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Slide 1: How to enter the Chinese market successfully!!! Written by; Sean Loucas (Business Relations Director for TLC) Target Learning & Consulting Group. Beijing, China Email: Loucas@execs.com In my past 10 years of doing business in China I have personally known countless entrepreneurs, start up companies and investors alike who have gone into the Chinese market for one purpose…Get a piece of the financial pie! Unfortunately, the majority of companies or reps who have arrived well funded, chest inflated, and chins up in the sky sooner or later all find themselves in the same situation. (Scratching their head, on a return home flight, with their pockets turned inside out), or lingering around the local Asian bars spending the rest of their years trying to make some sense of it all. To be honest…back in 2000, I was one of these victims of the Asian business paradox. But why?... What is the main obstacle that most every western business person fails to overcome in their journey to success in China? Why does their successful western business modal get eaten alive the second they arrive in the orient land of golden opportunities? How is it possible to fail with a proven success plan used back home countless times? These are the most common questions asked by western business people time and time again while banging their head on the great wall of china commerce. By the time they ask themselves these questions it’s most likely too late for them to reenter the massive Asian casino called China. Let’s take a quick look at some fundamental necessary questions a business must ask before entering the Chinese market. Is your understanding of ancient Chinese history and culture deep enough, and how is that properly carried over in the way Chinese do business today? Are your contacts older generation Chinese or younger?
Slide 2: Do you have someone on their side that you are sure will look out for your best interests? If so what is their motive? Friendship? Political? Monetary? or Immigration? How do you deal with transparency issues that can affect your company’s performance? Developing a company branch successfully in China truly requires three things. Heaven-Earth and People (Ancient Chinese thinking for success) 1. Heaven refers to; Luck, or good timing. 2. Earth refers to; Necessities such as; money, location, experience, manpower. 3. People refers to; Guanxi or “Relationships” both internally & externally. • “Guanxi” or “Relationships” (High Importance!) Now, the meaning of guanxi translates into a much deeper meaning of the word “relationship”, and takes a long time to properly cultivate and apply. At its most basic, guanxi describes a personal connection between two people in which one is able to prevail upon another to perform a favor or service, or be prevailed upon. The two people need not be of equal social status. Guanxi can also be used to describe a network of contacts, which an individual can call upon when something needs to be done, and through which he or she can exert influence on behalf of another. In addition, guanxi can describe a state of general understanding between two people: "he/she is aware of my wants/needs and will take them into account when deciding her/his course of future actions which concern or could concern me without any specific discussion or request Guanxi refers to the benefits gained from social connections and usually extends from extended family, school friends, workmates and members of common clubs or organizations. It is custom for Chinese people to cultivate an intricate web of guanxi relationships, which may expand in a huge number of directions, and includes lifelong relationships. Staying in contact with members of your network is not necessary to bind reciprocal obligations. Reciprocal favors are the key factor to maintaining one’s guanxi web, failure to reciprocate is considered an
Slide 3: unforgivable offense. The more you ask of someone the more you owe them. Guanxi can perpetuate a never ending cycle of favors. The term is not generally used to describe relationships within a family, although guanxi obligations can sometimes be described in terms of an extended family. The term is also not generally used to describe relationships that fall within other well-defined societal norms (e.g. boss–worker, teacher–student, friendship). The relationships formed by guanxi are personal and not transferable. When a guanxi network violates bureaucratic norms, it can lead to corruption, and guanxi can also form the basis of patron–client relations. In East Asian societies the boundary between business and social lives can sometimes be ambiguous as people tend to rely heavily on their closer relations and friends. This can result in nepotism in the work force, as it is common for authoritative figures to draw from family and close ties to fill employment opportunities; instead of assessing talent and suitability such as is the norm in Western societies. This practice often prevents the most suitably qualified person being employed for the position. Although guanxi is associated with the traditional Confucianist doctrine, guanxi ties were strongly developed during the Mao regime (1949–1976), particularly due to the work-unit (danwei) system, which led many workers to construct strong social networks within their units, thus improving their ability to enjoy important resources and privileges. Distinguishing between guanxi and guanxixue (the 'art' or 'knowledge' of guanxi), as the former is considered in the modern Chinese society as common interpersonal ties that reflect the Chinese nature, while the latter represents the manipulation and corruption brought about a selfish and sometimes illegal utilization of guanxi. Although many Chinese lament the strong importance of guanxi in their culture, they still consider guanxi as a Chinese element that should not be denied. So, in closing, You may already have Heaven & Earth on your side. But, how much guanxi do you have and how effective will it be in your journey to success depends on the people you choose to support your vision….