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Guanxi in Jeopardy Presentation 1

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Courtnay & Stephanie Guanxi in Jeopardy: Doing Business with China
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Page 1: Guanxi in Jeopardy Presentation 1

Courtnay & Stephanie

Guanxi in Jeopardy: Doing Business with China

Page 2: Guanxi in Jeopardy Presentation 1

Guanxi

Conducting Business in China

The Chinese Economy

Case Overview

Case Assessment

Starbucks in China

Wal-Mart in China

Outline

Page 3: Guanxi in Jeopardy Presentation 1

An intricate web of connects that individuals draw from to secure favors in personal and organizational relations

With no formal legal system it has been used to accomplish tasks for more than 5,000 years.

Relationships promote trust and cooperation

A network which includes close family members at the centre and acquaintances on the outside

Guanxi

“It is critical for businesses in China, whether foreign or local, to understand and properly utilize guanxi in order to gain an edge over competitors."

Page 4: Guanxi in Jeopardy Presentation 1

Guanxi A complex network of relationships in social and personal

relationships

Mianzi or Face A form of social status and pride

Keqi Thoughtful, courteous and refined behaviour

Confucianism An ethical belief system based on the concepts of

relationships, responsibility and obligation (Gorrill, 2009)

Cultural Terms

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Don’t Rush the process of building a

long term relationship Use negative language Push formal contracts Show emotion at social or

business functions Cheer, only applaud

performances

Conducting Business in ChinaDo’s and Don’ts

“Business cards are exchanged during an initial meeting. Use both hands when presenting business cards and ensure that the writing faces the person to whom you are presenting your cards (China Knowledge, n.d).”

Do Establish long term relationships Be punctual to all business and

social functions Gain trust Maintain eye contact Address Chinese counterpart with

full name and title Wait for Chinese counter part to

initiate greeting Be patient Engage in small talk before

meetings

Page 6: Guanxi in Jeopardy Presentation 1

2010 - Population of over 1.3 billion people

2011 – GDP(purchasing power parity) - $11.3 trillion

2011 – GDP rose by 9.5% since 2010

2010 - China became world’s largest exporter

2010 – Second largest economy in the world

If the Chinese economy stays on its current path it is predicted to become the world’s largest economy in the next 10 years

Chinese Economy

Page 7: Guanxi in Jeopardy Presentation 1

Small company which started in 1962

Enterprise of the Beijing municipal government

Decision making is slow and difficult

Strong at achieving economies of scale in assembly–line manufacturing of engine control subassemblies

Key Objective - Partner with a foreign company and developing a long-lasting relationship that will work with government policies.

The Team Deng Zan - Factory director; Ai Hwa Chew - Deputy director of supply and distribution Wang Yoo - Minister of finance.

The Case: Motosuzhou

Page 8: Guanxi in Jeopardy Presentation 1

$5 Billion company

Manufacturer of automotive electronic products

Employees approx. 15,000 employees in the United States

Plans to expand into the Asian market

Joint Venture with Chinese Company

Chinese partner will help manufacture, and sell engine management systems that run emission control, fuel nozzle, and igniters systems for Chinese – made vehicles

The Case: Electrowide

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Motosuzhou was top choice for Electrowide’s joint venture (JV)

Electrowide team assembled & travels to China Motosuzhou spends weeks trying to build

relationships with Electrowide team• Sightseeing, dinners, entertainment

Electrowide getting restless, anxious to close deal By 5th week, Motosuzhou willing to discuss JV

Case: Stage of Events

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Motosuzhou team’s specific questions about JV were limited

Electrowide took this as good sign, felt deal was nearing

In 8th week, Motosuzhou began raising concessions Americans drafted formal contract with lawyer &

presented to Motosuzhou Motosuzhou team offended, ended negotiations

Case: Stage of Events

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Where do you think the Electrowide team went wrong?

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Do you think they did anything right while in China?

Page 13: Guanxi in Jeopardy Presentation 1

Starbucks entered China in 1998 and its first store open in Taipei of Greater China which includes China, Hong Kong, Macao and Taiwan.

In mainland China the first Starbucks opened in Beijing January of 1999

2010 - 750 locations in Greater and Mainland China

Why does Starbucks succeed when other’s haven’t? Created products to fit Chinese culture Maintain a significantly lower turnover rate than the average Chinese

Business High level of customer service Offer employees good work environments, compensation and career paths Created a new international logo Promoted dine in service over take out

Starbucks in China

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Who is the Ai Ni Group? Established in 1993  Operates in Yunnan Province Many coffee processing facilities Two coffee farms Four high end restaurants Manage a large cattle farm

Confident the JV company will be successful in build Yunnan up as a globally recognized premier coffee growing region

The JV company will, Be controlled by Starbucks Purchase and export coffee Operate dry coffee mills in Yunnan

Starbucks Partners with Ai Ni Group

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Starbucks’s Objective Increase its coffee-sourcing activities in the region for use in global

blends Build long term relationships with Yunnan’s coffee farmers Support Yunnan’s coffee farmers

Starbucks Partners with Ai Ni Group

“Starbucks collaboration with Yunnan province coffee farmers and suppliers reached a major milestone with the launch of Starbucks® South of the Clouds Blend® in early 2009”

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Has anyone ever visited a Starbucks outside of North America?

