Case 06: Negotiating in Shanghai
Bob Andretti, a 32 year-old engineer, was in Shanghai on his first visit to China. He was there to negotiate a joint-venture agreement with a large public-sector company. On the fourth day of meetings the two sides were discussing delivery of factory equipment worth about $7.5 million which Bob’s company was to supply the joint venture.
At one point the American could see that the Chinese side apparently did not understand the shipping term ‘FOB’. This misunderstanding would have the result of understating the value of the U.S. firm’s contribution to the project by a few hundred dollars.
To clear up the misinterpretation Bob turned to the Chinese company’s 55 year-old senior engineer. “Mr. Li, I guess you don’t understand what we mean by FOB. Let me explain it to you briefly…”
Having smoothly corrected his counterpart’s mistake, Bob expected the meeting to get back on track. But to his surprise, the Chinese negotiators now seemed to lose interest in the proceedings. In fact, shortly thereafter they adjourned the meeting without setting a date for the next session.
Bewildered, Bob called his home office that evening to report that after a very promising beginning, negotiations were now suddenly at an impasse. If you were to explain to Bob Andretti what happened to damage the atmosphere of the meeting, which of these explanations would you choose?
1. The Chinese were unhappy because under Bob’s interpretation of the delivery terms they would have to pay several hundred dollars more than originally anticipated.
2. Bob was being too formal. After three or four days of meetings it was time for him to address the Chinese senior engineer by his first name.
3. In correcting the leader of the Chinese team in an open meeting Bob had caused him to lose face.
4. None of the above.Assuming it was important to clear up the apparent misunderstanding, how could Bob have handled the clarification in a different way?