Before the optimistic avalanche of products and information descended from China, to each world corner, one has turned this geographic region in the new focus of business opportunity searching. Like a “gold fever” all world business men fix his look before the new protagonist of the worldwide economic geo, order, some wait to adjust to the conditions imposed by this new trend, others prefer making part of her taking part in the economy directly someway of the Asian’s giant. This I constitute a revision bibliographic on a fundamental topic for whom decide to make incursions of the economy Chinese ago: The Guanxi, a word in language mandarin that her represents way of creating long-term in Pebble and that has been indentified as the key gives birth to surpass cultural and social to the huge “Kingdom market entry barriers relations “C entral.” From the perspective of a Latin American student in China, the author tries the reader to offer an idea on the socioeconomic implications that the Guanxi has this part of the hemisphere.
KEYWORDS: Guanxi; personal relations; reciprocity; face; culture of business in China; build confidence; mutual respect; effective communication; joint you desire.
The avalanche of products and good news coming from China, spreading in every corner of the world has made this geographical region in the new target for business opportunities. As a “gold fever” business men all over the world keep an eye on the protagonist on the world’s new geo-economic order. To react move its make to tendency new the for wait them of Some; be to it of, giant’s economy Asiatic the in how some interfering part to prefer others some. This article i to biographical review about to fundamental topic for whom you decide into China’s economy entry to: Guanxi to process in the represents which word mandarin the building long term relations in China, has been identify as a key fact to overcome social and cultural entry barriers to the huge market of the “Middle kingdom”. From the perspective of a Latin American student in China, the author tries to give an idea to the reader about the socio economic implications that the Guanxi has the hemisphere of part this in.
KEY WORDS: Guanxi; personal relations; reciprocity, face, Chinese business culture; build trust; mutual respect; effective communication; joint you desire.
“China is the biggest expansion opportunity during the century XXI stops any company.”
Kai Fu Lee, Manager of the Research Laboratory and Development of Microsoft Asia.
In the three last decades, since Deng Xiao Ping opened the doors of Pebble towards a market economy, companies of every kind have made of this region his objective to develop his global strategy of business progressively. Charles Brown, President of Du Pont China, assures that “China is one of the few countries wherein the economy does not show deceleration any signals nowadays. He is important about the future by his growth rate strategicly. The fast transformation of this huge country towards a market economy and the statistics of the size and his economy growth, does not allow that the foreign investors face other side and, thereby, the Straight Foreign Inversion (IED) already made in Pebble during 2002 had surpassed that of United States.
However, China presents barriers of entry and challenges for the success in the objectives of the foreign investors between whom he tells the difficulty to set business relations long-term. The Doctor Gary Dirks, President of the British Petroleum China, states: “If he had to approach me in a managed alone message managers who came to China, that would emphasize the very important relations sound. The business bases on people, relations between people and the confidence that generates one between them. China is still more this way than United States and Europe. Therefore, he becomes necessary introduce Guanxi term in the glossaries of management and management in the “new axis.”
Guanxi?) The Chinese word that defines the mutual, critical benefit relation concept to achieve the success in the “Central Kingdom,” is literal translation of China, called “Zhong guo?”). In China he does not exist as pure relation of business, in change, slightly, to be successful one must set formal relations with people. The term Guanxi refers to the delicate art of building and nourishing these personal links. In the old school of business in China, this term has a negative, favouritism and cronicismo connotation; however, the same word also groups the deep and lasting relations that only can be built along the time, and is then like the term Guanxi has connotations positive.
The Chinese idiosyncrasy is still deep-rooted to the traditional and millenary values of Confucius, that include, the respect, the moral commitment and personal in the family and in his predecessors, the appearance care and the importance of the network of the personal relations between others. It is like that as the Guanxi maintains one on four different principles that are in his turn: The confidence (concerning and knowledge of others), the favorecimiento (loyalty and duty), the dependence (harmony, reciprocity and mutual benefit) and the adaptability (patience and cultivismo.)
