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ChinaBusinessReviewNegotiations,ChineseStylePrint

ChinaBusinessReviewhttp://www.chinabusinessreview.com

Negotiations,ChineseStyle
November1,2010@8:50pmInBusinessEtiquette

Strategicpreparationandculturalawarenesscansharpenthecompetitiveedgeforcompanies
negotiatinginChina.byBetsyNeidelTheglobaleconomicslowdownanddebtcrisesinthe
Westernhemispherehavespurredmanycorporationstolookeastfornewbusiness
opportunities.FornewcomerstotheChinamarket,aswellasforthosewithestablished
businessrelationships,Chinasexpandingeconomyandballooningconsumerdemandcanexert
anirresistiblepull.Suchconditionsalsocreateoperationalobstaclesandcompetitivechallenges
forforeignplayers.
Today,effectivestrategiesforleapingintoChinasoperatingenvironmentorfortakingexisting
venturestothenextlevelincludesteppingoffthebeatenpath.Tobecomeorremain
competitiveinChina,corporationsmayhavetoentersecondorthirdtiercities,build
relationshipswithregionalandnicheplayers,orcultivatedealsinChinasinteriorprovinces(see
ReachingChinasNext600Cities).Thesestrategicpathswilltakecompaniesbeyondthe
cosmopolitancomfortsofBeijingandShanghaitoregionsandcitieswherebusinessdealings
frequentlyexudemoretraditionalChinesecharacteristicsandfollowlocalrhythms.
Whenworkingoutsidefirsttiercities,whereofficialsandlocalcompaniestendtobemore
attunedtoWesterndealmakingstyles,corporationscanbenefitfromhoningtheirChinese
stylenegotiationskills,regardlessoftheirlevelofexperienceinChina.Negotiationisaconstant
formultinationalcorporationsworkinginChina,whetherforacquiringnewbusiness,managing
ongoingventures,orcopingwiththerapidlychangingbusinessenvironment.Theabilityto
negotiatewell,Chinesestyle,constitutesastrongcompetitiveadvantage.

TheChineseviewofnegotiations
TheChinesewordfornegotiationtanpancombinesthecharactersmeaningtodiscussand
tojudge.FromaChineseperspective,negotiationexistsprimarilyasamechanismfor
buildingtrustsothattwopartiescanworktogetherforthebenefitofboth.Trustisbuilt
throughdialoguethatletseachpartyjudgeorevaluatethepartnerandthepartners
capabilitiesandassesseachothersrelativestatus.Thenegotiationprocessalsoenablesparties
toreachanunderstandingonaspecificissue,condition,ortransaction,inawaythatletseach
sidefeelthatagooddealwasbrokered.Buttheconceptofnegotiationhingesoncreatinga
frameworkforlongtermcooperationandproblemsolvingmuchmorethanondraftingaone
timeagreement.
Assuch,negotiationinChinaisviewedasanongoing,dynamicprocessthattakesintoaccount
practicalmattersandcontext.ManyChinesepreferthisapproachovercreatingcontractbased
absolutes,whichmanyChineseperceiveastheprimarypurposeofWesternstylenegotiations.
Significantdifferencesinnegotiationstyleandculturecanbeaccompaniedbymutually
unfavorableperceptions.AmericansmayseeChinesenegotiatorsasinefficient,vague,and
perhapsevendishonest,whileChineseperceiveAmericannegotiatorsasimpersonal,impulsive,
andoverlyfocusedonimmediategains.
WhenadaptingtoChinesestylenegotiations,taskbased,timeconsciousforeignpartnersmust
balancetheneedforquicksettlementonspecificissuesandcontracttermswiththeslower
pacedandseeminglyabstractbuildingofinterpersonalrelationships.Competingeffectively
withinaChinesenegotiationframeworkmeansunderstandingandaccommodatingthe
Chinesestyleapproachinordertocraftastrategicplanthatworksonalocallevel.

