Doing Business in China

“They did what?” our mechanical engineer exclaimed as I talked about working with a supplier in China. Culturally China can be very different to the United States and we were negotiating pricing. Pricing discussions always have the potential to bring out unexpected business behavior in any context, but in China, some westerners find it positively unbelievable.

I grew up in greater China, and did my first serious business trips in China when I was a teenager, more than 20 years ago, and while I was completely unfazed by this latest turn of events, because I’d seen it before, even I get surprised from time to time.

Right from the beginning we set a cost target for the design. The cost target has been one of the clearest things that we’ve done to shape our thinking. It has always forced us to think more simply, think harder and has guided the project. From the start there was a budget for each assembly, and while those budgetary ranges are updated as we get new information, this latest price fell somewhat outside the target range. Often the cost target drives a technical change but in this case we knew that it was a case of working with the supply chain. We had cultivated multiple sources for all our major suppliers, but switching is not something we do until we can’t find a solution with the primary supplier. So after a little tough discussion an invoice came back with a price that was in target. What is more, we learned more about where the costs truly lay, and what we can do about them.