Doing Business in China - Term Paper Example

?Doing Business in China Doing business in a foreign country is not easy. It requires familiarity with its culture, economy, and business practices. Familiarity with culture ensures that the capitalist will serve products that do not clash with the beliefs and values of the people. Knowing business trends allows careful planning and budget management. Moreover, knowledge of business practices is essential to identify challenges beforehand and establish good relationship with partners and competitors. When doing business in China, familiarity with culture, economy, and business practices is just a must. It is a challenge that every businessman should take if they want to succeed. This paper provides information on how to do business in China. Relying on current literature for ideas and examples, it gives recommendations on how to deal with the Chinese and establish business in China. According to Hamilton and Jhang (2012; p.4), “China is one of the most dynamic markets in the world in which change is the only constant.” By saying this, Hamilton and Jhan point out two things about China. The first one is dynamism, and the second is change. These two things suggest the main challenge in doing business in China. Dynamism is evident in the country’s culture, political makeup and religious beliefs while change is constant and rapid in its economy. Therefore, knowing aspects of dynamism and change will give businessmen an edge in their Chinese ventures. Culture Dynamism can be found in every aspect of the culture. Importantly, every foreign capitalist should be aware of the Chinese culture in order to act according to it. Otherwise one will lose all the chance to even start business in China. Culture is a very important aspect in doing business. There are practices that should be observed and non-observance would mean ignorance and lead to failure. The most important value that the Chinese has when doing business is guanxi. This term means goodwill. Establishing goodwill or friendship is the first step towards a good business partnership. For the Chinese, this is achieved by paying a visit, dining out, having a drink or doing some fun together. Several sessions of establishing guanxi is important before formal business talks start. Chee and West (2007) claims that in doing business with the Chinese, especially with the northerners, one must exercise, “eat first, talk later.” This is the same throughout China but the southerners have become more Westernized in doing business, especially Shanghai people. Nevertheless, the culture of guanxi is respected throughout the Mainland. Establishing guanxi is like developing brotherhood in the West. Along with it is showing genuine sincerity with Chinese partners. According to Hamilton and Jhang (2012), genuine sincerity goes a long way in China but not all businessmen realize its importance. Non-Chinese people think of Chinese as corrupt, possibly because of the practice of guanxi but they should understand that guanxi is not similar to bribery. Many Chinese do not accept bribes for jobs they ought to do. For instance, one taxpayer gave a significant amount of money to a banker in gratitude for the fast transactions they had with the bank. When the banker saw it, he did not feel the need for the gift and credited the amount to the company’s account. This act illustrates that bribery is not the way to do business in China. Similarly, foreign visitors are not obliged to give tips to the Chinese. Tips in hotels and restaurants are welcome but they are not expected. The Chinese people appreciate tips even in small amounts but they will do their job even without tips. Greeting them, exchanging stories and smiles are more valued, as it goes with business. One thing that is valued much in China is presence. According to Hamilton and Jhang (2012), visiting often will create goodwill among the Chinese. They cite that Hank Paulson, former CEO of Goldman Sachs, spent 70 visits in China, thus making him well-regarded in the country. Another man named Jim Rogers, an investor, travelled China thrice, had his two daughters learn Mandarin and made a big amount of money there. These examples illustrate that goodwill through presence is actually what counts most among the Chinese. Political Makeup It is a common knowledge that China is a socialist society that practices Communism. This political makeup affects business in China. Being communist, the government owns a lot of companies and businesses in China. Comprising such, it has the highest power to control or regulate laws that benefit it. It also has the power to reject competitors, making it difficult to enter the scene without proper channelling and connections. Communism implies censorship, which businesses have to submit to if they want to stay in China. This is one aspect that Google.com missed when they went operational in China. They had a problem with government censorship and almost lost their presence in the country in 2002 as the Chinese firewall blocked their sites. Users had to be directed to the Hong Kong site, which resulted in great loss due to slow traffic, ending up in the inability to connect or access the search engine. Hamilton and Jhang (2012) report that Google had to rethink of its way of doing business in China and dealing with government censorship. It was torn for it wanted to exercise its own vision, which the Chinese government did not welcome. To deal with the problem, it bought a USD 5M shares in Baidu, a local web company in order to re-establish its presence. Later on, Google was allowed to hold offices in China and although it still has problems with self-censorship, it has improved its