cultural primer for doing business with china · power. • religious worldviews and beliefs –...
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CULTURALPRIMERFORDOINGBUSINESSWITHCHINA
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CHINAPERSPECTIVESANDCULTURALEXPERIENCES
BUSINESS–Exportsvs.domesCc,
privatevs.SOEs
GOVERNMENT Socio-economicStrata
Expatsvs.Chinese
North-South,Rich-Poorregions
BewareofChina’sspeedofchange
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“知己知彼,百战百胜 :Knowyourself&knowyourenemy–andwinahundredbaWles”–ArtofWar,SunTse
“HeWhoKnowsOnlyOneCountryKnowsNoCountry“ FrancisFukuyama
WhyCulturalandInsCtuConalKnowledge?
China‘sStateCapitalismandlargecultural
distancefromCanada
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Bewareofyourownculturaltendencies&worldviewandlearnyourpartner’sculture-butcanyouworkwithit?Youmaybetheonetomakethe
adjustment!
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• “HeWhoKnowsOnlyOneCountryKnowsNoCountry“ FrancisFukuyama
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LegislaJive&ForeignPolicy
Business&Economics
Social&Culture
InterplayofFactorsinaGlobalBusinessEnvironment
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Onemayarguetheyareallunderpinnedbycultureandvalue
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CulturalInfluenceonInternaConalBusiness
• InternaJonalizaJondecisions• MarketselecJon
• EntrymodelsanddistribuJonmanagement• Personnelmanagement
• Brandingandpricingstrategy• MarketsegmentaJon• InvestmentStrategies
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SelectViewsonWesternizaConandDevelopmentZakaria(2011),P.84.
• PetertheGreat(RussiamustdevelopthroughWesternizaJonofinsJtuJons-theBeardtax).
• Nehru(BackwardnessofIndiatobecuredbyWesternizaJonofinsJtuJonsetc.).
• SunYat-sun(ChinamustcopetheWesttoadvance).• Fukuzawa(JapanmustleaveAsiaandjoinEurope–MejiReformaJon).
• Ataturk(TocatchupwithEurope,Turkeymustwesternize-changedresscodeandpoliJcalinsJtuJons).
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WesternizaConversusModernizaCon
ModernizaJongenerallymeansIndustrializaJon,urbanizaJon,literacy,increasingwealthandeducaJon
andisnotculturalbased.WhilemostglobalinsJtuJons,technologiesareWesterninorigin,
WesternizaJonisaculturalphenomenoni.e.dresscodes,“capitalism”?,andcertainpoliJcalvalues.ModernizaJonischaracterizedbyawesternface
becauseithascoincidedwiththeriseoftheWest.Ithasshapedglobalvaluesortheglobalagenda.Tothe
extentthatlocalcultureshavepersisted,ModernizaJonwithlocaldifferencesmaybethenorm.
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CulturalDifferenCatorsoftheWest
• RoleoftheChurchasacontenderforpoliJcalpower.
• Religiousworldviewsandbeliefs–Divinelaws,evangelicaltradiJons,andsourceofmorality
• Geographyandexternalthreats–roleofthestateanddegreeofculturalhomogeneity
• ShorthistoryinpoliJcalunitywhichmightbeconducivetocentralizaJonandauthoritarianism
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HowwouldglobalizaConaffectChinaandwouldChina’seconomic
emergencechangetheglobalbusinessculture?
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CultureDefined
Values
Beliefs
Customs
Culture is an integrated system of learned behaviour patterns that are distinguishing characteristics of members of a society. Includes everything that a group thinks, says, does and makes – its customs, language, material artifacts, and shared systems of attitudes and feelings.
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TheHallModelofCulturalCommunicaConStyles
Societies can be compared on the basis of :
1. Requirement for explicit expression of context or information in communication – high vs. low
context societies. 2. Amount of personal space in communication.
3. Monochronic or Polychronic orientations 4. Structure and speed of information flows.
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Hall’s Observations
• High context societies tend to be authoritarian and explicit communication is not needed or encouraged.
