The document discusses three common mistakes Westerners make when negotiating in China: lack of clear goals, choosing the wrong partner, and not having an exit strategy. It notes that Westerners often fail to properly plan their goals and objectives, which leaves them vulnerable. They may also partner with individuals who intend to steal their intellectual property or are otherwise a bad fit. Finally, Westerners sometimes structure deals without considering how to exit the partnership if problems arise. Proper preparation, due diligence on partners, and ensuring deals can be unwound are keys to avoiding these negotiating pitfalls in China.
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Foreign Fails When Negotiating in China
1. Three Foreign Fails in China
Negotiate for Success in China
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2. What are the biggest
negotiation mistakes
Westerners make in China?
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3. What are the biggest mistakes
Westerners make in China?
1. Lack of goals and planning.
2. Wrong partner.
3. No exit strategy.
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4. #1 Bad Goals
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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”.
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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.
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7. No Goals = High Risks
• The whole Chinese negotiating
process is set up to gather
information and steepen their
learning curve.
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8. NO Talk Show Interviews!
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9. NO Talk Show Interviews!
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10. Remember your
SMART goals
• Specific
• Measureable
• Actionable
• Realistic
• Timely
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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.
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12. #2 Bad Partner
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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.
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14. Due Diligence in China
• In China, due diligence is about
character and loyalty – not credit
reports and assets.
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15. Don’t Hold on Too Long
• If you have the wrong partner or
counterparty in China, the situation
is unlikely to fix itself.
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16. #3 Bad Deal Structure
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17. No Exit Strategy
• Risks grow with profits
• Beware of long term commitments
for a short term investment.
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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?
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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
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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. 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
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.