Why big American businesses fail in China

Failure or the possibility of, will result without a clear understanding and acceptance of guanxi. It’s not just a way of doing business, it’s China’s culture. “Spend any time in China, and you quickly learn the power of “guanxi,” or social connections. Guanxi drives business deals and government contracts. It’s the invisible glue that ties people together. It’s the sense of connection and mutual obligation that Chinese society prizes in personal relationships.” by Shawn Mahoney in China Daily Mail

 

China Daily Mail

If Tolstoy had written a history of foreign corporations in China, it might have started something like this: “Companies that succeed in China do so for similar reasons; every company that fails, fails in its own way.”

Since China opened up to foreign investment in the late 1970s, some of America’s most powerful corporations have gone confidently into the People’s Republic, only to stagger out a few years later, battered, confused, and defeated.

It’s not because the businesses were incompetent. Many of the biggest failures belong to the Fortune 500: MatteleBayGoogleHome Depot. All of these have thrived in markets around the world, but not in China.

Why?

Some suffered from a lack of flexibility, or a failure to localise. Others fell because of bad timing, or a superior local competitor. While the causes are as varied as the industries themselves, a pattern…

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