Managerial implications

Managerial implications. Priority In the late 70s and early 80s, when a number of Western firms were negotiating with China due to newly spread China fever, many of them were greatly disappointed.

After negotiating for months or years, they realised that foreign was not available for firms. Even for the Chinese authorities it was a great problem as they were losing face and credibility among the investors. As a result, as long ago as in August 1985 the Chinese authorities announced four categories of priority projects to attract foreign investorsEnergy and mineral recources, high technology, medical equipment and food- processing, and construction projects.

During this spell of China fever-1993-1994 things improved in China. The decentralisation of decision making and the independence were given to provinces facili- tated business activities and the process of negotiating. Basically the Chinese government selects the projects carefully and the priorities change from time to time. But the culture of standing by agreement leaves much to be desired.

Even the authorities are enable create obstacles such as unnecessary delays. On the other hand, if the project goes with the categories mentioned above the firms are in the better position in negotiation and implementation. As a rule the foreign exchanges are approved by financial authorities. It is also important to gather information of Chinese negotiators. Time and patience is the most important assets of foreign firms exercising negotiating process in China. Many potential investors get frustated since the Chinese, sometime, are slow in signing of a contract even if the everything has been settled. The Westerners get impatient waiting for final agreement. Probably it is rather incommodious participating in many stages of negotiating processes for several months.

For swedish Ericsson it took more than two years to conclude an agreement a telecom- munication contract while for Otis it took 5 years to establish a joint-venture. And the story of the French businessman who went insane is quite well known After about one year of discussions and travelling back and forth between different departments, he was told by the Chinese that they were willing to buy his technology.

He telegraphed his office that the contract of 500 million has been concluded. The chief executive wired back immediately that he was on his way to sign the formal contract. And the next morning a high ranking official from the Ministry of Foreign Trade and Economic Relations approached to him and said, Now that we are willing to buy your technology we can start negotiations.

The negotiators, therefore should have a plenty of time, patience and strong nerves. Many of the negotiators have tried to set deadline and give other ultimatums to Chinese negotiators, but it normally does not help. Price The Western firms should be very careful in calculating the price for their technology. It is the most difficult and cruicial factor. If a foreign firm reduces its price radically, say by 15-20 percent, the Chinese negotiators get suspicious and there is a risk that the firm will lose its credibility. The Chinese get more convinced of evils of capitalismand would try to press the firm even more. The concessions given on price should be remained behind the all stages of negotiations except for the last one. The timing of such concessions is important as, if given too early, they can have too early.

The Chinese do not like to pay for the personnel of selling firm. When they hear the costs of the foreigners, they get very sucpicious, and allegations about the evils of capitalismrise again. Therefore it is advisable for the Western firms should hide these costs in their offers and include them at the cost of production, technology development or project administration cost.