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The International Entrepreneur – Maximizing Potential in Your Multicultural Team

ConfidenceEntering the room, you can feel the tension. Your multicultural team, representing different company interests, is sitting around the table. One confident young man boldly answers your first question and others look blankly ahead. How can you possibly get this team to accomplish anything if they can’t work effectively together?

One of the greatest challenges in international business expansion is bridging the cultural gap. Team members have to understand how their approach to group dynamics affects others in order to avoid alienation and everyone counting down minutes until the meeting ends.

The multicultural team is one of the most underutilized aspects of international expansions, mergers, and partnerships. In fact, on more than one occasion I have heard frustrated managers refer to their team as “performing” and their role as one of “babysitting”. The challenge for both the team leader and members is to leave behind assumptions and find the unlocked potential of the team’s productivity and usefulness. Here is my advice:

 

Know the Likely Points of Contention Between Team Members

When various cultures mix, there is likely to be friction. One important issue is how to deal with conflict. A German team member may want to articulate the issue and how it occurred, including assigning fault. Those from indirect communication cultures find this rude and disrespectful. A key ingredient to high-functioning teams is trust, and for most from Asia, Africa, Latin America and the Mediterranean area, this directness just lost the trust.

The important thing is to know who is on the team and what can be learned about their native work culture ahead of time to anticipate some of the obvious flash points.

 

Create a Common Goal

This is especially critical for multicultural teams. The goal helps to create a common set of terms around what needs to be done and what the outcome will be if successful. The clearer the goal, the more likely it will be that the team will perform to reach it.

 

Establish a Framework for Team Norms

Team leaders often default to the social norming for teams in their home culture. And often little thought it given to how this style is received by team members. A leader from Chile may use storytelling to emotionally connect with team members. But the Canadian may be annoyed by how long it is. The direct communicators in the team will likely tune out many anecdotes. There is middle ground, but it must be defined in order for both direct and indirect communicators to speak and interpret for the same situational understanding. Perhaps this means limiting the amount of anecdotes or explaining that this is a useful tool to understand perspective.

It is also important to establish a way to make decisions as a team. Must decisions be unanimous? Is there a point where discussion will be stopped and the team votes? Or does the team leader take the input and make the decision? Never assume that other cultures make decisions in a similar way.

 

Head Off Issues Early

If the team is underperforming, then it is better to investigate the root causes sooner rather than later. Issues may have an easy fix such as clearing up a misunderstanding. A common problem is a team member that stays quiet. It may be helpful to forewarn this person that you will be calling on them and to be prepared to share their perspective. It is also helpful to give this person permission to give an answer contrary to others in the team.

A word of caution: if there are indirect communicators in the team, DO NOT bring up team communication issues in an open team meeting. Indirects do not like discussing issues in a group setting (again, it’s considered rude). Ask questions of individuals in private instead.

 

Take Advantage of Diverse Perspectives and Strengths

This is why a multicultural team can be so powerful! Instead of seeing an issue or opportunity from a limited set of assumptions, those from a diverse background can bring ideas and solutions from more varied experiences. There may be a best practice from Brazil that no one in Italy has ever heard of before. In confronting similar issues, there are infinite ways to approach solving them. When an unexpected solution is presented, be sure to ask questions to understand the underlying assumptions that led to that conclusion.

 

Stay Positive & Focus on Progress (Patience)

Multicultural teams may be more challenging to manage. But as the team leader, it helps greatly to encourage participation and stay positive with the team about any progress. That doesn’t mean sacrificing results or progress towards results. Building the team’s effectiveness may take a little more time.

Overall, building an effective multicultural team is much better than languishing in frustration. Instead of underestimating the contributions from collaboration, focus on maximizing team’s performance. This means balancing the interests, communication styles and cultural assumptions. If you need help getting more from your multicultural team or staff, please contact me.

