THE EFFECT OF CHINESE CULTURAL VALUES ON MARKETING STRATEGIES IN SMALL BUSINESS – THE CASE OF TAIWAN MANUFACTURING FIRMS Wenchang Fang National Taipei University No. 67, Sec. 3, Minsheng E. Rd., Taipei, Taiwan 104, R.O.C. Tel: 886-02-25009848 E-mail: [email protected] Ting Lie National Taipei University Pei-yu Chen Tsukuba University ABSTRACT This study examines the applicability of Western small firm marketing theory in a nonWestern context - Chinese small firms in Taiwan - and particularly the influences of Chinese cultural values. Methodologically, the research is divided into two stages. Stage one reviews the literature on the subject for the purpose of understanding the “state of the art” of small firm marketing and Chinese cultural values in Taiwan. Stage two conducts in-depth personal interviews with owner managers of 28 Chinese small manufacturing firms to identify the effect of cultural influences on the marketing strategies. The results indicate that the doctrine of harmony with others influences Taiwanese small firms in marketing strategy formulation. Chinese small firms use defensive and conservative marketing strategies to compete against competitors. The research findings suggest that the doctrine of the mean and the principle of harmony with others make Taiwanese small firms use steady growth rather than aggressive marketing strategies. To maintain competitiveness, and also be subject to the influences of the interdependence principle, the group orientation and Yuarn, Taiwanese small firms use personal selling and try to develop close relationships with buyers. The results confirm with the arguments of using social capital to develop business in Taiwan. Propositions of Chinese small firm marketing with reference to the Chinese cultural values are developed in this study. Keywords: Marketing, Small Business, Chinese Culture, Taiwan 1. Introduction Kohli and Jaworski (1990) define market orientation as the organisation-wide information generation and dissemination process which results in an appropriate response related to current and future customer needs and preferences. Recent research results (Kohli and Jaworski 1990; Kotler 1988; Levitt 1983; Slater and Narver 1995) have pointed to the positive relationship between market orientation and marketing performance. However, the marketing literature has been confined to large firms and American marketing managers (Kohli, Jaworski and Kumar 1993; Narver and Slater 1990). There has been relatively little coherent research into Chinese small firm marketing (Siu and Kirby 1999a). The applicability of the western instruments to Chinese small firms is dubious (Lin, Fang and Siu 2000). Ngai and Ellis (1998) argue that company performance is related to marketing practices, not market orientation, in the Hong

Kong context. Though there is common agreement that the universal principles of marketing are applicable to small firms, recent research findings (for example Siu and Kirby, 1999b) suggest that the broad small firm marketing principles, specifically generated from the Western countries, may not be fully suitable for, and applicable to, Chinese socio-cultural contexts. Cannon (1991) suggests that the role and behaviour of the entrepreneur in the development of marketing, for example, the mechanism by which the marketing decisions are made, and the skills and aptitudes which underpin it, have received little attention. It is widely held that the key to successful small firm marketing is the owner-manager. Thus, it is vital that research into small firm marketing should understand the cultural value orientations of the owner managers - why they behave as they do and how they make their decisions and choice, under cultural influences. This research is, therefore, an attempt to understand small firm marketing in a non-Western context - the marketing practices of Chinese small firms in Taiwan. The purposes of this research are as follows: (1) to examine the extent to which marketing has actually been adopted by small firms in Taiwan; (2) investigate the effect of Chinese cultural values on small firm marketing. (3) develop propositions for Chinese small firm, with reference to the influences of Chinese cultural values. 2. Literature Review 2.1

