Fresh from the HuffPo! Going International? Read on…

Posted on 1 February, 2012 by

Here is the link to my newest article, published a few minutes ago by the Huffington Post and also posted below:

President Obama said it again last week in his State of the Union Address: the Export Initiative is still high on the Administration’s agenda. While this is great news, I wish more would be done to equip new exporters toward best international business practices. In the international arena, everything differs from what they know. Having access to a guiding hand that will point out the invisible traps that are often hidden beneath cultural beliefs and principles would shave years off the lengthy and often costly process new exporters encounter.

One of the mistakes U.S. exporters make is using their domestic structure, including the sales and marketing forces, to go international. Going international requires a deep understanding of the region the company wishes to penetrate. Sales people must be hired in function of the client’s needs rather than the ones of the company that employs them. This means the HR director and C-level executives must be knowledgeable of that region’s cultural preferences, language and mores. Asking your best sales person to take his Midwestern sales techniques to Abu Dhabi is bound to fail.

To put to good use the government’s monetary assistance, please take into consideration the following steps when expanding to a new region:

1)   Do some soul searching within your company. Is everybody on board with regard to international business? Is everybody committed to and excited about the idea of pursuing an international strategy for the next 10 years in a certain region?

2)   Draft an export strategy. Hire an expert and listen to what she has to say. Whatever your company did to be successful domestically will have to be entirely rethought to fit the international curriculum.

3)   Identify if there is a need for your product throughout the world. While market research may seem expensive, it will save you in folds if you know exactly why your product/service might be embraced (or not) by a different culture.

4)   Be proactive. If you’re lucky enough to have foreign customers knocking on your door, assist them by organizing the shipping of your products and analyzing if they should become your distributor/agent in that region. Don’t sell EXW!

5)   Hire sales representatives for that region. Look for people in your area who are from the culture you’re trying to penetrate. They may not have the technical skills you need, but those can be taught–while the cultural subtleties required to succeed in that region and the language may escape your company forever.

6)   If it’s truly impossible to train that sales representative on the technical side of the product, team up that person with a technical person and have them travel together.

7)   If it is ABSOLUTELY impossible to find a person who comes from the region in which you’re interested, hire and groom someone who is multicultural and multilingual for the job. Give that person access to language classes and cross-cultural training so she can say at least 20 sentences in the local language and is well aware of the cultural mores.

8)   Consult with an international intellectual property attorney. Put protection in place to disincentive counterfeiting operations or intellectual property theft.

9)   Put procedures in place. Train your entire company, including third-party agents, on the Foreign Corrupt Practices Act.

10)  Try to not replace people often, and don’t move people around. International business is all about relationships and established trust. Each move forces your potential client to start from scratch with the new comer.

My last piece of advice is not to get discouraged. Realize that it may take up to five years of intense travel and relationship building for the business to take off in the host country. Once you have the right people in place and your product/service has been tweaked to fit the culture, it’s all about commitment, perseverance and patience.

 

 

 

Posted in Cross-Cultural Communication, Cultural Intelligence, Foreign Corrupt Practices Act, International Business Practices, International business travel, International Marketing, International Sales | Leave a comment

The Success of Ethnic Minorities in International Business

Posted on 26 January, 2012 by

Last December an article in The Economist discussing advertising to ethnic minorities caught my attention. The article discusses at one point how “ethnic origin is the key to people’s identity, much more than education, income, religion, sex and sexual orientation.”

This is of high interest to someone like me as it echoes what I see and hear when talking about internationalization with small business owners who come from a U.S. ethnic minority. For example, many African Americans voice an interest in promoting their products in Sub-Saharan African nations. Most of my interlocutors have never been to Ghana or Zaire, but they feel a deep connection to those places and seem to instinctively know that Ghanaians or Zairians would be interested in their products or services. This gives them the audacity to get out of their comfort zone and start their expansion efforts.

My Hispanic clients often still have connections in their home country and already tested their products by taking it to aunts and cousins who remain in the home country. They also often already identified a possible distributor or agent through the large social network of their family. Chinese and Koreans are even often more involved with their homeland community and will invest their money in their home country by building a commercial outlet that will give economic viability to their family back home while building an international presence for their brand. The Greeks are not too shabby at internationalization either. Look at Arianna Huffington: in less than two years, she expanded her on-line newspaper to Canada, England, and France. The world is her oyster.

The multicultural and multilingual approach these ethnic groups bring to the commercial equation make them think internationally from day one. They don’t feel that they have to learn to walk before they run or that they may take on a bigger risk by opening a commercial entity in Seoul rather than Los Angeles.

