Manage your risk: business in China is about having the right partner

China is for many businesses the great big unknown. It seems to hold so much potential, it is powerful, it is the source of low cost manufacturing, and shouldn’t your company be looking at entering the Chinese market in some capacity? China is also a large market in its own right and this is another opportunity which you could take advantage. But how do you do it?

China the forbidden country?

We have all heard the horror stories of business failure in China, or Intellectual Property being stolen and a product that is identical to your being launched on the global market place as a competitor. This is not necessarily how things need to be for a company looking to invest in China in any capacity.  It is critical for the success of any business venture for you to manage your exposure to risk, and with China, you may need to consider many more factors then those risk factors that are common in established ‘western’ markets. So how do you go about entering the Chinese market?

There are of course a few ways in which you can enter the Chinese market, those which are high risk, such as searching for manufacturers on the Internet. A simple search on http://www.alibaba.com will show you a plethora of manufacturers who can provide products to any specification required, and many will have pictures of their “manufacturing plant”.  Using this method of finding a business partner in China is rife with danger and risk. How do you know that the manufacturer is who they say they are? are they a middleman? or the manufacturer themselves? can you afford to take the risk? and are you getting the best deal possible? The answer to all these questions may indeed be NO!! The old refrain “buyer beware” is important whenever you enter into business relationships of this kind.

As in any culture and country, there are good people, and bad people, people who will do the right things and those who will try to take advantage of you and rip you off. But there are ways of offsetting this risk in China. The Chinese appreciate and treasure relationships, so you need to be aware of this with any business venture in China.  An alternative to the high risk strategy described above is to attempt to minimise your risk exposure by conducting research on the ground in China. If you want to succeed in business in China, then you need to get over to China and meet with business people who can help you, either with a joint venture, or who can help you establish a wholly owned subsidiary. It is important that as a western company that you engage good people and partners to investigate the Chinese market. Each market opportunity is unique in China, and as a consequence any investigation needs to be unique. It is here that specialist “China” companies such as The Australia China Development Company (www.tacdc.com.au) can help. Companies of this kind specialise in investigating market opportunities for western companies looking to invest in China. They can find the opportunities on the ground in China for your company, and perform a full time role that saves your company the time and manpower to fully investigate the Chinese market.

It is important to remember that this all takes time and there are no real quick deals to be made in China. If you want a good long lasting deal then you need to be prepared for the long haul. Ultimately however if you engage the right business partner to help you, your success in China will be for the long-term.

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Maximise your strengths when negotiating in foreign language environments

Managing a cross cultural negotiation is a tricky and complicated affair at the best of times. When these negotiations occur in a foreign language environment it can be even more so, particularly if you allow yourself to become lost in the discussion.

It is easy to feel left out of the loop when those around you are in discussion using a language you don’t understand. You can feel distanced and become distracted, and it can impact on your natural communicative flow. Many challenges arise from the use of translators in business and it is how you manage these challenges that may well determine the ultimate success of your business negotiations. It is natural to ask yourself questions about the translators, questions such as:

How do you know they are translating everything as it is said? Are there side discussions? How are the ambiguous words translated? Can you trust your translator? Have they given away your business secrets?  And of equal importance does the other negotiating party actually speak your language?

There are many more questions, but if you can have a strategy for dealing with and managing these questions then you will be well on the way to negotiation success. Use your own translators where possible. If you trust your translator, and they have a long history working with you, they will know what they can and can’t say.  A good translator is hard to come by, but can become just as important as a deal broker.

Accept that if you don’t speak their language, then you are obviously going to be at a loss sometimes. In this instance you need to use your other senses to be able to pick up on the key business cues as they come out in discussion. Think of it this way, people who suffer from hearing loss or deafness can still communicate, and often their other senses are heightened to compensate. In a cross-cultural negotiation in foreign language, you too have to heighten your other senses. Finally use your time most effectively during the translation stages in the negotiation.  What do I mean?

