Exporting to Taiwan: Guanxi in action
You are the newly-hired marketing manager of Glorious Paints, a Singapore manufacturer of marine paints. It is a fast-growing company headed by three young, Western-educated directors.
Last year the marketing director led Glorious Paints to its first overseas sale, selling a large quantity of paint to Australia and New Zealand. Director Tan achieved this success by first sending information to potential distributors along with cover letters requesting appointments.
After receiving replies, Tan met with the interested candidate firms at their offices to negotiate a distribution agreement with the company best qualified to handle that market area. This process took about four months and today sales volume already exceeds expectations. Following that success you were hired to expand exports to other Pacific Rim markets. The director called you into his office to discuss market research showing that Taiwan is a very promising market with high demand and little local competition. So you were instructed to set up distribution there using the approach that had worked in Australia/New Zealand.
By searching a number of data bases you came up with the names and contact information of a number of Taiwanese importers, agents, representatives and wholesalers involved in the paint business. Next you sent off brochures and product information to these prospects, enclosing a cover letter requesting an appointment to discuss possible representation. To your surprise, six weeks went by without a single response. At a strategy session Mr. Tan pointed out that many Taiwanese are not comfortable corresponding in English, so you fired off a second mailing, this time in Chinese. But after another two months not a single prospective distributor has answered your request for an appointment.
Mr. Tan is upset with your lack of progress in this attractive market. He has called an urgent meeting for this afternoon and expects you to come up with a solution. As you sit stirring your tea the questions revolve in your head like the spoon in the teacup. “What have I done wrong? This strategy worked fine with the Aussies. Why not with the Taiwanese? What do we do now?
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1. Mr. Tan is simply wrong – there is no market in Taiwan for marine paints.
2. The Taiwanese business people were irritated because you sent them the mailing twice. You should have sent the information in Mandarin the first time.
3. Unlike Aussies and Kiwis, Taiwanese business people are uncomfortable with a direct approach. You need to find a respected third party to introduce you to the potential Taiwanese distributors.
4. Although both Singapore and Taiwan are relationship-focused business cultures, the young directors of Glorious Paints were clueless about how to do business in Taiwan because they were educated in the West.
5. Since face-to-face meetings are very important for relationship-focused people, instead of writing to these potential distributors you should have flown to Taiwan to meet them in person.
Exporting to Taiwan: Guanxi in action
Solution and Discussion
1. There is no information in the case to support this choice. The shipping industry is in fact very important in Taiwan. Look for another answer.
2. Yes, it’s true that the Singaporeans should have sent the marketing material in Chinese. Still, this is not the best answer. Keep looking.
3. This is the best choice. The key word here is guanxi: relationships, networks, connections. Business culture is all about expectations and assumptions, and relationship-focused Taiwanese business people tend to expect potential suppliers to be introduced. That is why the indirect approach usually works better in RF markets.
4. This is also a good choice. The business culture of Singapore is relationship-focused (though somewhat less so than Taiwan) so the bosses really should have been aware of the need to be introduced. So, why didn’t they get it?
The answer is found in the first paragraph of the case: “….a fast-growing company headed by three young, Western-educated directors.” Many Singaporeans study abroad, mostly in English-speaking, deal-focused countries such as Australia or Canada. At business schools in those countries their professors are usually deal-focused, their textbooks written by DF authors.
So it’s not surprising that some of these younger Singaporean business people forget their guanxi roots. The directors of the company called Glorious Paint in this case actually needed a Western consultant to remind them that introductions are expected in relationship-focused markets.
5. Of course meeting your potential customers in person is a good idea. But it is rarely smart to travel to RF markets without prearranged appointments. First of all, your prospects may not be available – away from the office on business or for other reasons. Secondly, “cold calls” are rarely fruitful in Asian relationship-focused markets such as Taiwan. RF business people tend to be uncomfortable talking business with strangers. That’s why introductions and referrals are strongly recommended.