Academic journal article Southeast Review of Asian Studies

Digital Music Success in China: Suggested Guidelines for Foreign Firms

Academic journal article Southeast Review of Asian Studies

Digital Music Success in China: Suggested Guidelines for Foreign Firms

Article excerpt

In this scholarly note, nine guidelines are recommended to foreign firms seeking to sell digital music in China as firms attempt to access one of the fastest-growing and most significant country markets for entertainment product sales in the world. A complementary piece is Jessica Gisclair's "The Dissonance between Culture and Intellectual Property in China" (pp. 182-87).

Digital Music in China: Nine Suggestions for Foreign Firms

China holds enormous potential for the nascent but rapidly developing digital-music industry. According to the International Federation of the Phonographic Industry, China is the world's twenty-seventh largest music market, with total retail sales in 2006 of US $121.2 million (Butler 2007). China's share of the world market is likely to continue to increase due to the growing middle class with increasing discretionary income. As economic history has shown, consumers become no longer satisfied with purchasing only necessities as income levels rise, so spending on various forms of entertainment--including music--will grow. Consequently, foreign record companies are understandably eager to sell recorded music in such a large market that until recently was largely closed off. If a foreign firm is to reach this large and growing market, the following nine guidelines should be helpful in designing a successful strategy to sell digital music in China.

Suggestion 1: Make Use of Guanxi

More often than not, the success or failure of an enterprise in China, regardless of the form or intensity of entry, resides in interpersonal relationships among the stakeholders--known in China as guanxi [TEXT NOT REPRODUCIBLE IN ASCII] (Luo 2007). Guanxi means "relationship" and is similar to the Western notion of networking. Guanxi involves a network of relationships that can help minimize frustration and risk. Guanxi is more than good relationships with existing business partners; the concept encompasses political as well as personal guanxi. Firms that select Chinese partners with wide-reaching guanxi are more likely to perform well than those that have minimal or no relationships in China.

Business guanxi will expedite objectives by making useful connections with suppliers, distributors, retailers, lenders, attorneys, customers, and more. Political guanxi uses relationships to plot a successful course through bureaucratic mazes and to shield firms legally from encroaching governmental challenges. Personal guanxi demonstrates a concern for individual and family matters that may be an essential prerequisite for commercial success. Tapping into a network of relationships is neither unethical nor illegal. Guanxi recognizes that the conduct of commerce is always in the context of relationships.

When a foreign digital-music firm finds itself within a network of relationships, the foreign firm must act with honor as well as confer respect on other members of the network, a concept known as "face" (Kim and Nam 1998). Giving, receiving, creating, maintaining, and restoring "face" is a necessary ingredient to receiving favor from members of the network. Consequently, the actions taken by a foreign digital-music firm reflect on the firm as well as on the members of the guanxi network in which the firm resides. The Chinese would prefer, out of a sense of obligation, to conduct business with their friends; so positive relationships are essential. If relations sour, the support network could lockout the foreign firm.

Suggestion 2: Prefer Regional Growth Strategies

Large cities and the coastal areas of China are experiencing unprecedented growth; and this growth will continue as 150 million surplus workers begin to leave rural China for urban areas in search of higher-paying jobs providing discretionary income (Central Intelligence Agency 2006). These growth patterns profile the regional demand patterns for Internet services, a primary medium for digital-music delivery. …

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