Forget your MBA: Think Chinese
China Business Weekly, (2004-03-17 14:18 2004)Abstract
China's rapidly-growing economy abounds with great business potential,
but doing business in China can be an adventure for Western executives,
offering new possibilities, discoveries and amazement. Yet, what
constitutes a challenging road may be a surprisingly fulfilling educational
journey for the daring Western executive. Marcene Marcoux PhD, a
cultural anthropologist, president and senior consultant of Great
Wall Consultants Ltd, views the keys to business success in China,
and describes how they may be different from any executives had imagined
when they depart for the Middle Kingdom. In a series of articles,
Marcoux offers her opinions, and provides her explanations about
the daunting challenges Western executives face within China's diversified
economic sectors.
There is a pressing call for advice, strategies, and leading-edge
thinking about China for Western executives wanting to master Chinese
markets. As the world's fourth largest economy and with a 1.3-billion
consumer market, China remains today's major economic challenge.
With its more than 5,000 years of civilization, 4,000 years of written
history, powerful dynasties like the Han, Tang, Song, Ming, and finally
the Qing, and with cities like the imperial Beijing and financial
powerhouse Shanghai, China is now poised to dominate the world economy.
Western executives and firms setting up businesses in China and those
leading international business divisions urgently need to acquire
the know-how, winning style, and breakthrough thinking appropriate
for the Middle Kingdom. To do that, adopting new thinking, innovative
strategies, and a more adventuresome attitude is required. It is
part of what I call "the New China Paradigm." At the same time, Western
executives must abandon old, outdated, though still used, traditional
business practices.
We'll examine four major obstacles international executives face in
China as they hamhandedly cling to old business rules and rely on
yesterday's practices.
The first problem occurs when Western companies even today send managers
into China based on horse-and-buggy ideas of how they should work.
Too often China-based training of executives is dated, unrealistic,
and ethnocentric. Far too many executives arrive not even knowing
a thing about the language, customs, or history - each aspect central
for success in the Middle Kingdom.
Too many executives speak only one language and know how to deal well
within their own culture. Executives from Maine to California, from
Washington D. C. to the state of Oregon, Americans, for example,
choose to travel, socialize and work within the contours of their
own culture. That magnifies their ethnocentricity, and their profound
lack of understanding of the diversity and differences within other
cultures.
Mastering one currency, one language, and one history is not enough.
Being satisfied knowing only American culture and conversing only
in English, for example, will never do in China.
Too often, Western ideals are emphasized and over-valued, leading
to the false belief in a universal standard, even if the so-called
universal criteria stem from only one culture. When the Western way
is heralded as the best and only way, arrogance too often replaces
perspective. As a consequence, Western companies can be tone-deaf
to the challenges that exist in global communication, cross-cultural
negotiations, and Chinese business styles.
Clearly, China is neither simple nor uniform, but a kaleidoscope of
different markets. It is geographically, linguistically and regionally
diverse. It is neither one seamless, integrated market, nor one unified
business world.
Consider the daunting challenge Western executives face with China's
thirteen diverse markets.
There is the formal northern Beijing and Tianjin, its more savvy east
coast Shanghai, the risk-taking, rule-breaking east Fujian coast,
and adventuresome southern Guangzhou and Hainan provinces. Then there
is also Inner Mongolia, Xinjiang Uygur, and Tibet autonomous regions.
In other words, China is vast and complex, and Western executives
must know enough about all these diverse regions: the various histories,
205 living languages, 56 different ethnic minorities, contrasting
customs, and different business styles. This is crucial, given the
regional requirements essential to most large infrastructure and
joint ventures projects. Indeed, Western business success depends
on mastering China's diversity.
Contracts in rail, locomotives, subways, buses and airports must meet
local guidelines, as well as national standards. This requires major
Western contractors to work co-operatively with local Chinese executives,
provincial and municipal political leaders, and ministers. Twenty
of China's 34 cities with populations exceeding 1 million have either
begun planning or building new metro lines. China's State investment
in urban rail systems for the 10th Five-Year-Plan period (2001-05)
involves a remarkable 800 billion yuan or US$96.6 billion proposed
budget.
Yet without regional partners and suppliers, Western attempts to gain
major Chinese contracts will fail. For Western managers to succeed,
regional knowledge of Chinese business is a must.
Relationships matter
A second problem involves the issue of time. The long-standing business
model is driven by quarterly analysis and quarterly reports. Under
that mode, there is little room or tolerance for Chinese infrastructure
projects that require years of relationship-building before they
can be successfully bid and awarded. Tellingly, this even applies
to major new subway lines in Guangzhou, Shenzhen, Shanghai, Chengdu,
Beijing, Tianjin and Nanjing.
Beijing's urban rail transit lines are expected to be extended at
an average yearly rate of 40 per cent during the next 20 years, with
financial commitments of 10 billion yuan or US$1.2 billion each year.
In Southern China, Guangzhou plans to extend its mass transit lines
by constructing another 15 lines, while Shenzhen has designs for
eight additional lines.
These two cities alone involve an investment market of US$38 billion
and an export market of US$4 billion. In the same southern area,
the mammoth Pearl River Delta regional light rail network project
will connect Guangzhou, Shenzhen and Hong Kong with a potential investment
of US$24 billion. While in the West, we see the Western Development
Campaign with new infrastructure projects for a 5-year projection
of US$45 billion. Judged from the formulaic model, however, this
much expenditure of time, effort and manpower without a rapid return
on investment will typically be labeled a failure and thus derailed.
After four or five quarters, we can expect corporate accountants
to demand results from China that realistically cannot be met. The
time frame is too short and unrealistic for success in China.
(To be continued in the next issue)