Negotiation with chinese Essay

We wish to express sincere appreciation to Professor Shia Yun Chiang for his assistance in the preparation of this manuscript. In addition, special thanks to Yama (Yuehai shoe material Ltd) who’s familiarity with the needs and ideas of these team and was helpful during the early programming phase of this research. INTRODUCTION Continental Design is a company where excellence and customer satisfactory are priority. After ten years of being in business, continental now seeks to enter the Chinese market. On Thursday, June 13th 2013, some members were selected to visit the potential customers of our new shoe-soles designs to introduce and negotiate our terms. These members include Mr. Emmanuel Mlay (Financial Officer), Mr. Robin Sharma(Managing Director), Mr. Cliff Osoo (Contracting Officer), Ms. Bella Chan (General Overseer), Ms. Sandra O. K (Sales Manager). Upon arrival, we were taken in and around the factory to experience their works and then to the meeting room. In this report, we explain further our observation and findings in negotiating with the typical Chinese. This report emphasizes mainly on the observations which includes specifications, mode of conduct, styles and techniques also elaborating on how they work together as individualist or collectivism. Again the language used, what they felt at ease to say, their communication skills, relationships with clients, were also under study. However their reasoning and way of thinking was somehow fascinating and very interesting which this report enlightens ideally and strategically. A brief but very informative research was done to know our potential customers before reaching out to them. The one talked about in this report is â€Å"Yuehai shoes material†, a very renowned shoesole company in China. In the end, all business operations can be reduced to three words: people, product and profits. Unless you’ve got a good team, you can’t do much with the other two. 1 1 By: Lee Iacocca 1 Chapter 1 THE CONTINENTAL DESIGN Continental design provides differentiated products that accelerate innovations in the global design market. With ten years of experience and commitment, Continental design has grown to be one of the strongest competitors in the field of designing. This company has also spent those ten years in developing its communication and negotiation skills. Its management capabilities have enabled it to technically handle the challenges and efficiently provide products that are best in the market. As Victor Papanek once said â€Å"Design is the conscious effort to impose a meaningful order. † Continental design was founded by a team of five engineers with one primary goal of working hard helping all small and big shoes companies to succeed through professionally enhanced designs. Today, Continental design is a full-service independent company with about 10 percent of the world market share. Our services cover the whole of Africa, South and North America, Middle East and few countries in Asia. Recently we have initiated our first staple toward China market. 2 BUYERS COMPANY PROFILE Yuehai Shoes Materials Yuehai shoe material has more than 20 years of manufacturing experience and large number of qualified senior employees who are devoted to settling problems and confronting challenges. It has adopted advanced equipment from Taiwan and main land China. The production technology is matured and reliable; at the same time it uses the original material that makes its products to be famous by their high qualities. Its domestic market ranges from Guangzhou and Dongguan where there is a stiff competition that helps them to develop new and up-to date designs that meet the market demands. It then covered the whole of China before capturing Europe and America as the first target in external market. Most recently, it has expanded its external market to Middle East and Africa as a whole, where it has entered into more than 10 different countries. Shoes are human daily life necessities. Shoes industries will never perish as long as human being still exists. With the use of imagination this company is committed to continue to develop shoe industries as part of making the life of entire society in the world better off. Address: No. 39 beicun road, huangqi, nanhai district, foshan city, Guangdong province, China. Tel: 8675785938525 Fax: 867578592981 Email: tailon@21cn. net Yuehaixe. com. cn 3 Chapter 2 NEGOTIATION PREPARATION In negotiation there are few things that have to be put in place before the negotiating team or person set off for the negotiation. The factors that are mostly considered before negotiation are: ? Length of contract This is the period that the contract will take before it’s renewed again. The seller always concentrate in this factor because it affect the profit the company will make and for how long. Mostly its 1 to 3 years. This factor is important because it also influence the price to be offered to the buyer. ? Volume to be ordered After a seller has agreed on the length of contract then the next thing to talk about is the Volume that will be bought. When few goods are bought, there is a high possibility that the price will be higher unlike when a large quantity is bought; therefore these first two factors influence the price of the item. ? Price The third factor to talk about after length of contract and volume is price at which the good will be sold. In every company, there is a price offered depending on the quantity to be bought, quality and other things needed for production. The larger the quantity, the lower the price will be and vice versa. 