Guanxi And Relationship Marketing

China is one of developed countries in the world that being successful in the field of business. It makes other countries try to understand and learn about China’s business, aimed to make their business as successful as China’s business. It leads many researchers around the world try to identify the key points of successful China’s business related to the business relationships. Generally, marketing plays an important role as business function to create a good business to establish the relationship between customer and firm’s organization and marketing is a discipline that is continually developing (Mckeage & Gulas, 2013). Kotler & Armstrong (2012) described that marketing is not only selling and advertising, but it is all about satisfying customer needs and managing profitable customer relationship to create value for customers and capture value from customers in return. The art of marketing lies in adding the value to make their market different to the competitors, this strategy also can be done by other competitors, but good marketing relationships are difficult to be imitated (Yau, Lee, Chow, Sin & Tse, 2000). Yau et al. (2000) argued that every business will inevitably face relationship dynamics related to the concept of relationship marketing in order to do the interactive process in society where relationship building is a vital concern.

Relationship marketing is the process of attracting a new customer and retaining customer (Schumann, 2009) as a firm’s strategy to change the marketplace and external business environment (Palmer, 1999) for the long-term oriented and emphasizes cooperative behaviors (Wang, 2007). A relationship or connection can be translated into Chinese language as guanxi. In Chinese culture, especially in Chinese business culture, guanxi is complicated item that used for describing personal relationships between people, but this simple translation can never fully explain the exact meaning of guanxi in Chinese culture (Yang, 2011). Guanxi is the traditional Confucian concept of a personal relationship and it defines the Chinese moral code (Wong & Leung, 2012). Chinese people using guanxi when they face non-routine problem that cannot be solved easily through normal channel (Bu & Roy, 2015). In China’s business, guanxi treated as a business practice guidance and it is one of the most critical factors for the successful China’s business (Chang, Chou, Huang & Wang, 2016).

Chinese culture is one of the world’s oldest cultures that have big influences in the East Asia culture and also influence to some of Southeast Asia culture. Chinese culture is different with Western culture, it creates business cultural diversity that affect to the international or global marketing. The international marketing approach is primarily based on the USA’s markets and it may not applicable under a different culture and tradition, so a relational marketing approach is better suited to the culture of most countries (Arias, 1998). The combination between the uniqueness of Chinese culture and some Western relationship marketing principles is absorbed, guanxi using some relationship marketing principle to be a key determinant of a successful business in China (Wang, 2007). Western relationship marketing and guanxi have to do with managing relationship network and interaction (Arias, 1998) using basic characteristics such as mutual understanding, cooperative behavior and long-term orientation (Wang, 2007).

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Exchange and fulfilment of promise and development of trust are the central importance steps of guanxi and relationship marketing (Arias, 1998). In Chinese business, the existing relationship still applying guanxi approach to maintain the firm’s performance, but for newcomers, they should focus on performance to earn the buyer’s trust before performing the guanxi tie (Chen, Huang & Sternquist, 2011). Although trust is the important aspect in both guanxi and relationship marketing, but those approaches have different practice of trust in business interactions. Western relationship marketing using a system trust rather than personal trust that used in guanxi practice in business interactions (Leung, Lai, Chan & Wong, 2005). Related to the guanxi, there is another Chinese cultural variable that useful in Chinese business which is xinyong. Xinyong can be translated from Chinese language as credit, but the meaning of xinyong in business practice is closer to the Western version of trust that related to the personal trust in the term of Chinese business relationship (Wang, 2007; Leung et al., 2005). Leung et al. (2005) found that there is no significant relationship between xinyong and customer satisfaction, when customer satisfied with the product or the service, it does not mean that the customer has xinyong to the supplier.

Developing trust in a relationship is one of expressive interaction to move the guanxi parties closer each other (Bu & Roy, 2015). High level of particularistic trust in relationships with kith and kin, a Chinese buyer may scarify business profits for personal friendship (Bu & Roy, 2015; Leung et al., 2005). Kith and kin (qinyou) associations is traditional source to get a partner in guanxi tie (Bu & Roy, 2015). Using pre-existing kith and kin association to get business partner will make the relationship closer and easier to get the trust from partners rather than building a new relationship with strangers. In fact, trust each other is really important to maintain the good relationship in every kind of social relationship, but once he/she failed to maintain partner’s trust and failed to fulfill the promises, he/she will no longer in the relationship circle.

Chinese businessmen are preoccupied with developing and maintaining guanxi relationship across organizational boundaries such as business-to-business and business-to-government (Bu & Roy, 2015). Maintaining good relationship in guanxi will generate good benefits for the firm, such as connect to partnership firm and government offices, gain access to “insider” information, decode government policy intents and open up needed resources that are otherwise unavailable (Gu, Huang & Tse, 2008). It shows the great power of guanxi in Chinese business, guanxi not only supporting the business through the relationship with customers like relationship marketing does, but guanxi also supporting the business through the relationship with the government that give so many benefits for firm’s performance. Gu et al. (2008) argued that guanxi are relevant to the three issues; market performance, corporate level to influence performance and potential damaging effect on firm performance. Each system have a bright and a dark side, Gu et al. (2008) argued that the dark side of guanxi can be found when the guanxi network fails, by that moment it will give an overburdening of corporate obligation, domino effects, overreliance and collective biases.

The fact that China is a country with one fifth the world’s consumers attracts a large number of business people to enter China’s market (Yang, 2011). The international competition and the globalization cause the number of suppliers and buyers to increase and the competition tend to become fierce (Kleinaltenkamp, Plinke & Sӧllner, 2015). To face the fierce competition in international competition, Morgan & Hunt (1994) suggest that multinational companies must collaborate to compete. For multinational companies from the West conducting business in China might be challenging, because they need to deal and understand the Chinese business culture (Yang, 2011). To face the global market, especially with target markets in China, companies must understand the key aspects in Chinese business. Guanxi is one of the key successful Chinese businesses that share same purpose with relationship marketing in the business relationship, but both approaches have different practice. This article aims to further understanding regarding the differences of guanxi and relationship marketing with a bright and dark side of both in Chinese market.