Types of steel produced by Baosteel Group...15 Figure 2.1.. Location: Baosteel Tower, 370 Pudian Road, Pudong New District, Strategic objective: To build itself into the most globallyco
PROVIDE A DETAILED OVERVIEW OF STRATEGY 9 1.1 Procurement Contracts & Supply Chain Contracts
The General Situation
VINFAST stands for Vietnam - Style - Safety - Innovation - Pioneer and aspires to be the brand for Vietnamese cars.
Founded in 2017 by Mr Pham Nhat Vuong, Chairman of Vingroup,
Mission: To bring "Made in Vietnam" electric vehicles to the global market and promote the transition to clean energy.
Main Products: VinFast produces electric cars, electric motorbikes, and related services, such as charging stations and electric vehicle maintenance.
Market: The company has expanded to markets in countries like the
U.S., Canada, and Europe, with a strong ambition to grow globally.
Listing on Nasdaq (2023): Becoming one of the first Vietnamese companies to list on the Nasdaq stock exchange in the US, marking a key step in global expansion.
ASEAN NCAP Safety Awards (2024): Winning 5/6 top safety awards for the VF 8 SUV, including "Best Overall" and "Best Child Occupant Protection".
In Q1 2024, VinFast sold nearly 10,000 electric cars globally, up 444% from the previous year.
Full Name: Baoshan Iron & Steel Co., Ltd (Baosteel) - Founded:
Parent Group: China Baowu Steel Group Corporation.
Location: Baosteel Tower, 370 Pudian Road, Pudong New District,
Baosteel is a globally leading modern integrated iron and steel company and the core enterprise of China Baowu Steel Group Corporation, listed in Fortune's Global 500.
Strategic objective: To build itself into the most globally competitive iron and steel enterprise and a listed company with the greatest investment value.
Founded in February 2000 and listed on the Shanghai Stock Exchange (stock code: 600019) in December of the same year.
In 2017, merged with Wuhan Iron & Steel, expanding its manufacturing bases to Shanghai, Wuhan, Zhanjiang, and Nanjing.
2nd globally in crude steel production.
1st in automotive sheet output and silicon steel output among all global listed steel companies.
One of the global steel enterprises with the most complete carbon steel products.
Fi gure 1.1 List of 10 largest steel suppliers in the world
Focuses on innovation, coordinated development, and green growth.
Produces high-end products such as automotive steel, silicon steel, and offshore steel.
Promotes green and low-carbon development, supplying steel for industries such as new energy vehicles and renewable energy.
A leading steel producer with an annual output of over 40 million tons.
Recognized for commitment to quality management and product innovation; first Chinese steel company to earn this accolade.
World Steel Association Steelie Award (2020):
Honored for achievements in sustainability and innovative green steel production techniques.
Recognized for advancements in high-performance steel products and R&D efforts in eco-friendly materials.
Consistently ranked among the top 500 global companies, demonstrating financial strength and global impact.
Leading steel exporter to Vietnam
In the first half of the year, Vietnam is projected to import over 8.2 million tons of steel, amounting to more than 5.9 billion USD, marking a significant increase of 48% in volume and 25% in value compared to the same period last year Notably, the import price in June was recorded at 727 USD per ton, reflecting a 17% decrease from June 2023.
Figure 1.2 Developments in the situation of iron and steel imports from China to Vietnam from 2022 to present
In the first half of the year, our country imported 5.7 million tons of iron and steel from China, generating over 366 million USD in revenue This marks an impressive increase of 86% in volume and 59% in value compared to the same period last year.
2023 Import prices also recorded a decrease of 14% over the same period, reaching more than 641 USD/ton.
Figure 1.3 China is the leading steel importer of Vietnam
In the first 6 months of the year, Vietnam's iron and steel imports increased to a record
Japan ranks as the second-largest steel supplier to Vietnam, exporting 878,851 tons valued at over 878 million USD Although the volume decreased by 2% compared to 2023, the value surged by 24% The average import price of Japanese steel reached 1,000 USD per ton, marking a significant 27% increase from the previous year.
The Vietnam-China Free Trade Agreement helps reduce import costs.
Geographical proximity, lowering transportation costs and delivery time.
Baosteel is China’s top steel producer, supplying high-quality steel for automotive production.
