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The International Entrepreneur – Chinese Business? Interview with Ding Zhengli and Tan Xiaoran

Ding Zhengli

Ding Zhengli

Today I have the privilege of interviewing Chinese business consultants, Ding Zhengli and Tan Xiaoran, who both studied in the United States and now add a cultural bridge to companies looking to expand business in China. Mr. Ding and Mr. Tan are a Principles of Global Progressive Solutions, a firm focused on global business strategy with particular concentration on entering and succeeding in the Chinese market.

The International Entrepreneur (TIE): Zhengli and Xiaoran, you have spent time in both American and Chinese business cultures. Do you have any recommendations for American and British professionals looking to better understand the Chinese market?

Zhengli: For this question, I’d say make some Chinese friends. I think this is the easiest way to get a fast access to know Chinese culture. Knowing Chinese in the real world will bring direct feelings and experience to American and British professionals. But in the real business, it won’t be enough time to find a good Chinese friend. I think western professionals should have a mentor for their Chinese market. The mentor should have deep understanding of both western culture and Chinese culture. And always be aware of your Chinese partners, employees and customers. As a collective culture like China, group harmony is a great deal for projects, assignments, companies and business. Treating people like family and friends would build the relationship faster and longer.

Tan Xiaoran

Tan Xiaoran

Xiaoran: I think doing business in China is not only about business. A deal is not just a deal. There are many social activities will be involved in all processes, such as tourist visits, dinners, night events and leisure activities. Chinese believe they are doing business with people who have their own personality. Such social activities can help Chinese learn about the people’s personality they’re dealing with. Participating in social activities can help build strong relationship and gain trust from each other. So be prepared for long conversations about family, sports, political topics or any other non-business things.

TIE: What are some fundamental ways that marketing a B2B product in China would differ from how we would approach this process in the UK or US?

Zhengli: I think this depends on the type of products. If it’s a manufactured product, online clients like Alibaba would be a good choice. These kinds of clients have built a great brand image as having all kind of products online. It’s easy to find selected products on those websites. But one thing should be aware of is bargaining. Even if a product is listed on the website, a customer could possibly bargain about the price if they think their bottom line is reasonable. Negotiation skills are really important here. If a foreign company is selling something, the customer will be satisfied if they can bargain the price lower.

If the product less tangible (ex. software), create a detailed “white book” in Chinese. But the real deal should always have personal contacts such as phone calls or visits even the customer has already paid. Those personal contacts can give customers a feeling that they are really important and they are dealing with humans, not companies.

Also, in B2B marketing and sales, be aware of titles. Always do a title match before meetings and calls. You don’t want your middle level managers talking to a company’s CEO, at least a match with a top guy from a related department. And say sorry for your boss to the other party if he cannot attend, so they do not lose face.

TIE: Many companies are trying to save costs and effort by directly translating their company website to simplified Chinese. From your perspective, what kind of potential (if any) is lost by not localizing?

Xiaoran: I think it still depends on what kind of business. Industries selling products such like equipment, pharmaceuticals or other real existing goods, directly translating their company website would not be a bad idea. Customers who need these kinds of products make their decision based more on products’ quality and price. Those companies could also use B2B websites such as Alibaba to reduce their risks of a bad translation. They only need to be careful about their product’s name in Chinese: it might have a different meaning.

For companies with low brand recognition in China, directly translating the website would not help their business in China at all. Chinese customers prefer to know someone in the company or know the company first, and then they take detailed look at websites when they are looking for services. Certificates and prizes would help companies on attracting customers, but most U.S or UK companies don’t highlight those on the website. Most Chinese, especially middle-age people don’t treat online searching as a way to look for partners or business opportunities in service industries. Chinese are more willing to talk with you face to face or on-line, rather than just sending messages or emails. This is the way Chinese building trust with their partners or customers. So the website needs to support building trust through more direct channels. And for sure, you need a localized website for your service in Chinese and has every detail about your service, your company’s professional experience/rewards, and your special deals! Remember, Chinese love a great deal.

