PHD Research ProposalTitle:The Extent of Guanxi between Chinese Suppliers and Their Western CustomersSubmitted by:Terry Ji RuanTable of Contents of this Proposal1. Introduction2. Aims and objectives3. Topics justification/scope and limitations4. Literature review5. Methodology and data collection6. Proposed developmentBibliography1. IntroductionChina started its economic reform since 1979 and now becomes the second biggest economy in the world due to the dramatic rise of Chinese economic development. More and more attentions have been focused on how the Chinese do business and how to cooperate with them through culture. Likewise, as for the Chinese businessmen, they are facing the outside word and need to learn more about other cultures. Therefore, Intercultural business communication becomes a big issue during the rising of the Chinese economic development.Owing to the Chinese culture, Chinese businessmen spend a lot of time and money on establishing personal relationship with the domestic customers, which is called guanxi in China. Guanxi, a phase from Chinese PinYing, can be roughly translated as personal ties, which presents the totality of the relationship between two persons. It is so complicated and quite different from the Western business relationship (So and Walker, 2006).In international business section, do the Chinese people do the same way as they do to their domestic customers? And does guanxi work? Because when we talk about guanxi, it usually refers to the relationship among the Chinese. In China, when a person has a lot of powerful guanxi, it will be easier for him or her to succeed in business. As for the international business section, is it conducive to the sale if the Chinese establish guanxi with their foreign customers by the Chinese ways, like big dinner, valuable gifts and big entertainment? What extent does guanxi exit between them?Most of the researches have focused on guanxi in Chinese society, whereasresearch on guanxi between the Chinese and the Westerners is scarce. More over, guanxi and cultural dimensions, these two areas of work, have never been brought together before. This paper will focus on the guanxi between the Chinese and the Westerners by the means of analyzing the cultural dimensions and so-called “guanxi dimension”. And a research will be carry on from the cooperation between the Chinese suppliers and their Western customers.2. Aims and objectives2.1 Aim(s) of proposed study:Find a better way for the Chinese to build up relationship with their Western customers. Also give some suggestions for Westerners to cooperate with their Chinese suppliers.2.2 ObjectivesTo find out what extent guanxi exits between Chinese suppliers and their Western customers? Also, establish a new theory named “ guanxi dimension”, which can specify the extent of guanxi between two cultures.3. Topics justification3.1Why I chose this topic?I have been working for Chinese companies as a part-time interpreter andtranslator for more than six years and negotiating and entertaining hundreds of foreign customers who are mainly from the Middle-East, Europe, Korea and America. Therefore I have plenty of experiences related to the topic which I like very much.3.2 The originality of the researchFirstly, the research brings together areas of work that have not been brought together before, that is, guanxi and cultural dimentions. Secondly, this research will try to establish a new theory named “ guanxi dimension” which can specify the extent of guanxi between two cultures.4. Literature review4.1 Theory involvedThis study involves some theory of guanxi and several cultural dimensions form Hall ,Trompenaar and Hofstede , such asz Trompenaars’s culture dimensions, specific and defuse.z Trompenaars’s culture dimensions, universalism and particularismz Hofstede’s culture dimensions Power Distancez Hofstede’s culture dimensions Individualism/Collectivismz Hofstede’s fifth culture dimensions, long- versus, short-term orientationSome relevant business network theory will be analysed in this research in order to compare the business network styles. Last but not least, some philosophies and religions will be deeply discussed to find out primary cause of the culture difference.4.2 Guanxi in Chinese Business4.2.1. What is guanxi?Guanxi, a phase from Chinese PinYing, can be roughly translated as personal ties ，which presents the totality of the relationship between two persons. It is so complicated and quite different from the Western business relationship (So and Walker, 2006).Guanxi is a central concept in Chinese society. It can include personal relationships, social and business network.4.2.2. The essentiality of guanxiA survey made by Chu and Ju(1990) in China, found that over 42 per cent of respondents regarded guanxi as very important in social-economic life, while nearly 50 per cent regarded it as important or somewhat important. The Chinese value guanxi very much because it plays an important role in a person’s life. Some Chinese people even say “Without guanxi you can not achieve anything.” According to my own experience of living more than thirty year in China, guanxi is an essential element for people to survive .If you have guanxi, you can find a better job, get promotion, sell your products easily and have majority to do everything. In business area, guanxi can reduce business risk, get more useful information, help the promotion of products and reduce costs. In China, people everywhere concentrate their energies to accumulating guanxi and mastering the art of using guanxi as a basic strategy for survival and mobility (Gold,,Guthrie and Wank, 2002).It is a rule that the larger one’s guanxi network, and the more diverse one’s