Do Americans have too narrow a deal-universe in China?

I have been going over the results of a small study I’ve been running on the topic of negotiating behavior between Mainland Chinese and non-Mainlanders in China.   The focus was on the attitudes of negotiators towards Mainland Chinese counter-parties. A full analysis of the results is underway, and will be available shortly.  (Yes, it’s taking a little longer than expected.  Sorry.)

 

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One finding that warrants separate discussion (and further analysis) is that Americans seem to have the smallest universe of Mainland counter-parties of any group studied.  American dealmakers tend to ignore State Owned Enterprises and multinational corporations to focus almost exclusively on privately held Chinese enterprises.   Furthermore, American negotiators have the narrowest focus when it comes to the age of their counter-parties – concentrating almost exclusively on relatively mature (40s & 50s) age groups.   It may come as no surprise that Americans are the least likely of any group to describe their own style as “collaborative” and are most likely to view their Mainland counter-party as “competitive”.  

 

The groups:

The online survey asked participants to self-select their demographic group as a single choice of:

  • North American
  • European
  • Mainland Chinese
  • Overseas Chinese
  • Greater Chinese (HK, Taiwan, Singapore)
  • Asian (non-Chinese)
  • Other

Overseas Chinese, Greater Chinese and Asian were aggregated into a single group – OCA (Overseas Chinese & Asian), and Other was, regrettably, discarded due to lack of sufficient sample size.    Thus I was left to compare North American (NA), European (EU), Mainland Chinese (ML) and OCA (Overseas Chinese and Asian) demographic groups. 

 

Process notes:

The survey was conducted online for approximately one month.  A total of 160 samples were collected and about 7% were thrown out.   The questionnaire had 15 questions – 12 single answer multiple-choice type (sometimes known as ‘radio-button’), 2 multiple answer multiple-choice type, and one open-text comment response.  The survey was clearly aimed at those who negotiated with Mainland Chinese counter-parties, but was open to Mainland Chinese who negotiate with other Mainlanders (which made up only 11% of the sample group.)  The OCA-constructed group was also small – making up under 20% of the sample.   For the purpose of this discussion all results are based on common-size comparisons of the 4 demographic groups.  

 

Americans:  Older, slower, and simpler – but not poorer.

Americans are consistently negotiating with older counter-parties, doing fewer deals and trying to do simpler deals than other Mainland negotiating partners.  The differences between American and European dealmakers are pronounced – though they tend to fade when comparing high-success negotiators from both sides of the Atlantic. 

 

Age of Mainland Counter-party

(The Age of Counter-party question was a multiple-answer question, and respondents could choose any combination of “Under 30”, “30-39”, “40-49”, “50-59” and “60+”)

 

American negotiators distinguished themselves from the rest with their penchant for negotiating with older counter-parties.  65% of NAs were sitting down with 40-somethings, and 38% were meeting with 50-59 year-olds.  Of the full sample group, 58% were negotiating with Mainlanders in their 40s and only 28% were seeing the 50’s.  Of the European respondents, only 56% were meeting with Mainlanders in their 40s and 18% were meeting with those in their 50s. 

 

Americans are shunning the kids.  Only 17% of NA respondents were meeting with the ‘Under-30’ set, compared to 24% of the total sample.  29% of the EU and a whopping 59% of ML was spending time with the younger group. 

 

Deal Frequency
(A single answer question that asked how many negotiations were engaged in during the last 12 months.  The choices were “0”, “1-3”, “4-5”, “6-12” and “12+”)

 

American dealmakers tended to show up at both ends of the spectrum.  31% of NAs reported 1-3 negotiations per year, compared to the universal average of 26%.  EU negotiators were busier – with 66% reporting 6+ negotiations per year compared to 59% for NAs.  Americans bested their EU colleagues in the 12+ deals/year category with 37% vs. 33% — but lagged far behind the OCA – 45% of whom reported 12+, and ML who said 41% of their group was dealing at least once a month.

 

Simpler Deals

(Respondents were asked – in a multiple answer format – “What type of business did the Chinese counter-party represent?” and given the choice of “Private Chinese firm –no foreign or government ownership” “Multinational Corporation”, Chinese State Owned Enterprise”, “Sino-Western joint venture” or “Other”.)

 

American dealmakers displayed a strong tendency to focus on private Chinese businesses and avoided SOEs and MNCs more than any other group. 

 

First, the Private Enterprise numbers.  This was everyone’s favorite group – the total universe reported that 71% were negotiating with private Chinese businesses – but NA led the back with 75%, vs. the EU 73%, the OCA 68% and ML 65%.

 

On the other end of the spectrum, SOEs were attracting the least interest.  Only 29% of all respondents were meeting with them.  Americans lagged with 27% – compared to 33% of EU respondents.  39% of the OCA group met with the bureaucratic types – but only 24% of ML negotiators were meeting with SOE counter-parties.    Another big difference between Americans and Euros was in Multinational sector.  The universal average was 30%, but OCA and Euros showed the big-brands more attention with 42% and 31%, respectively.    Americans also ignored the JVs – only 15% reported meeting with them, vs. 21% of the total group,  24% of EU and 26% of OCAs. 

 

Looked at a different way, the average American negotiator was meeting with members of 1.5 groups compared to 1.69 for EU, 1.81 for OCA and 1.82 for ML.

 

Deal Goals 
(
A single-answer question asking respondents to state their position in the negotiation:  “Buyer”, “Seller”, “Partner” or “Other”)

Americans tended to be negotiating purchases more than sales.  44% of NA respondents classified themselves as buyers, 35% were sellers and 17% were looking for partnerships.  Only 38% of EU respondents were buyers vs. 42% sellers.  OCAs were buyers (52%) or partners (23%), and ML were strong seller (65%). 

 

Is There a Problem With Success?

 

Another finding was that American negotiators are declaring “Mission Accomplished” more than their European colleagues/competitors.  60% of Americans studied volunteered that 75% or more of negotiations led to deals, vs. 51% of Europeans.  If the mandate is to bring in deals 50% or more of the time, NA still did well with 87% of the group batting .500 or more.  Only 84% of the EU could do that, and 81% of the OCA.  ML lagged with 76%.  

 

A Familiar Orthodoxy

 

American deal making plays in China seems be called from a familiar playbook.  They focus on the decision-making age group, shun government and bureaucratic entanglements, and concentrate on the types of deals that have the highest chance of success.  But the focus on high-potential deal targets may be limiting the Americans’ range of counter-parties and contacts.   If American companies start looking for more sales in China – or need to start doing more business with the Chinese State sector, they may find that they are at a disadvantage compared to their European and Asian competitors who seem to be putting in more face-time with a wider range of counter-parties.  

 

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NOTE:  The  full results of the survey will be available soon.  Summaries and comments will be available on this site and  www.ChinaSolved.com.  For the complete report, please place yourself on the ChinaSolved newsletter by clicking here: http://www.chinasolved.com/signup1102.php

 

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