Current Research into Small Firm Marketing

Though the basic principles of marketing are universally and equally valuable to both large and small businesses, academic research into the marketing/entrepreneurship interface has been addressed only relatively recently (Davis, Hills and LaForge, 1985). While research studies (for example Carson, 1985; Carson and Cromie, 1989) into marketing in small business have proliferated, empirical evidence has been generated in an 'ad hoc' manner, as a consequence of the general absence of a systematic approach to the subject (Cannon, 1991). Insufficient knowledge about marketing in small business remains (Davis and Klassen, 1991, Hills and LaForge, 1992) and an appropriate small firm marketing theory, specifically related to the understanding and knowledge of strategic marketing, is absent (Hills, 1987; Hisrich, 1989; Wortman, 1987). The literature, where it exists, is largely descriptive or pedagogical (Brown, 1986; Kenny and Dyson, 1989; Waterworth, 1987) and the absence of a coherent framework for analytical consideration is largely explained by the dynamic nature of marketing science (Baker, 1985a and 1985b) and the absence of an acceptable definition of small business (Brooksbank, 1991). 2.2

Cultural Characteristics

Lin (1966) uses the model of Kluckhohn and Strodtbeck (1961) to study the value orientations of Hong Kong students and their parents. Also adopting the framework of Kluckhohn and Strodtbeck (1961), Yau (1986, 1988, 1994) develops a classification of Chinese cultural values to examine Chinese consumers. However, marketing implications from the corporate point of view have been explored by Siu (2000) on Chinese small firms in Hong Kong only. Though researchers such as Kindle (1982) and Waldie (1981) have pointed to the importance of using traditional cultural values in understanding Chinese marketing decisions, there is no major study of Chinese small firms in Taiwan which adopts this approach.

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Yau's (1994) Chinese cultural value orientations are adopted to explain the likely cultural influences. Five types of value orientation are used to provide the analytical framework, namely Man-to-nature Orientation, Man-to-himself Orientation, Relational Orientation, Time Orientation, and Personal-activity Orientation. The man-to-nature orientation explains the belief of the Chinese in nature -- man as a part of nature never trying to master nature but learning to adapt so as to reach harmony. The Chinese also believe in the Way -- all things become what they are, and Yuarn -- the pre-determined relations with other things or individuals, which are far beyond one's control. The man-to-himself orientation describes the self-concept of the Chinese. The child-rearing practices of Chinese families make the Chinese believe in modesty and selfeffacement, and also make Chinese children learn that circumstances have an important bearing upon what is right or wrong and compromise, in most cases, is inevitable. The relational orientation depicts the relationship of the Chinese among other people. This orientation includes the respect for authority doctrine, the interdependence principle, the group orientation, and the "face". Time-orientation relates to the time concept of the Chinese and includes the continuity doctrine and the past-time orientation. The Chinese tend to have a long-term view and to see the business as something which sons will inevitably inherit, as suggested by Redding (1982). The personal-activity orientation epitomises the inter-personal activities among Chinese people. Yau (1988) argues that the evidence for the personal activity orientation of the Chinese is conflicting. The Chinese are greatly influenced by the doctrine of the Way which places emphasis on the "Being" orientation, whereas they also conform to Li (propriety) which denotes a system of semi-formal norms of behaviour. Thus, the doctrine of the mean demands the Chinese to employ the 'proper' means by a sincere attitude to explore commonalties (instead of extremities) inherited in things and thus to attain the 'natural laws" (i.e. moral principles). 3. Research Design The research is divided into two different stages. Stage one reviews the literature on the subject for the purpose of understanding the “state of the art” of small firm marketing in Taiwan and Chinese cultural values. The publication of stories based on interviews with small business entrepreneurs and managers published by the Small and Medium Enterprise Administration and China Management Association of Taiwan is reviewed. In total, 112 stories were collected in this study. Stage two conducts in-depth personal interviews with 28 owner managers of small manufacturing firms in Taiwan to identify the effect of cultural influences on small firm marketing. The cases are from the Taiwan Business Directory which is generally agreed that it is the most authoritative and innovative business directory of Taiwan. Two thousand samples are randomly drawn from the directory related to small businesses. A mail survey based on these samples was conducted in another study previously in which 28 companies agreed to be in-depth interviewed later on. The interviews are transcribed and the transcripts are processed and analysed by the grounded-theory approach. Based on the assumption that the differences are due to cultural values, a tentative model linking cultural values and specific marketing practices is constructed.