Reading those lines, you may feel that of course people who are connected to their  family back home have a leg up on you. The truth is, if you ask, they might be more than willing to share their network and multicultural approach to business in their home country–but you will have to learn to LISTEN to them and FOLLOW their advices and recommendations.

Too often clients of mine realize they need someone in house to make that connection with the country they wish to penetrate. What they don’t realize is that they seldom empower the Vietnamese or Nigerian employee to lead the business the way it should be led in Hanoi or Abuja. Executives want access to the language mainly, while wanting to remain in control of the management and negotiation styles. Seldom do they realize there is a business know-how in each culture that differs from theirs and that must be engaged in order to connect with potential buyers.

High-caliber multinationals have noticed, and many are now working on decentralizing their management, empowering each country to lead the way it sees fit culture by culture.

You, however, don’t need to be a multinational to take advantage of the infinite power of international sales. What you need, big or small, is the capacity to admit that there is more than one way to skin a cat. And you must trust people from different cultural backgrounds to teach you how to do it in their own country so your business can be recognized as a business that belongs and feels natural to the locals.

Posted in Cross-Cultural Communication, Cultural Intelligence, Cultural Wisdom, International Business Practices, International Marketing, International Sales, Managing People | Leave a comment

HuffPo Post: Building the Case for Business Class Travels

Posted on 18 January, 2012 by

Here is the link to another article of mine, published today in the Huffington Post or… keep on reading:

It’s very common in the United States for companies to entrust management of their international department to someone who knows how to manage money. More often than not, that person has no international business experience and as such does not understand what type of expenses are necessary for international sales to take place.

One of the biggest misconceptions of the financial type is that there’s no reason to spring for a business class ticket to travel. Getting from Point A to Point B is the irrelevant part of the international transaction, and flying coach is good enough. Well, I’m here to inform the CPAs and MBAs of our nation that they have it all wrong.

Think about it: flying from Seattle, Wash., to Amsterdam requires almost nine full hours of uninterrupted flying time. Flying is a bit like playing Russian roulette: you never know who will be sitting next to you for those long hours. So why not put the odds on your employees’ side by realizing that the chances of a valuable, captive audience for so many hours might be much more probable in business class than in coach?

Take my story: I used to work for a Brazilian company while stationed in Portland, OR. I had to report to Curitiba every quarter and would fly business class, courtesy of my savvy employer. Flying business class for many years, I made some of the most important international business contacts of my career and even ended up meeting the VP of Purchasing for a very large Fortune 500 company. He ended up buying the products I represented for the next seven years. While it’s true that my business class ticket was expensive ($7200), I made up in folds by maximizing my in-flight networking and transforming my seating companion into my next customer at $500,000 a month in sales.

As an employee, your Russian roulette may leave you with a hole in your pocket at times, feeling you might not be able to connect with your traveling companion. If such is your case, here are a few pointers for you:

-       Dress in a professional manner. Being well dressed when traveling shows success. Success breeds success, and the chances that the person sitting next to you opens up and talks to you while en route increases exponentially if you’re well-groomed.

-       Carry your noise canceller headset and a book/review to show people you’re pre-disposed to go quiet if they give you the non-verbal cues that they’re not interested in talking. (It does happen.)

-       Introduce yourself. Many people are uncomfortable talking to strangers. Taking the first step takes the pressure off many travelers who will then be thrilled to have company.

-       Have something intelligent to say to break the ice: read a newspaper before flying so you know what’s happening in the world.

-       Ask questions and then LISTEN. Remember, this isn’t about you; it’s about turning a stranger into a potential customer or referral. Nothing goes further with people the world over than letting them talk about themselves.

-       When you talk, don’t hard sell your company. Tell stories that illustrate what you do or give away just enough for your interlocutor to ask for details.

-       Don’t push your business card onto people. By the end of the trip, people should be eager to exchange business cards.

-       Watch your drinking. Nothing is worse than being seated next to an obnoxious drunk who is loud and belligerent.

-       Don’t argue. If people have political or religious views that differ from yours, always remain polite and respectful. You have the right to state your opinion; but remember, the goal is to make a professional friend, not to replace the high school buddy you lost by moving West.

-       Find reasons to stay in touch. If your interlocutor loves caribou hunting, take notes. Once you have his email address, send him articles/information to fuel his passion.

Paying for business class travel should be perceived as an investment by the company and understood by the employee as another professional component that has to be meticulously executed.

