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Ethical Issues in China Retailing

Ethical Issues in China Retailing. 3. Guanxi. Guanxi. Guan. Xi. 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 (Wikipedia). Guanxi (Fan, 2002).

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Ethical Issues in China Retailing

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  1. Ethical Issues in China Retailing 3. Guanxi

  2. Guanxi Guan Xi • 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 (Wikipedia).

  3. Guanxi (Fan, 2002) • Guanxi is based on relationships, but relationship do not guarantee the development of guanxi • Guanxi is an active connection. • Guanxi is a long-term social obligation. • Guanxi is reciprocal exchange. • Guanxi is a form of social capital. • Guanix is a dynamic process. A→ B → C

  4. Levels of Guanxi • Jia-ren • Shou-ren • Sheng-ren Jia-ren Guanxi Shou-ren Guanxi Sheng-ren Guanxi Guanxi Model

  5. Business Guanxi (Fan, 2002) • Business Guanxi • Guanxi is a personal asset • Guanxi may not transferable • A guanxi process consists of informal social interactions. • B2B • Buyer-suppler • B2G • Business-government officials • Obtain information • Improve efficiency by reducing the transaction costs. • A way to bypass laws and regulations and obtain special treatment or scarce resources.

  6. Types of Guanxi (Su and Littlefield, 2001) • Favor-seeking vs. Rent-seeking • Favor-seeking • It is selective and limits to certain carefully chosen circles. • Rooted in Chinese traditional ethics and possesses a moral power

  7. Benefits of Good Guanxi (Fan, 2002) • Right guanxi could bring a wide range of benefits: securing rare resources, bypassing or short-cutting the bureaucratic maze, obtaining information and privilege, reduce transaction costs, selling otherwise unsellable goods, provide insurance against uncertainty and assistance when problems arose. • Guanxi is not a competitive advantage. • Guanxi is necessary but not sufficient for achieving business success.

  8. Dark Side of Guanxi (Fan, 2002) • Rent-seeking • Quanli guanxi (power-dependence relationships emphasizing rent-seeking) • Quanli guanxi is equated to bureaucratic corruption and is often synonymous with nepotism, bribery, favoritism, unfair competition, and fraud • Guanxi and Corruption Money←Guanxi → power Corruption

  9. Enter Guanxi (Su and Littlefield, 2001) • Making friends or becoming shu-ren or insiders. • Take the lead in making commitments • Always be helpful • Always be empathetic • Use intermediaries • Develop guanxi cost time, energy and money. • Avoid quali guanxi and illegal transactions

  10. How to control “bad” Guanxi?: • Create competition • Rotate the front line • Increase points of contact • Build company loyalty

  11. Will Guanxi Remain So Important? • A better legal system will make it less necessary as transaction support • A market economy and administrative reform will make it less profitable

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