RESEARCH AND PRACTICE
IN HUMAN RESOURCE MANAGEMENT

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Nie, K. S. (2008). The Development of an Instrument for Evaluating Chinese Business Strategy Orientation from Western Theoretical Underpinning, Research and Practice in Human Resource Management, 16(1), 131-152.

The Development of an Instrument for Evaluating Chinese Business Strategy Orientation from Western Theoretical Underpinning

Katherine Sue Nie

Abstract

The acceleration of China’s integration towards the global economy and the ever changing business environment under its continued economic transition has heightened the need for overseas investors and Multi National Companies (MNCs) to understand the Chinese business strategy orientation in the Chinese relationship based society. Moreover, the disparity of business strategic underpinning between Chinese and Western organisations that has been accentuated in the globalisation of business has made it imperative to develop an instrument to evaluate the Chinese business strategy orientation in the Chinese business context. This paper explains the comprehensive and rigorous investment that was made to develop a 24 item scale for evaluating Chinese business organisations in the Chinese operational context. The instrument was successfully developed through three empirical studies under 15 distinctive processing phases. The initial endeavours of developing the instrument was reported in Volume 13 Issue 1, 2005, of RPHRM. The results demonstrate that the newly developed instrument has adequate internal consistency with good validity and reliability to be employed in the Chinese business environment. Implications for developing an instrument and undertaking a cross-cultural study are discussed.

Introduction

The rapid pace of economic development in China under its continuing reform initiative has accelerated China’s integration towards the global economy. Indeed, China has emerged as one of the world’s dominant economies and has become the largest Foreign Direct Investment (FDI) recipient in the world in less than two decades (Economic Analytical Unit 2002, Xi 2005). Such strong economic prospects and trade complementarity has upsurged the expanding commercial relationship between China and many countries worldwide (Zhang 2005), which is reflected in the current GDP of China which has been boosted to 11.5 per cent in the first half year of 2007 (Gao 2007). It was predicted by Robert William Fogel, who won the Nobel Prize in Economics in 1993, that China’s GDP would take up 40 per cent GDP of the whole world, and also overtake the combined GDP of the USA, India, the European Union, and Japan by 2040 (Wong 2007). Observably, with China’s huge population, increasing transparency, and its annual projection of a robust growth of around seven per cent in five to ten years that might double the size of the Chinese economy in the early 2010s, China is predicted to become the world’s second largest economy in 2020 (Pantichpakdi & Clifford 2002).

Along with the reinvigorated reform initiatives, China will maintain its key role in the global economy and continue to be a fascinating market for foreign investors to explore their business ventures (Zhang 2005). Nevertheless, understanding the cultural divergence is particularly important for people engaged in global business ventures (Langenberg 2007). It is suggested that understanding Chinese culture, especially the Chinese way of doing business, is a continuing need and of high interest to MNCs and overseas investors who seek to do business in China (Andersen & Nicholson 1999, Lo & Everett 2001). Thus, to comprehensively explore the business strategy orientation in the Chinese business context under its fast economic transition towards globalisation of world business, the development of an instrument to investigate Chinese business strategy orientation is warranted and may provide foreign investors and Western managers with a potentially practical tool for assessing business strategy orientation that can be applied in the Chinese business context.

This paper explains the comprehensive and rigorous investment that was made to develop a 24 item scale for evaluating Chinese business strategy orientation in the Chinese operational context. The instrument was successfully developed through three empirical studies under 15 distinctive processing phases. Delineation of the development of the instrument begins with an overview of the literature.

Theoretical Framework

Over the last two decades, business strategy orientation has been extensively assessed in the Western studies (Miles & Snow 1978, Porter 1980, 1985, Digman 1986, Pearce & Robinson 1991, Aaker 1992, Rajagopalan 1997, Barnett & Wilsted 1998). Most of these studies (e.g., Miles & Snow 1978, Porter 1980, 1985) have employed the configuration approach, which mainly focused on market effectiveness against operational efficiency. For instance, the philosophy of Miles and Snow (1978) characterises business strategies into three typical categories, such as 1) defender, 2) prospectors and 3) analysers. Conversely, in Porter’s theory (1980, 1985), business strategy mainly reflects three generic strategies, namely 1) overall cost leadership strategy, 2) differentiation strategy, and 3) focus strategy. Each of these generic strategies employs a distinctive move toward competitive advantage. In essence, the overall cost leadership (e.g., defender strategy/ efficiency-orientated strategy/operational-efficiency strategy) and differentiation strategies (e.g., prospector strategy/market-oriented strategy/market-effectiveness strategy) strive for competitive advantage in a wide spectrum of industrial segments. Alternatively, focus strategy has two variants, which are 1) cost focus strategy, and 2) differentiation focus. Cost focus is a strategy for cost advantage, while the differentiation focus strategy targets a narrower market domain (Porter 1985). However, it is possible for firms to employ both the differentiation strategy and the overall cost leadership strategy simultaneously, under certain market conditions, on a temporary basis. Moreover, there is one more business strategy namely pre emptive move, which was not theorised in Porter’s (1980, 1985) three generic strategies and the strategic framework of Miles and Snow (1978). It is contended that firms applying a pre emptive move strategy aim at the first move advantage by responding to the market swiftly for market opportunity (Aaker 1992). Noticeably, the Western business strategic framework has been systematically established and generally adopted by Western business organisations.