 

About Ding Zhengli and Tan Xiaoran

Born and raised in Hubei, China, Ding Zhengli is Chinese national with a highly diverse background. Zhengli attended Huazhong University of Science and Technology in Wuhan, receiving a Bachelor’s degree in Electrical Engineering. After graduating from Huazhong University, Zhengli came to the United States to earn his Master of Science in International Business at the University of Colorado Denver. After living in the United States for more than 3 years, Zhengli became one of the founding partners of Global Progressive Solutions (GPS). He is a skilled consultant concerning U.S. companies wanting to operate in China.

Tan Xiaoran was born and raised in Changchun, Jilin Province of China. He has a Bachelor’s Degree in Accounting. Xiaoran has been living in USA for more than 3 years, and received his Master’s Degree of Economics from The University of Colorado Denver. Due to his extensive experience in Chinese banking and politics, Xiaoran has developed deep knowledge of building relationships and dealing with businessmen in China. He also has strong connections in northeast region of China.

Contact Ding Zhengli and Tan Xiaoran: [email protected]globalprogressivesolutions.net

 

The International Entrepreneur – Managing Growth in Marketing

embarrassedI am fortunate to work with very talented B2B technology marketing professionals and this week’s article is dedicated to them.

B2B technology marketers are a particularly dedicated group of professionals. They often work with underfunded marketing budgets. They rarely have enough trained staff. And they have to understand the nuances of highly complex products and services and translate it all into messaging that makes sense to both technical and non-technical stakeholders. But challenges are even greater when the company starts to grow. Scaling marketing on a shoestring budget requires a whole new level of creativity. This is something I see with most of my clients. Here’s my advice to these marketing managers:

Don’t Do It All

The typical small and growing technical firm has one in-house marketing full-time employee. This person might even wear multiple hats (many roles) in the company. What normally happens as the marketing role begins to expand is that the marketing manager begins to work more hours trying to keep up with the increased work load. But this is only a temporary solution. Instead, it’s important to take the step back and ask:

  • Out of my responsibilities are there any that are not actually necessary? Those are the first to fall off the list.
  • Am I making time to plan and organize my work load, or am I just starting each day in a reactive mode?
  • Does the marketing program have an overarching strategy? Are the different activities interconnected?

All of these questions can lead you to better uses of your precious time.

Look for New Resources in Unexpected Places

If your company happens upon a windfall of cash, then maybe the marketing funding will receive the budget needed to properly staff. But in small B2B technology companies, this rarely happens. Instead, you’ll need to be a bit more creative. Here are a few of my favorite sources of free and near-free marketing resources:

  • College Interns. These are students eager to gain real work experience and hopefully a great reference before they start their job search. Be sure to get faculty references and hire for strong communication skills and positive energy.
  • Outsourcing. Are there marketing tasks that can be delegated to outside resources without breaking your budget? Look for tasks that are specialized and that an outside resource could do much more efficiently than you can. Examples can include graphic design, website development, and parts of social media.
  • Bored homemakers. Yes, I said it. Mothers & fathers from marketing careers who have taken a break to focus on raising children often are interested in small defined projects they can do from home. A contract worker in this situation rarely cares about earning top dollar but is grateful to keep a hand in their former career. It’s a win-win.

Justify Additional Marketing Budget by Addressing Key Revenue Issues

Early in my career I worked for a healthcare software company in northern California. I was the proposal (RFP) writer. But in between deadlines I would stop and think about the company’s future path. Our average sales cycle length was 18 months and our close rate was about 50%. Knowing that, it was easy to add up the deals in the sales pipeline and see that we were not going to meet our financial goals a year away. I approached my department head with this information and an idea, what if we had a dedicated lead generation analyst focused specifically on finding leads? Even one new sale would justify that position for years. The company immediately funded the position and I was promoted. I actually did that proposal-leading-to-promotion a few more times before leaving the company.

I hope this article gives you some new perspectives on how to weather the challenges of technology marketing. If you need any help managing growth and change in your company’s marketing function, please contact me.

Here’s another B2B technology marketing article you might enjoy! How Fluffy is Your Marketing?

The International Entrepreneur – Best Practices for Entering American Business Markets

ConfidenceAmerican businesses buy trillions of dollars’ worth of products and services every year. If your company is not American but is looking for a piece of that marketplace, what are the best ways to break in to the American market?