In mandarin, “guan” means “door” and “xi” means “links.” He can define as a door or a connection between two people created by a mutual duty brings in them semanticly. The Guanxi exists between relatives by a blood link between fellows of class or of work by the shared, between partners or experiences known in the business by the made attendances.
In fact, the sentence “personal connections” without justice he describes Guanxi complex and deep concept. While the americans give a big importance to the relations between institutions and the information that these generate (networking,) the Chineses social capital descended from his group of friends, relatives and close associates give that same importance to the relations with people and to that. Though the Guanxi role goes in rub of the modern theory of business management and of the process of “westernization” of some practical managerial pebbles, he has still a social important force so, so the person who owns the best Guanxi, wins.
We end the definition of Guanxi with the Chinese popular following proverb: “When I do you the difficult things, I make them difficult give birth my also. When I make the things easy for you, I make them easy give birth my also.
The GUANXI RELEVANCE
In a study made by Fernández and Underwood, supported in interviews to twenty big managers from multinationals with presence in China, he identified to the Guanxi as one of the most important aspects gives birth to do business in China. Of an interesting way they found that between the five main personal features on which a manager must count to be successful in China, four of them seemed to be of contradictory natures. The tall executives interviewed they advised to be humble and strong at the same time, be patient and function with speed. The fifth feature, that is of absolute obligatory nature, is capacity of building Guanxi.
For the foreign manager working in China, building confidence elements is still more urgent than for the local managers. Kai Fu Lee, Manager of the Research Laboratory and Development of Microsoft Asia, notices on certain paranoia that exists in the Chinese collective with regarding to the foreigners that make incursions into China, who is maintained in historical roots. He tells more notable in the 19th century during the dynasty Qing, to the European attacks that gave one of a way when several European countries introduced to her forces the opium in China as pretext gives birth balance the commercial balance between Europe and Pebble, that was, as nowadays, in favour of that “Central” big “Empire.” For that one then, “very weak government era to reject these actions” mentions Lee. However, “a Chinese general had the courage of incinerating the existing opium his city and as consequence the Britishes invaded this city and murdered many of his inhabitants, besides demanding Chinese government the delivery from part of some cities to certain European powers. This ended in the “Boxer” in which eight European nations invaded China and burnt the imperial palace, causing so a big shame for the Chinese nation revolt that had to give strategic zones of his territory and pay huge quantities of money. Since then, the general concept is that the foreigners are people who is necessary to handle with a lot of care. This phobia still to the countries and companies foreign persists, though in last twenty years he has come decreasing dramatically. It is then I eat, the Chinese enterpriser will, want first to set personal relations with foreign potential partners and subsequently, set the trade relationships: “Demonstrate us that his intentions are sincere, and we will show reciprocity then.”
Additionally, “the Chinese culture is built confidentially, relations and mutual respect. Building this confidence takes time and effort, but a lot of ways of ending with the reached confidence, as show respect to refuse make already received favors in consideration of them, not follow the protocols, condescend, unite and insist in controversies exist.
Knowing the protocols and forging reliable relations sound steps that that one can not obviate in the process of the Guanxi development in a foreign company want make incursions into China. Regarding to the differences in the protocols between western and Chinese managers having bill the following aspects to achieve a lasting relation with a future partner is very important:
Mutual confidence: Given the cultural differences of language and of managerial orientation, both parts must be very careful in the process of confidence avoiding mistrusts and resentments between partners construction.
A good communication: Introducing the term is necessary “face” or “mianzi?” In mandarin, that determines the image of an individual in a social group. The process of communication differs so in objectives as in way, the way he introduces himself in the following table:
Table 1. Comparison in the process of business communication between Westerners and Chinese.
It is necessary to stress that the “face” loss brings the shame and straight dishonour to the people and indirectly to his families and friends, by what losing the aforementioned “appearance” is considered an aggressive, doomed act for those who have provoked the corresponding desacreditación morally.
