ScanCRM is a high technology company that is privately owned and is base in Wellington, New Zealand. They offered online customer relationship management software system based around open platforms. Though ScanCRM have businesses in both Australia and New Zealand, they were facing challenges of market expansion and in order to achieve its growth and profit targets, ScanCRM have turned their attention towards the market of China. Even though the market of China is huge, the company was caught in a severe case of “China Syndrome”. This syndrome has infected many large and small companies, as they have no appreciation of the cultural complexities involved in actually establishing a business presence here. In the case for ScanCRM, due to the promise of good return, ScanCRM has disregarded many vital point of the culture for China, which result them in failing their business. This report will aim to explore the vital point of culture and the different approaches, which ScanCRM have failed to do so.
ScanCRM is a privately small company that has high technology based in wellington, New Zealand. The company offered online customer relationship management software system based around open source platforms. However, due to the many other small businesses in both Australia and New Zealand, the company was facing challenges of market expansion. They divert their attention to the market of China. The following report will identify the issues why did ScanCRM fail to enter the market of China
1.1 Research Problem
China is a huge market where companies from all over the world are entering. However, with the lack of knowledge and understanding of business cultural, companies is suffering from ‘China syndrome’. As for ScanCRM, they have lack of research and understand of China business cultural and by using a simplistic calculation to justify their revenues. Since ScanCRM is entering a new market, they have to understand the importance of business cultural and the respective regional differences in China. .
1.2 Limitation of the report
Informations found along the writing of this report were taken from online database. Wwebsite, newspaper and magazines articles are the main sources in gathering secondary data. For future study, longer research will help to build stronger report. However, the report content managed to answer all the questions given with credible information to support its ideas.
1.3 Method of data collection
Data gathered for the report found mostly through secondary sources. Secondary sources are the data or information, which has been conducted by other researchers and have been provided for research purposes.
1.4 Report Structure
This report will begin off with an introduction then followed by the cultural, most important error made by ScanCRM, Microtargeting and field observation. Moving on will be the four fundamentals of China business cultural, examples in Singapore and the general attitude could adopt followed by consumer behaviour factors such as motivational factors, status concern and consumer perception. Lastly will be China regional differences, northern, southern and eastern business perspective followed by conclusion.
A culture is the sum of total of the learned behaviour of a group of people that are generally considered to be the tradition of that people and are transmitted from generation to generation. (Schiffman, 2014) 2.1 Most important error made by ScanCRM
According to the case studies ScanCRM used a very simplistic analysis to justify their entry into the Chinese market which they have misunderstood the vital point of culture. The buying behaviour is being influence by culture, social and psychological across countries. However, ScanCRM failed to identify that the buying behaviour in China. A cross-cultural consumer analysis is defined as the effort to determine to what extent the consumers of two or more nations are similar or different (Schiffman, 2014). This analysis could provide ScanCRM with an understanding of the psychological, social and cultural characteristics of the foreign consumers they wish to target, so that they can design effective marketing strategies for the specific national markets involved.
Since ScanCRM is entering a huge market like China, they could use niche marketing or microtargeting. However, there are some challenges that need to be dealt with such as consumer analysis and test marketing. According to Clemons (2010), in order to have a successful microtargeting, company should listen to their consumers. Listening means that they need to do intensive consumer-generated content reviews. In addition, microtargeting can be very effective in competing with big existing companies in China. With the internet and technologies nowadays, companies are able to tailor their offerings in specific market segment.
Another strategy for ScanCRM is to set up a base in China, hire a Chinese consultant, and conduct a field observation. Field observation involves the company to interact with natural environment to identify their behaviour. However, field observation can cost large amount of resources since it requires them to hire high-skilled researcher and set up a new base in China.
4. Four fundamentals of Chinese business culture
There are total of four fundamentals that Chinese business culture has, that are: Guanxi
Guanxi – which translate from English known as “connection” or “relationship”. In China, business organizations and social circles are often nepotistic in nature. Relationship form the foundation of business and society when are built upon. Chinese people rely on their personal relationship when conducting business (Upton-McLaughlin 2013). Face – Which represent a person’s reputation, personal respect and feelings of prestige within a company and society. Face could be based on their accomplishments, and the amount of respect they feel is their due based upon their position and status, such as in a company or society (Upton-McLaughlin 2013).
