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For Chinese business, the means is more valuable than the end

By Jeremy Ballenger - posted Tuesday, 1 February 2005


Numerous perceptions exist on why the Chinese diaspora is successful in businesses abroad and apparently more so than in their domestic market. A review of Chinese cultural roots only provides part of the solution. Greater insight can be garnered by combining ethnicity with contemporary business theory. The mere fact of being “different” is the key.

A free trade agreement (FTA) with China looms on the horizon. The popular press is whipping up concern with headlines like “Be warned - The China danger”. Fears the dumping of low cost imports on the Australian market will crush domestic suppliers has prompted surveys, with the Australian Industry Group duly reporting that 848 Australian manufacturers “suspect” they have seen some form of low cost, predatory pricing by Chinese competitors.

Certainly credible reportage, but a little caution is necessary. Results like these are easily refuted on questions about sample size, leading questions to interview subjects and similar issues that can influence how much sway they hold. Arbitrary surveys aside, China poses a very real threat to Australian business should it achieve unfettered entry to the global marketplace.

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Parallel expansion efforts are occurring globally. China’s entry will make the international market considerably larger, meaning Australian business (and businesses from other nations) must pay attention to developments. The threat is the possible influence the sheer size of China’s presence will have on the free market.

There is a maxim in strategic management that every threat posed holds within itself an equal, if not greater, opportunity. The situation arising from the China FTA and the alleged threat to Australian business is no different. The present opportunity here is to learn from the Chinese diaspora before China gains “market economy” status, and better prepare ourselves to interact with the billions of Chinese businesses and consumers.

Yet circumspection is required, especially when investigating a particular ethnic group. We must be careful about drawing the conclusion that all Chinese are united by their ethnicity, cultural legacy or other such traits. This approach tends to focus solely on the observable commonalities and ignores the differences. It is rarely noticed that there are many poor Chinese overseas, mainly in rural areas, as well as rich and successful ones. Differences between various groups of Chinese in these respects turn out to be just as striking as any similarities between them, or more so.

It follows then that ethnicity (or “race”) must be accepted as just one element of many sentiments, ideals, prejudices and stereotypes that we might hold. We would do better to acknowledge racial differences, confront them openly, and learn how to best cope, instead of pretending, as some do, that race is a dirty word to be avoided altogether.

In openly confronting this issue, we can look to the roots of Chinese culture for insight into contemporary interactions. Two thirds of the population still live in rural areas, working the land as part of a communal society, not as individuals (as we do in the West). Loyalty and obedience to familial structure binds labouring groups where agriculture is regarded as the root of society. With agriculture the root, commerce becomes the branch, and historical Chinese social and economic theories have favoured the former and slighted the latter.

Signally entwined with this lifestyle is a Confucian morality based on the construct that a society organised under a benevolent moral code is prosperous and politically stable, therefore safe from attack. Scholarship and kinship are revered.

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Discussions about the benevolence, prosperity and political stability of domestic China belong to a different forum, as we are concerned, prima facie, with the Chinese who pull up stumps and head abroad to find prosperity. This adventurer takes with him the ideals with which he was raised, employing them to best effect in the new environment.

Prominent among these ideals are approaches to negotiation that stem from Confucian sentiments. The concepts of guanxi (personal connection), renji hexie (interpersonal harmony) and chiku nailao (endurance, relentlessness) are arguably most informative in describing some of the differences in the “Chinese” way of doing business.

Western business is transactional. The initial transaction between parties commences the relationship, and should this be successful, the practice generally continues. Based on continuing behavioural patterns, we might begin to trust our counterparts. By contrast, the Chinese believe that there must be trust first, and only then can business be done. There is also an inherent wariness of foreigners borne of hard won experience. Further, they trust in two things above all - their family (Confucius) and their bank accounts (jiejian or thrift).

The building of trust through guanxi and renji hexie is linked to the structured societal relationships that are pivotal in Chinese society both at home and abroad. In what can seem to the Westerner at times to be a frustrating delaying tactic, a large amount of effort is invested in establishing personal relationships, often through intermediaries known to both parties, as a precursor to any commercial dealings.

This process grows trust between the parties, providing impetus to moving the relationship up the ladder of cardinal Chinese societal relationships beyond mere acquaintances towards something resembling family.

This approach is rooted in the concept of yin and yang, where finding the way (the Tao) is more important than finding the truth (the means is more valuable than the end). And they are prepared to work hard to find this compromise. The Chinese are famous for their work ethic, instilling it from childhood. The difference is they take this diligence one step further - to endurance (chiku nailao). To the Chinese, relentlessness and endurance are considered far more honourable in society than talent.

Unfortunately this has led to occasional accusations in relation to corruption and other nefarious attitudes, but these opinions tend to illustrate a lack of understanding that this is above all a very moral approach.