Normally when you are in business negotiations in your own language, you may be guarded in what you say and how you say it, concentrating mostly on ensuring you don’t say something offensive, unprofessional or let out a business secret. In addition to this you may be able to notice if the people across the table understand what you are saying, maybe, although it is often very difficult to pipck up the subtle cues.  Only the most skilled negotiator can pick up the implicit cues given off in this situation. When you have a translator, you have the opportunity to watch and monitor the reactions of opposing side of the negotiation table.  People naturally give off subtle hints when listening to new information, if you can take note of this then it will give you an edge. Watch for facial expressions, fidgeting, side discussions, and any note taking. These can all be indicators to the potential success or failure of your pitch. Using a Translator also gives you pause for reflection before you deliver the next section of your presentation or discussion, so after analysing the subtle reactions of your counterparts, you can adjust your speech accordingly.

If you stay calm and maximise your strengths in observations then you will give yourself the best chance of being able to navigate the challenges posed when negotiating in a foreign language environment.

“Gan Bei”: Business and ritualistic drinking in China

As I have discussed in my previous article on “The subtle art of the formal Chinese banquet”  (https://nathanhgray.wordpress.com/2010/04/14/the-subtle-art-of-the-chinese-banquet/), the importance of relationship building to the Chinese is paramount. Apparent social functions like banquets are held in very high regard by Chinese businessmen and government official due to the ability for one to get to ‘know’ their potential business partners. This knowledge is achieved through watching foreign businessman’s behaviour during the formal and informal drinking and eating rituals that are performed during every formal banquet. It is therefore important to be aware of these rituals, drinking strategies and how to ensure you leave the banquet in higher esteem than when you arrived.

Drinking in China

 There is a definite hierarchy to the formal toasting at a banquet.  Thus the host will toast the most important guest, then the next most important and on and on down the order of importance. This must be remembered, in order for one not to jump the gun and propose a toast before ones allocated turn. It is therefore important for one to observe the banquet environment to determine ones hierarchy at the banquet table. Toasting someone is highly ritualistic and generally requires the toaster to stand and make a toast. It is important at this stage to ensure there is an adequate supply of wine, beer or spirit in the glasses of the toaster and the toastee. The glasses should be filled to the same level, if they are uneven it can imply anything from a lack of respect through to an intent to cause drunkenness. One must then propose a suitable toast, probably to enduring friendships and successful business ventures, while looking at the person receiving the toast. It is at this point that the glasses are clinked to confirm the toast. Even this ritualistic clinking is embedded with importance.

Clinking of glasses should be done in a delicate and considered manner, not smashed together like beer steins in a Bavarian beer hall.  It is important to get the glass as low to the table as possible when clinking glasses. This is much the same principle of bowing in traditional Japanese culture. A lower glass infers respect upon the other person. This can create a competitive environment when in China, as each person strives to outdo the other with the lowest glass.  Ultimately both glasses may be touching the table.  It is at this point that the toast is completed with the refrain of ‘Gam Bei’ which is like cheers, and implies that the glasses will be emptied. Obviously this could pose a problem if the glass is significantly filled, or is filled with a strong spirit, especially if you have already completed a series of ‘Gam Bei’s’. The glass should ideally be grasped with both hands, one hand around the rim and the other at the base of the glass.  Drinking the contents of the glass in a measured fashion, not necessarily throwing them back quickly like shooters in the front bar of you favourite night club. Depending upon the competitiveness of the drinking, you may be required to show the inside of your glass to prove it is empty, or even turn it upside down over your head. Allow for regional variations to determine which is the norm in this regard…when in Rome do as the Romans, when in China do as the Chinese.
At this point its starting to seem like an end of season footy trip or even a stag party…..but it is in fact serious business, and it is vitally important to remain at the top of your game. Potentially business killing mistakes can be made easily under drinking duress, so be careful. To succeed in not playing the fool or blowing the game through inappropriate drunkenness it is important that you have a strategy to deal with a ‘Gam Bei’ attack should one occur. A ‘Gam Bei’ attack is where a series of hosts all toast you one after the other; this is especially dangerous if you are at a numerical disadvantage, and your team members don’t match up evenly with the other side to reciprocate the ‘Gam Bei’s’.  If there is no disadvantage then this is easily remedied by reciprocal ‘Gam Bei’s’ by other members of your contingent, that way evening the drinking balance.  If you are under siege and have a disadvantage then you need to be a seasoned drinker, keep calm and even consider regular trips to the toilet….for a ritual cleansing (I am not joking here).
 Obviously not everyone who ventures to China on Business is a drinker, or a seasoned drinker, however, not accepting a toast is very dangerous and will be looked upon as uncivilized or potentially disrespectful. This does not mean that you will necessarily kill any deal, but it does mean a successful deal is a lot more difficult to achieve. So the moral of the story is to be prepared, be strategic, and try not to drink mystery spirits.