Balancing Money vs. Time

Ideally we would all have limitless capital resources. If that were true, then you could acquire the company with the largest American market share. Or, you could quickly expand into every major American geographic market with local representation. On the other side, there are low-cost ways to enter the U.S., including distributors, local reps, strategic partnerships with companies selling related products and e-commerce. These channels do take time to establish and develop, so will not bring success as quickly as capital-intense approaches will.

Don’t Settle on the First Representative Option

The American market has many freelance sales representatives, distributors and business services professionals. If one learns that your company is looking to enter the American market, you will likely be approached for your business. This may or may not be the right resource for helping you enter the American market. Instead, talk to several potential partners, reps, distributors and suppliers. Ask the same questions and see where the differences exist. In many business cultures, new business relationships require an introduction from a mutual colleague. This is not the case in the U.S. The goal is to find the right resources that will make strategic sense and reinforce your company and products’ brands in terms of quality, values, and service.

Art of the American Fast Deal

Compared with the rest of the world, Americans make buying decisions and business deals very quickly. It is not necessary to have a previous relationship or even a current one to sell to American clients. This can make many non-American companies uncomfortable since they are doing business with a company and its representatives who are unknown and untested. When doing business in the U.S., you need to hire a local business transactions lawyer to write and review any contracts. Americans will expect any signed contracts will be enforceable in an American judicial court. Your American lawyer will help to keep language out of your contracts that increases your business risks.

Business Loyalty has a Price

I was recently talking with a client about possible companies that could acquire them. Since this is my client’s exit plan, we rolled through several names. But the most likely buyer was also a company that might shut the company down after purchase and eliminate the current staff. My client wanted to avoid this option until I asked him how he felt if he walked away from such an acquisition with US$3 million. His answer immediately switched. The truth is that American business leaders are heavily motivated by financial returns. For companies doing business with Americans, this means that if another supplier comes along offering a lower price or other incentives, you may lose that client before you ever knew that the relationship was in peril. The way to keep clients and business partners loyal is to periodically stop and ask them how the relationship is going. If someone is trying to underbid your company’s prices, your partner/client is likely to tell you when asked. Also, keep track of competitors in the American markets as to what incentives they are giving potential clients to switch away from your products.

I hope this article helps you in your business expansion. If your company needs assistance to expand into the United States and you have technical products or services, please feel free to contact me.

Best wishes,
Becky

The International Entrepreneur – Strategic Marketing in Latin America

Marketing Strategy in Latin America

Skyline of Sao Paulo, Brazil

As I write this article, I am flying over the Great Plains of North America. There is nothing like being at 35,000 feet/10,668 meters as a place to take the high-level view of marketing strategy. I was in Minneapolis speaking on Social Media in Latin American Markets at the U.S. Commercial Service’s Access to Western Hemisphere conference. After two days of discussing a variety of strategies with several company leaders, here is a strategic framework that I hope you find useful as you look at Latin America.

Global vs. Multi-Domestic Approach

This is the core strategic decision that helps to guide many marketing decisions. In a Global approach, a company changes their products or services very little when going from one international market to the next. Normally, a global strategy company either communicates in one or a few global languages. They would keep the product fairly unchanged in order to gain cost savings from standardization. In a Multi-Domestic approach, the company localizes its products and services to maximize greater potential out of each market. In Latin America, there might be multiple local websites customized to reflect the local language and product specification preferences. The company may have a completely different product and marketing mix for Colombia vs. Argentina. The choice between these two strategies lies on several criteria:

  • How fast does your company want to grow?
    Most companies would answer that they want to grow as quickly as possible. But that requires investment capital from combination of profits, debt and equity. Since localizing products, marketing communications, and customer service are all costly, a full-on Multi-Domestic Strategy is costly. A Globalized approach where marketing communications, products, etc. are standardized takes less financial resources.
  • Does your product/service category fit better with a more standardized or localized approach?
    Some products have very little variance from country to country. This group includes back-end software, bioscience products, and engineering services. On the other end of the scale are consumer products like foods and beverages, which are often localized for every market. Ask: what do the end-users of my products and services expect from a foreign product/service provider? If you are uncertain, your trade association can be a great resource for learning industry localization standards.