Despite the extensive studies on the formulation and implementation of Western business strategies (Miles & Snow 1978, Porter 1980, 1985, Digman 1986, Barnett & Wilsted 1988, Pearce & Robinson 1991, Aaker 1992, Rajagopalan 1997), few empirical studies have been conducted to examine the business strategy orientation in Chinese business organisations. The paradox is that Michael Porter’s three generic business strategies are very popular and highly recommended in China. Indeed, this is reflected in the several repeated translations of Porter’s texts (1980, 1985) that are widely read by Chinese managers. The Chinese even call it ‘competitive trilogy’ (Chen 1997) which is an indication that the Mainland Chinese have adopted Western texts and used Western theory. Yet, the globalisation of business has accentuated the difference in business strategy orientation between Chinese and Western organisations, a point noted by Wong and Chan (1999) that the low context Western paradigms may not be easily generalised to a Chinese high context environment under its economic transition. Similar observation has been previously made by Ralston, et al. (1993) in their study, which identifies that the interaction of both culture and the business environment across different countries usually results in dissimilar sets of managerial value. Apparently, there is still a great deal to be learnt about the evaluation of business strategy orientation, particularly for Chinese business organisations.

The lack of the empirical evaluation in the Chinese business strategies has become evident that there were no standard scales that can be adapted or modified to assess the business strategy orientation in Chinese business organisations from Western theoretical underpinning. Indeed, an universal scale instrument is an indispensable tool to assess the business strategy orientation in the Chinese business context. In spite of discovering relevant scales their appropriateness for employment in organisations in Mainland China had to be established, and this was undertaken by an amalgamation of a qualitative and a quantitative process. The process for determining a relative robust instrument is discussed in the next section.

Methodology

Respondents

The study sample involved in the instrument development process was 1369 respondents. A convenient sampling method that endorsed interpersonal relationship (guanxi) ideology was adopted using a business network and client base of an Australian based company that has been operating in Mainland China since 1994. Most of the respondents were indigenous Chinese business executives of the top five senior managerial levels of 526 Chinese business organisations. These executives have proven overall successful business and managerial careers in directing and developing businesses in Mainland China. A number of the business executives/owners from each of the research cities, which are Guangzhou, Foshan, Xiamen, Kunming, Hefei and Dalian, have extensive business acumen. Indeed, several of the managers have been successfully managing various large scale and reputable businesses in Mainland China for at least 15 years with some managers having more than 20 years experience. For example, two of the business owners are the Chairmen (and the major shareholders) of a group of Chinese companies with the parent company being listed on the Singapore stock market. Another six business owners are operating three different highly reputable brand businesses, which have been consistently ranked in the first 50 strongest tax payees in their cities for the last five years. These three organisations are currently under the final processing of being Listed Companies on the Chinese stock market. An additional two business owners conduct large scale commercial property portfolios, one of their tenants of these being from the USA, who is a large retailer conducting a business that is of similar status and size, as Target is in Australia. In addition, there were numerous business executives who have been successfully leading their organisations to become the top ten largest businesses in their regions. Also a number of the study business executives have been leading the biggest property development organisations and managing a majority of the largest real estate development projects in their cities. These executives have shown high competency in identifying business opportunities and are market leaders in the ever changing transitional economy of China. Many of these study business executives have travelled to Western countries frequently, and they possess extensive experience and proven records in global business dealings. The demographic profiles of the samples of the three individual empirical studies are presented in Tables 1, 2 and 3 as Appendix A.

Procedure

The First Empirical Study

A total 238 participants were involved in the process for developing a 19 item instrument for assessing Chinese business strategy orientation in late 2004. The process had five distinct phases. The first phase was that the researcher engaged eight prominent Chinese businessmen independently in lengthy telephone discussions (between Australia and China) to compile a number of questionnaires items that corresponded with Porter’s (1980, 1985) framework of three generic businesses strategies. These three strategies of 1) cost leadership, 2) differentiation, and 3) focus were to be the three sub scales of the instrument. The eight participants of this first phase were from the Chinese cities of Fujain, Fushan and Guangzhou that are in Guangdong province, which was one of the earliest Chinese regions to install economic reforms.

The second phase of the first empirical study involved 12 bilingual assistants. These people were the members of three mutually exclusive teams that collectively back translated the inaugural scale of 19 items (English to Mandarin to English). Each person held membership in only one team. Members of the first team translated the 19 items from English to Mandarin. The members of the second team translated the 19 items from Mandarin to English. And the third team assessed the translated 19 items for correspondence with the initial English version of the 19 items. As perfect correspondence between the English version and the Chinese format was most unlikely, it was an important function of the third group to ascertain the ‘reasonableness’ of the final English version. The members in the first two teams were qualified translators, who had been working as professional translators with the Notary Public of China for some 20 years. The members in the third team were Australia accredited translators, who had lived in China for over 30 years before they migrated to Australia.