• Communication is not sequential and may appear haphazard in high context societies.
• Rules tend be explicit and rigidly followed in low context, monochronic societies.
• In- group, out-group distinction critical in collectivist, monochronic societies – different communication styles and relations vis-à-vis these two groups
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Context as an Element of Culture (Hall)
• High Context Cultures (Languages) • Context is at least as important as what is
actually said (e.g., Japan)
• Low Context Cultures (Languages) • Most of the information is contained
explicitly in the words (e.g., Canada)
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The Context Continuum
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Other Elements of Culture
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Language Capability
• Language capability serves four distinct roles in global marketing:
1. Information gathering and evaluation efforts 2. Access to local society 3. Company communications (including
communication with channel members) 4. Extends beyond mechanics to the
interpretation of contexts
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Nonverbal Language
• Marketers must analyze and become familiar with the hidden language of foreign cultures – high – versus low-context languages and “time concepts”
• Five key topics: 1. Time 2. Space 3. Material possessions 4. Friendship patterns 5. Business agreements
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MONOCHRONIC CULTURE POLYCHRONIC CULTURE
INTERPERSONAL RELATIONS
Interpersonal relations are subordinate to present Schedule
Present schedule is subordinate to Interpersonal relations
ACTIVITY CO-ORDINATION
Schedule co-ordinates activity; appointment time is rigid.
Interpersonal relations coordinate activity; appointment time is flexible
TASK HANDLING One task at a time Many tasks are handled simultaneously
BREAKS AND PERSONAL TIME
Breaks and personal time are sacrosanct regardless of personal ties.
Breaks and personal time are subordinate to personal ties.
TEMPORAL STRUCTURE
Time is inflexible; time is tangible Time is flexible; time is fluid
WORK/PERSONAL TIME
SEPARABILITY
Work time is clearly separable from personal time
Work time is not clearly separable from personal time
ORGANISATIONAL PERCEPTION
Activities are isolated from organization as a whole; tasks are measured by output
in time (activity per hour or minute)
Activities are integrated into organization as a whole; tasks are
measured as part of overall organizational goal
Time Concept of Culture
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Religion
• Religion provides the basis for transcultural similarities under shared beliefs and behaviour
• Dominant religions of the world: • Christianity • Islam • Hinduism • Buddhism • Confucianism
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Material Elements of Culture
• Material culture results from technology and is directly related to the way a society organizes its economic activity
• Technological advances have probably been the major cause of cultural change in many countries
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ManifestaConofCulture
• ValueSystems
• LifePerspecJve• PoliJcalandSocialNorms
• IdeologyandBeliefSystems
• CommunicaJonsStyles(High-contextv.lowcontextlanguage)
• OrganizaJonalculture(MulJ-chronicv.mono-chronic)
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RootsofCulturalMisunderstanding
• ValueSystems
• LifePerspecJve• PoliJcalandSocialNorms
• IdeologyandBeliefSystems
• CommunicaJonsStyles(High-contextv.lowcontextlanguage)
• OrganizaJonalculture(MulJ-chronicv.mono-chronic)
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Approaches to Business Relations: Example of culture conflict
The Chinese construct
The Western construct
1. Relationships 2. Discussions of concepts 3. Business Agreements 4. Due diligence and
implementation 5. Risk management and
problem solving
4. Personal Relationships
3.Contract implementation
2. Decisions and negotiations on
processes and goals 1. Risk management and study of potential
problems.
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WesternComplaintsaboutChineseBusinessCulture
¡ Longer time scales ¡ Objective data and Information hard to get ¡ Performance management system unclear ¡ Incentive system not based on performance ¡ Financial management systems designed to monitor not to exercise control
and provide information ¡ Paternalistic organizational culture ¡ Not used to working on tight schedule and cost constraints ¡ Indirect Communications style ¡ Rules are unclear ¡ Too many changes ¡ Planning and priority setting not followed ¡ Non-transparent commercial and legal cultures ¡ Rely too much on Guanxi
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ChineseComplaintsofWesternBusinessCulture• Too rigid and inflexible
• Too straight forward (not diplomatic enough) • Too rule-bound
• Ask for too many details • “Slow” to make decisions • Inefficient government
• Too impersonal (do not care to build personal relationship)
• Too impatient (short in-country visits and rush to results) • Do not understand Chinese hierarchy and culture.