4 ? Payment Terms and Services. The most important thing for a company going for a negotiation is; length of contract, volume and price and other things like payment terms and services comes up later. The last two remaining factors are considered to make sure that the items agreed before is taken into account in a proper manner. Payment terms are important because even if you have a long contract with large volume but payment is not done in time, you will have to lose something. Services are offered to the buyer to make sure he/she is satisfied with the goods bought. 5 SELLER’S WISH LIST. Here we made our wish list before we went to the meeting. We had decided our lowest price and the contract length. Below you can see the result of our company board meeting before going to negotiate with Chinese company ITEM2 Length of contract Volume Price Payment terms Services WEIGHT 40% 25% 20% 10% 5% RANGE 2-1 Years 500-100units/month $200-$150 10-15days 5/5-8/5 In the following table you can see that we agreed to have at least 1 year contract with Chinese company. As they are old and experience company, we believe that it won’t be any problem even if we have 2 years long contract. In terms of volume we were ready to deliver any amount till up to 500 per months. Price was the main concern of our meeting. We know that they will try to spend more time on the price negotiating and knowing we have many competitors in the market, we needed to come up with a very good price range. We also had an agreement on payment terms which should meet within the short period. Lastly, we agreed to offer them a good customer service. 2 Professor Shia Yun Chiang Power point presentation-Estimating wish list ,Power point presentation slide no. 9 & 10 6 THE AGREEMENT ZONE In every negotiation, there are two possible outcomes. The parties can either reach an agreement or not. The first situation is where the seller and the buyer don’t reach an agreement at all, either, due to the buyer or seller not agreeing with the offer given. The second situation is where the two parties (Buyer and Seller) reach an agreement and signs a contract for the business to take place immediately. For the two parties to reach an agreement, they will have to consider their Consequence of No Agreement (CNA). CNA will either make the two parties to agree or disagree. BUYER’S WISH LIST ITEM3 Price Services Payment terms Length of contract Volume WEIGHT 45% 25% 20% 5% 5% RANGE $100-$150 8/5-5/5 Cash transfer 3-1Years 50-100units/month After a lengthy discussion with the buyer, following were the outcomes of negotiation; OUTCOME ITEM Price Length of Contract Volume Payment Terms Services DETAILS $150/Design 1 Year 100 Units/month Cash Transfer in 2 days 10 Days training Professor Shia Yun Chiang Power point presentation-Estimating wish list ,Power point presentation slide no. 9 & 10 7 Chapter 3 OBSERVATION VALUES AND THINKING IN NEGOTIATION. When going for a negotiation one has to learn the buyer’s values in thinking. These values differ from one country or one region to the other and it can cause a misunderstanding between the two parties. According to the research we did about Chinese negotiation, we found out that Chinese are more relationship oriented than Africans and even other nations. As soon as we entered into the Chinese office for the negotiation, they offered us Water. This proves that they are more relationship oriented; they use this to build a rapport between their clients even before negotiation. Another thing that the company we were negotiating with did is that, they invited us for supper. In these acts we can see how Chinese people are mostly towards relationship with their clients unlike other European countries or America and even Africa. Before us reaching a conclusion, the Chinese people asked a lot of personal questions even in the middle of our negotiation. Some of the questions they asked were; When will you go back to your country? Do you like china? Is your country very hot than china? These personal questions that are not related to business are a clear picture of Chinese values and thinking in a negotiation. â€Å"As a general rule, it’s always safer to adopt a formal posture and move to an informal stance, if the situation warrants it, than to assume an informal style too quickly†4 4 As Jeswald W. Salacuse- (Ivey Business journal) 8 . During our research, we were also able