Foreignness- Foreignness refer to a companies that has too little or no knowledge of another country business cultural. In China, there are several business systems and is important to understand before entering the market to avoid foreignness (Dolle 2013). Hierarchy – Hierarchy and rank is a way of obtaining face and it differentiate between levels of management. Chinese leaders and managers expect respect from their subordinates and in many cases expect them to obey without questioning them (Upton-McLaughlin 2013). 4.1General attitude companies could adopt
One of the general attitude companies could adopt for respecting any of the four fundamentals is to adopt a respectful attitude. King (2014) mention that, cultural is diversity and different people with different background has a cultural differences in them. Thus, it is essentially important for a person to adopt a respectful attitude in accordance with different cultural.
5. Consumer behaviour factors
Motivation was described as the driving force within individuals that impels them into action (Schiffman, 2014). Individual’s needs in one country may not be similar with the other one. The goals may be different as well, thus the behaviour in completing ones goal is differ from one individual to another. Although understanding motivational factors across cultures could be considered impossible due to numerous cultures, marketers can use the approach in understanding ones needs. (Luthans & Doh, 2012).
Social class can be define as a group of people that has homogenous behaviour then form a hierarchy against each other such as lower, middle and upper class. Each social class has different behaviour and buying patterns. Consumers tend to buy goods or services that represent their social status. For example, a professional office worker will prefer Mercedes rather than Kia that has lower esteem. Social class among countries may be different due to its culture.
Cultural environment has huge impact in shaping ones perception (Jandt,2012). Edward T. Hall (1979) came up with a concept of culture influencing perception, the low and high context culture. For instance, Japan that has low context culture will tend to rely more on body language communication rather verbal communication. The actual words may not convey the actual message. On the other hand, in Switzerland people are more explicit since they are high context culture. They deliver their message very obvious and direct.
6. Chinese regional differences
With a rapidly expanding economy and a population demanding more consumer goods, China is a potentially huge market for any companies looking to expand overseas. (Stepankowsky and Borgaard 2014) The key specific economic regions are northern China (centred of Beijing), eastern China (centred on Shanghai) & southern China (centred on Guangzhou and Shenzhen) as these three regions have the most population and western brands are in fashion. Thus, consumers are more willing to spend their wages on higher-priced product or services.
6.1Northern Chinese Business Perspective
These are some of the important cultural differences which an overseas company need to take note of when doing business with the Chinese:
Face-giving & Relationship Concept
The northern Chinese truly believe quotes that say “A friend in need, is a friend indeed”. It means that when difficulties are encountered, the northern Chinese believe that their business partner will definitely help. However, if there is no help offer or no reasonable/acceptable explanation given, then it might ruin the business relationship asthe northern Chinese will think that their business partner does not give any “face” or disrespect their relationship (Renita, 2014).
The northern Chinese prefer a more straightforward communication with either their friends or business partners. Therefore, whoever is communicating with the northern Chinese must be extremely caution and do not beat around the bush (Renita, 2014).
6.2Southern Chinese Business Perspective
Polite and Indirect
The southern Chinese are polite to each other, but are very good at argument. The southern Chinese does not like to express their ideas or reject directly. Additionally, when money is on the line, the southern Chinese will become more fussy, calculative and strict budgeting (Renita, 2014).
The southern Chinese put money first than relationship when doing business, but are much more efficient and respect the rules over relationships (Renita, 2014).
6.3Eastern Chinese Business Perspective
Time is money
The eastern Chinese believe time is money as driven by immense economic pressures to do more with less resources and are competing against time zones to be the first to bring new product into the market (Mackta, 2014).
Always say ” NO “
The eastern Chinese tend to say more “no” as to avoid any responsibility and deadly consequences, if something go wrong (Mackta, 2014).
In conclusion, this report explored the different factors on ScanCRM failed to enter the China markets and the appropriate strategic and approach to enter China Market. ScanCRM had failed to understand the business cultural differences in China. Furthermore, China is a huge market where there are regional differences. Therefore, before entering into China market, ScanCRM should understand the different local culture and languages communication is preferred. Additionally, ScanCRM could hire a China based consultants for some professional advice instead a consultant based in New Zealand. Word count: 1,641
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