Fool me twice – a calculated risk in China?

Two Americans in town to meet with buyers asked me one of the toughest questions facing negotiators in China:  Should we try doing business with someone who has burned us before?

It’s a great question anywhere – but in China it carries a little more weight.  If you are a buyer in China you may have dealt with suppliers who have failed to deliver, under-delivered, delivered poor quality, delivered wrong things, gone around you to go direct to your customers and tried every other predatory, quick-kill sales trick in the book.  Sellers to China tell about getting stiffed on payments, and projects that never took off. 

And now you have the chance to do business with them again? 

Face facts.  Both of them.

  • You need the business.  They’re having this recession thing going on, and it’s hard to find business.  If things were booming you could work off a much more attractive short list of qualified counter-parties, but with global demand continuing to fall you are starting to kiss a few more frogs.
     
  •  The guys who have burned you once think that they can burn you again.  Chinese counter-parties are masters of running down the clock.  They know that your business is getting squeezed by the recession, and now they think that they are in an even stronger position than when you came knocking on their door last year.  Foreigners are easy to fool.  They know what works with you, and they’ll keep doing it for as long as you let them.

You’re smarter now – but so are they

You’ve got three options.  The best one may be to keep on walking.  No one gets more honest when times get tougher.  If the only thing you gained from your last China deal was the hard-won knowledge of a bad experience, then you shouldn’t be too quick to squander it. 

You may be tempted (or forced) to deal with a counter-party that has already burned you.  You’re not worried, however, because you know that you have learned from the experience and come back stronger.  But so has he.  He’s learned what works with you — and he has lots more tricks up his sleeve.   If you have to get back on a horse that threw you and then stepped on your crotch, then you are going to be a lot more cautious and prepared this time around.  Just make sure you don’t repeat the same mistakes — OR MAKE NEW ONES.  The best thing you can do is build the best deal you can and make sure you get paid up-front. 

Fresh start.  Maybe your last disastrous deal wasn’t really that malicious or evil after all.  They were naive and unsophisticated — not Machiavellian.  And maybe you were new to China business at the time, and your own inexperience gave them the advantage.  Now you’re will to start over with a clean slate — but this time the deal will have to be negotiated a lot more carefully. 

From a negotiating perspective, the only real question should be – ‘Is there a reasonable chance that I will reach my goals by doing this deal with this counter-party?’.   Now, if your reaction to that statement is, “of course they’ll burn me again the first chance they get“, then you already have your answer.  But if your answer is, “given my business environment, this counter-party is still one of my best options” then you should proceed with caution.

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