Onward & upward!
Becky Park

The International Entrepreneur – How International Expansion Affects the Rest of the Company

How International Expansion Affects the Rest of the Company

Expanding your company internationally represents both great rewards and risks. Going global can exponentially grow well past the limitations of your domestic market. But one of the greatest challenges to success can lie within the company’s structure and staff. This article is focused on how an international expansion affects the rest of the company and where to focus your planning beyond business development in foreign markets.

Always Start With Strategy

The key to international expansion is ensuring that your plans align with the company’s overall strategy. Here are some questions to ask your leadership team:

1. Does this expansion fit into the VISION we have for where we want the company to be in 5 years? 10 years?

2. Does the expansion into global markets match the company’s IDENTITY to our customers, our industry stakeholders and our employees?

3. Does this expansion fit with our FINANCIAL GOALS and the ultimate EXIT STRATEGY?

4. Is our company’s STRUCTURE organized in a way where domestic customers and new foreign customers can both be served?

Many companies start expanding internationally while continually chafing against a clash with existing strategy or unspoken assumptions about direction. It’s better to halt expansion plans without this strategic alignment. This holds true for organic international growth as well as foreign company acquisition.

 

Incorporating International Into Existing Functions

It is critical to integrate international activity into the rest of the company. One of the biggest mistakes I repeatedly see in companies is to establish”International” into its own separate department. The problem with this structure is that the rest of the company begins to disassociate from international and decisions are made elsewhere in the company that do not optimize for all world markets and customers. Eventually leadership tends to shut down the International Department for any number of reasons. Shutting down even a successful operation is easier than working through issues with this “foreign entity”.

Here are some ways that international expansion can affect some core business functions:

  • Accounting– Different required accounting reports for government, different norms for handling accounts receivable, need for bribery/corruption strategy
  • Business Development/Sales – Different customer buying patterns, different negotiating styles & techniques, different compensation structures
  • Customer Support– Local dialects and languages, different expected modes to access service information, different ways of expressing emotion
  • Finance – Exchange rate fluctuations, repatriating profits, access to financial capital and banking services
  • Human Resources– Staffing for language coverage and other international business skills, updating company employee policies to ensure that they apply to international situations, training needs
  • Information Technology– Planning information systems to reach new geographic locations (extension of existing systems), evaluate the need for greater integration for efficiencies in serving more markets
  • Legal – Understand legal implications of doing business in new countries/locations including intellectual property rights, employment law, commercial registrations & other regulations governing foreign companies
  • Logistics/Shipping – International shipping forms & regulations, hiring a good freight forwarder, managing shipping costs & ensuring that those costs are built into pricing
  • Marketing– Country laws governing marketing activities, different customer preferences, different communication preferences, different style preferences, translation/localization of materials
  • Product Design/R&D– Manufacturing input requirements (materials AND country of origin), metric vs. English measurement, different packaging requirements
  • Production– Increased unit production for additional demand, any alterations to products that stop production before product batch can run, inventory storage
  • Supply Chain Management – Sourcing any newly required materials, and hopefully discovering better quality or less expensive supplies/materials available in the new geographic markets!

 

Managing Company Culture and Expectations

Cr0ss-cultural leadership is the area most overlooked and also most likely to derail an international expansion from within the company. All it takes is for one key employee to view serving international customers as a burden and product orders are delayed, shipping costs are inefficient, or marketing copy is left unchecked for localization. Just like any big change in the company, the change must be managed internally with staff. This means communication from leadership about international markets’ role in the company’s plans. It means training for any staff interacting with the new foreign customers. And it means incorporating international success into employees’ performance objectives and expectations.

When I am working with a company client that has this as a risk, I normally recommend inspiring employees with their expanded international role in the company’s success. Change is uncomfortable for most of us, but when we understand the reasons for international expansion and its importance most employees normally play a positive part. Cross-cultural training can be a wise company investment. It also doesn’t hurt to highlight fun parts of the new country’s culture: celebrate holidays like Cinco de Mayo, display country travel posters in common areas, etc.

