China: Make Friendships First, Then Profits
Follow the formula for success, slow down and appreciate the Chinese approach to doing business.
This story first appeared in the June 2008 issue of Entrepreneur. To receive the magazine, click here to subscribe.To learn about other featured countries, please check out our Global Hot Spots page.
Silas Deane, 42-year-old president of Baden Bath, a $1 million provider of luxury showers, tubs, sinks, vanities and the like, found himself in China for the same reason every company seems to find itself in the world's most populous country: manufacturing. China is the world's second largest economy and one of the leading destinations for direct foreign investment. But just because China is the global go-to country doesn't mean that making it work for you is a piece of cake. Indeed, overcoming cultural differences can still be as formidable as scaling the Great Wall.
The Chinese want to do business with individuals--not companies--so cultivating friendships is crucial. Rather than cutting to the chase, the Chinese prefer a courtship filled with get-to-know-you banter and big banquets full of mysterious delicacies. Thus, like other Americans, Deane had to rein in his "get the deal done and move on to the next one" philosophy. To drive home the point, instead of talking turkey, the Nashville, Tennessee, entrepreneur once found himself getting a two-hour foot massage with one of his hosts so that they could chew the fat. And nearly every time he visits his manufacturers in Foshan, they insist on taking him on long drives in the countryside to build camaraderie, often recovering ground he's admired on previous trips. "They want to spend time with you," Deane explains. "They want to get to know you."
As a formula for success, Barry Tomalin, director of cultural training at International House, recommends you get a Chinese agent and treat your partners to "very nice meals in very expensive places . . . doing this for six months to a year." Chinese society rests on a foundation of guanxi, your network of relationships that is supported by the favors you do and accrue. Deane, for instance, will be helping one of his manufacturers--who doesn't speak English--attend an upcoming trade show in Chicago and hopefully win new business. In return, he's giving Deane the samples he's shipping over from China and offering to bring new products just for Baden Bath's benefit.
But despite the relationship building, Mike Saxon, author of An American's Guide to Doing Business in China, warns that a seemingly solid rapport can still be trumped by yuan. "People who go over to China think it's the China of centuries ago: Confucius, everybody's honorable and whatever--and it's not! It's a different culture today," explains Saxon, who adds that the 36 Stratagems, a collection of Chinese proverbs, is part of the basic Chinese gestalt. Indeed, Saxon says that it's not uncommon for Chinese companies to keep four sets of accounting books.
Saxon also says that the Chinese take a long-term view and aren't risk-takers. The society is less individualistic than America's, so the Chinese aren't big on confrontation. To this end, Tomalin highlights the Chinese belief in the "middle way," a nuanced form of compromise, which means they may insist on working out an agreement rather than taking no for an answer. For an American, this translates into fostering respect, including stifling open criticism.
The challenges can be as big as China, but Deane says his relationship with the Chinese has been a valuable asset. "I would consider a lot of our manufacturing partners over there more than just business partners; they're friends," he says. "They advise me a lot. They're interested in seeing us succeed, too."
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