guanxi connections with people of different occupations and positions, the better becomes one’s general manoeuvrability in society and with officialdom to obtain resources andopportunities(Yang,1994).4.23. Guanxi is specialFirstly, guanxi is always personal. The relationships formed by guanxi are personal and not transferable, which is different from the Western relationships. In Chinese society, personal relations dominate and are not separate from business relationships. While business relations in the West are more technical and company oriented (So and Walker,2006). guanxi is always personal，which always struck with two people. Although it can be business relationship between two firms, you will see the true fact that it is based on two important persons from the two firms. The deal is guaranteed by the two people. If the relationship between the two important persons break up, than the relationship between the two firms will definitely break up too. Even if an individual is running a number of separate companies, the counter-party considers himself as still trading with the same entity, the person with whom he has guanxi. He could not have different relationship with each company. For example, "One can bankrupt a limited liability company and start all over again but liabilities with the person terminate only at death"(So and Walker,2006:69).Secondly, guanxi is always utilitarian. In the West, business relationships are based on a business culture and can be personal and personal or purely pragmatic (utilitarian). Other relationships e.g. social, family, have their own culture. But "guanxi is the totality of any relationship; it is indivisible, pragmatic, or personal and pragmatic, but essentially utilitarian"(So and Walker, 2006:3).Thirdly, guanxi is always involved in some special emotion like ganqing,yiqi and renqing. Ganqing can be roughly translated as emotional affects which denotes the closeness of guanxi( Jacob,1982). If you have good ganqing withsomebody, usually, you have good guanxi with him or her. Yiqi is a Chinese “ethic of brotherhood.” It refers to the tight bonds of mutual aid, trust, and loyalty linking the members of a friendship or partnership in business. While renqing is a favour offering to a friend, which is expected to be returned in the future (Yang,1994).But, do any ganqing,yiqi and renqing exist when the Chinese deal with the Westerners?4.24The use of guanxiSince guanxi is so important in the Chinese society. How do the Chinese develop and maintain guanxi? Firstly, they try to know more people, make more friends and get close to the people they know. And then, usually, they offer renqing to the people they know to get guanxi. "China is a world where what counts is not only whom one knows, but also who owes whom a favour." (Terry,1984) .When one owns others a favour, in China, people call one owns others a renqing, which is expected to be returned in the future. “Both parties expect to offer help when asked and both would try to repay the renqing debt at some later date and is an exchange without the sanction of law but the Confucian”(So and Walker,2006:69). "If there is guanxi between two businessmen, which seems willing to grant more favour terms to the other in business affairs so that deals are easily more struck between them" (So and Walker,2006:70). All in all, guanxi is often set up and maintained by the offering a favour by one party to another. So if the Chinese offer favours to their western customers, what would the westerners think of the favours?More importantly, the Chinese also develop ganqing to maintain or strengthen their guanxi. As mentioned earlier, the more g anqing you get, the firmer guanxiyou have. So the Chinese attend to develop ganqing in order to have and maintain better guanxi. Chinese businessmen try to get guanqing with their customers by offering big dinners, big entertainment and valuable gifts, chatting and drinking .Giving gifts to local officials is a matter of courtesy and observance of proper social form and etiquette. It will lead to the establishment of a good relationship, but not to ganqing Money/bribery relations are the weakest in term of emotional effect, followed by guanxi, renqing,yiqi,and ganqing as the most filled with emotional content(Yang, 1994). But, Do the Chinese attempt to develop ganqing with their western customers by big entertainment, value gifts or dinner and drinking?Favours seem to flow when guanxi is present. On the fact of it, deals are struck which appear less profitable to one or both parties than other options which appear readily available but which involve other parties (So and Walker,2006:15). What is the magic behind guanxi that allows this? It could be because there is an emotional tie between two businessmen or it may just be a rational business decision. So and Walker (2006) argued that affection is unlikely to be the reason behind most guanxi relationships. Even if affection can account for some guanxi behaviour, the majority of guanxi relationships are seen to be rational business practice by the parties involved. However, because of the impact of Confucianism, the Chinese do not mention the rational purposes but ganqing in front of their friends (Buderi and Huang ,2006). Do the Chinese also develop ganqing with their western customers without mentioning the rational business purposes? Can ganqing help their business relationship, especially, during the recession?4.25 The hypothesis of “guanxi dimension”In order to find out what extent guanxi exits between the Chinese suppliers and their Western customers, we need new cultural dimension called guanxidimension which would be involved in ganqing index, yiqi index,renqing