Chinese Business Negotiation – Guarding Your Virtue

Stop giving it away in China.

You’re the Cow.COW
Are you a withholding, passive-aggressive manipulator who makes promises he can’t or won’t keep? Well, maybe it is time to start – at least in China. No one buys the cow when they can get the milk for free. In China, technology, IP and business methodology is the milk of profitable transactions. If you’re giving it away too early or too cheaply, then you are the expensive cow no one buys. Sorry.

Good Will is not a Bank in China
Americans new to Chinese negotiation think that they can build up a bank of good will and trust by “front loading” their benefit package. Novices think that doing business in China is about having Chinese partners owe them favors. They are kidding themselves – and forcing conflict. If the Chinese side of the deal feels that it is ahead of the game, their best move is to terminate the partnership and lock in their gains – not wait around for you to collect on what you feel is owed to you.

American Intent
Win-Win type negotiators often feel that the best way to approach a negotiation is to demonstrate their good will, trust and value by “over-delivering”. They feel that if they provide the Chinese side with what it wants now (technology, brand, product designs), that the Chinese side will feel obligated to reciprocate later (distribution, execution, quality control). The western side has read up on guanxi and harmony, and believes that this is the way to develop loyalty and respect.

Chinese Reaction
The Chinese side may lock in gains by ditching you as soon as they are ahead. You see profitable transactions as the main goal, but your Chinese counter-party may care more about acquiring technology, designs and know-how so that he can operate independently. He’s willing to put up with you and cooperate as a means to an end. If you start off by satisfying his long-term goal, then you are simply shortening the life-cycle of a deal that was always supposed to end with you going home alone.

The Solution
Structure China deals so that you get what you need as they get what they want.  That means understanding the value of your skills and technology – and being able to articulate and measure what you want them to deliver. Don’t let them set the agenda or determine benchmarks.

5 Ways to Guard Your Assets in China:

1. Determine his real needs, and have a business response. Don’t project your desires on your Chinese partners. Find out what he really wants. Assume nothing. Your first job in mastering Chinese negotiation is to be able to acquire mission-critical information, and nothing is more critical than figuring out what his real goals are.

2. Know what you want. Profiting from your IP, technology, brand and other Western super-powers depends on two things – having something he wants and knowing what you want from him. Withholding is easy. Knowing what you want from him is tougher. Good negotiators in China are able to articulate a graduated list of goals and demands. Prepare for a “YES” when you negotiate.

3. Deal with the “exclusivity” dilemma. The Chinese side will generally angle for some form of exclusivity or guarantee that restricts your access to his competition. DON’T address this with vague promises you don’t plan on honoring!  Instead, ask for a specific plan for your future together – and negotiate the specifics of what he is offering. Your position on exclusivity – it is the product of a strong relationship, not the prerequisite.

4. Grow your deal – tap into his ambition. What does he really want? Chinese negotiators often ask for assets and technologies that they don’t really know what to do with, while ignoring variables that might really benefit them. Does he plan on expanding to western markets, developing his own brand or climbing the technology ladder? It might be possible to enlarge the scope of your proposed deal – and thus get more in return. But to do that, you may have to help him develop his own business plan – particularly if it involves international expansion.

5. Walk away smiling – if you have to. Some Chinese negotiators are too grabby for your own good. If all he cares about is your technology and your benefit is obviously a secondary consideration, you may have to withdraw and reassess. Don’t stick around hoping things will magically get better on their own. They won’t. If a China deal is going to die, than quick & clean is the best way. Don’t hang around to get abused and battered, praying that they’ll eventually see what a great partner you could be. Get the hell out of there now.

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