Getting in contact with Chinese companies
When a company want to establish in China they have to follow some unwritten rules based on the cultural development Chinai?? s. You cannot come to China and doing business as you know it from Germany. That will not work. The chinese people will misunderstand you. In this assay I will give some informations about chinese negotiating methods and how western people can manage it, where they have to be careful. I chose this topic because in my opinion this is very important for doing business in China where you can see heavily the cultural differences between China and western countries.
My assay will give information about this topic from the the first contact over the negotiation process to what may happen after the contract is signed. Getting in contact with Chinese companies Before you can negotiate with anyone you need to know with whom you can do business in China. There are different ways to get in contact with Chinese companies. – getting in contact with the “Aui?? enhandelsgesellschaft” in Shanghai – contact the responsible ministry – trade fairs/exhibitions – specific lectures, lecture travel to institutes/universities/ministries – private advice companies with seat in Hongkong
Finding a chinese single person who have good contacts (guanxi) – advertise in magazines and newspapers – contact Chinese great companies of the same branch and try to get in direct contact with them or to get informations about other possible partners – contact an other german company who already established their business in china and asking them to work as a contact person to china – asking the german embassy in china – speak to homebank, consolidated companies, chamber of industry and commerce These different ways to get into china are in a way ranked as how important or effectful they are in my opinion.
Pre-Negotiation Negotiation with Chinese or getting in the first contact with Chinese can be made in several ways like mentioned above. The Chinese negotiation process starts with contacts with the Chinese partners. The Chinese are first of all interested in getting to know the other party during first initial contacts. They try to determine whether or not the foreign firm has: – the most advanced technology required for their project, art of business – the willingness to sell or transfer it to the Chinese side by way of, for example, joint venture (knowledgetransfer)
The capacity of delivering the products on time. Lobbying For doing business in China Lobbying is very needful. Lobbying is one of the most important marketing activities facing foreign firms that want to sell large industrial projects in Chinese key industries like automotive, communication and so on. Foreign firms must convince the Chinese that they have cutting-edge technologies that suit Chinese government’s priorities, that they have long-term commitment to the Chinese market, and that they are financially strong.
They must present a highly reliable image before the Chinese, making them feel safe to do business with them. Getting a good lobby is good for the business in China. To built up a good lobby as a foreign firm you can visit government authorities, make presentations, technical seminars and advertise in great Chinese profesional journals and informal channels such as dinner parties. Presentation Giving attractive and reliable presentations to let potential Chinese partners know the company, products and negotiating team members, is an important step toward formal negotiation sessions.
Presentations aim to convince the Chinese of the sincerity of the company in doing business with China and show the Chinese that the company’s products are an advanced technology with high quality and reasonable price. Foreign firms need to present themselves and their technologies to a number of authorities. Very often one has to endlessly repeat the same things to different negotiators who may suddenly, without explanation, be replaced by another team. From the Chinese point of view, it is done to check the reliability and firmness of the supplier.
Learn how to make good presentations to present you and your firm. One time a good presentation made you can use it again and again to make your business and targets clear to each partner. In China it is often also important to have the presentation in English as well as in Chinese. One reason is that sometimes the decision maker cannot speak a word English especially in state-owned enterprises and older persons in charge. Informal Discussion Initial and informal discussions with Chinese organizations often occur directly after making presentations.
At this early stage, the Chinese are already interested in special things like technology and price. Trust Building or “guanxi” The Chinese attach great importance to trust building in business negotiations. One Chinese negotiator explained: “They [Western firms] want to come and sign the contract quickly and do not know that [if] we do not understand each other . . . there is no business relationship. First, we have to know and trust each other, then we sign the contract. ” Formal Negotiation Task-Related Exchange of Information
Formal negotiation starts when the Chinese show a strong interest in “further discussions” and both parties sign a “letter of intent. ” The Chinese tend to send a formal document, informing the foreign party of the composition of the Chinese team and ideas for future. Normally the decision-maker does not participate at every meeting but at every important, also he do not say much, he let the others negotiate. He take part and listen carefully on what is said and afterwards he make the decision. Concessions and Agreement The formal negotiation ends with an agreement by the negotiating parties through their concessions or compromise.
In this stage, the Chinese show a strong inclination to settle all suspending issues in a “package deal. ” They make concessions too; however, their concessions very often turned out to be a disguised gesture devised to attract the counterpart into making real concessions. For every concession, they want a counter concession. When drafting the contract, the Chinese weighed words meticulously when it came to the clauses that would affect the Chinese, while treating issues of concern to the foreign party as generally as possible.
In analyzing the formal negotiation stage, Chinese negotiating teams tend to be large; people from many organizations and departments take part in negotiations and ask many questions. From the PRC condition point of view, Chinese companies are not companies in Western terms; rather, many are still “factories” of the Chinese government. A large number of people are involved in negotiations and keep asking questions. The Chinese propensity to ask many questions seems necessary given China’s “relatively new” involvement in international business and their want for foreign technologies/knowledge.
The absence of Chinese lawyers at the face-to-face negotiation table is maybe based on Confuciunism where legal power does not feature at all. But this is changing because in the early times of business making in China there were not many Chinese lawyers who had the same status and respect as the lawyers from the western. Nowdays more and more Chinese lawyers participate at negotiation meeting and when they do not participate at the meeting they are working in the background Post-Negotiation Implementation and New Rounds of Negotiations
A great problem everybody know is that Chinese do not see a contract as a contract like in Germany or somewhere else in western countries. They see it just as an agreement to do something. This is a very common problem at doing business between Chinese and Western people. Generally speaking, the Chinese honor their contract; however, cases of Chinese nonfulfilment of their obligations do occur. About this problem the general manager of Degussa told us about this problem in a presentation at an excursion to Degussa company.
He told that there are sometimes companies with whom hei?? s making contracts or “paper of agreement” and after Degussa fullfilled their part of the contract they are waiting up to one year for the money they need from the Chinese side. Managerial Implications As a foreign company or as an foreign expert it is very important in negotiations to know things like Chinas priorities, who these people are (cultural aspect). As an expatriate you should also be very patient. And it is important to know about Chinese thinking about the price.