Ha ha ha, we chuckle each and every time but that is the pervasive perception of many people who do business in China.

And these comments come mostly from people who have been on the ground in China trading punches with suppliers for years.

This reaction is common when coming from the US, where people have sued the golden arches for making them fat or that their hot beverage was too hot.

The simple fact of reality is that China does not enjoy the direct confrontation that we do in the West when problems arise and must be dealt with.

While the courts in China are changing, it will take time for the structure of the legal system to develop, just as it did everywhere else.

In the meantime, you do have several options for dealing with disputes IF you PREPARE correctly.

Mediation is a great choice and is quickly becoming a preferred method of settling disputes in Hong Kong, if fact as of January 10^th, 2010 solicitors are required by law to inform and explain the availability and differences between mediation and litigation.

This is the direction that dispute resolution will take in Asia, and those that do business in Asia will need to understand the manner in which to handle disputes with a minimum of disruption to business.

Mediation is not a one-size-fits all solution to disputes in China, there are situations when it is a good idea and situations when it is a bad idea.

Mediation is a good idea when;

• You have a solid history of cooperation with the other party
• There are many different parties involved or individual parties where there is a clear distinction about who is responsible for your relationship
  • Mediation works best between two parties that will attempt to be fairly open about their relationship
• There are no hugely overwhelming issues between the parties
  • Mediation works well for smoothing over small bumps in the relationship road, not for overly complex and involved issues
• You have an ongoing relationship with the other party
  • Mediation is not a good option for resolving disputes with a wham-bam-thank you ma’am relationship with a supplier that you are using for a single project.
• The parties BOTH want to reach an agreement
  • If one side is going to be a stick in the mud, they will have a pretty easy time stopping the mediation process

There are also times when mediation will probably be ineffective;

• If the parties have a history of adversarial relations or there is hostility between the two parties.
  • If both parties come to the table looking for a fight, they’re going to find one and nothing will be resolved.
• If the issues in dispute are overly complex or involve many different parties
  • Remember the goal of mediation is for the parties to resolve the disputes themselves, the mediator can only facilitate the parties and act as an independent third party
• If the issues are purely legal issues or one party is forced by requirement to mediate.
  • This is the inherent issue I have with judges requiring parties to mediate, when someone is forced into a situation where they must amicably reach an agreement they will often fail to do so if forced.
• If continuing the dispute is beneficial to one of the parties
  • In a situation where one party would benefit from a long a drawn out mediation, it is possible to entice the opposing party by acting as if you are serious about resolving the problem when in fact they are simply wasting time.
• If there is a significant power imbalance between the two parties.

A well trained mediator should be able to help you work through some small problems.

Their job is the help parties look forward and not dwell on the past.

They should also be able to separate the people involved in the dispute from the problem that is the core of the dispute.

Most importantly they need to be able to help the parties find common points of interest and remember why they are doing business in the first place.

Keep your eyes open and your head on a swivel, its good advice in sports and its good advice for China.

For this situation, I don’t think there could of been a legally scripted solution to prevent this.

Like how most of these romance stories began, it was when the Buyer met the Supplier at the fair. A trade show fair that is …..

Something I should point out is, the product here is particularly specialized and the supplier is one of the biggest in China.

Unfortunately I have to keep it vague but it basically goes like this:

-Buyer meets supplier at fair

-Supplier sells a sample to buyer to approve

-Buyer approves sample and wants to start first order

-Supplier refuses to sell sample, as product is being sold to another customer in same country

-Buyer dumbfounded

-Supplier offers a “better and newer” product to buyer, yet still reluctant to sell this, but eventually does

-Buyer knowing holiday is coming up, flies to China to solidify the deal

-Buyer is hoping the new sample will be sent to home office to be approved before they arrive to China for meeting ….. but isn’t

-Buyer and supplier meeting again, supplier now will sell product and the originally approved sample

-Buyer still needs to approve the sample flying over the Pacific sea.

-Happily ever after?

Yes, an over simplified version, but it gets the point across.

Just looking at the story, it makes one cringe at the thought of doing business in China. It looks over complicated, unreliable, down right frustrating. Why did this all happen? Why so complicated? Why so much time and money wasted? Sometimes these questions can not be answered. Moreover, searching for these answers is not important. What is important is, getting what you need and finding out how.

Capitan Obvious’ observations:

Chinese mentality: Cautious, slow approach

Western mentality:  Time-line driven

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Chinese mentality: Indirect

Western mentality: Direct

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Chinese mentality: Willing to wait

Western mentality: Willing to compromise in lieu of waiting

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With all this being said, the beat of business is not done to the same drum. Also, the pace of commerce in the US is based on speed. For a lot of purchasers, they simply do not have the time to jump the hoops of relationship management and supplier development. It just does not exist the same way it does here. Therefore, they are locked into a system and working with China becomes confusing and frustrating.

For Chinese companies, working with foreign companies is frustrating. Relationship management is almost non-existent, business conduct is completely different. It is something that both sides have to deal with.

Again, what is the scripted answer?  I would venture to say there is none. The key to success here is, understanding your surroundings and situation. Preventative home work goes a long way in China and if you are doing business here it won’t solve all the headaches but it will make you more prepared for them.

He hits a lot of good points on what you want to get from your supplier.  I am going to cherry pick some from his list to show my point.

1.   If you’re not here, you’re not getting what you ordered.

10. Nobody cares about your product as much as you do, but if your supplier sees you regularly, knows how much you care and also cares about you/likes you, you just might get what you are asking for.

These two points above are one of the biggest reasons you might have communication drop off. If you are not here in the first place, they can simply ignore you.  Knowing that you are not even the same country, can lead to this kind of conduct when things might be going wrong or you have put on the pressure.

The solution then lies in number ten of David’s list. If you can’t be here representing your interests, (which is costly in plane tickets and hotels or a change in your life style and move to China), there should be somebody here to represent you.

To tie this to legal situations, I think this also holds true for the contracts you draft for suppliers to abide by. If no one is here to over see the enforcement of those terms, there is not much bite to your bark.

Now, this is not to say that you should be in the way and overbearing to your supplier. Being on site regularly helps drive home the idea of your commitment to them and the project at hand.

Writing a rock solid contract IN CHINESE is just one part of your interaction with the company. Backing up those agreements and showing commitment is the other part.

I think this  method is great when working with suppliers over here in China. One thing you want to avoid in China is ambiguity. As I said in my first post, China is not a place you want to “figure things out”. If you are relying on the company to give you solutions, you will not get what you want.  To get to my theory above, let’s start with the first part of our new Mantra:

Tell them what you’re going to say

Always know more. Be prepared with your material before you start and know your specifications. Now that you have a clear path, email your supplier with your intent. You are not giving them specifications now, you are weeding out suppliers.

Say it

At this point, you should have a collection of possible suppliers that you are ready to work with and have responded to your request. You and your possible suppliers should be on the same page.  Now is the time to get into the details of the specifications.

Then say just what you said

This part is usually in the beginning to middle of your interaction. This is a kind of a reminder of your requirements. I have received samples of different materials than the specification I gave them. Some of the explanations I get are:

This is only the sample , so we thought this was easier

Or

This material was easier to get

Or

This was cheaper to do

Or

We will do right next time in production.

Clarify your specifications and sometimes there is a need for a change. If a change is necessary,  ……… tell them what you’re going to say, say it, then say just what you said. REPEAT

There are always variables to these situations. But the biggest piece of advice I can give is, be clear in your goals, be consistent and be knowledgeable. The next step is production and that opens up a whole new can of worms.

Any other methods that work well for you?