The third phase of scale development was the administration of the 19 item scale to a sample of 202 indigenous Chinese managers. A Mandarin version of the instrument was used. Respondents were from the Chinese centres of Guangzhou, Fushan, Nanhai, Zhongshan, Shenzhen, Anhui and Dalian, which are major cities in three of the Chinese provinces that are in leading positions of economic reform initiatives. Accompanied with a cover letter that explained the purpose of the study and timeframe for the collection of data, the 19 item instrument was distributed via fax, email and courier services by the researcher and three administrative assistants. ‘Follow up’ calls were made by the researcher and the three administrative assistants to the respondents to ensure the receipt of the dispatched two page questionnaire. Supplementary telephone calls were subsequently made to the respondents to remind them of the time frame of collection of the completed instrument, which was scheduled for two weeks later. In total 210 questionnaires were distributed and 208 replies were initially collected within the aimed time frame. However, due to incomplete information, 202 useful replies were finally used while six questionnaires were discarded. This constitutes a net response rate of 96 per cent, which is comparatively higher than most of other empirical studies conducted in China. It is believed that the relatively higher response rate of this study is attributed to the application of the guanxi ideology in sample selection.

Assessments of the 202 sets of responses were the fourth phase of the process. Data were examined with two main procedures using the Statistical Package for the Social Science (SPSS 13.0, 2004). First, frequencies of response scores for each of the 19 items were obtained, and the item mean and standard deviation was identified. Second, exploratory investigation with principal component method for extraction of factors using the Varimax option was employed to assess the scale dimensionality. Eigenvalues greater than one were retained. In this study, rather than three factors as proposed, six factors were obtained in seven interactions. Endeavours were made to obtain three, four or five factors, but these endeavours resulted in less satisfactory factor scores and groupings of items.

In the fifth phase, the researcher visited Mainland China and conducted four focus group meetings with 16 ‘successful’ Chinese business people to elucidate the idiosyncratic dimensions of the responses to each of the 19 items. These focus groups, which varied in composition from three to five people, provided valuable comments that enabled the refining and extending of the instrument to a 24 item questionnaire with six factors for assessing the six business strategies that applied in Chinese business organisations.

The Second Empirical Study

The second empirical study involved three processing stages to assess the veracity of the developed 24 item questionnaire. In the first stage, the researcher engaged 76 indigenous Chinese business managers. These participants, who were mainly from the same regions of the initial survey, responded to a Mandarin version of the 24 item instrument that had been refined and extended from the initial 19 item instrument. Assessment of the 76 sets of response was the second phase of the process. Data were examined with two main procedures using SPSS (2004). Firstly, frequency tables were used to examine the demographic data and descriptive statistics. Secondly, factor analyses and reliability assessments were performed to assess the validities and consistencies of the scale. Six factors were obtained, as expected, in five iterations with satisfactory factor scores and groupings of items. The results of the reliability estimate were satisfactory with three Cronbach alpha coefficient of above .52 and the other three above .80, which demonstrates adequate internal consistency for the scales. According to Sin (1994), the reliability value falling between .50 and .60 is sufficient for exploratory research. Other researchers (Burns & Bush 1998) claim the reliability coefficient falling between .65 and .70 is considered acceptable for measures being used for the first time.

The third processing stage of the second empirical study involved a series of pre tests and face to face interviews with five focus groups. These sessions were undertaken with 22 successful Chinese business people, and three Professors of Economics in China to add depth to the questionnaire and to enable further clarification on wording of the statements in the 24 item questionnaire and the other two adapted instruments that the researcher employed for a cross-cultural study. As a result, the developed 24 item instrument was refined and retained for a further empirical study.

The Third Empirical Study

During April 2006 the refined 24 item scale was employed to assess the Chinese business strategy orientation in a subsequent pilot study that the researcher conducted in Dalian and Lianning provinces. The pilot study involved 151 Chinese business executives from the top five senior managerial levels of 46 Chinese organisations. The analytical results demonstrated that the scales were found to be satisfactory for exploratory research. Although there were a small number of items that had some leakage and cross loading, it was believed these features would be ‘eliminated’ in a larger sample. As a consequence, the full set of the newly developed 24 item scale was then retained.

In November 2006, the newly developed 24 item instrument was again employed to evaluate the business strategy orientation in Chinese business organisations. The investigation was conducted in the six large coastal and inland cities of Mainland China. These six cities are Guangzhou, Foshan, Xiamen, Kumming, Hefei and Dalian. The participants were 1033 indigenous Chinese business executives, who were in the top five senior managerial levels of 480 Chinese organisations across four major industrial fields of Trading, Building/Construction, Manufacturing and Service. These participants included the 151 respondents from the pilot study that was conducted earlier in Dalian city.

