by Andrew Hupert
Western negotiators in China are more successful when they fully grasp the difference between tactics and strategy – and understand how to develop and implement them in their new business environment. Unfortunately, many foreign negotiators and managers in China spend so much time thrashing out tactical details and trying to clear operational bottlenecks that thought of constructing a practical, coherent China strategy is a fantasy. Chinese counter-parties benefit from the Westerners perma-fluster, and happily add fuel to the fire in the form of new crises, obstacles, and opportunities. Western managers complain of starting hundreds of projects but completing few and accomplishing even less.
Strategy and Tactics have fuzzy meanings, and no two managers seem to agree on when one begins and the other ends. For our purposes, let’s assume that:
1) Strategy and Tactics are not one and the same.
2) Strategy is tied to goal-setting and long-term planning. Firms develop strategies to determine what their business will be doing in the future.
3) Tactics are methods for achieving strategic goals. Managers and individuals employ tactics to execute and implement plans in the short term.
4) Strategies are high-level corporate functions, usually decided on at the Board and C-Level.
5) Tactics are managerial decisions, usually decided on at the middle and front line levels.
Strategy must be set before you start negotiating with Chinese counter-parties, and it must involve all of your internal stakeholders. Tactics are the methods and operations you use to execute those strategies. While this sounds simple and familiar enough to seasoned senior managers and recent MBA grads alike, it is actually quite difficult to apply these rules to Chinese negotiations and joint ventures. Cultural differences, short term planning horizons and conflicting agendas often result in western strategies getting trampled underfoot moments after an American or European negotiator arrives in Europe.
There are two reasons why Western negotiators suffer chronic strategic drift when managing or forming partnerships in China – You and Them. Western managers and their Chinese counterparts do not share the same conceptual framework on strategy and tactics, so instead of spending valuable time and energy pontificating about such theoretical, top-down issues, we prefer to dive right in and start hashing out concrete operational details – like price, delivery dates, and payment terms. While this approach is great for short-term agreements, it leads to longer term conflict and mistrust. As any experienced China negotiator will tell you, that’s precisely the pattern that undermines partnerships and agreements between Chinese and Western counter-parties.
Western Approaches to China Strategy
Western strategic approaches to Chinese business usually fall into one of two dangerous extremes. Some companies don’t bother to change their international SOP (standard operating procedure) and rely on local managers and consultants to smooth out the differences. eBay, Best Buy, and Home Depot were criticized for this problem – though there are countless others. The problem is that if locals are successful in making adjustments, then the Chinese business won’t resemble the global parent. If the China operation sticks too close to the international template, then it is irrelevant in China.
On the other hand, if Western companies try to change their model too much to accommodate local tastes and customs, then they lose their international cache and may come across as inauthentic. While YUM’s KFC chain has avoided this trap, its attempts to localize Pizza Hut and Taco Bell (brief though it was) didn’t fare as well. As the consumer market in China takes center stage, branding strategy will become even more crucial for international firms.
Chinese Approaches to Strategy
Chinese managers simply don’t see strategy and tactics as distinct from one another. Westerners are often confused by Chinese negotiators’ use of time. Chinese managers have a reputation for long term decision-making and meticulous planning – yet seem to react opportunistically and impetuously to proposals.
While every Chinese negotiator may have his own unique approach to deal-making and partnering with international counter-parties, it is important to clarify one thing: Just because a Chinese negotiator has a long term plan, that doesn’t necessarily mean he plans on doing business with you forever.
Chinese base their long-term strategies on relationships and relative power-balances. If they’ve just met you and the relationship-building isn’t going particularly well, then they are going to treat you as a short-term tactical player and not an integral part of their long term strategy. That may change over time – but it may not.
Chinese negotiators have no interest in sharing their long term plans with an unknown newcomer, and a tried & true tactic for dealing with potential competitors is to foil their strategy with distractions, misdirection and delays.