For newcomers to the China market, as well as for those with founded business romantic relationships, China’s expanding overall economy and ballooning consumer demand can exert an irresistible pull. Such conditions also create functional obstacles and competitive issues for foreign players. Today, effective strategies for leaping into China’s operating environment or when planning on taking existing ventures to the next level include stepping from the beaten path.
To become or remain competitive in China, corporations may have to enter second- or third-tier towns, build interactions with local and market players, or cultivate offers in China’s interior provinces (see Reaching China’s Next 600 Cities). These proper paths will take companies beyond the cosmopolitan comforts of Beijing and Shanghai to regions and metropolitan areas where business dealings frequently exude more traditional Chinese characteristics and follow local rhythms.
When working outside first-tier cities, where officials and local companies tend to be attuned to Western deal-making styles, corporations can reap the benefits of honing their Chinese-style negotiation skills, of their degree of experience in China irrespective. Negotiation is a continuous for multinational corporations employed in China, whether for acquiring new business, managing ongoing ventures, or coping with the rapidly changing business environment.
The capability to negotiate well, Chinese-style, takes its strong competitive benefit. The Chinese phrase for negotiation-tan pan-combines the characters meaning “to go over” and “to guage.” From a Chinese perspective, negotiation is available mainly as a mechanism for building trust so that two celebrations can work collectively for the advantage of both.
Trust is built through dialogue that let us each party judge or evaluate the partner and the partner’s capabilities and assess each other’s comparative status. The negotiation process also enables parties to reach an understanding on a specific issue, condition, or transaction, in a way that lets each part believes that “a good deal” was brokered.
But the concept of negotiation depends on creating a platform for long-term assistance and problem-solving a lot more than on drafting a one-time contract. As such, negotiation in China is viewed as an ongoing, dynamic process that considers practical matters and context. Many Chinese prefer this process over creating contract-based absolutes, which many Chinese perceive as the primary reason for Western-style negotiations. Significant variations in negotiation style and culture can be accompanied by mutually unfavorable perceptions. Americans could see Chinese negotiators as inefficient, vague, and perhaps even dishonest, while Chinese perceive American negotiators as impersonal, impulsive, and overly centered on immediate gains.
- The Mermaid
- Use of alternative party contracts/contract terms vs. in-house agreements
- What is Compatibility Testing
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When adapting to Chinese-style negotiations, task-based, time-conscious foreign partners must balance the need for quick negotiation on specific issues and agreement conditions with the slower-paced and seemingly abstract building of social relationships. Competing effectively within a Chinese negotiation construction means understanding and accommodating the Chinese-style strategy to be able to build a tactical plan that works on a local level. The aim of strategic preparation for negotiations is to get insight into the negotiating partner’s situation, intent, and capabilities, and to identify regions of focus for conversations.
This takes time and effort, but comprehensive preparation can help an organization decide the best way to approach the desk, increasing the likelihood of a successful negotiation and sustainable business agreement. Understanding the circumstances and environment where business occurs is critical. Because the business context in China can differ from what Western executives are used to or expect, trading resources in broad-ranging due diligence is money well spent often. Chinese partners generally expect foreign parties to learn and work within the neighborhood context, making ready usage of local information and insights an important precursor to seated at the negotiation table.
Local staff, local contacts, and external advisors can provide pre-negotiation guidance by knowing what questions to ask prior to and during the negotiation. They may interpret and evaluate the answers received also, in the context of the local business environment. A foreign partner that is knowledgeable about the local situation and circumstances is more credible in the eyes of the Chinese partner and can build trust. For an example of the importance of context, Western companies often underestimate the degree to which government and business are linked in China.