To increase profitability, multinational companies must continue to expand their businesses internationally in seeking more opportunities in developing economies. China, as one of the most significant developing markets, offers the greatest potential to western creative consultancies seeking to expand their businesses. However, considering the cultural barriers and market differences, …
To increase profitability, multinational companies must continue to expand their businesses internationally in seeking more opportunities in developing economies. China, as one of the most significant developing markets, offers the greatest potential to western creative consultancies seeking to expand their businesses. However, considering the cultural barriers and market differences, western companies must go through what can sometimes be a challenging business remodeling process in order to localise to the Chinese market.
At the completion of my eight months of field research in Shanghai, I concluded that social harmony is more important than any other factor in Chinese sociality. Guanxi, the Chinese term referring to the subtle interpretation of relationships, has a significant impact on western business models when relocating to China. Guanxi applies to different relations in different scenarios. For example, Guanxi can be involved in the recruitment system, the government relationship, the client relationship and outsourcing relationships. While the social network and its power affect communication methods and customer strategies. Guanxi links all Chinese people together and is the most important value system in Chinese society. Ignoring the power of Guanxi will result in what will be seen as inappropriate business strategies and may lead to unprofitable business models for the Chinese market.
Leveraging Guanxi as part of new business models and engaging with local, social power will result in gaining operational benefits to business. My research conclusion offers a successful business model innovation case study presented as a mapping of my findings. The initial goal of this project is to localise a multinational creative consultancy into the Chinese market and to reach commercial success for both the parent organisation and the local branch. This mapping manages the level of market engagement (change and risk) and the responses on the level of model change (innovation solution). In this example, an American business took the opportunity to extend into the Chinese market. It went through an integration process with Chinese culture at which point the model is turned into a ‘mixture stage’. This then ends with Guanxi as the most successful business strategy to localise the business model.
Traditional Chinese culture relates to harmony, peace, humility and the balance of concepts across all disciplines. Chinese people tend to avoid argument and risk, and act moderately with others. Therefore, Chinese people have a notion of the common good and avoid being different or unique. The Chinese education system teaches discipline at all levels, ensuring that everyone adheres to rules and guidance. Chinese people tend to follow instructions and they are easily managed. To some extent Chinese people are afraid to be different. Considering the power of Chinese relationships and networks, a two-fold communication strategy can develop social standards for communication with external customers while maintaining a western open and creative environment within the organization. Leveraging Guanxi, as part of a company strategy can build bridges with both local customers and employees and provides a workable solution for commercial success.