Takethetimetoprepare
Theobjectiveofstrategicpreparationfornegotiationsistogaininsightintothenegotiating
partnerssituation,intent,andcapabilities,andtoidentifyareasoffocusfordiscussions.This
takestimeandeffort,butthoroughpreparationwillhelpacompanydecidethebestwayto
approachthetable,increasingthelikelihoodofasuccessfulnegotiationandsustainable
businessarrangement.Therearefivemainsuccessfactorstoconsider:
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Knowthecontextofthedeal
Understandingthecircumstancesandenvironmentinwhichbusinesstakesplaceiscritical.
BecausethebusinesscontextinChinacandifferfromwhatWesternexecutivesareusedtoor
expect,investingresourcesinbroadrangingduediligenceisoftenmoneywellspent.
Chinesepartnersgenerallyexpectforeignpartiestoknowandworkwithinthelocalcontext,
makingreadyaccesstolocalinformationandinsightsanimportantprecursortosittingdownat
thenegotiationtable.Localstaff,localcontacts,andexternaladvisorscanprovidepre
negotiationguidancebyknowingwhatquestionstoaskpriortoandduringthenegotiation.
Theymayalsointerpretandevaluatetheanswersreceived,inthecontextofthelocalbusiness
environment.Aforeignpartnerthatisknowledgeableaboutthelocalsituationand
circumstancesismorecredibleintheeyesoftheChinesepartnerandwillbuildtrust.
Asanexampleoftheimportanceofcontext,Westerncorporationsoftenunderestimatethe
degreetowhichgovernmentandbusinessarelinkedinChina.LackofclarityonChinese
industrialpolicy,governmentregulations,andrelevantgovernmentandbusinessstakeholders
atthenational,provincial,andlocallevelscanleadtothewrongstrategicapproachto
discussions.If,forexample,foreigncorporateobjectivesconflictwithlocaldirectives,effortsto
findagreementwiththeChinesepartnermaysloworstallwithouttheforeigncompany
understandingwhy.Withadequateknowledgeofthebusinesscontext,companiescanposition
themselvestoachievethebestpossibleoutcome.
Knowyourpartner
ForeigncompaniesmustbecomefamiliarwithprospectiveChinesepartnersonthe
interpersonalandorganizationallevels,verifyingcredibilitybylookingatpasttrackrecordsand
understandingtheChinesepartnersobjectivesforenteringintoabusinessrelationship.Too
oftenpartnersarechosenbasedonEnglishlanguagecapabilityaloneoratarandommeeting,
ratherthanthroughastrategicscreeningprocess.Havingareputablelocalpartnerandbeing
closelyalignedonmutualgoalsaretwoprerequisitesforsuccessfulnegotiationsandalasting
businesspartnership.
LackoforganizationaltransparencyinChinamakesitcriticalforcompaniestospendtime
upfrontunderstandingtheircounterpartsespeciallyinareassuchasownershipstructure,
revenuesources,andfundingofcapitalassetsandoperations.Companiesshouldtaketimeto
confirmwhetherthereisabasisforsustainablebusinessbeforeinvestingindiscussions.
Inonecase,partnersconcludedanagreementforthepurchaseofaproductthatrequired
exportlicenses.Theforeignpartnerenteredintoapurchaseagreementonlytodiscoverlater
thattheChineseentitydidnothaveandwasnotauthorizedtoobtainthenecessaryexport
licenses.Deeperinvestigationintoapartnerscapabilitiescanreducetheriskofconcludinga
dealthatmustbecompletelyrenegotiatedandrestructuredlater.
Knowyourself
Paralleltoknowingonespartnerisknowingoneself.Onanindividuallevel,selfawareness
allowsonetoknowhowtobestpreparefornegotiatinginChina(seeUpCloseandPersonal).
Onacorporatelevel,clarityabouthighlevelobjectives,resourcecommitment,andmanagerial
supportforbusinessinChinadrivesinternalprenegotiationpositioning.This,inturn,helpsthe
companyprepareopeningstatementsaboutitsbackground,commitment,trackrecord,and
valuetoChinesepartnersthebigpicturestorythatisstandardintheopeningphaseof
Chinesestylenegotiations.Theeffectivenessofthisapproachrequiresknowinghowtoposition
theforeigncompanyspitchinthelocalChinesebusinesscontext.
Asanexampleofwhatnottodo,aforeignexecutivenewtonegotiationinChinawas
discussingabusinessventurewithhiscompanyslongtimeChinapartners.Whenaskedhowa
recentUScourtrulinghadaffectedcorporaterelationswithadomesticregulatoryagency,the
foreignexecutivebrusheditoffasbeingunimportanttothebusinessathand.Butbyappearing
