ongoing social dispute between China and Canada. The Canadians have accused the Chinese of human rights violations against minority ethnic groups in Xinjiang. In retaliation, China has also accused Canada of human rights violations among its indigenous populations, resulting in cultural eradication, property destruction, and grabbing their resources such as lands. The social duels between China and Canada could ...