Recommendations when negotiating with Chinese companies

Recommendations when negotiating with Chinese companies

When a company decides to source products from an Asian country for the first time, one of the main challenges it will have to confront is the fact that to negotiate with Chinese business has little or nothing in common with commercial relationships to which they are used to in Europe.

In order to be successful in a negotiation with the so-called ‘Factory of the World’, there are a number of factors to be taken into consideration, which are, even though this might not sound obvious, critical for companies if they wish their import activities to end well.  From our own experience of more than 15 years dealing with Asian suppliers, we therefore will be sharing some of the main recommendations while negotiating with companies in China.

1. Make sure we know what we wish to achieve

This may sound like a very simple recommendation (almost too simple), but when a company embarks on the adventure of sourcing products for the first time, all too often some basic previous preparations have not been made and neither has a clear sourcing strategy been well developed, all of which may lead to not defining correctly what we wish to achieve.   In this context, the previously mentioned preparation phase, before the sourcing activity itself, should start by identifying exactly the products we want to purchase, which are their specifications and when do we need them.  It is only after having established our demands in a clear way, that we can start negotiating, while avoiding any type of confusion that may deviate our attention.

2. Bye to all hurries

In the West it is very common to be in a hurry in almost all of our contexts of our life (including in business), but in Asia things tend to go in a different way. It is best to forget about hurries when starting to negotiate with Chinese companies, because in this country commercial relations tend to have a long-term scope and Asian negotiators will want to control well the situation. To be in a hurry will only create a lack of trust with our counterpart.

3. Listen attentively to what the negotiator says and keep an open mind

In any commercial relation an exchange of interests has to exist, and it is fairly common that one of the two parties has to cede a bit more than the other side. Nevertheless, while negotiating with Chinese companies we should try to avoid making proposals that are very far away from the starting point of the exchange. Neither is it very much to be recommended to reject literally everything the counterpart offers.

4. Total respect

It is worthwhile to note that we will be negotiating with people from a very different cultural background, which may lead to misunderstandings in terms of actions or gestures seen during the negotiation. It is better to avoid sudden movements, as well as raising our voice. We can’t risk a situation whereby our attitude may be interpreted as aggressive by the counterpart in this process.

5. Avoid using a distant attitude

Although this recommendation might be applicable to any negotiation in any part of the world, at times it could be hard to know how to act appropriately in this sense while dealing with Asian countries, most of which might be culturally distant from us. Learning some words or expressions in our counterpart’s language, as well as showing interest in their culture, it will all help to create a more comfortable atmosphere for the negotiation. At the same time, it is worthwhile to note that both the initial greeting as the corresponding gestures at the end of the negotiation all need to strictly follow the country’s business protocol.

You are not ready to negotiate with Chinese companies? Get in touch with an expert!

Even though you might consider yourself a specialist in the art of negotiations, when you start dealing with Asian companies, chances are that you will soon note how things are done very differently in that context and that, beyond the useful tips and recommendations you might learn, it is not always easy to achieve your goals in the end.

One should remember that communication is a key factor in negotiations and that precisely this aspect is one of the main problems with any sourcing activity in China.  And not only due to the language barrier.

In this context, many companies prefer to leave it up to an expert to negotiate their import activity, a very common outcome particularly for those business who have just started their international purchasing transactions.

In S3 Group we have accumulated more than 15 years of experience managing a wide variety of sourcing services and from this perspective we can definitely confirm that a well-executed negotiation is key for the import deal to be successful and, as a consequence, to improve the competitiveness of the company (reduced costs, more profits, etc.).

Additionally, when counting on the external support of a sourcing partner we can avoid many of the expenses associated to import transactions, like e.g., international traveling in order to negotiate with the Chinese suppliers, a cost that is often not correctly taken into consideration and which has to be passed on to the final sales price of the product.