index and so on. It will be established by quantitative approach among the Chinese as they have higher and obvious guanxi dimension.4.3 Particularism in Chinese Business4.31. Rules versus guanxiUniversalism-Particularism explains the two contrasting concept of a rule is a rule and particular obligation to relationship (Trompenaars and Hampden-Turner,1993). Universalists focus more on rule than relationship while particularists focus more relationship than rules. For the universalists, a deal is a deal. For the particularists, goodwill is important to relationship. In terms of business, Universalism-Purticularism elucidates the two contrasting strategies of developing core competence and getting close to the customer (Trompenaars and Hampden-Turner, 1993). According to Trompenaars Hampden-Turner(1993),the Chinse culture is high Purticularism .That is to say, relationship is very important to Chinese businessmen. It may include not only jointly developed strategies and shared secrets but also "help each other" which means “rather flexible than rigid”. According to this culture dimension, many Chinese people may spend a lot of money on establishing relationships with the customers, like big dinners, good entertainment and valuable gifts, in order to get particular interaction, which is flexible working style and ready to break rules. So, guanxi is popular in China because of the Particularism culture.When a guanxi network violates norms, it can lead to corruption (So and Walker,2006). Although, Efforts are made by the gift-giver or dinner host to leave the impression that he or she does not regard the gift or dinner as a crude bribe or mere payment for services renders, but as a social occasion forestablishing good relations(Yang,1994). The receivers always have the obligation to repay. Yang(1994) point out two reasons: first, one has to take into consideration one’s standing in public opinion and to avoid losing face in the eyes of others; second, one may help others with material benefit in mind. Although we can not say guanxi leads to corruption, guanxi is always associated with corruption. But, do the Chinese do the same to their foreign customers? Does it work if the Chinese do in that way?4.32. Contract versus trust and flexibilityWeighty contracts are a way of life in Universalist cultures. It services to record an agreement that parties have promised to do. It also implies consent to the agreement and provides recourse if the parties do not keep to their side of the deal (Trompenaars, and Hampden-Turner,1993). However, Gold,Guthrie and Wank, (2002) argue that Chinese business practices still approach such bedrock Western concepts as “contracts” from a perspective where the contract is seen as a cage that appropriate guanxi can unlock, although the Chinese have been attempting to set up and implement a set of regulations and laws.If you introduce contracts with strict requirements and penalty clauses to the particuliarists, they will feel they are not trusted and may accordingly behave in untrustworthy ways. Because they think it is too rigid to allow a good working relationship to evolve (Trompenaars, and Hampden-Turner, 1993). They regard their customers or suppliers as good friends and it is not kind to sign contracts with friends. Good-will and trust are basic of a business relationship for the Chinese people (Gold,Guthrie and Wank, 2002). If people have good guanxi, they don’t need to sign contracts. They prefer guanxi and trust to contracts.According to my own experience, some Chinese businessmen hate to sign contracts. Some of they have been in business for decades but they have not signed any contracts as they think contract is a too specific, too rigid, not kind and not flexible. They strongly believe that business should base on trust and credit. But, do the Chinese sign contracts with their western customers? Do they strictly follow the contracts? Do the western customers allow some changes for the contracts they signed with the Chinese?4.4 Diffuse culture in Chinese BusinessAcoording to Trompenaars and Hampden-Turner (1993), many western countries have specific culture while the Chinese culture is more diffuse. Specific is analytic, and diffuse is holistic or synthetic. In diffuse cultures, “everything is connected to everything” (Hampden-Turner and Trompenaars, 2000:79). Your business partner may wish to know where you went to school, who your friends are, how many children you have, what you think of life. Actually, the Chinese people do that as they wish to make closed friends with their business partners, which is also called la guanxi. In certain extent, Guanxi is rooted in diffuse culture.Traditional Chinese business culture is based on diffuse relationships, especially, Guanxi networks. These networks are used to obtain easy access to capital, establish business contacts, and share and disseminate information. All aspects of the relationships in these networks are interwoven, and the “diffuse” whole is more than the sum of its parts (Trompenaars and Hampden-Turner, 2002).In specific-oriented cultures, people segregate out task and relationship, while in diffuse culture, every life space and every level of personality tends topermeate all others(Hampden-Turner and Trompenaars, 2000).According to the “everything is connected to everything” concept, business is connected to Guanxi, friendship , drinking, rengqing, gifts and dinners etc. In China, if you do something officially, sitting around an office table to talk about your business, which is regarded as “no Guanxi” and you are regarded as a poor guy. People who have Guanxi, are regarded as VIPs and usually discuss business somewhere outside the