 

 

Posted in International Business Practices, International business travel, International Marketing, International Sales, Managing People | Leave a comment

The Cross-Cultural Concept of Community

Posted on 11 January, 2012 by

In 13 U.S. states, one can hear the voice of the benevolent Tom Shane on the radio trying to convince listeners that “you now have a friend in the diamond business.” I often wondered if that tag line sells, as most of my U.S. friends make it a point not to do business with friends and family. I suspect they may have spent lots of time watching Judge Judy on TV scowling at petty criminals suing one another over $50 and a heavy heart. According to many, friends are for parties and picnics in the park. They are not there to be relied on when in need of professional help or money to attend to an unexpected bill.

Interestingly, other cultures will only do business with friends and family–and those are the ones who buy from their Diasporas when living abroad. They only buy from friends and family because they are the only ones, they feel, who can be trusted.

As a cross-cultural mediator and consultant, I love paradox and always try my best to understand why certain cultures behave the way they do. So here is what I learned about the reason Americans tend to avoid dealing with friends in the United States: the culture is based on conflict avoidance. We diffuse and do everything we can never to upset the other party. With the convenience of email, we even learned to deliver bad news electronically instead of saying it face to face. It’s easier on everyone. Like this, we can all get upset or hurt in the privacy of our own homes instead of running the risk of losing face in public.

The problem is that when we engage in a business transaction with people, we run the risk of having to deliver bad news. We may have to voice our discontent and request that the service be improved. That’s uncomfortable, so we involve attorneys to do it for us. Not so good when you have to turn the attorneys loose on your friends! So we avoid doing business with friends at once.

In comparison, several cultures favor dealing with friends because:

1)   A friend shares our values and beliefs;

2)   A friend is part of our social network;

3)   A friend will go the extra mile to please;

4)   A friend is someone we feel comfortable talking to when things don’t go well.

As a result, Chinese, Mexican and Vietnamese Diasporas excel in the United States because those cultures are supportive of one another. Back home for them, opening a business was a great challenge because few banks would loan money to people who just have a business concept. In the U.S. small businesses thrive, and obtaining a loan based on a concept is not as hard. What is hard, time consuming and expensive is advertising and promoting the business so people know it exists. But if you are Chinese, Mexican or Vietnamese, you can forget about advertisement and rely on word of mouth because your friends will buy from you. Not only do those cultures believe in their friends, but they rightly believe that the friend, once wealthy, will reinvest in the community and share her money with them in some ways. It’s part of being a group culture vs. a culture based on individualism. By coming to the United States, those cultures have it made, which can be seen by the large amount of immigrants who are excelling business-wise in the United States.

The truth is, avoiding doing business with friends wasn’t always the case in the United States either. Community and friends were all people had one hundred years ago; and attorneys did not dictate the way people should live their lives. As a result, people had faith in one another and had no choice but to confront problems when a friend let them down. People had the skills to turn conflicts into opportunities without the intervention of the law.

Friendship is at the core of a life worth living. Next time you think about hiring someone to do some work for you, consult your address book and reach out for your friends first. They may surprise you.

Posted in Cross-Cultural Communication, Cross-Cultural Friendship, Diaspora | 3 Comments

The Knee-Jerk Reflex of Internationalization

Posted on 5 January, 2012 by

For those of you of have missed it, here is a copy of my article, published today in the Business Section of the Huffington Post:

For American companies of all sizes, 2012 will be remembered as the year that forced them to enter the international chase for market shares. While this should be perceived as a positive action, I foresee a problem that too many of my clients can’t pinpoint: their lack of international reflex.

Too few Americans have professional international experience, and even fewer have an innate sense of how to lead with cultural intelligence. As such, sending people on international business development assignments to countries they can barely identify on the map will be challenging and not so profitable as intended.

In comparison, many European countries have an ingrained sense of internationalization. No commercial entity (even the smallest shop or café in Brussels or Geneva) can ignore the fact that its market is too small and too multicultural to sustain a business that doesn’t include a name and tag line that easily translate or a sales staff that can’t communicate in three or four languages. Internationalization in Europe is a way of life. In the United States, the concept of internationalization is normally considered as an afterthought–and often due to a foreign customer who’s knocking on the business’s door, begging you to grant her the right to export the product to her market. The economic situation we have experienced for the past four years is, however, forcing many U.S. companies to contemplate a mutation that will allow for a knee-jerk reflex for internationalization. U.S. products are still in demand throughout the world, but we now have to work harder at finding customers than ever before. Competition is fierce, and the knock on the door must come from our own sales person patrolling the world in search of the next customer. Nobody is banging on our door any longer. We must be proactive, and we must think on international terms.

