Getting quotes from Chinese-based suppliers is a lot different than receiving quotes in your own country. Careful analysis, examination, and a hard look at each part of a quotation are needed to prevent future problems. Indeed, getting a quote is the easy part, and after receipt of a quote from them, your hardest work begins. If you are the end user or an agent of the end user, you must understand that the reputation of the Chinese as “inscrutable” in business is on target and is evidenced by how their quotes seem to be less firm than those of in-country suppliers.
Following are tips to help you use psychology to help prevent problems with your reaction to your Chinese supplier’s quote.
Tip 1 – Negotiations Need Time to Gel
When you get the initial quote from them, view it as a first draft. Both you and the supplier will be engaged in a lengthy back and forth. The best way to deal with an initial quote is to acknowledge it and tell the supplier you will evaluate it and will send any questions to the supplier in a follow-up email.
So, spend the time you and perhaps your colleagues need to complete a full analysis, as quotations from the Chinese are known for their looseness.
Tip 2 – Initiate Contact
Once your Request for a Quote (RFQ) is answered, it will be along the lines of a very generic response – such as “our quote completely meets your RFQ.” Of course, this sparse amount of information is insufficient for you to act on, but, your virtual relationship is established.
Your virtual relationship is instead of a face-to-face meeting where you have fluidity in discussions that go over every aspect of the quote – you need this virtual framework to succeed in email negotiations with them.
Tip 3 – View Your Supplier Quote as Unsettled
While assumptions are usually a poor way to begin relationships, you can safely view the initial quotation as “unsettled.” Price quotes from them have a well-earned reputation for being shifting and lacking important information when first received.
One reason for this is the number of inquiries they get each day. Most of these are from overseas companies and never lead to completion. The tactic of a flawed quote is to gauge customer interest – unanswered quotes are quickly ignored.
The Chinese business person is not contrary to changing a quote – another reason for their tactic of changing goal lines is to be sure the inquiry is genuine.
On the other hand, isn’t that the purpose for the RFQ? – to discern supplier interest in fulfilling your needs.
Tip 4 – Ask for Samples and References Before Inking a Deal
It is impossible to judge their capability and skills from a distance. Therefore, you must ask for references and check them. In addition, references help in the selection process but don’t go far enough. Ask your potential supplier for samples of their work. When checking references. Include a query as to the potential supplier’s record for respecting intellectual property rights.
Tip 5 – Haggle hard, but for the Right Things
If you don’t bargain hard, the Chinese business community will think your company is a weak partner. However, bargaining just on money issues will get you limited results. So, bargain for the things that are important for you such as quality guarantees, delivery dates and such. Some negotiations end up with “pay for performance” clauses that allow the contracting companies to get paid based on performance. Substandard shipment, delayed shipments, and other failures on the part of your Chinese supplier then results in a delayed or forfeited payment or payment at a discounted price.
Tip 6 – Keep Your Email Negotiations in Perspective
The Chinese culture flows into their business practices. They view the negotiation process as allowing for change – in their response to your RFQ and in changes to your stated requirements. When they respond to an RFQ it with the attitude that if there are issues with their response you will tell them – and they can decide their next steps based on your response.
Always keep in mind that workloads vary from vendor to vendor and if there is no prior relationship, the accuracy of initial quotes will vary – busy vendors being even vaguer than less busy ones.
While in your own country, accuracy may be expected from suppliers. However, in your search for Chinese suppliers who are lower cost, the expectation of accuracy is simply unrealistic. They do not know you, their culture, and their business practices differ from nearly all other countries including many is Asia. Bracing yourself beforehand for an inaccurate initial quote is helpful – you are prepared and will not explode when it happens.
As with most relationships, as you and the supplier continue to have a business partnership, the inaccuracy of quotes diminishes and may even disappear. Recurrent orders and larger orders help to make this happen.
- The Chinese’ reputation for being savvy and cunning in negotiations is present even in email negotiations.
- Negotiations take a longer time to complete than with in-country suppliers.
- Cultural difference plays a part in lengthy negotiations as doing business practices depending on how busy the supplier is – the busier the supplier, the lengthier the negotiation.
- Ask for references and check them
- Ask for samples from the potential supplier
- When bargaining, negotiate tactics should include haggling on issues that include but are not limited to price.
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