What’s the Right Marketing Mix?

The global vs. localized decision is important, along with considering industry norms. In globalized strategy, the focus is on standardized marketing channels from country to country. This can include online marketing around a website, social media, in-country reps and distributors, and international instead of local trade show exhibiting. Materials are typically standardized on a single language or small group of languages. In the localized approach, the marketing focus is on market penetration, with localized marketing materials taking into account local dialect in Mexico vs. Chile and definitely Portuguese materials for Brazil. There would be in-country promotions and local sponsorships, and an in-country sales force that can help fine-tune marketing messages for the local market.

There is a wide variance in marketing mix between industries. Point-of-sale marketing is often critical for consumer products sold in distribution outlets such as stores. In large business-to-business industries, the sales representative that knows the local culture takes a key role in relationship-based marketing. Some industrial products can generate half of the year’s sales from trade show leads. In other industries, direct marketing is more effective. While it can be beneficial to take stock of what other companies in your industry are doing for their marketing, this is only a comparison. Your own marketing should be based in part off of the company’s competitive strengths.

Latin American Online-Offline Deal Flow

Today, it is hard to find a company that does not market both over the Internet, as well as through the more traditional sales channels. In Latin America, social media has grown to become the top Internet activity. User rates for Facebook, Twitter & Google+ continue to rise in countries like Argentina, Chile, Brazil and Mexico. Yet many companies consider their social media marketing to fall under the category of branding, meaning something that perhaps helps build the company’s image, but has no direct effect on the company’s profitability. In my experience, ALL marketing needs to in some way be measured and linked back into the lead generation and sales process. In the case of online marketing channels, these efforts need to drive toward either an online purchase or allow a local sales rep or distributor to follow up with potential clients.

I hope this information is useful to you in as you do business in Latin America and the rest of the world.
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The International Entrepreneur – The Role of Corporate Social Responsibility in International Marketing – Part 2

In Part 1, we looked at how Cirque du Soleil balances global and local marketing. In particular, Cirque du Soleil has an outreach program called Cirque du Monde that serves several purposes in its efforts to be seen as a responsible global corporate citizen. Here is a video about Cirque du Monde:

This leads to questions about what lessons can be applied from Cirque du Soleil to entrepreneurs doing international business. In Part 1 of this series, I raised several questions that you as an entrepreneur can ask yourself:

Are there corporate socially responsible (CSR) practices or programs that would easily fit with the mission of our company and the products or services we already sell?

For some companies, this is relatively easy. If your company is involved in healthcare, there are opportunities to donate medical supplies or services to underserved populations in most countries. There are also healthcare organizations who seek donations, such as children’s clinics, who readily take donations.

So where’s the opportunity for a company that develops and manufactures glass-making ovens? This is an international product, but not one that can be installed for the benefit of the poor or other underserved group. Glass is a highly recyclable product. There may be opportunities around developing recycling programs or paying locals to recycle. In any case, look for parallels between your company’s focus and needs in the community.

Corporate social responsibility also includes ethical employment practices, resources usage and transparency. Keep in mind that your company may already be practicing good CSR but not using it yet in your marketing communications.

What do our customers expect from a company like ours in terms of corporate social responsibility?

Corporate social responsibility varies greatly by country. In some European countries, CSR particularly in areas of employment, accounting practices and resource usage, is written into law. In some Central American countries, there is less legislated CSR, but companies are expected to be benevolent to their employees and community. Before entering a new market, find out the local expectations of their corporate citizens. As a new company from abroad, you want to at least meet both legal and implied expectations and preferably be above average in this area.

Are there negative country-of-origin effects that could be softened by publicly showing goodwill in a specific country?

“Yankee go home”, is a phrase my countrymen hear when locals are angry at either an American’s actions in-country or else American foreign policies. When there is bias against your company because of the perceptions customers have of your country, that’s a negative country-of-origin effect. Think of CSR as being an appreciative guest in that foreign market. As long as the negative impressions of a country are mild and not severe, CSR activities can go a long way to smoothing over misconceptions about the intentions of your company.