 

For more information or ideas about international expansion planning, please contact Becky Park, The International Entrepreneur. Becky works with B2B technology and professional services companies to help them become more competitive in global markets.

The International Entrepreneur – International Expansion: Organic or Acquisition?

You may be asking yourself if your approach to international expansion is the right one. Should you grow organically by the strength of expanded international sales? Or would the right company acquisition in the local market be a shortcut that provides instant market access?

As with most questions in international business, the answer is:it depends.

Why (or Why Not) Grow Organically?

The International Entrepreneur ?International Expansion: Organic or Acquisition?

Shanghai – old & new

There are two main reasons why you would want to grow organically. First, it usually requires less upfront capital investment than buying a local company. Since many growing companies are low on unused capital and may have limited access to debt financing, organic growth could be the better fit. Second, going it alone allows your company to control everything: brand, client relationships, finances, processes and your company culture. For some industries, control is paramount to manageing competitive advantages like intellectual property or internal efficiencies that lower cost structure.

Motivations for NOT growing organically include slower growth. For companies that need aggressive growth as part of their exit strategy (ex. acquisition or merger), then organic growth might not be assertive enough. Also, the organic growth path has a higher chance of making cultural or market-related mistakes. The company may not understand the market’s buying patterns or time frame. A local company would already understand how business is conducted & avoid this risk altogether.

 

Why (or Why Not) Acquire a Local Company?

Acquiring a local company gives you immediate access to local markets, revenue streams and likely to required local connections to government and business resources. The local company already understands business cultures, language, etc. And not every company is strapped for cash. Post-IPO or after an investment round a company may have need to put capital to work as soon as possible. Acquisition may be a strategic shortcut for companies like these.

I see two main challenges for your company doing foreign acquisitions. First, there’s a sizable risk of being oversold on the local company’s value. Other countries valuate differently. Plus as a company is sold key players might leave, creating a hole in client relationship management or other vital functions. This is also a point where a departing employee may take intellectual property outside of the company, thereby reducing company value.

The second main risk I see is one of integration with the new company. Many companies choose to have the local acquired company operate independently of the parent firm in order to avoid integration issues. But there are still likely to be numerous cultural misunderstandings and reduced productivity over integration issues.

For Either Approach, How to Mitigate Some Big Risks

Market Research

It is critical to extensively research your foreign target before market entry. This includes both analyzing secondary data collected by government and industry sources, as well as primary research conducted in country. If international market research is a company forte, then you should do it internally. If not, then outsource this critical step to a qualified international advisor. Intimate market knowledge will make organic market entry and acquisitions much more successful.

Set Aside Additional Budget

No matter how much a company expects to invest into market expansion, it is wise to set aside additional funds for the unexpected (and there is almost always several unanticipated expenses).

Troubleshoot In Country

In any market or subsidiary there will be issues that arise. This is even truer in international markets. The distances may be challenging financially or logistically, but going to visit in person often can clear up issues quicker than a phone call. It’s easier to see a problem and to understand it in context. Again, if you or your team members can’t travel consider sending an experienced international business advisor to investigate and recommend solutions.

A Third (Middle) Option for Expansion

Another option between organic and acquisition would be to seek out a strategic partnership with a local company. While such a relationship needs to be defined and cultivated with great care, it eliminates some of the disadvantages of both organic growth and acquisition. First, there’s no large upfront capital outlay like in an acquisition. The right partner would have both the immediate cultural and market knowledge to help speed product acceptance and avoid the organic method’s slow growth and cultural missteps. And when the partnership is no longer needed, there is no need to dispose of assets.

To explore potential strategic partnerships, consult with your local government export office, industry organizations or an international business advisor for referrals and advice in how to proceed.

