Le Costbucks' HRM in China: Cultural Dimensions & Ethical Issues

This report evaluates the cultural differences between France and China using Hofstede's cultural dimensions to advise Le Costbucks on HRM strategies for its expansion into the Chinese market. It identifies key differences in individualism, uncertainty avoidance, and indulgence, suggesting a polycentric staffing approach to leverage local talent. The report also addresses ethical issues such as migrant worker management, employment terms, and corruption. Ultimately, it recommends that Le Costbucks adopt a polycentric orientation and carefully consider ethical implications for successful operations in China. Desklib offers a wealth of resources, including similar solved assignments and past papers, to support students in their academic pursuits.

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IHRM
Le Costbucks

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Executive Summary
The aim of this report is to evaluate the cultural difference between France and
China to understand their impact on HRM approach adopted by Le Costbucks while setting
up its operations in the Chinese market. Hofstede’s cultural dimensions theory is used in this
report to identify key differences between both countries which provided that they are
major different in areas such as individualism, uncertainty avoidance and indulgence. The
company has to take these factors into consideration while implementing HRM policies.
Ethnocentric, polycentric and geocentric orientations are evaluated in this report to suggest
Le Costbucks that it should select polycentric orientation which will make it easier for the
company to expand its operations in China. Major ethical issues which European MNC
should consider while setting up in China include management of migrant workers, terms
and conditions of employment and corruption. Lastly, a conclusion is drawn, and
recommendations are given for Le Costbucks regarding the expansion of its operations in
China.

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Table of Contents
1. Introduction........................................................................................................................3
2. Cultural Differences............................................................................................................3
Hofstede’s Cultural Dimensions.............................................................................................3
3. Staffing Attitude..................................................................................................................7
Ethnocentric...........................................................................................................................7
Polycentric..............................................................................................................................7
Geocentric..............................................................................................................................7
Recommendation for Le Costbucks.......................................................................................8
4. Ethical Issues.......................................................................................................................9
5. Conclusion.........................................................................................................................11
6. Recommendations............................................................................................................11
7. References........................................................................................................................12

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1. Introduction
Customer preferences and choices are affected by cultural aspects which make it
important for companies to evaluate these factors before expanding their operations. The
management also has to take into consideration cultural factors while hiring employees to
retain them for a longer period of time (Hwang & Seo, 2016). Discrimination based on
individual differences resulted in hindering the performance of employees as it creates a
hostile working environment; therefore, the management has to learn about cultural factors
while managing across border. The objective of this report is to advice Le Costbucks
regarding HR consideration for establishing their business in China by understanding cultural
differences between France and China. This report will use Hofstede’s Cultural Dimension
theory to evaluate key cultural difference between France and China and what is their
significance in relation to the HRM approach. This report will evaluate whether the
orientation of the company should be ethnocentric, polycentric or geocentric based on key
reasons. Lastly, the key ethical issues which are relevant to be evaluated by a European
MNC setting up in China will be analysed.
2. Cultural Differences
Hofstede’s Cultural Dimensions
There are a wide range of factors that differentiate Chinese culture from French
culture which affects the business of companies such as Le Costbucks; lack of understanding
of these cultural factors can harm the business operations of companies which highlights
the importance of evaluation of cultural differences. Hofstede’s cultural dimensions theory
is referred to a framework which was developed by Geert Hofstede that can be used as a
cross-cultural communication tool (Mazanec, Crotts, Gursoy & Lu, 2015). Companies can
understand the effect of a society’s culture on the values of its members and their
behaviour through six dimensions given in this framework. These dimensions include power
distance index (PDI), individualism vs. collectivism (IDV), masculinity vs. femininity (MAS),
uncertainty avoidance index (UAI), long term vs. short-term orientation and Indulgence vs.
Restraint (IVR) (Minkov & Hofstede, 2012). These factors have a significant impact on HRM
approach adopted by companies.