What would be the effect of such programs on employee productivity and retention, if employees appreciate the good works of your company?

In all countries, employees prefer to work for companies that treat them fairly and who help the community. A good CSR reputation increases staff productivity. Employees stay longer with the company and save the company money in the long run.

One last note: CSR activities should normally be budgeted for no more than 5% of the company’s earnings. Once in a while a company can get so wrapped up in their goodwill projects that they neglect their real reasons for existence. But generally, corporate social responsibility programs can have a myriad of positive outcomes in international markets, just like Cirque du Soleil!

The International Entrepreneur – The Role of Corporate Social Responsibility in International Marketing – Part 1

 

Recently I was lecturing an international operations class at the local university on global marketing. I was able to use an interesting case study video about the international performance company, Cirque du Soleil.

Certainly one of the aspects of Cirque du Soleil’s international marketing success is their ability to walk a tight wire between standardized and localized marketing elements. The company employs staff from over 50 countries, often recruiting street performers to join the show. They blend various cultures into each performance and still manage to use almost no words during the performance, making it accessible to people from all linguistic backgrounds. Shows are designed for a set of cultures, appealing to specific values and ideas of beauty and interest.

But what you might not know about this company is how they strategically use corporate social responsibility to help brand the company as a source of goodwill before even entering a new country market. The program is called Cirque du Monde. The company collaborates often with would-be local circus competitors to set up programs for underprivileged and homeless youth usually in areas where the company wishes to set up a new base of operations. The programs typically teach performance arts such as juggling, stilt walking, clowning, and acrobatics. Cirque du Soleil gains a reputation for doing good deeds in the community, further building interest in their shows and helping to build relationships in that community.

For Cirque du Soleil, working diligently to be seen as a responsible corporate citizen in every country where they operate takes enormous efforts. But it fits well with the company vision, branding and culture. This leads to the question for entrepreneurs expanding their companies into new markets:

Are there aspects of the Cirque du Soleil approach to corporate social responsibility that can be widely translated for every company’s benefit?

Yes, there are definitely lessons to be learned. Entrepreneurs can ask themselves:

  • Are there socially responsible practices or programs that would easily fit with the mission of our company and the products or services we already sell?
  • What do our customers expect from a company like ours in terms of corporate social responsibility?
  • Are there negative country-of-origin effects that could be softened by publicly showing goodwill in a specific country?
  • What would be the effect of such programs on employee productivity and retention, if employees appreciate the good works of your company?

In Part 2 of this series, we will examine each one of these questions in more detail. Stay tuned until next week. Until then, best of success to you in all of your international business endeavors.

The International Entrepreneur – 5 Mistakes to Avoid in Your Tech Firm’s International Marketing Strategy

What an amazing time to be an innovative entrepreneur. Technology, globalization and entrepreneurship are all evolving rapidly, allowing for advancements that no one thought possible just a few years ago. My own professional area, international marketing, is barely recognizable from 2002 and much less from 1992. But even as your company jettisons into the future, here are five mistakes in marketing strategy to avoid:

1.Copying the Competition

If you follow the competition’s marketing, you’ll only ever be a 2nd best version of their success. The best marketing strategies are built around a company’s unique competitive advantages. I met with a small company recently that had developed an email marketing program that would be the envy of companies five times their size. Any marketing strategy for this company would need to center around this well-developed marketing channel. I even have my own copycat competitor who mirrors my marketing efforts in social media a few weeks or months after I have developed a new tactic. In the end, copying others loses the leverage of your unique advantages and poorly copies the advantages of your competition.

2.Delivering Highest Quality at the Lowest Price

In high-tech markets we frequently see this issue: wanting to be all things to our customers. The truth is that your business strategy should match your core competencies. The two most popular strategies are Low-Cost Leader and Differentiation. But when you incur the expenses to differentiate, to develop and deliver a superior product, charging the lowest cost can fatally undermine your profit margin. Instead, pick the strategy that fits your competitive competencies best and build your operations and marketing programs around those strengths. Feel free to charge premium pricing if you see market demand for your high-quality product. Likewise, if your product is not the most innovative then work on lowering production costs and appealing to the cost-conscious buyer. Either way, make the choice.