As an international business advisor to B2B technology and professional services companies, I can help your company with any of the following:

  • International market research
  • Troubleshooting international operations or marketing/sales issues
  • Searching for potential strategic partners and developing an action plan

I can be reached at: Contact – The International Entrepreneur

Best of success to you in all of your international business efforts!

 

– Becky Park, The International Entrepreneur

The International Entrepreneur – Are Foreign Investors the Right Option for Tech Firm Growth?

DenverThis past week I developed an itinerary for a Chinese investor’s trip to the U.S. that will take place later this summer. “Helen” is someone I met five years ago in Beijing. She and her investment firm have been highly successful in China working with technology firms spinning off from Chinese state-run enterprises. Helen’s trip represents a golden opportunity for at least one of my bioscience clients, as well as other technology companies in my home state of Colorado. There has been a shortage of both angel investment and private equity investment deals in the past few years especially in the alternative energy and bioscience industries. It’s an investo’s market, with plenty of high-growth-potential companies to be found. So should a company look internationally for their next round of funding?

Availability of Local Funding

Many countries have a shortage of angel and equity funding for their locally grown technology companies. Nowhere is this probably truer than in Israel, which develops countless cutting-edge technologies and then struggles to stretch local funding sources to cover all worthy companies. Israeli entrepreneurs are used to courting investors from around the world to consider their investment opportunities. In the U.S., our technology industry clusters gather uneven attention from potential investors with concentration in areas like Silicon Valley and Boston. There are angel investors based in Colorado, but certainly not enough to keep up with demand. Most angel investors prefer to invest locally in order to keep a hand in their invested companies. Later stage investors may be located farther afield. But in order to get to that later stage, a company must first secure funding to help it commercialize its technology.

One way to bridge this gap is to look for angels who have a trusted business associate in the area. This is the case of Helen from Beijing. A member of her “guanxi” lives in Denver and could therefore keep a close eye on any local investments made in the Denver area. This also helps to build a bridge between Beijing and Denver as the business relationships over investments deepen.

Finding Opportunity in the Investor’s Home Country

Foreign investors make the most sense when the foreign market is a prime market opportunity. My bioscience client immediately saw the connection between having one of three or four investors based in China and Chinese markets for their products. The Chinese market has high growth potential for those technology companies with strong in-country connections. I saw a similar situation a few years ago with then growing firm The Wheelabrator Group, who sought funding from a Polish investment group. This company then strategically set up manufacturing operations in Central Europe near both its investors and its growing markets. When foreign investors live close to top international markets, then investors can give market-specific advice and connections to further propel the company’s growth forward.

Where to Find These Foreign Investors?

This is the hard part, investors rarely advertise their available funds publicly. They would be risking a flood of interested companies and thousands of investment applications. As an entrepreneur with a great technology but limited resources, the best place to start is within your own industry. Investors traditionally stick to industries they know well. Ask trusted industry experts if they know of investors who specialize in your industry. If there are trade shows in a country of specific interest, quietly ask around for the names of potential investors. The actual introduction may require an intermediary.

 

I hope this helps your company to start thinking of less-traditional funding sources that could help you reach your next level of growth. Best of success in all of your business efforts!

The International Entrepreneur – Advice for Starting a Career in International Business

International College BeijingThis year I accepted a position as adjunct faculty to teach International Operations from an Entrepreneurial Perspective at the University of Colorado Denver. It has been a rewarding experience especially because of the level of enthusiasm of the students and their career potential in international business and related fields. Like many graduating students this year in the U.S. and Europe, these students will have to compete for jobs not only in a tight job market, but also compete against all of those underemployed graduates from the past five years. This week’s article is advice on breaking into this field.

Choose Internationalized Industries and Companies

Start by looking for area companies that are in internationalized industries, such as high-tech, manufacturing and specialized professional services. Since regional offices rarely are involved in international operations, look for companies headquartered in your area. Then, look for signs of international involvement on a company’s website. This includes translation buttons to other languages and contact information in other countries.

