Doing Business in China: Respecting Society

Foreign executives in China must understand the economics of ‘more’, and understand it in the context of doing business in a hugely diverse country.

“Like everywhere in the world people in China want ‘more’; more success, more beauty, more health, and more friends. Everybody wants ‘more’, but what exactly the ‘more’ is greatly depends on who they are and where they live,” Kennedy argues.

On the one end of the spectrum there are the nouveau rich and those Chinese who have lived and worked overseas. They typically live in first tier and second tier cities and their needs are very similar to those of people in any other big city of the world. On the other end of the spectrum are people living in the third tier cities and in rural areas. They are far away from Shanghai and Beijing, both literally and figuratively.

China is an extremely competitive market that you need to understand in-depth in order to make it work for you. Take the example of advertising. All the major international ad agencies are already in the market, as are thousands of local agencies.

“Executives who cannot find a job in their home countries, or lost it because of the economic downturn, will not be able to start an ad agency in China without having any knowledge of the local brands. The same is true for any other industry,” Kennedy explains.

“Foreign companies entering the market need to offer a product or service that is different and innovative, one that has a unique value proposition.”

While one hears stories of companies that are battling with complicated legal procedures, lengthy approval processes and bureaucracy, this is not necessarily the case.

“When we legally registered iTV Asia as a website, the registration process took only one day. It was as simple as filling out an online form; very similar to a simplified business registration process in the US. It was fast and efficient and officials were friendly and helpful,” remembers Kennedy.

Recognizing Confucian values in modern-day entrepreneurship
In China, old age brings increased respect and status, however Confucian ethics also places high value on learning and self-improvement. The biggest segments of people studying overseas in general and an MBA in particular are Chinese.

“Generally people in China believe that better education, especially an MBA, automatically means a better job and hence a better life with more money and more success, which makes their families proud. With better education, they will do a better job for their company, which benefits society and ultimately the country,” he adds.

As a foreign business executive you might find yourself dealing with Western educated Chinese in their late 20s and early 30s who can play the big industrial games, and play them well.

“They understand brand development and management and all the business functions. They also know exactly what their competition is like because they might previously have worked for a Western company. Expect them to be very competitive and ahead of the game,” Kennedy advises.

Like in other Asian cultures, respect is a crucial concept in Chinese culture. This applies to individual relationships as well as to a foreigner’s relationship with China as a nation. Absolute courtesy in any dealings will open doors while displays of criticism or arrogance will almost certainly result in failure.

“Looking at culture, society and politics, most of our thinking comes from a Western paradigm. If things are different in China, this does not mean that one or the other is better or worse. Like in the US, Europe or indeed elsewhere in the world, you have to abide by the local rules but you also have to be ‘smart’ enough to know how and when to challenge them,” Kennedy concludes.

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