Inter Personal Relationships in Business - "Guanxi" in China

Market Culture is vivid subject area which once has to clearly identify before starting a new business in a complete alien venue. It’s different from place to place, country to country and society to society. This factor plays a significant part in running a business successfully. If a business entity unable to recognize the market culture, it will be quite difficult for them to survive.

Let’s discuss about a strong concept in Market Cultures, “Guanxi”. The Chinese business culture “Guanxi”  literary means “Inter personal relationships”. At its most basic, “Guanxi” describes a personal connection between two people in which one is able to prevail upon another to perform a favor or service, or be prevailed upon. The two people need not be of equal in social status. “Guanxi” can also be used to describe a network of contacts, which an individual can call upon when something needs to be done and through which he or she can exert influence on behalf of another. In addition, “Guanxi” can describe a state of general understanding between two people: "he/she is aware of my wants/needs and will take them into account when deciding her/his course of future actions which concern or could concern me without any specific discussion or request".

“Guanxi” refers to the benefits gained from social connections and usually extends from extended family, school friends, workmates and members of common clubs or organizations. It is custom for Chinese people to cultivate an intricate web of “Guanxi” relationships, which may expand in a huge number of directions and includes lifelong relationships. Staying in contact with members of your network is not necessary to bind reciprocal obligations. Reciprocal favors are the key factor to maintaining one’s “Guanxi” web, failure to reciprocate is considered an unforgivable offense. The more you ask of someone the more you owe them. “Guanxi” can perpetuate a never ending cycle of favors.

The term is not generally used to describe relationships within a family, although “Guanxi” obligations can sometimes be described in terms of an extended family. The term is also not generally used to describe relationships that fall within other well-defined societal norms (e.g. boss–worker, teacher–student, friendship). The relationships formed by “Guanxi” are personal and not transferable.

This is so powerful in China so that many a big companies had to wrap up their operations in China. It’s still a growing market requirements in China so that it’s a huge financial loss for a business entity if they no longer functioning in China.

For an example Internet giant Google went many hardships in China 2002 onwards due to government’s censorship over internet. Apart from that Google’s China rival Baidu.com was behind the scene as they intended to grab the market share which hold by the Google.com.

Google had to undergo not a good time at all during 2002-2010 period of time in China.  Obvious point to strike is Google didn’t understand the market culture of China. As a result of the pressure that Google faced in China, ultimate decision was to pull out and established company’s search engine in Hong Kong as Google.com.hk. For not maintaining a good relationship with Chinese government let Google in a terrible position as they had to pull out from a well growing Chinese internet market, which was a huge blow in Google’s financial perspectives. In the sense that by 2006 China’s internet usage was 105 million, this represents just 8% of the Chinese population.

The concept of Guanxi is the idea of "saving or preserving face." When doing business in China it is very important that both partners in a negotiation maintain their pride, regardless of the outcome. In this situation it appears that Google caused its own loss of face, in addition to 338 million customers.  No company can go far unless it has extensive Guanxi in this setting. In China's new, fast-paced business environment, Guanxi has been more entrenched than ever, heavily influencing Chinese social behavior and business practice.

Photo : http://guanxithegame.bureauvenhuizen.com/wordpress/

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