Smart Shanghai Team » purchasing http://www.smartshanghaiteam.com Negotiation Training in China Mon, 15 Dec 2008 00:14:59 +0000 http://wordpress.org/?v=2.9.2 en hourly 1 China Purchasing Managers – Renegotiating Deal Terms in a Recession http://www.smartshanghaiteam.com/2008/12/03/china-purchasing-managers-renegotiating-deal-terms-in-a-recession/ http://www.smartshanghaiteam.com/2008/12/03/china-purchasing-managers-renegotiating-deal-terms-in-a-recession/#comments Wed, 03 Dec 2008 03:01:27 +0000 Andrew http://www.smartshanghaiteam.com/?p=46 China purchasing managers are negotiating successfully for better deal terms.  The lucky ones are going for more advantageous terms in future negotiations — but a few are learning to give bad news about deals that were negotiated in the past.   

Right now, the power balance is in your favor.  Smart purchasing managers, however, will take care not to alienate their network of suppliers.  In the future, there may be shortages and technological breakthroughs that will give the seller more power in the relationship.

Here are a few ideas for handling the deal-renegotiation call with a western or MNC supplier:

  1. Be as direct as you can.  They are expecting the call.  Don’t make it worse by dragging it out.  I know that if the counter-party is Chinese you may be a bit more polite and round-about.  When the counter-party is Western (or has Western bosses) then you are being kinder by being quicker.  Start out with, “I’m afraid I’ve got some bad news.  We have had new orders from the very top to cut costs and review all existing contracts…”.   You can take it from there.
  2. Show a little transparency.  Give your suppliers a little information about your situation – particularly when you expect to be big buyers again.  If you are in financial trouble, be as honest about the situation as you feel is appropriate.  Chinese buyers can very tight-lipped at times – and it often serves them well.  This is not one of those times.  Share a little info and learn more about the seller’s situation as well.  
     
  3. Don’t let it get ugly.  You remember when the situation was reversed and you were begging for reasonable prices and the other guy showed you no love.  Now is your chance for revenge, right?  Wrong.  Now is the time to secure your future relationship with key suppliers and strategic partners.  You want to come out of this global recession in a stronger position — not just see your suppliers fail.  

Go to www.ChineseNegotiation.com for their take of how Western sellers are handling the renegotiation call.

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My name is Andrew Hupert, and I’m a teacher and writer in Shanghai. I am now working on a project for my International Negotiation class at New York University’s Shanghai campus (in cooperation with East China Normal University). 

 

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]]> http://www.smartshanghaiteam.com/2008/12/03/china-purchasing-managers-renegotiating-deal-terms-in-a-recession/feed/ 2 China purchasing departments need key relationships with their key suppliers http://www.smartshanghaiteam.com/2008/10/17/china-purchasing-departments-need-key-relationships-with-their-key-suppliers/ http://www.smartshanghaiteam.com/2008/10/17/china-purchasing-departments-need-key-relationships-with-their-key-suppliers/#comments Fri, 17 Oct 2008 02:03:43 +0000 Andrew http://www.smartshanghaiteam.com/?p=20 I remember sitting with a group of purchasing consultants talking about the problem their clients were facing.  One purchasing manager told that his standing instructions to were to negotiate a 10% price decrease for the same parts and materials EVERY year.  There are only 2 ways to sustain that trend:

1)  Find new suppliers each year — assuming that competitive pressure and hungry new sellers would ensure an endless stream of new suppliers, because you have to find a new source every couple of years.

2)  Build a long-term relationship with a single key-supplier and negotiate a long-term plan based on your requirements.

Most Chinese purchasing managers have been doing #1.  And this may work great during the early stages of a bear market.  But once the bankruptcies and buyouts have taken affect, there are going to be signficantly fewer players in the market.  Then you are going to have to learn to do #2

Hint:  Now is a great time to negotiate longer-term key-supplier relationships with solid companies.  Every company doing purchasing in China needs a solid list of key-suppliers.  Now is the time to forge long-term, friendly, mutually beneficial purchasing terms with your China supplier.

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