Carmaker in China

Volkswagen (VW), the first overseas carmaker in China, is the only foreign manufacturer to have been making profit in China over the past decade. The company signed a joint venture agreement with China, one of the country’s first major joint venture agreements, in 1984 and involved many government authorities. In addition, the company built its first manufacturing facility in collaboration with the local companies. The company succeeded in gaining market leadership through product quality, reputation and pricing, indeed every Chinese knows VW.

Even though the price margins have decreased following its entry into the WTO, no other carmaker has yet been able to whittle aware VW’s competitive edge (March, Wu, 2007, p. 71) VW was first approached by China National Technical Import Corporation in 1777 and in 1978, a delegation visited VW headquarters in Wolfsburg, Germany. The first VW delegation went to Beijing in 1979. So there were six years of negotiations, involving at least seven parties on the Chinese side, and major contracts were negotiated, including a joint venture contract, a technology transfer agreement, articles of association, supply agreements, and a planning agreement.

One of the original VW negotiators with China, Heinz Bendlin said that even in the early days the Chinese behaved courteously. They, unlike their western counterparts, were patient and spent considerable time in solving problems step by step or ibu ibu, as the Chinese say. Setting deadlines or showing impatience leads to disadvantages in negotiation. Also it was seen that Chinese liked to negotiate in rather large groups. Fairly frequently, three or four VW people negotiated with ten to twenty Chinese. However, typically only one would speak while others took notes and the entire team was much disciplined (March, Wu, 2007, p. 72)

During negotiations they would try to cultivate friendship to seemingly manipulate situation and asked to repeat matters several times, just as a tactic VW, on the other hand, never tried to show that only their products and plans were outstanding and listened carefully to the Chinese. Instead they explained the facts and figures as often as they required, explain why their offer was the best one and why certain payments were asked. The best thing is to behave as the Chinese negotiation teams did, in a disciplined manner without confusions and being extremely well-prepared (March, Wu, 2007, p. 73)

Looking back on its successful negotiating style with the Chinese, VW suggested the following seven points as the keys to its success: Have small team and don’t change the team members. Show up as a team. Remain patient and never negotiate under pressure of a deadline. Explain facts and figures and your ideas as often as you are asked to do. Convince your partners through facts and figures that yours is the best offer. Do not get nervous when the Chinese use the mass media to influence their position in negotiations. Do not seek quick results, since they could be bad results – especially in China. (March, Wu, 2007, p. 73)

References

Ambler T, Witze M, (2007), “Doing Business in China”, 2nd Edition, Published: Routledge/Taylor & Francis Group, New York Bucknall K, (2002), “Chinese Business Etiquette and Culture”, Published: C&M Online Media, Inc & Boson Books Chen MJ, (2003), “Inside Chinese Business: A Guide for Managers Worldwide”, Published: Harvard Business Press, Boston, Massachusetts Collins R, Block C, (2007), “Doing Business in China For Dummies”, Published: For Dummies, Danvers, Massachusetts Dahles H, Wels H, (2002), “Culture, Organization and Management in East Asia: Doing Business in China”, Published: Nova Publishers, New York