Source: compiled by E. Wong 17-01-12 27
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CulturalDifferencesasExplanaCon
• Cultural Conflicts may depend on circumstances and the relational framework – What is the nature of cross-cultural exchange and interaction?
• General principles apply only to the majority and may not be true for given individuals
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Disclaimer
Discussionsandviewsexpressedmaynotapplytooutliers 29
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PERSPECTIVES ON CULTURAL EXPERIENCES
BUSINESS – Exports vs.
domestic, private vs. SOEs
GOVERNMENT Socio-economicStrata
Expatsvs.Chinese
North-South,Rich-Poorregions
WEALLEXPERIENCECULTUREDIFFERENTLYDEPENDINGONOURBACKGROUND
Buyfromorsellingto
Demographics
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DoesGlobalizaConmeanCulturalConvergence?
DoesthepredominanceofWesterninsJtuJonsandvaluesintoday’sglobaleconomymeanculturalconvergenceand
westernizaJonofemergingeconomiesoverJme?
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Manifestculturei.e.behavior,artifacts,food,music,language,clothing–Superficialelements
Expressednorms&Attitudes
Intrinsicorcorevaluesofaculture(intrinsicelements)Source:Adaptedfrom
GhemewatandReiche
TheThreeLayersofCulture
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SuperficialversusIntrinsicCulture
• Superficialculturaltraitsarehabitandlifestyle–orientedwhileintrinsiccultureisbasedonvaluesystems
• Convergenceinsuperficialcultureisevidentbutintrinsicvalue?
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Cultural Analysis – The Hofstede Model
• Individualism Reflects the extent to which people in the society are focused on individual achievement as opposed to that of the group
• Power Distance Reflects the extent to which people accept inequality in society
• Masculinity Reflects the extent to which the society is focused on competition and achievement vs. caring and nurturing
• Uncertainty Avoidance Reflects the extent to which individuals in the society expect to be guided by formal rules and regulations
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IndividualisCcsociety
¡ Ties between individuals are loose and everyone is expected to look after themselves and their immediate family
¡ Worker seek time for personal life, freedom in adapting their own approach to the job, and challenging work and give them a sense of accomplishment
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CollecCvistsociety
¡ People are integrated into strong, cohesive groups, which throughout their life continue to protect them in exchange for un questioning loyalty
¡ Workers seek training opportunities to upgrade skills. Good working conditions, and full use of their skills on the job
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Powerdistance
¡ The extent to which less powerful members of institutions and organizations expect and accept their power is distributed unequally
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SmallPowerDistance
¡ A limited amount of dependence of subordinates on their bosses
¡ A preference for consultation and interdependence between bosses and subordinates
¡ May object to ideas and disagree with bosses
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Cultural Analysis – Hofstede
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Masculinity-Feminity
¡ Masculine culture is assertive, aggressive, and decisive
¡ Masculine culture attaches strong importance to opportunity for high earnings, personal recognition, career advancement, and challenging work
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FeminineCulture
¡ Good relationship with direct superior ¡ Value Cooperation with others ¡ Live in areas preferred by their family ¡ Desire security of employment
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UncertaintyAvoidance
The extent to which members of a culture feel threatened by uncertain or unknown situations
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Lowuncertaintyavoidance
¡ absence of formal rules except where absolutely necessary
¡ Greater respect for rules when they exist
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Long-termOrientaCon
“ThisdimensionassociatestheconnecJonofthepastwiththecurrentandfutureacJons/challenges.Alowerdegreeofthisindex(short-term)indicatesthattradiJonsarehonoredandkept,whilesteadfastnessisvalued.SocieJeswithahighdegreeinthisindex(long-term)viewsadaptaJonandcircumstanJal,pragmaJcproblem-solvingasanecessity.“
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Highuncertaintyavoidance¡ Conflict must be eliminated from interpersonal
relationships ¡ Rules must cover as many aspects of operations as
possible ¡ Mangers must give precise answers to subordinates ¡ Individuals must be given precise job description and
job instructions ¡ There must be absolute clarity of responsibility and in
reporting lines within organization
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Indulgence
• “IndulgencestandsforasocietythatallowsrelaJvelyfreegraJficaJonofbasicandnaturalhumandrivesrelatedtoenjoyinglifeandhavingfun.”Incontrast,“restraintstandsforasocietythatsuppressesgraJficaJonofneedsandregulatesitbymeansofstrictsocialnorms.”