The procedure for data collection and assessment for this study was carried out in four phases. In the first phase, the researcher and a total of 12 administrative assistants (each two of them were responsible for one of the six research regions) contacted the potential respondents through the business network and client base that has been built up through the researcher’s family business in China since 1994, via telephone, email and facsimile to determine their agreement to voluntary and anonymously participate in the study. After consent was obtained from the potential respondents, the respondents were given the Chinese version of the questionnaire via email, facsimile, post or courier service. Accompanying the questionnaire was a covering letter (written in Chinese) with further explanation about the survey in terms of the time frame for return (of the questionnaires) and the method that would be employed for the collection of the competed questionnaire.

In the second phase, ‘follow up’ calls were made by the administrative assistants and the researcher to the respondents to ensure the six page questionnaire had been received. This was done in the several days after the questionnaire had been dispatched. Subsequently, participants were contacted by telephone call, fax or email for collection of their responses or to remind them of the survey completion date. The administrative assistants and the researcher also provided additional explanation about the questionnaires ‘if and as required’ by the respondents. This action was taken two weeks after the distribution of questionnaires.

Evaluations of the 1033 sets of responses including the 151 responses from the pilot study were the third phase of the process. Data were collected over a six week period and first analysed by quantitative methods which were follow by qualitative techniques by involving 90 senior business executives in 20 focus group meetings. The result of this study demonstrated that the newly launched scale (business strategy orientation) had acceptable internal consistency with robust reliabilities.

Elucidation of the pattern of the result, from the qualitative evaluation of the questionnaire data, was obtained by employing focus groups. This became the fourth phase of the process. A qualitative feedback programme was conducted following the completion of the quantitative analyses. Representatives of the study respondents were invited to attend the feedback sessions conducted by the researcher and the administrative assistants in the six study cities. Two approaches were employed for the qualitative study. The first approach was to conduct face to face interviews and discussion in each of the study cities. Each of the focus group meetings was approximately for 90 to 120 minutes in duration. For participants who were unable to attend the focus group session, an alternative approach was offered that conducted discussions by way of telephone, email or facsimile. With the consent of the respondents, the researcher drew feedback from each individual respondent via electronic means. In these meetings, respondents were advised there were no right or wrong answers for the questions, but were asked to explain why they consider certain patterns emerged in the statistical results.

Measure

The 24 items in the business strategy orientation scale were scored with a seven point Likert scale that ranged from ‘Strongly disagree’ (1) to ‘Strongly agree’ (7). The scale consists of six subscales, which are (a) overall cost leadership on resources, (b) overall cost leadership on quality, (c) overall cost leadership on sales volume, (d) differentiation mixed with overall cost leadership, (e) focus, and (f) pre emptive move. Each subscale was measured by four items. Among the 24 items, only item six was reversed scored. The items that were evaluated (are presented in Table 4) are presented as Appendix B.

Analysis

Data were examined with two main procedures. Firstly, frequencies of response scores (i.e., number of 1s, number of 2s, …number of 7s) for each of the 24 items were obtained. Also the item mean and standard deviation were identified. Secondly, an exploratory investigation with principal component method for extraction of factors using the varimax option was employed to assess the scale dimensionality. The responses (N = 1033) to this scale were factor analysed and six factors were obtained. In spite of some leakage, and one of the Eigenvalues was slightly less than 1.0, this six factor solution explained an acceptable 58.10 per cent of the variance. Table 1 presents the six factor loadings. Most items loaded onto their corresponding factor as anticipated, a finding that demonstrated two main features. First, the content of Table 4 provided relatively strong agreement with the findings of earlier studies, which underpinned this research. Second, a high majority of the items loaded significantly onto their corresponding factors (i.e., factor loading = .50), with the exception of item 14 (i.e., factor loading = .30) in the pre emptive move factor. Nevertheless, the dimensionalities of the instrument were identified to be coherent and the scale demonstrated adequate internal consistency.

Results

The reliability of the business strategy orientation scale was assessed, and the findings are presented at the foot of Table 4. All items met the .35 criterion for item-to-total correlation (Guildford 1965). Accordingly, all items in these six subscales were retained. The pre emptive move subscale had a comparatively low reliability of .50, which may have been caused by misinterpretation and sensitiveness to the words of premium/over valued price in item eight. This matter was suggested during the feedback sections and is discussed later in the Discussion section. All four items of the pre emptive move scale were retained for further analyses. Overall, there was sufficient internal consistency for the business strategy orientation sub scales.

