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1、Chapter Nine: Five Links of International Business Negotiation “Everything considers itself to be right and others to be wrong, itself to be beautiful and others to be ugly. Everything is what it is. The opinions of the one and the other are different; that they both have opinions is the same. -Kuo

2、HsiangKey issues to be presented:o1. A brief introductiono2. Five links in details: EOCAC o3. Case studies & empirical analyses1. A brief introductionoA. IBN & foreign tradeoB. Formula of IBN: written & spokenoC. IBN & termsoD. Five links in generalA. IBN & foreign trade International Business negot

3、iation is an important part of conducting a foreign trade. It is the dealings between supplier and customer in order to reach agreement on the price, quantity, quality, payment and other terms and conditions of a sale. Obviously, the conclusion of sales contract results from the business negotiation

4、 to the satisfaction of both sides. International business negotiations are carried out either by writing or verbally. In the latter case, traders talk about the terms and conditions of a transaction with each other in B. Formula of IBN: written & spoken person or by telephone. The foreign businessm

5、an may call on the domestic trader upon invitation, or the exporter will make a visit to an overseas importer on his own account. Business negotiations are also held at international fairs where businessmen all over the world can negotiate with one another over export and import trade. Through verba

6、l negotiations trading transactions between Chinese and foreign businessmen are concluded in large amounts at the China Export Commodities Fair in Guangzhou twice a year. C. IBN & terms When business negotiation is done by writing, communications by letter, fax, or by e-mail are the usual means trad

7、ers use. In practice, letter-writing plays a major role and thats why a prosperous trader always has a great deal of correspondence to deal with. However, sometimes both types, communications in writing and in spoken words, are used interchangeably in one single transaction, as the case may be. The

8、formulation of the export/import sales contract represents the conclusion of some possibly difficult negotiations and, accordingly, particular care should be taken regarding the preparation of its terms. The following terms are talked over, for the main, in order to come to D. Five links in general

9、an agreement during a business negotiation. They are those terms about the descriptions of the goods, about their quality, quantity, packing, price, shipment, insurance, payment, inspection, claims and disputes, arbitration and force majeure. Only when the two parties all agree on the various terms

10、consulted can the business be done and the sales contract concluded. To reach to an agreement of the various terms mentioned above in the international business negotiation, generally, needs going through five links: enquiry, offer, counter-offer, acceptance and conclusion of a contract. Procedures

11、of conducting Foreign TradeEnquiry- Offer- Counter-offer- Acceptance- Contract 2. Five links in details: EOCAC -Link I: Enquiryo1Who makes? importer/exportero2What included? price list, catalogues, samples, details about goods and trade terms & conditions.o3Legal validity & liabilityo4Global commerc

12、ial practiceoCase study: oWritten communication skills-drafting enquiries & repliesoSample enquiries & replies general & specifico Business negotiations in international trade usually start with an enquiry by an importer to an exporter, asking for the price lists, catalogues, samples and details abo

13、ut the goods or trade terms and conditions. o However, at some times, an exporter can also initiate the negotiation by making an enquiry to a foreign importer, including his intention of selling certain goods to the latter. It is worthy of note that whoever makes an enquiry is not liable for the buy

14、ing or the selling. And the opposite side, at the same time, can make no reply at all. o But, according to the commercial practice the receiver of an enquiry will respond without delay in the usual form of a quotation, an offer, or a bid. 2. Five links in details: EOCAC -Link II: Offero1Definitiono2

15、Classification & legal validity & liability o3Six items to be includedoCase study: oWritten communication skills-drafting offersoSample offers Fax & oral An offer is a proposal of terms and conditions presented in a potential contract by one party, called the offeror, to another party, called the of

16、feree. In order for the agreement to be binding, the offeree must first accept the offer, otherwise there is no legal contract. There are two kinds of offer: offer with engagement firm offer, offer without engagement non-firm offer. Offer with engagement is different from offer without engagement. T

17、he latter is just an indication of price without contractual obligation. It is subject to change without previous notice. While the former is a definite commitment on the part of a supplier. A satisfactory offer will include the following:1. Name of commodities, quality, quantity and specifications.

