Guanxi is, essentially, a philosophy for conducting business and other interpersonal relationships in the Chinese, and broader Asian, context.
Therefore, its effects have a signifi cant impact on how Asian societies and economies work.
The notion of Guanxi has been known to western economists since at least 1978. This was the time when the Chinese market began to open up to the west. 56 The foundations of Guanxi are Buddhist and Confucian teachings regarding the conduct of interpersonal interactions. Guanxi refers to the informal social bonds and reciprocal obligations between various actors that result from some common social context, for example families, friendships and clan memberships. These are special types of relationships which impose reciprocal obligations to obtain resources through continual cooperation and exchange of favours. 57
Guanxi has become a necessary aspect of Chinese and, indeed, Asian business due to the lack of codifi ed, enforceable contracts such as those found in western markets. Guanxi determines who can conduct business with whom and under what circumstances. Business is conducted within networks, and rules based on status are invoked. Network members can only extend invitations to others to become part of their network if the invitee is a peer or a subordinate.
Understanding relationships 55
References
1. Barnes , J.G. ( 2000 ) Secrets of customer relationship management . New York : McGraw-Hill .
2. Heath , R.L. and Bryant , J. ( 2000 ) Human communication theory and research: concepts, contexts and challenges . Mahwah, NJ : Lawrence Erlbaum Associates .
3. Dwyer , F.R. , Schurr , P.H. and Oh , S. ( 1987 ) Developing buyer–seller relationships . Journal of Marketing , Vol. 51 , pp. 11 – 27 .
4. See, for example, Morgan, R.M. and Hunt, S.D. (1994) The commitment–
trust theory of relationship marketing. Journal of Marketing Vol. 58(3), pp. 20–38; Rousseau, D.M., Sitkin, S.B., Burt, R.S. and Camerer, C.
(1998) Not so different after all: a cross-discipline view of trust.
Academy of Management Review , Vol. 23(3), pp. 393–404; Selnes, F. (1998) Antecedents of trust and satisfaction in buyer–seller relationships.
European Journal of Marketing , Vol. 32(3–4), pp. 305–322; Shepherd, B.B.
and Sherman, D.M. (1998) The grammars of trust: a model and general implications.Academy of Management Review , Vol. 23(3), pp. 422–437.
5. Singh , J. and Sirdeshmukh , D. ( 2000 ) Agency and trust mechanisms in consumer satisfaction and loyalty judgements . Journal of Marketing Science , Vol. 28 ( 1 ) , pp. 255 – 271 .
6. Harris , S. and Dibben , M. ( 1999 ) Trust and co-operation in business relationship development: exploring the infl uence of national values . Journal of Marketing Management , Vol. 15 , pp. 463 – 483 .
Summary
In this chapter you have learned that there are differing beliefs about what counts as a relationship. Although interactions over time are an essential feature of relationships, some believe that a relationship needs to have some emotional content. Although the character of a relationship can change over time, successful relationships are based on a foundation of trust and commitment. The primary motivation for companies trying to develop long-term relationships with customers is the profi t motive. There is strong evidence that long-term relationships with customers yield commercial benefi ts as companies strive to enhance customer lifetime value. The satisfaction–profi t chain suggests that customers who are satisfi ed are more likely to become loyal, and high levels of customer loyalty are associated with excellent business performance. However, companies are advised to focus their customer acquisition and retention efforts on those who have profi t-potential or are otherwise strategically signifi cant. Although companies generally want to develop long-term relationships with customers, there are good reasons why customers don’t always share the same enthusiasm. Finally, the chapter closes with a discussion of several schools of management or marketing theory that shed light on customer relationship management. These are the IMP, Nordic, Anglo–Australian, North American and Asian (Guanxi) schools of thought.
7. Morgan , R.M. and Hunt , S.D. ( 1994 ) The commitment–trust theory of relationship marketing . Journal of Marketing , Vol. 58 ( 3 ) , pp. 20 – 38 . 8. Buttle, F. and Biggemann, S. (2003) Modelling business-to-business
relationship quality. Macquarie Graduate School of Management Working Paper #2003–3.
9. Wilson , D.T. and Mummalaneni , V. ( 1986 ) Bonding and commitment in supplier relationships: a preliminary conceptualization . Industrial Marketing and Purchasing , Vol. 1 ( 3 ) , pp. 44 – 58 .
10. http://www.allheadlinenews.com/articles/7009767911 . Accessed 20 January 2008.
11. The idea of strategic signifi cance is discussed in Chapter 5.
12. Reichheld , F.F. and Detrick , C. ( 2003 ) Loyalty: a prescription for cutting costs . Marketing Management , September–October , pp. 24 – 25 .
