Overview
The People’s Republic of China is the most populous country in the world. The country is famously known as a country of etiquette and ceremonies. China is emerging as one of the major global economies of today. Such unique character of a strong sense of pride in history ands culture is enormously incorporated in their economy and business practices.
The guanxi, mian-zi, keqi and Confucianism guided the modern Chinese economy. The guanxi concept means a network of elaborate relationships or connections to promote trust and cooperation. The mian-zi or face denotes personal pride and the basis of individual’s reputation and social status. Further, the keqi is the concept of advocating thoughtfulness, courteousness and refined behaviour. The Chinese philosophy of Confucianism placed an emphasis to the elements of responsibility and obligation and its relationship.
In Chinese business culture, possession of right guanxi minimizes the difficulties and frustrations. Praises are regarded as a form of ‘giving face’ to earn respect and loyalty to aid negotiations. Moreover, the demonstration of humility and modesty is very crucial in dealing with Chinese business players. The philosophical beliefs of Confucius are still applied in order to preserve harmony and sustain collective good.[1]
The Business the Chinese are in
Economic reforms in China uprooted from the late 1980s. Historians began the ‘sprouts of modernization” through reconstruction and understanding of the Chinese marketing structure. The national market was identified as urban, rural and regional segments. It even extended to bulking and wholesaling from retailing. Reforms raised the issues of price formation, commercialization and property rights. The Chinese businessmen started to specialize the rights and responsibilities. Other business scholars focused on civil law, contracts and forms of business organizations.[2]
The Chinese business operations have changed over time. New perspectives include the role of the family, structure and strategy and the role of the government. The features of modern Chinese business are: small-scale with relatively simple organizational structure, close and overlapping ownership, centralized decision-making, personal and family networking and a high degree of strategic adaptability.
On the other hand, the business of China faces a lot of issues and challenges. The size and complex operations and the government involvement are seen as contributors to slower economic growth among others. The Chinese business firms are concern mainly on compartmentalization. The concept lacks vertical integration in various industries. The production and distribution are divided into different stages and units.
Other concerns are lineages, merchant guilds, joint-capital partnerships and large commercial firms. On the organizational and functional level, historians and economists listed different aspects of Chinese business concerns: flexibility of accounting, four-stage evolution of family firms, business rationality and transaction costs.[3]
Moreover, the monopolistic businessmen and commercial middlemen are integral parts of the business networks. The two concepts reflect the importance of government and business relations. They acted either as a manufacturer or financier but traders. Some economists viewed such as inappropriate.
Chinese businessmen have different interpretations of entrepreneurship. Siulun Wong studied the Shanghai entrepreneurs in Hong Kong. He discovered that there are two types of entrepreneurs in the Chinese business context: the Schumpeterian and the McClelandian types. The Schumpeterians are the risk-takers, experimenters and profit-maximizers. The McClellandian, on the other hand, works on the basis of steady rewards based on long-term competitions. [4]
The Chinese business enterprise operates according to family principles. Thus, the business history in China is a dorm of familial business institution. The common features of this enterprise are shareholding, hierarchical and centrifugally concentrated. Since, it has both advantages and disadvantages, scholars cannot identify if this system hinder or benefit the Chinese business.
The Chinese businessmen formed various organizations such as occupational groups, merchants’ guilds, native-place associations, coalitions and chamber of commerce. During the Qing dynasty, guilds played role in religious, political and economic aspects. Among these three, scholars found issues in their economic functions. The influence of the guilds ‘affected the economy in general and the market mechanism in particular’.[5]
Historiography viewed the business network of Chinese as particularistic and dysfunctional. Chinese businessmen emphasize the personal connection based on place of origin kinships and schooling. They cannot afford to sacrifice the xinyong.[6] In order to expand the business, the resort will be through institution of bao or guarantorship.
A Market-focused Business Transition
A clear understanding of the past economic practices, the present market status and the future business trends are vital to initiate the transition of and within the Chinese businesses. We already have a grasp of industry approaches and practices in the past in which some are still being utilized by the industries.
Today, the China is mainly concern with manufacturing and production, consumer goods, power and utilities, automotive, financial services and infrastructure and service industries.[7] The highly-urbanised Chinese economy relies more on investment. It is increasingly becoming export-oriented and the growth is increasingly being driven by capital-intensive, technologically-sophisticated production instead of labour-intensive manufacturers.
The immediate challenge will be labour scarcity, unemployment and upward pressures on wages and inflation. [8] As such, the China business industry must strategically prioritize. In lieu with this, the China can exploit the population density and the development zones: special economic zones, new and high-technology development zones, bonded zones and export processing zones as part of economic transition.
The transition must be supported by a strategic business plan. The vision must be long-term and must have a commercial proposition that is outwardly-focused. In addition, the main concern shall be the in-depth understanding of the market and the customers’ needs and desires. The business industry shall develop strategic intent based on prevailing market trends and deliver the benefits and not product features to customers. [9]
Since the China businesses are already familiarized with segments and units and compartments, they can divide the market-focused into different sub-groups to maximize the utilization of the financial strength. The market-driven focus in this approach will be group-specific, in effect.
The companies and organizations understanding of customer needs and the competitors will necessitate the data and input to make tactical decisions. Market focus is also concern with the overall dynamics in the marketplace and the impact of those forces in the business. [10]
The status of Chinese businesses today is internal and product-driven. They can identify improvements and opportunities for customers but they cannot afford to capitalize on opportunities. The Chinese businessmen must divert their attention into stable, strong and consistent growth through a market-focused perspective.
Such strategic intent must be placed on the leadership level. The nature of the business structure of China is far too complex – state-owned and collective. In a collective or family-based structure the capital is inwardly concentrated and they are commonly anxious to immediately capitalize to other venture. The tendency is the market intelligence will be paternalistically-approached and the systematic market research is being sacrificed.
The Chinese businesses must think like the market leaders in developing core competencies and establishing effective management. Further, a market-driven China will need labor mobility, a dynamic private sector[11] and a service market that better reflected demand in addressing the unemployment pressures.
The fundamental considerations would be risk-management and legal compliances specifically in the tightly-guarded sectors. In sum, the transition will never focus on big profits, political structure, lousy business plans and complex internal structures of the company but rather the service marketing, distribution, inventory management and retention of good staff as the secret of strong market position.[12] The China must continuously reorder industries, revamp political and military relationships, sustain the value chain, redefine strategic interests and revive local industries.[13]
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