International HRM: Le Costbucks' Expansion into China Report

This report addresses key HRM considerations for Le Costbucks, a French coffee bar chain, as it expands into the Chinese market. It begins by analyzing cultural differences between France and China using Hofstede's cultural dimensions, highlighting differences in individualism, long-term orientation, indulgence, power distance, uncertainty avoidance, and masculinity. The report then evaluates staffing attitudes based on the EPG model (ethnocentric, polycentric, and geocentric orientations), recommending a polycentric approach for Le Costbucks. Furthermore, it identifies ethical issues European MNCs face in China, such as human rights violations and corruption, and provides recommendations for Le Costbucks to handle these issues effectively. These recommendations include adapting employment terms, considering migrant worker policies, and understanding customer preferences through local employee insights.

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IHRM

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Executive Summary
In this report, Hofstede’s cultural dimensional model will be used to understand key
cultural difference between France and China that affects HRM approach adopted by Le
Costbucks. China scored low in dimensions such as uncertainty avoidance, indulgence and
individualism which highlights cultural differences between the two countries that affect
HRM approach of Le Costbucks. Based on EPG model, key factors of ethnocentric,
polycentric and geocentric orientations are analysed in this report from which polycentric
orientation is the most suitable option for Le Costbucks due to benefits such as effective
cultural management, easy hiring process and inexpensive process. Various ethical issues
are identified in this report that affects European MNC when they establish their operations
in China such as violation of human rights, unfair terms and conditions of employment,
corruption and growing number of migrant workers. Recommendations are given for Le
Costbucks which can assist the company in handling these issues in an effective manner
such as terms and conditions in employment agreement to ensure health and safety of
employees, hiring of migrant workers and education facilities for them and understanding of
customer preference by collecting insight from local employees.

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Table of Contents
Introduction...............................................................................................................................3
Q1 Cultural Difference between France and China...................................................................4
1. Hofstede’s Cultural Dimensions......................................................................................4
1.1 Individualism................................................................................................................4
1.2 Long term orientation..................................................................................................4
1.3 Indulgence....................................................................................................................5
1.4 Power Distance............................................................................................................5
1.5 Uncertainty Avoidance.................................................................................................6
1.6 Masculinity...................................................................................................................6
Q2 Organisation Methods..........................................................................................................7
2. Staffing attitudes.............................................................................................................7
2.1 Ethnocentric.................................................................................................................7
2.2 Polycentric....................................................................................................................7
2.3 Geocentric....................................................................................................................7
2.4 Recommendation.........................................................................................................8
Q3 Ethical Issues.........................................................................................................................8
Conclusion................................................................................................................................11
Recommendations...................................................................................................................11
References................................................................................................................................12

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Introduction
Due to globalisation and information technology revolution, organisations are facing
challenges relating to diversity management as it became easier for them to expand their
operations overseas and hire employees from different countries. Cultural factors affect the
business of corporations when they operate in foreign markets which mean just because a
business is successful in a domestic market does not mean that same business strategy will
succeed in foreign markets as well (Amir Bolboli & Reiche, 2014). These factors affect the
performance of employees as lack of diversity management leads to conflict between
employees and the management which adversely affect the performance of the company.
Therefore, it is important that the management considers key cultural difference while
implementing international human resource management policies to effectively manage a
diverse workforce (Amir Bolboli & Reiche, 2014). In this report, the cultural difference
between France and China will be recognised by using Hofstede’s cultural dimension model
to understand their impact on HRM approach of companies. Ethnocentric, polycentric and
geocentric orientation will be analysed in this report to suggest which one is the most
suitable one for Le Costbucks. Ethical issues which are faced by European MNCs that expand
their operations in China will be evaluated in this report as well.