13. Ang, L. and Buttle, F.A. (2002) ROI on CRM: A Customer Journey Approach. Proceedings of the Inaugural Asia-Pacifi c IMP conference, Bali, December 2002.
14. Bain & Co/Mainline. ( 1999 ) Customer spending on-line . Bain & Co . 15. Christopher , M. , Payne , A. and Ballantyne , D. ( 1991 ) Relationship
Marketing . Oxford : Butterworth-Heinemann .
16. Gordon , I. ( 1998 ) Relationship marketing . Ontario : John Wiley .
17. Reichheld , F. and Sasser , W.E. Jr. ( 1990 ) Zero defections: quality comes to services . Harvard Business Review , September–October , pp. 105 – 111 .
18. Bain & Co/Mainline. ( 1999 ) Customer spending on-line . Bain & Co . 19. Ferron , J. ( 2000 ) The customer-centric organization in the automobile
industry – focus for the 21st century . In: S. Brown (ed.) . Customer Relationship Management: A Strategic Imperative in the World of e-Business . Toronto : John Wiley , pp. 189 – 211 .
20. IBM (2000) Business intelligence in the fi nancial services industry: the case for differentiation. http://sysdoc.doors.ch/IBM/fss_business_
intelligence_2.pdf . Accessed 20 January 2008.
21. Reichheld, F. and Sasser, W.E. Jr (1990) Zero defections: quality comes to the services. Harvard Business Review , September–October, pp. 105–111; see also Reichheld, F.F., Markey, R.G. and Hopton, C.
(2000) The loyalty effect: the relationship between loyalty and profi ts.
European Business Journal , Vol. 12(3), pp. 134–139.
22. Lee , J. , Lee , J. and Fieck , L. ( 2006 ) Incorporating word of mouth effects in estimating lifetime value . Journal of Database Marketing and Customer Strategy Management , Vol. 14 ( 1 ) , pp. 29 – 39 .
23. Berger , P.D. and Nasr , N.I. ( 1998 ) Customer lifetime value: marketing models and applications . Journal of Interactive Marketing , Vol. 12 ( 1 ) , Winter, pp. 17 – 30 .
24. Biong , H. , Wathne , K. and Parvatiyar , A. ( 1997 ) Why do some companies not want to engage in partnering relationships? In:
H.-G. Gemünden , T. Ritter and A. Walter (eds) . Relationships and networks in international markets . Oxford : Pergamon , pp. 91 – 108 . 25. Anderson , E.W. and Mittal , V. ( 2000 ) Strengthening the satisfaction–
profi t chain . Journal of Service Research , Vol. 3 ( 2 ) , pp. 107 – 120 .
26. Anderson , E.W. ( 1994 ) Cross category variation in customer satisfaction and retention . Marketing Letters , Vol. 5 , Winter, pp. 19 – 30 .
Understanding relationships 57 27. Oliver , R.L. ( 1997 ) Satisfaction: a behavioural perspective on the consumer .
Singapore : McGraw-Hill International .
28. Dick , A.S. and Basu , K. ( 1994 ) Customer loyalty: towards an integrated framework . Journal of the Academy of Marketing Science , Vol. 22 ( 2 ) , pp. 99 – 113 .
29. Kaplan , R.S. and Norton , D.P. ( 1996 ) The balanced scorecard . Boston, MA : Harvard Business School Press .
30. Fornell , C. , Johnson , M.D. , Anderson , E.W. , Jaesung , C. and Bryant , B.E.
( 1996 ) The American customer satisfaction index: nature, purpose, and fi ndings . Journal of Marketing , Vol. 60 ( 4 ) , October, pp. 7 – 18 . 31. http://www.theacsi.org/predictive_capabilities.htm . Accessed 30
November 2005.
32. Yeung , M.C.H. and Ennew , C.T. ( 2001 ) Measuring the impact of customer satisfaction on profi tability: a sectoral analysis . Journal of Targeting, Measurement and Analysis for Marketing , Vol. 19 ( 2 ) , pp. 106 – 116 .
33. Copyright © 2008. ACSI, University of Michigan Business School.
Used with permission.
34. Cassel , C. and Eklof , J.A. ( 2001 ) Modeling customer satisfaction and loyalty on aggregate levels: experience from the ECSI pilot study . Total Quality Management , Vol. 12 ( 7–8 ) , pp. 834 – 841 .
35. Anderson , E.W. , Fornell , C. and Lehman , D.R. ( 1994 ) Customer satisfaction, market share and profi tability: fi ndings from Sweden . Journal of Marketing , July , pp. 53 – 66 .
