From: allin
Engaging in business in China necessitates a fundamental re-evaluation of established strategies. Entering the market with preconceived notions of success is ill-advised, as it often leads to unfavorable outcomes [00:00:05]. Instead, a “first principles, bottoms up” approach is crucial [00:00:10].
Unique Aspects of Business in China
One common piece of advice when entering the Chinese market is to secure a 50/50 partnership [00:00:14]. However, questioning the rationale behind such requirements and, if unsupported, pursuing an independent, ground-up approach can be effective [00:00:20]. Initially, direct operations on the ground might experience fair treatment without bias [00:00:27].
The “China War” Goes Global
A significant shift occurs when the “China war” extends beyond its borders, becoming a global phenomenon [00:00:35]. The Chinese government, through entities like sovereign wealth funds, may invest hundreds of millions or billions of dollars into global competitors [00:00:37]. This strategy aims to deplete a company’s resources, making it harder to compete in China [00:00:49]. An example is Apple’s mandated billion-dollar investment in DDI, which is uncharacteristic for Apple’s investment strategy [00:00:54].
Negotiation Strategies
When faced with this expanded competitive landscape, companies may need to adjust their objectives from aiming for gold to securing silver [00:01:10].
Leveraging Fear and Market Share
A key negotiation tactic, particularly when pursuing a deal like securing a 20% stake in a merged entity, involves creating leverage by instilling fear in the other party [00:01:21]. This can involve:
- Aggressive Spending: Pushing operational spend significantly to demonstrate financial firepower and a willingness to escalate competition [00:01:27]. For instance, burning $75 million a week during peak negotiation periods can create immense pressure [00:01:34].
- Skyrocketing Market Share: Simultaneously increasing market share can cause distress for the negotiating party, solidifying the leverage created by aggressive spending [00:01:51].
This approach is likened to a poker game, where the deal is only secured if the opposing side perceives a threat [00:01:47].