2.4 What Is Guanxi Management, and Why Is It Important?

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From the course by The Chinese University of Hong Kong

Selling to Chinese Consumers

26 ratings

The Chinese University of Hong Kong

Selling to Chinese Consumers

26 ratings

Course 1 of 4 in the Specialization Doing Business in China

This course is designed to help learners sell their products, goods and services to Chinese consumers. To achieve this goal, the course will use evidence-based research in psychology, economics, legal studies and marketing to help learners understand the historical, economic and legal contexts of doing business in China and the behavioral characteristics of Chinese consumers. The course will cover topics in Chinese and global marketing, Chinese consumers, institutional and cultural influence on consumer motivation and behaviors in Chinese markets, and brand management in China.

From the lesson

Digital Marketing and Relationship Management

The Internet has created plenty of business opportunities in China. The current module highlights how you can manage relationship with Chinese consumers in the digital era.

2.1 Xiaoling and Lingnan: A Life Example of Chinese Consumers' Online Shopping Behaviour5:23

2.2 The Online Shopping Behaviour of Chinese Consumers4:37

2.3 Relationship Building in China1:29

2.4 What Is Guanxi Management, and Why Is It Important?5:10

2.5 Renqing, and the Cultivation of Guanxi with Chinese Consumers Online5:41

2.6 Utilizing New Media to Communicate With Chinese Consumers6:48

2.7 Dialogue with Practitioner: Stewart Li10:02

2.8 Dialogue with Scholar: Professor He Lingnan6:47

Meet the Instructors

Prof. Letty Kwan
Assistant Professor
Department of Psychology

<i>“Guanxi”</i> is a Chinese word

for social relations.

It has become a familiar term

in the Chinese business world.

What is <i>guanxi</i>?

What are the implications of <i>guanxi</i>

in Chinese marketing?

The word <i>guanxi</i> is made up of two

Chinese characters:

<i><b>Guan</b></i> meaning connections and

<i><b>Xi</b></i> meaning ties.

Simply speaking, <i>guanxi</i> is about building

a network of mutually beneficial ties or

connections that can be used for personal

and business purposes.

<i>Guanxi</i> is a central idea in Chinese society.

It plays a far more important role

in China than it does in the West.

The popular practice of <i>guanxi</i> management

in Chinese business underscores

the importance of cultivating a strong

interpersonal ties and connections

when doing business in any country.

<i>Guanxi</i> is a complex concept in Chinese culture.

It refers to relations or how one

is related to others. It also refers to

how good a relationship is.

In Chinese culture, when you interact with

another person, you pay attention to

how this person is related to you

and how good your relationship is.

In addition, you also pay attention to

how this person is related to others

in your broader social network

and how good these relationships are.

For example, when you interact with

your client, you will pay attention to your

relationship with this client -

whether she is a stranger,

or an acquaintance, or your relative.

You will also pay attention to whether

you like this client or not; that is, your

personal relationship with this client.

Moreover, you will also pay attention to

this client’s relations with other people

in your broader social network.

For example, knowing that this client

is a relative of your partner will change

the way you interact with this client.

Finally, you will consider how good

the relationship between the clients

and people in your network is.

For example, you will treat your clients

favorably if you know that your partner

likes this client a lot,

but will not do so if you know that

your partner dislikes them.

In this brief overview, I have shown you

<i>guanxi</i> in action in a clip

at the beginning of this lesson,

and I have also given you an example

of how Chinese conceptualize <i>guanxi</i>.

To better understand <i>guanxi</i> in the

context of marketing, let us compare it

to the concept of relationship marketing

in mainstream marketing theories

in our upcoming segment.

Relationship marketing focuses on

establishing, developing and maintaining

successful relational exchanges and

good customer relationship.

In Western culture, relationship marketing

aims at fostering mutual understanding,

cooperative behavior and a long-term

orientation in social interactions,

within the boundaries of what legal rules

and regulations permit.

Generally speaking, relationship marketing

emphasizes professionalism in

relationship cultivation and does not

advocate extension of the business or

professional relationships into other

relationships with the consumers.

Relationship marketing also advocates

the use of consistent strategies

to cultivate relationships with all

customers indiscriminately.

In the example of waiting in queue

for a table in the restaurant,

allowing a friend of a colleague to jump

the queue will not be considered a good

relationship marketing strategy.

<i>Guanxi</i> management is different from

relationship marketing.

Although <i>guanxi</i> management also

emphasizes fostering relationships

or social connections

based on mutual interests and benefits,

its focus is on how to maintain the

relationships with particular people

through exchange or reciprocation of favors.

These particular people are those

one wants to have, or already has, a

potential profitable relationship with.

That is, I rub your back and you rub mine.

Moreover, I don’t rub the back of

everybody, I do so only to those that

I want to have a relation with,

and so must you!

To illustrate the application of the

concept of <i>guanxi</i> in business,

let us return to the restaurant story

you watched earlier.

Let us see how the concept of <i>guanxi</i> can be

applied to explain why Li Ying, the

restaurant owner, allowed Xiao Liu to go

straight to a VIP seat in the restaurant.

Xiao Liu, the restaurant customer who

was allowed to jump the queue,

had previously given a big favor to

Li Ying, the owner of the restaurant.

Li Ying: <i>Xiao Liu had gone out of her way</i>

<i>to contact one of her business clients</i>

<i>to speed up the licensing of my restaurant.</i>

<i>Without her help, the opening of my</i>

<i>restaurant would have been delayed.</i>

<i>I owed her a big one.</i>

<i>Giving her a table first is the least</i>

<i>I can do to return her favor.</i>

Please note that the exchange of favors

is not restricted to exchanges of

financial benefits.

What is reciprocated in <i>guanxi</i> relationship

may also be time, affect and emotion.

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