'Guanxi' crucial in kindergartens' forays into mainland China

Overseas education groups, like EtonHouse, have learned that business success across the border is determined by the concept of guanxi

PUBLISHED : Monday, 07 April, 2014, 11:14am
UPDATED : Tuesday, 08 April, 2014, 3:45am

On the mainland, guanxi - simply put, one's connections - determines the success or failure of a business, going by the experiences of two Singapore-based education groups.

One made it while the other flopped, all because of the way they related to the authorities.

"In Singapore, we tend to schedule a meeting before everything else, but in mainland China … we paid a lot of tuition fees [to learn the ropes]," said Ng Gim Choo, founder of the EtonHouse International Education Group.

Ng was speaking to Hong Kong media for the first time since the group started the city's first branch in Tai Tam in January. But before Hong Kong, the group had set up 11 kindergartens across the mainland, starting out in Suzhou , Jiangsu province, in 2003.

With support from its government, EtonHouse was the first Singapore-based education provider to expand onto the mainland. Ng also attributes the group's success to recruiting its administrators locally. It meant the staff knew how to deal with their own authorities.

"Doing business in Singapore is very transparent, but in mainland China, there is no standard way of doing things," Ng said. "Different people will give you different answers to one question, which makes things much more complicated."

She said Hong Kong was more akin to Singapore in terms of efficiency and transparency.

Ng related the story of another Singapore-based kindergarten that failed in its efforts to expand to mainland China. The kindergarten was asked by the local mayor to admit his grandson. The school was full, and the principal insisted on putting the child on the waiting list, Ng said.

Shortly after, the mayor talked to a parent who had secured a place for his child in the preschool, and it was not long before the parent gave up the spot to the mayor's grandchild. "If [a kindergarten] keeps doing things like this, it would face many difficulties [operating on mainland China]," Ng said. "He is a mayor; you have to squeeze in a place for him by any means."

Dr T. Chandroo, chief executive of the Modern Montessori International Group (MMI), says guanxi was instrumental in his Singapore-based group's failed foray into mainland China.

Unlike EtonHouse, MMI set up shop in Hong Kong first, hoping it would be a stepping stone to the mainland. The group had ambitious plans to set up 80 branches in the vast market when it opened its first mainland branch in Haikou , Hainan province, in 2009.

But it was a steep learning curve for the education group, trying to understand the local people and business partners, Chandroo said.

Not only were things done at a slow pace, but local authorities also required that the kindergarten appoint a local Chinese to represent its interests.

"The need to promote guanxi is essential, and very often you will have to offer free shares in the company, which is considered a norm in China," he said.

MMI plans to return to the Chinese market, which offers enormous potential because of its large population. "But we are particularly careful," Chandroo said. "And we are doing our due diligence before appointing any franchisee in the country."


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