As such, it’s important to pay particular attention to the employees who are selected for international assignments. U.S. C-level executives, especially in mid-size companies, seldom have had international exposure and rarely lead with cultural intelligence. They keep on hiring for technical skills instead of multicultural pedigree. They wrongly assume that everybody throughout the world speaks English (or should) and that being multicultural is the cherry on top of the cake instead of realizing that it’s the steel mold that allows the cake to take shape. The abundance of job postings on LinkedIn for international positions that stipulate “foreign language a plus” and “small amount of travels involved” reflect that not enough cartilage has been grown thus far for internationalization to become a knee-jerk reflex. So when things aren’t instinctive to the C-Executives and the Board of Directors, where does one start?

To transform a company into an international one, an injection of internationally competent people must be brought on board. For this, the HR Director must have an international background and understand the required traits to succeed internationally, department by department, even if the company isn’t international yet. Nowadays, all eyes must be on international expansion; each move must be incorporated into a global strategy. As a bird builds its nest one straw at a time, a company must build its international structure from the ground up—strategically and methodically, and no longer as a simple afterthought.

Posted in Cultural Intelligence, International Business Practices, International Marketing, International Sales, Managing People | Leave a comment

NOT Selling Internationally IS Your Biggest Risk

Posted on 19 December, 2011 by

I read an article that talks about Australian companies setting up purchasing offices in the U.S. to purchase goods that American companies refuse to sell internationally. While the article praises the ingenuity of those Australian entrepreneurs and the appeal of American goods in Australia, the true question is: Why would any business nowadays refuse to sell its products internationally?

The past three years have demonstrated that the U.S. economy has plateaued and that companies interested in maintaining their market shares must tackle the growing middle class of fast-growing regions such as Brazil, India, China, Chile, Nigeria, Vietnam, etc.

Reflecting on the question, the immediate reasons why U.S. companies would refuse to sell their goods internationally are mainly based on misconceptions:

1)   Selling internationally is a headache we don’t need. International paperwork and transaction are overwhelming and terribly complicated. By the end of the day, there is no money left.

2)   Fraudulent credit card activities prevent sellers from getting paid.

If the above reasons are part of your reasoning process, let me help you get over them.

Selling internationally has an established set of procedures that are handled by professionals who specialize in international business. Those professionals can help you in a multitude of ways and reduce your risk. Make sure you consult with one of them.

As to you, here are a few things you can do: Train your people to inquire about the end user of the product and her location. If you realize your product is in high demand internationally (you could also have a box on your website asking your clients where they would like to see the product offered worldwide), train your sales person to track the volume of potential export by region for your product.

At first, your volume might be low and shipping each item separately is wise. Your local post office can train your shipping specialist on how to handle the export papers, as they are simple. If your item is large, you may want to pair with FedEx or UPS. They are the pros of international shipping and will be happy to show you how to fill out the necessary paperwork.

Assuming that your volume gets bigger, you will want to locate a distributor in the host country. An efficient way to do that is to find a complementary item to yours and find out who is selling that item. For example, let’s say your company manufactures snowboards. Find out who sells ski goggles or ski jackets to outdoor stores in Australia. Contact the distributor and find out if he would be interested in adding your product to his existing line.

The objective is to find someone who will benefit from representing your product by extending her product line while you enjoy the network of established relationships that person/company already has in-country. Your distributor should be able to buy per LCL (less than a container-load) or even full-container loads and safely store the material in country. Make sure to visit your potential distributor in his country. Spend as much time as you can afford with that person before closing the deal. Building trust with your potential distributor is of utmost importance.

Payment terms and insurance policies are arranged and mandated by the international department of your bank. (If your bank does not have one, Wells Fargo does a great job for small to mid-size exporters.) Based on the size of the transaction, a Letter of Credit is open or even an open account if appropriate collaterals have been set up. Remember that many countries do not have our banking system in place and that you may be forced to think outside the box to generate business. It is not because people operate differently than you do that it is automatically fraudulent or risky. It’s just different.

Developing a relationship with your foreign counterpart, transforming her into a true business partner is CENTRAL to any international business. If your volume keeps growing and you feel you have a good handle on the cultural mores and purchasing preferences of your customers, consider, in tandem with your distributor, owning your distribution center or even your own store.

As to fraudulent international credit cards, Interpol reports show that the risk of getting stung is not higher outside of the United States.

Refusing to sell in a country where your product is in demand is the biggest risk you take as a manufacturer, as you are losing control over its retail price and opening the door to counterfeit products. Work with your bank, put smart policies in place and go for it!

Happy Holidays! We will resume our blog in January.