Source:hkp://geert-hofstede.com/index.php
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Cultural Analysis – Hofstede
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Comparative Organizational Culture
CHINA 1. Highly collectivist
(HC) 2. High masculinity
(LM) 3. High power-distance
(HPD) 4. Low on uncertainty
avoidance (LUA) 5. HighLongterm
OrientaJon(HLO)
NORTH AMERICA 1. Highly
individualist (HI) 2. Low masculinity
(HM) 3. Low power-
distance (LPD) 4. High on
uncertainty avoidance (HUA)
5. LowLongtermOrientaJon(LLO)
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Source: Cultural Tools, the Hofstede Centre website, November 2014
Hofstede Indices: China, Canada and Brazil Compared
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OtherChineseCulturalViews
• Confucianism–respectforhierarchy,emphasisonprotocolsandsocialstability,moralitythroughknowledge.
• Taoism–BalancesinlifeandrelaJonshipsandemphasisonharmonyandtheMiddleway.
• Buddhism-Non-engagementandnon-materialism,sancJtyoflife,charityandharmony.
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CulturalValues&WaysofThinking
American1. Individualist2. Youthoriented3. Egalitarian4. InformaJonoriented5. Competencybased6. InsJtuJonalrule7. TransparencyinLaw8. ReducJonistthinking9. SequenJal
Chinese1. CollecJvist2. RespectforAge3. Hierarchical4. RelaJonshiporiented5. Hierarchical6. Personalrule7. Maintainharmony8. HolisJcthinking9. Circular
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AnExample:CriteriaforDealingwithRuleviolaCons–theimportanceofrelaConship
China
TheWest
1. RelaConsandCompassion情 2. Reasonableness理 3.Legality法
3.Relations and Compassion情
2. Reasonableness理 1. Legality法
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ConceptofPsychicDistance• TheUppsalainternaJonalizaJonschooldefinedpsychicdistanceas“thesumoffactorsprevenJngordisturbingtheflowsofinformaJonbetweenfirmandmarkets”(JohansonandWiedersheim-Paul1975,p.308);psychicdistancehasbeenwidelycitedasapredictorofinternaJonalmarketselecJon.TheconnecJonbetweenpsychicdistanceandknowledgeisthatafirm’smanagerstendtowardthecountrymarketsthattheycangettoknowmosteasilyandavoidmarketsthataredifficulttogettoknow,atleastearlyoninthefirm’sinternaJonalizaJonprocess.
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PRIMARYELEMENTS FORMATIVEINDICATORSCommercialJes Two-waytrade
StockofforeigninvestmentPoliJcalJes Tradeagreements
TraderepresentaJonofficesValueofforeignaids
HistoricJes ColonialrelaJonshipSharedwars
GrographicJes GeographicproximitySocialJes CulturalsimilariJes
SportpreferencesLanguagesimilariJes
InformaJonJes SecondaryinformaJonavailabilityImmigraJonnumbers
Development Levelofdevelopmentoftheforeigncountry
LevelofcorrupJonoftheforeigncountry
NaConalPsychicDistanceIndicators
Source: Paul Brewer, “Operationalizing Psychic Distance: A Revised Approach,” Journal of International Marketing. Vol. 15, No. 1, 2007, pp. 44–66.Confirmed for Australia who has shortest distance with the UK, NZ, US, Singapore, HK, Japan, Canada, NPG, Fiji, and Malaysia in that order.
