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Such conditions also create operational obstacles and competitive challenges for foreign players. These strategic paths will take companies beyond the cosmopolitan comforts of Beijing and Shanghai to regions and cities where business dealings frequently exude more traditional Chinese characteristics and follow local rhythms.
When working outside first-tier cities, where officials and local companies tend to be more attuned to Western deal-making styles, corporations can benefit from honing their Chinese-style negotiation skills, regardless of their level of experience in China.
Negotiation is a constant for multinational corporations working in China, whether for acquiring new business, managing ongoing ventures, or coping with the rapidly changing business environment.
The ability to negotiate well, Chinese-style, constitutes a strong competitive advantage. But the concept of negotiation hinges on creating a framework for long-term cooperation and problem-solving much more than on drafting a one-time agreement.
As such, negotiation in China is viewed as an ongoing, dynamic process that takes into account practical matters and context. Many Chinese prefer this approach over creating contract-based absolutes, which many Chinese perceive as the primary purpose of Western-style negotiations.
Significant differences in negotiation style and culture can be accompanied by mutually unfavorable perceptions. Americans may see Chinese negotiators as inefficient, vague, and perhaps even dishonest, while Chinese perceive American negotiators as impersonal, impulsive, and overly focused on immediate gains.
When adapting to Chinese-style negotiations, task-based, time-conscious foreign partners must balance the need for quick settlement on specific issues and contract terms with the slower-paced and seemingly abstract building of interpersonal relationships. Competing effectively within a Chinese negotiation framework means understanding and accommodating the Chinese-style approach in order to craft a strategic plan that works on a local level.
This takes time and effort, but thorough preparation will help a company decide the best way to approach the table, increasing the likelihood of a successful negotiation and sustainable business arrangement.
There are five main success factors to consider: Know the context of the deal Understanding the circumstances and environment in which business takes place is critical.
Because the business context in China can differ from what Western executives are used to or expect, investing resources in broad-ranging due diligence is often money well spent. Chinese partners generally expect foreign parties to know and work within the local context, making ready access to local information and insights an important precursor to sitting down at the negotiation table.
Local staff, local contacts, and external advisors can provide pre-negotiation guidance by knowing what questions to ask prior to and during the negotiation. They may also interpret and evaluate the answers received, in the context of the local business environment.
A foreign partner that is knowledgeable about the local situation and circumstances is more credible in the eyes of the Chinese partner and will build trust. As an example of the importance of context, Western corporations often underestimate the degree to which government and business are linked in China.
Lack of clarity on Chinese industrial policy, government regulations, and relevant government and business stakeholders at the national, provincial, and local levels can lead to the wrong strategic approach to discussions.
If, for example, foreign corporate objectives conflict with local directives, efforts to find agreement with the Chinese partner may slow or stall without the foreign company understanding why. With adequate knowledge of the business context, companies can position themselves to achieve the best possible outcome.
Too often partners are chosen based on English-language capability alone or at a random meeting, rather than through a strategic screening process. Having a reputable local partner and being closely aligned on mutual goals are two prerequisites for successful negotiations and a lasting business partnership.
Lack of organizational transparency in China makes it critical for companies to spend time upfront understanding their counterparts—especially in areas such as ownership structure, revenue sources, and funding of capital assets and operations.
Companies should take time to confirm whether there is a basis for sustainable business before investing in discussions. In one case, partners concluded an agreement for the purchase of a product that required export licenses. The foreign partner entered into a purchase agreement only to discover later that the Chinese entity did not have—and was not authorized to obtain—the necessary export licenses.
On an individual level, self-awareness allows one to know how to best prepare for negotiating in China see Up Close and Personal. On a corporate level, clarity about high-level objectives, resource commitment, and managerial support for business in China drives internal pre-negotiation positioning.
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China - Transaction Growth a Huge Driver. China has stores in cities with 5 million visits per week.
This is an average of visits per store per week. By comparison, the whole of Starbucks has 26, stores with 90 million visits per week. This is an average of visits per store per week.
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