eithernottoknowaboutbigpictureissuesthataffectedhisownorganization,orbeing
unwillingtoshareknowledgewithtrustedpartners,thenewexecutivelostcredibility.This
resultedinlessopennessandtrustfromtheChineseside,andbusinessvolumewasmuch
lowerthantheWesterncompanyoriginallyexpected.
Putrelativestrengthsandweaknessesincontext
AfteracompanygetstoknowsitselfanditsChinesecounterpart,itmustevaluatetherelative
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strengthsandweaknessesofeachsidewithinthebusinesscontexttopreparethenegotiation
strategy.Thecompanyalsomustunderstanditsstrengthsandweaknessescomparedto
potentialcompetitorsintermsofbothpriceandnonmonetaryvalue.
Forexample,theChinesepartnerislikelytorankpotentialpartnersagainstothersandisoften
quiteopenaboutthisduringnegotiations.ItisnotuncommonforaChinesepartnertosay
thatithasreceivedmuchmorefavorablepricingfromtheforeigncompanysdirectcompetitor.
Tominimizethefocusanddiscussiononprice,bepreparedtohighlightproductvaluesand
companycomparisoninareaslikebrandrecognition,quality,service,andoverallperceptionin
China.
Companiesthattakethetimetothoroughlyanalyzeexternalandinternalstrengthsand
challengesinthelocalcontextarebetterequippedtoparticipateinChinesestylenegotiations.
BeingunawareofhowthecompanyranksintheeyesofaChinesepartneryieldsadistinct
disadvantageduringnegotiationsandpossiblelossofcompetitivepositioning.
Striveforoperationalreadiness
Operationalreadinessmeansaligninginternalorganizationalresourcestoworkmosteffectively
inChinesestylenegotiations.Mostimportantisthecreationofahighlydisciplined,cohesive
negotiationteamthatfollowsaunifiedcommunicationplan.Thisdiffersfromtypical,unscripted
Westernstylenegotiations,whereeachteammemberhasanindividualvoiceintheprocess
andisencouragedtouseit.
Intheunifiedteamapproachthereisgenerallyonedesignatedspeaker.Ifotherteam
membersspeak,itshouldbefromtheplanorscript,showingcorporateconsensus.Eveninside
talks,teammembersshouldneveropenlydisagree,questioneachother,orairunresolved
internalissuesinfrontoftheChinesepartners.InChinesestylenegotiations,sayinglessis
alwaysbetterthansayingtoomuch.
Aunifiedteamalsodesignatesindividualdutiesforeachteammembertheseofteninclude
thatofnotetaker,translator,culturalinterpreter,andintermediary.Functionsmayoverlapbut
allaretypicalandexpectedinChinesestylenegotiations.Forexample,thenotetakerservesan
importantrolebecausetheChinesepartnermayreferbacktostatementsorconcessionsmade
inthepast.Withoutaccuratedocumentation,itwillbedifficulttocontestspecificstatements
suchas,DuringhisvisitlastMarch,yourNewYorkvicepresidentassuredusthatyouwould
provide.
Similarly,foreigncompaniesshouldusetheirownChinesetranslatorevenifanofficial
interpreterhasbeenprovided.Muchcanbelostintranslationwithoutaccesstothefullbreadth
ofdiscussionsinbothlanguages,andmanyinsightscanbegleanedfromtheothersides
internaldiscussions.Showingawillingnesstousebothlanguagesisalsoviewedasasignof
goodwill.
Separatefromverbalinterpretation(thoughsometimesdonebythesameperson),acultural
interpreterprovidesinsightintononverbaldevelopments,culturalfactors,andoutside
influencesthattheforeignpartymaynotbeawareof.Thebigpictureandhighlycontextual
natureofChinesestylenegotiationsmeanthatWesternnegotiatorsareusuallyata
disadvantageiftheylackthiscapabilityduringoperationalreadinessplanning.Forexample,a
culturalinterpretercantellaforeignnegotiatorwhethertheChinesepartnerisconstrained
fromgivingconcessionsbyhisenvironmentorbymanagementandwhatispossibletopush
forinthenegotiations.
Finally,companiesshouldnotneglecttheroleofintermediarywithintheteam.TheChinese
proclivityforavoidingdirectconfrontationandpersonalembarrassmentnecessitateshaving
someonewhocanspeakinformallytotheChineseteam:toaskforclarification,exchange
ideas,influenceattitudes,andotherwiseworkbehindthescenes.Oftenthemostpivotal
informationforadvancingnegotiationsisconveyedoverdinnerorinsmalltalkinthehallway.
Buildingtheroleoftrustedintermediaryaspartoftheteamprovidesaconduitfortheall
importantinformaldiscussionandispartofChinesestyleoperationalreadiness.

