Interaction between Business Strategy and the Use of Guanxi in China - Research Proposal Example

Interaction between Business Strategy and the Use of Guanxi in China ABSTRACT The research in the relationships in business in China has attracted interests from different stakeholders and therefore, there is a necessity to focus on the current as well as the past issues related to the topic. This research will serve as an evaluation of the guanxi relationships in China and its possible implications on businesses in relation to outcomes and it will focus on sustainability of it. The research will establish whether there are business related benefits in using the guanxi business strategy as well as establishing the different other business strategies used in the world. The guanxi business strategy will be measured according to the various aspects of business that can be influenced when it is implemented on individuals in the market. This research aims at collecting data that will be used to analyze the situation and give objective recommendations on the best business strategy to adopt in the whole issue for businesses to be sustainable. INTRODUCTION Background to Guanxi Guanxi is dated to very long in the history of the Chinese where there were many political and social upheavals in which people were killed and resources destroyed (Leung et al, 2011, p801). In those times, people were disintegrated and fought against each other as well as exploiting the weak to gain some properties from them and dominate them (Kang et al, 2007, p45). As a result guanxi was formed, which is a term that means a network through which people relate and help each other to secure favors as individual or in business and hence promote the wellbeing of each other. The Confucius codified the individual, family and societal ties, which specified the responsibilities of different people in their environment and laid the expectation of the society on different people to ensure they fulfill them. During the times when China face social and political instabilities, the relationships established were important in preventing the spread of injustices and wars among the members who related with each other (Langenberg, 2007, p33). The Chinese society is established in units of families, in which the members have a certain kind of relationship that could be defined by blood, neighborhood, friendship or involving classmates who shared a class in school. All the members in this family are very loyal to each other but on the contrary, they have similar level of distrust on the non-members who could be around them (Tan and Chee, 2005, p204). This means that in order to extend business favor to any person in the Chinese society, the first consideration is the ties a person has with the one who possesses it and is ready to give out (Lee, Reiche and Song, 2010, p164). The people who are members of this same family are connected together in relation to a system of reciprocity and equity and that helps them to treat each other well so that they can also receive particular favors from them (Jin, Cheng and Yunjie, 2009, p161). On the other hand, there are different consequences that are associated with disregard to the commitment to one’s family whereby the errant loses his or her social reputation and prestige, which is a very important thing in the relationship of the people with each other (Guan, 2011, p5). Business interactions in China are established on the bases of these ties and they contribute to decisions that a person takes in a transaction or a venture that can extend a certain favor to a person or to both (Ruehle, 2010, p9). Guanxi principles have permeated to the political and other social relations to disrupt laws of justice that are enacted to curb favoritism because personal judgment is the conviction that people have to enable them to have all they need (Luo, 1995, p248 and; Luo and Chen, 1997, p7). In this respect, loyalty to the family becomes a very important thing, more than the loyalty one has on the government or other institution of the society that has similar or contrasting demands (Hong, Gray and Kim, 2009, p817). Research Questions In order to establish the various aspects of the guanxi business strategies and inform the various things in this research, there are questions that will be the basis of the inquiry will be; 1. How are guanxi ties used for gaining competitive advantage as a business strategy in China? 2. What is the motivation for people to transfer private guanxi (or individual guanxi) into firm- level guanxi in order to improve the company performance? Answering the two questions will ensure that the research is able cover and elaborate different things about guanxi business strategy and the strategies through which businesses can used to conquer the market. Research Hypotheses The hypotheses of the research will be divided into two ways including the null and the alternate hypothesis which are the assumptions of the research as it explores the different areas of the research. The null research hypothesis states that the guanxi business strategy provides all the required business conditions for all the people and the alternate hypothesis will state that the guanxi business strategy is restrictive and does not provide the required business conditions. The scope of the research The research will be based on the study of the business strategy of guanxi in China where the businesses established under this principle operate. However, in order to understand different perspectives of the business in the world and other forms of business strategies, literatures will be used to inform businesses from a world perspective. This will focus on businesses established in China or out of China which do not use guanxi to operate in their different markets within their environment and exploit distant environment. Research Objectives The research in this study seek to establish the various dynamics of the guanxi business strategy and how it can be implemented with ease and provide the various advantages thereof. The objective of the research in this proposal are; 1. To determine the advantages of using guanxi business strategy for a busness venture in the world 2. To evaluate the reason why people are motivated to transfer their individual guanxi into the business and in doing business in the different people in the China and beyond 3. To determine the factors that make guanxi business strategy to be presentable to the people in China and beyond 4. To discover the different other business strategies which are applicable to the people in different environments in the world Significance of the Research In order to discover the different circumstances in the market, there is a need to carry out research that to give empirical information and reliable information about it. Through the proposed research, people will be able to have a valid explanation for the different business strategies that are applicable and which are used by the people in different parts of the world. The information will not only be important to the Chinese firms which use the guanxi business strategy but also to the different organizations within the world as it will elaborate the various issues in establishment of business. The information will explain the different circumstances in the business that could favor competitive advantage and measure them against the parameter of the guanxi business strategies. Research Subject The study focus on