Question

The Chinese society revolves around something called Guanxi. Guanxi loosely translates as personal connections, relationships or social networks. It implies trust and mutual obligations between parties, and it operates on personal, familial, social, business and political levels. Having good, bad or no guanxi impacts one’s influence and ability to get things done The Chinese culture is much different than our own western culture and not understanding how to deal with Chinese people can hinder a business. Because of this, it makes good public relations with the locals extremely important for a successful business.

Because BASD Pharmaceuticals is only looking to penetrate China with one product right now, a strategic partnership makes the most sense. BASD could enter the Chinese market relatively quickly while having a local presence for Chinese citizens to do business with and trust as one of their own. This would allow BASD to do a lot of research and in-field testing for future endeavors in the Chinese market as well. A strategic partner would also help limit the liabilities if something were to go wrong with the partnership and provides an easier exit than a wholly own subsidy would offer. BASD will be able to infiltrate the Chinese market with their calcium channel blockers through the partnership of a local Chinese company, one who would already be well known in the community and who already has relationships built with customers.

please explain in further detail

Answer 1

"Guanxi" (Pronounced gwon-she) is a Chinese Term meaning "networks' or "connections" that opens doors for new business and facilitate deals. A person who has a lot f quanxi will be in a better position to generate business than someone who lacks it.

It is particularly true in China that wheels of business are lubricated with guanxi. Guanxi is perhaps best understood by the old axiom, "its not what you know,but who you know that's important."

Guanxi in the west comes in various forms-

• Alumni Network
• Fraternity or sorority houses.
• Past and present places of employment
• Clubs, Churches
• family and Friends

This is can be explained further with the help of following illustration.

A mid tier US Industrial fittings manufacturer, tired of 5 yrs of mediocre results in China, relocated a senior director from its midwest headquarters to Guangzhou. Run properly, the company knew its Chinese operations could drive its topline and dramatically reduce costs through more strategic sourcing and manufacturing.

The senior direction, whom we’ll call Bill, knew the assignment could accelerate his career, but having made frequent business trips to China, knew it would not be an easy one and that he had much to learn about local business practices. To better prepare, he took Mandarin classes and a cross-cultural business course.

A year later, under Bill’s leadership, the company’s Chinese business had taken a step backwards. The distributors he signed weren’t moving the needle, his customer relationships were cordial but didn’t increase sales – and his local Chinese team didn’t find him particularly effective.

Bill’s failure is one of the main reasons why many Western firms are shifting to local leadership or are re-thinking their approach to China.

To understand where Bill went wrong, and what he should have done differently, we need to take three steps back in time: hundreds of years ago into Chinese history; 30 days before Bill’s relocation.

China’s history has been marked – contrary to the popular belief of an autocratic, centralized state – by intense political upheaval, natural disasters, economic hardship and decentralized rule. Traditional Chinese society was predominantly rural and built around the family. Confucianism, the dominant cultural belief, emphasized the interdependence of social connections. Business and societal relationships relied more heavily on networks of trust and mutual obligations than on strong, codified laws.

Thirty days before relocating to China, Bill studied this in a two-day cross-cultural course: Keys to Doing Business in China. The speaker, using powerful anecdotes, focused on a concept that embodied this dynamic in Chinese society: Guanxi.

Bill’s trainer likened guanxi to a figurative gate erected in the Chinese business world. Those behind it help each other. Those on the outside can’t get in, unless they have guanxi with someone on the inside.

Bill was fascinated with the analogy, and with guanxi. This was the first sign his problems were just starting.

Bill become determined to pay close attention to cross-cultural nuances, specifically guanxi. He signed distributors that appeared to have good guanxi with key customers. He selected consultants that emphasized their guanxi with government agencies and local regulatory authorities. He worked to establish guanxi with his Chinese employees.

Paying attention to guanxi was not a bad move by Bill – but it was his singular focus on it that sunk him.