China presents huge opportunities in business and trade, but a short-term approach to doing business here doesn’t always bring about long-term results, writes AustCham Beijing Chair, Brendan Mason.

It is a common perception that things don’t happen overnight in China. When people talk about doing business in China, they often refer to ‘guanxi’ and the need to develop relationships – but it could be argued that developing and managing relationships isn’t just a key part of conducting business in China.

Invariably, many people prefer doing business with people they already know and whom they trust. There is, however, another aspect to doing business here in China, which is just as important – the need to take a long-term approach.

Perhaps the most famous exposition of how different cultures take differing approaches to time scale, comes from work conducted over more than 40 years by psychologist Geert Hofstede in the 1960s and 1970s. Using his research of IBM employees in 72 countries, Hofstede drew up four psychological dimensions to describe the effect of a society’s culture on the values of its members, and how those values relate to behaviour. But having spent time in Asia, he realised that there were elements that were not being captured by the original studies. 

Based on the work of Michael Bond, who had developed a survey with Chinese respondents, which took into account a different set of questions, Hofstede added a fifth dimension to the framework that measured the long-term versus short-term orientation of the respondents. In the Hofstede schema, those countries which hold long-term orientation in high esteem are more likely to value persistence over immediate results. They look towards the future.

By contrast, short-term oriented societies are more concerned with values related to the past or to the present. This is particularly relevant in business decisions: long-term oriented cultures will seek to have long-term commitments, whereas those who ascribe to a short-term orientation might make quicker decisions in order to gain more immediate results.

A corollary for personal behaviour relates to how income is used – long-term cultures tend to save, short-term cultures tend to spend. Some of the key characteristics associated with the two typologies are as follows: Different countries perform in terms of long-term orientation. Those most likely to have long-term orientation are clustered around North-East Asia – China tops the list, followed by Hong Kong, Taiwan and Japan. By contrast Western countries, including Australia, the US and UK, have a much lower long-term orientation. (African countries, according to the research, have the shortest orientation of all).

So what does this mean for strategy development for Australian businesses in China?

Clearly, on first entry to the Chinese market, you cannot expect to get the kind of immediate results you might expect in another more short-term oriented country. Here are some ideas that may assist Australian businesses in developing a strategy for a country with a long-term orientation like China.

• build long-term relationships by sharing information, arranging visits to facilities, meet with employees

• rather than aiming to have things completed and signed off, be prepared to take a more working document approach. Agreements become living documents that evolve and grow as the relationship grows, set up a working committee to take the agreement to new and higher places as the relationship develops

• doing business in China can be ambiguous and volatile: short-term indicators may be misleading. Be prepared to take a smoothing approach when measuring operational indicators

• Changing key managers can lead to staff discontent – take longer to hire the right person rather than rushing in to fill a key role

• Research design web and online presence for countries with longer-term values From a political perspective, coming from a country such as Australia, with a short political cycle, there are challenges to adopting a long-term orientation.

Overall misalignment between our government structure and terms versus Chinese longer terms requires careful management. For example, the Australian government’s commitment to conclude a free trade agreement with China within the next 12 months is welcomed by the Australian business community here in China, however the success of any FTA with China is going to depend on a long-term strategic approach and a process that allows it to evolve over time as priorities develop and as the relationship evolves.

Taking a long-term orientation is not code for losing money, rather it’s a frame of mind that allows us to reset our perspective. Often volatility and ambiguity define doing business in China, taking a smoothing approach in measurement indicators which allows managers to guide country level business units toward an eventual goal are preferred to only measuring short-term measures. Putting this idea into practice requires a slightly different level of business acumen. ■

*To learn more about AustCham Beijing and for a full listing of upcoming Chamber events, visit: www.austcham.org