Figure 1.4 Types of steel produced by Baosteel Group
VinFast's Import Choice => Product Chosen: CR Steel Sheet
Reason for Choice: Baosteel's HRC Steel Sheet is ideal for car manufacturing Its smooth surface and high durability make it suitable for producing car bodies.
Overall Objectives & Detailed Objectives
1 Ensure stable supply: Find a reliable partner to supply high- quality steel, ensuring a stable source for growing production needs.
2 Enhance product quality: Utilize steel from Baosteel to improve overall quality of vehicles and increase international competitiveness.
3 Optimize costs: Achieve competitive pricing and favorable payment terms to reduce production costs and increase profit margins.
4 Build long-term partnership: Establish a sustainable partnership with Baosteel to jointly expand market presence.
1 Expand market: Penetrate the Vietnamese market, especially in the rapidly growing automotive sector.
2 Increase revenue and profit: Capitalize on VinFast's demand for steel to boost sales and business efficiency.
3 Strengthen global position: Become a leading steel supplier for major car manufacturers, enhancing brand reputation globally.
4 Diversify product range: Develop specialized steel products to meet the high technical demands of the automotive industry.
1 Successfully negotiate contract terms, including price, quantity, and delivery timeline.
2 Complete import procedures to ensure timely steel supply for production.
3 Assess the quality of imported steel and its production efficiency.
1 Provide all necessary quality certifications and technical documents.
2 Organize production and deliver goods on schedule, ensuring product quality.
3 Establish strong working relationships with VinFast's relevant departments.
1 Expand the scale of cooperation and increase steel import volumes from Baosteel.
2 Collaborate with Baosteel to develop new steel types suitable for electric and new energy vehicles.
3 Build an efficient supply chain management system to minimize risks.
1 Become the long-term strategic steel supplier for VinFast.
2 Invest in research and development projects in Vietnam to meet market needs.
3 Expand distribution networks in Vietnam, increasing competitiveness.
IDENTIFY THE KEY INTERESTS & BATNA, ZOPA,
Zopa
The zone of possible agreement (ZOPA) refers to the negotiation space where multiple parties can identify shared interests and work towards a mutual goal Within this area, negotiators can explore potential agreements that integrate elements from each party's proposals, facilitating collaboration Often referred to as the "bargaining range," the ZOPA is crucial for effective negotiations.
Condition 1: A ZOPA can only exist when there is some overlap between each party's expectations regarding an agreement.
Condition 2: If negotiating parties cannot reach a ZOPA, they are in a negative bargaining zone.
Figure 2.1 HRC FOB steel price developments in the market
It was observed that from January 2024, HRC prices were generally quite volatile and showed a continuous downward trend untilSeptember 2024.Due to excess supply and weak demand.
Figure 2.2 HRC steel price developments in the Chinese market
Industry experts anticipate a recovery in Chinese steel prices, including hot-rolled coil (HRC), driven by supply constraints beginning in Q4 2024 This forecast is linked to the Chinese government's decision to limit the licensing of coal-powered steel mills in 2024, aimed at enhancing environmental protection and curbing supply levels.
Therefor, Price Baosteel needs: 494 USD/MTS (Baosteel’s lowest target) - 540 USD/MTS (Baosteel’s highest target)
VinFast analyzed the prices of hot-rolled coil (HRC) from the Chinese market, global markets, and local Vietnamese sources, taking into account transportation costs and other expenses In pursuit of establishing a supply chain partnership with Baosteel, VinFast proposed a pricing range that reflects their strategic objectives.
Therefor, Price Vinfast needs: 475 USD/MTS (Vinfast’s highest target)-520 USD/MTS (Vinfast’s lowest target)
⇨ The feasible agreement zone lies at the price range of 494
USD/MTS - 520 USD/MTS This is the price range Vinfast needs to focus on negotiating.
Baosteel, as a supplier, emphasizes the importance of receiving higher advance payments to reduce financial risks and maintain steady cash flow prior to delivery This strategy enables the company to partially offset production and transportation expenses while effectively managing delivery uncertainties Consequently, Baosteel's preferred payment terms are structured accordingly.
