Two weeks into an international business trip negotiating and establishing a long term procurement and supply contract for our customer in China, things did not go exactly as planned.
Frustrated that the contract that I have been negotiating for about three months with a supplier has been delayed due to lapsed permits.
Missing family, missing home, missing football, missing salad and missing the beach!
Recognised the onset of “gotta finish, gotta go home” state of mind.
The “gotta finish, gotta go home” mentality is the pressure to deliver tangible result within the limited time that you have in negotiating business internationally. In the context of international business negotiations, it puts you at a disadvantage and your counterpart in the advantage.
The important thing is to recognise it and make sure it does not influence your business decisions. You should be willing to walk away from any transaction if you do not get the outcome that you want regardless of the timing.
I am now negotiating with another supplier. Over the weekend, I met with supplier’s representative. He gave me the draft contract. Reviewed the draft contract. On Sunday night, I emailed the proposed contract amendments to the new supplier.
Below is the account of my third week into a supposedly two week business trip. Pressure is on.
Day 15, Mon: Waiting for supplier to respond to my proposed changes to draft contract to mitigate our domestic, sovereign and financial risk.
Supplier agrees for our representative to do ocular inspection of the site and obtain product sample. The new site is about an hour and forty minutes by plane from the main city where I am staying.
Sent funds to our representative to cover expenses and cost of testing.
Day 16, Tues: According to our representative site was the best he had seen. Sent product sample to laboratory for independent testing. It will take 24 hours to get the Test result.
If test result is positive, we will go to the site to do full due diligence.
Reached agreement with Supplier on the draft contract. Will sign final contract when we go to the site scheduled for later in the week.
Day 17, Wed: At 4pm, received confirmation from laboratory that sample result was positive.
Great! Booked flight and accommodation for the team.
One team member is going on Thursday morning at 6.30am. Another team member and I are going on Friday at 6.30am.
Day 18, Thu: Team member leaves at 6.30am arriving at the site at 11am. Quite pleased that all seem to go as planned.
Spoke to soon!
At 7pm, dinner and planned to go to bed early for 6.30am flight the next day.
Received phone call from team member.
His first words were “we have a big problem Houston”. Supply is not ready. Further processing required. We need to postpone our trip. “xx@@##???xxHK!”.
My mind goes into contingency mode.
Had to scramble. Rang travel agent to re-schedule flights. Had to pay a rebooking fee. “xx@@##???xxHK!”. Rang hotel to cancel our booking. “xx@@##???xxHK!”.
At 8.30pm rang and spoke to supplier and our team member who was already at the site to get full story. Now have to push back our schedule by 5-7 days. “xx@@##???xxHK!”.
Day 19, Fri: Went to travel agent to rebook flight. Paid rebooking fee. All airlines now charge a rebooking fee. This used to be a free service!
Met with other team member. Had to decide on next steps. Project now delayed for a number of days. Will travel only once supplier confirms availability of stock within agreed quality specifications.
Day 20, Sat: Our team member at the site advised that they processed only limited quantity of stock. They encountered mechanical problem with the processing equipment and had to do maintenance work. More delays.
Day 21, Sun: Site is closed. No work.
International business is often beset with challenges and frustrations. It is not a short term thing. It takes time, money and a lot of effort to develop personal relationships, find reliable and trusted partners, negotiate contracts, establish systems to make it happen and then execute the project.
I have been working on this project for two and half years. We made our first delivery in March of this year from another supplier. We want to develop a long term relationship with this new supplier. The relationship building process is an ongoing exercise.
Below, I share some important things that you should keep in mind when doing business internationally.
- You have to understand the people that you are dealing with, their motivation and business culture. This is basic stuff. The thing about doing business in Asia is there is a story that they tell you and there is another story that they do not tell you. It is the other story that they do not tell you which is more important. This is something you have to uncover as you go.With business culture, when in Rome you do what the Romans do. Basically, you have to be willing to do business the way the locals do business. If you are not willing to do this then you are just wasting your time.
- 2. Developing trust from both sides is extremely important. People will only do business with people they trust. However, regardless of the level of trust that you have established you must always keep front of mind how to mitigate risk particularly with regards to your personal safety and money.
- 3. Be flexible in structuring the deal. The way you structure the deal at home may be completely different to the way you structure the deal in Asia. The main thing to remember is to be flexible in the way you approach a deal as long as the deal is within your mandate and it is legal.
4. Always have a contract even if you are dealing with a relative or a close friend. And even if you are dealing with your long lost grandmother, you should still have a contract.Contract negotiations is often the most painful part of the process but once it is in place you can put it in the drawer and get on with the business. In any business deal, there are always risks. The main thing is to minimise those risks. Your contract will at least provide you with a basis to minimise those risks if ever disagreement or a black swan event arises.
Note that in Asia, a contract is never final. Think of it more as a working document.
- 5. Be aware of the “gotta finish gotta go home” mindset particularly its impact on your decision making. There is always pressure for you to perform. You have or your employer has invested money in this deal so you are under the pump to make it happen. You have to show results. Right!
Thing is, in Asia they operate on a different time frame. What might take you one month to do at home will probably take six months plus in Asia. People you are dealing with do not care if you are only in town for two weeks and under pressure to show tangible results to your boss.
All your counterpart cares about is what they will get out of the deal. If they do not get it today, they are happy to go home to their family and start again the next day.
The main thing to remember is to recognise the “gotta finish gotta go home” mindset and make sure this does not affect the quality of your decision making and thus, the quality of your deal.
- 6. In doing business internationally, you must be willing to invest for the long term. If you want short term then I suggest that you stay at home.
At the earliest, you might get lucky and get a result in one year. For most, you will be looking at a 3-5 year window.
One of the biggest projects that I did which was worth $250 million took more than three years just to get it to the signed contract stage and involved travelling overseas almost every two weeks.
- 7. In Asia, referral is King. And the higher up the referring person is, the better. Trust is very important in doing business in Asia. By getting a referral from somebody high up you are basically short circuiting the trust building process.Just make sure though that you deliver on whatever you promise. If you fail to deliver, the person who referred you will also lose face. Not just you. This is something you should avoid at all cost.
- 8. If you can, have a local team behind you consisting of a trusted local confidante, a lawyer, an accountant and a contact from your country’s foreign and trade office. It is always good to have somebody you can talk to just in case you encounter some challenges along the way.
Now back to my supply contract ….!
Hope the above helps you in some way in your international business journey. Would love to hear what you think?