THE IMPACT OF GUANXI TO MULTINATIONAL COMPANIES BUSINESS PERFORMACE, CORPORATE REPUTATION, NEGOTIATIONS AND MANAGEMENT IN CHINA
Ratilainen, Perttu (2012-05-12)
THE IMPACT OF GUANXI TO MULTINATIONAL COMPANIES BUSINESS PERFORMACE, CORPORATE REPUTATION, NEGOTIATIONS AND MANAGEMENT IN CHINA
Ratilainen, Perttu
(12.05.2012)
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The modern business development of China began during 1978 and during the last decades
Chinese have created one of the most dynamic and strongest economies in the world. China is now
second largest trading power calculated in dollars. The special characteristic of this economic
development is that it is not copy of any existing economy, instead the developments have been
strongly influenced by the Chinese cultural characteristics.
One cultural characteristic, guanxi, which is a “network of services and counter- services” is
argued to be major component of successful business in China where these changes of services
happen between people but also between companies. Obtaining introductions and the guanxi when
doing business in China will give attentive audience and security for companies business. Despite
the evidenced importance of guanxi, China´s business environment is rapidly changing towards
Western economies, which might then reduce the importance of guanxi. Therefore the current
impact of guanxi is a important topic to study.
The main purpose of this study is to explore the impact of guanxi for Western big and small sized
multinational companies´ business processes when doing business in China. This study looks What
is the impact of guanxi in contemporary Chinese business environment for foreign companies
doing business in China. Sub-questions in this research focus on what is the impact of guanxi on
corporate reputation, management and negotiations.
Findings present a mixed view where the importance of guanxi is not anymore critical, especially
among younger people in the cities, however guanxi was clearly important outside the cities and
when dealing with government officials. Efficient use of guanxi can be extremely profitable
especially during early stages of business operations and guanxi plays role when bargaining prices
and ensuring product quality from the factories. Therefore guanxi should be considered as essential
element for successful business in China.
Chinese have created one of the most dynamic and strongest economies in the world. China is now
second largest trading power calculated in dollars. The special characteristic of this economic
development is that it is not copy of any existing economy, instead the developments have been
strongly influenced by the Chinese cultural characteristics.
One cultural characteristic, guanxi, which is a “network of services and counter- services” is
argued to be major component of successful business in China where these changes of services
happen between people but also between companies. Obtaining introductions and the guanxi when
doing business in China will give attentive audience and security for companies business. Despite
the evidenced importance of guanxi, China´s business environment is rapidly changing towards
Western economies, which might then reduce the importance of guanxi. Therefore the current
impact of guanxi is a important topic to study.
The main purpose of this study is to explore the impact of guanxi for Western big and small sized
multinational companies´ business processes when doing business in China. This study looks What
is the impact of guanxi in contemporary Chinese business environment for foreign companies
doing business in China. Sub-questions in this research focus on what is the impact of guanxi on
corporate reputation, management and negotiations.
Findings present a mixed view where the importance of guanxi is not anymore critical, especially
among younger people in the cities, however guanxi was clearly important outside the cities and
when dealing with government officials. Efficient use of guanxi can be extremely profitable
especially during early stages of business operations and guanxi plays role when bargaining prices
and ensuring product quality from the factories. Therefore guanxi should be considered as essential
element for successful business in China.