Reciprocity: A good Guanxi depends also on a strict reciprocity system, or what the Chineses call the hui bao? ) In mandarin. This concept is not of strictly immediate character. In the American reciprocity concept if a part makes a concession one he waits the return on the table that same day by the counterpart. There is not hurry, in China, the agrarian rates take time. The favors are always remembered in most of the cases and vomits, though I am not at that same moment. This reciprocity period to the opinion is the cornerstone in the personal relation strengthening, by far because confidence in which the favor will always be reminded implies. Being ignorant the reciprocity in China is not only a bad education question, it is immoral. If a person has been catalogued as someone who forgets the received favors and lacks to the rectitude and the loyalty, his future in him has seen ruined business and in any other kind of social interchange.
By the relevance that government has the Chinese economy development, he is critical create relations with governmental entities to all the hierarchical levels absolutely. This means look for the government employees’ consultancy, though this is not really necessary. Finding the way of being them very close to is important for knowing his perspectives and needs, and of this way the company can design strategies for strengthening this relations. Motorota, during the SARS crisis, made several supportive meetings where his team of high management advised governmental tall employees of the affected provinces. As a result of these rapprochements the idea offering to government employees a Doctorate program emerged for Executives in I associate with University of Hong Kong, surpassing so MBA programs for Executives who offered one in Chinese universities to this kind of governmental “officers.” With this program an only opportunity for strengthening the existing relations between this company and government was created. Motorola is the company of teams of communications number one in China nowadays and some people in the company manage to consider that this company is almost Chinese.
The previous is a show of that the Chineses see with good eyes to the signatures that contribute to the his nation success and that not only note to obtain part of his vast market potential. The multinationals that have demonstrated a commitment in giving him a hand to China long-term usually have been compensated reaching new markets and acceding to valuable human resources enormously: “The friends will be beneficiary of profitable rewards, while the other ones will join in the forgetfulness. He is of general knowledge them favorecimentos that Chinese government has made to Coca Cola on Pepsi, to Volkswagen Toyota exceeds, to Sony Toshiba exceeds, to Kodak Fuji exceeds and to Motorota Ericsson exceeds “states Lee.
In the beginning of the decade of them eighty, Coca Cola was obliged to assume joint model you desire with local partners as entry strategy China by government’s restrictive politics foreign companies who wanted to make incursions into this new market. Coca Cola invited to CITIC (International Corporation of Inversions of China,) Swire Pacific and to the Group Kerry to associate in a new glue bottleneck company. This strategy was the approach to the Chinese market plus western and with the most impressive network of contacts and Guanxi sight until that moment undoubtedly. CITIC a governmental conglomerate of inversions is Chineses founded and by Deng Xiao Ping directed in his beginnings; the Group Kerry, of the Malayo Robert K enterpriser’s property uok, who counted on significant inversions in China and who kept relations very close with some of the leaders of the central government and Swire Pacific was Coca Cola partner in Hong Kong (region that in s then about part of the United Kindom) and that also had excellent relations Chinese central government. With these partners, one positioned Coca Cola actively in China stops the future.
The first efforts centered on the construction of the plant of concentrate in the Special exclusive economic zone of Shenzhen thinking about minimizing his participation in the construction of the bottleneck plants in the country rest, because these require high levels of capital concentrating then in the production of that I eliminate and in the distribution. His local partners took charge of the approval for the new plant construction of bottleneck that would mean the expansion the Chinese territory rest. Though the success of Coca Cola in Chinese depended on the success in his partners’ managements, the multinational controlled the joint handling desire graces which most of the property owned: 60/40.
In Pepsi’s case, this company that brought in to the Chinese market only a year Coca Cola later, but his entry strategy was ignorant the importance of the relations with the Chinese tall employees, his participation in his joint desires what represented him limitations and delays in the his operation management was minority in China, in the conformation of his network of distribution, in which Coca Cola took him the leading strengthening his own force of distribution in the main ones more specifically Chinese cities. The consequences were not made wait, Coca Cola handles the 65% of his chain of distribution in China directly and Pepsi only controls the 20% nowadays. Coca Cola has a geographic influence of the 90% in urban areas, whereas Pespi only arrives at 60%. Coca Cola sales triple the sales of Pepsi with the extenuating one of that the Coca Cola drink was not well accepted by the public for which one supported and strengthened his marks Sprite and Fanta. The number of bottler plants of Coca Cola arrives at 23, their of Pepsi, and of which doubles three produce local glue marks because his products did not achieve a fast growth that allowed them to use all his installed production capacity.
