Feb 01 2007
How Risky are Chinese Suppliers?
I just returned from Zhejiang, China earlier this week where we conducted negotiations with some manufacturers.
On the surface, the Chinese seem to be very friendly and willing to help, but don’t get mistaken. For example, in our case we’re getting some designs manufactured in addition to buying some ready-made items, so it seems simple enough to just draw up an order form for the parts you want. Chinese people don’t necessarily mean to make mistakes or misunderstand intentions, but they quite easily do. Very few are college educated, considering the fierce competition that exists for getting into colleges in China. And this is where you have to be careful.
In this case, a simple order form with item numbers on it creates a lot of problems. First, if there’s no indication as to what items those numbers refer to, well, you’re screwed. They’ll just fill out the order with anything they have left in stock regardless of the numbers, because you’re paying them and they need to get stuff off their hands. This is usually due to miscommunications between internal staff and your contact window who may be persuaded by them into believing what they guess you want is actually true. A simple recommendation is to actually get pictures of products together with the serial numbers, and the pictures for what you really want should trump everything else where discrepancies arise. The reason is that somewhere down the road the company can say that the serial numbers for the products you want never corresponded with what you thought you were getting, even though you know what you ordered, the criteria you’ve used to make those decisions, and that they’re absolutely mistaken. Instead, they’ll insist that you ordered what they wanted you to order. Best thing is to cover your tracks with something like the pictures.
The next issue is how much work goes into what you’re ordering. For example, you may have made a deal and they say they’ll do the work you’ve requested, but the next day you get a phone call saying they can’t possibly do the extra work, even though you’re willing to pay for it. In negotiation, this is known as the “nibble” tactic–after a deal has been made they nibble away at you for as long as they can. Or worse yet, they don’t inform you at all and just send the shipment without fulfilling any of the requests that you’re paying for, completely against whatever contract you may have. But in the end, there’s nothing you can do about it. Make sure all these terms are discussed up front very specifically. Connect with a local or another company from your country that does business locally and pay them to help ensure that things are getting done correctly. You need to have back-up plans and insurance (i.e. strategy) and always expect the worst-case scenario, no matter how confident you think talks are going (yeah, even if your “talk” is in Chinese–I can’t imagine the additional complications arising using English or a poor combination of either Chinese or English: it’s better to be fluent and be understood than sorry, and call me crazy but I take it seriously enough to have even gone as far as learning to speak the local Zhejiang language, called Wu).
If you know all the negotiation tactics that people use, there really aren’t any cultural barriers at all: it all comes down to another tactic that you should be aware of. Always dig for the other party’s interests and the criteria they use to make decisions and you’ll come out with a much better working relationship with your suppliers in China. The reason the Chinese may use what seem to be tactics, or back-stabbing, or whatever else you want to call it, is because you probably just didn’t prepare well enough in advance. Anybody with that advantage over you would see how easy it is to use you. Start with giving yourself an advantage by laying the ground rules (you’ll need clout to even consider negotiating in the first place, and they should be willing to talk to you). Indicate that you’re well positioned locally and you have a lot of ties with the locals and the government, and back up what you say. If you don’t have this, then start working on it.
If you want to do business successfully in China, you have to do what every invader of China has done in the past: become Chinese. Start growing roots immediately in the areas where you do business. Assimilate and work on building those relationships. They don’t have to do business with you (unless your clout is big enough) because somebody else will come along knocking on their door anyway.
Also remember that the Chinese, generally speaking, follow laws very carefully. You may get to China and find that people seem to be doing things haphazardly, but just keep in mind that those haphazard areas are probably areas where laws are not so strict or well defined. In the system that exists in China, it is not the people who voice their opinions for bettering society with laws or regulations on this, that or the other, but it is the government, rather, that has to single-handedly figure these things out and initiate such changes. When laws are promulgated, the government is absolutely serious, and the people had better follow them or face harsh penalties! Believe me, do the Chinese follow the rules? 绝对 YES!
If you witness people doing questionable or unethical things while in China, all I have to say is that there probably aren’t specific laws making those actions illegal. Maybe nobody in your country would consider doing such a thing, but maybe there are laws preventing it as well.
Now taking these thoughts into consideration when in China will help you be a better business negotiator. Focus on what’s legal and uphold your counterparts to their legal obligations and you’ll find that in pursuit of their interests, they’ll be more likely to stick to the rules of the game.
Good luck.
