December 6, 2011
The first rule when negotiating internationally is to forget what you learned back home about talking business. If you’re not armed with the right negotiating skills in markets such as India, China or the Middle East, you may well lose out, says Ned Nedungadi, BDC’s Regional Director for Global Expansion.
Nedungadi tells the story of one deal that went off the rails because of a lack of understanding of the negotiating style in India. A Canadian entrepreneur became impatient towards the end of a lengthy meeting with potential partners in Delhi that was heavy on niceties and light on deal making.
At the end of the meeting, the entrepreneur decided he would rather prepare for his flight home rather than accept a dinner invitation from his hosts. Wrong move. In the eyes of the Indians, the dinner was the venue for sealing the deal. When the Canadian declined, they were insulted and negotiations fell through.
“Not knowing that in some cultures the real negotiations come after a business meeting can cost you millions of dollars,” Nedungadi says. “In many of these cultures, time is more elastic than in Canada. So you should expect your partners to be patient and be patient yourself.”
Nedungadi has advised and accompanied many BDC clients on business prospecting trips abroad and has also operated companies in Singapore, the Middle East, Europe and Canada. He offered some tips to ensure your international negotiations go smoothly.
Be Prepared. It’s important to prepare for the negotiating style you will find in your target market, Nedungadi says. Let’s say that you are negotiating in Canada, and your business partner asks $10 for a product. You want to pay less and ask him to take 50 cents off.
The same negotiating process, this time in Asia. You have to start your discussions by slashing 70 percent off your potential partner’s initial asking price, Nedungadi says. After long deliberations, you will get to a compromise at 40 or 50% of the initial price.
“If you negotiate the Canadian way overseas, you leave a lot of money on the table.”
Also, it’s wise to spend time learning about the background and the history of the country. “The history is what makes the people.”
Be Patient. The typical North-American attitude is to fly to another country with the intention of signing a contract. But that’s not necessarily the attitude of your business partners. “Flexibility is imperative and patience is paramount.”
Don’t rush things. A simple deal that might take two days to close in Canada can go up to 10 days in Arab or Asian countries.
Think long-term. In some cultures, business people don’t think in terms of single deals, but rather building an entire future business relationship with you. This colours the amount of time they are willing to spend on negotiations.
Be respectful. Your deal may hang on to some apparently insignificant cultural detail.
It goes without saying that it’s always wise to stay clear of politics and religion when negotiating.
On the other hand, don’t be surprised if things get personal and you have to answer questions about your age or your family. It also isn’t unusual for people to invite you to their home even if you have just met.
Find experienced allies. Whether you are selling something abroad, looking to find a distributor or someone to represent you in a specific market, you will be better off if you have someone on site who knows the language, understands the market and is on your side.
“We travel with our clients and also have partners in selected markets. This gives Canadian entrepreneurs a sense of comfort during negotiations,” Nedungadi says.
Plan your moves in advance and always be ready to move on to a “B” scenario.
“It is a good thing to expand your business. But the key is to be prepared.”
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