Instructors Manual - Section 2

 

 

 Global Logic

 

Section 2:  

The  Challenge of Globalisation for Southeast Asian

 

 Business Systems       

 

Chapters 6 – 7

 

Chapter 6:  Southeast Asian Business Systems

 

 

 

Chapter Summary

 

In the search to understand the dynamics of business activity and interrelationships it is important to appreciate the influence of endogenous factors along side of exogenous factors, or influence from outside. Thus, in explaining the influence of culture upon the business systems of SE Asia, it is necessary to appreciate that the region is a mosaic of cultures and traditions, and consequently comprises a number of business systems all operating in parallel. Of these, the Overseas Chinese business system, encompassing the family centred interrelational practice of guanxi, dominates domestic and regional business activity.

 

Theme

 

Business activity occurs within and as an expression of the business system. Business activity is not divorced from the culture and tradition of the society from which it emerges. While there has been much study of the ‘Asian’, as to a ‘Western’ system of business, for SE Asia, there are a number of business systems as there are a multitude of cultures and traditions. 

 

 

Key Ideas

 

  • Business systems as an identifiable pattern of behaviours, practices and beliefs, express the culture of the people involved.

  • Businesses express an indigenous logic. 

  • SE Asian business systems having developed over centuries are not easily changed.

  • While Western civilisations mostly share a common Christian heritage of law and ethics, SE Asian civilizations have diverse traditions.

  • Five major business systems are identifiable in SE Asia: The Overseas Chinese, the Japanese TNCs, the Malay bumiputra, the Singapore government-business system, and the Overseas Indians.

  • The Overseas Chinese maintain an internal cohesion between their social and commercial activity by way of adherence to the guanxi system of relationship building.       

Word List

 

  • Business system

  • Culture

  • Endogenous

  • Values

  • Guanxi

  •   Confucian ethics

  • Bingfa

Teaching Objectives  

 

  • To introduce the idea that business activity takes place within business systems.

  • To introduce the issue of the importance of culture in shaping and determining the practice of business. 

  • To discuss the study of the influence of culture upon business systems.

  • To explore the mosaic of cultures and business systems in SE Asia.

  • To introduce and discuss the dynamics of the Overseas Chinese business system and its cultural derived ethics.

Overview of the Chapter

 

It remains to ask if guanxi can survive the exogenous

forces of globalisation.  

 

Business and Culture

 

Do Values Make a Difference?

 

Business systems are built on culture and the social values that comprise them, and as economies develop, so the dynamics of business become more complex. Under the influence of capitalism and international business opportunities, SE Asian economies have experienced pressure to change, or more accurately, adapt, their social and commercial values as they move from predominantly agrarian societies to industrial and post-industrial states.

 

 

Asian Business Management Systems  

 

Historically, the study of management and organisation has sought to apply universal laws of business behaviour to the neglect of the role of culture and social environment. However, there needs to be an appreciation of culture as an integral and distinguishing factor in the way business is organised and executed. A study of comparative business systems reveals something of the dynamics within national business systems and how SE Asian business dynamics are different from Western nations.

 

 

 

A Mosaic of Cultures and Traditions  

 
A Diverse Heritage

 

While Western influences may have changed the SE Asian socioeconomic landscape, SE Asia continues to exist as a heterogenous collective of economies and peoples who have in many ways been clustered together through trade and the influence of Western

colonisation. As a mosaic of cultures and traditions, there is a range of social values that influence economic and business behaviour across the region.

 

 

A Malaysian Journey  

 

Malay cultural and commercial practice varied from one Sultanate to another. However, the growth of industrialisation and capitalisation of Malaysia in the later quarter of the 20th century has certainly moved at least urban Malaysia into different systems of business. The pressure of market economics and political organisation, coupled with nationalism and international education, has led to the growth in the number of Malay entrepreneurial enterprises.

 

Chinese Immigration 

 

Probably the second most important influence on SE Asian modern history, next to colonisation, has been the immigration of the Overseas Chinese across the region. Above all else, perhaps the main strength of the Chinese communities has been their ability to adapt and transport their culture, by way of social structure and cohesion, into environments where such culture was poor.

 

 

Singapore: A Product of History and Opportunity 

 

Singapore is significant in a study of the development of business systems not only because it exemplifies the history of cultural development, but because it exemplifies the change in cultural and social values brought about by human and commercial progress and adaptation.

 

 

 

In Search of a Predominant Business Model  

 

Is There a SE Asian Business Model? 

 

Corporate Asia represents only a small percentage of companies compared to the many thousands of SMEs that under-gird the business systems of SE Asia. What is common is the use of networks as a means of business development. Indeed, the key to understanding business systems across SE Asia is to appreciate the centrality of network building.

 

 

Japanese Business  

 

Japan has become SE Asia’s largest investor, the largest exporter, the largest source of tourism, the largest foreign aid donor and the largest buyer of raw commodities – oil, timber and coconut oil , as well as dominating the SE Asian electronics industry and auto industry.