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Q1 Cultural Difference between France and China
1. Hofstede’s Cultural Dimensions
Geert Hofstede provided six dimensions framework which can be used by companies in
order to work effectively with people who are from a range of cultural and geographic
backgrounds. The six dimensions which are given by Hofstede include Power Distance Index,
Individualism Versus Collectivism, Masculinity Versus Femininity, Uncertainty Avoidance
Index, Long- Versus Short-Term Orientation and Indulgence Versus Restraint (Khlif, 2016). It
is important that companies evaluate these factors before implementing international
human resource management policies to ensure that they effectively work with employees
who belong to different cultural backgrounds since it affects their performance. Le
Costbucks also require evaluating these factors before implementing HRM framework to
ensure that it effective set up its operations in China.
1.1 Individualism
This dimension is used in order to identify the level up to which the members of
society are interdependent. The company that score lower have trust between group
members whereas a high score indicates fragile bonds between members (Triandis, 2018).
The score of France in this dimension is 71 since people are self-dependent and they are less
likely to rely on the support of other individuals for their actions (Hofstede Insights, n.d.).
Chine scored 20 which is significantly lower because people are close to each other and they
prefer to live in groups. They care about each other and their opinions which shape their
decisions. This factor requires Le Costbucks to change its HRM approach while setting up in
China to earn the loyalty of its employees by building a strong relationship with them. The
HRM approach should promote employee engagement and interaction so that strong bonds
are built between the management and employees that are crucial for their retention
(Laroche, Vinhal Nepomuceno & Richard, 2014).
1.2 Long term orientation
In this dimension, long term orientation defines that the country is more pragmatic
and modest. In short term orientation, people tend to be more focused on truth, principles
and consistency which are based on religious or nationalistic values (Arli & Tjiptono, 2014).

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France scored 63 which mean the country is more pragmatic and modest. Similarly, China
scored 87 which is also considerably high which shows that the culture is pragmatic and
people focuses on virtues and obligations rather than rights and values (Hofstede Insights,
n.d.). The HRM approach of Le Costbucks should take this dimension into consideration
since in this aspect the culture of both countries is similar. The management should
emphasis on virtues, and they should act modestly while dealing with employees to build a
strong connection with them and retain them for a longer period of time.
1.3 Indulgence
In the case of indulgence versus restraint, a high score indicates that people are
more likely to drive by their emotions. A low score indicates that they are focused on
suppressing their gratification to regulate their conduct and behaviour while complying with
stricter social norms. France scored 48 whereas China scored 24 which show that people in
France prefer to show their gratification and they prefer to express their opinions and
desires (Hofstede Insights, n.d.). In China, people prefer to suppress their behaviour, and
they have a tendency to cynicism and pessimism (Laroche, Vinhal Nepomuceno & Richard,
2014). While implementation HRM policies, Le Costbucks has to consider these factors since
the management cannot solely rely on the contribution of employees while implementing
their policies.
1.4 Power Distance
This dimension is used in order to identify the level up to which people in a culture
accept unequal distribution in the power structure. Countries that score higher have a
culture in which they accept the unequal distribution of power. A low score provides that
members did not accept inequality when it comes to power distribution between parties. In
this index, France scored 68 points which shows that it has a culture in which people accept
unequal distribution of power which is mostly reserved for parties such as organisations,
governments and other authorities (Hofstede Insights, n.d.). This is also the case with China
which scored 80 points which shows a higher degree of acceptance when it comes to
unequal distribution of power between superior and subordinates. Le Costbucks can
implement similar policies which it has implemented in France to manage its employees in
China since both the country has a culture that accepts unequal power distribution (Kan,
Cliquet & Puelles Gallo, 2014). The key difference is the level up to which they accept this

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distribution based on which the HRM approach of the company should focus on effectively
controlling its employees in China by implementing effective control policies.
1.5 Uncertainty Avoidance
A low score in this index provides that people are open to change and they are
relaxed in an ambiguous environment. A high score provides that they did not life surprises
and prefer to eliminate ambiguity from their life. France scored 86 which shows that people
did not prefer ambiguity and they prefer to plan for the future. China scored 30 which is a
low score that means people are relaxed with ambiguity (Hofstede Insights, n.d.). Thus, the
HRM approach in France should keep employees up-to-date with future changes whereas it
is not the case with China.
1.6 Masculinity
A high score indicates that people are focused on heroism, achievement and
assertiveness in order to define their success as they are focused on masculinity. A low score
indicates femininity culture where people focus more on helping weak members, caring and
improving the overall quality of life. France scored 43 which indicate femininity culture
where employees expect benefits from the employer such as health and safety policies,
limited working hours, holidays and focus on improvement of the quality of life (Hofstede
Insights, n.d.). The score of China is 66 which highlight aspects of masculinity culture in
which people focuses on achievements more than quality of life. People work for long shifts
and weekends and avoid taking holidays to succeed in their work. They give priority to their
work in order to succeed rather than spending personal or family time (Laroche, Vinhal
Nepomuceno & Richard, 2014). Thus, the HRM approach in France is focused on providing
adequate benefits to employees in order to attract them whereas in China, if the company
did not provide growth opportunities for employees for their hard work, then it is likely to
increase employee attrition rate.

