by Andrew Hupert
Chinese businessmen solve problems. If they can solve their problem by delivering high quality products at a reasonable price, on time, using their own technology – then that is what they will do. If they can solve their problem by outsourcing shoddy production to 4th tier countryside workshops and ripping off foreigners with a new company registration every 3 months, then that is what they will do.
Seize the agenda in Chinese negotiation
Your job as a negotiator and purchaser is to structure your business deals in such a way that your Chinese counter-parties are solving the problems you need solved. You do not want to be the solution to this problem: “How do I separate some fat, dumb western sheep from his cash?” Your job, as a negotiator in China is to create a situation where your Chinese counter-party solves his problems by satisfying your requirements — not by ripping you off.
The good news is that it really is possible. In spite of the bad reputation that China has among many western businesses, if there were no opportunities there than no one would go back and there would not be any horror stories. There are still plenty of great partners and valuable opportunities in China. The bad news is that it is hard and getting harder.
The good news is that the Chinese have never been more accessible — there is plenty of information available, plenty of knowledgeable consultants and potential staff, plenty of case studies to learn from. The bad news is that knowing how the Chinese operate doesn’t change them — it just shows you how you must change in order to deal with them.
Negotiate successfully in China
Success in China requires preparation, internal negotiation and new organizational approaches. You will need to work harder and dig deeper.
Here are a few ideas for making sure that your bank account and technology are not the solution to your Chinese partner’s problem:
1. Do not rely on the Chinese business you are paying to furnish you with basic business intelligence. Do your homework. It is your job to know about price levels, QC methods and regulations. If you suppliers, partners or distributors are your only source of business information, you are just a sheep being fattened for slaughter.
2. The race to the bottom is over – everybody lost. If you want the absolute rock-bottom price on everything, then you will get it. But you will also get the worst quality possible, shoddy service and dishonest, uncaring partners. Focus on value, not price.
3. Have alternatives, and let your counter-parties know it. Exclusivity in China is a goal – not a precondition. If you want to keep a supplier or partner honest in China, make it clear that you want to work with him if you can, but will work with his competitors if you must. Walk away slowly but deliberately if you must.
4. Become an HR expert. If you plan on setting up a facility in China, make HR your first priority.This is the biggest single challenge for all managers – Western and Chinese – in the PRC. Westerners should have a natural advantage here – the science of selection, training and retaining was pretty much invented in the US, and you still have a lot of advantages to offer potential hires. American bosses have a mindset that “you are lucky to have a job at all,” and manage accordingly. In China this just forces your high-potential hires into the arms of your local competition.
5. Have a goal and a plan – and revisit it often. “Making a lot of money in China” is not a plan – it is a wish. You have to walk into every meeting with a Chinese counterparty with an agenda. Negotiators in every other part of the world prepare 1) their opening demands, 2) their bottom line (or walk-away) and 3) an idea of their most likely outcome. It is second nature for buyers and sellers everywhere – but in China, Western negotiators seem to forget about planning and opt to “get the best deals possible”.