Case study: Intercultural Negotiation
Canwall in China
Two Canadians representing Canwall, a manufacturer of wallpaper printing equipment, went to a town north of Shanghai in the province of Jiangsu, China, to negotiate a sale to a new wallpaper production company. Charlie Burton, the president of Canwall, was traveling with his Marketing Director, Phil Raines. The company had never before sold its equipment outside Canada, and two Canadians were delighted with the warm reception they enjoyed in China.
This wasn’t the first meeting between the Canadian company and the Chinese wallpaper factory. The manager of the Chinese company, Mr. Li, had been a member of a delegation to Canada. He had met with one of Canwall’s senior salespersons and the director of manufacturing. Subsequently, a trade representative from Canada had been in China representing Canwall’s interests to the Chinese manager. After those meetings and numerous letters and faxes, Canwall’s top people were now ready to negotiate the sale.
The day they arrived they were met at the airport in Shanghai by Manager Li himself, and transported in a chauffer-driven car 90 miles to the town. Their accommodation was in a newly built hotel. A few hours after their arrival they were treated to a 12-course banquet given by their host, with several high-level municipal officials present. This red-carpet treatment made them feel optimistic about the sale.
The next day, they were taken to see the sights nearby: a large port for container ships and several factories that indicated the prosperity of the region. They were eager to begin discussing the sale, but after lunch they were given time to rest. In the late afternoon, one of the manager’s English-speaking employees came by with news that they would be taken to see a local dance company’s performance that night.
On the third day, they finally sat down to meetings. Progress seems very slow, with each side giving generalizations about itself that seemed to the Canadians to be unrelated to the sale. They used an interpreter supplied by the Chinese, who was eager to please them, so the Canadians felt comfortable with her, but translation slowed down communication.
The Chinese also spent a lot of time talking about the Canadian trade agent who had been in their town earlier and asking about him. Burton wasn’t able to tell them much about that person since he had never met him.
When the Canadians at last were able to make the presentation they had prepared, they were surprised at the number of people who showed up: ten Chinese faced them across the table. The Canadians were a bit disconcerted when several people at different times answered mobile phone calls, without leaving the room and without apologies. Still, the Chinese frequently nodded and smiled and said “yes.” Burton and Raines had prepared sales data and showed, effectively they thought, that within five years the factory could double its current production. At the end of the day, the jubilant Canadians returned to their hotel rooms confident they had sold the equipment.
The next day, they were asked to explain once again things they thought had been covered already to a Chinese team with four new faces in it. They were confused about who their negotiating counterparts really were. Their jubilation began to evaporate. They were asked to explain the technology in minute detail. Neither Burton nor Raines had been involved in the engineering of the high-tech component that was the heart of the equipment. After doing the best they could, they returned to the hotel exhausted.
Their interpreter also seemed to be unfamiliar with technological terms, since she and the interpreter for the factory spent some time discussing the terms between themselves. Because the Canadians’ interpreter was a woman, they had to meet with her in the hotel lobby to discuss their plan for the next day. The two tired men would have preferred to sit in their room while they talked with her rather than in the noisy lobby where they were the object of curiosity, but she requested they remain in a public place because as a woman she could not meet with them in their room.
The next day one member of the first-day Chinese team pointed out discrepancies between what they had said and what the manufacturing director, an engineer, had told them in Canada. Burton and Raines were chagrined. The Chinese were reproachful about the discrepancies, as if the Canadians had been caught out. At lunch, the two Canadians quickly faxed Canada for specifications and explanations. The afternoon session was uncomfortable, although everyone was polite. Burton and Raines were a bit unsettled when a middle-aged woman suddenly burst into the negotiating room and whispered in the ear of one of the key Chinese speakers, who immediately got up and left the room. The Canadians expected some explanation for the emergency, but none ever came.
The Canadians didn’t receive some of the documentation they needed by fax until the following day, because of the time difference. Discussions resumed with the same questions being asked yet again. It all went very slowly. The Chinese appreciated the high quality of the Canadian product but worried they couldn’t be able to fix the equipment if it broke down. They suggested – delicately, to avoid implying that they expected breakdown – that perhaps the Canadians could give them some help with maintenance training. The Canadians pointed out that the expense and difficulty of keeping someone in their city for several weeks or months and expressed confidence that there wouldn’t be any problems the manual didn’t cover. They confidently asserted that Chinese would be able to look after the equipment just fine.
Finally, the technical discussions gave way to the issue central to most business negotiations: price. This proved to be the most difficult of all. The Chinese began by asking for a 20-percent price discount. The Canadians thought this was outrageous negotiating ploy; they stuck to their price, which they knew to be fair, and offered a 3-percent discount on the printing cylinders.
Although Burton and Raines had heard that negotiations took time in China, they had thought a week would be ample. Now time was running out, and they were due in Beijing in two days. The Canadians began to ask pointed questions about what the Chinese were unhappy with and where they needed to go over issues again. During the last two sessions, the Canadians tried to get the Chinese to focus on the unresolved points, but the Chinese seemed reluctant to do so.
Things were still unresolved when the farewell banquet was held the following noon. The question of price seemed near solution, but not the method of payment. That was the final, apparently insurmountable hurdle, since the Chinese couldn’t guarantee the payment schedule; it seemed tied to deadline and requirements of the municipal officials. Nevertheless, Manager Li smiled and spoke of mutual cooperation for the future, and past Chinese-Canadian relations, and the great amount he and his factory could learn from the Canadians. They signed an expanded version of the letter of intent that had been signed nine months earlier in Canada. The Canadians left disappointed but with expressions on both sides of willingness to discuss the sale by mail and fax.
The Canadians were stunned to learn two weeks later that the factory had decided to buy from a Japanese equipment manufacturer. They knew their product was good and their price was fair. What happened to derail their sale?
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