36. Ittner , C.D. and Larcker , D.F. ( 1998 ) Are non-fi nancial indictors of fi nancial performance? An analysis of customer satisfaction . Journal of Accounting Research , Vol. 36 ( supplement 1998 ) , pp. 1 – 46 .
37. Carr , N.G. ( 1999 ) The economics of customer satisfaction . Harvard Business Review , Vol. 77 ( 2 ) , March–April, pp. 15–18 .
38. Behn , B.K. and Riley , R.A. ( 1999 ) Using non-fi nancial information to predict fi nancial performance: the case of the US airline industry . Journal of Accounting, Auditing and Finance , Vol. 14 ( 1 ) , pp. 29 – 56 . 39. Gustaffson , A. and Johnson , M.D. ( 2002 ) Measuring and managing
the satisfaction–loyalty–performance links at Volvo . Journal of Targeting, Measurement and Analysis for Marketing , Vol. 10 ( 3 ) , pp. 249 – 258 .
40. Yeung , M.C.H. , Ging , L.C. and Ennew , C. ( 2002 ) Customer satisfaction and profi tability: a reappraisal of the relationship . Journal of Targeting, Measurement and Analysis for Marketing , Vol. 11 ( 1 ) , pp. 24 – 33 .
41. Helgesen , O. ( 2006 ) Are loyal customers profi table? Customer satisfaction, customer (action) loyalty and customer profi tability at the individual level . Journal of Marketing Management , Vol. 22 , pp. 245 – 266 .
42. Anderson , E.W. and Mittal , V. ( 2000 ) Strengthening the satisfaction–
profi t chain . Journal of Service Research , Vol. 3 ( 2 ) , pp. 107 – 120 .
43. The IMP group has its own dedicated website, www.impgroup.org , annual conference and are prolifi c publishers of books and papers, a number of which follow. Cunningham, M. (1980) International marketing and purchasing: features of a European research project.
European Journal of Marketing , Vol. 14(5–6), pp. 5–21; Ford, D., Gadde, L.-E., Håkansson, H. and Snehota, I. (2003 ) Managing business relationships (2nd edn). Chichester, UK: John Wiley & Sons; Ford, D. and McDowell, R. (1999) Managing business relationships by analysing the effects and value of different actions . Industrial Marketing Management , Vol. 28, pp. 429–442; Ford, D. and Redwood, M. (2004) Making sense of network dynamics through network pictures: a longitudinal case study. Industrial Marketing Management , Vol. 34(7), pp. 648–657; Gadde, L. E., Huemer, L. and Håkansson, H. (2003) Strategizing in industrial networks. Industrial Marketing Management , Vol. 32, pp. 357–364;
Håkansson, H. and Ford, D. (2002) How should companies interact in business networks?Journal of Business Research , Vol. 55, pp. 133–139;
Håkansson, H. and Snehota, I. (1995)Developing relationships in business networks . London: Routledge; Håkansson, H. E. (1982). International marketing and purchasing of industrial goods: an interaction approach . Chichester: John Wiley; Turnbull, P.W. and Cunningham, M. (1980) International marketing and purchasing: a survey among marketing and purchasing executives in fi ve European countries . London: Macmillan;
Zolkiewski, J. and Turnbull, P. (2002) Do relationship portfolios and networks provide the key to successful relationship management?
Journal of Business and Industrial Marketing , Vol. 17(7), pp. 575–597.
44. Håkansson , H. and Snehota , I. ( 1995 ) Developing relationships in business networks . London : Routledge .
45. Dyer, J.H. (1997) Effective inter-fi rm collaboration: how fi rms minimize transaction costs and maximise transaction value.Strategic Management Journal , Vol. 18(7), pp. 535–556; Dyer, J.H. and Chu, W.
(2003) The role of trustworthiness in reducing transaction costs and improving performance: empirical evidence from the United States, Japan and Korea. Organisation Science , Vol. 14(1), pp. 57–68.
46. Defi nition based on Barney, J.B. (1991) Firm resources and sustained competitive advantage.Journal of Management , Vol. 17(1), pp. 99–120 and Wernerfelt, B. (1984) A resource-based view of the fi rm. Strategic Management Journal , Vol. 5(2), pp. 171–180.
47. Christian Grönroos and Evert Gummesson are prolifi c authors.
Among their works are the following. Grönroos, C. (1996) Relationship marketing logic. Asia-Australia Marketing Journal , Vol. 4(1), pp. 7–18;
Grönroos, C. (1997) Value-driven relational marketing: from products to resources and competencies. Journal of Marketing Management , Vol.
