In Part 1, I wrote about cultural assumptions in China. In the second half of this series, I have advice for entrepreneurs starting negotiations with their first client or partner in the Chinese market.
Prepare, Prepare, Prepare
One of the biggest mistakes that a company can make in international negotiations is to skip preparations. Americans in particular are notorious for “shooting from the hip”. The danger is walking into a negotiation where your Chinese counterparts know not only your company’s product information and history, but have researched the backgrounds of everyone on your negotiating team, your business culture, and likely any past business you have conducted in China. They will have planned out strategy, tactics and contingency plans. As your Chinese counterparts are socializing with you, they are also studying and testing you. They will also likely attempt to get you and your team drunk in order to collect more information that they can use in negotiations. I have written a checklist for international negotiations available from my site, if you want to see the detailed list.
Another part of preparations is carefully choosing your negotiating team. You’ll want to match the number of team members and their roles to your Chinese team. A CEO, VP of Production, Technical Engineer and Logistics Manager on one side should be matched as closely as possible by the other side. When socializing, the pairs of each role will often break off to discuss more specific information and form one-to-one business relationships. Be sure to consider the number of team members when deciding how many translators you might need if a pair does not share Chinese or English as a common language.
Time is NOT on Your Side
One the best-working negotiation tactics used against Westerners and particularly Americans is TIME. Americans like to strike a business deal as quickly as possible and then move on to the next deal. The Chinese and other Asian cultures know this. A common first question on a negotiations visit is: “how long are you staying?” Your Chinese counterparts know that if they avoid coming to agreement in the hours before your return flight, they can get deep concessions from you. The American is motivated by completing the transaction and reporting back to the home office that the deal is made as opposed to requiring further trips.
Time as a tactic can also be used by Chinese during negotiations (although this is actually a favorite tactic of Japanese). This is when your counterparts simply stop speaking and silence fills the room. Typically, Americans and other Westerners are very comfortable with prolonged silence. In order to the conversation going again, the American will often give away concessions. But the best answer to this tactic is to meet silence with silence. Be prepared to stay quiet and very emotionally neutral for up to three minutes. If this tactic doesn’t work, the other side will stop trying to use it.
Negotiations are NEVER Finished
Americans use contractual agreements to define a business relationship. As long as the agreement terms are being carried out by all parties, Americans are generally satisfied. This is not how agreements are viewed in China. In Chinese business, the agreement puts into writing the verbal agreements that have been initially negotiated. But all terms can be renegotiated at any time. This can be frustrating to Americans who feel like negotiating once is enough. The typical reaction by Americans is that their Chinese counterparts cannot be trusted to uphold their side of the agreement. In reality, the strength of a Chinese business partnership is in the shared interest and flexibility of the relationship, not the contract terms. A great article on this topic is by Chinese business expert, Steve Barru, China Business Hand: In China Everything is Negotiable.
For more information about doing business in China or how to troubleshoot existing relationships, please contact Becky DeStigter, The International Entrepreneur.