 

 

Overseas Chinese Business

 

The Overseas Chinese business management system of networking and inter-connected socio-commercial obligation is evident at all levels of business. The commercial practice of guanxi networking and the giving of preferential pricing to relatives and associates has proved to be the success of the Overseas Chinese trading companies across the SE Asian region.

 

 

 

 

 

Can a Socio-commercial System Change?

 

To generalise, Overseas Chinese culture, as it affects business practice, comprises three main characteristics – the adherence to the Confucian ethics, or way of life; their use of the philosophies of Sun Tzu in business negotiation; and their high degree of social cohesion arising from their adherence to the guanxi social and commercial system of developing personal relationships and networks.

 

 

 

Study Review Questions

 

1.      How does culture influence the business practice?

 

2.      Explain the comparative management theory of Geert Hefstede. 

 

3.      Why is it that business systems do not easily change?

 

4.      What are the features of the Swierczek and Hirsch model of comparative business systems? 

 

5.      Why have some people argued for an ‘Asian’ model of business, as to a Western model of business?

 

6.      What are some of the features of the Malaysian model of business practice? 

 

7.      What are some of the features of the Japanese model of business practice?

 

8.      What are some of the features of the Overseas Chinese model of business practice?

 

9.      What is bingfa?

 

10.  What is guanxi?

 

 

 

Essay and Discussion Questions

 

1.      Why it is that Western models of business practice can not be used to either explain SE Asian business systems or even to negotiate business transactions.

 

2.      Discuss the development of Singapore and explain how this relatively new country has come to dominate the business activity of SE Asia.

 

3.      The Overseas Chinese socio-commercial system of guanxi is foundational to their family-centred networks. Discuss some of the influences of the global business dynamics that may bring change to the guanxi system.

 

 

 

Key References for Study

 

 

Backman, M. (1999). Asian Eclipse, Singapore: John Wiley & Sons.

 

Department of Foreign Affairs and Trade (1995). Overseas Chinese Business Networks in Asia, Canberra: Australian Commonwealth Government.

 

Fallows, J. (1994). Looking at the Sun, New York: Pantheon Books.

 

Hefner, R. (1998). Market Cultures, Boston University: Westview Press.

 

Hodder, R. (1996). Merchant Prince of the East: Cultural Delusions, Economic Success and the Overseas Chinese in Southeast Asia, Chichester: John Wiley.

 

Reynolds, C. (2000). “Reflections on the Value of an ‘Asian’ Model”, European Business Forum, Spring.

 

 

Chapter 7: The Financial Crisis as a ‘Critical Event’ for the Guanxi Business System

 

 

 

Chapter Summary

 

This chapter raises the issue of the impact of the financial crisis for the SE Asian business systems and focuses on the Overseas Chinese guanxi system to explore both the dynamics of this relational system and how the emergence of globalisation might bring change. The social interaction theory of George Herbert Mead is used to explain the interrelationship of social values and business practice and to explore how societies, and their business systems, change.

 

 

Theme

 

The Overseas Chinese guanxi socio-commercial way of life when viewed as a social interaction model can be understood as resistant to ‘forced’ change but nevertheless able to make ‘perceived benefit adaptations’ to opportunities as they arise. 

 

 

Key Ideas

 

  • The Overseas Chinese guanxi socio-commercial system needs to be understood as a social interaction model in order to explain the dynamics of its social and business activity. 

  • The individual of a society is always in interaction with others and with society as a perceived whole, or generalized other.

  • Guanxi is a socio-commercial model that reflects both the traditions of social behaviour and expectation and, yet, is flexible enough to adapt to change and opportunity.

  • Mead sees change as social progress.

  • People act, interact and react to objects, people and events on the basis of the perceived meaning of the interaction.

  • The Overseas business system is to be distinguished from the Anglo-American or European business-meaning systems.

  • The social interaction theory allows an explanation of the cultural resistance to outside pressures to change.

Word List

 

  • Social interaction theory

  • Generalised other

  • Critical event

  • Preferential treatment

  • Fiduciary

  • Contractual

  • Stakeholders

  • Perceived-benefit adaptation

Teaching Objectives

 

 

  • To introduce George Herbert Mead’s social interaction as a theoretical model to explore the dynamics of social change.

  • To explain the Overseas Chinese guanxi socio-commercial system as an interaction model.

  • To introduce criteria for socio-commercial change in a society.

  • To examine the financial crisis as a possible ‘critical event’ causing change to the guanxi-based Chinese societies of SE Asia. 

  • To discuss how and why societies change, as a process of social evolution, and to determine what is the basis for adaptations to the emerging global information era.

Overview of the Chapter

 

Business systems evolve as people respond to their

perceived-benefit opportunities.

 

 

Guanxi as a Socio-commercial System

 

The Financial Crisis: The Need for a Sociological Interpretation 

 

In order to explore the critical event value of the financial crisis for the guanxi system, I propose to demonstrate how guanxi operates as a socio-commercial network of human interaction and how in an interactional system, the members of the society deal with the forces of change.