to notice some of the things that are not common in African countries and even other continents. The first thing that they did is to welcome us in a very encouraging manner that made us feel at home, and with such hospitality, we were able to do the negotiation having been convinced that Chinese are good business people. This kind of hospitality that Chinese people give to their clients make them win in the businesses they negotiate in because the other party will feel so cared for that they can trust the offers given. Another thing we noticed in the research is the way they asked us whether someone has introduced us to the company or we looked it up in the internet. At the beginning I didn’t see the reason why they should be concerned with how we got to know about the company, but after we finished the meeting I had to ask and what they told us is, in Chinese (Intermediary/ middleman). This is one of the things that make us to realize how important Chinese value relationship in the business arena. The other behavior that we observed in the process of visiting and doing the negotiation is that, immediately we arrived at the factory, we were received and taken around the factory to see how they do their production and even explaining every step of production line. This really made us feel honored and we started to see them as transparent and responsible people, something that needed in business so much. â€Å"Chinese negotiating style is people oriented and permeated with such Confucians notion as guanxi, renqing, face, family age, harmony, hierarchy, li (etiquette)†5. 5 As said by Tong Fang –Chinese Business Negotiating Styles 9 CIRCULAR REASONING & TALKING In our haste to market our designs for shoe soles. We came across various ways in which Chinese carry out their business negotiation. While most of the companies we approached exhibited the sequential kind of talking, the Chinese demonstrated the circular type. Interestingly, as we tried to obtain information and answer their questions regarding our products, we realized that Chinese, when not interested in your product would rather beat about the bush than going straight to the point. This is mostly demonstrated in the time of negotiating prices. This makes it hard to determine their stance in terms of buying the product. It is almost impossible at that moment to determine the level of consequence of no agreement on the buyer’s side. As much as you try explaining and convincing Chinese buyers who are less interested in a product, you will end up just like before. It is hard for them to say â€Å"no† point blank. This I believe is because of the long courting and relationship they build up with their business partners before negotiating. For instance, in one of our interviews, the interviewee mentioned after our refusal to take lunch with him that it is the culture of Chinese people to dine with their potential business partners irrespective of their interests. He explained that not only does this emphasize politeness; it also creates room for next or future cooperation. That is why in almost every meeting with a Chinese business man, you are served tea or water even before the talking starts. As pleasing as this might sound, it is also the reason behind the average Chinese would want to beat about the bush when not interested in the product for sale. Relationship and friendship are commonly used to obtain a better price and more concessions. 10 Herbig and Martin (1998), Stark, Fam, Waller and Tian (2005), and Zhu et al. (2007) all found that the Chinese do not rush into the negotiation, but rather, spend a lot of time in getting to know their counterparts as much as possible, even including personal information in order to build guanxi and trust from the beginning. Another finding is that they would want to end the meeting peacefully and friendly just as it had started without having to ruin the relationship or hurt anyone’s feelings, yet they have to decide whether or not to purchase the product. According to Faure (1999), the Chinese focus more on relationship building during this stage, as they need to know their counterparts for any business deal to occur. This negotiation practice might cause conflict with Westerners, as Westerners prefer to start negotiations straight away after basic greetings and introductions. Rule how to be successful in dealing with Chinese: â€Å"Be fair, reasonable and diplomatic: â€Å"If your Chinese counterpart believes that you are being unreasonable, they may not openly say so, but your negotiations are likely to stall and go nowhere. If you disagree with your counterpart, don’t simply reject their position out of hand, but carefully explain your reasoning†. 