13, pp. 407–420; Grönroos, C. (2000a) Creating a relationship dialogue:
communication, interaction and value.The Marketing Review , Vol. 1, pp.
5–14; Grönroos, C. (2000b) Relationship marketing: the Nordic School perspective. J.N. Sheth and A. Parvatiyar (eds). Handbook of Relationship Marketing . London: Sage Publications, pp. 95–120; Grönroos, C. (2004) The relationship marketing process: communication, interaction, dialogue, value.Journal of Business and Industrial Marketing , Vol. 19(2), pp. 99–113; Gummesson, E. (1990) The part-time marketer . Karlstad, Sweden: Center for Service Research; Gummesson, E. (1987) The new marketing: developing long-term interactive relationships. Long Range Planning , Vol. 20(4), pp. 10–20; Gummesson, E. (1994) Making relationship marketing operational. International Journal of Service Industry Management , Vol. 5(5), pp. 5–20; Gummesson, E. (1996)
Understanding relationships 59 Relationship marketing and imaginary organisations: A synthesis .
European Journal of Marketing , Vol. 30, pp. 31–44; Gummesson, E.
(1997a). In search of marketing equilibrium: relationship marketing versus hypercompetition. Journal of Marketing Management , Vol. 13, pp.
421–430; Gummesson, E. (1997b) Relationship marketing as a paradigm shift: some conclusions from the 30R approach. Management Decision , Vol. 35(4), pp. 267–272; Gummesson, E. (1997c) Relationship marketing:
the emperor’s new clothes or a paradigm shift? Marketing and Research Today , Vol. 25(1), pp. 53–61; Gummesson, E. (2002) Relationship marketing and a new economy: it’s time for de-programming. Journal of Services Marketing , Vol. 16(7), pp. 585–589.
48. Grönroos , C. ( 1997 ) Value-driven relational marketing: from products to resources and competencies . Journal of Marketing Management , Vol.
13 , pp. 407 – 420 .
49. Gummesson , E. ( 1997 ) Relationship marketing as a paradigm shift:
some conclusions from the 30R approach . Management Decision , Vol.
35 ( 4 ) , pp. 267 – 272 .
50. Grönroos , C. ( 2000 ) Creating a relationship dialogue: communication, interaction and value . The Marketing Review , Vol. 1 , pp. 5 – 14 .
51. Christopher, M., Payne, A. and Ballantyne, D. (1991) Relationship marketing: bringing quality, customer service and marketing together . Oxford: Butterworth-Heineman; Payne, A. (2000) Relationship marketing: the UK perspective. In: J.N. Sheth and A. Parvatiyar (eds.).Handbook of Relationship Marketing . London: Sage Publications, pp. 39–67; Peck, H., Payne, A., Christopher, M. and Clark, M.
(1999) Relationship marketing: strategy and implementation . Oxford:
Butterworth-Heinemann.
52. Peck, H., Payne, A., Christoper, M. and Clark, M. (1999) Relationship Marketing: strategy and implementation . Oxford: Butterworth-Heinemann.
53. Payne, A. and Frow, P. (2005) A strategic framework for customer relationship management. Journal of Marketing , Vol. 69, pp. 167–176;
Payne, A. and Holt, S. (2001) Diagnosing customer value: integrating the value process and relationship marketing. British Journal of Management , Vol. 12(2), pp. 159–182.
54. Heide, J.B. (1994) Inter-organisational governance in marketing channels. Journal of Marketing , Vol. 58(1), pp. 71–86; Heide, J.B. and John, G. (1990) Alliances in industrial purchasing: the determinants of joint action in buyer-supplier relationships. Journal of Marketing Research , Vol. 27(1), pp. 24–36.
55. Morgan, R.M. and Hunt, S.D. (1994) The commitment–trust theory of relationship marketing. Journal of Marketing , Vol. 58(3), pp. 20–39;
Gao, T., Joseph S.M. and Bird, M.M. (2005) Reducing buyer decision- making uncertainty in organizational purchasing: can supplier trust, commitment, and dependence help?Journal of Business Research , Vol.
58(4), pp. 397–406.
56. Ambler , T. ( 1995 ) Refl ections in China: re-orienting images of marketing . Marketing Management , Vol. 4 ( 1 ) , pp. 23 – 30 .
57. Davies , H.A. , Leung , T.K.P. , Luk , S.T.K. and Wong , Y.H. ( 1995 ) The benefi ts of Guanxi: an exploration of the value of relationships in developing the Chinese market . Industrial Marketing Management , Vol. 24 , pp. 207 – 214 .