Negotiating Starts at the Front Door

Related entries: Business Issues, General, Strategy

Negotiating can be tough, especially when it is done in different languages, in a strange (often very cold or very hot) place, with a room full of (mainly irrelevant) people, on a tight (often self-imposed) schedule. That is the situation in which many foreign businesspeople find themselves in China, and it can be uncomfortable.
Luckily there is plenty of good advice on how to deal with a China negotiation successfully. Diligence China has a number of suggestions, including a couple which are summarized here:

    • Negotiate with multiple partners: It will take a long time anyway, and it is a sensible approach.
    • Don’t lose control of your schedule: Or lose sight of the big picture.

Very true. It is amazing how many people set themselves up for failure in China by jumping on the first train that comes along, and by telling their counterparts that they “need a deal by next Tuesday”. Talk about painting your self into a corner! Especially given (as I read on the CIO China Weblog) that “Western people use money to gain time; Chinese people use time to gain money.”

China Law Blog also did a nice piece on negotiation a while ago, based on an article from Harvard Business School. The full article is here, and the book, “Doing Business in China” (which also contains this article), can be found here.

Key lessons include the importance of understanding local culture, values and etiquette – while keeping an eye on the broader context. Eight (lucky?) elements that are worth reading up about (and bearing in mind when negotiating) are:

    1. Guanxi (Personal Connections)
    2. Zhongjian Ren (The Intermediary)
    3. Shehui Dengji (Social Status)
    4. Renji Hexie (Interpersonal Harmony)
    5. Zhengti Guannian (Holistic Thinking)
    6. Jiejian (Thrift)
    7. Mianzi (“Face” or Social Capital)
    8. Chiku Nailao (Endurance, Relentlessness, or Eating Bitterness and Enduring Labor)

Being well informed about the cultural background is important, and can provide real benefits. In “One Billion Customers” (see here) James McGregor notes a fine example; that of US Trade Representative Charlene Barshefsky. Barshefky, when negotiating for a clampdown on IPR abuses (such as pirated CDs) in China, turned down an opportunity to meet with then President, Jiang Zemin (the holy grail of meetings for many). Her reasoning?:

    “Her crafty refusal [to meet Jiang] put even more pressure on Chinese negotiators. She told Chinese officials that she didn’t want to embarrass Jiang. If she met with him and then went on to impose sanctions on Chinese textiles, Jiang would lose face. Shortly after she spurned Jiang’s invitation, the CD factories were closed.”

Of course, not everyone can have a case-study negotiation, but preparation can certainly help. That is why it is also important to know about the firm and people you are negotiating with. One of my clients was about to enter into negotiations with a Chinese automotive supplier, and had us do some analysis of the company. We found that they were suffering from very high inventory levels, and that their business plan relied on rapidly increasing their export markets. As a result, we were well-positioned to negotiate a good deal for the client.

But, as an old China hand once pointed out to me, the positioning for negotiations often starts well before you might think. So, the next time you approach a door with your Chinese counterpart, and he or she motions politely for you to go ahead, instead of moving forward, return the gesture. See how long it takes for either of you to give way…the negotiations have begun!

As the Scouts say, “be prepared”. And start early.

4 Responses to “Negotiating Starts at the Front Door”

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