Table 4
Principal Components Factor Structure of the Business Strategy Orientation
Variables Item #
Section 2
Factors
1 2 3 4 5 6
Eigenvalue 4.92 2.79 1.82 1.27 1.02 .96
Percent of variance 22.34 12.70 8.27 5.79 4.65 4.36
Cumulative percentage of variance explained 22.34 35.04 43.31 49.09 53.74 58.10
Overall cost leadership on resources 7 .16 -.02 .26 .11 .63 .10
4 .06 -.02 .08 .09 .78 .04
10 .21 .05 .34 .14 .53 .13
Overall cost leadership on quality 18 .15 -.02 .73 .04 .07 .16
11 .03 .13 .66 .19 .16 .12
5 -.08 .15 .59 .08 .38 -.07
21 .26 -.11 .66 .14 .11 .04
Overall cost leadership on sales volume 12 .14 .04 .16 .74 .14 -.01
15 .11 .10 .24 .65 -.05 .05
3 .15 -.09 .03 .74 .21 .07
Differentiation & overall cost leadership 19 .76 -.02 .07 .08 -.01 .12
22 .77 .09 .11 .02 .10 -.03
20 .76 -.13 .10 .18 .12 .13
24 .75 .09 .06 .19 .13 .06
Focus 23 .09 .78 .08 .01 -.02 .04
9 -.03 .80 .03 .04 -.00 .01
1 -.12 .78 -.00 -.00 .07 -.04
13 .08 .78 .01 -.00 -.06 .11
Pre emptive move 2 .26 -.13 -.06 .42 .16 .51
8 .13 .38 -.05 -.16 .25 .48
14 .40 -.01 .19 .14 .25 .38
17 .03 .11 .31 .06 -.02 .75

Notes:
a. N = 1033.
b. Factor 1 = overall cost leadership on resources (x = .61).
Factor 2 = overall cost leadership on quality (x = .70).
Factor 3 = overall cost leadership on sales volume (x = .64).
Factor 4 = differentiation with overall cost leadership (x = .80).
Factor 5 = focus (x = .81).
Factor 6 = pre emptive move (x = .50).
c. x is the coefficient alpha value.

Discussion

The development of an instrument demands a comprehensive and rigorous investment. The 24 item business strategy orientation scale was successfully developed through three empirical studies under 15 distinctive progressing phases. Yet, the development of instruments is a high risk venture. This fact is typified in the endeavour by Rizzo, House and Lirtzman (1970) who developed the seminal scale for measuring 1) role conflict and 2) role ambiguity in the then relatively monoculture of North America. As a result, more than one half of their inaugural questionnaires were removed after factor analysis. Nevertheless, the Rizzo, et al. instrument is still popularly employed in contemporary research despite the subsequent formation of substitute role instruments. In addition, translating scales across culture is even more challenging. A concern for work related instruments that can be used universally provoked Bond and colleagues (The Chinese Culture Connection 1987) to conceptualise the Chinese value survey. Having devoted substantial qualitative investment to create a robust, culture free scale the initial 40 items were reduced to 16 items through a factor analysis process. More recently Pearson, Chatterjee and Okachi (2003) attempted to evaluate the relevance of the 10 managerial roles by employing two paired 33 item (Mintzberg 1973), a worldwide recognised managerial theory that is taught in leading business schools and reported in prominent management texts. However, the results, that were yielded from a sample of 195 indigenous Japanese managers in the cities of Osaka and Kansai, revealed the perceptual intensity (Importance of the role) for each role was significantly greater than the frequency of employment. This perplexing enigma was later resolved by qualitative assessment through Japanese focus group discussions, which identified that the 195 surveyed managers did not extensively practise the profile of managerial roles as revealed by Mintzberg in his study with American managers. Indeed, the Japanese managers were embedded in a very different set of culture, religious, social and economic factors. These examples indicate that the development of an instrument for evaluating Eastern business and work related practices (with the objective of enhancing managerial encounters) from Western theoretical underpinning is a complicated and demanding course due to the cultural nuances.

Implications of this study are illustrated in three practical findings and five empirical observations. The practical findings are in relevance to the application of business strategy whereas the empirical observation concerns the development of an instrument and implementation of a cross-cultural research. The first practical finding is that there is some evidence that Porter’s framework of three generic business strategies would not be completely adoptable to the Chinese market due the uniqueness of the Chinese business environment, which is undergoing its rapid economic transition and integration towards globalisation of business. As such, the boundary of the three generic business strategies is not as clearly cut as posited by Porter for business contexts universally. This fact is exemplified in the result of this study that the initial 19 items, which were generated from Porter’s framework for evaluating three business strategic facets has been subsequently refined and developed to 24 items for assessing six strategic facets. The result also indicated that doing business in China may need to employ combined business strategy (i.e., differentiation with overall cost leadership), adjust business strategy frequently, and alternatively change the business strategic approach according to the ever changing market environment as well as institutional and economic changes under the economic transition. Moreover, the Western theory of business strategy is perhaps not entirely adaptable for Chinese organisations due to its unique market environment and cultural difference. Further elucidation was made through lengthy discussions with 90 senior business executives in 20 focus groups.

