Alibaba’s Distribution Center Bidding War: Belgium vs. the Netherlands
An interesting article in the Dutch Financial Times (Financieel Dagblad) last month discussed the bidding war between Belgium and the Netherlands to secure the new distribution center that Alibaba plans to build in the Benelux. Rumors of “$16 billion” and “more than fifty football fields” moved the Dutch and Belgian prime ministers to set up private meetings with Jack Ma, CEO of Alibaba. Unique in modern Dutch trade history.
Although the Dutch lost the bidding war, in hindsight, it seems they dodged a bullet. After all the excitement around this seemingly momentous opportunity, Alibaba’s concrete intentions are a far cry from the original plan, and next steps remain unclear. This is a familiar phenomenon I often encounter: miscommunication between European and Chinese parties that can be prevented and remedied. The solution? Listen to what is, and more especially, what is not being said.
Chinese Negotiation Tactics: Flexibility and Vague Proposals
The Chinese are smart negotiators and purposefully let two of Alibaba’s subsidiaries request bids from both the Dutch and Belgians. By putting out separate requests and providing a minimum of information, a common Chinese tactic, the Dutch then go about filling in the blanks. Seduced by what seems to be on offer, they pull out all the stops. In early April, a large delegation headed by the Dutch Prime Minister and Minister of Foreign Affairs traveled to China to seal the deal. As a result, scarce property around Schiphol airport was offered up to the Chinese, much sought after by Schiphol’s many Dutch partners.
By steering away from specifics but enticing the Dutch with lofty promises, the Chinese can rarely be held accountable. Looking back, one could argue that the Chinese were merely sharing a vision of their plans, leaving the market to respond to that vision in their own way.
Understanding the Dynamic Chinese Market: Rapid Changes and Pragmatism
From the outset, Alibaba’s requests for proposals were vague. How does one write a winning proposal based on information like “something close to the airport” and “in the area between Amsterdam and Rotterdam”?
Is this a deliberate strategy by the Chinese? Often, no. The ambitions are genuine, and the long-term plans are often serious. However, the path there is dynamic. The Chinese market is developing so rapidly that promises made only weeks ago can become obsolete. The only way to survive in China is by seizing opportunities strategically and swiftly. The most important decisions are made suddenly and, if needed, changed just as fast.
This is why Memorandums of Understanding (MOUs) with Chinese companies often mean very little. They are merely a statement of intention, as nobody can predict what tomorrow will bring. The Chinese are pragmatic, reviewing situations day by day. In a market like China, where things move faster than a marketing plan can be written, many traditional processes are left by the wayside.
The Key to Success: Understanding the Chinese Way of Doing Business
Statements made by the Chinese to Prime Minister Rutte and his allies were most likely sincere, but a highly visible meeting with Jack Ma in Rutte’s “Little Tower” is merely a dialogue on stage. It gives Jack Ma public standing but says little about the decisions the Chinese will ultimately make. The real decisions happen behind the scenes.
How can businesses get a grip on this dynamic? A local foothold is essential to react to the rapidly changing realities and plans of the Chinese. Real decisions are made after the players have moved off stage.
Misunderstandings surrounding the Chinese ways of working unfortunately often lead to unnecessary wariness. Chinese business partners are frequently described as mysterious and elusive. The good news is that there is another way. It all starts with asking the right questions: What do we know about the situation in China right now? What information do we have to craft a fitting proposal?
Navigating Chinese Negotiations: The Importance of Expertise and Patience
In my experience, asking the right questions at the right time yields the necessary insights. What are the true ambitions of the Chinese? Where do their interests lie, and what offers appeal to them? What factors—politics, economic interests—shape their decision-making?
In the case of Alibaba, employing experts with the right knowledge and experience could have led to a different outcome. Either by saving a lot of time and money or by submitting a fitting proposal with a better result for both parties.
The world is getting smaller, and China will continue to play an increasingly important role in global trade. If your company wants to be a part of this growth, understanding the Chinese way of doing business is essential.
As Sunzi once said, “Know the enemy and know yourself. Your victory will be painless.” What makes the Chinese such proficient negotiators? They listen carefully, gather the necessary information, and let time do its work. Then, they respond when it suits them—or not.