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Power Distance Index
This dimension provides that individuals in all societies are not equal when it comes
to expressing towards inequalities. This dimension defines the extent up to which less
powerful members will be willing to accept the unequal distribution of power (Hofstede,
2013). France has scored 68 in this index which is fairly high (Hofstede Insights, 2019). In the
country, children are raised to become emotionally dependent, and this dependency is
transferred from teacher to superiors. Thus, a fair degree of inequality is accepted in French
culture. Power is centralised based on geographic factors and among companies and the
government. China scored higher than France (80) because power inequality is acceptable
among people in the country (Hofstede, 2019).
The culture fosters the subordinate-superior relationship which tends to be
polarised, and subordination did not have any defence against power abuse by superiors.
Thus, acceptance of power inequality is common among both nations; however, the key
difference is the level of acceptance which is higher in Chian than France which is necessary
to be taken into consideration by companies while adopting HRM policies (Xu-Priour, Truong
& Klink, 2014). The management of Le Costbucks has to focus on ensuring that employees
look up to the senior level management and they should guide them in order to achieve
common organisational goals.
Individualism
This dimension evaluates the degree of interdependence which is maintained in
society among its members. A high score reflects weak interpersonal connection between
individuals whereas a low score indicates loyalty among the group and they are more likely
to take responsibility for actions of one another (Rinne, Steel & Fairweather, 2012). France
scored 71 because children are emotionally independent in relation to the group which they
belong. A person is supposed to take care of oneself. People in France are less obsessed
than compared to other EU countries still family relations act as glue that joins people
together. On the other hand, China scores 20 which is considerably low because it has a
highly collectivist culture in which people act based on the interest of groups rather than
themselves (Hofstede Insights, 2019).

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People live in closer in-groups such as families who receive preferential treatment.
The commitment of employees towards the organisation is low; however, it is not
necessarily the case with people in the organisation. It is a major difference between the
culture of France and China which companies have to take into consideration in order to
retain talented staff members. The management has to build a strong relationship with
employees in China to retain them for a longer period whereas it is not the case in France
(Stankiewicz & Moczulska, 2012). The HRM approach in China should focus on building
trustful relationships with their employees, and the management should engage in their
personal lives in order to retain them in the workplace.
Masculinity
As per this dimension, the societies based on masculinity prefer material rewards,
heroism, assertiveness and achievement when it comes to the accomplishment of targets.
On the contrary, countries those have femininity culture focuses on caring quality of life,
caring for weak and modesty (Arrindell et al., 2013). France has a somewhat feminine
culture as it scored 43 in this dimension. Based on this culture, facilities such as 35-hour
working week, welfare system, focus on the quality of life and five weeks of holidays is
given. Although in this culture, the upper class is feminine whereas the working class is
masculine that is a unique characteristic which is not found in other countries. China scored
66 as it is a masculine society that is success oriented and driven.
It is common in its culture that people sacrifice their family and leisure in order to
give priority to their work. All class of people work late at night, and most of them even
work on holidays and weekends to meet their targets (Kwon, 2012). It shows major
difference between France and China’s HRM approach as employees in France expects to be
treated with welfare options. They expect to only work for specific hours in order to
maintain a balance between their professional and personal life. In China, employees did
not expect such benefits, and they prioritised their work above their personal life.
Uncertainty Avoidance
This dimension defines the extent up to which people in society did not prefer
ambiguity and uncertainty. A low score indicates that people are more relaxed, open and