6 6 â€Å"Forbes† by Jack Perkowski (Negotiating in China; 10 rules for Success 11 QUESTIONING & INTERRUPTING We’ve had several encounters with many customers throughout the years, but what makes the Chinese customers outstanding is their mode of questioning. Unlike our African customers, they tend to interrupt and chip in their questions whiles you are talking. In some cultures, this might seem rude and impolite but this is not so for Chinese. They are very cooperative, assertive and defensive. This encourages and makes the one talking feel he’s being listened to. This normally generates positive feedback. During one of the interviews conducted, it came to our realization that, the typical or traditional Chinese interrupts more than the Chinese who has been open to Western culture. Customers who deal with Westerners or Africans have adjusted to some of their negotiation skill. This we believe will go a long way to influence most Chinese business partners. Their character or attitude of seeking and asking questions is different from other people in the sense that Chinese exhibits a character of â€Å"Xenophobia which is a distrust of all things foreign to one’s own culture. Xenophile is a lust to obtain all things new and or foreign. The Chinese have become inclined to distrust anything and everyone from foreign lands due to their history of violent revolutions and government seizures and changes. On the other hand, they have also seen the new technologies and high standard of living in the West, and many Chinese struggle with these mixed feelings as they pursue business opportunities with foreigners and seek to acquire western technologies â€Å"(Pye, 1992) 12 COLLECTIVISM Under collectivism, the means of production are owned and controlled by the state or the people as a whole. Also, it describes any outlook or philosophy that stresses the interactivity between people. It is often consider as opposite of individualism. There are two basic types of collectivism: horizontal and vertical. In the horizontal type, members are considered to be as equal as possible, and share resources and responsibilities. The vertical include a social hierarchy that society member work to maintain, and people submit to those above them in the hierarchy. Collectivism in China When Mao Ze Dong came into power; he strengthens the collectivism by eliminating landowners and individualists, sending nearly everyone to work in collectivist communities. Therefore, China has been more collectivist than individualist in both ancient and modern history. Many research states that, there are many leaders in China today who believe that the days of collectivism in China will soon be gone. There are several reasons for this. First is that the â€Å"one-child-policy,† especially in the cities, it gives us many younger citizens who have been raised to believe that they hold a special place in the world. This kind of upbringing leads to individualism over collectivism. In business point, there are still many examples of collectivist thinking. For example, When we(foreigner) and Chinese, began to work together, mainly the Chinese look towards the team as 13 the reason for the company success, but on the other hand, the foreigner(us) were trying to identify individual high performers. That’s one of the different between Chinese and foreign culture. Collectivism between our culture (as a foreigner) and Chinese Collectivism is a cultural pattern found especially in East Asia, Latin America, and Africa. But nowadays societies are not purely individualist or collectivist, but some of them are the mixture of the two. Western and Northern Europe, USA, Canada, Australia, and New Zealand are individualist. Conclusion Although there are few countries fully apply in collectivism, like North Korea, most of the countries are applying the mixture of collectivism and individualism. Those countries practicing collectivism mainly have a low GDP level, because it affects trade with the other countries. 14 THE RELATIONSHIP BETWEEN SPECIFICATION OF TIME AND PRICE. The important aspects when we negotiate with Chinese: Patience is the most important qualification for successful negotiations with the Chinese. Negotiations in China often take time because of different departments within one organization tend to be involved in negotiation processes and decision-making within the Chinese bureaucracy often takes time. By Confucianism, Chinese will not rush into any serious meetings with someone whom they do not know; trust and a certain feeling of closeness. Here is the example of Chinese negotate style we found. It prove that, to negotiate a favourite price with Chinese, obviously we need time. 1. Don’t expose too much of your interest in a product you want to buy even though you’re really drawn to it. It is better to act like that it does not matter to you and you don’t have to have it. Sometimes the sales person would tell you if he or she can judge from your facial expression that you really want that item. 2. In the first time you will never get the exact item for the price. Usually the sales person would try to seduce you by offering an unfavorable price. For example, for a necklace placed at $100, if you ask the sales person for discount, perhaps for the first time she would give you a discount like $90. Don’t take it. Just think that it is too high and walk away. Sometimes the sales person would shout at your back and offer much more favorable discounts. 