50% TT after delivery to 100% TT advance
(Baosteel’s Worst Case) (Baosteel’s Desired Time of shipment)
As the buyer, Vinfast wants to reduce the risk of goods not meeting requirements or being delivered late Therefore, Vinfast’s preferred payment terms from
70% TT after delivery to 30% TT after delivery (Vinfast’s Desired Payment) (Vinfast’s Worst Case)
The feasible agreement ranges from 50% TT advance, 50% TT after delivery to 70% TT advance, 30% TT after delivery
Baosteel is focused on evaluating its production and delivery capabilities, particularly for large or complex orders The company requires adequate time to plan and adjust the production process, ensuring high product quality and effective resource allocation A longer timeframe, ranging from 7 to 30 days, allows Baosteel to maintain flexibility in managing potential supply chain risks, including material shortages and transportation disruptions.
Desired Time of shipment) days after signing the contract
A precise delivery timeline is essential for VinFast to sustain ongoing production and prevent material shortages, which guarantees seamless manufacturing and accelerates product time-to-market Consequently, VinFast must optimize its shipping schedule.
5 (Vinfast’s Desired Time of Shipment) to 14 (Vinfast’s Worst Case) days after signing the contract
⇨ The feasible agreement range is between 7 and 14 days after signing the contract.
Batna
- BATNA means Best Alternative to Negotiated Agreement, Batna is the best alternative option.
+ Step 1: Devising a list of actions that we might possibly take
Devising a list of actions that we might possibly take if we fail to reach any mutual beneficial agreement including:
Offer to buy a large quantity of ordered steel in exchange for a discount.
Find other competitive partners + Step 2: Filter the list
Option 1: Propose buying a large quantity of steel ordered in exchange for a discount From 10,000 tons or more, there will be a 5% discount However, larger volumes require more storage space, which is costly for us to rent warehouses in the short term
This BATNA is not feasible.
Option 2: Propose a deferred payment method: The price that Baosteel proposed to us is higher than expected With the payment by T/T deferred payment with 50% of the invoice value Vinfast will have more time to arrange finance without the pressure of paying in full immediately and can use Baosteel's products or services to implement projects, thereby generating revenue and profit before paying in full.
Option 3: VinFast can look to other steel suppliers such as HBIS Group, Posco , but this may increase costs due to having to set up a new supply chain.
POSCO (Pohang Iron and Steel
HBIS, a leading steel producer in China and globally, boasts extensive production facilities and offers a diverse array of steel products, including hot-rolled coils, steel plates, construction steel, and alloy steels.
POSCO, headquartered in Pohang, South Korea, stands as one of the largest steel producers globally With manufacturing facilities located in countries such as Korea, India, China, and Vietnam, POSCO is recognized for its commitment to modern and innovative manufacturing technologies that enhance efficiency while reducing environmental impact.
HBIS boasts a robust supply capacity and an extensive distribution network, ensuring stable and flexible service to meet customer demands However, meeting high-quality requirements may pose challenges when supplying large quantities on short notice.
Can offer more competitive prices due to large production scale and lower production costs in China With prices ranging from 500-
548 USD/Ton for HRC steel.
Usually has a higher price due to quality and strong brand Prices range from 550- 600 USD/Ton for HRC steel.
Table 2.2 Comparison of 2 companies in the alternative plan for
+ Step 3: Choose one option that seems to be the best one
Offer a deferred payment method: the most feasible batna Cooperate with HBIS Group: The second feasible batna Choose HBIS Group because:
HBIS Group is also a Chinese corporation, which will save time learning about the culture and negotiation style
Power balance
- VinFast is financially very powerful: Supported by a
US investment fund (Yorkville Advisors) and billionaire Pham Nhat Vuong.
- Total profit in the first quarter of 2024: $302.6 million.
- Baosteel owns 62% of the main operations of Baowu steel enterprise (leading in the world)
-Total profit in the first quarter of 2024: $385 million
- Access to large capital pools: Depends mainly on government assistance and financial support.
- Extensive distribution network: VinFast has built an extensive network of dealerships nationwide, spanning from major cities to remote rural areas.
Autopilot, Deep Learning, LiDAR sensors…
- The primary workforce consists of robots and skilled labor.
- Featuring a state-of-the-art manufacturing facility, among the leading ones in
- Has a long history in developing modern steel production technology: With over 40 years of experience and numerous achievements in product research and development.
- Skilled expertise: has a strong focus on enhancing the productivity and skills of its workforce.
- There are many manufacturing factories:The company has multiple production plants across
Southeast Asia, that meets Industry 4.0 technological trends.
