China Management Question: Unique China, or China Business Unit?

Chinese people are justifiably proud of their culture and history — but don’t let that lead to bad management decisions.

When training your international team to work with Chinese counter-parties and colleagues, do you treat China as a unique entity that has nothing in common with your existing operation – or is it just another business territory that should be integrated into your overall management plan?

Two Views on China Business Management:

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Unique China. UC proponents generally maintain that Chinese culture is so fundamentally different from Western society that it requires foreigners to rewrite their standard operating procedure. You are expected to follow Chinese customs, traditions and best practices. This is the  “politically correct” view that is becoming a little outdated – but still has validity for some people and companies.  If you are training Western team leaders who will be living in China or marketing to consumers then this is where you want to end up. It’s probably not a great place to start it though.

China as business territory. The China Business Unit is a more traditional approach – at least for Americans. Internationally oriented firms already have developed international corporate cultures and though they take pains to adjust and alter it to accommodate Chinese business methods, they don’t feel that they have to start from scratch to do business in the PRC.  CBU planners view Chinese managers and markets as coming from one of many distinct and rich cultures that can be assimilated within their existing corporate structure. Senior people in Western HQs will talk about compromise, give & take, and mutual learning – but Chinese managers and staffers often chafe under what they see as arbitrary, foreign rules.

Which is the Right Choice for You?

Unfortunately, both Unique China and China Business Unit have validity. The only clear wrong choice is not making a choice – and attempting to patch together an ad-hoc reactive policy that tries to please everyone, everywhere. GlaxoSmithKline is only the latest example of giant MNCs who thought they had their culture-barrier issues figured out.

Benefits and Dangers of Unique China

The advantage of taking the Unique China approach is most apparent for firms looking to add to their top-line revenue in the China market. International firms that are willing to throw out their Management Best Practices handbooks and start over in China will find that they are more in touch with the Chinese market, respond quicker, have less conflict within their own ranks, grow faster and earn more. All great stuff. The bad news? Although they have fewer internal conflicts and less day-to-day friction with regulators and bureaucratic stakeholders, they tend to play fast & loose with traditional Western notions of risk management. That means fewer hiccups – but a much greater chance of catastrophic failures. Senior management in HQ is going to need a strategy for making sure that their entire self-directed China operation doesn’t simply secede and go into business for themselves. This also puts your IP, technology and brand at greater risk.

Companies that ran into trouble running Unique China operations were Danone  , KFC (recently) and GSK.

Benefits and Dangers of China Business Unit

Treating China as just another business unit tends to work great at the beginning and then grind to a bumpy, jarring halt later. When do thing go off the rails? At just about the time you stop spending and investing and start looking for performance and profits. The problem with treating China as just another territory is that you won’t get recognizable feedback that anything is wrong until it is too late. The advantages of SUCCESSFULLY managing China as a business unit is that you will have greater control and ultimately better returns as you leverage the strength and power of your worldwide operation. Starbucks is probably the poster child for the China Business Unit approach – it managed to grow its top line without sacrificing profitability or brand integrity. Others, however, were not as fortunate. Best Buy, eBay, Google and a slew of other foreign fatalities suffered from not adequately adjusting their business plan to Chinese economic & market realities.

Out of the Classroom, into the Fire

The easy MBA lecturer answer is that you need some form of blended approach – acknowledge the unique aspects of China business culture and make adjustments within the broad framework of your proven corporate culture. The key differentiator between success and failure, however, is where those decisions about compromise vs. corporate policy take place. If senior planners make the strategic decisions about how to flexibly adjust company procedures, then it may work.  All too often, however, decisions about when to bend (or break) standard operating procedures get made ad-hoc (or after the fact) by front line managers far removed from company policy-makers. It’s rarely a successful option.

Next: Training and preparing international teams for China decision making

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