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4. Results 4.1 Content analysis The content analysis suggests that successful Chinese small firms in Taiwan exhibit distinct marketing practices, compared with their American counterparts. Taiwanese small firms are product or production oriented and focus on product planning and quality control, whereas the American small firms are marketing or customer oriented and put most of their efforts into customer relations and advertising. Taiwanese small firms possess limited to substantial marketing expenditure and Taiwanese owner-managers have limited marketing expertise. Interestingly, however, Taiwanese owner-managers appear to have a strong market impact. The findings also suggest that Taiwanese small firms do little strategic marketing planning. One possible reason may be the Taiwanese owner-managers apply innovative tactics and change the marketing planning technique to suit the characteristics of their firms and their particular circumstances. Thus, it is not strange to find that Chinese small firm marketing in Taiwan can be described as entrepreneurial and the marketing planning activities are unstructured. The results appear to suggest that either the Western tenets are not fully applicable to Taiwanese small firms or the marketing behaviour of Chinese small firms in Taiwan is so distinct that a specific marketing model is needed. 4.2 Personal Interview Findings The personal interview results show that the Chinese culture and the business environment of Taiwan, to a great extent, influence the marketing practices of Chinese small firms in Taiwan. About one half of the respondents are OBMs. They have to export their products to international buyers by offering competitive prices and premium product quality, and also market their own brands in the domestic market by establishing entry barriers. They try to attain high company performance by relying on their marketing competencies, establishing sole agency, registering patented products, being the first mover in the market segment, and using interpersonal networks, skills and relationships. Taiwanese owner managers perceive the importance of marketing, but do not believe that marketing is the sole factor contributing to success. Rather networking, trust, creditworthiness and establishing reputation are perceived as being of greater significance. Transactional and relational marketing skills are of equal importance. The influences of Yuarn on strategic analysis and forecasting were profound. Taiwanese owner-managers perceive Yuarn is an antecedent which is important in relationship building, and in turn provides competitive advantages. However, Yuarn is also a mediating factor that facilitates initial contacts with customers. Good marketing skills like good product quality, excellent services and competitive pricing strategies, are needed to make a deal or conclude business. Yuarn provides great impetus for the operation of Chinese small firms, as Yuarn leads to self-reliance and hard work. Taiwanese owner-managers perceive that the doctrine of the mean as the proper and appropriateness way of doing things, the prudence in risk-taking, and the approach to find a balance point accepted by the suppliers and buyers. Rather than going to the extremes, Taiwanese owner-managers try to balance between short-term profits and long term success; company oriented and customer driven; conservative and aggressive; diversification and