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Q2 Organisation Methods
2. Staffing attitudes
While deciding staffing attitudes in international markets, Le Costbucks can use EPG
model to decide which orientation is most suitable for the organisation. There are three
orientations provided in this model which include ethnocentric, polycentric and geocentric.
2.1 Ethnocentric
This orientation is used by companies for staffing employees in host countries by
sending their current employee to ensure that they effectively manage their operations.
This approach is used by companies in international expansion to ensure that they avoid any
discrepancies in their work (Michailova, Piekkari, Storgaard & Tienari, 2017). Organisations
can send their qualified and talented employees to foreign countries to ensure that the
operations are handled in an appropriate manner. This approach is most suitable for
companies that manufacture industrial products.
2.2 Polycentric
In this approach, companies did not send their current employees in host countries;
instead, they hire local employees to manage their operations. The objective of the
selection of this strategy is to reduce the costs of hiring since hiring employees in the host
country is a substantially cheaper option than compared to sending employees to another
country. This also eliminates cultural issues which are faced by the companies since local
employees are already familiar with cultural norms which lead to efficiency in the
operations of the company (Lakshman, Lakshman & Estay, 2017). This approach is most
suitable for companies that offer consumer goods to their customers.
2.3 Geocentric
In this approach, the companies focus on expanding their operations on a global
scale, and they required to hire talented employees to manage their operations. The
management focuses on hiring the most talented and skilled individuals to conduct their
business operations in international markets due to the complexity of the work (Plakhotnik,
Rocco, Collins & Landorf, 2015). The company selects employees regardless of their location,
and they are sent to the host country in order to handle the operations of the company. This

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is a global orientation approach which is most suitable for research and development
purposes.
2.4 Recommendation
For Le Costbucks, selection of polycentric orientation is the best option since it will
provide many benefits to the company. The cultural norms of France and China are different
which will make it difficult for French employees to settle in the Chinese market. They will
also find it difficult to deal and interact with local employees and customers since they are
not likely to be aware of their culture. The company has to provide cultural training to its
employees in order to eliminate conflict and teach them about the local cultural values still
it would be difficult for them to reach out to the local customers (Guo, Rammal & Dowling,
2016). On the other hand, if local employees are selected, then the company can save its
costs and time incurred in diversity training given to the employees. The local employees are
already familiar with the cultural factors based on which they can give suggestions to the
company regarding making changes in its products to make sure that meet the customer
demand (Liu, Yan, Phau, Perez & Teah, 2016). Selection of this approach will result in
reducing the costs of the company, and it will make it easier for the company to manage its
operations. Hofstede’s cultural dimension model provided that working long hours and
within the control of the top level management is normal in the culture of China which will
benefit Le Costbucks since its management will be able to effectively control employees in
China (Hofstede Insights, n.d.). It will become easier for the company to manage across
border without having to deal with issues such as cultural conflicts, discrimination, high
training costs and others. Therefore, polycentric orientation is the best option for Le
Costbucks when it comes to the expansion of its business in China.
Q3 Ethical Issues
Due to differences in cultural, social, economic and environmental factors, European
MNCs that establish their operations in China face many difficulties which adversely affect
their business operations. It is important that these companies effectively handle these
changes to ensure that they did not adversely affect the operations of the company
(Cumming, Hou & Lee, 2016). Following are various ethical issues which European MNCs are
likely to face while setting up in China.

