China Part 1: Business culture & success

Why is China so successful? What kind of Business culture do people have there?

These are questions which I focus on in this and also in the next blog entries. I was inspired to take a closer look at China after having read some interesting articles from Michael Freitag and Astrid Maier and my interest was also drawn to this region when I was rummaging around in a book about multinational management.

The topic business culture was already introduced by my last post where I gave an introduction with Mexico as an example to illustrate the information.

At first let us take a look at China’s business culture. In this case I would like to consider the conditions of the country, which is constantly changing. With the help of the Cultural Revolution many young people are sent to work in country areas but at the same time education is denied to others. But however in the time over the last 2 decades more Chinese people have had the chance to succeed in a business education and career and thus help to define the Chinese business culture, which is developing in a really fast way.

For giving you an overview of Chinese business culture, these are key issues:

  1. Business in China is moving in a slower pace than it does in the US or in Europe. If you want to tap in the business in China it is often the case that you have to visit the country several times before you start with buying or negotiating about possible facilities.
  2. Similar to Mexico, the organizational structure is very hierarchical. It might help you if you have relationships to the individuals with the highest reputation because the likelihood is high that they will be the decision makers.
  3. Chinese companies do not like to say no and things that appear to be agreed upon could become an obstacle in the future so it is important that you handle as much agreements in writing as possible.
  4. The last key issue is the Chinese business etiquette which was a little bit surprising for me. One advice is that you should dress up conservatively and you also should arrive on time for your appointments. You, as a negotiator, are expected to show business cards with both hands and it would be a benefit for you if you have one side of the business card in English and the other in Chinese. Furthermore it is not a secret that Chinese companies greet visitors with extravagant banquets and you should be prepared to participate in some form of drinking.

For this aspect I found that there is also a book about this issue, if you would like to grow a business in China this book may help you:

Doing Business in China for Dummies

What are the reasons for China’s success?

The country which is moving in such an impulsive way has many perspectives. They were often considered with cheap products or fake products. By the way when I talked with a Cambodian man about this issue he told me:

No we are not imitating you, we are just trying to do our stuff as good as the master.

This might be a subjective issue.

But the times where China was only the cheap location for production could be over because China is constantly improving technology, no matter whether it is in Chemistry, Cars or wind power plants. Many Chinese companies established on the Market. They use around 5 percent of their revenues for research and development and economy in China is constantly growing. I think people underestimated China in recent years because many of them may have thought that China is not a concurrent for the Western technology. They thought that they are so progressive that China could not hold on with that but obviously they were wrong. China can catch up with it and probably even go further.

The computer manufacturer Lenovo managed to be at eye level with Hewlett-Packard and Dell and Huawai constantly offers surprises in innovation.  To manage this economic improvement there are two major factors.

One is that the salaries were so low that it was easy to underbid Western companies in production costs. The second factor is the enormous demand of the huge population of China so the companies keep going on growing and the production plants are increasing in size and quality. There is always a lot of money invested in technology and every year there are more than 500 000 engineers completing their academic studies and launching their career. The state of China really supports growth in its 5-year-plans with detailed technological- and growth goals. Chinese enterprises are free and controlled at the same time. This was even considered as the “better market economy” by Hasso Plattner, chef of supervisory board of SAP. Volvo which was known as a Swedish car manufacturer with high quality standards was taken over by the Chinese car manufacturer Geely. There is no other country which invested as much in projects in Germany as China did in 2011.

About Lenovo and its ambition

I have read an interesting interview about the ambition of Chinese managers with Yang Yuanqing, CEO of Lenovo. With a remuneration of 12 million dollar per year this man is the highest paid CEO of China. As it is an interview in German language I do not want to give quotations, I rather concentrate on key aspects.

Lenovo already is the market leader in China and they have the goal to become global market leader and also to become as popular as Apple. Yang Yuanqing believes that the number of Chinese brands known all over the world will increase in the near future, which is based to the fact that there is already a broad variety of companies in the Chinese market so it is obvious that there will be several ones which evolve to global brands. He considers especially the High tech industry as one of Chinas strengths but he thinks that the Chinese industry has to become more innovative to be even more successful. Incentives for this are given by the 5-year-plans of the government in Peking which I mentioned in the text above.

I consider it as an interesting aspect that he says that on the one hand Chinese enterprises have a quite efficient organisation and supply chain but in the other hand the experience of how to lead an international enterprise is often missing. But to avoid this many Chinese enterprises take over foreign enterprises or parts of it, as for example Lenovo overtook parts of IBM (parts of its PCs) and recently they also overtook Medion. Yang Yuanqing disagrees with the rumour that China is going to buy Germany, because he verifies that with the fact that Germany is still investing more in China than the other way around. He also emphasizes that the take overs between Germany and China will help both sides and he gave the example in the take over of Medion, because the workforce have not been cut, instead they have created more jobs.

I think I have underestimated Lenovo before, because I have not expected such a big enterprise behind it before I started researching. But this is not the only example I would like to include here.

