GENERAL STRATEGIES AND 16 PRACTICAL TIPS IN THE THREE STAGES OF BEFORE-DURING-AFTER NEGOTIATION IN CHINA
by Vincent F. Yip, PhD MBA, Management Consultant, and Lecturer, Stanford Continuing Studies ( Palo Alto, California)
Note from Foreign Entrepreneurs in China: I´m planning to share this very good article in some social media forums so this is a compilation of part I & II that you have probably read in my previous two posts)
For companies in Fortune 500 or even Small and Medium Enterprises, entry into the lucrative China market is a highly desired process that begins with identifying potential Chinese partners and entering into all-important negotiation. Other than generalities such as maintaining “guanxi” and “face”, any western team intending to go into China for business and commercial negotiations should have as many practical tips on the “dos and don’ts” of negotiating in China. I shall be teaching the Stanford Continuing Studies course “Doing Business in China” we will spend half a session on this important issue of negotiation during the six-week duration. This course begins in late June and the description of the course is in this link:
Based on this author’s 30 years of experience travelling, living and working inside China, here is a list, not exhaustive by any means, for use in the three stages of before, during, and after the actual negotiations.
1. Pick a neutral large city & location;
Background Fact: Do not give into pressure to conduct all negotiations in the small city of the Chinese partner, and suggest doing it in a larger international city with modern conveniences and security. There have been cases where the Chinese side can and has resorted to unethical practices to illegally obtain information from you.
2. Do background research on subject and personalities using Chinese sources;
Background Fact: China has no Moody’s, Better Business Bureau or any trustworthy rating agencies on the track record of a company. Best you find several other local Chinese sources to cross check the reputation of your Chinese partner or opponent in negotiation.
3. Pick your own team (age, seniority, sex, attire) carefully. Be consistent from meeting to meeting;
Background Fact: The Chinese prefer to maintain personal relationship from beginning to end, so keep the team intact. Also, youth and women among your team are not frowned upon in today’s China, but make sure your top leader has a title (make up one if needed) that commands respect from their side.
4. Be realistic about your strengths and weaknesses;
5. Bring gifts for your host, bring your own personal effects/medicine;
Background Fact: Most Chinese cities are quite modern and medical facilities are effective and reasonable, but not all your western medicine is readily available.
(B) ACTUAL NEGOTIATIONS:
6. Pick a neutral venue and a convenient time avoiding the eve of long national holidays of both countries, and allow “float” for overflow of schedule or the Chinese may use time pressure against you;
Background Fact: They tend to wait till the last day to raise critical issues and demands, and force you into making concessions because you are pressured to leave.
7. Stay at an international hotel, watch your belongings and intellectual property;
8. Know the wants and needs of your Chinese side, remember Sun Zi’s premier advice of “know yourself and know your enemy, and you will win a hundred battles”.
9. Do not fall prey to food, wine, & women; do not negotiate when tired or pressed;
10. Speak in your native tongue, use your own translator, write it down when it comes to numerals and figures as mistakes are commonly made right here;
Background Fact: Best to hire your own translator/interpreter and when it comes to numerals and magnitudes, insist on writing them down. Because of the difficulty in translating numbers/magnitudes, gross errors can occur even to the best VIP translators and the consequences are horrific of course!
11. Remember such Chinese negotiation tactics as:
- accusing you of violating guiding principles, guilt trip;
- asking for the moon, outrageous demands;
- threatening to go elsewhere for the better offer;
- divide and conquer & outlasting your patience;
12. Remember national and cultural sensitivities, avoid discussions on human rights and Tibet, for example, and always keep face and give face. Jokes seldom work across culture so best not to crack them openly.
(C) POST NEGOTIATION
13. Thank and praise host, take photographs, exchange souvenirs;
14. Redraft final agreement (must be in both languages), check for accuracy, go over details, and always have a scribe/secretary take care of all documents;
Background Fact: Remember that Chinese is a much more flexible and opaque language, but yet the Chinese copy is the one that prevail in their courts. Make sure then those details you had written down in the English version is correctly reflected in the Chinese version, and submit Appendices if needed.
15. Win or lose, happy or not, a farewell banquet (speeches, toasts and gifts exchanged) is definitely required;
16. A contract is valid only if it continues to be serviced, it is only the beginning of a difficult long road towards a successful project.
Many often ask if it is useful to study Mandarin and the Chinese language before going and my answer is normally to persuade them to instead spend their valuable time reading up on China’s history, culture and psyche. One of the most successful China experts is Dr. Kissinger, the legendary diplomat who helped open up US-China relationship in 1972, and he is not known to speak any Chinese. It is much more important to understand what drives the Chinese, their fears, concerns, and wants and needs, and China’s own “pride and prejudice”.
In general, some knowledge of Confucius teachings that are the underpinning of Chinese culture is certainly useful before hopping on the plane to China. But I would definitely recommend spending a week or two to browse through articles and business/military books on the famous Sun Zi “The Art of War”, as many of its strategies and tactics will surface during the long course of negotiations with the Chinese side.
Here is a parting comment that may surprise you. In the west, wars and military efforts are about display of bravery and valor, but Sun Zi said a successful militarist is never short of treachery and cunningness! Then there is also the Chinese saying that “the business field is just like a battle field”, now combine the two saying and you know why negotiation in China is not for the faint-hearted and unprepared!
By Vincent F. Yip, PhD MBA
and Lecturer, Stanford Continuing Studies
Palo Alto, California
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