Posted in Cross-Cultural Communication, International Business Practices, International Marketing, International Sales, Managing People | Leave a comment

The FCPA and, Yes, Wal-Mart

Posted on 13 December, 2011 by

Some of you wrote to me observing that dissecting the Foreign Corrupt Practices Act (FCPA) was a bit depressing so close to the Holidays.  You have a point. But giving you access to this important information that could keep you and your company out of legal trouble is meant as our gift to you.

Once again, here is Mr. Bruce Alan Johnson finishing up our  FCPA three-part series:

“When the world’s largest retailer, Wal-Mart, disclosed a few days ago that it is thoroughly investigating itself for suspected violations of the Foreign Corrupt Practices Act, do you honestly believe that your own company can’t also possibly be in violation? Wal-Mart maintains a huge staff of inside counsel, has a solid compliance policy in place worldwide, and employs a large number of compliance executives. Yet even Wal-Mart had to say publicly, “We are taking a deep look at our policies and procedures in every country in which we operate. As a result of information obtained in that process, we have begun an internal investigation related to our compliance with the Foreign Corrupt Practices Act.” (Wal-Mart operates 9,000 stores across 28 countries.) Wal-Mart has learned the bitter lesson that there is simply no way to know if one’s company is in compliance with or in violation of the FCPA without turning to outside experienced help that knows the many dark turns and corners of the Act, and can spot the danger flags and errant practices.

We explained last week that if your company is hit with a Deferred Prosecution Agreement (DPA) by either the Department of Justice or the Securities & Exchange Commission over an accused violation of the Foreign Corrupt Practices Act (FCPA), you’re basically going to have to fold. (We also pointed out that this is a vicious practice that completely eviscerates the sacred legal principle in this country of the presumption of innocence, but that’s for another blog.)

There was a case just a week ago that some have hailed as a major breakthrough in favor of American business under Federal scrutiny in connection with the FCPA. The senior executives of the Lindsey Manufacturing Company had been convicted of violating the FCPA, but from the very outset, these executives decided to fight the government. After a protracted court fight and millions of dollars in legal fees, a US District Court sent down a ruling that overturned their convictions—the first and only such reversal in FCPA history, out of hundreds of successful Federal victories. Clearly, the odds are not with you.

Perhaps the most telling remark came from Lindsey’s lead counsel, Jan Handzlik (of the law firm Venable), who said: “In addition to charging huge multinationals with bribing foreign officials, the Justice Department has made a practice of going after small companies with a limited ability to fight—they have no choice but to roll over because it’s a matter of life and death.” [emphasis added]

It is indeed a matter of life and death for your company. The intricacies of the FCPA simply cannot be mastered through a seminar or webinar. This is because, over the years, even basic definitions of terms like “foreign official” have been twisted to mean relationships that most American companies don’t even know exist in their own overseas operations.

Remember: it doesn’t really matter which countries you’re doing business in or with: the FCPA applies to ALL of them. But if you’re concerned that your company might get flagged and tagged by the Federal government, we suggest you see the map in our 28 November blog. Are there, though, any specific countries which tend to trigger FCPA investigations and accusations more swiftly than others? Unofficially, yes. They include—but are by no means limited to—Brazil, Russia, India, China (two companies indicted so far are Lucent and ITT), Korea, Mexico, Nigeria, Afghanistan, Venezuela, United Arab Emirates, Iraq, Philippines, South Africa, Russia, Kazakhstan, Saudi Arabia, most of Eastern Europe, Argentina, Ukraine, Turkey, Pakistan, Indonesia. Thailand, and the Philippines. Actually, we’re not sure we should have offered that unofficial list, because you might look at it and breathe a sigh of mock relief. Whew—we don’t deal with any of those, so we’re fine! On the contrary, those countries are the ones that are likely to trigger automatic investigations. But investigations by the SEC or DOJ have been launched against American companies doing business in at least sixty-three other countries not on this list! Bottom line: you’re not safe.

Oh, that one successful reversal case we cited above? The judge was outraged by some of the Federal practices exposed during the trial. They included FBI agents who lied to grand juries; material falsehoods used to obtain search warrants under false pretenses; improperly reviewed confidential e-mail correspondence between one defendant and her lawyer; reckless failure to comply with discovery obligations; and outright misrepresentations to the court. But since we know these now to be longstanding Federal practices in FCPA investigations, you can be certain that any fight you elect to wage is going to be terribly expensive and terribly difficult to defend successfully. Far wiser is a decision right now to undertake a thorough test of your company’s compliance with the Foreign Corrupt Practices Act. It’s the only hope you have of staving off a fight that could bring your company to its knees. As the lawyer put it, “…It’s a matter of life and death.” It is.”

 

Posted in Foreign Corrupt Practices Act, International Business Practices, International business travel | Leave a comment