TheMarketForIdeas

“Marketplace is a battlefield” – a commonly used Chinese proverb, applicable today more than ever. As cross-cultural business consultants, we believe in strategy and clarity above all else, and who else to learn from if not Sun Tzu himself – the Chinese military tactician influencing strategic decision-making today despite having lived long before the formation of the PRC or the emergence of capitalism. Yet he claimed that the best battles are won without drawing swords.

Here are our insights into how the 5 Elements of Success as outlined by Sun Tzu in The Art of War apply to cross-cultural business practices in China. 

1. Tao (Righteousness) 

This is the first element of Sunzi’s “Five Elements that Govern Success”. It translates to “the way, rightness or morality” or more generally “the righteous way”. It means making the right decision, every time, even if that means giving up short-term profits.

"When you do the right thing for the right reason, the right result awaits." - Chin-ning Chu

Nestlé, the world’s largest food and beverage company, provides an example of the success that can come in making decisions based on Tao. In 2008 when a devastating 8.0-magnitude earthquake hit China, Nestle gave 10 million yuan to China for disaster relief with no strings attached.

Nestlé was not looking for short-term profits in doing so. They were interested in lending a helping hand to the Chinese when they faced a disaster beyond their control.

Later, when the melamine tainted milk scandal hit China, Nestlé had already fostered trust with the Chinese and subsequently became a major dairy distributor in China. Today, China is the second biggest market of Nestlé worldwide.

"When you do the right thing for the right reason, the right result awaits." - Chin-ning Chu 

2. Tien (Timing) 

“Being in sync with universal timing gives you momentum, and momentum gives you power. Waiting until the right time to do something is like running with the wind at your back.” – Chin-ning Chu

It is important to know when to move and when to wait. Sometimes waiting is the better strategy until the time has come for an idea to move forward.

Sun Tzu said, “Move not unless you see an advantage; use not your troops unless there is something to be gained; fight not unless the position is critical”.

We can see how Starbucks used this principle in entering the Chinese market. Being a coffee company, they had to be smart about how and when to enter a market whose consumers had a thousand-year+ tea culture.

Sun Tzu said, “Move not unless you see an advantage; use not your troops unless there is something to be gained; fight not unless the position is critical”.

The company strategically waited until globalizing trends smoothed the path for Euro-centric culture to enter China, and did extensive market research before making their move to set up their stores within China.

They did not take the conventional approach to advertising through mass media, which could be perceived as an attack on local tea culture. Rather, they positioned their stores in high-traffic locations to attract people seeking to up their status by consuming Western goods as a symbol of a luxury lifestyle.

As a result, China is now the second-largest market for Starbucks, with over 1400 stores across the country. 

3. Di (Resources) 

This literally translates to “earth” but is more broadly applied to include multiple terrains. It means that in battle a general must not only consider his opponents, but also the advantages and disadvantages of the battleground.

Sun Tzu said, “Earth comprises distances, great and small; danger and security; open ground and narrow passes; the chances of life and death”.

Sun Tzu said, “Earth comprises distances, great and small; danger and security; open ground and narrow passes; the chances of life and death”.

So it is in business: every company (and individual) is positioned within a context that presents both assets and liabilities. The strategy is to turn these liabilities into assets, and, indeed, the chances of survival or succumbence for an individual or company depend on it.

A client of LITAO, the biggest surimi producer in Europe, wanted to introduce their product into the Chinese market. Their liabilities were that a) they had not built up trust for their brand within China, and b) their products were far more expensive than local ones.

Sun Tzu said, “If you know the enemy and know yourself, you need not fear the result of a hundred battles”.

By taking this into account, and doing market research, the company implemented a premiumization strategy to turn the liabilities into assets. By selling their products as high-quality proteins with a story behind the origins of their seafood products (a story that cheap, mass-market companies lack), the company was able to appeal to a target audience of luxury and high-quality consumption, and successfully entered the Chinese market. 

