Birmingham Insights on Asia — (1) The Impact of the Government Policy on the Small and Medium-Sized Enterprises’ (SMEs) Export Activities in China

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This comment is based on Zheng Guan’s Dissertation written under the supervision of Prof. Michael Czinkota at the University of Birmingham, UK.
On a year-to-year comparison of export activities, most of firms surveyed exported more. However due to increased costs caused

Guanxi – The Web of Relationships

There is a fundamental difference in the way Western and Asian firms approach business. Basically, for Western companies the business comes first and then the relationship follows. With Asian firms the relationship is developed first and the business flows from the relationship. Thus, a basic strategy for Asian organizations is the development of a web of relationships, or guanxi, that will eventually pay off with business opportunities. The development of long-term relationships requires time and patience, but in them Asians find commercial security. As Asian firm that really knows the people and companies it is doing business with reduces its business risks, as opposed to dealings with unknown, untried individuals and business organizations.

Western companies, on the other hand, seem not to have the desire, patience, or time necessary for Asian-style networking. Part of the reason may be traced to the relatively short stay of Western executives in Asian assignments. The typical stay of 2-4 years is not sufficient for the development and nurturing of long-term relationships. A more desirable strategy would be for Western firms to consider investing human resources over a 10-20 year time span. In a similar manner, many Western firms position executives in Asia without giving them decision making authority. This requires the executives to constantly confer with headquarters for advice and approvals – undermining how they are viewed by Asian business leaders and causing, in effect, a loss of face in a land where saving face is everything.