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concentration; and securing safety and risk taking. They try to follow the rules of the game, maintain good buyer-seller relationship, reach a consensus in discussion, avoid face-to-face competition and select market segments differently from their competitors as far as possible. The harmony with nature orientation influences the setting of conservative marketing objectives by encouraging Chinese small firm owner managers to adopt a balanced orientation to their businesses, set steady growth marketing objectives and formulate less aggressive marketing strategies. The harmony with others orientation also influences the marketing strategy formulation of Taiwanese small firms. Taiwanese owner-managers perceive that conflict is unavoidable in business but they have to solve the conflict and try to attain harmony with others. Taiwanese owner-managers classify their competitors into two categories – competitors and noncompetitors. To avoid competition, Taiwanese small firms will try to segment the market and enter into a segment not served by the competitor. Or, they change their attitude and perception towards the competitors and perceive that they are non-competitors or friendly competitors with no direct competition against each other. Aggressive market domination is uncommon in Chinese small firms. Paternalism and family business nature mould a small decision centre and prohibit participative marketing decisions by employees. Nevertheless, open communication is commonplace in Chinese family business. Hence, marketing decisions are dominated by one individual (the major shareholder) or a small number of family members. Though Taiwanese small firms use sales turnover as a yardstick performance evaluation, the influences of face and the affective relationship between employers and employee on performance evaluation are profound. Face could increase/decrease the efficiency of control and leadership, and facilitate/hinder communication and trust. However, because of close and friendly relations, employees have to give great support to the employers. In Chinese family businesses, employees may not follow the instructions of the employers because of face and affective relationship (specifically personal and familial relationship). The owner-managers, under the possible influences of the harmony with others orientation, are afraid to jeopardize the relationship and so they try to avoid using harsh measures in marketing control. Face also makes the Chinese owner managers adopt less objective but more personal marketing control devices. 5. Discussion This study suggests that the broad U.S. marketing principles are not fully applicable to, and suitable for, some specific socio-cultural context, for example the Chinese Taiwan, a Chinese society) socio-cultural environments. Moreover, this study also confirms the recent research into Chinese family business (Redding, 1996; Whyte, 1996). It acknowledges the importance of using traditional cultural values in understanding Chinese marketing decisions and as there is no major study on Chinese small firm marketing which adopts this approach, the results of this research add new knowledge by examining exactly, and in more depth, how and to what extent Chinese small firms in Taiwan make marketing decisions, promote products and/or services, and maintain market competitiveness. The research results suggest that care should be taken before making generalizations about marketing based upon evidence drawn from a particular marketing situation and assuming that

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marketing tools and techniques are equally applicable across all places. The specific business and socio-cultural environments of a place, as is the case of Taiwan, demand that caution should be exercised when generalizations are made. Four propositions are therefore developed related to harmony with nature and others, the doctrine of the mean and Yuarn for further studies. The doctrine of harmony with nature and others From the case study, the results indicate that under the influences of the harmony with other orientation, Taiwanese small firms will try to avoid face to face competition with their direct competitors. Thus, Chinese small firms use defensive and conservative marketing strategies to compete against competitors. Also Taiwanese small firms are transforming from OEMs to OBMs and they try to excel with superior product performance and design. Thus, entering a new market or using good product performance and design, and offering added-value products are ways to minimize conflict, avoid direct confrontation, make the competition more impersonal and suit the environment most appropriately. Proposition 1: The doctrine of harmony with others affect Chinese small firms adopting defensive and conservative marketing strategies to compete against competitors. Proposition 2: The doctrine of harmony with nature influences Chinese small firms offering value-added products in order to minimize conflict and suit the environment most appropriately. Doctrine of the Mean Taiwanese owner-managers perceive that the doctrine of the mean as the proper and appropriateness way of doing things, the prudence in risk-taking, and the approach to find a balance point accepted by the suppliers and buyers. Rather than going to the extremes, Taiwanese owner-managers try to balance between short-term profits and long term success; company oriented and customer driven; conservative and aggressive; diversification and concentration; and securing safety and risk taking. Proposition 3: The doctrine of the mean influences Chinese small firms to exploit steady growth rather than aggressive marketing strategies. Yuarn Yuarn is a mediating factor that facilitates initial contacts with customers. Good marketing skills like good product quality, excellent services and competitive pricing strategies, are needed to make a deal or conclude business. Yuarn provides great impetus for the operation of Chinese small firms, as Yuarn leads to self-reliance and hard work. To maintain competitiveness, and also be subject to the influences of the interdependence principle, the group orientation and Yuarn, Taiwanese small firms use personal selling and try to develop close relationships with buyers. The results confirm with the arguments of using social capital to develop business in Taiwan. Proposition 4: Yuarn has an effect on Chinese small firms on using personal selling and utilizing social capital to develop businesses. To conclude, one of the major contributions of this research is the acknowledgement Chinese cultural values influence small firm marketing strategies. Thus, researchers need to focus on the external contexts rather than using a grand marketing theory or the normative marketing approach for all possible settings.

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