When doing business in China, American negotiators already know that they have to be ready to walk away from the table — but just make sure you do it right.
Chinese negotiators are expert at manipulating American counter-parties with deadly combinations of tactics that will have you scratching your head all through the fight back to the US. One particularly effective set of maneuvers used by Chinese negotiators is to start with an opening offer that is several times the price that they actually expect to receive from a knowledgeable counter-party. They follow with a very reasonable, “well what were you thinking of paying?” The Chinese side will then rapidly – and quite humbly – allow you to ‘beat them down’ to a price only 200% over the reasonable market level. I’ve seen Americans accept terrible deals – but leave the table convinced that they’ve out-dealt the Chinese side because they were able to cut the initial offer in half.
A real danger for Americans negotiating in China is that you may get drawn into an emotional haggling match instead of a considered business negotiation. You’ve probably read the standard negotiating literature about focusing on ‘interests – not positions’ and this is exactly what they are talking about. If your negotiations with the Chinese get emotional or heated then you have already lost. Keep your cool throughout the entire deal cycle – from making first contact with a potential partner all the way through to the end of the negotiation. Be careful to have a clear bottom-line, and stick to.
If you decide that there is no point in continuing the discussion, then you have to walk away. But like everything else in Chinese negotiating, there is a right way to do it.
1) Don’t get emotional. Smile. Breathe. Relax. Stay friendly, cordial, polite – but most of all, professional. Its just business. Your goal is to move on to the next meeting – not to ‘teach them a lesson’ or get in a final zinger.
2) Thank them. This tends to put the Chinese off-balance. “I appreciate your honesty and frankness. Even though we can’t do business this time, I’ve certainly learned a lot from the experience. Thank you.”
3) Acknowledge the Chinese side’s position – and then some. I like to say something along the lines of, “clearly your offer is honest and considered, but your product or service is far beyond my needs and expectations. If this is a fair offer on your part then we aren’t talking about the same type of material/product/service. But I hope that we can try again if my situation changes in the future.”
4) Now it’s time to walk away – but do it slowly. There’s an excellent chance that they will come back with a much more reasonable offer. I call this part, “doing business on one foot” because you are in the process of walking away – albeit in slow motion.
5) DO NOT COME BACK TO THE TABLE UNLESS THE OFFER IS SIGNIFICANTLY IMPROVED. The one-foot approach only works once, and if you just pick up where you left off the previous negotiation then you have squandered your advantage.
As in all negotiations in China, your chances of success are vastly improved if you have researched market conditions thoroughly, decided on a clear walk-away point, and have a wide range of potential counter-parties waiting in the wings. Be warned though – all of your preparations count for nothing if you lose your head and allow your China negotiations to become an emotionally-charged haggling session.
Next: Who should make the first offer – the Chinese or American Negotiator?
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