Dialogue from the feedback sections indicated that firms applying a differentiation with overall cost leadership strategy in the Chinese marketplace are usually the winners over various price batters in the given market segments. These winners originally employed an overall cost leadership strategy when the businesses were initially established. The strategy of differentiation is a supplementary competitive edge to the overall cost leadership focus in order to maintain the winning position in given industrial domains. More importantly, certain percentages of modern Chinese people have been financially wealthy and have pursued unique and distinctive products and services under the economic transition over the last three decades. Such phenomenon has resulted in a high demand for differentiated produces and services. The best elucidation to the phenomenon is perhaps a Chinese idiom that ‘a princess has no worry about getting married’. Indeed, there are countless characteristic products and daily goods that are well sought after by modern Chinese people. These excessive demands on differentiated products and services have led to the rapid expansion of shops that are selling branded products in China. This is where the combined business strategy of differentiation and overall cost leadership stands in most of the well established Chinese business organisations. From this finding it is apparent that Porter’s theory, whereby the combined strategic approach was only possible to survive on a temporary basis, is not entirely applicable to the unique Chinese market environment.

A second practical finding is that focus strategy is seldom employed solely and constantly by small (less than 100 employees) and medium size (less than 500 employees) Chinese business organisations, except the group enterprises that are applying a regional focus or a production line focus strategy for their divisional businesses. The reason is because the pervasive business opportunities that are generated from the different stage of the economic reform would somehow distract the approach of focus, which limits the business scope in a constrained market portion. In particular, modern Chinese people have become typically opportunist and pragmatic. Firms may initially apply a focus strategy when the businesses were newly established, but under the process of the business development, other business strategic approaches might be alternatively or simultaneously adopted when a new business opportunity emerges. The probable exception is that those small to medium size traditional business practices that are affiliated in the minor industrial fields. For example, firms that produce certain plastic clothing materials might be merely demanded by traditional artists for traditional performances. Elsewhere, firms that manufacture a special type of old fashion underwear may only be required by the traditional elderly. As a result, focus firms favourably situate at a seller’s position in the Chinese marketplace due to weak competition subsists. Indeed, such phenomenon demonstrates that the Western theory of business strategy might not apply to the Chinese organisations.

An additional practical finding is that the winning strategy in the Chinese marketplace is a pre emptive approach, by which firms swiftly ‘step into’ the target segment and then quickly ‘step out’ from the market when the business opportunities ceased to exist. As a rule, the opportunities in Chinese business environment only ‘stay fresh’ for a short period of time (maybe months), as Chinese business people have a typical business sense and are eager to flock for chances together. Hence, firms applying pre emptive move seek a quick fix to launch their new products or a new service to promptly occupy the market sector. Concurrently, pre emptive users would employ their usual business strategy for normal business operations, or adjust to their usual business strategic approach after the pre emtive battle is competed. In fact, such strategic practice is prevalently adapted in most of the Chinese industrial domains.

The first empirical observation relates to the general preference for measurement instruments in Mainland China. It was observed from the qualitative study meetings that Chinese people mostly prefer a five point Likert scale instead of a seven point Likert scale. The notion of this concern was mainly caused by the Chinese language, as the Chinese transactions for ‘somewhat disagree’ and ‘somewhat agree’ means ‘not completely disagree’ and ‘not completely agree’, which should be placed at the lower level of ‘disagree’ and ‘agree’. In other words, the wordings of the seven point Likert scale in a Chinese mindset would be positioned as ‘strongly disagree, disagree, somewhat disagree, neither disagree nor agree, somewhat agree, agree, strongly agree’. In such contexts, respondents may find difficulty in choosing a proper answer, as the scale orders are confused in classification. Further attention that also needs to be drawn is that Chinese people do not like reverse statement, because it is fairly easy to overlook the negative wording that is typically the core meaning of the reverse statements. In particular, two sentence statements are preferable than single sentence statements, as one sentence statements are similar to the political slogans, which remind people of the era of Mao, Zedong. These theoretical suggestions are valuable for future studies to avoid ambiguous or incorrect responses that have a significant impact on the empirical findings.

A further empirical observation may lie in the wording of the questionnaire. As indicated by the members of the focus groups, the words of ‘premium and over valued prices’ were a bit too sensitive to use in a survey questionnaire item as it relates to the profit making of business. It is advisable that a future study may consider using other words, such as ‘good prices’. Overall, this newly launched instrument was considered to have acceptable internal consistency with robust reliabilities for assessing the business strategy orientation in Chinese business context.

One of the most salient observations relates to the interest of a cross-cultural study. In this study, the inaugural developed instrument for assessing the business strategy orientation in Chinese business organisations was generated from a Western business strategic framework (Porter 1980, 1985, Aaker 1992) in the English language. The questionnaire items were back translated by 12 qualified Chinese translators, who were the members of three mutually exclusive teams (English to Mandarin, Mandarin back to English). Each of the translators held membership in only one team. Similar action was also performed on the two adapted scales that were employed in the current survey. This approach was to ascertain the ‘reasonableness’ of the translated statements, given that a perfect correspondence between the English version and the Chinese format is not possible. In summary, a literal translation of the words was undertaken, but the results of this study appeared to show that although a reasonable level to the correspondence between the original English and the Chinese translated scales was ensured, the Western notions might not have been entirely transmitted and conceptualised by the Chinese participants due to cultural differences. This phenomenon was not initially observed as the assessments of the quantitative analytical results from factor analyses and reliability assessments on particular subscales were quite reasonable. Later, when there was a lack of statistical support for a number of the hypotheses it became apparent that there might not have been a strong correspondence of notions and concepts between the two languages. This observation was then extensively discussed in the qualitative study sessions, which provided valuable comments that are particularly beneficial to cross-cultural study analyses.