Some industries remain focused on the domestic market. These are often highly-regulated industries like health care and military/defense. Even within these industries, there are companies that have discovered how to profitably work within the various regulations around the world in their industry. There are also companies that should internationalize to realize market potential, such as software, bioscience, and specialized engineering firms. That is no guarantee of interest or international expansion.

Network in Person and Online with Potential International Business Contacts

The power and influence of professional networking cannot be overstated. Most jobs are never advertised, so it becomes important for those in your network to know who you are and what you are capable of doing for a company. First, let’s talk about networking locally. If you are in a larger metropolitan area, you are in luck. Most countries will have some sort of organization that promotes bilateral trade. Examples include the German-American Chamber of Commerce and the Japan America Society. There are World Trade Centers located in most major cities around the world. And most industries have a regional organization focused on promoting the industry’s interests. When networking at an organization’s event, be sure to dress professionally, bring your business cards (yes, order your own cards), and be prepared to have conversations with anyone standing/sitting on their own.

Networking online through social media allows you to expand your contacts without traveling to far-flung locations. I recently had lunch in Washington DC with a contact I made on Twitter three years ago. We have held online conversations about our mutual business interests and I was delighted to find that this person was very much the same online as he was when I finally met him face to face. Since business in most countries is facilitated through in-country contacts, starting to build this network could serve you well in the future. Good networking platforms include Google+, Linkedin and Twitter.

Continue to Study World Business Languages

If you are a native English speaker, then you are in luck. English is by far the world’s international business language. That said, there is much to be gained by studying other languages. Knowing at least some of the language helps to speed up relationship building and to keep from losing important meaning that can be “lost in translation”. Proficient language skills could help you land a job. But since languages can take years to learn, it may assist you in the long-term to continually expand your multilingualism.

I wish you all the best of success in your international careers! ~ Becky

 

 

The International Entrepreneur – Breaking Through Assumptions in Chinese Negotiations (Part 2)

In Part 1, I wrote about cultural assumptions in China. In the second half of this series, I have advice for entrepreneurs starting negotiations with their first client or partner in the Chinese market.

Prepare, Prepare, Prepare

One of the biggest mistakes that a company can make in international negotiations is to skip preparations. Americans in particular are notorious for “shooting from the hip”. The danger is walking into a negotiation where your Chinese counterparts know not only your company’s product information and history, but have researched the backgrounds of everyone on your negotiating team, your business culture, and likely any past business you have conducted in China. They will have planned out strategy, tactics and contingency plans. As your Chinese counterparts are socializing with you, they are also studying and testing you. They will also likely attempt to get you and your team drunk in order to collect more information that they can use in negotiations. I have written a checklist for international negotiations available from my site, if you want to see the detailed list.

Another part of preparations is carefully choosing your negotiating team. You’ll want to match the number of team members and their roles to your Chinese team. A CEO, VP of Production, Technical Engineer and Logistics Manager on one side should be matched as closely as possible by the other side. When socializing, the pairs of each role will often break off to discuss more specific information and form one-to-one business relationships. Be sure to consider the number of team members when deciding how many translators you might need if a pair does not share Chinese or English as a common language.

Time is NOT on Your Side

One the best-working negotiation tactics used against Westerners and particularly Americans is TIME. Americans like to strike a business deal as quickly as possible and then move on to the next deal. The Chinese and other Asian cultures know this. A common first question on a negotiations visit is: “how long are you staying?” Your Chinese counterparts know that if they avoid coming to agreement in the hours before your return flight, they can get deep concessions from you. The American is motivated by completing the transaction and reporting back to the home office that the deal is made as opposed to requiring further trips.