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Culturaldistance AdministraCveandpoliCcaldistance
Geographicaldistance Economicdistance
Distancebetweentwocountriesincreaseswith
• Differentlanguages,ethniciJes,regionsandsocial
• LackofconnecJveorsocialnetworksnorms
• LackofsharedmonetaryorpoliJcalassociaJon
• PoliJcalhosJliJes• Weaklegaland
financialinsJtuJons
• Lackofcommonborders,waterwayaccess,adequatetransportaJonandcommunicaJonlinks
• Physicalremoteness
• Differentclimates
• Differentconsumerincomes
• Differentcostsandqualityoffinancial,humanandnaturalresources
• DifferentinformaJonknowledge
Distancemostaffectsindustriesorproducts
• WithhighlinguisJccontents(TV)
• RelatedtonaJonalidenJty(food)
• Carryingcountry-specificqualityassociaJon(wines)
Thataforeigngovernmentviewsasstaples(electricity),asnaJonbuildingreputaJons(aerospace),orasvitaltonaJonalsecurity(telecommunicaJons)
• WithlowvaluetoweightraJo(cement)
• Thatarefragileorperishable(fruitsandglass)
• InwhichcommunicaJonisvital
Forwhichdemandvariesbyincomes(car)Inwhichlaborandothercostdifferencesmaker(garments)
Source:PankajGhemawat,“DistancesJllmakers,thehardrealityofglobalexpansion,”HBR,Sept200117-01-12 55
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ChallengesforCanadiancompaniesinChina
Source:AsiaPacificFoundaJon–CanadianBusinessesinChinaSurvey2012
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EaseofDoingBusiness:Chinainthe50thpercenCle
Canadaranked13thoutof183.JapanandSouthKorearanked20thand8th.
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HowfarhasChinacome
Source:DoingBusiness2013-China,theWorldBank,Fig1.4
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HowChinaandComparatoreconomiesRankonEaseofDoingBusiness
Source:DoingBusiness2013-China,theWorldBank,Fig1.2
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ImprovementinCPI,butlevelsClllow
10isleastcorrupt.Canadawas8.7(10thbestintheworldoutof183countries).Chinaimprovesfrom50/54to75/182.
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Source:NandaniLynton,ManagingtheChineseway,McKinsey&CompanyJuly13,2013.
BeingeffecJveinChinameansrealizingthateverythingispoliJcal-ExecuJvesmusthaveakeengraspofpoliJcalandsocialtrends………..ThesortoflinearanalysisgenerallyfavoredintheWestdividesa
problemintoitscomponentpartsandseeksraJonalsoluJons.IntuiJvethinkersseekpakernsand
relaJonshipsbetweenaproblemanditscontext,includingcontradicJons.“TheChinesedon’tpolarize-…….;wegetmovinginstead,”saystheChineseheadof
agloballife-sciencescompany.
Everythingispersonal–“itisjustbusiness,
nothingpersonal”won’tcutitinChina
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TwokeyConcepts:GuanxiandGivingFace
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TheConceptofGuanxi
• GuanximeansReciprocalrelaJonsthatentailmutualobligaJons.Itisameasureofone’sgroupmembership.Itmeansmorethanmembershipinanetwork.Itismembershipininterlockingin-groups-“Friendofafriendisafriend.”
• Guanxiisonlythefirstlevelof“connecJon”–“GangQing”measuretheemoJonalakachmentanddepthofsuchrelaJons.