3.Competing in Red Oceans

A great business book, Blue Ocean Strategy, by W. Chan Kim and Ren Mauborgne, brought to the mainstream an important issue that technology companies often face. New companies tend to join an industry and allow themselves and the market segment to be defined by the existing competitors. Technology companies are typically offering new or better solutions to problems. Instead of competing head to head for what is often a saturated market space, look for market segments in your home market or abroad. That can often mean that you define your new space and then defend that space from new entrants. If you haven’t already done so, I recommend that you read this book.

4.Not Measuring Marketing Results

I used to work for a growing healthcare software company that never measured any quantifiable metrics from their marketing programs. Needless to say, the company also never reached its financial objectives and the shortfall depreciated the company stock price quarter after quarter. They just continued to repeat the same marketing mix from month to month. When the marketing team finally agreed to allow for measuring, they discovered that the most expensive marketing programs were the least effective and that based on win rates and average sales cycles the sales pipeline was woefully lacking in enough leads to meet sales objectives. ALWAYS measure because metrics can be actionable information and even the best market programs need occasional tweeking. Nowadays there are many free and near-free tools to help even the smallest marketing team to track marketing and sales activities all over the world.

5.International Distributors Are Appropriate for Every Industry

International expansion is not the right choice for every company, let alone using distributors for foreign market entry. Technology companies may be putting their intellectual property at risk by sharing their cutting-edge technology with an untested source. Also, distributors who approach newly internationalizing companies often are looking for easy sales that require little marketing or sales effort. If the technology company truly has an innovative technology, it may be safer to sell directly to overseas customers.

I hope that you and your technology company can avoid these particularly painful strategic marketing mistakes. For more information about B2B international marketing, please read additional articles from International Marketing Consultant, Becky Park. To contact Becky directly, call +303.601.2566.

The International Entrepreneur – Technology Opportunities in Latin America (Part 2)

Cordoba, Argentina – high-tech industry cluster

This is the second article in a series about the technology sector in Latin American markets. Last month, we looked at Brazil. This month, we explore Argentine technology markets.

Argentina’s Business Environment

Argentina has a very mixed reputation as a periodically politically unstable nation, yet with great potential for economic growth when allowed to flourish by its leaders. Argentina has long had a technological focus and success in fields such as medicine, nuclear physics, biotechnology, nanotechnology and space science. It currently plays host to global high-tech companies like Motorola, Microsoft, Hewlett-Packard, IBM, Sony and Google.

Argentina is competitive in terms of access to technology’s core tools. Its internet penetration is twice as high as the world average and similar to many European countries. Argentina’s broadband penetration is less than half of Europe’s, although it is similar to Chile and high for the region. 2011 saw a continued increase of broadband access (fixed 21% and mobile 150%) combined with higher notebook sales and the record sale of smartphones and USB modems. Broadband services over both cellular and fixed networks are expected to continue increasing in 2012.

The main factors helping to drive demand for IT hardware, software, and services in 2012 are:

  • New investments in Argentina in several industries, including tourism
  • Needed upgrades to most current IT systems
  • The growth of Internet access (fixed and mobile)
  • Increased complexity and convergence of technologies
  • Highly educated and tech-savvy population
  • New mobile number portability law
  • Nationwide extension of fiber optic lines under Argentina Conectada Program

Argentina is investing in both technology cluster development as well as in technology infrastructure to help position this country for growth.

Technology Clusters

Buenos Aires

Today, Buenos Aires is home to many tech start-ups and established companies, and a top notch talent pool. The Buenos Aires technology community also provides help in both subsidies and business coaching to its high-tech entrepreneurs. Based in the capital, Palermo Valley is a non-profit organization connecting the Argentine community with the global high-tech business community. For example, Palermo Valley arranged for Argentinean start-ups to pitch their companies in Silicon Valley.

