Over the past few weeks, I’ve been talking to one of my friends back home about how important it is to understand the culture of China. If you want to succeed in China, you must understand the culture! Now I know that some people might say, hey, culture isn’t that important, I deal with culture all the time in North America and rarely have problems I can’t overcome. While this might be true back home, China is not North America. You can have the best business plan, the greatest marketing strategy, a heap load of capital, and the top executives working for you, but if you fail to understand the culture of China, your business will inevitably fail. As my girlfriend has said in the past “There is over 5000 years of culture here, do you really think you can just ignore that?”.
Let’s take a look at the recent example of eBay in China. eBay didn’t understand the culture of China, and after the departure of several CEO’s, eBay has now had to hand over management of eBay China to Tom.com (a Chinese company). eBay did several things wrong in the Chinese market, including treating the market as if it was North America and not realizing that the Chinese love to use Chinese brands, and when it comes to online sites, there are tons! Did you know that there are over 60 Chinese Youtube imitators? Did you know that while initially successful, both Google and Yahoo! have been losing market share to Baidu.com?
The problem with understanding culture is that it is not one dimensional. There are many aspects to culture, including but not limited to, the way people eat, the way people sleep, the way people do business, the way people live, and the way people maintain their health. I should note that one of the problems with attempting to define and understand culture is that it requires generalizations, and there are always exceptions to the rule.
Did you know that mainland Chinese people are not fond of eating raw vegetables? Take a bag of raw carrots and celery sticks to work in China and watch how people avoid the bag like it’s the plague - mainland Chinese like their vegetables cooked! This is a big issue if you are thinking about opening up a food service business in China. Look at Subway Sandwiches, which has 4 or 5 locations in China. Now let’s take a closer look at who shops there. I rarely walk by the Subway in Guangzhou and see locals in there, it is generally filled with foreigners (and I am sure it is no co-incidence that it is located beside one of the most popular hotels for foreign visitors). Now compare Subway to KFC, which opens over 200 locations each year. Subway starts to seem insignificant and definitely not primed for growth in this market - its business model does not fit in with the local culture!
Let’s say that you are a foreign construction company wishing to setup shop in China, did you know that Chinese people love giant and elaborate foyers and staircases? These structures waste a lot of room, making the house or building much smaller than it should be, but you’d have a hard time finding occupants in China if you didn’t have these two items.
Back at the turn of the century, all of the large fitness facilities and gyms from North America/Europe came to China. These included companies such as Bally’s, Gold’s Gym, and Powerhouse Gyms. If you try to find some of these gyms now, you’ll have a hard time doing so. Ask anyone who has lived in China since 2002, and they will be able to tell you that tons of fitness centers went out of business over the past four years. You can rest assured that the problem came from not understanding Chinese culture. Physical exercise has been part of Chinese culture since the early teachings of Confucius (2500 BC). The problem is Confucius did not teach people how to lift weights and how to build Hercules type muscles – there were no weights at this time, so physical activities such as Tai Chi, archery, gymnastics, and Gong Fu were utilized. Now imagine moving into the Chinese market and telling people that the way they have been doing things for the past 5000 years is wrong, Tai Chi will not keep you fit, lift this heavy weight and you’ll be strong like me. The success of this strategy can be seen in the lack of Western fitness centers in China. Perhaps if these companies had started by trying to blend Western and Eastern exercise philosophies, they would still be around today – understanding the culture matters!
Did you know that Chinese people like to sleep on very hard beds – you’ll have trouble finding a soft bed here! This presents a huge business challenge to mattress companies.
Now what if you’ve researched your product or service, and have attempted to understand how it relates to Chinese culture. You decide to pursue your entrance into China, and now have to select a marketing campaign to promote your product. Do you know which types of celebrities/personalities are popular in China and which ones aren’t? More importantly, do you know why? There are many strong preconceptions about race and ethnicity in China, failing to understand this aspect of culture is a critical mistake.
An interesting note is that many MNCs create marketing strategies in their home countries. These strategies are then sent out to the satellite offices abroad for “fine tuning”, creating a huge opportunity to completely ignore the culture aspect overseas.
One of my first exposures to the culture of China was a case study on Lingo Media. Lingo entered the Chinese market and failed to completely understand the significance of culture in the business world – specifically the education publishing world. The end result was Lingo was not able to achieve the results it so desired – even though its product was perfect for the market! Fortunately, Lingo was able to re-educate itself on the significance of Chinese business culture, and has now created a profitable business in China.
The business culture in China is not like anything you have experienced in North America. Two huge parts of Chinese business culture are “gifting” and guanxi – failing to understand how these impact your business and how you must incorporate them into your actions and lifestyle will lead to devastating results.
When I first moved to China, I advised a company on how it could enter the Chinese market. My advice was simple, take 6 months to explore the market and understand what it is really about – learn about the people, the opportunities, and the culture. The company decided to enter the market immediately and has been struggling with making sales, creating an opportunity for its product to be duplicated! Once again, failing to fully understand and appreciate the culture has created a significant roadblock to success.
As you can see, culture plays a huge role in doing business with China, but these problems aren’t limited to just China. Understanding culture is an important thing in any new market. Wal-mart failed to fully research and understand the cultures of South Korea and Germany. The result has been Wal-mart’s complete withdrawal from these markets because the culture of shopping in both of these markets is going to many small vendors to get what you want - bread from the bakery, meat from the butcher, and fruit from the fruit market.
One of the most important things I’ve learned here has been the significance of culture - it is definitely not something that can be ignored. There is a constant flow of examples of companies who do not understand the culture of China, and the result is always the same - a lack of funds in the bank account, many unhappy employees, large amounts of wasted time, and the dreaded task of figuring out where to go from here.