office, like, at the leader’s, at a restaurant, at a tea house, at KTV or other entertainment arena. That’s why the Chinese are so busy---after work, they have so much la guanxi activities to do. Unlike the Chinese, after work, most Westerners have their own time to do whatever they want to do. Work is work, leisure is leisure. While in China, sometimes, work is leisure, leisure is work. Their leisure activities always have some business purposes.Because of the interlocked nature of a Guanxi network, a failure to uphold obligations is destructive to all members. Thus, a Guanxi network allows a member to ascertain the true character of potential partners (Li, 2001). That is why they need to know a lot about their business partners from all aspect through drinking, eating, chatting and playing. The diffuse culture obviously appears in these circumstances.Specific indexes are always more definite and unambiguous. They may force you to face facts. Yet diffuse relationships may inform you of what you have to do to restore your credibility and value to the customer (Hampden-Turner and Trompenaars, 2000). Diffuse cultures may be more concerned with more vague criteria, like goodwill and support from customers and the willingness of customers to remain loyal in the face of difficulties. Diffuse cultures would not deny that profits are necessary, but they would argue that the multiple bonds established with customers are the origins of these profits and the reason these profits continue. Such kind of business relationship just likes friendshipbetween two Chinese friends. They support each other and remain loyal in the face of difficulties. Therefore, Guanxi mixes friendship and business relationship together. The Chinese prefer establishing friendship first, and then do business. Western style friendship is a lot simpler than the Chinese one. In China, business may flow out of friendship whereas, in the West, friendship may flow out of business (Ambler and Witzel, 2004).The Chinese prefer establishing friendship first, and then do business. However, do the Chinese attend to make good friends with their Western customers before their business? Do they also expect the “friend style” of business relationship with their Western customers? what do the Western customers think of the “friend style” business relationship？How do they react?4.5 Long-term orientation in Chinese businessAccording to Hofstede(2001), long-term orientation is the extent to which a culture emphasizes long or short-term goals. The value of long-term orientation would be: “Most important events in life will occur in future.” A culture with a long-term orientation is based on stability, persistence, order and thrift. On the other hand, a culture with a short-term orientation will expect immediate returns and will focus on the satisfaction of immediate needs and wants rather than on long-term investments. China has high LTO (long-term orientation) couture while most of the West countries have low LTO.The Chinese want other people to owe them more than they owe you, so that in times of emergency or crises in the future, they can turn to you .They work very hard and save money for their Children’s education even they have a miserable life themselves. They are very frugal in order to build big house in the future or so. More importantly, the Chinese not only “invest” their hard workand money for the future but also “invest” Gauxi. Guanxi is a form of capital which needs to be invested to certain area and gain the benefit in the future. Guanxi is regarded as a resource, often called “Guanxi capital”, can be profitable invested and it can be a very long term investment for lifetime or even generations. The Chinese “invest” Guanxi and wish one day in the future they or their children can use this Guanxi. They invest valuable gifts, big dinners, expensive entertainment and all kind of favours to their customers in order to get a firm and long-term relationship with the customers so that they can get benefit in the future even though they do not have benefit at present. That is why the Chinese want other people to owe them more than they owe others.Also, Guanxi is first and foremost about the cultivation of long-term personal relationships. That is to say, Guanxi usually is regarded as a long-term relationship so people always need to maintain this relationship by la guanxi. For example, in the West, when a person changes circumstances and activities, he or she changes friends, whilst the Chinese seem to expect their friendship to stay the same over a long period of time, maybe for a lifetime (Davis, 1999). This is obvious a long-term orientation culture.According to Hofstede(2001),low LTO culture expect quick results, while high LTO culture have more persistence. This value difference is very obvious in the business area between the Chinese and the Westerners. Businesses in long-term-oriented cultures are accustomed to working toward building up strong positions in their markets. They do not expect immediate result. For example, the Chinese, who are looking for long-term agreements and solutions, prefer discussions to be protracted. Basically, they are trying to decide if you are really the type of company (or person) they want as a long-term partner (Lewis, 2003). Another example, la guanxi sometimes does not ask others to provide favours immediately, but one day in the future theymay need help, they can ask for help as they have Guanxi and better ganqing already. Therefore, those people who you have Guanxi with may help you in the future because of yiqi, renqing or ganqing. Chinese people are so busy with la guanxi because they are investing social relationship for future use. This