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‘Know thyself, know thine enemy, know the lie of the land and thou shalt win 100 battles’ Sunzi’s Bing Fa or The Art of War.
The underlying premise to Sunzi’s Bing Fa, written over 2000 years ago, is that a true victory over an opponent, is gained by a strategy of tactical positioning. For the Chinese, to have to resort to open conflict is to say that these artful skills in strategy are lacking. Understanding the implications of the above and other Bing Fa sayings, is second nature to most successful people in contemporary China. It illustrates the deep importance of ‘strategy’, to winning in all endeavours of Chinese life, especially business.
Designing and then optimising your strategic control is thus essential to conducting business in China. Maintaining leverage over commercial arrangements, minimising and managing the risks (and the risks, understandably, are different in China!) are also critical to a winning strategy. To do otherwise is to expose your business plans to possible ruination. But isn’t this just plain good business sense in any commercial situation?
To return to the above Bing Fa saying, preparation is part of a successful China business strategy. In addition to becoming familiar with the more tangible transactional information, eg. laws and regulations, knowing your product and business strengths and weaknesses in relation to the China market is also part of this preparation. Knowing your own and your staff’s personal skills, strengths and weaknesses in relation to doing China business and practical China training will ensure you have the best ‘soldiers’. Careful selection and thorough research into business partners (and customers), particularly soft due diligence (research into character and reputation), is also critical as is learning about the specifics of the local context.
Learning early about those things which are done differently in China will lead to an increasing understanding of how your own cultural norms and expectations in specific project situations may differ from those of your Chinese counterparts. For example, negotiating in China across language and cultural differences and in an unfamiliar locale, with very different legal processes and systems, can be a very unsettling affair for those who have not done all their homework; ‘Entice the tiger to leave the comfort of its mountain’- Bing Fa. To start with, lavish banquets may lull you into a false sense of security; ‘Hide a knife behind a smiling face’ – Bing Fa. True due diligence may be problematic; ‘Create something from nothing’ – Bing Fa.
During negotiations, wearing you out on what seems to be a triviality can result in you then relenting on the key issue; ‘Distract your opponent’s attention eastward when you mean to attack westward’ – Bing Fa. Denigrating, or an expression of disapproval to, you or one of your team, who is found to be formidable, is a another way to weaken the negotiating team – ‘remove the firewood from under the cooking pot’ –Bing Fa.
Further, misunderstandings can easily develop because of different conceptual or normative frameworks. All this allows the Chinese side to gain considerable overall advantage in negotiating on their own turf, on their own terms.
The often short-term focus of individual corporations can also place their representatives at disadvantage when negotiating with people with the long-term strategic focus of a collectivist nation such as China. Most of China’s strategic resources such as telecommunications, minerals, gas or oil are in the hands of state owned companies, either national or provincial. In western economies such strategic resources are often fully owned by private concerns. Their focus on short term gain can blind them to a different focus on the long term strategic control of resources or source of supply; Crossing the ocean without the sky being aware of it – Bing Fa
WATCHPOINT: Know thyself, know thine enemy, and know the lie of the land.
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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