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Market Research

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1. Introduction

An increasing amount of attention is being paid in the literature to business Guanxi or relationship in Asia particularly in the business dominated economies of the Hong Kong, Singapore, Taiwan and the People's Republic of China. Chinese business relationships and contracts that needs to be understood and worked within to successfully conduct business and management in most countries in the region. However, the attention is directed to the different perspective on the importance of guanxi to business practices and possible impacts of the guanxi on western firms' success in China.

In order for western firms to enter China market, they have to confront with complex and constantly changing ethical percepts in China (Wu, 1999) and different types of guanxi not only exist but also can be harnessed in an ethical fashion to create wealth (Leung et al., 1999). Dates back to the mid 1980s, Motorola's presence operates the largest owned subsidiary in China and had moved their country from a centrally planned economy to a market economy. The Motorola has invested in China for a decade and is so far the largest foreign investor in China. Therefore, guanxi has an impact on Motorola to be an established company in China compared to their competitors, Siemens and Nokia.

The limitation on this research is addressed. The continuous development and changes in market condition in China is of a certain period of time. This is because it needs to be adapted to fit the prevailing situation at that time. Moreover, interview session is difficult to conduct as the research is on Motorola-China and therefore it is heavily rely on secondary sources.

2. Guanxi's implications to practices

In recent decades, there have been several fundamental concerns for western companies in China. For the Motorola, they learn how to manage a socialist workplace culture in which employees depend on their state-run employers for housing, food transportation and other necessities. The managers also have to baffle by guanxi, the vulnerable Chinese practice of developing and nurturing intricate networks of personal relationship. Nevertheless, priority is sometimes given to them over bottom-line performance.

As China is admission to the World Trade Organisation (WTO) in 2001, it has reduced tariffs and business prospects are likely to grow even more promising. In China, standard incentives given to foreign enterprises include a complete income tax exemption for three years with a fifty percent exemption for a further two years and a business tax rebate. According to sales volumes, China's high-tech parks and zones usually offer faster customs clearance and other shortcuts through red tape that makes life easier.

For instance, it allows Motorola to generate greater market access for lower tariffs and guanxi for further flexibility. For example, Motorola managed to cope with the tight market in part by utilizing the Chinese practice of guanxi due to the China's effort to promote business-education programmes, multinational operation that are growing rapidly. In addition, the company learned that retention tactic favoured in the west such as rewards does not apply well in China because financial markets are very tightly controlled by the government. Therefore, they have changed the policy to health insurance and other benefits that are more powerful selling point for recruiters in China (Ahlstrom, 2004).

Contemporarily, multinationals are moving aggressively to localize their operation in China by hiring Chinese talent to fill expatriates. Thus, the Motorola shift to localize management and cultural issues to handle talent wars. The importance of guanxi is realized when the expatriate managers were unwilling to pass knowledge along to the Chinese because they wanted to hang on their jobs. According to Xing (2003), they resolve this problem by adopted the Chinese policy by giving the expatriates an additional incentive such as better jobs or richer retirement benefits if they helped localized Chinese operations. As a result the foreign expert were very glad to train the local staffs. This practice results because the company realize that these talents know Chinese language and have superior cultural skills, such as utilizing guanxi networks and dealing with local political official (Lieberthal, 2003).

Ahlstrom (2004) stated that multinationals also could boost retention by capitalizing on another aspect of Chinese culture that is employees' strong loyalty to their families, which is typically far stronger than their link to any employer or organization. Hiring the wife of a valuable employee, for example, might be viewed as unseemly nepotism in the United States, but in China it can be a way of cementing the tie between that employee and the company.

On the other hand, having a good understanding of Chinese culture and business practices are most essential factors to do business in China (Chen, et. at., 1994). Thus, a conceptual framework for testing business effectiveness of venture operation in China is developed as in the Figure 1 below (Appendix 1, p13)

Figure1: Conceptual Framework

Former Motorola human resources manager Greg Wang (2004) says that guanxi is perhaps more universal than is widely known. Several recent reports on recruiting in the United States show that employee-referral programs are by far the most effective way of hiring outside recruits. Motorola, whose Chinese operation has 12,000 employees and accounts for 15 percent of the company's total revenues, has been especially successful with its localization efforts. In 1994, 11 percent of the company's middle managers were Chinese nationals. Today, the number is 84 percent.

On the other hand, the company do learned to respect 'face' in order to build good relationship in China. This is because 'face' issue is an essential component of the Chinese national psyche. It denotes the general tendency of Chinese people to do business with long-term orientation. With good relationship, Motorola can always find a better solution when unexpected circumstances occur and excused for future business improvement. It can be better off with goodwill and friendship than signing a contract. Motorola realized that a well-established guanxi is built on the basis of mutual trust and giving face to one another but it cannot be overused and the favours will have to be reciprocated in one way or another.

According to Luo (2004), foreign



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