Anheuser-Busch's Entry Into China's Beer Market Challenges

Introduction: The Challenge of Doing Business in China

One of the many challenges faced by any foreign company attempting to do business in the vast marketplace of China is the fact that the majority of Chinese people believe no foreigner is capable of success in their culture. This belief is encapsulated in the statement many Chinese reiterate constantly: "Chinese problems require Chinese solutions." The belief is deeply ingrained in Chinese culture and shapes widespread attitudes toward foreigners.

It would probably have been a good idea for Anheuser-Busch to consider such attitudes before investing in what may have seemed like a very promising opportunity. Anheuser-Busch more than likely saw dollar signs before taking a hard look at who the company would be dealing with, who would be purchasing their product, how the product would be distributed, and — especially — how much it was going to cost to maintain the footprint they believed they were acquiring when making a bid to take over Harbin Brewery Group of China.

Cultural Attitudes and Management Challenges

Many of the problems that Anheuser-Busch could experience by attempting entry into China's marketplace might have been anticipated by understanding that fundamental cultural attitude. A striking example is provided in the case study by Tim Clissold, who describes a common occurrence at a brewing plant: "I watched the operators gossiping and making half-hearted grabs for the occasional bottle but generally watching the containers go past, sometimes even less than half full. Whenever I went over to yell at them, the operators looked at me as though I was a madman. They had grown so used to lax management that they just didn't bother any more…" (Thunderbird, 2005, p. 9).

Lax management was only one of the many problems with which Anheuser-Busch would be confronted in their efforts to establish themselves in the Chinese market. Attempts to correct that lax management could also backfire, particularly if the individual attempting to make the correction was a foreigner — which would then trigger the deeper problem of Chinese attitudes toward foreigners, whom many believed were inferior to local management.

On the positive side of the equation, Anheuser-Busch recognized the enormous perceived potential of the marketplace. All three market segments — economy, standard, and premium — offered significant room for growth in both dollars spent and overall consumption. However, in addition to lax management and negative attitudes held by much of the Chinese population (whether in positions of authority or not), any foreign company entering China's marketplace faced a complex political hierarchy and structure.

Political Hierarchy and the Power of the Chop

Provincial and municipal governments, along with mayoral governments in the larger cities, had very significant sway over local affairs (Thunderbird, p. 1). For a foreign company attempting to establish a marketplace for its product, this meant that a deal could be negotiated at the highest level and still not be recognized by local authorities, regardless of how senior the parties to the original negotiation were. In many cases, an individual not included in the transaction held the official company chop — the red stamp that conferred unquestionable power over all transactions associated with the organization.

Without the official chop, the deal was not consummated, at least by Chinese standards. As the case study explains: "He who held it — by whatever means — held the power without question to all transactions associated with the organization itself" (Thunderbird, p. 3).

With this type of political system in place, the Chinese would ensure that everyone involved received a share of any arrangement. If someone was left out or ignored, the plan would in all probability have difficulty being fully implemented. Anheuser-Busch may have believed it could overcome this situation through sheer size and global presence, but the irony is that it does not take an army to stop a tank — sometimes all it takes is one individual willing to stand in front of it and say "stop."