To succeed in China, it is not enough for companies to be market-oriented and willing to learn. They must also adapt their operations to the Chinese relationship orientation, a new study shows.
KNOWLEDGE @BI: Business in China
China looks like an attractive market for many western companies, both because of its size and financial growth. Many have tried to gain entry, but not everyone has succeeded.
China is well known for its emphasis on relationships in business. “Guanxi” has become an international byword describing Chinese people’s orientation towards relationships in all important aspects of life generally, and in business life particularly. Guanxi is Chinese for “relationship” or “connection”. Many researches have attempted to find out how this special type of orientation towards relationships impacts management subjects in China.
Associate Professor Jan Ketil Arnulf at BI Norwegian Business School has conducted a study in cooperation with researchers Xina Yuan at Xiamen University in China, SangYong Kim at Korea University Business School and Wanwen Dai at Nanjing University in China, to find out to what extent companies need to pay attention to this Chinese penchant to act according to relationships.
The researchers wanted to know how important it is for foreign companies to establish, develop and maintain relationships in ways that change common marketing practices in order to reach Chinese markets.
On their way into China
With his research colleagues, Arnulf has conducted a survey among 296 foreign companies that have invested in order to gain entry to the Chinese market. The companies were recruited from an economic development area in Wuqing, located between Beijing and Tianjin.
The results are now presented in an article in the Baltic Journal of Management.
The study shows that the companies’ marketing efforts need to be specially adapted to the Chinese market. We already know that market orientation is not enough to succeed in new markets; it needs to be combined with the ability and the will to learn. With a combination of market orientation and learning orientation, companies will go far. But not as far as China, however.
“Our study shows that for companies operating in China, an orientation towards Guanxi is just as important as a learning orientation. Traditional international knowledge about marketing may not be sufficient in China,” Jan Ketil Arnulf says.
This means that the company can do everything according to the book, but still fail if it is not aware of how to build relationships that support its activities.
A strategic look at relationships
For companies to succeed in China, they must make relationships, Guanxi, a key part of their marketing strategy. According to the researchers, this is involves a lot more than doing relationship marketing.
“The company’s strategy development must dovetail with the development of relationships in and around the company,” recommends Jan Ketil Arnulf, dean of an MBA programme which BI Norwegian Business School offers jointly with Fudan University in Shanghai, China.
Companies can choose to develop relationships on their own. This may be expensive and can take a long time, sometimes too long. As an alternative, companies can seek to work with partners who already have the necessary relationships in place. This is not without its risks, however, since such partners represent a significant resource in the collaboration.
Although the markets in China are becoming more mature, the need for relationships is no less important. Rather to the contrary, this study shows.
Yuan, X., Kim, S. Y., Dai, W., & Arnulf, J. K. (2014). How FIEs may sustain competitive advantage in China: Adapting marketing strategy by the use of Guanxi. Baltic Journal of Management, 9(1), 22-46.
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