Tag Archives: chineseculture

What Makes IKEA Successful In China?

IKEA’s success in China shows that it is possible to succeed and even thrive in China as an foreign company.

WeChat Image_20170801092414

IKEA in Beijing

Many business people see entering the Chinese market as a very difficult, almost impossible task. To these people, the idea seems incredibly exotic and shrouded in mystery. The very idea of “entering China” becomes akin to starting an opium war or engaging in some political espionage worthy of Henry Kissinger.

While there is plenty of ammunition for such claims, (certainly mainstream media is not helping), the model for succeeding in China is quite simple. Successful businesses in China possess strong business acumen and take the long term view. One example of understanding these principles and succeeding in China is the Scandinavian furniture retailer, IKEA.

Refurbishing My Apartment

My own personal connection to the topic comes by way of living in Beijing and recently wanting to refurbish my apartment. Whereas in America there are plenty of decent options for furniture on a middle class salary, these options dwindle abroad. In many ways, my time spent living and working in Beijing over the past four years has effectively turned me into a Chinese consumer (with cultural caveats, of course).

This past Sunday I traveled by bus across the fourth ring road, from Wudaokou to Wangjing in order to visit one of the two IKEA stores in Beijing. Again, I was reminded by the hordes just how dominant IKEA is in Beijing. My original goal was to purchase a sofa, but the crowds inside the store were so much that it was nearly impossible to actually inspect them.

WeChat Image_20170801092418

On the Fourth Ring Road

When I got back home from shopping, I couldn’t get the thought out of my head. Just why was IKEA so popular with the Chinese? Upon further online investigation I found some interesting points about the company.

What Makes IKEA Successful in China?

IKEA has taken a long view of doing business in China. They have done a spectacular job of monitoring and adapting their business in alignment with new information.  One such adaption that has undoubtedly helped them is their price point reduction in 2003 which led to 35 percent raise in sales (China Business Review).

IKEA has a strong tradition of creating product catalogs which focus on the culture of target customers in a given country. This focus on adapting to cultural differences has helped them do well in many international markets where others often fail.

IKEA has also invested significantly in an online business model. This will be crucial as e-commerce becomes more and more popular.

IKEA’s proactive attitude and subsequent success shows that, yes, it is possible to run a successful operation in China. Of course, IKEA also has deep pockets and experience in international markets which has made their ride smoother than many others who looked on jealously.

I want to make a point of IKEA’s large capital reserves here. It’s important to note that doing international business is inherently more capital intensive than setting up shop in domestic markets. You need to hire lawyers and buy plane tickets if you want to be more than a simple cog in the supply chain. A lot of the time it doesn’t make sense for companies to try and make the leap until they have a strong base at home.

Wrapping Up              

Some other companies that I have been particularly impressed with in terms of adapting to the Chinese business landscape are Starbucks, Apple, and Coach. They are also very useful to look at as case studies.

WeChat Image_20170801092409

My IKEA Bounty



Additional Reading:


Making My Peace with Hongbao Culture in China

As of writing this article, the population of China is just over one and a quarter billion people. That makes it the most populous country in the world. It also makes it hard to get special attention or treatment for any problem you might have. 

dragon and boy

Chinese have developed a way to get that attention and its called the hongbao (red envelope stuffed with money).  This is both literal (yes sometimes you have to bribe people), as well as metaphorical (more often the case that your “hongbao” will look like a special gift or service). 

As a foreigner, I naturally stand out and therefore receive special treatment more easily than others. However, I also see the constant exchange of this both literal and figurative hongbaos as I mentioned above. 

They are given to people like doctors, teachers, policemen, and government officials in exchange for things like heightened attention on a loved one or the expedition of an important document.

For outsiders, and even for many Chinese themselves, this practice can be particularly hard to live with. It undermines the law and seems unfair. However anyone who stays here for a longer period of time must understand and adapt to this practice or else risk insanity.

For the time being, it is a part of life in China.

Hongbao Plus One

This past weekend my girlfriend received a red envelope in the form of an invitation to a resort in the north of the city: on the border of Beijing and Hebei. The parents of some students in her class wanted to solidify their relationship with their children’s caregivers and therefore offered the invitation to the student’s homeroom teachers. I went as the plus one.

The resort was the recently opened water town called Gu Bei Shui Zhen (古北水镇), which is basically a replica of a water town that you might find in the southern city of Suzhou.

For people not familiar with China, this is like saying that somebody built a replica Virginia tobacco farm in upstate New York. I don’t really like these kinds of places. They feel very fake, like the very soul of the place is missing.

Normally when I travel, I like to visit local places. I don’t stay in fancy hotels, and opt for budget accommodation like a hostel or cheap hotel. I like to focus my time and resources on visiting places, rather than staying in my room. To me this is what traveling is all about- talking and experiencing life as the locals would see it- rather than an airbrushed resort version. 