Through the qualitative study it was revealed that under the Chinese cultural point of view, the perceptions to the statements that were comprised in the pre emptive move were somewhat disparate from the Western concept. The disparity of the perception is probably mainly attributed to the intricate communication between a high context Chinese culture with a low context Western culture. In a high context culture, meaning is determined from how a thing is said, rather than what is said. On the contrary, meaning is determined by what is said, rather than how a thing is said in the low context culture (Xin & Pearce 1996, Seng & Lim 2004). Indeed, the low context Western paradigms are probably difficult to be generalised to a Chinese high context environment, particularly under its ever changing economic reform (Wong & Chan 1999). Thus, the theme of the Western ideology is unlikely to be transmitted and assimilated into the Chinese mindsets completely over a set of questionnaires, and vice versa to the transmission of knowledge from a high context culture to a low context culture. According to the ‘grapevine’, the qualitative investigation technique is essential to capture information that was not attainable through the quantitative assessment and to complement the quantitative result. Hence, an amalgamation of a quantitative and a qualitative investigation methodology is essential for cross-cultural studies to attain a more comprehensive insight of the research problem.

An extended remark links to the theme of the sampling method when conducting research in an Asian context, particularly in Mainland China. Chinese people are reluctant to answer questionnaires driven by the defence mechanism that was generated from many political conflicts. Specifically, ruled by the Confucian humanity codes of ‘make use of principle of the mean’ and harmony, Chinese are disinclined to make discussions with people who are unfamiliar or a stranger who comes from a research consultancy. This Chinese traditional human value is unlikely to be supportive to the Western ‘mail out’ system for a reasonable response rate. Previous studies (e.g., Davies, Leung, Luk & Wong 1995, Leung, Wong & Tam 1995, Leung, Wong & Wong 1996, Wong & Leung 2001) have reported fairly low response rates using a ‘mail out’ methodology in Mainland China. Preferably, the guanxi (interpersonal relationship) ideology is practical in overcoming the deficiency of the cultural difference in conducting a cross-cultural study in China. More importantly, the guanxi relationship plays a significant role in attaining genuine and liberated comments in qualitative analytical meetings. Although the application of the guanxi ideology does not ensure complete randomness of the data collected, it eliminates the bias in results that usually occurs due to a lower than expected response rate. Arguably, the guanxi approach has the potential to capture open comments into the research matters through the qualitative discussions.

Another key empirical observation is concerning the global mindsets of Chinese individuals. The quantitative analytical results on T test and ANOVA of this study demonstrated that there was a high degree of convergence among all the examined variables of the conceptual model between the demographic elements and structural properties. The strong consensus in the results probably suggests that the global environment has reshaped the quality and mindset of Chinese people. Over the last three decades, the Chinese business environment has been undergoing dramatic changes under the economic transition, which has been conceptualised as a triple process of decentralisation, marketisation, and globalisation (Wei 2000). Specifically, the growing pressure of globalisation has been intensely influenced by the Chinese marketing system and Chinese business people since China entered into the WTO in late 2001. The globalisation impact has reformed the Chinese market from a low quality products exporter to one of producing sophisticated high technology products (Dayal-Gulati & Lee 2004). Perhaps the globalisation force has restructured the viewpoint of Chinese business executives and this has resulted in the substantial consensus in conceptualising the theories of the present study. This finding is valuable, as it indicates that the global winners are now inextricably enmeshed into patterns of behaviour, and China is considered as the new engine of the global economic growth (Dayal-Gulati & Lee 2004).

This study leads to at least three directions for future studies. First, as this study was cross sectional in design, causality among the variables cannot be determined, but inferences can be made from the associations. The constraint of this study is related to the sample. Although this study sampled 1369 business executives at the top five senior managerial levels of 526 Chinese business organisations from different industrial fields across the ‘early’ to ‘late’ open economic regions in Mainland China, the limits on the generalisability of the results of this study within Mainland China needs to be tested. In addition, due to the lengthy process for official approval for conducting surveys in Mainland China, this study adopted a convenience sampling method that endorsed a guanxi ideology. Although this data collection method does not ensure complete randomness, given that this study is an exploratory study in nature, it is considered acceptable for studies with an exploratory purpose (Weiss 1994). Second, the newly developed instrument for assessing the business strategy orientation in this study was undertaken in limited Chinese industrial sectors mainly in cities located in southern, northern and central parts of China. A further study could enrich the investigation by testing this newly developed scale in various business sectors and within a wider spectrum in other regional locations of China. Such an endeavour has the potential to gain a better understanding of the generalisability of the instrument. Last, future researchers might also compare the business strategy orientation and its fluidity between regions and between Chinese private businesses and state owned businesses. Further replication of studies has great potential in enhancing the understanding of the Chinese business strategy orientation.