Some have argued that the personal relation development is enough to achieve the success in the business in China; however, they are wrong. The Guanxi can be very useful but by if alone it is not enough. The government employees change positions, they do not comply with the fiancé by incapacity or they change opinion simply. There is not better substitute for the development of a business than a good understanding of the market and a competitive product. Some multinational managers assure that the true challenge, for the companies who want to do to a part of this huge market, is generated by the governmental reforms orientated to assume a market economy.
By other part working of government’s hand is fundamental; the government employees still retain capacity of affecting competitiveness and a lot of companies’ profitability, still if this is excellent. Know that employees could support with more vehemence the process with his company and as developing useful relations with them is a part maybe integral stops the business strategy success. To that except some of the signature executives they should do the necessary efforts for building effective relations.
The Guanxi had a role more critical during previous generation, when China suffered of limitations in his resources, information and global business influence. For example, getting a new phone line was able to delay several months unless some friend of the manager in the telephonic company helped to reduce this process to some days. In fact, most of them interviewed stressed that the Guanxi character has come one transforming into the measurement in which more multinationals have arrived China and the managerial environment is reaching international standards. Unilever en China CEO, Alan Brown, points out that managing to practice illegal practices to build personal relations with government employees is not necessary: “The Guanxi in China is more important than in other countries because government is related to the economic business directly and business and in a tallest grade with the foreign inversion. Therefore, if it is very important, but that does not require doing commitments exceed the codes conduct set by the multinationals.
Guy MacLeod, President of Airbus China, describes to the Guanxi like the method to accelerate the governmental processes mainly: “You need to have a close contact with government for that they are able know it either, he stops accelerate the process handled by them approval. An element is key in my responsibilities. Anything that we are going to do, a group of ministers always exists who must do them lobby.
The second aspect on the importance of the Guanxi introduces himself in the cases in which the regulations are not clear or the conditions are not very stable. Jung Tang, President of Microsoft China, explains that in China laws are written in “opaque” terms letting spaces for his interpretation on the part of each government employee”,” usually: “Chinese laws are not specific in detail. If an Officer (employee) favours you, his company he will obtain a best concept. It is by that that in the Guanxi China is important super “and adds: “For example, if a company with poor relations with government must wait six months to obtain a permission, other company who counts on a good Guanxi can obtain the same permission in two weeks.”
For the foreign managers assimilating the changes in the business culture is not always an easy task. Mike Graves, Manager of American Apparel in China, reported one to that cultural impact so: “Robert O’Reilly, our auditor arrived to my shouting that our Chinese partner spends the money as if it was water. But both gave us bill that all those expenses paid by us deducted one by his results gradually. The Chinese ritual of sharing food and alcohol, consolidating the Guanxi, is as powerful in the shutter of contracts and business than he has turned into one of our hidden assets. I fear that we can not achieve the current results if we are devoted to trim costs and see off workers only the way Ohio asks us to do.
For the western managers one exists you overwhelmed pressure to keep with every clearness the limits between family, friends and business. In China, that same pressure functions to eliminate this limits.
GUANXI VS. CORRUPTION
The Guanxi on which a person counts represents for him a social coin in the measurement in which with this interchanging favors and attendances between two people who do not meet by means of a friend in common is possible. Friends’ network turns into a powerful source of influence to achieve objectives that would be difficult to achieve in other circumstances this way. After a light reading one could finish that the Guanxi can define like a kind of corruption, simply but in China it is not perceived as little ethical how I could be assumed by a western manager. For the Chineses doing business with friends with people of whom they are confident, is important, with whom are able building deep and close relations, is like that I eat the Chinese managers his companies under parameters of friendship and personal relations operate more than under the general parameters for business competitiveness.