China, these plants are equipped with state-of-the- art technology and have a high level of automation, enabling Baosteel to maintain high productivity and efficiency.
- The strongest automotive brand in Northern Vietnam:
In addition, VinFast was ranked among the top 100 most influential brands of the year.
Vietnam: Represents 14.3% of the total domestic automotive market.
- Is the leading automotive brand driving the global smart electric vehicle revolution in Vietnam.
- The biggest steel producer in the world.
- The brand is a pioneer in actively seeking and implementing green and low-carbon solutions across the entire industrial chain.
Table 2.3 Power Balance between Vinfast and Baosteel
How they reach mutually agreements
For successful discussions and negotiations, Vinfast and Baosteel must transparently exchange information to understand each other's goals, needs, preferences, and concerns.
VinFast should approach negotiations with Baosteel as a collaborative dialogue rather than a one-sided persuasion effort By prioritizing their own agenda, VinFast risks overlooking important insights from Baosteel Instead, engaging in active listening and asking insightful questions will enable VinFast to collect valuable information, paving the way for a mutually beneficial agreement.
Making Multiple Equivalent Simultaneous Offers (MESO)
VinFast can enhance its negotiation strategy by presenting three compelling proposals simultaneously rather than making a single offer If one offer is rejected, this approach allows them to gain valuable insights into Baosteel's preferences, as the company may indicate which proposal they favor most This feedback can guide VinFast toward reaching a mutually beneficial agreement, increasing the chances of a successful outcome.
Vinfast can also use techniques such as feedback, acknowledgment, or recommendations to recognize Baosteel's contributions and achievements, thereby strengthening trust and respect between the two parties.
ANALYSIS OF THE STEPS IN THE NEGOTIATION PROCESS
Stage 1: Pre-Negotiation
The pre-negotiation will include 3 steps; that is preparation, building the relationship, and exchanging information
Before we can get into the negotiation with our partner, we must answer all these questions:
- Know what your company wants and your partner wants (INTEREST).
- Send the proper negotiator to the negotiation
- Set the Agenda for the negotiation
- Prepare for a long negotiation, knowing that this could be tough.
- Know about the operating environment and strategy of the partner.
VinFast should establish a clear objective for the outcomes of our negotiation with our partner By understanding our Best Alternative to a Negotiated Agreement (BATNA), Zone of Possible Agreement (ZOPA), and our interests, we can enhance our negotiating power effectively.
- Top objective: 500 USD/MT FOB Shanghai port, Incoterms 2020
- Target objective: 508 USD/MT FOB Shanghai port, Incoterms 2020
- Bottom objective: 515 USD/MT FOB Shanghai port, Incoterms 2020 Our top objective is to secure a price of 500 USD per metric ton FOB
Shanghai Port, with Incoterms 2020 This is our ideal outcome.
Negotiations require a balance of concessions, which is why we have established a target price of $508 per metric ton under the same terms, reflecting our realistic expectations for achieving this goal.
Lastly, we've established a bottom line of 515 USD per metric ton.This is the absolute maximum we are willing to pay.
* Reasons why Vinfast should be bought at the prices and delivery conditions as mentioned:
In the first half of 2024, VinFast achieved impressive growth by delivering nearly 21,800 electric vehicles (EVs), marking a 92% increase from the previous year This surge in production highlights the rising demand for essential materials, particularly steel, as VinFast scales up its operations to satisfy the growing global appetite for electric vehicles.
Steel market conditions in China in 2024:
Recent data indicates that the price of hot-rolled coil (HRC), particularly Q235 steel, in China is between USD 490 and 520 per ton VinFast can leverage its substantial orders and established partnerships with BaoSteel to negotiate prices that are lower than the current market peak.
VinFast's offer of USD 500 per metric ton for 30,000 metric tons of Q235 steel at FOB Shanghai port is justified, as it reflects a modest rise in logistics and import expenses while remaining aligned with current market trends.
VinFast leverages FOB terms to effectively manage its supply chain, select optimal shipping partners, and regulate shipping expenses between China and Vietnam By focusing on cost optimization and risk management, VinFast strategically assesses current steel market prices and capitalizes on its significant purchasing volume to enhance its negotiating power.
We have established a negotiation range of $505 to $513 per metric ton to maintain flexibility during discussions, enabling us to make concessions while safeguarding our interests.