Huawei, founded and improved by Ren Zhengfei, has emerged to a leading network terminals provider. Their concept of becoming a globally known firm is typical of the Chinese Incorporation, because it is a mix of governmental promotion, low costs and the intention of gaining power combined with latest technologies. In Germany Huawei has especially become famous by selling smart phones for relatively low prices, for example the Ascent Y200 at the supermarket chain LIDL.

The next part about China will follow next week , but here I have included some links for you to inform you about two famous Chinese business men:

Here you can get information about Yang Yuanqing, CEO of Lenovo

And this link will offer you information about Ren Zhengfei who founded Huawei

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9 responses to “China Part 1: Business culture & success

  1. Hey janastraub,
    really nice and elaborated post! You seem to be very interested and a real expert on this topic since you provide such a good but short overview about this huge topic of Chinese Business culture. I especially liked the quote of the Cambodian man. Haha, the perspective from which you see the matter is always different!
    There are so many things you have to consider when doing business in China; I also read some pieces on this. For example, did you know that that the Chinese avoid eye contact when talking with a business partner because this is a mean of showing respect? Germans would say it is impolite to not have eye contact. Or pauses during conversation: Chinese people regard a pause as expression of serious consideration whereas Western people feel uneasy about it and interpret a pause in a negative sense. Therefore they try to avoid a stop in the conversation, which on the other hand makes the Chinese feel uncomfortable and think this man/woman is arrogant. Do you know some more examples? Maybe these are some inspirations for your next posts.
    There is so much more, and I’m looking forward to your next post 😉

    • Hey Mai,
      thank you for your nice hints and the examples you gave, probably I will look for more for my next post 😉

  2. This is wonderfully detailed and well told, but it would be significantly improved if it included citations to your sources and a discussion about them!

    • Thank you for the suggestion, but I have to say, the reason why I did not include citations from the interview was because it is written in German in a business paper and I wanted to avoid German phrases, but I think I will try to include a discussion in my next post!

  3. Hello janastaub,

    being half Chinese and having visited the country many times I was instantly curious about your blog post.

    First of all I really appreciate the issue you choose since I know it can be quite a challenge. Business is China is not only a highly discussed ( and often controversial) topic, it can also be hard to grasp and understand for people in the Western world. That is because the whole culture and the way of living is different there. Chinese people have completely different value which include different Do’s and Don’ts as well. Some of those you mentioned in the overview of the Chinese business culture.

    I have to say that I found those a bit too general for my personal liking but maybe that only because I’m a bit biased (sorry for that!). Where did you get the information?

    I really liked the fact that you chose to explain the Chinese business culture with a real life example, in this case Lenovo. It makes it easier for the reader to understand the keys of success.

    The only thing I would have done different is to include my own opinion in the end. I would have really appreciated that!

    By the way if you’re really interested in this issue here is another book that I can really recommend:

    http://www.amazon.de/Der-China-Knigge-Gebrauchsanweisung-Reich-Mitte/dp/3596166845/ref=sr_1_1?ie=UTF8&qid=1339274618&sr=8-1

    I look forward to your next post!

    • Hey,
      I also thank you for your nice hints and the book recommendation, but to answer your question where I got my information from. Some parts I got from an article in the manager magazine and other parts I got from a book which is called “Multinational management” written by John B. Cullen and K. Praveen Parboteeah. I think you are right especially in the point that my key issues of business culture are rather general, probably because that I wanted to include too much different issues (examples, success, business culture) in one post, I think I will try to integrate some of the hints I got here for my next post!

  4. Hey janastaub!
    You´re right! Writing about the Chinese culture is a very good idea because it´s interesting for me, as a German, to know something about such a different country. I guess we all have recognized that China became a very powerful nation and is going to reach the same economic performance like Western countries. To be honest, I was really excited to get to know what´s behind the “Chinese secret”.
    Especially the relation to your former blog post, for example about the mexican business culture, is very adequate! Indeed, this runs like a thread through all your blog post like this “Similar to Mexico, the organizational structure is very hierarchical. It might help you if you have relationships to the individuals with the highest reputation because the likelihood is high that they will be the decision makers.”
    Additionally, I really like that you also write about examples like “Lenovo” and “Apple” which are current issues, indeed!
    However, you should insert more visuals into your blog post. Otherwise, the most interesting topic can become boring!

  5. Pingback: The overcoming of culture barriers within Global teamwork | BLOG OR DIE TRYIN'·

  6. Hey Johanna,
    By having a first look at your post I thought that it is really well structured, as you not only subdivided it into four sections but also highlighted some keywords, marked a citation and listed some key issues. I can imagine that in one or two of these different sections another subdivision of the paragraph would make your post even more enjoyable to read.
    Is there are reason that you didn´t include the links in your text (respectively that you linked several words) but stated them twice on the end of a paragraph?
    I believe one can safely say that your text would be a lot more valuable with some more links. To be honest I had a closer look at the three quotes you gave in your blog post and I have to admit, that there were just very short text and not a lot of information behind the link.
    Plus – Do you own the book “Doing business in China for Dummies”? As I was really interested in digging deeper into this information and when I clicked on the link I realized that it would just lead me to the webpage of amazon. That seemed a little confusing to me.
    Although I criticized your post quite a bit it is important for me to say that I really enjoyed reading it and I think that you have done a great job apart from the indication of sources.

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