To many of his colleagues, Sandro is an old China-hand. Having been working in various cities in China for the past 7 years, and has more working experience here than most of his Chinese colleagues.
One of the key success factors that attributes to Sandro’s career success in China is that he takes time and patience to listen and understand his Chinese colleagues, suppliers and partners. While some of the business practices in China may be very different, even contradictory, with the ones in his native Germany, Sandro has always been patient enough to understand why certain things are done in certain ways, and then seek to get his Chinese counterparts understand why some things have to be done the international way.
Hence, when it was time to negotiate a major deal with a key supplier, Sandro decided to have his Chinese Project Manager take the lead in the negotiations. As Sandro had not had the experience negotiating for such a large project in China yet, he thought it may be a good idea to learn from the local expert.
The Chinese Project Manager, Mr. Chen, shared with Sandro his negotiating strategy, which is to divulge nothing and squeeze them for the lowest price. And that was what he did.
Halfway through the negotiations, Sandro found things to be diverting away from his goals, such as:
• While the company does have a policy of minimising purchasing costs, there have been frequent cases of suppliers increasing prices unilaterally because they just realised the agreed prices were below their costs. If the buyer does not agree to the increased prices, the seller will cut the supplies. And since the agreed prices were below costs, the buyer then could not find other alternative suppliers to supply at such prices too.
• One of the key requirements for this deal is to have the supplier commit on various quality and delivery guarantees, which are critical for the buyer’s production. However, these issues have not been discussed as Mr. Chen fears discussing such issues will then increase their buying prices. Mr. Chen thought it best to secure the best price, then state these requirements after the price have been agreed. Sandro knows that if these requirements are stated after the price has been agreed, the supplier may not honour their quality and delivery guarantees because the price they get does not cover the costs of additional work.
Having these observations in mind, Sandro was wondering if there’s a better way to get long-term commitment to negotiated agreements in China.
Formulating Your Negotiating Strategy
“The victorious army plans for victory before fighting, the vanquished army fights before planning for victory”, says Sun Tzu in the Art of War. The same principle applies to formulating negotiating strategies as well. We can use Sun Tzu’s 5 elements:
• The Way: Your Goal or Desired Outcome
• The Climate: External Factors beyond Your Control
• The Ground: External Factors within Your Influence
• The General: The People Conducting Your Negotiation
• The Method: How Should the Negotiation be Conducted
To start with, you will have to define what the goal, or desired outcome, is for the negotiation. The most primary concern you need to have is if you just want to win the negotiation, or would you like to have a sustainable outcome of your preference.
Interestingly, while it is often mentioned that Chinese business people expect negotiated agreements to be re-negotiable later should there be some unforeseen circumstances arising, most Chinese negotiators tend to view a signed contract or agreement is an indication of negotiation success. They often are too myopic to see that if the agreement is not sustainable in the long term, or that if it is deemed unfair, their negotiation adversaries will want to re-negotiate. As such, the negotiated outcomes are NOT sustainable
Hence, to reach a sustainable negotiating outcome, you will have too consider a few more factors, such as:
• What is the negotiating outcome you want to achieve, besides price or immediate gratification?;
• What is your best-case, second-best case and worst case scenarios?;
• Why should your adversary agree to your demands or requests?;
• What are you willing to give in return for what you get?;
• When to walk away and negotiate with someone else instead?
The next question then is: would it be safe to tell our adversaries what we want?
The best victory is the one that is won without fighting
In simple terms, negotiation can be defined as: getting others to give you what you want, by giving them what they want.
The problem is, most of us would like others to give a lot MORE of what we want, while we give as little of what they want. While the reason behind such thinking is to control costs or maximise profits, there are however some flaws in this logic:
• It doesn’t mean that if you give a lot more of what they want, it will cost you a lot. There are some things that you can give at minimal or zero costs to you but may benefit your adversary a lot;
• Many times, the costs of NOT getting what we really want (apart from lower price and immediate gratification) is higher than the savings of giving as little of what they want; and
• Sometimes, you need to educate your adversaries to understand what sustainable outcome that is what they really want too!
As Sun Tzu says, “The best victory is the one that is won without fighting”. If you want your adversaries to give in to your demands or give you a lot of what you want, you may want to make your adversaries feel that:
• When they give you what you want, they will get what they really want (besides price and immediate gratification);
• You will make sure that whatever deal you make with them is something that they will be happy with, even if it’s made in your best interests;
• You make the conscious effort to shift from adversaries in the the negotiation, to being partners in the long term.
Sun Tzu also says, “Use conventional methods to get organised, but use out-of-the-box methods to achieve victory”. Talking endlessly about price will end in a stalemate, but if both parties are willing to explore the reasons why they want what they want, they might be able to come up with a creative solution that meets mutual needs.
There is a Chinese expression called “words spoken from the bottom of one’s heart”, which is actually quite common between buyers and sellers whom have done business together for a long time. It goes back to the Chinese ideal of taking care of the welfare of your business partners, even if they may be your negotiation adversaries. The trick is to make your adversaries trust you quick enough for this effect to happen.
Know Yourself and Your Adversary
When we mention we need to win the trust of our adversaries, it doesn’t mean that we are just being nice and sacrifice all our profits. Hence, Sun Tzu says, “Know yourself and know your adversary, a hundred battles fought and not be imperiled in any”.
What this means for the negotiator could be:
• You can’t win with ALL adversaries. Knowing whom you can trust, and get them to trust you, is key to getting winning outcomes;
• You don’t just learn about your adversaries by talking to them only. You can get more information about your adversaries (including if there’s a huge need for you to give them what they want) from their colleagues, business partners or industry news in general; and
• In negotiation, knowing your adversary could be just as important to let your adversary know you. If the adversary is someone whom you do not know, start with disclosing less sensitive details in smaller deals.
In short, while there are overwhelming tips, techniques and other resources on how to win in negotiations, there is only one thing in the minds of your adversaries, and that is “Why should I let YOU win?”.
Here’s one last little story to illustrate why it is important to get your adversaries to want to let you win, rather steamrolling over them. We often see some unreasonable and rude guests in hotels or restaurants who make unreasonable demands to the service staff in very rude ways, knowing that because they are paying the money, the service staff will just have to say “yes” to most of their rude demands. While some service staff merely suffer in silence, some experienced service staff know how to get back by secretly spitting or adding other unmentionable “ingredients” into the food of the rude customer.
The moral of the story: even if you have overwhelming bargaining power, you may still want to make your adversaries wanting you to win. As in the Art of War, “To win, use reason to connect with your people, and use discipline to implement your strategies”
by c.j. Ng