Articles

Prerequisites for successful business negotiations

Despite a gradual change in the Vietnamese mentality when written or electronic communication with a business partner begins to gain more importance, negotiations in person are key to success of an intended project. Meeting in person, especially for the first time, will allow participants to assess each other and make sure that the partner is reliable and the project is solid. Therefore, maintaining the local business negotiation etiquette is as important for the success of the project as a correct calculation of a business plan. Some of the principles mentioned below may not be respected by a Vietnamese partner but a foreigner is always expected to respect them.

Before the very first meeting, it is necessary to ensure that the Vietnamese partner has sufficient information about your company and the business plan under consideration. This information should be sent in writing and sufficiently in advance of the proposed date of the meeting. Even though in large business companies there are of course people who know foreign languages (the most widespread is English), many executives and most people in the provinces speak only Vietnamese. You will make a good impression with English printed materials provided with additional Vietnamese translation. It is appropriate to ask for a meeting only after a written introduction, preferably again in writing, and afterward by phone. It is optimal if a third party that is trusted by your Vietnamese partner can recommend you.

During the negotiations, it is absolutely necessary for the Vietnamese partner to fully understand the content of the project and all provisions of the negotiated contract as well as to fully agree with your interpretation of its wording. Negotiations cannot be rushed because if a partner does not understand certain aspect of a contract, he often signs the contract rather than ask as that would mean “losing his face”. However, while executing the contract, he will be following his interpretation of the misunderstood point and if you subsequently try to enforce fulfilment according to the actual (= your) interpretation, it may be considered as an attempt to deceive the partner and result in a loss of confidence.

The “losing once face” is more likely to be expected from a foreigner, although not in the sense of improper or impolite behaviour, but in the sense that the Vietnamese partner must have a feeling of victory after the negotiation. It is therefore wise to adapt your negotiation scenario to this axiom and to be ready to offer your partner a “significant concession”. In general, a foreign partner is expected have almost zero gain, if not negative, while trading (investing) in Vietnam. Information leaks about profit, provisions etc. are therefore twice as bad while doing business in Vietnam.

Negotiating requires a polite and patient attitude and any signs of anger or arrogance will be seen by your Vietnamese partner as a “let-down”. During negotiations, one has to take into account the fact that the Vietnamese don’t like to say no and they don’t admit it if they don’t understand something. Therefore answers such as “perhaps yes” should be interpreted as “rather not” and “maybe” as “definitely not”. It is necessary to inconspicuously and politely ask “control questions” to make sure that your partner fully understands your idea. It is certainly necessary to anticipate a longer negotiation process than what would be usual in Europe.

Last but not least, one needs to take into account an aspect of strong superstition which also significantly influences doing business. It is good to find out what date your partner considers appropriate for closing the deal – at that time, his motivation to sign the contract is extremely strong and you can achieve significant concessions from his side. On the other hand, when the time is “inappropriate”, it almost does not make sense to engage in negotiations. It is always inappropriate time during the Vietnamese main holiday – the Lunar New Year, as family is without exception the most important for Vietnamese people.

The necessity of a “follow-up” by a local representative. If you do not contractually negotiate with your local agent (= a private person or a business you must choose before your departure from Vietnam or preferably even before your first arrival to Vietnam) to effectively handle your business interests, the business correspondence from your partner will usually – especially if you deal with large state-owned companies – gradually diminish until your project ceases completely. This aspect certainly cannot be neglected.

Mentality and local customs related to business negotiations and contracting.

Punctuality

The Vietnamese are usually surprisingly punctual. This is probably the outcome of their respect for the authorities. When we invite our partner to a meeting (at a hotel, office, etc.) we must be prepared for the eventuality that our partner arrives 5 to 10 minutes before the agreed time. Punctuality is expected also from us and making excuses blaming traffic is inappropriate. During the execution of an agreement we can expect frequent delays on the side of the Vietnamese party for various “objective” reasons, however, strict adherence to agreed deadlines is required from the foreign partner.