To effectively prepare for negotiations between Vinfast and Baosteel, it is essential to create a detailed agenda that incorporates the gathered information This includes identifying the key negotiators from both companies, outlining the specific issues to be addressed—such as commodities, pricing, payment methods, and shipment logistics Establishing a clear timeline for the negotiation process, along with defined objectives for each party, will enhance the effectiveness of discussions Additionally, determining the location and format of the negotiations will ensure a structured and productive dialogue.
Besides, we must know the relationship of both parties, we want to build or maintain with the other party This could affect our negotiation.
In our case, our priority is to create a long-term relationship with Baosteel Therefore, we use the “Problem-solving” strategy to approach the negotiation.
- Initially, both parties should avoid focusing directly on business details Instead, spend time fostering friendliness and creating an open, comfortable atmosphere.
- Avoiding immediate mention of contracts or pricing helps reduce pressure on the other party and allows trust to build gradually.
3.1.2.2 Partners get to know each other
- Both sides should take the opportunity to learn about each other’s organization, working style, and personal perspectives.
- Understanding one another minimizes misunderstandings and lays a solid foundation for sustainable collaboration.
- Strengthening social connections and personal bonds helps build relationships Both parties can participate in social activities like dining, having coffee, or visiting local sites together.
- These interactions reinforce trust and create a sense of familiarity,making future discussions easier.
3.1.2.4 Duration and Importance Vary by Culture
- The time and emphasis on relationship-building depend on the culture of each partner.
- Understanding cultural differences fosters effective partnerships and avoids unnecessary misunderstandings.
1 Clear Objective and Consistency: Vinfast and Baosteel will clarify objectives, including quantity, quality, and pricing, and commit to maintaining consistency in both negotiations and deliveries to build trust.
2 Empathy Tactics: Vinfast will emphasize professionalism and understanding of Baosteel’s role in its supply chain, sharing logistical plans to ensure reliable transportation and timely coordination.
3 Address Concerns: Vinfast will listen to Baosteel’s pricing and supply concerns, committing to transparent discussions and cooperative problem-solving to address potential issues.
4 Certification: Vinfast will request relevant certifications from
Baosteel to ensure consistent quality, while also sharing its quality standards for electric vehicle production.
5 After-Sales Support: Both parties commit to long-term support and responsiveness to quality issues, reinforcing a lasting, dependable partnership.
3.1.3 Step 3: Exchanging information/ First offer
Prior to the negotiation, VinFast's representative meticulously prepared a comprehensive contract outlining key details such as product quality, pricing, delivery timelines, and other essential conditions This draft was then shared with Baosteel to ensure that VinFast's products meet market standards.
+ Have competitive pricing with a discount for bulk orders.
+ Within 14 days after the signing of the contract
Stage 2: Face to face
There are 2 steps in this stage
In face-to-face negotiations, persuasion is crucial for achieving a balanced solution amidst potential conflicts The goal is to reduce conflicts of interest while fostering a cooperative relationship with Baosteel This approach emphasizes the importance of collaboration and effective communication in reaching mutually beneficial outcomes.
1 Persuasion is at the heart of the negotiation process.
2 It involves helping Baosteel see things from Vinfast's perspective, which can create mutual understanding.
3 Finally, we need to use various tactics to effectively communicate our viewpoints and reach an agreement that benefits both sides. Here are some tactics we might face or use during this step:
- Promise: Offering a positive outcome if Baosteel agrees to our terms.
- Threat: Indicating negative consequences if they do not comply.
- Recommendation: Suggest more beneficial terms that benefit both parties, depending on the current situation.
- Warning: Alerting the other party to potential risks or dangers if not partnering with us.
- Reward: Providing incentives for compliance or agreements/providing more beneficial terms for Baosteel.
- Punishment: Imposing penalties for non-compliance.
- Normative appeal: Refers to social norms or standards to persuade the other party.
- Commitment: Demonstrating dedication to our partner and showing our willingness through building a long-term relationship.
- Self-disclosure: Sharing personal information to build trust and rapport.
- Question: Ask open-ended questions to gather information or clarify points.
- Command: Giving direct instructions or orders.
- No: Rejecting a proposal or offer that is unreasonable for us.
- Interrupting: Breaking into the other party’s speech to steer the conversation.
