Editorials & Articles of Interest
International Business Development: It’s about Relationships, Stupid!
by Ron Aubé
Provocative title, we know! While the expression was coined by Bill Clinton's campaign in 1992, it remains largely unknown to many outside of United States. This by itself, highlights the need to understand and respect cultural differences when conducting cross-national transactions. Thomas Friedman (2005) metaphorically dubbed our new global economy as a flattening world, a term describing a new playing field for commerce, one in which competitors have an equal opportunity to succeed. Aided by technology and the Internet, economic global interdependence is no longer a notion of the future, but clearly an everyday reality. This recent enthusiasm about “going global” has emboldened many companies to expand beyond their domestic borders lured by the apparent ease of conducting business internationally. Many are finding that it’s easier said than done. Whether your market entry is piggybacking, distribution channeling, franchising, licensing, joint venture, or acquisition, are you ready for global expansion?
For many years, marketers have appreciated the value of the four Ps of Marketing: Product, Price, Place, and Promotion, a concept that has resiliently sustained the test of time. We contend that when trading globally, it’s best to put another “P” first: People. Because of the significance of cultural biases, language distinctions, and regional etiquettes, we propose that your market entry adopt the “4 Rs” of global expansion: Relationship, Relationship, Relationship, and Relationship! Gone are the days when you could manage international operations from home, today’s ultra-competitive environment requires the hiring of competent local staff.
To develop a competitive edge, companies must wisely select partners deeply rooted in the region with extensive knowledge of the culture. This partner often called “fixer” can be the difference between success and failure, or getting your first sale 6 months down the road as opposed to 18-24 months later. International business developers should not surrender to the belief they can replicate the success they enjoyed at home without a great deal of changes in their methods and approaches. Having a partner knowledgeable about the region or better yet local presence is critical for your success abroad. Such relationships will fast track introductions to customers.
Going global requires relationships and a long-term commitment to the region. Understanding your target nation’s business culture is vital to conducting business successfully. Being respectful of cultures, rites, and behaviors will go a long way in gaining acceptance by the locals. In many countries, there is tremendous emphasis on relationship building – business people will want to know you on a personal basis, your family, and your values, before engaging in business negotiations. This often means interacting frequently and on a personal basis with your stakeholders in the region. In Japan, this translates into an exchange if corporate gifts1 (not so expensive that they constitute a bribe) and drinking sake when the time is appropriate. Business the Brazilian way is based on individuals knowing and trusting each other. The conduct has to be interactive, face-to-face, and with a personal touch. Don’t be in a hurry, don’t expect people to be on time for meetings, and be prepared to hug complete strangers.
When conducting business in China, one must be mindful of the complexity related to the cultural influences based on hierarchical, communal, and political factors. Authority and hierarchy is respected unconditionally to avoid losing face, a major insult all over Asia and particularly in China. More than anywhere else, relationships are crucial in China and more important than business itself. Respect and dignity, a light handshake, and a lowering of the eyes are important ritual. Respect begins with an undivided focus on what people say along with the all-important ritual of studying the business card very closely when presented to you. Do not put the card in your pocket! Do not rush people in China, be patient in meetings, and show respect and dignity at all times – this will make you an “honorable” person a key qualifier for relationship building.
If you’re a manager with a process-type profile wishing to conduct business internationally, surround yourself with colleagues with a great deal of “people” skills, you’ll need them! Put people first - forget analytics and processes for now. Don’t go at it alone. It’s about relationships, stupid.
1. The Foreign Corrupt Practices Act (FCPA) of 1977: The FCPA applies to any person who has a certain degree of connection to the United States and engages in foreign corrupt practices. The Act also applies to any act by U.S. businesses, foreign corporations trading securities in the United States, American nationals, citizens, and residents acting in furtherance of a foreign corrupt practice whether or not they are physically present in the United States. In the case of foreign natural and legal persons, the Act covers their actions if they are in the United States at the time of the corrupt conduct. Further, the Act governs not only payments to foreign officials, candidates, and parties, but any other recipient if part of the bribe is ultimately attributable to a foreign official, candidate, or party. These payments are not restricted to just monetary forms and may include anything of value.
Copyright Ron Aube 2013