The Balance of Economic, Political and Social Systems

Effective penetration into the Greater Chinese Market for any company, though especially MLMs, requires a balanced approach.

Aside from direct incentive and leverage of political guanxi, a strong government relationship is made possible through obtaining positive support of the people. This public image can be obtained through direct public contact or the influence of newspapers, television and other forms of media. When relationships with the public are supported by the media, marketing channels that exist from the present bureaucracy become useful—of course permission to use these marketing channels requires cooperation and assistance from the Chinese government. Middle Kingdom Group (MKG) LLC, a marketing company comprised of experienced Chinese and Western business and government consultants, makes the point that by efficiently balancing these interdependent relationships, efficiency in business will result. In MKG’s business proposal for market penetration into China, four key components are recognized: strong government relations, cooperative use of media, cooperation with social culture and synergism with existing marketing channels (“Who Will Help Her Find Her Way Around China?” 2003, p.4). In meeting with representatives from a Utah-based MLM company, Dan Mabey, former Director of International Economic Development for the State of Utah and member of MKG, recognized that existing MLM companies are making use of the previously mentioned key aspects of successful business in China, but very few, if any, are doing a very good job of it (personal communication, November 21, 2003).

Government Relations
The inseparable relationship of business and government in China places government relationships at the forefront of importance. The mounting pressure from the WTO and the growth of retail based MLM companies in China are creating an environment in which the government may respond with additional legislation and direction. Although the Chinese-MLM environment has drastically changed in the past 22 years, the government’s role has not. To secure product registration, product protection and operation expansion, support from the government is imperative. These relationships can be built by direct government interaction or indirect leverage of guanxi.

Media have tremendous influence in China. To gain a positive image in the public eye is extremely helpful. Negative press was one of the key factors that led to the ban on direct selling (“When the Force is Against You,” 1998, p.5). Positive press could have helpful effects. An example of helpful media coverage can be found in one of China’s most prominent papers, Xinhua. Recent articles highlighted Amway’s successful social-improvement donations programs and praised a publicly announced US$120m increase in their China operation’s investment (“Amway Supports Welfare Causes in China,” 2003, par.4; “US Businessman Values China’s Investment Environment,” 2003, par.1). This type of media hype is excellent for gaining positioning and placement of public support in the Chinese marketplace. Media are especially effective when used to highlight the less ostensible characteristics of a company, such as the number of employees, their attitudes towards the company and products and the help of the company itself to its immediate community.

Social Culture
China is losing its anticapitalist sentiments of the past and now opening to Western capitalist ideologies and culture. Companies that can be perceived by the people as being a benefit to society will help to create an image of cooperation and progressiveness. This mentality is in conjunction with words of Deng Xiaoping, Mao Zedong’s influential successor, “It doesn’t matter whether the cat is black or white, as long as it catches mice.”(“Who Will Help Her Find Her Way Around China,” 2003 p. 5) This expression can be applied to the role of capitalism in helping society (i.e. it does not matter whether one uses communism or capitalism, but what does matter is that society is helped).

Amway has been very active in demonstrating its benefit to China. In 2002 Amway sponsored more than 246 public welfare programs, totaling over US$1.8m. One of Amway’s more recent programs includes a simple program where donation boxes will be set up in nearly 100 of its national branches. The donations are distributed toward children’s education and other welfare programs (“Amway Supports Welfare Causes in China,” 2003).

Marketing Channels
China’s communist government relies on extensive hierarchy and committees to function. Geographic and ethnic differences in the Chinese system require a unique network of administration throughout the country. The close relationship of government and business, coupled with the practice of guanxi, create several exclusive networks throughout China. Many of these quazi-business/government marketing channels provide a strong and well-defined foundation to be utilized in the market.

These market channels can be illustrated in the distribution of cellular phones in China. China now claims to have over 250 million mobile phone users (“China’s Cell-phone Users,” 2003, par. 1). Dan Mabey, former Director of International Economic Development for the State of Utah, is keen to point out that the price of phones and service is far more than even the above average Chinese citizen can afford. Rather it is through the ministry of communication and the budgets of other budgets of government ministries and large firms that such pecuniary consumption is possible. The citizens do not buy the mobile phones; the government does (Dan Mabey, personal communication, November 21, 2003). Tapping into other markets that have strong ties to government ministries provides a large market base with enough capital to purchase the products.

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