 

 

Social Interaction Theory   

 

Mead’s thesis is that individuals are known and have knowledge or awareness of their self as they interact in society. It is the interaction process of society that leads to the emergence of the awareness of self, and of the mind as that which encapsulates the process of thinking. Society, therefore, consists of people in association and nteraction. People understand themselves as members of society and pass on their social values to their young.  

 

 

Guanxi as an Interaction Model

 

In business, guanxi is not just about closing a deal or building a relationship. It is about building life-long relationships and business associations across an integrated web of social roles and responsibilities. The guanxi system is not a model of functions of formal relationships but better understood as a social dynamic human action. Indeed, it can be depicted as a matrix of social and commercial interaction or behaviour.

 

 

Elements of the Model

 

§         Family-centred decision making

§         Differentiated relationships

§         Mutual trust and Obligation

·        Risk avoidance

·        Commercially competitive

§         Preferential Treatment

·        Credit extension

·        Discounting

·        Marketing

·        Reflexive action

·        Opportunist

·        Contingent

 

 

 

The Dynamics of Change   

 
Critical Events and the Process of Change

 

While the financial crisis was an economic event, for it to be socially significant, it also has to be seen as a community crisis event – one that impacted the community and the community’s value system. Thus, a current event is judged for its significance by the values, relationships and the experience of the community over time.

 

 

The Criteria for Change   

 

First, that individuals act, interact and react to objectives, people and events on the basis of their meaning. Second, that such meanings arise from interaction with others as others (the community of the past, present and future as experienced as me) determine the meaning of a thing. And, third, that the individual, in the experience and knowledge of the generalised other, enters into an interpretive process of the meaning and value of a thing – a process of reflective intelligence. Thus, the question of the significance of an event or interaction is first a question of meaning.

 

 

A Problem to be Solved for Guanxi  

 

It is suggested here that the guanxi socio-commercial system will change, or evolve, as key individuals influence the collective thinking of the society. I suggest that social change to the guanxi system will occur by a process of individual and collective perceived-benefit adaptations – where perceived benefits are defined as social rewards.

 

 

 

Responding to Exogenous Factors   

 

The Process of Adaptation  

 

The guanxi business system, alongside other SE Asian business systems, is evolving as key actors respond to their perceived benefit opportunities. This adaptation,  however, is not a process of Westernisation but of globalisation. This process of globalisation will bring about the emergence of a new guanxi. SE Asian business systems in the future will not be a hybrid of West and Asian capitalism, but of traditional ways of doing business (both Asian and Western) with global business methods. The dialectic is not between East and West, but between traditional and global paradigms of business management.

 

Perceived-benefit Opportunities   

 

I suggest here three examples of perceived-benefit adaptations taking place in the Overseas Chinese communities arising from emerging opportunities. First is the reduced need for the family network support system to carry the success of the business. Second is the development and acceptance of global business knowledge. Third are the growing trade opportunities. Again, while guanxi may adapt to emerging regional and global commercial markets, it will do so in response to perceived-benefit

opportunities.

 

 

 

Study Review Questions

 

1.      What is the thesis of George Herbert Mead’s social interaction theory?

 

2.       What are the fundamental principles of the guanxi socio-commercial system?

 

3.      In social interaction theory, how does society influence the individual?

 

4.      How does a society develop a tradition of shared meanings?  

 

5.      What makes the guanxi model of interaction different to the Anglo-American model? 

 

6.      How is it the guanxi system of social obligation can extend across generations?

 

7.      What are the criteria for change to occur in a society?

 

8.      How is it that globalisation is a ‘problem’ to be solved for societies?

 

9.      How is it that people and societies adapt to change?

 

 

 

Essay and Discussion Questions

 

1.      The Overseas Chinese socio-commercial as a traditional way of life expresses different values and processes of interaction than, say, the Anglo-American model of social-commercial interaction. How do these differences affect business negations?

 

2.      Discuss the dynamics of the Guanxi socio-commercial system and suggest areas that may change in response to globalisation.

 

3.      Societies exist in a world of dialectics. Explain.

 

 

 

 

Key References for Study

 

 

Buckley, W. (1967). Sociology and Modern Systems Theory, New Jersey, US: Prentice Hall.

 

Buttery, A.E. and Leung, T.K.P. (1998). “The Difference Between Chinese and Western Negotiations”, European Journal of Marketing, Vol. 32, No. 3/4.

 

Mead, G.H. (1934). Mind, Self and Society, Chicago: University of Chicago Press.

 

Reynolds, C. (2000). “Reflections on the Value of an ‘Asian Model”, European Business Forum, Spring.

 

 

Whitley, R. (1998). “East-Asian and Anglo-American Business Systems”, in Thompson, G. (ed.), Economic Dynamism in the Asia-Pacific, London: Routledge.

   

 

 


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