Mcdonalds First Failure in China Case Study

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Guanxi is one of the powerful forces in chinese culture, literally means “Relationship”. The concept of Guanxi has its roots from the Confucianism which came into existence since 5th BC and became the culture of china. In confucianism the relationship is given the importance in the family or in the workplace or in the social life.

Guanxi express the relationship of one person to another or to one party to another. However, more importantly the term also express an obligation of one party to another build over time by the reciprocation of social exchanges and favors. If one has a Guanxi with another, one party will be quite to do a favor, act on another party's behalf, depending on the depth of the relationship, do anything necessary for the other party by establishing this type of relationship with someone the other party is implicitly agreeing also to be available to reciprocate when the need arises. Gifts are often used in Guanxi to establish or bring equilibrium to their relationship. if the favors are not paid back or reciprocated the reputation of the party will be damaged and the party will be less able to draw the guanxi help in the future.

In a society that lacks a rule-based legal tradition, and thus legal ways of redressing wrongs such as violations of business agreements, guanxi is an important mechanism for building long-term business relationships and getting business done in china. Regardless of business experiences in ones home country, in china it is the right Guanxi that makes all the difference in ensuring that business will be successful. With the right Guanxi even the legal rules of law can be bent.

Importance of Guanxi in doing business in china

The chinese culture is distinguished from the western culture in many ways, including how business is conducted. The chinese prefer to deal with people they know and trust. Even though these almost looks similar, but in reality the heavy reliance on relationship means that western...
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