Understanding China – a business case!
Doing business in China is not all beer and skittles.
Just ask Dr Mona Chung.
After completing her PhD on the impact of cultural differences on Foster’s 13 year sojourn into China, she is now one of Deakin’s resident experts in the field she has played a pivotal role in developing – the study of international business, particularly in the Orient.
“There is no magic wand,” she says of setting up a business in China. “A lot of companies see the size of the potential market, 1.3 billion people, and are excited by that. But it’s not that simple. About 90 per cent of businesses setting up in China are not making a profit.
“As an international business consultant I saw business after business pouring millions and millions into China, all making the same mistakes as the others.
“One of the major conclusions I drew from my experience and then from my research is the cultural differences are the major barrier.
“It is quite easy to say ‘oh well we don’t know how to use chopsticks’ or ‘we don’t know how to speak Chinese’ however, in my view they are part of the factors but relatively minor compared to the understanding of business behaviour and conduct. In others words, without the language and chopsticks one can still be successful but without the understanding of the differences in behavioural patterns, life in China is less likely to be easy.
“In doing business, language can be a barrier, but if you have no understanding at all about what the other people are thinking, how they process information, how they make decisions, it is more certain that the venture will fail miserably.
“While working as a consultant, I had identified these cultural barriers and set out to search for published material on this topic, but there was hardly anything available. People I spoke to in universities said ‘that sounded like a good topic for a PhD’.”
Dr Chung gained the support of Foster’s, Australia’s largest beverage company whose progress she had been watching in China over the years, and she managed to complete her thesis, even though she was only doing it part-time, in three years.
“I didn’t want to be one of those people who have their PhD drag on for years,” she laughs.
Her thesis was also timely for many other companies seeking profound enlightenment about the enticing but difficult market that is China. So quickly to the big question: What did Foster’s do right, what did the company do wrong, and what lessons are there for other businesses?
“It is never as simple as that, especially when you look at the whole operation itself, the fact of cultural differences, how they impact throughout the entire operation.” Dr Chung explained.
Perhaps the example of Foster’s experience in Shanghai best proves that point.
The company’s Australian management team decided to abandon a policy of holding banquets for suppliers and some government officials.
Soon after, power supplies to the brewery became less reliable. Other suppliers decreased in their regularity, while fines for breaches of health laws suddenly increased.
It soon became apparent the costs of the banquets were less than the losses sustained when the power went out, or another fine had to be paid.
“When you go into China there are a range of things to look at, your strategies, management, HR and marketing,” Dr Chung said.
“Often many strategies are decided by people in boardrooms who have no real understanding of what China is, apart from it having 1.3 billion people. “China is a huge place and it has many sub-cultures. What might work in Shanghai doesn’t necessarily work in Beijing.
“So there is still no one perfect strategy for China.”
However, Dr Chung’s latest work at Deakin might be the next important step closer to finding a better system of approaches.
“We are working on a model that businesses can use to develop their strategies before they go into China, so they are not making the same mistakes as everyone before them,” she said.
“The idea is that we look at all the factors and create a model that takes into account the many complex issues starting with the question of why is a company choosing China? Is it necessarily the right place?
“You have to look at your own business as well. One business I know of has its major clients all in Europe and America, so they don’t need to consider the Australian and Chinese markets, they will just use China as a manufacturing base.
“But they need to know they have easy access to the resources they will need.
“Other companies have markets in Europe and America that have matured and they are looking to expand and the fastest expanding market is China and Asia. So if they are going into China, they need a different strategy because they are looking at a totally different group of consumers.
“I believe our new model will help businesses recognise these issues and challenges and be ready before they invest in China instead of having their Australian managers in China reporting back to head office that things are going too well.”
One advantage for Dr Chung is being able to interview both the Australians and the Chinese herself. Born in Beijing where she obtained her first degree in nursing, then international trade, she speaks flawless English.
And she has managed another personal and considerable cross-cultural movement.
When she was a young girl growing up in China at the time of the Cultural Revolution, the only music she was allowed to hear was that deemed appropriate by Madam Mao.
Now she has a highly developed appreciation of classical Western music. “I love ballet and opera, and the other day, while driving from Melbourne to the Deakin campus at Warrnambool, I was listening to Chopin,” she said. “I find classical music very relaxing.”
And thanks to Dr Chung’s research, Australian businesses might be able to relax a bit more when they choose to invest their millions into China.