explaining the guanxi business strategy which is predominantly used in China because of the societal dynamics that exist between the people in the area. The strategy of study is based on the different ways of relationship that characterize Chinese society that is formed into families that determine the various areas of interaction of people. The research revolves around the way people are able to transact business around certain circles in place of free choice they could make to trade with any partner available in the market because people are likely to be termed disloyal to the family (Fock and Woo, 1998, p37). The guanxi strategy has also dominated the market in China with very many areas of the society facing the impact of it and being influenced by its choices. For example, guanxi strategies on the political and social areas have dominated the law with their interpretation of rules and regulations on the bases of the relationships that exist between the members of the definitive families. This does influence business choices because individuals are required to should a level of equity band reciprocity toward other members of the family through favoring them in the time of engaging a transaction between them (Glenn, 2011, p17-21). LITERATURE REVIEW Background to guanxi business strategy Guanxi principles in China are the basis on which the society is based and they dictate the various things that are done within the society by different people (Chen, 1995, p11-13). Guanxi dictate the people who will get what as people struggle to attain their loyalty to the families that exist in all the aspects of life i.e. social, political and economic areas (Philippe and Pierre-Xavier, 2005, p105). The principles of reciprocity and equity are well established in the families such that other organizations and institutions take the second priority in extending favors (Liu and Pearson, 2011, p9-11). Through the different systems of interactions within the environment of guanxi, people identify themselves with their families to avoid the ridicule and being perceived as traitor for deviating from their roles toward other fellow members (Fang, 2009, p23). Because of this, businesses have decided to pick their own people in conducting transactions among each other (Millington, Eberhardt and Wilkinson, 2006, p507). Effects on business performance of Guanxi Business Strategy Although with little empirical research having been conducted in the area of business, various things have indicated that guanxi, as a business strategy has profound positive business advantages to an organizations. This is because guanxi does not only influence the social behaviors of the Chinese but also the business choices these people make in different business ventures (Arora, 2012, p4-6). Through the guanxibu, a derivative of the word guanxi, which imply specially connected business networks, the companies that are not well established in the field of marketing sell their products. This happens because the companies in the same family provide preferential treatment to each other and cause the small un-established companies to have some special competitive advantage over the large dominant companies in a specific region (Mei-mei and Karen, 2008, p344). As a strategy of business, the guanxi is used to determine the business’s sales in marketing and credit liberalization, which helps to the increased growth of business. This results in improving the rate of performance of a company as the company is its early age of establishment in the market (.Windsperger, Kocsis and Rosta, 2009, p48). However, the problems guanxi have resulted in the possibilities of firm liquidation or spin-offs, which are resultant from the different networks, that are not strong enough to address the challenge of the market (Alon, 2003, p37). Companies operating using this strategy of business have failed to produce quality standards since they rely on their members to buy their products in place of quality products from other companies of non-members (Chen et al, 2011, p3323). This has reduced to a very degree of productivity of the people in the international market because they compromise the quality and lose the favor of the potential customers (Jonathan and Alex, 2002, p127, and ; Zinzius, 2004, p97-98). Another problem that has emanated from this kind of business strategy is that institutions face high uncertainties in business where cost of products has gone high (Nie, 2007, p121). This causes the institutions to internalize their transactions to reduce the impact of losses in the business (Chen, Chen and Huang, 2013, p179). Alternative to Guanxi Business Strategy Following the different defects of the guanxi, there is a need to develop an alternative strategy that will ensure sustainability of business transactions between different partners and which will help to increase quality of products through competitiveness (Aimin and Ping, 2008, p78). An alternative strategy to the guanxi is the Western Marketing and management strategy, which, although it bases its establishment on networking, emphasizes on the accessibility of products of other members of other families which causes competitiveness (Brennan and Wilson, 2010, p.51, and; Judy and Junwei, 2012, p23). The competitiveness witnessed in this situation causes different parties in the transactions to improve on the quality of the products their commit to the buyers, which makes the institutions very sustainable (Chung, 2006, p473). NETHODOLOGY Research model based on the above literature review of the subject was developed to explore the effectiveness of the guanxi business strategies and the interactions involved in Chinese market businesses. The method utilized primary and secondary research methods where the primary research was based on door-to-door interviews with administration of questionnaires to respondents (Mazzocchi, 2008, p26). The secondary research methods of data collection involved analysis of research of books and other literature of previously done research to ensure that all the evaluated the guanxi and the western marketing business strategies (Trzesniewski et al, 2011, p87). The research model and the development of hypotheses will attempts to study the effectiveness of guanxi business strategy in China and the technique and methodology was based on Martyn Denscombe’s views mentioned in his popular book “The Good Research Guide: For Small-scale Market research Projects”. Rationale The methodology proposed for this proposal is a combination of primary and secondary research because the data from these approaches would be helpful when involved in formulating a theory and weighing against it with the practical information gathered through primary research (Remler and Van, 2011, p118). In order to get reliable data, the method of collecting data will be through door-to-door personal interview which produces better results as compared to mail interview, mail survey and telephone interview because it; 1. Increases the participation rate of the respondents 2. Reduces non-response error by the interviewer who may not receive the questionnaire in good time 3. Provides a more representative sample of the population of the people who use the strategy Limitations Even with the used of the different modern materials in collection of the data for the study, there are likely to be limitations in giving the result of the analysis of that data. 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