International Law

China Supply Chain Problems. Maybe It's All In Your Head.

By Dan

Received a very nice email this morning from Keith, a Birmingham, Alabama 3L with a quite good blog called An Associate's Mind. Keith was writing to pass on a blog post on China supply chain problems.

The post is "Supply Chain Risk: Culture Shock," and it is on an academic article that posits that many supply chain issues that arise between China and the West are caused by cultural differences. The article reviewed ascribes the problems to supply relational risk caused by the following prime differences between the West and China:

1. Family orientation vs self-interest.
2. Guanxi network vs multiple institutions-
3. Guanxi building process vs Western relationship-building process.

I must say that the article does an excellent job defining guanxi, which it describes as "a special type of relationship that bonds the exchange partners through reciprocal exchange of favours and mutual obligations a special type of relationship that bonds theexchange partners through reciprocal exchange of favours and mutual obligations."  

To incredibly grossly oversimplify, the article seems to be saying that the Chinese supplier is more focused on its guanxi family than on making this one supply relationship work. I have no idea whether this is true or not, but I have seen this dynamic at work in China joint ventures where the Western company is focused on profit and the Chinese company is focused on nurturing its network. This "same bed, different dreams" thing frequently comes up in joint ventures when the Chinese company (which usually has hiring authority) is more focused on hiring a bunch of friends and relatives for the Joint Venture, rather than hiring based on merit.  

Come on you supply chain experts, are your problems with China due to cultural differences?   

Full post as published by China Law Blog on August 24, 2010 (boomark / email).