Why savvy startups and SMEs need negotiation skills for Asia

This year has seen a wave of interest from Asia into the Australian startup scene, from the landmark investment led by Chinese internet giant Tencent in Melbourne-based fintech firm Airwallex, to the deal by local mobile ad startup Unlockd with Asian teleco giant Axiata.

These strategic investment partnerships are helping Aussie startups to expand into Asian markets, establish new global operations and invest in ongoing product development, knowledge and technology.

Often, they offer ground-level access to local customers and businesses in rapidly growing Asian markets, while combining access to capital and networks with cutting-edge technology and IP.

Airwallex, for example, is using its $17 million capital injection led by Tencent, to expand the business to the next level, conduct new research, and scale across the Asia Pacific and beyond.

The value of this collaboration is increasingly recognised by industry, government and the research sector alike. For instance, during a visit to Australia earlier this year by Chinese Premier Li Keqiang, Prime Minister Malcolm Turnbull and Premier Li formally agreed to explore new areas of innovation cooperation that could benefit multiple industries across the startup scene.

But as the success stories demonstrate, having the right strategies and tactics in place to negotiate effectively with prospective investors and partners is essential to clinching win-win deals.

Startups and SMEs more agile in Asia?

In fact, cross-cultural negotiation skills, including the ability to adapt behaviour, are a critical tool for entrepreneurs and SMEs wanting to expand their business in the region.

Alarmingly, research released earlier this month by Asialink Business in partnership with PricewaterhouseCoopers and the Institute of Managers and Leaders found that just 10% of the ASX 200 senior leadership is equipped with the Asia capability skills needed for success with Asia.

The report found corporate Australia urgently needs to get ‘match fit’ for Asia by investing in leadership that understands and is experienced with the region, if the country’s top companies are to thrive in the future. Whilst there were pockets of strength in industries such as mining and resources, the research revealed the technology, communications and media industry was amongst the worst performers in terms of Asia capability.

Historically, big Australian companies have paved the way in Asia for smaller businesses to follow. However, the increasing interest and investment from Asia in Australia’s entrepreneurial scene has created a unique window of opportunity for agile startups and SMEs to be ahead of the game in securing winning partnerships and deals.

Negotiation skills a key Asia capability

With multiple cross-cultural, economic and organisational issues affecting each party’s negotiation approach, how can startups and SMEs ensure they negotiate to achieve mutually beneficial outcomes?

Obviously, there is no one-size-fits-all approach to success.

A strong understanding of how culture affects the negotiation styles of both parties at each stage of negotiation is key to securing a successful outcome.

Negotiating with Asian stakeholders requires a greater degree of patience, preparation and adequate research, particularly when it comes to carefully selecting potential partners and clients.

Putting cross-cultural strategies in place

It is important to put strategies in place to anticipate and manage cultural differences, build better relationships and maximise the mutual gains from negotiations.

No two Asian markets and cultures are the same, and nuances and differences can exist even within a country.

For example, when negotiating with Chinese counterparts, building a strong relationship through both formal meetings and informal chats is essential. Concerns about hierarchy, face and internal alignment may limit the potential to explore your counterpart’s interests. Using a letter of intent to clarify a prospective partner’s interests can therefore be a useful tactic.

Similarly, when negotiating with potential partners in Japan, it can be wise to assume that your counterpart will have performed substantial analysis on your firm, and you need to be adequately prepared. Patience is key; it may take time to understand a counterpart’s internal interest, organisation, and hierarchy and team structure. Extra time may also be required for your counterpart to undertake ‘nemawashi’, a process of internal consensus building and alignment.

Achieving mutual outcomes

By learning and employing multiple strategies like these — as well as focusing on building trusted relationships — it is possible to successfully navigate cross-cultural negotiations, and achieve a long-term partnership that benefits both parties.

Direct investment in Australia from our top four Asian investment partners (Japan, Hong Kong, Singapore and China) surpassed $500 billion last year. So as more and more investors and potential partners from Asia take interest in Australia’s innovation sector, as well as in small and medium businesses more generally, increasing numbers of startups and SMEs can benefit from building their cross-cultural negotiation skills.

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