presence and sold its Baidu shares for USD 60M in 2006. Just like other businesses in China, Google struggled hard at the start because it failed to establish guanxi with the Chinese. The greatest error was that it entered China on its own, without paying regard to Chinese culture and politics. Conversely, when it had its share with Baidu, that was when it grew and really established its presence. To think of it, the government could be teaching Google a way to do business properly. Religious issues Religion is another factor that has to be addressed in China. The three most common religions are Buddhism, Taoism and Confucianism. Although the Chinese are not religious—they neither need to worship their god on Sundays nor fear they are going to hell for an evil deed—they follow philosophies of their religions. Confucian beliefs are held with high respect. They usually teach people to value family relationships, respect for ancestors, elders and husbands, goodwill and honesty among friends and brothers. According to Brahm (2004), Confucian values emphasize on interpersonal relations while Western ones give importance to the achievement of goal. Therefore, when making negotiations, one should prepare to give in and spend significant amount of time and patience. They should be prepared to embrace the Chinese culture, eat their food and drink their tea, if they want to win or start a negotiation. Brahm (2004) also suggests that those wanting to do business in China should follow the great teachings of the religions. In his book, he describes how businessmen should practice the Sun Tzu way, which is coupled with patience and respect for culture and laws. These are almost similar with Confucian beliefs that give respect to traditional values and ancestry. Following Confucian values, which emphasize responsibility of family members, especially the men, many Chinese would speak against homosexuality. According to Lau (2010), until the 90s, the concept of homosexuality is considered a mental illness. Nevertheless, the Chinese society, especially those in the south, reports developments and acceptance of homosexuality nowadays. This then implies changes in the Chinese market. Economic and Other Issues Economic issues are usually permeated with culture and politics. Likewise, it is greatly affected by the population issues in China. Commonly, the issue of One-Child Policy in China will always be regarded as a factor affecting the economy in the country. Changes in the Chinese market are shaped basically by its population. Therefore, when doing business, one should look into the One-Child Policy to confront changes in the market. According to UN’s population projection of China (cited in Chee & West, 2007), come 2025, the country will have a problem with the bulge of the elderly. This will thus change the Chinese market, which the organization assumes will be poorer and less eager consumers. Nevertheless, market trends rapidly change and the needs of the people continually change alongside technology so although the market will change its behavior and preferences, it will likely continue to consume products that fit their lifestyle. Therefore, understanding the market and responding to its needs will be best for businessmen. The business trend in China includes the popularity of wholly foreign-owned enterprises or WFOEs. These are the opposite of joint ventures or JVs, which have long been the usual practice for foreign businesses. Nowadays, WFOEs who are too strong to beat the odds exist especially among Western businesses. WFOEs manage to have their own rules and standards because they have proven themselves in other markets. However, Ambler, Witzel and Xi (2009) advise that those who are just starting business or are not as strong as WFOEs should enter China through JVs. Just like in any place, doing business in China requires “commitment, time, resources and action” (Hamilton & Jhang, 2012; 8). Commitment entails understanding the culture of China, which basically means establishing guanxi and a good working relationship with one’s business partners. Time means devoting time to know the people and waiting to act at the right time, which is also decided by the Chinese counterparts. As authors agree, a lot of patience is needed to be in good terms with the Chinese so anyone doing business with them should have a great amount of time and ability to wait. In particular, one cannot act without agreement and a “yes” in the Chinese could barely mean the start of negotiation, and not the approval to start business. Resources could mean giving everything one can, including favors that are not relevant to the business (i.e., letting one’s child study in the U.S., giving a car as a gift, etc.). Finally, it requires action, presence and communication, which cannot be delegated but borne by the partners themselves. Establishing business in China can be very difficult. Nevertheless, thinking about the massive population and big market it could bring is rewarding in itself. Above all, the main focus of every business should be to be dynamic and innovative, as the Chinese market is full of dynamism and change. References Ambler, T. Witzel, M. & Xi, C. (2009). Doing business in China. Oxon: Routledge. Brahm, L. (2004). Doing business in China. Massachusetts: Tuttle Publishing. Chee, H. & West, C. (2007). Myths about doing business of China. Hampshire: Palgrave Macmillan. Hamilton, S. & Jhang, J. (2012). Doing business with China: avoiding the pitfalls. Hampshire: Palgrave Macmillan. Lau, S. (2010). Homosexuality in China. Retrieved December 1, 2013 from http://www.uschina.usc.edu/w_usci/showarticle.aspx?articleID=14740&AspxAutoDetectCookieSupport=1 Read More