Foreign Fails When Negotiating in China

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Let's take a look at how Westerners get into trouble when putting together deals with Mainland counter-parties. The main culprits: bad planning, bad partnerships and bad deal structure.

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  • Let’s look at some common problems Western companies run into – and how they result in failed negotiations.What are the biggest negotiation mistakes that Westerners make in China – and how can you avoid them?
  • The three mistakes that I consider most significant are 1) Lack of goals, 2) Picking the wrong partner and 3) not having an exit strategy. Let’s look at each of these in a little more detail.
  • What’s your goal for your company’s negotiation in China? Making a lot of money isn’t an appropriate busienss goal – it’s a naïve wish.Don’t make the mistake of trying to turn your first China deal in “on the job training” or a learning experience.You can end up sacrificing your technology, IP, brand and reputation to learn a lesson you should already know – don’t take blind risks.
  • While you may learn generic market and economic basics from them.They will try to learn details about your technology, sales process and market strategy.This is a real problem for Westerners in general and Americans in partiular. Chinese negoatiators consider learning about your business to be a major priority, and they are very deliberate in the way they go about it.
  • Don’t let your early meetings become a talk-show interview where you are the guest – and they are the inverviewer.
  • Don’t let your early meetings become a talk-show interview where you are the guest – and they are the inverviewer.
  • If you can’t make your China goals SMART, then you may be doing something dumb .
  • Westerners in general and Americans in particular have a tendency to make thinks up as they go along. This is due in part to the fact that they don’t have a clear picture of the Chinese business environment. Westerners management style in China can be described as “flying by the seat of their pants and hoping for the best”. In many cases, this means that Westerner’s main source of information is the counterparty sitting across the negotiaitng table. While there is nothing wrong with learning from your new partners, if your counterparty is providing you with basic business intelligence and strategy, you are putting yourself in a weak position.Americans also have a habit of trying to transplant their existing busienss model directly into China. This rarely works out well.
  • The second big contributor to Foreign Fail syndrom is negotiating with the wrong partner or coutnerparty.
  • Lack of good goals leads directly to problem number 2 – The Wrong PartnersIn China, this can mean 2 things.First – your partner may be actively working against you. He may plan to steal your technology, IP, customers and assets.But even more dangerous is the partner who wants to work with you – but is a bad fit. He lacks the skills, resource or perspective to help you succeed.Many western negotiators end up doing nothing more than training their own competitors
  • Do you plan on calling the shots? Does he plan on moving into your markets? If you can’t agree on big picture issues early, then you have to find a new parnter. Don’t stick with the wrong counterpaerty and hope for magic later. In 6 months The guy across the table from you will probably know more about your China operation than you do. Remember that before you give up exlusivity or make long term comittments.
  • Westerners have a habit of sticking with the wrong partner for too long, either because they don’t want to go through the time or effort to search for a new partner or because they believe that their existing partner will eventually improve and start doing business the Western way. Some mismatches can be fixed – but be explicit and disucss the situaiton directly and honestly. Don’t expect them to eveuntually start doing business according to your standards or internatonal norms. China has it’s own methods and approaches – and they may think that their process is just fine.No one gets more honest, reliable or efficient after they are in control of your assets. If you are frustrated or lack confidence in your partner, be diplomatic – but deal with it. Things don’t just “work out” on their own.
  • The final contirbutor to final fails has to do with deal strucuture. Is your relatinship with your negotiating counterparty going to end? How? You may plan on being in China forever – but do you plan on being with him? And what does he think?
  • Westerners are so worried about getting the deal that neglect to plan for doing the actual business. In China, your risks grow as your business thrives – because that’s when you have assets worth going after. Westerners in China have to be particularly worried about accidently taking on long term commitments – with a partner, the government or employees – without sufficient planning.
  • Foreign Fails When Negotiating in China

    1. 1. Three Foreign Fails in China Negotiate for Success in China All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    2. 2. What are the biggest negotiation mistakes Westerners make in China? All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    3. 3. What are the biggest mistakes Westerners make in China? 1. Lack of goals and planning. 2. Wrong partner. 3. No exit strategy. All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    4. 4. #1 Bad Goals All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    5. 5. #1 Lack of Clear Goals • “Making a lot of money” isn’t a business goal – it’s a naïve wish. • Don’t make the mistake of considering your first China deal a “learning experience”. All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    6. 6. Know Where You Want to End Up • If you don’t know where you want to end up, you are certain to get lost. • The less familiar you are with the environment and conditions, the more you need to prepare in advance. All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    7. 7. No Goals = High Risks • The whole Chinese negotiating process is set up to gather information and steepen their learning curve. All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    8. 8. NO Talk Show Interviews! All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    9. 9. NO Talk Show Interviews! All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    10. 10. Remember your SMART goals • Specific • Measureable • Actionable • Realistic • Timely All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    11. 11. Lack of Goals • Common fatal mistakes of foreigner negotiators in China: –Flying by the seat of their pants & hoping for the best. –Learning from their partners. –Transplanting American business model. All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    12. 12. #2 Bad Partner All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    13. 13. 2 Kinds of Wrong Partners: • Asset Raiders –Plan on stealing your IP and technology from the start. • Bad Fit –Want to help you – but can’t. All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    14. 14. Due Diligence in China • In China, due diligence is about character and loyalty – not credit reports and assets. All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    15. 15. Don’t Hold on Too Long • If you have the wrong partner or counterparty in China, the situation is unlikely to fix itself. All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    16. 16. #3 Bad Deal Structure All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    17. 17. No Exit Strategy • Risks grow with profits • Beware of long term commitments for a short term investment. All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    18. 18. Structure Deals for Success • The more money and assets you accumulate in China, the greater your risks. • Will your partners be satisfied with the status quo when the business starts making money… or will they think they can do better on their own? All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    19. 19. Structure Deals for Success All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    20. 20. Follow the discussion on LinkedIn at the China Solved group. All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    21. 21. Thank You All Rights Reserved. Property of Chinasolved, LLC. @Copyright 2013
    22. 22. About Andrew Hupert • 10+ years in China, – 3 in Taiwan & HK • Principal at Best Practices China ltd – Specialist in US-China Negotiation – Corporate training, consulting, and project management • Publisher of ChinaSolved.com and ChineseNegotiation.com • Author – Guanxi for the Busy American and The Fragile Bridge Full list of publications and slideshows available on www.AndrewHupert.com Property of ChinaSolved. All Rights Reserved. Copyright @201322
    23. 23. Guanxi for the Busy American • A professional’s guide to building relationships in China. • Written for the Western negotiator who needs to transact and execute. • Available on Kindle, iBook and all major e- formats. Property of ChinaSolved. All Rights Reserved. Copyright @201323
    24. 24. The Fragile Bridge • Conflict Management in Chinese Business . • Building relationships is easy – maintaining them is hard. Learn to do it right. • Available on Kindle, iBook and all major e- formats. Property of ChinaSolved. All Rights Reserved. Copyright @201324
    25. 25. Contact www.ChinaSolved.com www.ChineseNegotiation.com Linkedin: ChinaSolved YouTube Channel: www.youtube.com/Chinasolved Property of ChinaSolved. All Rights Reserved. Copyright @201325

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