15 3. The second negotiation is to reach a middle point. Try to get 45-60% discount of the original price. If it is impossible, try to get somewhere around 70-85%. Try to negotiate in a friendly way. If the agreement cannot be reached, walk away again. 4. The final negotiation will be the last attempt. Be firm and try to get 40% off. Some might finally give you 40% off, while some can’t due to different price strategies involved and store renting fees, staff cost, etc. To compare with our culture(as a foreigner), in our country, all the goods had set their fixed selling price, and most of the company usually have their own rule for market selling, therefore the vacuum for price negotiate will be less. 16 LANGUAGE BARRIER Our group members come from Nepal, Ghana, Tanzania, and Hong Kong. We speak different languages. English is our second language. We often face with language barrier within and outside the group. . Language barrier often is a big problem. If this was an outsourcing job or transcription work, language would probably have a major role, as both require clear understanding of the accents, practice of speaking in a fluent way. Cause of language barrier: 1. Emails – written communication we should be able to clearly understand written instructions and reply with clear and also follow rules in a polite way. Sometimes we often wrote a business mail in a friendly tone, instead we should write in a formal way. 2. Phone Calls While working with an outsourcing partner, providing a phone number for emergencies may seem to be a good idea. However if this phone number happens to be attended by a non-English speaking person, it will serve nothing but a source of irritation. So we can think of giving the mobile number of a representative who can speak with clear and patience – even if the resolution is not attained on the call in itself. 17 Useful method between different language. Pictogram and simple image are useful method as icon or sign for almost every place. It means they are efficient to give information to people without any words. They have high possibility to support the communication between two people without spoken language. Conclusion We need to use English to communicate with each other, when we were going to Nanhai to take the video, sometimes we need to use Chinese to communicate with the local Chinese people. When people from different countries speak in different languages, we often face difficulties an understanding each other. We cannot express our meaning in a proper way. During our research, when we took the train, there was problem in translating Chinese characters. So it is quite hard for us to find the way to the shoe factory. In addition, the English level of a local Chinese are mainly still in low level, some of them even cannot understand what we are asking. I think it is what we are called language barriers. 18 Chapter 4 TIPS TO NEGOTIATE WITH CHINESE The intensive research negotiation we conducted at Yuehai Shoes Materials factory widened up our knowledge about Chinese negotiation. We believe through this report you have acquired some usefully tips on how to strategically negotiate with Chinese. Upon what you have learned here are our recommendations for you to conquer any negotiation: ? Be prepared†¦Ã¢â‚¬ ¦ Make sure you are well prepared. ? Understand the cultural differences†¦. Get to know the other culture. ? Don’t be afraid of negotiation†¦ if you can talk you can negotiate. ? Show some emotions (share some burden)†¦remember, people value them. ? Be on time†¦.. time is money. ? Be careful†¦ use appropriate language. ? Be in control†¦ don’t allow other things to distract your focus. ? Give some room for the other party (compromise whenever necessary). ? Show some vivid example†¦ a picture is worth a thousand words. 19 CONCLUSION â€Å"Deal is always better that no deal. †7 As hard as negotiation may seem to be, its outcomes are almost always worth the endurance. In different cultures where there are different goals, different point of views, different interests, different values and beliefs, different needs and different decision making styles; it takes a considerably huge amount of effort for sellers and buyers to reach the agreement zone. Both parties must be willing to give up part of their wish or lower their requirements which do not happen easily. With better understanding of both cultures of the parties involved, the negotiation will yield more significance solutions. One should keep in mind that negotiation is the cornerstone of any successfully business in the world. Despite the difficulties involved in the strategic negotiation, lets us follow the words of one of our great fathers who once said, â€Å"Let’s never negotiate out of fear, but lets us never fear to negotiate. †8 7 Professor Shia Yun Chiang class PowerPoint presentation 8a.