Negotiationsareneverover
AllsituationsinvolvingtwoormoreentitiesinChinarequiresomeformofnegotiation,ranging
frominformal,friendlydiscussionswithalongtermpartnertoformalbilateraltalks.Chinese
stylenegotiationistheprocessofbuildingandtendingrelationshipstoproducebenefitsfor
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bothsides.Itisaprocessthatdoesnotendunlesstherelationshipissevered.Thisapproachto
negotiationisrootedinChinesecultural,historical,andpracticalconsiderationsandexists
throughoutmodernChina.Italsodiffersgreatlyfromtheviewthatthenegotiationendswhen
thecontractissigned.FromtheChineseperspective,thecontractsigningindicatestheformal
beginningofthepartnershipandwithit,thecommitmenttotheongoingnegotiation.Inthis
context,successfulforeigncompaniescommitadequatetimeandresourcestounderstanding
andtendinglocalChinarelationshipsforthelongrun.

UpCloseandPersonal
WhennegotiatinginChina,whattypesofqualitiesaremostlikelytoresonate?Thoughitisby
nomeansexhaustive,thislistprovidessomeperspectiveonthetypesofstrengthsandabilities
thatwouldbenefitmembersoftheforeignnegotiatingteam.Theforeignteamshould
Beabletoseethebigpicture
ConveyclarityaboutthecompanyspurposeandobjectivesinChina
Listen
Bepatientandpersistent
Controlemotions,expectations,andego
HaveathoroughknowledgeofChineseculture
Makeacommitmenttounderstandandobserveprotocol
Haveagoodmemoryandpayattentiontodetailand
Berespectful,trustworthy,andsincere.
BetsyNeidel
AboutTheAuthor
BetsyNeidel(neidel@blueheron8.com[1] )isthefounderandmanagingdirectorofBlueHeron
Holdings,LLC,aTexasbasedadvisoryfirmspecializinginUSChinabusinessstrategyand
interculturaleffectiveness.

ArticleprintedfromChinaBusinessReview:http://www.chinabusinessreview.com
URLtoarticle:http://www.chinabusinessreview.com/negotiationschinesestyle/
URLsinthispost:
[1]neidel@blueheron8.com:mailto:neidel@blueheron8.com

Copyright2013ChinaBusinessReview.Allrightsreserved.

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