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TMFMmbop (38.51)

Another example where guanxi still matters

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July 09, 2010 – Comments (1)

Here was a fascinating (paraphrased) exchange today we had with the CEO of a small pharmaceutical company that acquires most of its new products from universities and public research institutions...

Q: Do you expect most new products going forward to be created internally or acquired?
A: Definitely acquired.

Q: Why?
A: Because it's much more effective and faster. We acquired for RMB 8 million a product from a university that took 10 years and RMB 10 million to develop.

Q: Why did they sell it so cheap?
A: Because they are professors. They are subsidized

Q: Why weren't there 100 companies lining up to buy this product at that price?
A: Because our chief researcher used to work at the university and they didn't tell anybody else they were selling it.

Q: Why not?
A: Because they wanted to tell their friend. You know, guanxi. We read your article.

I remain fascinated by this country, commerce here, and its many potential futures.

1 Comments – Post Your Own

#1) On July 09, 2010 at 1:11 PM, HDTVBG (< 20) wrote:

In Hollywood we used to say it's not what you know but who you know (the more ugly version goes - who you blow -) . With the advent of social networking  -LinkedIn, Twitter etc., the equation has shifted slightly  - the punchline now reads - "who knows you?" In this way, perhaps we are becoming a bit more like the China biz networks and their concept of guanxi. Look at Alibaba.com (ALBCF.PK) for a web 2.0 mashup incorporating some of this influence.

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