Improving communication between multinational fast moving consumer goods manufacturers and Chinese wholesalers

Abstract

China with her 1.3 billion plus population is potentially the largest fast moving consumer goods market in the world. Since China re-opened her domestic consumer market to foreign products in the late seventies, multinational fast moving consumer goods manufacturers have been trying hard to penetrate this market. However, many multinational companies consider the distribution and wholesale network in China as one of the main obstacles to expand their business (Niu, Dong & Chen, 2001; Brenan & Wilson, 2003). While the China distribution and wholesale market has been widely and profoundly studied by academics, the focus was more on the retailing format, retailing functions and wholesale structure instead of management and operating models with Chinese wholesalers. On the other hand, industrial practitioners have spent a lot of effort in designing and implementing management and operating models to build the working relationship with their Chinese wholesalers. However, such understanding of the working relationship between the multinational fast moving consumer goods manufacturers and Chinese wholesalers from an academic perspective is limited. Traditionally, Chinese wholesalers are usually low profiled, subtle and pragmatic. They are less interested in responding to enquiry about their businesses from non-customers in order to avoid unnecessary exposure to regulatory authorities. It has been difficult to collect first hand direct information from Chinese wholesalers on their working relationship with their customers. As a consequence, most research studies focus on either the manufacturers/retailers angle or using a quantitative and deductive approach to collect data from the channels about the working relationship between manufacturers and wholesalers. This research study tried to take a balance view to re-examine the working relationship between multinational fast moving consumer goods manufacturers and Chinese wholesalers through qualitative interpretive approach. The scope of the study was confined to communication factor which is one of the six factors contributing to a successful working relationship between manufacturers and wholesalers (Anderson & Narus, 1989). This study investigated on the research question of improving communication between multinational fast moving consumer goods manufacturers and Chinese wholesalers. This research study employed a qualitative interpretive approach by using a series of expert interviews with experts (namely, decision makers of both wholesalers and manufacturers) in the China wholesale arena to collect rich and contextual knowledge through enquiring on their opinions and experience. The results of this research study have reconfirmed the contribution of the management and operating models commonly used to build the working relationship between the manufacturers and the wholesalers. It also pointed out that the contribution of such management and operating models have not been fully capitalized due to weakness created as a result of insufficient and ineffective communication. Furthermore, the results also provided new insights to challenge some of the traditional beliefs about the mentality and competency of Chinese wholesalers. Some traditional beliefs derived from previous research from academics and opinions from practitioners concluded that Chinese wholesalers are short term focused and thus are unwilling to upgrade their competency and capacity to develop long term partnership with manufacturers. Such short term mentality has made it difficult for multinational manufacturers to develop sufficient trust and thus fully cooperate with Chinese wholesalers. The findings of this research study however suggest that benefiting from the fast growing China fast moving consumer goods market in the past decades, many Chinese wholesalers have grown and evolved to become comparable to their western counterparts in many areas including competency, capacity and even financial power. They are also interested to develop long term working relationship because the opportunity cost to change distributorship is getting higher and higher. There is however a communication gap existing between manufacturers and wholesalers due to information asymmetry. Such communication gap hinders the understanding of business philosophies of each other and thus makes it difficult for them to develop compatible business goals and subsequently builds a long term working relationship. Recommendations were made to improve communication between the multinational FMCG manufacturers and Chinese wholesalers so that they can enhance understanding and trust, develop compatible business goals and build long term working relationship. The findings of this research fill a void in prior research of China wholesaler management by taking a balance view of first hand direct information from both Chinese wholesalers and multinational manufacturers. The learning of this research contributes with both academic and practical implications on communication factor of working relationship between multinational manufacturers and Chinese wholesalers. It also provides opportunities for future research especially by tapping into the experience of collaboration between academic researcher and industrial practitioners.

Date of Award	15 Feb 2013
Original language	English
Awarding Institution	City University of Hong Kong
Supervisor	Kuldeep KUMAR (Supervisor) & Kwok On Matthew LEE (Supervisor)