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Forget your MBA: Think Chinese
By Marcene Marcoux (China Business Weekly)
Updated: 2004-03-17 14:18

Editor's Note: China's rapidly-growing economy abounds with great business potential, but doing business in China can be an adventure for Western executives, offering new possibilities, discoveries and amazement. Yet, what constitutes a challenging road may be a surprisingly fulfilling educational journey for the daring Western executive. Marcene Marcoux PhD, a cultural anthropologist, president and senior consultant of Great Wall Consultants Ltd, views the keys to business success in China, and describes how they may be different from any executives had imagined when they depart for the Middle Kingdom. In a series of articles, Marcoux offers her opinions, and provides her explanations about the daunting challenges Western executives face within China's diversified economic sectors.

There is a pressing call for advice, strategies, and leading-edge thinking about China for Western executives wanting to master Chinese markets. As the world's fourth largest economy and with a 1.3-billion consumer market, China remains today's major economic challenge.

With its more than 5,000 years of civilization, 4,000 years of written history, powerful dynasties like the Han, Tang, Song, Ming, and finally the Qing, and with cities like the imperial Beijing and financial powerhouse Shanghai, China is now poised to dominate the world economy.

Western executives and firms setting up businesses in China and those leading international business divisions urgently need to acquire the know-how, winning style, and breakthrough thinking appropriate for the Middle Kingdom. To do that, adopting new thinking, innovative strategies, and a more adventuresome attitude is required. It is part of what I call "the New China Paradigm." At the same time, Western executives must abandon old, outdated, though still used, traditional business practices.

We'll examine four major obstacles international executives face in China as they hamhandedly cling to old business rules and rely on yesterday's practices.

The first problem occurs when Western companies even today send managers into China based on horse-and-buggy ideas of how they should work. Too often China-based training of executives is dated, unrealistic, and ethnocentric. Far too many executives arrive not even knowing a thing about the language, customs, or history - each aspect central for success in the Middle Kingdom.

Too many executives speak only one language and know how to deal well within their own culture. Executives from Maine to California, from Washington D. C. to the state of Oregon, Americans, for example, choose to travel, socialize and work within the contours of their own culture. That magnifies their ethnocentricity, and their profound lack of understanding of the diversity and differences within other cultures.

Mastering one currency, one language, and one history is not enough. Being satisfied knowing only American culture and conversing only in English, for example, will never do in China.
Too often, Western ideals are emphasized and over-valued, leading to the false belief in a universal standard, even if the so-called universal criteria stem from only one culture. When the Western way is heralded as the best and only way, arrogance too often replaces perspective. As a consequence, Western companies can be tone-deaf to the challenges that exist in global communication, cross-cultural negotiations, and Chinese business styles.

Clearly, China is neither simple nor uniform, but a kaleidoscope of different markets. It is geographically, linguistically and regionally diverse. It is neither one seamless, integrated market, nor one unified business world.

Consider the daunting challenge Western executives face with China's thirteen diverse markets.
There is the formal northern Beijing and Tianjin, its more savvy east coast Shanghai, the risk-taking, rule-breaking east Fujian coast, and adventuresome southern Guangzhou and Hainan provinces. Then there is also Inner Mongolia, Xinjiang Uygur, and Tibet autonomous regions.
In other words, China is vast and complex, and Western executives must know enough about all these diverse regions: the various histories, 205 living languages, 56 different ethnic minorities, contrasting customs, and different business styles. This is crucial, given the regional requirements essential to most large infrastructure and joint ventures projects. Indeed, Western business success depends on mastering China's diversity.

Contracts in rail, locomotives, subways, buses and airports must meet local guidelines, as well as national standards. This requires major Western contractors to work co-operatively with local Chinese executives, provincial and municipal political leaders, and ministers. Twenty of China's 34 cities with populations exceeding 1 million have either begun planning or building new metro lines. China's State investment in urban rail systems for the 10th Five-Year-Plan period (2001-05) involves a remarkable 800 billion yuan or US$96.6 billion proposed budget.
Yet without regional partners and suppliers, Western attempts to gain major Chinese contracts will fail. For Western managers to succeed, regional knowledge of Chinese business is a must.

Relationships matter

A second problem involves the issue of time. The long-standing business model is driven by quarterly analysis and quarterly reports. Under that mode, there is little room or tolerance for Chinese infrastructure projects that require years of relationship-building before they can be successfully bid and awarded. Tellingly, this even applies to major new subway lines in Guangzhou, Shenzhen, Shanghai, Chengdu, Beijing, Tianjin and Nanjing.

Beijing's urban rail transit lines are expected to be extended at an average yearly rate of 40 per cent during the next 20 years, with financial commitments of 10 billion yuan or US$1.2 billion each year. In Southern China, Guangzhou plans to extend its mass transit lines by constructing another 15 lines, while Shenzhen has designs for eight additional lines.

These two cities alone involve an investment market of US$38 billion and an export market of US$4 billion. In the same southern area, the mammoth Pearl River Delta regional light rail network project will connect Guangzhou, Shenzhen and Hong Kong with a potential investment of US$24 billion. While in the West, we see the Western Development Campaign with new infrastructure projects for a 5-year projection of US$45 billion. Judged from the formulaic model, however, this much expenditure of time, effort and manpower without a rapid return on investment will typically be labeled a failure and thus derailed. After four or five quarters, we can expect corporate accountants to demand results from China that realistically cannot be met. The time frame is too short and unrealistic for success in China.
(To be continued in the next issue)

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