Is there a link between long-term planning horizon and strong business relationships?

Does taking a long-term view lead to developing stronger relationships?  Is there a link between long term business planning and strong relationships?  Are relationships less important for counter-parties who think that they are negotiating a one-off deal?  Can you be in business long term, yet still have a series of one-off deals with a wide range of different counter-parties?

US negotiators in China tend to see long planning horizons and a broad network of strong relationships as being closely linked.  How can a business survive in a market or industry for the long-term if it doesn’t have strong relationships with its customers, suppliers and partners?  Likewise, strong relationships will lead to long-term business arrangements.  A good client or customer is one that continues to do business and expand the relationship.  Transparency and access between the two businesses will also increase.  The seller develops a strong brand and good reputation, and the buyer receives better service and preferential treatment.    

Because Chinese counter-parties tend to emphasize the importance of ‘guanxi’ and relationship, many Western negotiators confuse cordial relations with a long-term planning horizon.  Westerner’s are often bewildered and frustrated by Chinese negotiating counter-parties who talk about the need to build strong relations but then behave in a manner that undermines the chances of doing follow-up deals.  Chinese negotiators, it seems, tend to talk long term but walk short term.

The root of the misunderstanding is the different function that relationships play in the two societies.

Western executives tend to build their relationships on successful transactions.  If I do business with Bob at XYZ Corp and it is successful, I’ll go back to Bob and continue to do more deals.  The relationship is a direct result of transactions. 

Chinese negotiators take the opposite approach.  They don’t feel comfortable doing business – no matter how small the initial test order may be – until they have spent time with the counter-party. The relationship drives the transaction.  

That means that a Chinese negotiator wants to invest time and energy to build a personal relationship with you – even if he only plans on engaging in a one-time deal with you.  This seems inefficient to westerners – but you have to remember that most Chinese business still operates without credit checks or recourse for non-performance.  The only way to be sure of success is to be sure of the counter-party.

Western dealmakers in China have to stop assuming that their Chinese negotiating counter-party wants to get married and settle down.  Just because they talk about being in the business for the long-term doesn’t necessarily mean that they expect to be doing business with YOU for a long time.   Make this an explicit discussion, and not a vague assumption.  It’s important that you understand how long they plan on doing business with you – and what they consider to be the criteria for continued transactions.  You may be surprised to find that the Chinese negotiator had not even considered completing more than one transaction with you.  If you handle the negotiation correctly, you may be able to secure more business than the Chinese side had originally planned on offering.  And if not, then at least you know that you’ll have to search out a new Chinese partner as soon as this transaction is finished.  

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Please help with a research project by taking a brief, simple & anonymous survey about US-Mainland negotiation. 

 

Click here to open online survey:

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My name is Andrew Hupert, and I’m a teacher and writer in Shanghai. I am now working on a project for my International Negotiation class at New York University’s Shanghai campus (in cooperation with East China Normal University). 

 

Thanks very much for your cooperation in my research. I would be happy to share raw data with any participants who wish to see it, and will publish my findings on ChinaSolved.com , ChineseNegotiation.com and DiligenceChina.com .

 

Click here to take online survey:

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