As has been mentioned in the former blog, many internet companies fail in China because of not establishing relationship cultivation strategies based on a clear understanding of the Chinese market, and essential cultural phenomena. Of those cultural dimensions, Guanxi is one of the most important, for it is predicated upon “network, connection, and personal relationships.” Any individual with a deep understanding of traditional Chinese culture understands that since ancient times, and when most Chinese lived in small towns, Guanxi, as shall be further explained in the following section, has related to inter-community networking, trusting interpersonal relationships, general reciprocity. In other words, one who is versed in Chinese tradition, will seldom hesitate to guess that at the heart of Chinese business, professional, and social matters, lay considerations about Guanxi. Furthermore, within the Chinese culture setting, Chitu’s fundamental objective is to connect people from various social strata, and further to inculcate solid and trusting interpersonal relationships. Based on these points, it may be assumed that Guanxi plays an indispensable role in encouraging Chitu, in its effort to be successful in China, to pursue a deep understanding of Chinese culture and its business environment, as well as, to pursue and maintain relationships with its key stakeholders.
Guanxi is a cultural phenomenon, based on Confucius teaching, and it is defined as personal relationships that are reciprocal, intangible, and transferable (Luo, 1997). Guanxi really means “connections” and is built on an informal structure that facilitates implicit exchanges of immediate or future favors. These informal structural ties are interwoven within the entire society via families, friends, and acquaintances in China.
Spend any time in China, you will quickly learn the power of "Guanxi." Guanxi drives business deals and government contracts. It is the invisible glue that binds people together. It is the sense of connection and mutual obligation that Chinese society prizes in personal relationships (“Why big American,” 2013).
Within the business-to-customer context in social media, Guanxi is used in the form of “seeking assistance from family” or “maintaining friendships by providing help to friends” (Taormina & Gao, 2010) as a means to formulate strategies for building B2C relationships. For a more intimate approach, firms that offer niche products with a smaller customer base can use the analogy of “seeking assistance from family.” For a mass market product, firms can use the analogy to persuade customers to use word-of-mouth by “maintaining friendships by providing help to friends.”
One major and fundamental difference of business and stakeholder relationships on social media networks between China and the U.S. reside in the concept of Guanxi versus networks (e.g., Lee, Pae, & Wong, 2001; Luo, 1997). Social media use is ideal for facilitating interactions among consumers. In the U.S., “friends and family” analogies have already been adopted in the B2C environment (e.g., MCI Friends and family program). In terms of doing business, China has a transitional and emerging economy with fast-changing rules and regulations, coupled with high-context communication, and face-to-face Guanxi is required on the ground to collect market intelligence and execute marketing strategies. Take the case of eBay, for illustration; according to a study conducted by researchers in the United States and Hong Kong, the crucial error that eBay made was that it had no mechanism for simulating Guanxi. While at the same time, its eBay’s biggest competitor—the local Chinese ecommerce company, Taobao, allowed buyers and sellers to chat over instant-messaging, giving them a chance to establish a personal connection (“Why big American,” 2013). China’s social media and business landscape vastly differs from those of the rest of the world. Therefore to effectively engage with a community of stakeholders, LinkedIn China’s management must be aware of its stakeholders’ wants and expectations, understand their attitude (supportive, neutral or opposed) and prioritize the members of the overall community to focus LinkedIn China’s scarce resources on the most significant stakeholders. Finally, a successful entry into the Chinese market means entering a very elaborate Guanxi network of partnerships, where participants play different supporting roles.
According to Su, Mitchell and Sirgy (2007), “Different Guanxi partners can contribute varying amounts of resources, and they become more or less important as a direct function of the resources they contribute” (p. 4). Guanxi partners are stakeholders (Tsang, 1998) influencing the consumption of scarce resources for business success.
Using a model of Guanxi built on stakeholder salience theory (Mitchell et al., 1997) and constituency theory (Anderson, 1982), Su, Mitchell and Sirgy (2007) identified “Who and What Really Counts” (Freeman, 1994). They developed “a hierarchical stakeholder model of Guanxi to propose that not all Guanxi is necessary for doing business in China; and among the necessary Guanxi relationships, not all are equally important” (p. 2). The authors sum up their work by stating that, “effective Guanxi is defined to be: a trust-commitment/power dependence relationship among firm stakeholders that is dynamic (cumulative, utilitarian, and long-term), yields socioeconomic benefits (positive work morale, group harmony, and enhanced effectiveness), and is substantively distinct from bribery” (Su, Mitchell & Sirgy, 2007, p. 6). What Guanxi relationships are necessary for a typical business firm in China? Freeman (1984) included in his direct implication of stakeholder theory that any Guanxi relationship that can affect or is affected by the achievement of the firm’s objectives is necessary. Guanxi relationships essentially represent a hierarchy of salient stakeholders (Mitchell et al., 1997) who have different kinds of resources—which affect the firm’s survival and growth.
As for the uneven economic development and market maturity in China, which has many regional economies, empirical studies indicate that each region is at a different stage of development (Cui and Liu, 2000; Keng, 2000). In China, coastal area are generally more economically developed and market-oriented; thus, the VP of marketing and customers are the primary major stakeholders, and consumerism is building momentum because market information has become more and more transparent because the mass media and telecommunication are increasingly developed. Therefore, good relationship with customer, board of directors and shareholders should ensure success in survival of the firms (Guthrie, 1998); while in more rural places where the customers have low income and little brand awareness, the VP of production play an important role as the core stakeholder. The availability of Guanxi and the firm’s resource demands determine what Guanxi is more important and must give a higher priority to cultivating Guanxi with governmental authorities and industrial suppliers than other external stakeholders (Su, Mitchell & Sirgy, 2007). The authors also introduced the idea of specialization into Guanxi management, which is expected to “enhance the efficiency and effectiveness of the firm in its exchange with external Guanxi coalitions, thus leading to resource access and survival” (Su, Mitchell & Sirgy, 2007, p. 15). All in all, “identifying a web of necessary Guanxi coalitions and developing a hierarchy of Guanxi priorities serve as the cornerstone for building effective relationship business strategies in China” (p. 16).
The content above is derived from Chapter 2 of my master's thesis - A Case Study of LinkedIn China and Its Sub-Brand Chitu - with a focus on Public relations and social media strategies. Excerpts and links may be used, provided that full and clear credit is given to Li Yingying and www.liyingying.us with appropriate and specific direction to the original content.