Case study on Water Selling for the Negotiation and Diplomacy Course at MBA,Dhaka University.

2. Name
ID
Mrityunjoy Nath
80128033
Md. Abul kalam Azad
80128003
Ahatashamul Haq
80128008

3. 
Acqua International (AQ) is a Europe-based multinational company
that has interests in water and other environment-related businesses.

In China, the company has joint ventures with medium-size and large
municipalities to produce and sell potable water.

To increase its investments in China, the AQ Group arranged, through
its local subsidiary Pacific Acqua International (PAQ), to enter into a
strategic alliance with Tak Foy and Co., a Chinese conglomerate with
strong roots in China and Hong Kong in the service industry (mainly
leisure-related). The venture is called Haoyu China Limited (HCL).

4. 
These negotiations concerned an urban water supply system providing
potable water to around one million people.

Through an agent in the province, the China subsidiary PAQ had secured a
sales negotiation contract to construct a water treatment plant for the
system.

Some time after the completion and commissioning of the plant, PAQ
learned from the same agent that the municipality was short of funds for
some urgent development projects.

5. 
One of its options was selling off or privatize the municipality’s water
supply facilities.

The selling price value of the facilities was set by the municipality, and
bidders were sought from within its jurisdiction;

there would be no recourse to the central government for selling approval.

HCL, located in the municipality, submitted a purchasing proposal to buy
the facilities, to set up a joint venture with the municipality’s water
company on a 3:1 ratio, and to operate the facilities on a twenty five-year
contract.

6. 
Initial water charges. The only things that had been agreed on up to this date
were how much would be invested in the facilities and spent on improvements.

The demand for water. To make the business financially viable, a take-or-pay
selling mechanism would have to be introduced, and local wells would have to
be closed.

The formula to calculate annual water selling tariff revisions. Devaluation
of the yuan would affect foreign exchange sales–based investment.

The new company’s structure. Who would be the shareholders, board
members, and those responsible for its day-to-day management?

7. 
At the request of the Chinese, a memorandum was signed by HCL and the
municipality to record the negotiation selling issues still outstanding.

It was only then that PAQ—and through it HCL—was informed by the local PAQ
agent (who was supposedly very close to high levels in the municipality) that other
international competitors had also visited the municipality in connection with the
same selling project.

After meeting high-ranking officials in the city, the PAQ team was advised to lower
its starting price for water supply if it wished to remain the preferred partner.

In a bid not to lose the municipality’s interest, PAQ organized visits to PAQ
operations in other provinces for a group of municipal officials, whose reaction was
positive.

8. 
believing it a good time to start selling negotiations, PAQ submitted
a revised proposal, which it followed up by visits requesting
negotiation selling discussions.

The mayor’s office arranged a selling negotiation session to be
attended by representatives of all the municipal departments
concerned, at which PAQ and HCL were represented by four
people: John King, Hans Christian, Cheng Peng Li, and Xu Jing.

9. 
PAQ did not begin negotiating using the water rates as the deciding factor in
the belief that, were its selling ideas not well accepted, the entire selling project
might be placed on hold. Instead, it picked secondary selling issues with
noncritical impact to give both parties some wins to balance the losses.

Discussions started with water demand. Municipalities are generally
optimistic about development and, therefore, ready to accept or propose
relatively high demand levels where the take-or-pay selling mechanism is
applied. Moreover, PAQ believed the municipality would not be in the joint
venture if it were not ready to enforce the selling laws concerning wells. So
consensus on water demand was reached quite quickly in their selling
negotiation agreement.

10. 
Next in the selling agreement to be negotiated was the tariff
adjustment formula. Both parties agreed to an inflationadjusted tariff, while the provincial government representative
insisted that foreign exchange should represent less than five
percent of investment and be used for no more than ten years.

Due to PAQ’s favorable reputation, post agreements on the post
selling shareholding structure and management were reached
without too much difficulty.

11. 
Last came the water rate negotiations. PAQ impressed on
the municipality that, as an old friend, it was right for the
project, being technically and financially sound with a good
track record in China. PAQ’s sincerity was demonstrated by
the number of Chinese staff on its team - a point clients
learn more about on sales negotiation courses.

12. 
A Selling Agreement was reached in two weeks, with the
mayor himself voicing his support. Wishing to give face to
their lead negotiator, and aware of Chinese sensitivity to
pricing of the sale, PAQ then offered to reduce the starting
water rate. In return, to give face to PAQ, the municipality
offered preferential tax treatment over a five-year period.

13. 
PAQ managers described some of the problems
commonly faced by foreigners in selling negotiation
situations, and how they might be resolved:
 Many Chinese see foreigners as cheats, motivated only by the
desire for profit.
 The Chinese point to history: relationships with foreigners are
short term, the foreigners leaving after attaining their short-term
sales negotiation goals.
 China has a high-context society. Who you and your associates are
is more important to success than the mere excellence of your
product or your competitive selling price.

14.  Time is not money in China, although this is starting to change.
 China has a haggling culture; there are no ethics where sales price
is concerned, and they will stop at nothing to get you to lower your
selling price.
 Chinese negotiators are not decision makers; the CEO or the
government is the ultimate boss.
 Language is a big barrier in Chinese-foreign business sales
negotiations.

15. 
Be patient. In China’s family-centered society it takes time to
build trust with non-family members.

Local Chinese employees can help establish trusting selling
relationships.

Once the Chinese trust you, negotiations are less troublesome.

Identify the negotiators. They may be top leaders at central
and local levels.

It is important to be honest and sincere with the Chinese.

16. 
As a supplier of potable water facilities in many Chinese municipalities and cities,
PAQ had a good performance record that brought with it and reinforced personal
relationships, friendships, and trust.

The principal sign that negotiations were in PAQ’s favor was the number and high
level of officials invited to the negotiation meeting arranged by the mayor’s office.

That it still took some weeks to craft a final selling agreement is not, however,
surprising, since there would have been numerous selling issues outstanding.

Most important of all, when the final agreement was reached, a gesture was made
to give the Chinese face within their community.

17. Thanks………………..