Depending on the situation during this step, we ought to be flexible between these tactics
In the negotiation process, it is crucial to be aware of "dirty tricks," which are tactics that can coerce a partner into accepting unfair agreements Failing to carefully evaluate these concessions may put us at a disadvantage To maintain a positive negotiation environment, we should refrain from employing such tactics; otherwise, if Baosteel discovers any unethical maneuvers on our part, it could jeopardize the entire negotiation.
There are four key points here:
1 An open mind: We should listen to Baosteel's views and be ready to adjust.
2 Shared interests: Focus on finding both common ground and addressing conflicts.
3 Positive start: Begin with points we agree on to create a constructive tone.
4 Flexible strategy: Adapt our approach based on the power balance, relationship, and context.
These steps will help us build a fair and cooperative agreement withBaosteel
Stage 3: Post negotiation
- Final agreement: The contract is signed with the agreement of both parties.
- Commitment to performance: Both parties have committed to fulfilling their obligations and responsibilities under the contract, with a formal written agreement.
EXAMINE THE CULTURE
Power Distance
China has a high level of power distance, meaning that hierarchy and authority in the organization are very important When negotiating with BaoSteel:
Make sure that Vinfast members have enough authority to make decisions, especially in important meetings.
Respect the role of the leadership in the negotiation process and avoid asking direct questions or directly contradicting them.
Individualism
China is a collectivist culture, where relationships and group harmony are valued over individual achievements Some points to note:
Build personal relationships with partners before discussing work (guanxi).
Make decisions that aim to reach a consensus among parties rather than focusing solely on VinFast's own interests.
Motivation towards Achievement and Success
China's strong emphasis on "Motivation towards Achievement and Success" reflects a cultural prioritization of personal accomplishment and tangible results This focus on efficiency aligns with a "Masculinity" index, underscoring the importance of competition, ambition, and career aspirations in Chinese society.
Clearly presenting the mutual benefits for both parties is crucial during negotiations.
Vinfast should prioritize achieving the benefits of both parties.
Uncertainty Avoidance
China has a relatively low level of uncertainty avoidance, they are more risk-tolerant than some other countries This means:
BaoSteel can be flexible in negotiating and accepting risks in contract-related decisions.
VinFast can discuss different options and contingencies but must be clear about the terms to avoid misunderstandings.
Long-term Orientation
China has a high long-term orientation, they value relationships and sustainable benefits instead of short-term benefits Note:
VinFast should emphasize long-term benefits and commit to long-term cooperation with BaoSteel.
Avoid giving the impression that Vinfast only wants to achieve short-term benefits.
Indulgence
China tends to be restrained, emphasizing emotional control and expectations When negotiating:
Avoid showing too much emotion and always keep a calm attitude.
Be patient during the negotiation process, as negotiations inAsia tend to take longer.
STRATEGY AND TACTICS IN NEGOTIATION
Strategy
The Lose-Lose negotiation strategy involves delay or avoidance, often employed by negotiators who seek to evade the process due to the potential disadvantages Typically, this approach is adopted when the costs of loss outweigh any possible benefits, leading to a situation where neither party achieves a favorable outcome.
The Accommodating (Lose-Win) strategy in negotiation focuses on making concessions and compromises to reach a shared objective This approach is typically employed when the negotiator prioritizes the importance of fostering and preserving relationships over the actual results of the negotiation.
The Win-Lose strategy is a competitive negotiation approach where one party seeks to maximize their benefits at the expense of the other This tactic prioritizes achieving immediate goals over maintaining relationships, making it ideal for situations with short-term objectives.
Collaborating, often referred to as the Win-Win strategy, focuses on cooperation to identify solutions that address problems effectively This approach is particularly beneficial when negotiators aim to ensure that both parties gain from the outcome, making it an ideal tactic in negotiations.
The Compromise strategy, also known as "splitting the difference," involves reaching an agreement through mutual concessions from all parties involved This approach allows negotiators to identify alternative solutions that align with the interests of both sides It is particularly effective in situations where conflicting interests are present, yet each party's interests hold equal significance.
5.1.2 Appropriate negotiation strategy based on the cultural dimensions
Based on the Long-Term Orientation index:
In China, the emphasis on long-term relationships is significant, with a high index of 77 reflecting this value Similarly, the Vietnamese also prioritize enduring partnerships Therefore, adopting a negotiation style that fosters trust is essential for achieving successful long-term cooperation between these cultures.