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inclusive in the country (Shah, 2012). On the opposite side, a high score provides that
people prefer predictability in life. France has scored substantially high in this index at 86
which shows that French people did not like surprises and they plan thoroughly before
making any actions (Hofstede Insight, 2019). China scored a low score of 30 which shows
that they are flexible and they are comfortable with ambiguity. It shows that a major
difference in the HRM approach of both nations is that French employees did not prefer any
changes in policies without prior notice whereas Chinese employees embrace uncertainty.
Long Term Orientation
A culture with long term orientation focuses on the search for virtue and modesty
whereas a culture with short term orientation inclined towards the establishment of
absolute truth (Venaik, Zhu & Brewer, 2013). France score high in this dimension (63) which
makes the country pragmatic and they believe that truth depends on the situation, context
and time. Chine scored higher than France (87) which highlights a very pragmatic culture
(Hofstede Insight, 2019). The difference between both nations is the level of pragmatic
culture as Chinese people show a higher ability to adopt traditional based on change in
conditions. Thus, the HRM approach in France can be flexible that can change with time;
however, the management should maintain a balance whereas it is not the case in China.
Indulgence
A high IVR score encourages free gratification of emotions and drives of people
whereas a low score focuses on suppression of gratification (Borker, 2012). France scored in
the middle (48) which shows that there is a combination of indulgence versus restraint. On
the other hand, China scored low in this dimension (24) which shows that the societies are
restrained and they did not focus on leisure time and control the gratification of their
desires (Hofstede Insight, 2019). Thus, the HRM approach in France can focus on increasing
the contribution of employees in the decision making whereas it is not the case with China
since the employees are more likely to restrain their emotions rather than freely express
them to the management.

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3. Staffing Attitude
Based on the cultural differences, the HRM factors which are necessary to be evaluated
by the management of Le Costbucks are discussed above. While expanding its business in
China, the management of Le Costbucks can rely on EPG model which is an international
model that includes three dimensions which include ethnocentric, polycentric and
geocentric.
Ethnocentric
Ethnocentric is referred to a staffing policy in which companies send employees from
their domestic country to host countries in order to manage their operations. This is a
suitable approach for companies in situations where companies sent their employees to
establish a new plant by using the new system (Hartshorn, Kaznatcheev & Shultz, 2013).
Since the staff members of the company are from the home country, the company can send
experienced employees which increase the control of the management on an international
level.
Polycentric
Polycentric is used by companies as a policy for hiring and promoting employees
who are citizens of host countries in which they have expanded their operations. This is a
suitable approach for companies that wanted to reduce their hiring costs. This policy also
makes it easier for the management to deal with cultural factors since employees did not
have to face challenges relating to local culture (Nagendra & Ostrom, 2012). In this strategy,
communication also remains smooth between operations.
Geocentric
Geocentric staffing approach assists companies that expand their operations in
international markets while adopting a transnational orientation. This approach is most
suitable for companies when they need the best personnel to work in their subsidiaries in
order to successfully run their operations (Keller & Lewis, 2016). In this approach,
employees are selected regardless of where they come from and this strategy assists in
ensuring that the company is able to select and sent best employees in order to expand its
operations in the international market.

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Recommendation for Le Costbucks
In the case of Le Costbucks, selection of polycentric policy is the most suitable option
which will assist the company in expanding its operations in the Chinese market. This theory
is based on political orientation which provides that Le Costbucks should hire local
employees while it establishes its operations in the Chinese market. The strategic focus of
this approach is based on host country oriented in which Le Costbucks can rely on effective
marketing approach in order to increase its customer base. This is a suitable approach which
is used by companies that operate in consumer goods industries such as McDonalds,
Starbucks, Costa and others (Nagendra & Ostrom, 2012). Similarly, Le Costbucks will be able
to reduce its overall costs incurred in hiring and selection of employees for its operations.
This approach will provide a strategic edge to Le Costbucks since the company will not have
to implement policies in order to ensure that its employees manage with the local culture. It
is one of the key advantages of selecting polycentric approach. French employees will face
difficulties while adjusting to the Chinese culture which could potentially reduce the
performance of the company while expanding its operations in the Chinese market.
However, the company can address this issue by hiring local employees who are already
familiar with the local culture. Based on Hofstede’s cultural dimensions theory, Chinese
employees did not mind unequal distribution of power, and they prefer to be directed by
the top level management (Hofstede Insights, 2019). Le Costbucks can benefit from this
cultural factor since it will become easier for the company to hire local employees who work
dedicatedly under the supervision of the top level management. While attracting and hiring
employees for the job, Le Costbucks can use its positive brand image due to its unique
stance on corporate social responsibility (CSR). Based on its positive brand reputation, the
company will be able to hire talented employees who will work dedicatedly to achieve
common goals. This strategy will also enable the company to change its products offerings
based on preferences of Chinese customers since the local employees can provide crucial
information regarding what customers prefer and it will also ensure that the company did
not violate any of its cultural values (Lawton, McGuire & Walzenbach, 2017). Therefore,
polycentric orientation is the most suitable choice for Le Costbucks.

