Doing Business in China - Assignment Example

MGMT 391A Introduction to Global Business - Homework 9 Final Essay “Doing business in China is like the Wild Wild West, except they know how to shoot better than the cowboys” (Akmadakmal 2012). China has unquestionably become a major player in the world economy due to a number of factors, such as economic liberalization by the Chinese Communist government, a population of over one billion people, and a very low GDP per capita. All of these factors have resulted in the Chinese economy experiencing a boom like no other country has ever seen before. Because of the fast-paced growth of the Chinese economy over the last two decades, China has become an attractive option for foreign entrepreneurs to invest because of the low wages on offer and access to cheap materials. However, just because China has a lot of economic potential does not mean that it is easy for foreign investors to succeed there. The number one determining factor of whether a foreign entrepreneur is successful or not largely comes down to culture. Chinese culture has a long history that is steeped in traditional, yet it is becoming more open to the west as Chinese leaders realize that economic growth can benefit the masses. This paper will discuss in detail about what to do when setting up business in China and what should not be done. The stories of three British entrepreneurs (Tony, Peter, and Vance) will provide examples that show the good and the bad of conducting business in China. When doing business in China, it is important to have respect for the local people and cultural customs. It was not until recently that China was opened up to the world, so the country naturally has a very low opinion of foreigners and expects them to make every effort to do business the Chinese way. Because of the obvious cultural differences, such as in language and communication techniques, it is a must to get some inside local knowledge on how to conduct business there. In “Brits get rich in China,” Tony was the only one to realize this before he opened business there; he managed to find a Chinese business partner, Miss Dy (Akmadakmal 2012). Tony even admitted that if he was going to do well in China, then it is a must to find a local Chinese business partner. Also, Peter eventually chose to work with a Chinese business partner, Cecil P., but only after failing to succeed by himself (Akmadakmal 2012). Unlike the other two entrepreneurs, Peter had never visited China before he decided to make the move there to sell his air conditioning energy saving units; he is also 70 years old, which shows maybe that he was unwilling to be flexible and conform to local Chinese business practices. This is reinforced when he says, “being born British means you’ve won first prize in the lottery of life” (Akmadakmal 2012). One of the first steps to succeeding in China is to be humble. There are many thousands of foreign businessmen who enter China each year, so there really is no need for the Chinese to go along with any particular foreign businessman. Finally, Vance understands the importance of working with local Chinese suppliers to help him sell his range of kitchenware. Unlike the other three, Vance has built up a vast selection of suppliers who are able to produce thousands of units of kitchenware for him. What makes this all surprising is that he did it without a Chinese business partner, but he at least had a local Chinese interpreter to help him with translations. Because Vance knows some of the language, with the assistance of an interpreter he can find out information straight from the source and more quickly than say Tony would. Tony’s business partner already speaks English, so he has no need to communicate to anyone in Chinese. While Vance’s Chinese may not be perfect, at least he is showing effort to learn the language; relationships go a long way to conducting business in China. Unlike the west, where everyone gets down to business virtually as soon as they shake hands, in China much more emphasis is placed on gaining the trust of the other person. To sum up, three vital things when setting up business in China are to work with the Chinese rather than against them, show respect and do not lose face, and develop trustworthy relationships with local Chinese businessmen. Conducting business in China can be a frustrating experience for some. Tony, for example, showed his immense frustration when he turned up to check his newly-built factory only to find that the building was still unfinished and the workers were sleeping on the job (Akmadakmal 2012). While he had every right to be angry with what he felt was laziness, he should not have expressed his disappointment at the lack of progress with building the factory. Instead, he should have quietly spoken to his Chinese business partner and informed her of his concerns. Chinese naturally avoid any type of conflict because to confront someone is to make them lose face, or Guanxi. As Tony is someone who seems to have adapted to the local culture rather well, it is a surprise to see that he was unable to control his feelings. Secondly, Peter took a huge risk by not signing a contract with his new acquaintance, Cecil P. (Akmadakmal 2012). After hitting a brick wall for the first month of being in China, Peter realized that it was time to get some inside help. This at least shows that he was willing to admit that he had made mistakes and was focused on correcting them. What he failed to do was develop a trusting relationship with Cecil P., let alone sign a contract to cement their business partnership. Without signing a contract, Peter was at risk of Cecil P. taking the design for his product and then selling it for himself. This eventually did happen, but Cecil P. did eventually call and inform Peter of his success at selling the product to a local government minister. Finally, Vance committed several things that are considered offensive in Chinese society, such as swearing at potential business suppliers, directly confronting people who he thought ripped him off, and refusing to eat food that was offered to him (Akmadakmal 2012). This last one in particular was very insulting his Chinese associates who he took out to dinner. After making up with Mr. Lee, who he originally suspected had stolen his money, Vance decided to makeup and take everyone out to dinner to celebrate. However, after the meal was finished, Mr. Lee offering up a donkey’s penis for Vance to eat. Vance was highly offended at this and refused to consume it. Mr. Lee did not express too much emotion, unlike Vance, but he would have obviously been hurt that Vance does not trust him enough. Food is an essential part of Chinese culture, with business often conducted over a meal. Choosing not to eat a meal can cause the person who offered it to lose face; it can also be thought of as a test. In other words, eating food that is presented to you shows trust when it comes to business. To sum up, openly showing disappointment, not signing a contract with someone who is a stranger, and turning down food that is offered are all things that should not be done in order to be a successful businessperson in China. China is an opportune place to invest because of the significant growth experienced there over the last few years. For foreign businessmen though, there are plenty of risks involved when doing business in China. When conducting business in China, it is important to work with a local partner, do not cause anyone to lose face, and form good relationships with local Chinese suppliers. On the other hand, it is imperative not to display any strong emotions in front of any Chinese people, go by verbal agreements only, and refuse to eat food that is given by a local businessperson. Work Cited Akmadakmal. “Brits get rich in China.” YouTube. Web. 11 Aug. 2012 Read More