Time as a tactic can also be used by Chinese during negotiations (although this is actually a favorite tactic of Japanese). This is when your counterparts simply stop speaking and silence fills the room. Typically, Americans and other Westerners are not very comfortable with prolonged silence. In order to the conversation going again, the American will often give away concessions. But the best answer to this tactic is to meet silence with silence. Be prepared to stay quiet and very emotionally neutral for up to three minutes. If this tactic doesn’t work, the other side will stop trying to use it.

Negotiations are NEVER Finished

Americans use contractual agreements to define a business relationship. As long as the agreement terms are being carried out by all parties, Americans are generally satisfied. This is not how agreements are viewed in China. In Chinese business, the agreement puts into writing the verbal agreements that have been initially negotiated. But all terms can be renegotiated at any time. This can be frustrating to Americans who feel like negotiating once is enough. The typical reaction by Americans is that their Chinese counterparts cannot be trusted to uphold their side of the agreement. In reality, the strength of a Chinese business partnership is in the shared interest and flexibility of the relationship, not the contract terms.

For more information about doing business in China or how to troubleshoot existing relationships, please contact Becky DeStigter, The International Entrepreneur.

The International Entrepreneur – Breaking Through Assumptions in Chinese Negotiations – Part 1

Becky in Beijing

Becky in Beijing

I will never forget my first trip to China five years ago. Everything that I thought I knew about China and its culture was completely wrong. I had always interpreted the Chinese expression “don’t be polite” to mean that the Chinese didn’t value politeness. On the contrary, the Chinese professionals and even random people on the streets of Beijing and Nanjing were extremely courteous and helpful. Actually, that expression is mean to put people at ease and roughly translates to “you’re welcome”. With the exception of Dublin, Ireland, I have never been in such a large city where people treated me with such respect and courtesy.

Fast-forward to last week. I was attending a local event for international business executives accompanied by my Taiwanese client. As she and I made our rounds through the room talking with our international peers, we would frequently fall into Chinese cycle of giving and rejecting compliments (sometimes in English and sometimes in my broken Chinese). Ching-Yen would say how smart I was. I would, of course, deflect her compliment “oh no, you are much smarter than me”. Ching-Yen would deflect my compliment with something else and around we would go in the Chinese cultural pattern. While I will always consider myself a “wai-guo-ren” (foreigner) to Chinese culture, I am a student always eager to learn my experiences and those of others.

When any of us first interface with a new business culture, it is easy to look through our own cultural lens and make assumptions about the other culture. Obviously it helps to read up on the new culture or engage with someone who knows the culture and can advise you on how to navigate business in-country. But even with help, you are still bound to make some cultural errors. Nowhere does this surface more than in business negotiations. With this in mind, here are some tips for entrepreneurs conducting their first relationship and business negotiations with a Chinese partner or client:

Relationship First, Deal Second

One of the key differences between negotiating with Chinese nationals compared with Americans is that the Chinese want to build a relationship first, then do business second. In the U.S., we approach business in the opposite order. We negotiate the deal first and once the teams are formed we implement the deal while getting to know each other in the process. A relationship beyond the agreement’s deliverables is not even required. This means that your Chinese contacts will likely want to spend days showing you the local sights, taking you out to dinner, and having many non-business conversations before you ever begin any serious discussions about the business deal you are trying to close. It is very important to go through these relationship-building steps for a Chinese business person will feel comfortable enough with you to start the real business talks.

Tune in to my next article (Part 2) where I will give more advice about negotiating with the Chinese.

The International Entrepreneur – Tips for Working with an In-Country Business Agent

BrazilAnyone can go to a country like Brazil and try to set up business operations and sales channels, but to truly make the most out of Brazilian business opportunities, it is best to hire the services of a “Despachante”. Despachante is a word derived from efficient in the Portuguese language, but it normally translates to business or customs agent. This person has many industry and government connections. Without this person’s help all business tasks can slow down to a glacial pace. This role may have different names in various countries and languages, but in Africa, Latin America, Asia and parts of Europe, a local business agent can help make your business interactions with government agencies and other vital business transactions run more smoothly.