None of the tall managers interviewed by Fernández and Underwood denied the existence of corruption in China. In fact everybody they showed the need of working for avoiding that his employees used methods commonly used by his competitors, such as bribes and commercial interchanges illicit for personal favors hard.
The corruption is an aspect with which the foreign manager in China has to battle. The listing on the Index of Perception of Corruption that makes International Transparency places China in the place 71 between 145 countries, and his situation could deteriorate if he has one bill the negative connotation that has the Guanxi the western managers. For example, giving a customer, invite him costly presents to eat and to drink alcohol in the best restaurant of the city is a penalized practice in some American Union states. The nepotism and the cronicismo are traditional practices in local companies; the links familiar and of friendships between academic fellows more influence in the managerial handling in Chinese than in any other country has. To confront this situation the western managers have applied conduct codes wherein employees in all the levels understand it you practice business acceptable and unacceptable by the signature foreigner.
In other occasions, the Guanxi is a tool used by local competitors to attack multinational foreigners usually. January 2005 furniture’s Danish company rejected a request by US$ 240,000 of leather furniture to a Chinese supplier by short quality in the raw material. Several months after the event, a command issued by one local cut froze bank bills of the Danish company by 3 million of RMB, equivalent to US$ 240,000, plus a seizure by 4 million of RMB additional in assets thanks to a demand boarding on the part of the old supplier. The case meets still unsolved thanks to the good Guanxi with which the claimant in them counts local cuts.
Other similar case one presented 22 September 2006, when a Chinese governmental office ordered to remove of the market the SK II cream arguing that contained trails of neodium and chromo above him allowed, whereby a high risk of suffering one eczema and allergic dermatitis if his use was continuous existed. The decision included the shutter of 96 points of sale. The case was national news and the damage to his mark positioning was devastating.
In a poll made by the popular portal Chinese SINA, in which twenty thousand people took part, the 80% expressed his intention of not getting back to consume mark products. Manufactured and SK II distributed in Pebble by Procter & Gamble arranged the reimbursement to the consumers that presented at least the 75% of the content in the points of sale and he made new studies in which he proved that the levels of neodium and chromo were by very under them you limit set by the FDA (Drug Agency & Food ) jacket. Subsequently, by means of his group of lawyers he achieved a rectification on the part of the Chinese governmental entity on the side effects of his product. The SK II is in the market on the way back and the points of sale restarted his activities.
At present, & G P tries to improve the image of his product in Pebble with advisory campaigns and is worried about that this event does not affect the his other important mark image as Gillete; Rejoice; Olay; Pampers and Head & Shoulders. The magazine “The Economist” considered that in this case the local competitors pressured to his contacts on government to discredit this multinational that competes as a whole, that count on an important recognition for mark and that counts on resources with that his local competitors can hardly provide.
In the philosophy and old metaphysics Chinese, plus precisely the fundamental notions of the Taoism, the relations between the “yin” (the passive, dark and feminine force) and the “yang” involve (the current, clear and masculine force) that one complements and one contrasts each other simultaneously. These can not be separated and they must be considered comprehensively. The work of the companies who try to make incursions into the Chinese market they have to take this description from the yang yin to give it a balance to his business. The “yin,” that representing her internal aspects could companies in which trace objectives and goals for which develop plans and teams specific of work. The external, more extrovert and spontaneous character aspects, would be represented by the “yang” in the processes of building the personal relations necessary for finding and/ or enlarge distribution channels, set joint you desire, accede to the public politicians’ benefits, and so on These two aspects must be worked on parallel with similar persistence and dedication as comprehensive part of a same strategy, the correct combination brings in Guanxi and the western managerial practices are fundamental to manage to make incursions into the attractive mas market of the planet.
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Antonio Hernando Mesa Torres
MBA of Technological University of China Wuhan, Specialist in I Market of University EAN and Companies’ of University of them Administrator Andes. Teacher of area of business spirit, plants of University EAN in that Bogota, Colombia.