How to negotiate with your China vendor

I saw a discussion in an online small business community the other day about what the best negotiating tactics are.

Some of the suggestions that people had are as follows:

1.) Build trust by listening to others and acknowledging problems

2.) Never negotiate under pressure

3.) Lay out the result you want and ask them how to get there.

4.) Make an emotional connection.

Although these may be good negotiating tactics in the US or other western cultures, let’s see how they apply to China. I will go through 1-4 as per the above:

1.) In China it takes years to build trust. You do not establish trust in negotiations with a first time vendor. Do you listen to and acknowledge your vendor when they tell you about production limitations or why they can’t reach your target cost? Of course but that does not mean you should believe them. So always be nice but ask questions to give your vendor the idea that you are no pushover and will question everything they do.

2.) This is a good rule. Never negotiate with a vendor when you are in a rush to find a supplier. They will sense it and you will not win. Always project the attitude to the vendor that you have plenty of time to find a supplier and that you will go elsewhere if they cannot meet your target costs.

3.) This is very good advice. Tell the vendor your target cost. If they say they cannot give you the product you want at the price you want, then ask them what changes they can make to the product to get the price down.

4.) This is good advice and can be a very effective tactic when you do business in China. But to do so you have to speak pretty good Chinese. You are not going to make an emotional connection with anyone in China if you speak English only.

Finally, although I do use some of the tactics listed above, this is generally how I see negotiation in China in a nutshell:

The key is to know the true cost of your product and build your target costs around this. If you meet with a lot of resistance when you tell a vendor your target cost, then don’t waste time with that vendor. The reason is this: Even if the vendor finally agrees to your costs, at some point they will try to recover what they may have given up in negotiations, by cutting corners in production or throwing a price increase at you late in the game. So my negotiation advice is always to lay out for the vendor what you need and if they really don’t seem willing to accommodate you then look for someone else who wants your business on your terms.

Finally, the Chinese negotiating method is often characterized – in articles and books about doing business in China – as a long drawn out process whereby the Chinese try to wear down their opponent into making concessions favorable to the Chinese side. There is some truth to this. When in the 18th Century Great Britain wanted to establish formal trading relations with China it sent Lord McCartney to Peking to negotiate on its behalf. Negotiations took over two months. But, remember, you are simply negotiating a cost of a product and not bi-lateral trade agreement. Negotiations should not take long and if they start to it means that you would do best to move on, just as maybe Lord McCartney should have. In the end he returned with nothing.

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