Before Americans go running for the hills in fear of being arrested for corruption under the U.S. Foreign Corrupt Practices Act, much of what a business agent does is legal. They know how business is done, which lines to stand in, what permits are needed, which lawyers are honest, etc. Here are tips for working with an in-country business agent:

Hire Only Intermediary Agents that Come Recommended from Trusted Sources

This is important. Be wary of business agents approaching your company at trade shows and through direct mailing/calling campaigns. While there may be reputable agents in the mix, you can just as easily put your trust in the wrong agent who could actually be working directly against your interests.

Instead, contact your country’s consulate for referrals for that market or else the local chamber of commerce. Check more than one source to validate the reputation of a particular business agent BEFORE starting to work with them in the new market.

Keep Clear Accounting Records for Transparency

In countries like Brazil and China, the business agent may operate in a “gray” set of business practices where government officials and key business contacts expect to be bribed for expediting your company’s paperwork, bank transaction, etc. If you are American or any other nationality that has strict anti-corruption laws, your company cannot directly OR indirectly bribe officials in any country. The best way to make sure that your in-country business agent does not act in a way that could leave you vulnerable to criminal or civil indictments is to require full transparency of how your fees are spent. It may be difficult to get this information from your business agent, but you will sleep easier at night.

Keep in Regular Contact

While working with a business agent, it helps to keep regular contact. Some companies make the mistake of signing an agreement and then rarely reaching out to follow up on tasks that the business agent should accomplish. Regular contact helps keep a business agent focused on moving your business interests forward and brings process and information bottlenecks to your attention sooner for resolution.

Provide Enough Product and Company Information to Understand Your Business

A business agent might not have extensive industry experience and so may not be well-versed in what you sell. Be sure to provide product and company information, preferably in the agent’s language, in order to avoid misunderstandings. This information should include how your product works, who it is normally sold to, company history and key company policies (ex. Anti-corruption). Do not be surprised if this material is not initially read, but refer back to it as a resource for your business agent if you hear discrepancies between what the agent has said compared with the written information.

If you would like more information about setting up and managing business agents abroad, please contact me. I wish you the best of success in all of your international business dealings!

The International Entrepreneur – Tips for Avoiding Chinese Bribe Requests

BribeThe issue of Chinese corruption has been making headlines again lately. According to Transparency International, China is seen as a moderately corrupt country compared with the likes of places like Afganistan and Paraguay. But corruption is still an issue for Westerners wanting to enter the Chinese market. Steve Barru of China Business Hand recently wrote about Xi Jinping’s Anti-Corruption Drive and that while China’s leadership will likely continue to round up various corrupt officials, corruption won’t really change since this campaign doesn’t address the root causes of the issue, including the lack of checks and balances. Steve also shared insights from his 25 years living in China about the Culture of Corruption in China. It is vital that international business professionals in all disciplines understand the complexities of corruption issues and in particular, how to handle bribe requests.

Like many American entrepreneurs, I find the U.S. Foreign Corrupt Practices Act overly stringent. I feel like my own government does not trust me to be honest and ethical. It leaves no room for cultural traditions of gift exchange in business relationships. Most cultures do not appreciate the American government judging business traditions dating back before the United States became a sovereign country. Michael Black recently wrote a blog post about Gifts, Guanxi and Corruption in China that’s definitely worth reading on this subject. Given the severe penalties, it is vital to know the FCPA and understand how to avoid any violations. Here’s what I recommend:

Expect to Hear Bribe Requests in Their Many Forms

Bribe requests come in many forms and at various points in the relationship. Oftentimes a bribe is asked for during initial negotiations. It is done normally in one-on-one conversations. It is often delivered as a strong suggestion instead of a direct request. The request could be for money or for a special favor like admissions to a prestigious school for a son or daughter. It can also come at a key point of a working relationship to help expedite a certain action. Government officials are often the most common bribe requesters, promising either a faster process, a permit, etc. or plenty of red tape if the bribe is refused. Do not be caught off guard by a request without having time to counteract. The risk is accepting the bribe request without thinking or else rejecting the bribe outright and derailing a key relationship. You can buy time with “I will consider what you ask”.