point fully embodies the long-term awareness of the Chinese people. They are very patient with this “long-term games”.In addition, as for low LTO culture, Leisure time is important. As for high LTO, leisure time is not so important (Hofstede, 2001). Chinese people usually spent their leisure time for la guanxi. As mentioned earlier, work is leisure, leisure is work. Further more, another important consideration in this culture is to leave a profit for the next person (Lewis, 2006). If you want a long-term relationship, you have to make sure that the negotiating partner is winning something and makes some profit. Otherwise, there is no incentive for him to continue the business relationship. You have to leave something in order to have a long-term relationship (Marx, 1999). Therefore, relationship influences the business decisions due to the long-term orientation. All the above cultural characteristics can be seen from the Guanxi practices. It is no doubt that Guanxi is influenced by Confucianism. In a word, Guanxi relationship is also rooted in long-term orientation culture (Confucian dynamism).According to Hofstede(2001),low LTO (long-term orientation) culture expect quick results, while high LTO culture have more persistence. This value difference is very obvious in the business area between the Chinese and the Westerners. However, cultures are changing; the Chinese value of long-term orientation might be different in the business with Westerners. That needs to be tested. Especially, in the recession, do the Chinese attend to maintain a long-term relationship with their Western customers even they do not have benefit at present? Is guanxi relationship affected by the financial crisis?4.6ConclusionOwing to the Particularism , diffuse culture and long-term orientation, the Chinese value and use guanxi which is very personal and can break rules and lead to flexible settlement. However, many questions are expected to be answered refer to the guanxi between the Chinese and their Western customers. In addition, other cultural dimensions, like, power distance and Individualism/Collectivism, are also related to this topic and they need to be deeply analyzed in this research too.Owing to the limited time and the less of the researcher’s knowledge, business networks theory and philosophy have not yet be discussed in this proposal.5. Methodology and data collection5.1 IntroductionThis chapter presents the study’s selected research methodology. As shall be seen, the methodology is influenced by the purpose of this study and is based on an assessment of the optimal strategy for responding to the research questions. As such, the current chapter reviews the purpose of the study, presents the research questions, and discusses the data collection and research approach.5.2 Research Question•How do the Chinese build up and maintain relationship with their Western customers? Why?•How do their foreign customers think of the ways the Chinese build up the relationship with them?•What extent does guanxi relationship exit between the Chinese and the Westerners?•What role does guanxi play when Westerners deal with Chinese?•How can Westerners deal with Chinese by taking advantage of guanxi?More specific questions will be set up later according to the above main questions, including “interviews questions for Western customers”, “interviews questions for Chinese” and “questionnaire for Chinese”. “questionnaire for Westerners”.5.3 The Research SiteThe first site is East Mountain Foreign Langue School, where more than six hundred part-time students are studying business English. Around sixty percent of them are sales or interpreters from foreign trade companies.Another important site is the Canton Fair where many Western business people are finding their Chinese business partners.Other sites are export-oriented factories in Guandong Province.5.4 SamplesThe samples of Western customers will be chosen from Guandong province where there are some foreigners setting up their offices and purchasing ceramics. Most of they have experience in cooperating with the Chinese.The samples of Chinese businessmen, interpreters and some salesman are from export-oriented factories in Guandong province.5.5 Research ApproachThe research approach influences design and gives the researcher the opportunity to consider how each of the various approaches may contribute to, or limit, his study (Creswell,2003). The research approach refers to the deductive/inductive and qualitative/quantitative approaches.5.51The Deductive versus the Inductive ApproachMarcoulides (1998) defines the deductive approach as a testing of theories. The researcher begins with a set of theories in mind and forms the hypotheses on their basis. After that, the research tests the hypotheses. The inductive approach, on the other hand, follows from the collected empirical data and forms concepts and theories on the basis of this data (Marcoulides, 1998).This study follows the deductive approach which appears more appropriate to the purpose of this study.5.52The Qualitative versus the Quantitative ApproachThe quantitative tools for data analysis generally borrow from the physical sciences, in that they are structured in such a way so as to guarantee (as far as possible), objectivity, generalizability and reliability (Creswell, 2003). Here the researcher is objective and the research results are numerical. Qualitative tools, on the other hand, are based on content analysis, among other things and are presented in non-numerical format. Even though they allow the researcher to gain a very deep insight into the topic that he or she is investigating, they are not suited for all types of studies. In addition to that, the。
