Navigating Chinas Changing Economy: Strategies for Private Firms Harvard Case Solution & Analysis

Despite rapid economic growth in China and the role of private companies have played in it, many of these companies have experienced numerous problems. At the heart of many of these problems is the lack of established basic trading rules and the absence of institutions that support and legitimize private enterprises. In addition, reforms in China in the late 1970s, passed most of the state's role in economic decision-making at regional and local levels. As a result, private firms are vulnerable to arbitrary and capricious intervention, invasion, and orders. This study of 12 private firms illustrates these problems, and shows how these firms use guanxi to manage these problems. Different forms of guanxi include coopting strategies, such as the placement of shares to local officials in the government hire people who already have a connection, or to hire a former village elders. Another strategy takes the form of trust in the relationship with suppliers and distributors, and to provide small services, such as regular banquets for local officials. Finally, the firm is involved in charity work diligently studied at the local level, with a donation for the construction of schools and community centers to help families affected by the floods. These strategies reflect the fact that the operations of private companies in China that are not based on pure market or pure planning, but also to influence. "Hide
by David Ahlstrom, Garry D. Bruton, Stephen SY Lui Source: Business Horizons 11 pages. Publication Date: January 15, 2000. Prod. #: BH046-PDF-ENG

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