The Subtle Art of the Chinese Banquet

Open the Door to Business Success in China

Conducting business in China can be a confronting affair, with the rules of engagement vastly different from what we would expect in many western countries.  The number one rule when conducting business in China is to take it slow, develop your reputation or Guanxi, and build your relationships with the people you meet, whether they be business or government officials.  Business deals can be, and will be formed in a variety of locations and environments, and the relationships you develop at the Chinese banquet table can be crucial for long term success.

Banquet settings will obviously change depending upon the people you are meeting, the location of the banquet or the food variety on offer. However some things never or rarely change.

The banquet table will in many cases be a round table, large enough to seat up to 14 people. The host of the Banquet is the most important person in the room, and their seat will be at the head of the table…which at a round table may be against the wall, allowing for the host to look into the room and see all the guests easily. The next most important host will be seated directly opposite the host at the foot of the table.  The most important guest will be seated to the right of the Host, with the second most important guest to the left. If Interpreters are required then they will be seated next to the guests, to allow for easier conversation.  The third and fourth most important guests will be seated in a similar formation at the foot of the table. The other important hosts will be seated at the wings of the table. It is always best to wait until you are invited to sit at the table, this will allow you to observe how important you are perceived by the Chinese Host of the banquet.

Is it half full? or just enough?

On the table will be placed wine glasses, and a waiter will come around with a decanted wine (depending upon the company this could be beer, rice wine or barley spirit), and pour approximately two mouthfuls of wine (about 60mls) into each glass on the table.  The head of the table will indicate that he is going to propose a toast, upon which everyone present should stand. The host will then propose a toast to enduring friendship and successful business and glasses should be raised and ‘clinked’ with each member of the banquet in turn, ensuring that the glasses were clinked as low as possible and gently. Once everyone has ‘clinked’ their respective glasses, you must drink the contents of the glass. The glasses will be promptly refilled as before, and the second host will propose a similar toast. The same ritual will then ensue.  The Chinese Banquet is as much about drinking as it is about the food. The drinking is ritualistic and reinforces the hierarchy present at the banquet table.

Following the formal group toast, the host will likely toast the guest to his right, with a speech about friendship and a personal welcome, this will indicate to all that this guest is the

Ritual symbolism is everywhere in China

most important guest at the table. The ritual will then be carried out with the second guest. It is then likely that the host will propose a toast to the second host. This will reinforce that the second host is equally important, and essentially this has passed the baton to him to start his own round of toasts to the guests beside him.  It is at this point that some food may start to appear on the table, for sharing. If you are going to China, learn to use chopsticks, as failure to adequately manage them will confirm to those present that you are indeed a Barbarian…..In essence it is not much different in western cultures to eating with your hands at a fine dining restaurant.

Conversation will be necessarily small talk and informal in most cases, and it is not appropriate generally to talk formally about business. The important thing is to build your relationship, and allow your host to understand who you are and what you stand for as a person.  And this leads us to the final point in the art of the Chinese banquet.  As in many cultures, alcohol is known to loosen the tongue, and so your host may strategically arrange toasts so that you drink more than you should, and then say more than you should. Hold your own, and try not to become too loud or obnoxious. There is no surer way of killing a deal than to be rude and offensive at the Formal Chinese Banquet.

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