July 13, 2010
GM598 – International Business
Case Analysis Assignment: DMG-Shanghai

1. Why do you think that it is so important to cultivate guanxi and guanxiwang in China?

According to the closing case on page 117 of the textbook, guanxi is based on reciprocity, which is the undertaking of higher authority to accept an obligation to return a favor in the unspecified future whenever they benefit from the guanxi network. The development and expansion of the guanxi is a form of social investment that enriches the executive's resources and future potential. The importance of cultivating guanxi and guanxiwang in China is to realize the imperativeness of personal connection between two individuals who are bounded by an implicit psychological contract to follow the social norms of guanxi (Hill, 2009, p.105). The norms include self-disclosure, dynamic reciprocity, and the long-term equity principle. Establishing connections in relationships would help do a better job in completing an assignment and may be able to bend the rules for a temporary time period. The society of China lacks a strong rule-based legal tradition, thus guanxi and guanxiwang is becoming a necessary and important mechanism for building long-term business relationships and getting business done in China successfully.

2. What does the experience of DMG tell us about the way things work in China? What would likely happen to a business that obeyed all the rules and regulations, rather than trying to find a way around them as Dan Mintz apparently does?

China cares very much about its culture, especially because its rich history goes back centuries around 500 B.C. The DMG experience in China shows that culture as an imperative factor when conducting business there: foreign or domestic. The guanxi and guanxiwang factors are very important pieces of China’s culture. Both are essential to someone