Part four:
Indirectness in the comunication and China’s rising Middle Class
Having explained the concepts of “guanxi” and “mienzi” and the importance to adapt your strategies to this particular market, today it is necessary to stress another aspect, namely the indirectness in the communications. Chinese people do not express their thoughts in the same manner as we, western people, do. Sometimes you have to “interpret” the words of a Chinese counterpart, and then to put these words in relation to the context (sometimes you have to do the same with your Chinese girlfriend, only when she is upset about something it is clear enough where the mistake is).
It is quite obvious that if you cannot fully understand the Chinese language, then communication can be rather difficult. Interpreters are a quick fix and can be found quite easily, but just because they can speak good English does not mean that they will be able to translate effectively. Interpretation is far from an easy task especially if you are talking about a technical aspect of a business agreement. Furthermore, in Western culture, communication between people tends to be much more direct, but in China it is much more indirect. You might ask your translator to directly translate something, but if they do it could be offensive. Therefore, it is imperative that you try to understand the indirectness involved in communication in China. Also, if you do use a translator, it would be a good idea to practice with them before meetings so that your ideas are communicated clearly without offense or misunderstandings. It is also important that you take the necessary time and effort to translate all necessary documents into Chinese. It is best to use more simple and straight forward language to make sure that there is not any miss-communications.
Another important aspect which should be considered when deciding if to initiate or not a business activity here in China is the potential grow of this market and the habits of Chinese consumers:
China’s middle class is expected to explode in the coming years. To give you an idea of this considerable growth, consider that it has been estimated that China will add 75 million urban middle class households by 2015 (
http://www.mckinsey.com/insights/china/unleashing_the_chinese_consumer
). A recent Credit Suisse report indicates that Chinese consumption will reach $16 trillion by 2020, and China will become the largest consumer market in the world. This shows how big the opportunity is in China. However, to effectively tap into the expendable income that these middle class families have, it is important to understand that they do not act or consume like middle class in Western countries. This might be an obvious statement but it is something that some businesses in China forget and in the process lose millions.
Before to step into this market, it is thus necessary to become more familiar with the environment and the taste of Chinese people. A case in point of how Western business can make fatal mistakes misjudging Chinese consumers can be seen in the case of American coffe and donut restaurant Dunkin’ Donuts (DD). They first attempted to enter the Chinese market in 1994 when they tried to bring a “clone” of their business from America to China. DD opened various small store fronts in Beijing that sold fresh baked donuts and hot cups of coffee. DD entered because coffee was just starting to become fashionable in places like Beijing and also because they thought if Chinese loved to eat McDonald’s hamburgers than why not a donut. But in their entry to China DD, they made two fatal mistakes: a) the first was that they failed to realize that coffee was becoming a symbol of middle class consumption. DD tried to sell a less expensive cup of coffee, but this was not the solution. To many Chinese it looked liked a fast food, it did not look confortable and it was not fashionable. As a result it mainly just attracted foreign customers. Substantially DD failed to realize that their customers viewed coffee as a symbol (at least at that time) of a more open and high class lifestyle, and they did not encountered the favour of the Chinese consumers because they did not considered the difference in tastes; b) the second mistake was in fact, their food products were not suited to the taste buds of Chinese people. The donut itself was not the problem, the fact was that most of DD’s donuts were covered or filled with a sweet glaze or frosting. It seems, Chinese consumers did not like the chocolate-covered and cream-filled donuts. Unfortunately, DD did not realize these two fatal mistake until it was too late, and by 1999 was pulling out of this market. Only recently they returned to China (
http://www.forbes.com/sites/greatspeculations/2012/01/04/dunkin-donuts-hits-10000-stores-on-china-push-stock-going-to-29/
), simply because the market is too big to be ignored, and hopefully they learned the lesson. In fact it is necessary to offer something that appeals the Chinese consumers to attract them. For example Starbucks, which has roughly 350 stores in China in 26 cities, has done an excellent job (first came to China via Beijing they didn’t really generate consumer interest) because they have done a good job of emphasizing teas, non coffee beverages and food; Chinese consumers try coffee but will often preferentially order tea beverages. They have also made Starbucks a destination rather than a waypoint. In China more customers want to stay. To compensate, Starbucks increased seating. In response to flagging demand due to the economic slowdown, Starbucks also recently introduced more Chinese food options (read more at
http://www.imediaconnection.com/content/25365.asp#d7jgHArG0jCczM7f.99
).
So, the point is: you have to adapt to this unique environment and to the taste of Chinese people if you want to be effective and have some results. And of course if you learn something more about their Culture, this will only reinforce your chances to be successful in China.
– Cristiano Rizzi