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Red Star China
Discovering the essence of Guanxi
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Learn to be a good man first, then learn how to do business

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Agenda
1. 2. 3. 4. Brief Introduction of the case Brief study of Guanxi Studying the options before Howard Our solution

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The case in brief
• Howard of Red Star has been building guanxi with the NCC Logistics head Pan to get a lucrative contract. • Unfortunately, Pan gets demoted to a remote location. • Howard’s guanxi efforts are at a crossroad, he is in dilemma whether to stay put with Pan, or pursue guanxi with Hans, Pan’s replacement or a Chinese authority higher up.

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Introduction
Company

Jeopardize the China strategy

Lucrative contract

Importance of the NCC contract

Future business expansion

“Hui zuo ren” reputation will go down
Professionally Future professional growth in the balance

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What is Guanxi?

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• Definition: Guanxi describes a personal connection between two people in which one is able to prevail upon another to perform a favor or service, or be prevailed upon. The two people need not be of equal social status • It is a network of contacts in a broader view

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Background of Guanxi- II
• Cultural background: Confucianism
▫ Benevolence ▫ Righteousness ▫ Fidelity

• Shaped by
▫ Harmony (Wulun) ▫ Tit-for-tat as a “golden rule” ▫ Loosing face as a worst case

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Confucius saw five major human relationships that should be governed by li, or propriety. Those relationships are: • 1. Ruler and subject • 2. Father and son • 3. Husband and wife • 4. Oldest son and younger brothers • 5. Elders and juniors (friends) Shu, or reciprocity, is seen in the five relationships as follows: • 1. Benevolence in rulers, loyalty in ministers and subjects • 2. Kindness in the father, filial piety in the son • 3. Righteous behavior in the husband, obedience in the wife • 4. Gentility in the oldest son, humility and respect in the younger siblings • 5. Humane consideration in elders, deference in juniors.

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Structure • Relations between natural persons • Vague agreements
Bonding

Trust

Guanxi

Empathy

Reciprocity

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Howard’s Choices

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Choice 1: Stick with Pan

Pros
Guanxi near fruition Better longer term relations with the company Crisis situation a litmus test to prove that “, Bad times help build good relationship”.

Cons
Demotion of Pan means out of favour for a long time Question of gaining advantage from someone without any power Possibility of losing NCC business if Pan not rehabilitated. Pan himself not confident of return

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Option 2:Build Guanxi with Hans

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Pros
Direct contact point
Westerners may now be acquainted with the concept of Guanxi and it may be pursued

Cons
Confusion on how to pursue guanxi on Howards part Westerners may consider it as just bribery

Hans in a superior position in the relationship so may not like Guanxi

Business over friendship culture in west

Future relationship with Pan in jeopardy

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Pros

Option 3: Build Guanxi with an authority higher than Hans

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Cons

Confidence on the part of Howard Time in hand to pursue Guanxi Requirement of a Guanxi contact in the future Targeting a higher authority than Pan’s previous position

Long amount of time needed in identifying right person
Guanxi may or may not be a success Future relationship with Pan in jeopardy

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Our Solution
• We propose that

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▫ Option 3: Build Guanxi with an authority higher than Hans would be more preferable mainly because, 1. Imminent return of Pan not foreseeable and if more than 2 years, would jeopardise Howard’s company and career. 2. Longer term guanxi contact necessary in the company. 3. Position targeted higher than Pan’s former posting.

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Team Members
• • • • • Charanya Chandran F11013 John Anthony Jose F11025 Nagesh V. Saralaya F11032 Srishty Merlin Bastian F11055 K. Vignesh F11058

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