Essays on Competitive Advantages of Guanxi Case Study

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The paper "Competitive Advantages of Guanxi" is a good example of a business case study. Since it opened up to the global market in 1978, China has been operating on an economic system that is often referred to as Guanxi or network capitalism. Guanxi, when translated to English, stands for any relationships or connections (Wong & Leung, 2013, p. 12). It plays a crucial role in how business is conducted in China since it comprises of a system of connections among various parties that work collectively and support one another.

Most of the Chinese businesspersons believe in long-term relationships with those that they think may contribute to the success of their enterprises. Moreover, it is believed that the right Guanxi is the one that determines whether a business would turn out successful or not. By belonging to the right Guanxi, businesses can minimize disappointments, risks, and frustrations when transacting with others. Having the right Guanxi, at the same time, enables a company to circumvent barriers, risks, as a Guanxi is always present to give a helping hand. For this reason, a Guanxi is considered as a vital business strategy in China that every company must cultivate. The history of Guanxi dates back to pre-communist years where private entrepreneurs collaborated with government officials to form bureaucracy-business alliances.

So and Walker (2013) explain that the networks were reinforced during the economic reforms that gave power to local officials to influence local development (p. 142). Significantly, the officials did not comply with central state regulations in their efforts to promote local economic growth (Wang, Ketchen, & Bergh, 2012, p. 227). As a result, private enterprises collaborated with government officials, which led to the creation of bureaucracy-business alliances.

As the government officials became embedded in the local networks, they were automatically compelled to protect the private sector while locals protected them. Therefore, the private business flourished and expanded as the networks grew to support them. De Mente and Wallace (2016) explain that developing and nurturing a Guanxi is necessary for companies to succeed in China (p. 126). Although the process takes time and requires resources, the efforts used in establishing a secure network is worth the investment as businesses often reap significant results.

Mostly, these networks are extensive and often cover suppliers, retailers, government officials, banks, and any person deemed necessary or relevant to the success of a venture. As a result, it is typical of Chinese businesspersons to pay visits to the residences of their acquaintances from other organizations carrying with them gifts with the aim of strengthening their relationship. Guanxi leads to the creation and sustaining of a good relationship between all the stakeholders of an enterprise. Arguably, treating someone without respect could worsen the relationship between trading partners and affect their business relationship.

On the other hand, executives that treat others with decency, especially in an industry where there is little regard for the same could endear clients and useful people to his or her firm. More so, relationships help build trustworthiness that is crucial for any business deal. Equally, establishing relationships means that a company has an extensive network that relays to its credible information aimed at making a company better (Johnson & Turner, 2010, p. 325). Through information from a Guanxi system, businesspersons may learn of new opportunities, trends, and laws as well as get advice on challenges.

Reference

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Johnson, D., & Turner, C. (2010). International business: themes and issues in the modern global economy. London, Routledge. http://www.crcnetbase.com/isbn/9780203634141.

Ramady, M. A. (2016). The political economy of wasta: use and abuse of social capital networking.

Ruehle, S. (2002). Guanxi as competitive advantage during economic crises: Evidence from China during the recent global financial crisis. 1st ed. [ebook] University of Oxford, UK, pp.1-41. Available at: http://www.ceauk.org.uk/2010-conference-papers/full-papers/Susanne-Ruehle.pdf [Accessed 10 Sep. 2016].

So, Y. L., & Walker, A. (2013). Explaining Guanxi: the Chinese business network. New York, Routledge.

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Wang, C. L., Ketchen, D. J., & Bergh, D. D. (2012). West meets East: building theoretical bridges. Bingley, U.K., Emerald.

Wong, Y. H., & Leung, T. K. (2013). Guanxi: relationship marketing in a Chinese context. New York, International Business Press.

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