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Entered Chinese market in 1996 Currently operate 357 stores in China Bought 35% stake in Taiwanese chain, Trust-Mart,

in 2007 Market share in China grew by 7% in 5 years

Fined by Chinese government for: Mislabeling food products Manipulating product prices

Top management quitting Stake in Yihaodian

Wal-Mart in China

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Bustillo, M & Burkitt, L. (2011, October 12). Walmart's Chinese Puzzle. The Wall Street Journal. Retrieved fromhttp://online.wsj.com/article/SB10001424052970203633104576624250559835360.html#project%3DCWALMART1011%26articleTabs%3Darticle

Central Intelligence Agency . (2012, February 8). The World Fact book. Retrieved from Central Intelligence Agency : https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html

China Australia Consult . (n.d). Guanxi Hierarchy . Retrieved from China Australia Consult : http://www.china-consult.com.au/2010/09/21/the-art-of-guanxi-2/guanxi-hierarchy-3/

China Knowledge. (n.d). Living in China. Retrieved from China Knowledge: http://www.chinaknowledge.com/Business/CBGdetails.aspx?subchap=6&content=27

Choong, E. (2008, April 28). Understanding Mianzi: The Concept of Face. Retrieved from Dragon Business Network: http://www.dragonbn.com/articles/17

Gorilla, J. R. (2009). Doing Business in China. London: Communicaid Group Ltd. Retrieved from Doing Business in China: http://www.communicaid.com/access/pdf/library/culture/doing-business-in/Doing%20Business%20in%20China.pdf

References

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Lee, M & Kwok, D. (2011, October 17). Walmart China CEO quits as retailer grapples with pork scandal. Reuters. Retrieved from http://www.reuters.com/article/2011/10/17/us-wal-mart-china-idUSTRE79G08620111017

Lee, M & Kwok, D. (2012, February 20). Wal-mart to take majority stake in China's e-commerce. Financial Post. Retrieved from http://business.financialpost.com/2012/02/20/wal-mart-to-take-majority-stake-in-china-e-commerce/

Lee, M. (2011, October 14). Walmart's pork scandal highlights struggle in China. Reuters. Retrieved from http://www.reuters.com/article/2011/10/14/us-walmart-china-idUSTRE79D1S020111014

McPherson, C. (2006, February 6). Starbucks to Partner with Ai Ni Group to Bring China’s Yunnan Coffee to the World. Retrieved from Business Wire: http://www.businesswire.com/news/home/20120206005771/en/Starbucks-Partner-Ai-Ni-Group-Bring-China%E2%80%99s

No Author. (2011, January 7). Starbucks Logo Evolution. Retrieved from Daily Contributor : http://dailycontributor.com/starbucks-logo-evolution/19692/

PARK, S. H., & LUO, Y. (2001). GUANXI AND ORGANIZATIONAL DYNAMICS:. Strategic Management Journal, 455-477.

References

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Rein, S. (2012, February 10). Why Starbucks succeeds in China and others haven't. Retrieved from USA Today: http://www.usatoday.com/money/industries/food/story/2012-02-12/cnbc-starbucks-secrets-of-china-success/53040820/1

Schell, O. (2011, December). How Walmart is Changing China. The Atlantic. Retrieved from http://www.theatlantic.com/magazine/archive/2011/12/how-walmart-is-changing-china/8709/.

Starbucks. (2012). Greater China. Retrieved from Starbucks Newsroom: http://news.starbucks.com/about+starbucks/starbucks+coffee+international/greater+china/

The Economist . (2011, September 24). Becoming number one. Retrieved from The Economist : http://www.economist.com/node/21528987

The World Bank. (n.d). China. Retrieved from The World Bank: http://data.worldbank.org/country/china

Travel China Guide. (n.d). Confucianism. Retrieved from Travel China Guide: http://www.travelchinaguide.com/intro/religion/confucianism/

Walmart. (2012). China Fact Sheet 01-2012. Retrieved from https://docs.google.com/viewer?a=v&q=cache:bYXuoMsACxkJ:walmartstores.com/download/1999.pdf+walmart+in+china&hl=en&gl=ca&pid=bl&srcid=ADGEESheUg18aqWOgIFNY7spMitTRvhjK8CorGBLJjLaM4LRfPB2exhz6zBNkPiHscQWHR201-AFgkJ9MZfkLnqbf9_tVfB9EhgFemmxU2F_OSk5D1f978z_mQDAa-JbwDW5ajKaIy7z&sig=AHIEtbQjmYNYTZwBTQQhSHYxic535fgqJQ&pli=1

References

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Questions??


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