Conclusion

This study reports a comprehensive and rigorous investment for the development of an instrument for evaluating business strategy orientation in Chinese organisations. It was found that the newly developed instrument has a good psychometric property and acceptable internal consistency. Most prominently, this instrument has shown to be valid and reliable in the Chinese business context. From a practical point of view, this study adds to the knowledge and literature in investigating the business strategy orientation in the Chinese business organisations and lays a crucial basis for future research in the relevant domain. It is believed that the instrument has great potential for providing overseas investors and MNCs with a perspective of business strategy orientation in Chinese organisations. Specifically, the results of this study could be incorporated into the formulation of a sound Chinese business strategy. As a prominent Chinese business strategic scheme goes ‘knows oneself and the other side, is ever victorious’. Indeed, a comprehensive insight of the Chinese business strategy orientation would provide an important competitive strategic tool to Chinese local business practitioners and Western business executives alike to improve their competitive advantage. Moreover, such knowledge is advantageous in overcoming cultural barriers in the Chinese business community.

From a theoretical point of view, the result of this study highlights the significance of the application of a multi method in implementing cross-cultural studies. It is suggested that the qualitative investigation technique is essential to capture information that was not attainable through the quantitative assessments and that the qualitative dimension complements the quantitative results. In addition, an extended remark in relation to sampling method was offered for further research in Mainland China. Preferably, the guanxi ideology is more practical than the Western traditional ‘mail out’ system when conducting a comprehensive survey in China. Especially the guanxi plays a significant role in attaining genuine and liberated comments for qualitative analysis. Secondly, the results of this study suggested that the global environment has reshaped the quality and mindset of Chinese people and this has resulted in the substantial consensus in conceptualising the theories of the present study.

Author

Katherine Su Nie earned her PhD at Curtin University, and has held positions of Director and Executive Manager of an Australia Based International Business Consulting Company in the People’s Republic of China since 1994. Her research interests include business strategy orientation in Chinese organisations and the relationship of business strategy orientation with guanxi in China’s current economic transition.

Email: austbg@westnet.com.au

Acknowledgement

The author wishes to express her deep appreciation to Dr Cecil A L Pearson for his invaluable comments and expertise in the development of the instrument and this paper.

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Appendix A

Table 1
Demographics % (N = 202)
The First Empirical Study
Age (year)   Industrial Fields
< 30 31.2   Trading 24.3
31 to 50 60.9   Building/Construction 18.3
> 50 7.9   Manufacturing 33.6
Gender   Service 23.8
Male 40.1   Organisational Location
Female 59.9   Guangzhou 18.8
Managerial Level   Fushan 12.4
Senior 39.1   Nanhai 11.1
Middle 35.7   Zhongshan 13.6
Supervisor 25.2   Shenzhen 16.5
Organisational Size (number)   Anhui 14.7
< 100 46.5   Dalian 12.9
100 to 500 42.1  
> 500 11.4  

Table 2
Demographics % (N = 76)
The Second Empirical Study
Age (year)   Industrial Fields
< 30 27.6   Trading 27.6
31 to 50 61.8   Building/Construction 9.2
> 50 10.6   Manufacturing 36.8
Gender   Service 26.4
Male 61.8   Organisational Location
Female 38.2   Guangzhou 16.6
Managerial Level   Fushan 15.3
Senior 63.3   Nanhai 18.2
Middle 22.2   Zhongshan 14.1
Supervisor 14.5   Shenzhen 12.8
Organisational Size (number)   Anhui 11.9
< 100 48.7   Dalian 11.1
100 to 500 38.1  
> 500 13.2  

Table 3
Demographics % (N = 1033)
The Third Empirical Study
Age (year)   Organisational Ownership
< 30 37.4   Privately owned 80.7
31 to 50 52.4   State owned 19.3
> 50 10.2   Industrial Fields
Gender   Trading 21.1
Male 62.1   Building/Construction 19.8
Female 37.9   Manufacturing 29.5
Shareholding Status   Service 29.6
Yes 38.6   Organisational History (years)
No 61.4   < 5 29.5
Tenure (years)   5 to 10 34.0
< 5 48.6   > 10 36.5
5 to 10 32.2   Organisational Size (number)
> 10 19.2   < 100 54.1
Industrial Experience (years)   100 to 500 27.6
< 5 37.8   > 500 18.3
5 to 10 36.8   Organisational Location
> 10 25.4   Guangzhou 21.3
Managerial Experience (years)   Fushan 16.9
< 5 56.4   Xiamen 15.8
5 to 10 27.8   Kunming 15.4
> 10 15.8   Hefei 16.0
Educational Background   Dalian 14.6
Vocational/Secondary 19.2  
College/Diploma 37.9  
Undergraduate 37.7  
Postgraduate 5.2