Chinese, and coincidentally enough my girlfriend, are the opposite. They don’t mind if something was made particularly for them. The most important thing is that it’s beautiful. If a place’s architecture doesn’t match the geography and history of an area, well, so what!

At least there is a nice pool. 

Moreover I found the entire situation slightly unnerving. The parents essentially decided the schedule and, even though they were very nice people, it felt like I was constantly walking on eggshells around them. It’s not that I don’t think it was very generous of them, it just felt a little odd to me.

The differences in our expectations of teacher-student relationships as well as travelling experiences tell us a lot about Chinese and American culture.

I would never choose to go to a place like Gu Bei Shui Zhen on my own. As I said above, something about its in-authenticity repels me.

I would also never invite my child’s teacher on vacation with me. Just like Gu Bei Shui Zhen, it feels slightly unauthentic and uncomfortable. 

How to Develop Cultural Literacy

The challenges posed by a clash of cultures here is a great metaphor for the challenges of living in another country. When confronted with these types of situations, the best thing you can do is to adapt- if only for the sake of preserving harmony- which is perhaps the most you can hope for when living abroad.

Even though I often feel like speaking out against these types of cultural practices in china (specifically the practice of giving envelopes and superficial relationships), doing so would accomplish nothing. In fact, it would make me more stressed out.

In the end I am not in China to change it. I am here as a visitor. I hope that my presence and interactions help to open them up a little bit to outside ideas; but ultimately I don’t plan on naturalizing.

The Result

As a result of practicing this cultural literacy I was able to lay back and relax with my girlfriend. Even though I did have the urge to criticize both the resort and circumstances under which I had come, I restrained myself and am very happy that I did. The most important thing was that she enjoyed herself and the parents felt like we were being reciprocative of their generosity.

This experience served as further proof that I rarely have all of the answers, and my own expectations are often wrong. I can’t change the way I feel about these types of places and relationships, but I can seek first to understand and not to be understood.

Yes, that is a Stephen Covey line. And while I am not promoting his whole system, I do think it is an important building block of living in another culture happily.

Nian Hui; Annual Parties in China

Nian Hui( 年会)  is the Mandarin word for a company’s annual party. They are big company parties that happen at the end of the Lunar Calendar, right before Chinese New Year, the largest and most important festival in Chinese culture.

This means that they normally take place in second or third week of January. Close enough to the new year that it feels relevant, yet with enough space before so that those leaving for vacation are able to attend.

What Happens?

The Nian Hui is basically a company show where everyone goes to a conference center, sits with their department, and watches about three to four hours of speeches and acts. The CEO, along with other figureheads, will pontificate about what great progress was made throughout the past year and all of their great plans to come. After and throughout all of this everyone is encouraged to cheer and support the company in quintessential Chinese style.

Those higher up will also dress up and participate in silly performances. This is one of the most curious aspects of the Nian Hui. For example, Jack Ma, CEO of world famous Alibaba, once dressed up as a woman for a performance. Although most executives do not go as far, participation in song and dance by higher level employees is ubiqiutious.

Those on the lower rungs follow suit by coming together and creating smaller performances. Women have a tendency to lean towards more sexual dances. Men enjoy drama productions of their favorite reality TV shows.

Why Do They Have It?

It is important to understand the Nian Hui if you want to understand Chinese culture. Like many things here, it’s all about face. The company can gain face by showing all the employees how strong they are through a number of different criteria, such as location, facilities, presentation, and quality of food.

A Nian Hui that does well in these areas will give the company a lot of face. Employees will feel that the organization is strong enough to weather a storm and will be able to provide a good future. If it does not do well in these areas, well, mutiny- or at least abandonment- could be imminent.  

The longer I work in China, the more I dread going to these events. And it’s not just about being a foreigner either. Chinese and Foreign Experts alike both experience the same feeling of being dragged to a stuffy location and twiddling their thumbs for an evening. Most of the time, everyone feels like they are being indoctrinated by company propaganda.

Often at a Nian Hui, you will hear lines such as “We are the best company in the industry this year. Next year we will be even better. Who is with me? Our company is the most innovative and will out work all the others!”

The thing is, though, that employees don’t care about the long term portfolio performance of the company they work for. It just doesn’t effect them in any tangible way. The thing that is really important to them is their salary, benefits, and daily work lives. It is not so complicated. But these events often go so far into the bigger picture of the company that the worker bees are entirely left out.

If the food is poor and the words are stale, well, these events more often than not become quite a drag. It’s not that the staff doesn’t enjoy their jobs; it’s just that this type of event is very out of date in a workforce that is increasingly educated and self-aware.

Not to suggest that the Nian Hui is all bad. Seeing your bosses and coworkers get a little silly makes them more human. During the performance, the executives will comes around and toast everyone. Not because they enjoy it, but because it’s what they are supposed to do. The workers drink with them for the same reason.

The core tradition is strong, however it is becoming obvious to everyone that the format is more outdated every year.