Western negotiators in China tend to walk into two traps that they set for themselves. They are both caused by a limited perspective – your own – when trying to anticipate the goals of counter-party.
Western negotiators in China should be very careful if they hear themselves or a member of their team say some variant of the following:
1) They’ll have to do XYZ because if they don’t the whole deal will fall apart and we’ll both suffer. It’ll be the END OF THE WORLD.
2) These people (whom I barely know and can never seem to understand) will obviously choose Option A. They would be crazy not to.
It’ll be the end of the world. This tactic is sometimes called ‘Armageddon’ in negotiating books. The idea is that the alternative to making a deal is so unthinkably disastrous that no one in his or her right mind will possible consider doing anything else. The problem here is that you and your Chinese counter-party don’t necessarily see things the same way – particularly when it comes to viewing your company’s health and well-being. Yes, it would be unfortunate if your company goes out of business or if you have to re-neg on your downstream contracts because you can’t get an order filled. But it’s not the end of the world for everyone – just for you. Unfortunately, you may seem much the same situation when negotiating over the fate of an up-and-running JV that you have already sunk a lot of capital into. If it fails, you are certainly out of the China business for good. End of the world. But what about your counter-party? He may not be much worse off at all – particularly if he has been anticipating this moment since the initial meeting. You’ve got to separate your BATNA (best alternative to no agreement) from his BATNA. If you were contributing capital and know-how to a partnership, your BATNA has been falling since the deal was signed and your partner’s has been rising. You’ve got to build an agreement that will preserve the equilibrium structure of the agreement.
They would be crazy not to… Famous last words – particularly when used to describe service contracts, due diligence procedures, regulatory approvals and just about any other non-price variable in a Sino-Western negotiation. Negotiations may get handed down across many levels of organizational responsibility in China. There is a very good chance that the last guy you speak with has been given a target figure – and nothing else to go on. He doesn’t care about quality, warranties, service contracts, long term relationships, function or anything else but his target figure. I’ve seen many good deals go very bad in the last stages because counter-parties were miles apart on the values they assigned to non-price factors.
Please help with a quick, simple, anonymous survey:
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.