Superstitiousness

As in other Asian countries, the lives of Vietnamese are influenced by a number of practices the roots of which are often no longer “traceable” but which are strictly observed. This applies to all areas of life: there are “lucky times” when it is appropriate to marry (or give birth), another time is appropriate for making deals, the lunar calendar governs eating habits and old superstitions also inexplicably influence hygiene habits (for example a woman may not bathe or shower for one month after giving birth).

Appropriate clothing and social etiquette

Business attire is not yet considered as such an important aspect in Vietnam or more precisely, it is rather simple. During the “winter season” (i.e. from December to March) the usual clothing is same as in Europe, which means a suit with a tie and for important negotiations or evening occasions, a dark suit; during the “summer season” (from April to November) however, a shirt with a tie will be sufficient for regular negotiations. During very formal high-level negotiations, it is appropriate to wear a suit even in the hot summer season, at least in the beginning of the negotiations. Due to the local hot and humid climate and the fact that many Vietnamese workplaces do not have air conditioning, the Vietnamese often do not wear ties for the meetings without wishing to express a lack of respect. Shorts or miniskirts in case of women are still considered indecent or even offensive in Vietnam and they are more or less tolerated only if worn by tourists – “backpackers”. It is also not recommended for women to have exposed shoulders.

Certain aspects of a social etiquette are taken very seriously in Vietnam. These include introducing and exchanging business cards. When handing a business card to an important person, it is appropriate to do so with both hands and in any case it is necessary to hand in and receive a business card from hand to hand and not to “throw” the business card on the table. Although we are not always offered a business card from every person present from the Vietnamese party, it is advisable to pass our business card to everyone. In the case of large delegations, only the senior executives might exchange business cards in the beginning of the meeting and the others might exchange their business cards after the meeting. If you read the full name and the post stated on a business card of a senior executive, you will show the expected respect. Business cards usually state last names first and first names after that. Because many Vietnamese share the same surname, they usually address each other by the first name together with Mr./Mrs. Titles are used mainly within medical or academic ranks (Dr, Prof., etc.). The content and design of business cards are not unified or important, but it is absolutely necessary to have them.

Negotiations are usually led by the highest-ranking representatives of the parties and subordinate members can add more specific information upon request. Although the negotiation language might be a world language (usually English) it is better (and in the provinces necessary) to have your own interpreter whose quality you can check beforehand. Interpreters will be provided upon request by a hotel or local travel agency at a cost of about 50 USD per day.

Due to a steady working pace in Vietnam, it is advisable to arrange meetings from 9 am or 2–3 pm although your partner may suggest another (later) time. Until recently Saturday was a working day in Vietnam but nowadays this time is considered private and therefore Saturday meeting may only be proposed by the Vietnamese partners.

Appropriate place to close a deal

There are indeed no specific local customs as the Vietnamese are pragmatic in this regard but we can offer an advice. Inviting your partner to the Czech Republic will definitely help to close the deal. On the one hand it is considered to be an expression of respect for the partner and on the other hand, it is usually a good opportunity to establish an informal, friendly relationship that is also very important for the Vietnamese who are otherwise pragmatic people. Last but not least, Vietnamese people often have friends and acquaintances in the Czech Republic but it is relatively difficult for them to visit. A rigorous visa policy of the Czech Republic could have been the reason why some Vietnamese businessmen feared applying for Czech visa (due to various stories heard through the grapevine) and in some cases would even arrange meetings with their Czech partners in other European countries (in Western Europe) rather than attempting to obtain the Czech visa. Even though the Embassy in Hanoi has recently been introducing a relatively welcoming and “human” visa policy, a proper invitation from a Czech company is still the easiest way for a Vietnamese businessman to visit the Czech Republic and for the Czech partner this small “extra task” will definitely pay off.

Alcohol in business negotiations

While beer is a universal and “popular” drink, during official (especially business) social lunches or dinners the host usually offers branded French wines or brandy; these are expensive but they serve to express the host's social status (or solvency). It is not clear whether the Vietnamese actually like the foreign wines or brandy but it is a matter of fashion and prestige.

