Instructors Manual - Section 2
The Challenge of Globalisation for Southeast Asian
Chapters 6 – 7
6: Southeast Asian Business
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 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.
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.
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.
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?
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.
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?
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.
References for Study
Backman, M. (1999).
Asian Eclipse, Singapore: John Wiley & Sons.
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.
(2000). “Reflections on the Value of an ‘Asian’ Model”, European
Business Forum, Spring.
7: The Financial Crisis as a ‘Critical Event’ for the Guanxi Business
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.
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.
Overview of the Chapter
Business systems evolve
as people respond to their
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
· Reflexive action
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
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.
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
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?
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.
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.
(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.