Expatriate effectiveness in establishing business operations in Beijing, China

International Business

Setting-up a business in Beijing, China- an environmental analysis

Engaging in business relations and transactions in China requires two (2) important prerequisites: knowledge about its culture and society and knowledge about the formal and informal systems of conducting business in the country and its cities and provinces.

The first prerequisite, knowledge of Chinese culture and society, is a critical component inevitably dealt with when conducting business in culturally-different societies and areas. This is particularly important in China, where people are primarily culture-bound in their ways and values, and this translates to their everyday activities, which includes business transactions, be it within the formal business system, or as part of the informal economy of the country.

Success in conducting business in China, particularly in the city of Beijing, is hinged on the company's grasp of the essential aspects of the city's business culture. 'First contact' with the city's business culture would come from the company's representative, usually an expatriate ('expat') delegated to establish initial business undertakings with principal contacts and core groups essential to the formation of a solid foundation of the business in the city. The role of the expat is indeed critical to the success or failure of the company's business endeavor in a culturally-laden country such as China. It is through the expat-representative that Chinese business affiliates will be able to gauge the acceptability of the company -- particularly its people -- to the business culture and landscape of Beijing (specifically) and the country in general.

Erbacher et. al.'s (2006) study on expat success in China uncovered six (6) factors that influence an expat's effectiveness in accomplishing his/her role as business representative to a foreign company or organization. These factors are categorized into two groups: personal and situational factors. Under personal factors, an effective expat-representative is said to 'perceive his/her career path, willing to relocate, and has a degree of personal international orientation' (184). Situational factors that influence expat effectiveness in enhancing business relations and brokering transactions, meanwhile, are said to have 'cross-cultural skills/relational abilities, cross-cultural training for cross-cultural adjustment, has a clear understanding of his/her role, has significant level of support from company, strong relationship between the expat and the company, and performance management system of the company' (184-5).

It is important to understand the underlying factors critical to determine the expat's success in mediating business transactions between the company and its Chinese affiliates. While the expat is not part of the 'natural social landscape' of Beijing, he/she must be included in the company's environmental analysis since he/she will become assimilated as part of the business landscape that the company would eventually enter, should initial transactions prove to be successful for the company. It is through the expat that the company will be able to project itself against the Chinese business community, and Chinese society, in the long run. Thus, because the expat would inevitably become a part of the Chinese business landscape, his/her competence in 'getting the job done' more than satisfactorily will become the main gauge that the company will take into account as it embarks into greater and more business dealings with its Chinese affiliates.

Of course, looking into the movements of different industries in China is just as critical as sending the right representative (expat) to launch the initial groundwork for the company in Beijing. A thorough scan of businesses in Beijing reveals that despite the gradual relaxation in state control over businesses in the city, it still has a stronghold over these businesses, and are actually 'informally' and perhaps, 'invisibly' governing and indirectly controlling the regulations that ultimately determine the nature of transactions and determine the level of consumerism in the city.

Powers' (2005) study of the retail industry in Beijing reflected this state of affairs. Though the government has already relaxed its control over retail business in Beijing, the author reported that "[m]any domestic retailers are nevertheless still hindered by inefficient state-owned enterprise management structures" (10). This status of the retail sector is not uncommon in the city, and this is in this aspect that the state inevitably showed its 'stronghold' and indirect control over local businesses that are gradually growing and competing against foreign-owned and international businesses. However, further review of the statistics on the retail sector in the city shows an increase in growth in local and foreign-owned retail businesses, signaling that the seemingly inefficient way of managing businesses by the state are gradually being replaced by "modern management systems" and "experienced managerial staff from foreign retailers" (ibid.).

Management systems are just one aspect of the overall state of business in the city. Apart from organizational changes, companies entering the Chinese market and business landscape would have to confront problems that the city took on for many years, even before it opened itself to the free market and the world of capitalism. These problems include, among others, poor infrastructure in the country in general, particularly water resources, transportation, and energy; improvement of the quality of human resources (linked with improvement of management systems); establishment of corporate systems in large- and medium-sized state-owned companies (SEOs); and increase in foreign investment to stimulate business growth in key cities and provinces in the country (Gelb and Chen, 2004:10).

This analysis ends by integrating the two components needed to enter the Chinese business landscape: knowledge of local culture of Beijing, and knowledge of the formal and informal systems governing business in the city. From the first part of the analysis, it was established that the expat has the crucial role of being the 'representative' of the company/firm to Beijing. As such, he/she must be culturally competent to provide his/her company with the practical and correct cultural knowledge necessary to make business dealings go smoothly and efficiently for the company. At the same time, the company must include in its analysis the expat himself/herself, as part of the business landscape it would be entering when it finally decides to go ahead with a big business launch in Beijing. Complementing this internal analysis of the company's representative and his/her self-reports on the local business culture of the city, the company, in partnership with the expat-representative, must assess the market movements in Beijing and China in general. As explicated earlier, it is by monitoring these industry movements that the company would have an in-depth look at the issues that must be dealt with once the company starts operating in Beijing. As the retail sector example demonstrated, Beijing still suffers from poor management effects that the government left as a 'legacy' to its businesses all over the country (i.e., businesses that were previously state-owned). From the analysis conducted, poor management system -- lack of adherence to the modern corporate system -- was the common root of the problem why local businesses do not grow as expected in the gradually flourishing Chinese market, both domestically and internationally.

Beijing (Personal and Professional) Lifestyle

Preparing for life in Beijing is a two-fold commitment, as personal and professional are different dimensions in the people's lives, requiring a different approach to each kind of lifestyle.

At the professional level, it is necessary to be prepared and equipped with the proper training on basic business practices and etiquette in Chinese business culture. Chinese society is generally a highly collective group, but respects a degree of power distance between each other. For them, individuals must know his or her place in the organization, and his/her actions must be based from this stature. Thus, they are used to working together as a group, but they maintain a degree of respect to individuals who are either senior or have more superior positions in the organization, or both. Thus, foreign staff members must learn to respect, and more often, adhere to this practice in the society. Since values are greatly respected in Chinese business culture, this is a mandatory practice that must not be forgotten especially when in the presence of Chinese affiliates with crucial roles in the success of the business in the city.

Personally, adopting the Beijing way of life requires great adjustment, since after work, workers would wrap up a day's work by going out with co-workers and relax through social drinking, or simply socializing and eating. Also, Chinese workers are known for being hard workers, and a foreign staff will know the true meaning of the saying, "work hard, play harder," because they epitomize this by working very hard, and suspending all work and celebrating extravagantly during special holidays (particularly, Chinese New Year). Thus, Beijing (and in general, Chinese) lifestyle is extreme, rather than moderate, in nature.

Executive Summary

The environmental analysis and lifestyle check on Beijing revealed that should the company wish to pursue its business endeavors in the city, a thorough scan of the market movements in Beijing must complemented with trainings on competence in Chinese culture must be given to the company representative and local and foreign staff that will be assigned in Beijing. It is recommended that these trainings incorporate learnings from the intercultural business communication model, and infuse practical tips on and facts about professional and personal everyday life in Beijing, for staff's immediate use upon deployment in the city.