During official social events, celebratory toasts are proposed, not unlike the Russian ones, although the Vietnamese partners will appreciate multiple toasts without speeches during the meal as well. While proposing a toast it is advisable to praise the hard-working and hospitable Vietnamese people and the host’s organization (company). The ending of an event must always be initiated by the guest; an attentive Vietnamese host will never dare to indicate a need to finish a lunch or a dinner even in a case of time pressure.

There are no restrictions on consumption and getting drunk won’t do any harm. After all, an average European doesn’t have to be afraid that he would get drunk before the Vietnamese colleagues do (as they usually get tipsy easily).

Negotiating style, bargaining, presents, and commissions

The Vietnamese like to use flowery speech and when dealing with Czech partners they like to recall the times of cooperation within the former COMECON. They are mostly sincerely grateful and it is not appropriate to disparage such memories, for we might lose the initial relative advantage of affiliation. We are also expected to recall the traditionally good Czechoslovakian-Vietnamese relations and from here we can gradually move on to specific business matters. As was already mentioned, raising our voice, making ironic remarks or grimaces that may offend sensitive Vietnamese people is extremely inappropriate in any situation. During negotiations, the Vietnamese usually keep a stone face (rather smiling Buddha than a poker face); an increased intensity of smile should be a warning sign for us as it doesn’t always have to express joy but it may signal embarrassment, annoyance, or even hidden anger. Similar behaviour is expected from us – excited gesticulation, mimic gestures and other such behaviour are considered rude. In case of formal receptions, it is usual to maintain a considerable physical distance between the negotiating persons with the exception of heads of delegations who sit side by side in the front of the meeting room. A brief handshake during an introduction is appropriate; otherwise, any physical contact is undesirable. Touching someone’s head is particularly undesirable (as in other Buddhist countries).Beware of casually sitting with your legs crossed. If the toes of your leg point to your partner, it may be considered rude. If you cross your arms over your chest or place your hands on your hips your partner might think that you are angry.

You have to be patient during the negotiations even if you feel that questions are unnecessarily repeated and sometimes even silly. In the vast majority of cases, our partner is “testing” our objectivity and truthfulness of our reasoning and thinking about the issue from different points of view. We should not be caught telling lies, that is to say, overstating the quality of our own goods or slandering the quality of our competition. Vietnamese partners are usually well-prepared for negotiations with a particularly good knowledge of the competition’s prices.

As has already been pointed out in the previous chapters, the Vietnamese have in a way been “fighting” for generations and it is reflected also in business. Your partner must have a feeling that he has gained an enormous advantage from the deal and that he has “defeated” you during the negotiations. It is therefore necessary to allow for a significant discount and not to look too happy if you can make a deal with a significant profit. It is better to behave modestly or even to look troubled. Yes, you are glad that you managed to enter the Vietnamese market, but you had to offer your product for mere “production costs”…In many cases, if your business partner is not the end user of your product and especially if he is an employee of a state-owned company, he will expect personal commission for mediating the contract. Without encouraging bribery, one cannot ignore the fact that corruption is still present in Vietnam even though the current government is trying to eliminate it or at least begins to call things by their real names.

Finally, we would like to recommend several principles for negotiating with Vietnamese partners that will help to carry your business plan through:

• Build a personal relationship with your partner (find out what their hobbies are, invite them to the Czech Republic and be an attentive host).
• Always smile, be polite and pleasant.
• Do not complain about little things.
• If you want to criticize someone, do it indirectly and avoid confrontation.
• Never show anger – your partner will lose respect for you.
• Do not try too much to gain advantage over your partner – be cooperative and collaborate. Remember that winning one battle can sometimes lose the war.
• Do not hurry. A gradual negotiation from general to specific matters will help your partner to better understand your intentions.
• Expect delays – include them in your plan. Tell your partner that your planned departure from Vietnam is at least a day before your actual departure.
• Have your project well prepared and be specific in your argumentation. The Vietnamese have a good overview of competing projects (products) and they are very pragmatic in appreciating the benefits.
• Always expect to offer discounts and commissions. The price factor is decisive on the local market and is often fatal for suppliers of high-quality (and therefore expensive) goods.

The information stated in this article express the author’s personal opinion and it is not an official statement of the Embassy of the Czech Republic in Hanoi.