18、2. Unit price and type of currency.3. Packing condition and date of delivery.4. Terms of payment and discount.5. The terms of validity of the offer.6. Indication of what the price covers. 2. Five links in details: EOCAC -Link III: Counter-Offero1Definitiono2Forms verbally or writteno3Essence of coun

19、ter-offershifting of roles of offeree & offerero4Arts of making a counter-offer RRS/SRSoCase Study & Empirical analysis 1Written communication skills-drafting counter-offer 2Sample counter-offers written & oralo A counter-offer is an offer made by an offeree to an offeror, accepting some terms and c

20、hanging other terms. It can be made verbally or in writing. In fact, a counter-offer is a partial rejection of the original offer. It is a new offer, at the same time, the original offer lapses. o The buyer may not agree on the price, or packing, or shipment put before him by the seller or offeror,

21、and state his own terms instead. Such alterations indicate that business has to be negotiated on a renewed basis. The original offeror or the seller now becomes the offeree and he has a right to accept or refuse. In the latter case, he may make another counteroffer of his own. oThis process can go o

22、n for many a round till the transaction is concluded or called off. In making a counteroffer, one should express regret/sorry at inability to accept, explain reasons for non-acceptance and suggest that there may be other opportunities to do business together in the future. RRS/SRS 2. Five links in d

23、etails: EOCAC -Link IV: Acceptanceo1Definitiono2Legal characteristicsfirm, valid, effective and unconditionedo3Forms written, verbal printed o4About silence or inactivityoWritten communication skills-drafting acceptanceoSample acceptance written & oral In business law, an acceptance is the assent to

24、 the terms of an offer, required before a contract can be valid. It must be absolute and unconditional otherwise it is not an acceptance but a counter-offer, may be tendered only by the person to whom the offer is made, and must confirm to any conditions concerning it that are set forth in the offer

25、. In accordance with the usual practice in international trade, an acceptance should confirm to the following conditions. o An acceptance can only be made in the form of a statement or any other conduct by an offeree, the particular person or a group of persons, who are clearly stipulated in a firm

26、offer. oEither a verbal or a written statement is good for this purpose. The conduct that the seller delivers the goods or the buyer makes the payment also serves. On the contrary, silence or inactivity is by no means an acceptance. An acceptance must be unconditional. It should be an unreserved ass

27、ent to all the terms designated in the offer. In principle, if any additions, modifications or limitations to the offer are made they are a counter-offer, and not an acceptance. It is necessary that an offeree should make an acceptance with the life of a firm offer. An acceptance, as a rule, takes e

28、ffect when it reaches the offeror. An order can be an acceptance of an offer or sent voluntarily by a buyer. It should be clearly and accurately written out and state all the terms of transaction. Many buyers now use printed order forms which ensure that no important information will be neglected.2.

29、 Five links in details: EOCAC -Link V: Conclusion of a contracto1Definitiono2Componentso3Formso4Differences between contract and confirmationoWritten communication skills-sales/purchase contractoSpecimen of purchase contract written & oral A contract is an agreement that creates an obligation, that

30、is a binding, legally enforceable agreement between two or more competent parties. It generally consists of an exchange of promisean offer and an acceptanceresulting in an obligation to perform some particular act. In order to be valid, a contract must have the genuine assent of the parties to it, t

31、hat is, it must involve both offer and acceptance. In export/import trade a sales contract is a legal document made by and entered into between a seller and a buyer on the basis of their offer and acceptance. The right and obligation of both the parties are definitely stipulated in the contract. The

32、 contract is binding on them all. In the course of business negotiation, an offer with engagement or a counter-offer is accepted, the transaction is completed and a contractual relationship between the offeror and offeree is concluded. It may be formal or informal. The contract which is generally ad

33、opted in import and export business is the formal written contract, either a sales contract or a purchase contract, sometimes in the form of purchase order when countersigned by the seller, or a sales confirmation when countersigned by the buyer. However, in keeping with the regular practice in inte