Do Not Delegate Bribing to In-Country Partners

This used to be the preferred way around direct bribing by American companies. A special “consulting fee” would be given to the local partner to carry out bribes on behalf of the American company. The American government now tracks these types of payments very closely and if caught, the American managers will serve time in prison. It’s not worth the risk.

Here’s a Way to Turn Bribing into a Legitimate Opportunity

American companies and others following stricter corruption laws are at a disadvantage in a sales process when others bribe without great risks. To successfully compete takes some creativity. Is there anything that your company can legitimately give to sweeten the deal without significant cost to your company? For instance, there may be previously developed online product training modules that you normally charge for. Could it be given away to counterbalance the bribe? Could your company donate children’s playground equipment at a nearby school in honor of your business relationship with the local Chinese government? Look for high-value/low-cost giveaways and goodwill-building opportunities that keep you free and clear of any FCPA violations. Keep in mind that the rest of the world understands American businesses’ restrictions and this may be a test to see what you will offer in lieu of the bribe.

The International Entrepreneur – Leveraging American Business Strengths in International Negotiations

Americans have been active in international business since before the United States was founded. As a people, there are several of our business cultural characteristics that we can leverage for better outcomes in international negotiations. Here are some traits to use to your advantage:

Friendly and Open

Most Americans doing business internationally use friendliness as a tool to start new business relationships. Overall, Americans tend to see everyone as equal. Meeting people of varying social status and backgrounds comes easier for Americans than for many other cultures. And even though this characteristic can clash with other cultures, it is often overlooked because it is seen as almost naive and endearing. This friendliness serves the useful business purpose of starting business relationships more quickly, which is normally an American business objective. Knowing that this is a strong American characteristic, it is best not to judge other cultures when they appear less openly friendly. When trust is built over time, it is much stronger than any initial enthusiasm.

Americans tend to be more open than many other cultures when negotiating. That is not to say that American won’t sometimes omit mentioning details which are not in their favor. But generally, Americans don’t hide much information. This again makes it easier to build trust when negotiating with a new international client, partner or supplier. Australians and New Zealanders typically prize openness and honesty above all other cultural traits, making Americans natural business allies with both Aussies and Kiwis. While it is easier for Americans to negotiate with similarly open business cultures, openness can build in many places over time and cumulative business dealings.

Confidence and Initiative

When Americans show confidence in their own abilities, it helps to strengthen their negotiating position in most international transactions. In win-lose business negotiation cultures (ex. Russia, Arab cultures, Israel) should confidence falter the other side will seek deep and unfair concessions. Building on American self-confidence is our ability to take initiative and steps forward in the negotiations. Americans are likely to follow up on outstanding issues in the talks as well as confront any issues that will likely derail the negotiations early on. Americans like to summarize negotiations’ progress in written form to ensure that both sides understand points that have been agreed upon. All of this serves American interests of a faster negotiation, saving money and time spent to close the deal.

Win-Win Outcomes

Americans generally prefer a fair business arrangement. Few want to risk a negative business reputation since this could deter future business from the same market. Americans like to approach business negotiations as a joint problem-solving exercise, including negotiations for sales to clients. Since win-win outcomes are more likely to lead to client referrals, repeat business and client testimonials, this trait can definitely pay off in international markets. For business cultures who also seek out win-win long-term business relationships (ex. most of Asia, Europe and Latin America), this makes for smoother negotiations. Even for those cultures who prefer to win while the other side loses, structuring a deal for a win-win still yields healthier long-term business dealings.

I hope this article was helpful to you. I welcome your comments. If you would like more information about international negotiations, please click here.

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