Cordoba

Cordoba is the second-largest Argentine city and is located near the geographical center of Argentina. It has a fast-growing software industry but a lack of qualified IT workers at least in the short-term. High-tech companies in Cordoba include: Nimbuzz, Intel, EA, Dreamworks, Zynga, IBM, Hewlett-Packard and LinkedIn. There is a new technology park in Cordoba: Cordoba City. A total of 33 companies have agreed to open offices in the complex so far.

Technology Industry Opportunities

Argentina’s information technology market (hardware, software, services, etc.) reached $5 billion in revenues in 2011, 15% more than in 2010 and expected to increase 12% in 2012. IT Services are growing in Argentina as outsourcing of IT-related services continues as a global trend. Total revenues of this subsector reached almost $1.5 billion in 2011.

International consulting firm IDC said data center service providers will focus on value-added services. Technologies like virtualization and green IT are expected to help drive investments in data centers. Argentine data center service providers are expected to adapt offerings for smaller firms given the saturation in the large enterprise segment.

On the hardware side, high-end branded PCs, notebooks, netbooks and minibooks, printers, servers, and multi-user systems will increasingly need to be imported. Smart phones, digital cameras, MP3, MP4, other PDAs, digital storage devices, GPS, and portable and fixed gaming products are expected to increase next year as well. Since locally assembled PCs account for over 70 percent of the market, PC components will continue to be in high demand. Local assembly targets the residential and home-office PC markets. In B2B markets the cost savings from local assembly does not offset guarantees offered from the original vendor. The Argentine Government passed a law three years ago increasing the tariff on imported electronics by 30%. This law is attributed for the increase in locally assembled products over imported products.

The IT Services market in Argentina offers major opportunities for U.S. companies in network implementation, management and maintenance, legacy applications, wireless LANs, RTE (real time infrastructure) implementations, remote operation processing, back-up, critical mission services, disaster recovery systems, internet and network security systems, document digitalization, digital asset management, storage, utility computing, and information systems for rural areas (traceability, RFID, etc). Cloud computing and virtualization-related services are strong market segments in 2012. Software development outsourcing and call centers will continue to garner investments, exports, and increased sales in the Argentine market. In software markets, there will be large opportunities likely in security systems and business intelligence applications in 2012.

Argentina is just one country in Latin America experiencing high growth in technology markets. Brazil, Mexico, Chile and Colombia are also seeing major technology investments by governments, companies and individuals. If you would like more information about entering Latin American markets, please contact me. Best wishes on all of your international business efforts!

– Becky Park, The International Entrepreneur

Article Sources:

INSEAD & World Economic Forum?s Global Information Technology Report 2012

Doing Business in Argentina ? Leading Sectors: Information and Communications Technology, Export.gov 2012

The International Entrepreneur – Flying Below the Radar: Taking Advantage of Second-Tier Industry Clusters

Work smarter, not harder.  All international entrepreneurs strive to stretch their expenditures in hopes of gaining as much as possible for money spent. This week’s article is about focusing on your industry’s geographic clusters and how to optimize your energies spent building your company in those regions.

What is an Industry Cluster?

An industry cluster is a geographic area where several companies from the same industry have set up operations for strategic reasons. There may be a university research center focused on the industry, as is the case in Upstate New York with the ceramics industry. It may be close to reserves of a specific natural resource, such as high-wind regions for wind energy companies. There may be a large corporation that has spawned spin-off companies, such as Philips in southeast Netherlands.

There are many advantages to setting up operations in an industry cluster area. Industry-specific suppliers have established a local presence. There is likely a local specialized labor pool build around the industry. There are potential collaboration partners. And often the local, regional and national governments take a keen interest in supporting industry clusters with tax incentives and grants. Clustered companies tend to become more successful, creating jobs and tax revenue. Countries that have done a great job cultivating industry cultures include Canada, China and Israel.

Why Second Tier and Not FirstTier Cluster?

There are advantages to growing a presence in a first-tier industry cluster, such as Silicon Valley in the IT industry. In the late 1990’s during the dot.com boom, I worked in the IT industry in the San Francisco Bay Area and was able to see Silicon Valley’s growth first-hand. Investors frequently flock to an industry’s first-tier clusters looking for the next big innovation. But there are challenges in first-tier cluster markets too. Competition is usually fierce, which means that the right connections and plenty of financial capital are required. First-tier clusters definitely play favorites so as a new company you will be paddling upstream to make inroads. The other issue with first-tier clusters is that they normally are blind to developments coming from outside their cluster. This is a competitive disadvantage to anyone who believes that all good ideas and innovation comes from the top market. Time and time again entrepreneurs have learned that this is rarely true.