34、rnational trade, a written contract or confirmation is usually signed to bind both the seller and the buyer. A formal contract or confirmation should be prepared in duplicate; each copy should be signed by both parties, and each party should keep a signed copy of it. A contract can be worked out eit

35、her by the seller or the buyer, and it is called a sales contract or a purchase contract respectively. The same is also applicable to a sales confirmation or a purchase confirmationinformal. Legally, both the sales contract or the purchase contract and the sales confirmation or the purchase confirma

36、tion are equally binding on the parties. On the whole, the former is more formal, and the latter, less formal. Besides, the formal consists of not only such main terms as the name of commodities, specifications, quantity, packing, marking, price, shipment, port of shipment and port of destination, a

37、nd payment, but also those clauses concerning insurance, commodity inspection, claims, arbitration and force majeure; while the latter covers several main items only. oIt goes without saying that both the parties will benefit from the sales or the purchase contract if disputes occur because the cont

38、ract has provided in detail the relative terms and ways of how to handle and settle the disputes. It is, then, appropriate to transactions of large amount and huge quantity. If the amount is not large or the business is done by means of agency arrangement or exclusive sales agreement, the sale or th

39、e purchase confirmation is often used.Case Study and empirical analyses General Enquiry Dear Sirs, We learn from the Chamber of Commerce in Shanghai that you are a Leading exporter in your country. We are, at present, very much interested in importing your goods and Would appreciate your sending us

40、catalogues, sample books or even samples if possible. Please give us detailed information of CIF prices, discount, and terms of payment. We hope this will be a good start for a long and profitable business relation. Yours sincerely,Reply to General Enquiry Dear Sirs, Thank you for enquiry of May 2nd

41、. We are enclosing some copies of our illustrated catalogues and a price lists living the details you ask for. Also under separate cover, we are sending you some samples which will show you clearly the quality and specifications. We trust that when you see them you will agree that our products appea

42、l to the most selective buyer. We allow a proper discount according to the quantity ordered. As to the terms of payment we usually require L/C payable by sight draft. Thank you again for your interest in our products. Should you need any further information, do not hesitate to contact us. We look fo

43、rward to your order. Yours sincerely,EnquirySpecific Enquiry Gentlemen, We are one of the leading importers of textiles in this city and shall be pleased to establish direct business relations with you. At the present, we are interested in Cotton Piece Goods and shall pleased to receive from you by

44、airmail catalogues, samples and all necessary information regarding these goods so as to acquaint us with the quality and workmanship of your supplies. Meanwhile please quote us your favorable price, C.I.F. San Francisco, inclusive of our 2% commission, stating the earliest date of shipment. Should

45、your price be found competitive and delivery date acceptable, we intend to place a large order with you. Truly yours,ReplyGentlemen,We warmly welcome your enquiry of January 27 and thank your interest in our cottonpiece goods. We are enclosing our illustrated catalogue and price list giving the deta

46、ils you ask forAs for the payment terms we usually require confirmed, irrevocable Letter of Creditpayable by draft at sight. We have already sold some of these products to the United States and nowrepresentatives there by Textiles Export Ltd, New York. May we suggest that you contactthe company dire

47、ctly? We think the firm may supply you with more details of our cottonpieces goods. We feel confident that you will find the goods are both excellent in quality and veryreasonable in price. Truly Yours,OfferDear Sirs,Sunbird Mens Silk ShirtIn reply to your fax of April 12, we are giving you an offer

48、, subject toyour reply here by 6pm Beijing time, Sunday, April 18, as follows:Commodity: Sunbird Men Silk ShirtSpecifications: As per attached list.Quantity: 500 dozen.Packing: At buyers option.Price: US$600 per dozen CIF2% New York.Shipment: May/June, 2002.Payment: Confirmed, Irrevocable Letter of

49、Credit payable by sight draft to be opened 30 days before the time of shipment.In view of the fact that our stock on hand has been quite low owing toheavy commitment, your early order is absolutely essential.Yours faithfully,Counter-offerDear Sirs,Re: Canned BeefThank you for your offer by fax of September 5 for 4,000 p

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