Multimedia University

BMG8014 ADVANCED MANAGEMENT

Lecturer: Dr.I.LOURDESAMY

CASES ANALYSES

Creating Guanxi In China

Student Name: Abdulla Saeed Alhamad

Student ID: 1111800065

MMUBMG 8014 ADVANCED MANAGEMENTAbdulla Alhamad (1111800065)

Creating Guanxi In China

What are the strengths and weaknesses of “Guanxi” as described in the handout

“Creating Guanxi In China”?

Summary

The explosively growth of the Chines market is forcing multinational corporations to

neglect other potentially growing markets and focus there interest on the Chines

market. U.S companies are leading this interest on Chines market by seeking more

and more opportunities; the low cost labor is the major attraction to the U.S

companies since the production cost has become very important in the American

manufacturing culture since its gives an extraordinary competitive edge in pricing and

profit.

Regardless the advertising and the media propaganda some reports are indicating that

this companies are not acquiring an actual profit; some experts explain and relate the

problem with the lack of knowledge among the western managers about the Chines

culture and especially with the concept (Guanxi).

Its has been confirmed that Americans believed that their culture, their believes, and

their way to do business is the best, and every one should do things the way they do.

This believes dragged a lot of American companies to generate loss while doing

business over seas. The lake of knowledge about culture influences in the countries

their establishing business in leads them toured did end.

The Chines market is the most important market for American companies, and

without complete understanding of the concept (Guanxi) this companies have no

opportunity of generating profits.

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MMUBMG 8014 ADVANCED MANAGEMENTAbdulla Alhamad (1111800065)

Strengths of “Guanxi”

Guanxi is all about establishing a very strong network of communication connected

by personal relationships. (Family and Friendship) do not considered part of Guanxi

network.

Fig 1: Guanxi Relationship Network

POINT 1: “Strong Business Network”

For the people within the Guanxi network business is always personal, if the

companies managers successfully established strong Guanxi network, this network

will protect their business by any affordable means, such as information about the

competition, putting a good word, advising costumers and potential investors about

the company.

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MMUBMG 8014 ADVANCED MANAGEMENTAbdulla Alhamad (1111800065)

POINT 2: Long-Term Business Relationship

This relationship will transform to a long-term business relationship leading to reduce

operational risks while operating in China gaining the support of the people through

the influences of the Guanxi network.

POINT 3: Government Relationship

The good relation to officials will help you to get your business license. The same

relation will assure you a timely and efficient administration of your request.

POINT 4: Employees Loyalty

Companies internal Guanxi is essential and very important, especially that employees

are also bound into a relation network, and this might leave them with interest

conflicts, as they have to serve tow masters.

Establishing good relation with your key employee will help them to trust you and

give you good reasons to trust them.

POINT 5: Bigger Piece Of The Market Share “Customer Guanxi”

When marketing in China the key of success is creating trust. Long-Term relationship

is critical especially while investing in goods. Therefore a good Guanxi to customers

is essential.

Weaknesses of “Guanxi”

As far as the Chines organizations and enterprises Guanxi is a very successful why to

do business, but when its come to the western management style especially the

American managers short-term business is essential.

POINT 1: Time Is Not Important

Time is the most valuable for American managers; they need every thing to be don as

quickly as possible, while the Chines Guanxi is an obstacle to do so “business will not

don until a trustful relationship is established”.

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MMUBMG 8014 ADVANCED MANAGEMENTAbdulla Alhamad (1111800065)

POINT 2: No Personal Relationship No Business

According to the principles of Guanxi if there is no personal relationship there will be

no business, this principle will eliminate great investment opportunities and scared

investors away.

POINT 3: No Trust No Business

American managers believe trust between businesses parties is there unless proved

otherwise, while the principles of Guanxi states that trust does not exist until a trust

bound is established.

And last but not least Guanxi is driving the people in the network-toured corruption.

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