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4. Ethical Issues
While expanding their operations in international markets, it is important that
companies take into consideration ethical issues to ensure that they implement adequate
policies to address them without hindering cultural values. Following are various ethical
issues which European MNC such as Le Costbucks should take into consideration while
setting up in China.
Migrant Workers
Unhappy migrant workers are a major problem in China which is proliferating due to
a number of factors. These workers face challenges such as lack of equal educational
opportunities for children and inhumane treatment in factories due to which the number of
strikes and protests are increasing in the country. The voluntary migration of workers in
China is largest in human history as there are over 287 million rural migrant workers in the
country in 2017 which is over one-third of the entire working population (CLB, 2019). This
issue has increased problems relating to housing, healthcare and education in big countries
(DW, 2012). International companies that expand their operations in China also have to deal
with these issues as well, and they have to ensure that they implement ethical policies to
deal with these issues. The CSR approach of Le Costbucks should include policies to handle
this issue based on which the company should only hire migrant workers in its stores in
China to provide adequate welfare facilities. The company should implement policies to
provide equal educational facilities for their children to ensure that they receive equal
development opportunities. It will create a positive brand image of Le Costbucks as well
which will also assist in the expansion of business operations of the company.
Terms and conditions of employment
Since the culture of China accepts the unequal distribution of power and employees
prioritised their work above personal life, it becomes easier for companies to exploit the
rights of workers. They include unethical terms and conditions in their employment contract
in order to take unfair advantage of them. Most of the times, workers are not able to raise
their voice against inhumane behaviour which they face in companies (Ou et al., 2015). It is
a major ethical issue which must be addressed by Le Costbucks by implement policies that

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are targeted towards eliminating discrimination among employees and promoting their
welfare. The terms and conditions of employment should recognise the rights of employees
to demand equal treatment and receive adequate facilities relating to health and safety. Le
Costbucks should also work with employees to understand their issues and take actions to
eliminate them in order to sustain its growth in the Chinese market.
Corruption
Corruption in China is a major issue due to abuse of political power by the members
of the Chinese Community Party that hold the majority of power in the country. High level
of corruption creates obstacles for companies that operate their business in the country
since authorities take bribes in order to work accordingly (Wang & You, 2012). International
companies that manage their operations in the country find it difficult to manage their
business accordingly due to corruption. In the past six years, around 50 high-ranking
officials have been arrested for corruption in the country. International companies should
take strict actions against corruption to eliminate this issue. They should not engage in any
practices relating to corruption, and they should avoid bribing authorities to conduct their
operations. They should also spread awareness if they face any challenges to ensure that
these factors did not affect their operations.

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5. Conclusion
In conclusion, there are many cultural differences between France and China which are
necessary to be taken into consideration by Le Costbucks while establishing its operations in
China. By using Hofstede’s cultural dimensions theory, the key cultural differences such as
individualism, uncertainty avoidance and indulgence are evaluated to understand how they
affect HRM approaches. Based on EPG model, selection of polycentric orientation is a
suitable option for Le Costbucks since it will make it easier for the company to understand
cultural differences, reduce costs and effectively control its operations. Key ethical issues
which are faced by European MNC setting up in China include migrant workers, terms and
conditions of employment and corruption which makes it challenging for them to sustain
their operations.
6. Recommendations
Following recommendations can assist Le Costbucks in successful expanding its
operations in the country.
 The company should evaluate political, economic and social factors before
expanding its operations to make sure it is familiar with current and future
challenges that affect the performance of the business.
 The company should rely on effective CSR approach to conduct its operations in an
ethical manner by maintaining a balance between the interests of its stakeholders
and ensuring that it avoids legal consequences.

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