Five Challenges Facing Entry Into the Asian Markets

Topics: Chinese culture, Overseas Chinese, Song Dynasty Pages: 12 (4011 words) Published: March 20, 2008
Five challenges facing entry into the Asian markets


The following part relates to relationships between people. It focuses on the differences in how Western and Asian business people approach relationships, how these relationships are developed and how various cultures have an effect on such relationships. The issues discussed are mainly threefold and are divided into: (1) Guanxi relationships; (2) Individualism, Collectivism and Confucianism; and (3) Westerners in China.

1: Guanxi Relationships

Having watched a fare share of Hollywood movies one is bound to have noticed the different methods of doing business in Asia. In more than one Hollywood movie a group of American businessmen try to set up a deal with some Chinese businessmen. Before any deal can take place the businessmen first have to meet with the Chinese businessmen and do what seems like anything BUT negotiate a deal. They go to a karaoke bar, out dinner, get drunk, play golf, and exchange gifts. This practice is commonly referred to as developing guanxi (a connection or relationship) and is a fundamental issue in the Chinese business culture. Understanding the way in which to develop guanxi, and eventually guanxiwang (a web of guanxi networks), is vital for anyone thinking about doing business in China.

Developing guanxi is the process by which two persons, or parties, do something for each other (a sort of favour) which develops a bond between the two, and a feeling of mutual obligation. Eventually, a series of such exchanges may lead to the formation of a guanxi based relationship. Yamagishi and Yamagishi (1994) believe that trust is not the main issue in guanxi but rather the assurance that one has created a feeling of mutual obligation towards the other party. In fact, guanxi doesn't even have to involve two people that like each other, as long as both parties continue to follow through with the obligations involved in the relationship.3

One thing to keep in mind when developing a guanxi relationship is that guanxi is much more than two parties simply exchanging favours or gifts. The ultimate goal is not to get a favour for a favour but to establish a long term relationship with another party. As described by Luo (2000), ‘The relationship itself must be presented as primary; the gift exchanges, useful though they may be, are treated only as secondary'. The risk involved in misunderstanding this relationship is that it can lead to the formation of a "meat and wine friendship" which may sound fine to a western business man, but is in fact a Chinese metaphor for mistrust.4


In order to form guanxi there has to be a ‘commonality'4 which can be any connection between two persons such as a place of birth, school, or work). Being in someone's family automatically gives a person some measure of guanxi but not working in the same organization.4 Commonality is therefore necessary but not sufficient to form guanxi. Some guanxi is even transferable. An example would be if A is interested in forming a relationship with C. The problem is that A does not have any known commonality with C and can therefore not start the development of guanxi. On the other hand, if B has a guanxi relationship with both A and C, then B can actually act as an intermediary, and introduce A and C –thereby forming a commonality between the two. According to Chon-Phung (1999) ‘a person who brings a buyer and seller together is more than a middleman –he vouches for the reputation of the one he introduces.4 Thus, strangers doing business become strangers no more.' Sometimes however, an intermediary is not needed. This is possible if both parties anticipate a future relationship and therefore believe that a commonality has already been established.4

Renqing and Mianzi

An unpaid obligation as a result of a guanxi relationship, such as a favour not yet returned causing the feeling of being obliged towards another party, is referred...
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