Second-tier clusters have several distinct advantages that should appeal to entrepreneurs. First, costs of operation are often lower. Premium pricing for supplies and services are often attached to the first-tier market. Local industry and government are often more welcoming to new companies than in the first-tier market, reducing the time needed to make connections and creating a core group of government officials, suppliers, partners and clients invested in your success. Competition is often less intense, making it easier to make sales and start to generate revenue in the new market. And second-tier clusters tend to be alert to industry changes and innovations coming from a variety of locations without fixating on only the first-tier cluster. The only exception I have seen is when a second-tier cluster ties itself to a first-tier cluster as a “satellite”. There are several second-tier IT clusters that fixate on Silicon Valley’s every update without a broader perspective. This is particularly dangerous because it gives that particular cluster few of the second-tier advantages and none of the first-tier advantages. Second-tier clusters in the IT industry include but are not limited to: Bangalore, India; Tel-Aviv, Israel; Eindhoven, Netherlands; Boston, USA; Sydney, Australia; and Vancouver, Canada.

I hope this gives perspective to where to set up new sales and production operations for your company. Entrepreneurs always need to seek out competitive advantages as their companies expand. For more articles about optimizing your company’s international marketing and sales, please click here.

The International Entrepreneur – Exit Strategies for International Ventures

business exit strategies, international trade, international entrepreneur

As your fiscal quarter or year is coming to a close, it’s a particularly good time to evaluate the effectiveness of your company’s various international business ventures. Many companies from countries with short-term business decision cycles (US, Australia, etc.) may be tempted to exit markets that are yielding lower than expected returns on investment. Here are several options to consider:

Exit as Quickly as Possible

If your company is about to fold or is significantly cash-strapped with few financial options, then by all means consider closing down some or all underperforming overseas operations. Keep in mind that there may be additional taxes or penalties owed for any workers’ wages, unemployment insurance, previous tax incentives owed to the local, regional or national government.

Another issue to consider is any future need to do business in that country. Business reputation takes a long time to build and a short time to destroy. The reputation is not only that of the company, but any individuals from the company who did business in that country. If Mr. Smith closes down operations in Indonesia and leaves partners, suppliers and customers in a bad position, then Mr. Smith not only earns a bad reputation for the company, but also for himself should he need to go back into Indonesia for a different company. A negative reputation is very hard to shake in most places.

Ease Out of a Country’s Operations

If a country’s operations is performing poorly and there is no reason to think that it will improve long-term, then another option is to slowly disengage from partnerships and suppliers in-country. This can occur when contracts come up for renewal or by renegotiating a smaller amount of goods. The idea is to preserve relationships and to also avoid costly fines from the local government. This is likely a better option than the quick exit when you want to preserve goodwill in country. Plenty of companies failed in their first attempt to establish a specific market. But oftentimes the same company will return years later and remember lessons learned (like Starbucks’ second attempt in China).

Stay and Make it Work

All new international ventures are challenging. One of the best options if you can afford it is to stay in-country and find new ways to improve your in-country operations. Also, there may be strategic reasons to engage in a low-performing market.

An example is the beer industry in China. There are hardly any profitable foreign beer producers operating in China. So why stay? The Chinese beer market increases by 30% each year. The average income of Chinese workers continues to increase and foreign beer is a status symbol of sorts, especially in the “night market.” Premium beer may not be profitable today, but in 5-10 years beer producers’ investments will likely pay off.

Consider renegotiating relationships with partners, vendors and customers to improve your profitability. It will benefit your partners to renegotiate often instead of losing your business altogether. Look for new ways to increase demand. This includes new ways to use your product or service or different packaging size. Personal items like razors can be sold individually. Consider renting instead of selling a product. Services can be repackaged as seminars of information instead of delivering it individually.

 

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