4. (Leadership) 

“The commander must be wise, trustful, benevolent, courageous, and strict.” – Sun Tzu

By examining a failure in leadership, we can understand its importance. In the tourism surge of early 1990’s a hotel in Yunnan province, the Roaring Dragon, faced a managerial problem. Their staff lacked motivation on the job due to their fixed salaries.

The government decided the hotel was not meeting its potential, and contracted foreign management to take over. These takeovers ended up losing them over 19 million RMB.

“By method and discipline are to be understood the marshaling of an army in its proper subdivisions, the graduation of rank among the officers, the maintenance of roads by which supplies may reach the army, and the control of military expenditure.” – Sun Tzu

The cause of this was that the foreign managers did not take into consideration the Chinese business culture of guanxi, or social relationships in which both sides benefit mutually. Former hotel managers had built up guanxi with tour agencies and employees, giving them discounts or benefits. When foreign managers entered the scene, however, they saw this as favoritism and banned these benefits. As a result, guanxi was ruined: tour agencies never booked tour groups in the hotel again, and employee morale plummeted.

The problem here is two-fold. First, the government was not wise in hiring foreign management. Rather, they should have reflected on and corrected their own actions as managers.

And second, although the foreign managers wanted to be strict and trustful in their management, they did not consider local context.

They violated a concept essential to good strategy and good leadership: that is, understanding yourself and your opponent.

Sun Tzu said, “If you know the enemy and know yourself, you need not fear the result of a hundred battles”.

In business this can apply to colleagues, employees, clients, target audiences, and competitors. Had the foreign managers heeded this, they would have had higher chances of success. 

5. Fa (Managing or Method and Discipline) 

This translates to “discipline” or “managing” or “method and discipline”.

“By method and discipline are to be understood the marshaling of an army in its proper subdivisions, the graduation of rank among the officers, the maintenance of roads by which supplies may reach the army, and the control of military expenditure.” – Sun Tzu

Managing a team, getting people to execute plans, and doing so with a balance of discipline and strategy can be a challenging task. Most chapters in The Art of War and The Art of War for Women (author Chin-ning Chu) deal with this matter in depth.

Sun Tzu said, “The art of war teaches us to rely not on the likelihood of the enemy’s not coming, but on our own readiness to receive him; not on the chance of his not attacking, bur rather on the fact that we have made our position unassailable”.

We can understand an aspect of the question by examining the 2014 McDonald’s meat scandal. In July of 2014, a local media reporter videoed expired meat being mixed into products with re-printed expiration dates at Shanghai Husi Food – the meat supplier for fast food chains such as McDonald’s in China.

The video went viral and caused an international scandal that tarnished the reputation of McDonald’s and other fast food chains, and resulted in millions of dollars of fines.

This debacle stemmed from McDonald’s lack of discipline in ensuring the consistent quality of their supply chain. In modern business, as in ancient warfare, it is necessary to ensure “the maintenance of roads by which supplies may reach the army, and the control of military expenditure.”

By proper management of one’s supply chain, this can, in some measure, be accomplished. Indeed, this is one factor of many to be considered within Fa. 

Key Takeaways 

Remember, that all five elements of success (and any strategy in Sun Tzu’s book) are interdependent and do not stand alone.

It is impossible to be a good leader without righteousness; if you do not have an understanding of yourself and your opponent, you are unlikely to succeed even if your timing is correct.

By using all of these elements in coordination, a businessperson can succeed in his enterprises, and more importantly be in control of his actions.

As Sun Tzu elegantly describes, “The art of war teaches us to rely not on the likelihood of the enemy’s not coming, but on our own readiness to receive him; not on the chance of his not attacking, bur rather on the fact that we have made our position unassailable”.

May you find your own truth in this and walk the path to winning in business and life.

LITAO is a cross-cultural business consultancy group based in Shanghai. We serve foreign companies tailor-made strategies for China market entry and market expansion. See how we approach our strategy within the business world of China at www.litao.lt