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 Human Rights
Human rights are one of the key controversial topics in China which is related to the
issues of unfair labour standards adopted by companies in the supply chain that leads to
child labour, human trafficking, civil and political rights (Franceschini, 2014). This issue can
be identified by the example of Foxconn which manufactures smartphones for Apple. Due to
unfair labour practices, a large number of employees committed suicide in the factor. The
company had to put safety nets in the buildings to avoid employees from jumping off the
buildings (Watts, 2010). These factors should be taken into consideration by Le Costbucks as
well; the company should ensure that it is taking appropriate actions to protect human
rights.
 Terms and Conditions of employment
Long working hours, late nights, work on weekends and no holidays are common in the
working culture of China which most of the times companies in the terms and conditions of
the employment. They often took unfair advantage of these policies in order to exploit the
rights of their employees. In case any employee wanted to take any actions against these
unfair practices, then they misuse these terms and conditions to fire them from the
company (Fang & Lin, 2015). These issues are also faced by international companies that
operate in China since they also include these terms into the employment contract which
leads to violation of the rights of employees. Le Costbucks should make sure that its terms
and conditions of the employment agreement are not prepared by local employees and
they are checked thoroughly to eliminate any terms and conditions that might potentially
affect the rights of its employees.
 Corruption
Growing rate of corruption is a major issue in China which affects the business of local as
well as international corporations. Organisations find it difficult to conduct their operations
in the country without facing threats from people who have the authority to take actions
against them (Jiang & Nie, 2014). Bribery is a common problem in the country which affects
the operations of companies that operate in the country. A study conducted by TI Global
Corruption Barometer found that out of 1000 Chinese respondents, 46 percent have felt

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that they have faced some level of corruption in the country (TICT, 2017). Actions taken by
the government to address this issue have not been effective as this issue has not been
addressed yet. Therefore, European MNCs find it difficult to conduct their operations
smoothly without bribing officials and authority figures to get permissions for their
operations. Le Costbucks should also take measures to ensure that it did not engage in any
corrupt activities while dealing with authorities in order to avoid legal consequences.
 Migrant Workers
China has the largest population of migrant workers which is growing at a significant
rate, and it is raising many ethical concerns in the country. There are over 281 million
migrant workers in the country in 2017 which is more than one-third of its total working
population (WSJ, 2017). Most of these workers have little to no education, and they live in
extreme poverty which makes it easier for large corporations to take unfair advantage of
them. These companies hire them on cheap wages and treat them in an unfair manner
while conducting their business operations. Children of these workers also did not receive
educational facilities which mean they also have to live the same life as their parents (Tao,
Wong & Hui, 2014). The growing population of migrant workers has increased problems
relating to the availability of healthcare, food, water and sanitation facilities. There is lack of
housing facilities to make sure these workers have adequate housing facilities. Many major
international companies choose Chinese market to conduct their business operations in
order to get migrant workers in cheaper rates and exploit them. Therefore, European MNCs
have to ensure that they did not exploit the rights of migrant workers and they take
initiative to provide them with adequate facilities while hiring them (Swider, 2015).
Similarly, Le Costbucks should hire migrant workers to provide them with appropriate
facilities so that they are able to live a decent life. Initiatives to provide educational facilities
for children should also be implemented to ensure that they are able to improve their lives
and protect their employment rights in the country.

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Conclusion
Based on the above observations, it can be concluded that the HRM approach which
is adopted by Le Costbucks will be affected by the cultural difference between France and
China. These differences include acceptance of unequal distribution of power, masculinity
approach, individualism and indulgence which are identified using Hofstede’s cultural
dimensional framework. These differences affect the HRM approach adopted by the
company. Polycentric is the best orientation for Le Costbucks regarding staffing in China
since the company can reduce its costs, avoid cultural conflicts and understand the
preference of its customers if it chooses this orientation. Key ethical issues which are faced
by companies while establishing their operations in China include violation of human rights,
unfair terms and conditions of employment, corruption and growing number of migrant
workers.
Recommendations
These suggestions can assists Le Costbucks in addressing major ethical issues and
successfully expand its operations in China.
 Le Costbucks should introduce employee welfare, health and safety terms and
conditions in the employment contract to make sure that employee rights are not
breached and they have the right to take action against unfair practices.
 The company should focus on hiring migrant worker rather than local residences to
help the country dealing with the issue of migrant workers and provide them the
opportunity to receive equal education and growth opportunities.
 Le Costbucks should rely on the experience and knowledge of its employees in China
to make changes in its product offerings to make sure that they meet the demand of
local customers.

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