It is strange that this approach does not enjoy greater prevalence in the West. Given the increasing amount of opinion devoted to how careful business must be with shareholder funds, efforts to ensure that commercial dealings are conducted with trustworthy parties would seem intelligent to say the least. Perhaps the reason we do not adopt them is they are not expeditious enough. The Chinese are known for their patience - 2,000 years to build the Great Wall is one example. Another might be their leasing of two underdeveloped little islands (Hong Kong and Macau) for a few hundred years, to have them peaceably returned as economic powerhouses. Yet it seems in the West, most things cannot happen fast enough.

These trust-associated approaches are an excellent basis for controlled and flexible non-task sounding of counterparts prior to committing resources. The combination of the two (agrarian and Confucian approaches) is an effective means of risk minimisation in business negotiation.

Does this make the Chinese good long-term thinkers? Their agrarian roots and continuing reliance on the land make them patient, as all things take time to grow.

Their language may also contribute to their success. Just as Western children learn to read Roman letters and numbers at an early age, Chinese children learn to memorise thousands of pictorial characters. The idea of a pictographic language, where words are pictures rather than letters, lends credence to the concept that Chinese thinking tends towards a more holistic processing of information, making them better at seeing the big picture, while we in the West have an easier time focussing on details.

Examples abound where Western companies have not been able to see the forest for the trees. The volume of existing business conducted with China leads to a focus on the negotiation essentials needed to make the deal. Ultimate victory is the aim of Western business, whereas the Chinese are more concerned with the process than the goal. This can be illustrated in an interesting fashion.

One great Chinese pastime is the game of Go. Generally considered a Japanese game, it came to existence over 3,000 years ago in China where it was given the name, Wei-chi. The popularity of Go quickly spread to other countries like Japan and Korea, although in China it has had its good and bad times. Confucius considered it nothing better than a waste of time, but not all critics were as harsh. Chairman Mao required his generals to study and learn from it, and through the Cultural Revolution it was considered a pastime for intellectuals.

Asians play Go and Westerners play chess. Recently these games have been used as explanatory mediums for understanding the competitive positions and strategic thinking of both groups.

As descriptive metaphors for both Chinese and Western business, these two simple games are surprisingly informative. In chess, the objective is simple - capture of the opposing King by virtue of superior offensive strategy, analytical and tactical skill. Success is achieved by destruction of the opponent through movement in one overall direction, and tied games are not uncommon. Opening positions are predetermined, moving through what can be reasonably described as mutually assured destruction with the taking of pieces to arrive at the end game - the final decisive showdown. The victorious King remains, dominating the board. (Former CEO of General Electric, Jack Welch, demanded that GE businesses must be number one or two in their markets - if not they were divested.)

In Go there is no precisely identified goal, aside from the conquest of areas through strategic flexibility, using context to guide a sense of direction. Profits are relative, and with tied games seldom occurring the ideas of sharing and co-existence are prominent. There are no predetermined starting positions and minimally formalised rules, with form created as the game develops according to a constantly evolving strategic overview. Both sides start with nothing, building organically from zero, the game ending in peaceful co-existence. Strategic considerations and holistic thinking take priority over tactics, and a strategy of exercising restraint in the opponent’s sphere of influence is widely adopted. Remember, for the Chinese, the means is more important than the end.

We should also remember that the Chinese produced Sun Tzu - author of arguably the most influential book on strategy ever written, The Art of War.

In closing, all of this information begs the question - why is there such a widely held perception that the Chinese overseas are successful? The answer, if there is to be one, has been related in business schools around the globe, and comes from the eminent Harvard Professor Michael Porter.

The combination of personal trust and interpersonal harmony as a precursor to commerce, an incredible work ethic, the moral approach of means over ends, thrift, and the strategic flexibility and support for sharing and co-existence in the marketplace are quite different, often times the opposite of how the West approaches business. This should not be surprising considering the Chinese affinity for balance in all things. It is the kind of difference that translates directly to differentiation. Differentiation leading, more often than not, to sustainable competitive advantage.

Why sustainable? Porter argues that differentiation stems from uniquely creating value, with sustainability derived from performing a range of unique value activities that impact purchase criteria. The mix and congruence of ideals and approaches detailed above fit Porter’s definition of a range of activities, and held up against many Western approaches, they are certainly unique. This situation provides some measure of explanation for the success of the Chinese overseas. At home in China, it really isn’t that different.

Put simply, doing things differently to your competitors in a marketplace, any marketplace, can pay dividends. Never forgetting of course, that if things cannot be done differently, perhaps it’s time to do something different.

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About the Author

Jeremy Ballenger is a Melbourne-based researcher and writer. His website is here.

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