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Brothers
Buddies
Oldfriend
Friend
Levels&sourcesofGuanxi
Family
ArmiesSchool
(classmates)
Hometown(Ethnicity)
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NetworkA
NetworkC
NetworkB
InterlockingGuanxiNetworks
“Socializing”orrelaJonshipculJvaJonbecomesaninvestmentcrucialtoChineselifethatitsvalueisunquesJoned.FriendshipsorGuanxibecomesaneconomicassetpeopletrytomoneJzetooffsetitseconomiccost.One’ssocialstatusdependsonone’sguanxi.
Gunaxiisnot
industryspecific
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• Guanxiisimportantduetoin-groupculture,immatureLegalsystem,non-transparentandfluidpolicy/regulatoryenvironment,non-trusJngbusinessculture,andriskmanagementnecessity.BUTGUANXIISNOTEVERYTHING.
• Protocol(orgoodmanners)meansneverembarrasspublicallyandsay“no”directly-ThismeansaneedtobuildtrustandpersonalrelaJonship-DonotunderesJmatetheimportanceofpersonalchemistryandrelaJonshipdespiteoutwardcourtesyandwarmth.IndirectnessincommunicaJonstyleandhierarchicalstructuremeansnon-linearworkprocessesandfollow–up.Pa4enceisvirtue.
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GivingandLosingFace
• Givingface(GeiMianZi)meansgivingappropriaterespectaccordingtorankandseniorityingiu-givingandseaJngarrangements,offeringpublicpraisesandrecogniJon,renderingfavorsforfriends(andtheirfriends),elevaJngothers’socialstatusi.e.letthembuyameal,angenerallymakingthemfeelandgoodlook.
• Losingface(DiuMianZi)meansacJnginappropriately,notbeingtreatedaccordingtoone’ssocialstatus,sufferingpublicembarrassment,andcausingothertoloseface.Forexample,arguingwithsomeonepublicallyoracJngconfrontaJonallywouldcausebothparJestoloseface.Losingfacewouldundermineone’sstatusandcredibility.
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ElementsofBusinessCulture
NorthAmerica� QuickmeeJngs� Processoriented� Informal� LegalisJc� Makecoldcalls� DirectcommunicaJon� WrikencommunicaJon� Ruleoriented� Avoiduncertainty� DelegaJonofresponsibility� ObjecJveperformance&
financialmeasures� Individualaccountability
China� LongcourJngprocess� Trust&relaJonship� Formal� Principle-based� Useintermediaries� Indirectness� VerbalcommunicaJon� valueoriented� Acceptneedforchange� AutocraJcmanagement� RelaJonalcriteriaand“big
picture”criteria� ObservanceofinstrucJons
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AContrastinCultureChinaandCanada
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Whatdothesetablesedngstellus?
HighdegreeoftaskspecializaCon-Clarityoftasks
Flexiblegeneralist
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Twowaysofapproachingproblems
Wetacklethemhead–on
Wegetaroundthem,someJmeswithaliklehelpfromfriends
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HowdowerelatetoourleadersTheyareelevatedandtreatedas
aboveus
Theyareoneofus
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China’sCollecCveCulture
TheCollectivistApproach
TheIndividualisticapproach
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Whengoodfriendsmeet
China
Canada
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TargetofRecogniCon
TheGroup
Theindividual
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LiuYang’sEastMeetsWestIconographs
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HandlingProblem
WestmeetsEasts------LiuYang
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ExpressingOpinions
WestmeetsEasts------LiuYang
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HumanRelaCon
WestmeetsEasts------LiuYang
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LifeStyle
WestmeetsEasts------LiuYang
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Party
WestmeetsEasts------LiuYang
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InRestaurant
WestmeetsEasts------LiuYang
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Leader
WestmeetsEasts------LiuYang
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PracCcalCulturalTips• SchedulingandKeepingAppointments• SeaJngarrangementsatdinnerandbusinessmeeJngs
• DressCodesandExchangeofGius• MeeJngprotocols–firstmeeJng• The“DelegaJon”andIndividualRanks• GreeJngsandExchangeofBusinesscards• MakingConversaJon&AddressingEachOthers• TheChineseBanquetandtoasJng
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