Successful negotiation in China means knowing when to walk away.
Doing business in China is tough, but it’s definitely a realistic goal. But one interesting aspect of negotiating in China is understanding how your Chinese host understands ‘time’ much differently than you do. Remember one of our favorite bed-time sayings, “If a deal has to die, then sooner is better than later”. Sometimes westerners hang through more rounds of negotiation with Chinese partners or buyers only because they don’t have any alternative counter-party.
If your deal is in trouble, your first step is to assess the chances for survival. Most negotiations do not result in a successful deal. There are infinite numbers of reasons for this, but there five general categories of “deal-killers” that you need to be aware of. If one or more of these scenarios applies to your situation, then you should be aware that the chances of success are very low. Remember – if a deal is going to die, then sooner is better than later.
The five deal-killers:
1) Lack of trust.
Do you distrust them? Do they distrust you? Are negotiations based on overblown or unrealistic claims? Does one of the parties involved think the other is trying to rob them or take advantage? Does one of the parties fear that the deal will result in poor value or unequal profit potential? There is a chance that this situation will improve over time – but it is not very likely. Good managers simply do not sign contracts with people they distrust.
2) Different goals or unclear goals
Your meetings are always relaxed and seem productive, but nothing ever really seems to happen. You could be supplying free market research or helping someone look busy. One thing is for sure — you aren’t getting rich as a result. It’s ok to ask the other side what they want, but it’s not ok for them not to know. If you don’t know the other side’s goal, then you aren’t going to be able to reach a profitable arrangement. If you have different perceptions of value or if your original business objective no longer makes sense, then you have to re-evaluate the benefit of continuing the negotiation.
Oh, by the way. If you don’t feel comfortable asking the other side what they wan out of this deal, then you should not be involved in the negotiation.
3) Different levels of commitment
Are they just using the “negotiations” as pretence to get information or free market research? Inappropriate levels of authority.
Important decisions keep getting deferred
Do you know your own price? Who will name a price first?
4) Lack of resources
There just isn’t enough time, money, or manpower to do all the deals we want to do. It doesn’t matter how big or wealthy your negotiating partner’s company is – if they can’t get the approval for this deal, then they don’t have the resources. Don’t waste time – and don’t waste the other side’s time. Be honest and straightforward, and tell them that you will have to pass on this deal.
5) A Deal-killing Point / Unsolvable impasse
Sometimes “No” really does mean no. If the two sides can’t agree on a major point, then you will have to drop the negotiations. Price, schedule, and control issues are good examples of deal-killing points. This may sound simple enough, but it is very common for inexperienced negotiators to defer or delay these points until the bitter end of a negotiation. If you want the General Manager to be a local Chinese and your partner wants an ex-pat from Germany, then there is really not much point in worrying about the location of the new factory – you obviously have a major problem. Fix it, or move on to another deal.