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Why LinkedIn survived in China while other tech giants failed (Part one)

August 16, 2016

 

LinkedIn, as a professional worldwide networking platform, entered China for the first time in January of 2014 and was granted the Chinese name of “Ling Ying,” which has a similar pronunciation as LinkedIn, while obtaining the Chinese meaning of “leader of elites” (David, 2014). As a new comer, LinkedIn China has aspired to be an entrepreneurial Chinese company. For about a year and a half thereafter, LinkedIn had won over those Chinese users, who are mostly identified as clerks, from foreign companies and multinational corporations, as well as, overseas students, who have a good mastery of English, and have the needs of “worldwide connection” (Qi, 2015. para.7). Those users, however, represent only a limited portion of the Chinese professional population. This relatively small segment of the population makes it difficult for LinkedIn China to reach its goal of “fast user growth” (Derek, 2015). Another factor that hinders LinkedIn China’s growth is that as a part of its global system, it has to report via a “chain of command,” to LinkedIn’s headquarters located in the United States, any movement, such as product adaption, to maintain its worldwide platform. This reporting requirement slows LinkedIn China’s development, especially because China has a fast-changing mobile internet environment and its users differ distinctively from western ones in language, culture, using habits and social hierarchy. “The most crucial underlying issues are the complicated social structure and the cultural differentiation of regions in China, because of which ‘worldwide connection,’ as LinkedIn’s key value, is lack of attraction to quite a few Chinese young professionals” (Qi, 2015. para.19). In order to gain a firm foothold in the Chinese market, LinkedIn China had to bring forth new concepts to win over as many users as practical.

 

In June of 2015, a remarkable and memorable moment for LinkedIn China occurred; “Chitu,” a professional social networking app, developed solely by a Chinese technical team in LinkedIn China and targeting young professionals in China, emerged into public view (“Chitu, An All-In,” 2015). Since then, there has been an increase in the number of users. Chitu’s development has been impressive in many ways. It is important to note that there are distinct differences between the brands of Chitu and LinkedIn China; to illustrate.

 

LinkedIn China is a relatively international, high-profiled and stern in its approach; while Chitu emphasizes warmth, youth, and fun in professional society. LinkedIn China targets consumers, who need “worldwide connection,” who speak English, and have overseas and multinational corporation backgrounds; while Chitu predominantly deals with Chinese local professionals who focus on career enhancement; moreover, LinkedIn China aims to establish a worldwide platform, while Chitu is only for the Chinese market with all its product designs based on Chinese characteristics. (Derek, 2015, para. 1)

 

It is the first time for LinkedIn to establish a sub-brand in a regional market, and it is groundbreaking as well as meaningful that the Silicon Valley giant delegates unprecedented power to its subordinate Chinese company (Qi, 2015). However, the existence of Chitu is both a supplement to and a competition with LinkedIn’s embodied products in the Chinese internet market. Then, why did LinkedIn agree to such a contradictory and risky experiment? Facing the conflicts and adjustments between western professional networking culture and Guanxi (literal personal relationships and connections) in Chinese traditional culture, how does Chitu, the star product of LinkedIn China, along with Chitu’s team, take the “intelligent risk” in order to not only survive, but thrive in China? These are most important questions that will be explored and discussed in this research.

 

Many multinational corporations, such as western food giants McDonald's and Kentucky Fried Chicken (KFC); tech companies, such as Apple and Samsung; as well as manufacturers Toyota and Subaru, have paid increasing attention to the Chinese market and have made it an essential part of their worldwide development strategies (“How many multinational,” 2015). They have witnessed that China is one of the world's fastest-growing economies:

 

The Chinese economy experienced astonishing growth in the last three decades that catapulted the country to become the world's second largest economy. In 1978—when China started the program of economic reforms—the country ranked ninth in nominal gross domestic product (GDP) with USD 214 billion; 35 years later it jumped up to second place with a nominal GDP of USD 9.2 trillion. (“China Economic Outlook,” 2016, para. 2)

 

The enormous potential of the Chinese internet economy is also encouraging an increasing number of foreign internet companies to launch operations in China (“Internet economy exploring,” 2015). However, setting foot into the Chinese market requires appropriate public relations strategies that take into account Chinese culture, politics and economic differences and uniqueness. Time has witnessed that a number of American companies have voluntarily given up their businesses in China, while others have failed on account of flawed business plans and execution. According to Lu (2011), “In 2007, eBay sold 49 percent of its subsidiary’s shares and handed over its operation to Tom.com. In 2010, Google declared [it would] close its searching services in Mainland China” (p. 2). In this age of internet globalization, it has been witnessed that “many successful foreign companies enter China with their heads held high only to later slink away in defeat” (Custer, 2015. para.1). There are other global internet companies, such as Facebook, who have found it difficult to make inroads into the Chinese market (Kristina, 2015).

 

Many foreign internet companies have failed in the Chinese market because of their insufficient understanding of the special Chinese environment and their desire to use their own successful models previously adopted in their own country (Custer, 2015). Foreign internet companies may find success difficult to achieve in China; there are several probable reasons: (1) they fail to access the realities of doing business in China; (2) they fail to cultivate mutually beneficial relationships; and (3) they neglect to offer Chinese stakeholders products and services competitive in value to those of local companies (Jianshuo, 2013). As an old Chinese saying goes, “One who knows his own strength and that of the enemy is invincible in battle.” Foreign companies may benefit from a better understanding of the large and sophisticated Chinese market and maintaining long-term relationships with the network of resource coalition-based stakeholders such as Chinese authorities and diversified consumers, which are crucial to their success (Su & Mitchell & Sirgy, 2007).

 

The primary focus of this study is to examine the extent to which the propositions of stakeholder and relationship management theories are applicable in a Chinese public relations context. Additionally, this research seeks to discover the ways in which Guanxi culture can bring greater understanding to these public relations theories. Lastly, the researcher provides practical insights for foreign organizations that need to nurture relationships with stakeholders in China; for instance, how they could identify and prioritize relevant stakeholders in the organizations’ different stages of development.

 

To accomplish this aim, this study adopts a case study methodology that includes an analysis of documents, interviews and observations from a wide scope of LinkedIn China’s and Chitu’s communication and relationship cultivation strategies from 2014 to 2016. Also, Chitu is a sub- brand of LinkedIn China, and for purposes of this study, the researcher primarily focuses on Chitu’s identifying, prioritizing its stakeholders as well as the implementation of effective relationship cultivation strategies with cultural sensitivities. It is hoped that this research provides a more robust understanding of the stakeholder relationships and relationship cultivation strategies that are needed for multinational corporations to do business in China, as well as stimulating further discussion on this topic (MORE TO COME from the following posts).

 

The content above is derived from Chapter 1 of my master's thesis - A Case Study of LinkedIn China and Its Sub-Brand Chitu - with a focus on Public relations and social media strategies. Excerpts and links may be used, provided that full and clear credit is given to Li Yingying and www.liyingying.us with appropriate and specific direction to the original content.

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