Therefore, we will rule out Avoiding and Competing
Figure 5.2 Long-term Orientation Index between China and Vietnam
Based on the Uncertainty Avoidance and Motivation towards A&S index:
Both parties exhibit a low Uncertainty Index, indicating their willingness to accept risks that do not adversely affect relationship building Additionally, with a Motivation towards Achievement & Success Index of 66, they demonstrate a strong ambition for achieving success.
Therefore, we will rule out the Accommodating strategy.
Figure 5.3 Motivation towards A&S and Uncertainly Avoidance Index between China and Vietnam
Based on the Individualism index:
Both have relatively low indexes, meaning that both sides are more inclined towards collectivism than individualism, individuals both value and prioritize group harmony and decisions
Therefore, we will rule out Compromising.
Figure 5.4 Individualism Index between China and Vietnam
The most suitable strategy that we can use isCollaborating
Tactics
Build Trust and Relationships First
In Chinese culture, establishing personal relationships, known as Guanxi, is crucial for fostering trust and facilitating long-term collaboration Prioritizing the development of these relationships through social interactions outside of work is essential before engaging in formal negotiations By investing time and effort into nurturing these connections, we can enhance our partnerships and ensure successful outcomes.
Be patient and accept a longer negotiation time frame
Negotiating with Chinese partners often requires patience, as the process can be lengthy and may involve multiple rounds of discussions It's essential to mentally prepare for an extended negotiation timeline and avoid the temptation to make hasty decisions.
Building trust and fostering harmony are essential for effective collaboration, as they demonstrate a commitment to cooperation This approach not only creates leverage for addressing more significant issues but also helps maintain control and safeguard core interests By encouraging partners to reach agreements more swiftly, it enhances overall productivity and strengthens relationships.
Effective negotiation involves active listening, which is crucial for understanding the other party's desires and concerns By gathering insights into their strengths and weaknesses, we can adapt our strategies effectively Moreover, attentive listening fosters respect and enhances the likelihood of successful collaboration.
The empathy tactic fosters a deep understanding of the emotions, needs, and perspectives of the other party, creating a more comfortable negotiation environment This approach encourages positive collaboration and significantly enhances trust-building between parties.
In negotiations, asking questions is crucial for uncovering valuable information that may not be readily shared by the other party, while also minimizing the risk of misunderstandings regarding intentions and details It is important to approach this process with sensitivity, ensuring that questions do not make the other party feel uncomfortable.
KEY SKILLS
SHOULD DO
Politeness and Delicacy in Communication
When negotiating with Chinese people, avoid using overly direct language or asking about sensitive issues, which are considered disrespectful and rude
Hierarchy plays a crucial role in Chinese social and business culture, where a clear structure within organizations is prevalent It is essential to show respect to those in higher positions Consequently, during negotiations, failing to engage directly with the decision-maker can lead to delays or modifications in agreements, as higher-level approval is often required.
Using indirect communication during negotiations is very important, showing tact and avoiding losing face from the partner
For example, if negotiating about financial issues, we can indirectly say the expected cost… to avoid losing face
Chinese partners will often appreciate you if you prepare your documents well and prepare for the negotiation carefully.
In Chinese negotiation culture, discussions tend to be lengthy and segmented into multiple stages Demonstrating patience is crucial, as it reflects respect for the partner's cultural values This approach not only helps maintain your position during negotiations but also minimizes the risk of errors when faced with prolonged tactics from the other party.
SHOULDN'T DO
In Chinese culture, “face” is extremely important, direct and straightforward communication can cause misunderstandings and lose face, which can lead to the entire negotiation being ruined
Chinese people like to negotiate in detail and carefully If you rush or appear impatient, they will feel you are unreliable and unprofessional.
Negotiations with Chinese people are often lengthy and require patience If you pressure them to make a quick decision, they may feel uncomfortable and react negatively.
In Chinese culture, it is considered unlucky to give gifts that contain the number 4, as it sounds like the word for "death." Additionally, avoid gifting items like watches or other items associated with negative meanings, as they may carry an unfavorable connotation.
In Chinese culture, social gatherings play a vital role in enhancing relationships, and declining invitations can be perceived as a sign of disrespect It is essential to accept invitations to parties or events organized by your partner, unless there is a compelling reason to decline.
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