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The International Entrepreneur ? How to Sabotage Your Negotiations

The International Entrepreneur ? How to Sabotage Your Negotiations

There are actually countless ways that you can doom your own negotiations, so this blog will focus on three ways:

Overemphasize the Legal Contract

Business cultures with a strong legal orientation (ex. US, Switzerland, Canada) often rely too heavily on negotiating and drafting a detailed legal description of all responsibilities and expectations. All future interactions normally take place within the parameters outlined in the contract.

The majority of the world does business very differently. The foundation is the business relationship forged between the key players. Business terms are negotiated and then renegotiated periodically to reflect any changes in the business environment. While documentation has its place, consider building your business relationships as a much stronger and flexible foundation.

Use Good Cop/Bad Cop & Make the Wrong Person the Bad Cop

Good Cop/Bad Cop is a classic North American negotiation technique. For anyone who is unfamiliar with it, it takes two negotiating team members. One is the accommodating team member, wanting to form close relationships and meet the other side?s demands. The other is the ?bad cop?, whose role is to remain aloof and say no to the other sides? offers. The other side forms a bond with the ?good cop?, sometimes taking concessions to help the ?good cop? since the ?bad cop? may be the good cop?s boss.

Internationally, this technique can backfire drastically. First, members of the same negotiating team are generally expected to work together and hold the same general positions. It appears incongruent to disagree openly as a team. Second, it?s a manipulative technique and often the other side can see through the ruse. Your side will lose credibility. And finally, putting a key player in the position of ?bad cop? could undermine any current or future ability for that person to form a relationship with the other side?s management. For instance, if your CEO is the ?bad cop? he or she may
never have the credibility to work with their counterpart.

Lying to the Other Side

Lying is a common negotiation technique. Think of it like bluffing in a game of poker. But when you negotiate with direct communication cultures such as Americans, Germans, or Israelis, normally your negotiation counterparts will backfire. To them, your morals are now suspect and trust is gone. You can pack up your belongings and head home. Direct communicators: it?s better to put the lie into the context. In negotiations, both sides are trying to find the maximum value they can get from the other side. Lying may trigger something from the other side that may reveal untapped value. On some level, negotiation is a game like poker. When someone tells an obvious lie, the best thing to do is to ignore it like it was never said. If you?re not sure, then do some fact checking before your finalize your deal.

Now that you?ve read about some of international negotiating pitfalls, please feel free to share your own experiences and techniques! I look forward to your comments.

 

The International Entrepreneur ? Inside the Born-Global Firm

Entrepreneur Community Online

As many of you know from social media – last month I started a new position as the Chief Operating officer for Entrepreneur Community Online?(ECO). This company is six months old and already has customers on five continents and in fourteen countries. Its evolution as a company is rapid, but its mission is clear:

To increase entrepreneurial companies’ online and offline value by connecting entrepreneurs to the resources they need.

ECO provides a platform for entrepreneurs to work together in social networking both online in social media and offline via events. CEO and Founder, Linda Hughes is passionate about helping entrepreneurs regardless of where they live and work. I have worked and volunteered with Linda before and feel that I know her very well. I have always found Linda to be conscientious, hardworking, passionate, honest, brilliant, and evolving her own knowledge at lightning speed. Joining her company was not a hard decision.

The decision to go international happened before I joined the company. Linda started calling me shortly after ECO?s site went live. There were questions about cross-cultural communications related to Israelis, Venezuelans, Chinese, and Indians. Sometimes there were negotiation differences and other times questions about what might be specifically important to a group of entrepreneurs. Most of the time, entrepreneurs in overseas markets were finding Linda through Twitter.

As a born-global company, I think it?s going very well. We are able to serve members in other markets, at least as long as entrepreneurs have access to social media tools and can converse in English. Now our membership base is geographically diverse and we ask ourselves some basic questions going forward:

  • What markets should we actively pursue in order to maximize our membership?base and the value we can deliver to entrepreneurs?
  • How much localization is needed to serve new markets?
  • How different is entrepreneurship in other markets?

These and other questions remain open for now. Stay tuned for future updates as this born-global firm continues to compete in international markets. If you?re interested in reading more about an insider?s perspective to a born-global company, you can follow my First Follower Blog on the ECO site:? http://www.entrepreneurcommunityonline.com/blogs/becky-destigter

The International Entrepreneur: A Sampling of International Negotiating

Recently, my friend Arlene Marom from Tel Aviv, Israel asked about what kinds of negotiating techniques to expect in non-American markets. Negotiating can vary greatly from person to person and culture to culture. Generally, there are several categories of negotiating techniques: Pressure, Emotional, Defensive, Aggressive/Adversarial, and Deceptive. My favorite class in MBA school was International Business Negotiations and the best book I know of on this subject is Negotiating International Business by Lothar Katz. I need to credit both of these sources for much of what I know. Since school, I?m amazed at how often I see some of these techniques being used. But regardless of the technique, the motivation is to get the most value out of the negotiation, even if it is only for your side of the deal. Here is a sampling:

Opening with Best Offer

This may not even seem like a negotiating technique since the presenter of the best offer may be trying to bypass negotiations altogether. Some cultures such as Germans, Swiss and Scandinavians might not like the bargaining process and so this is their way of not negotiating. But it does not build relationship that serves as the foundation to most business partnerships and sales around the world. It also requires that you are in a position of power where ?take it or leave it? is an option. Normally it leaves value for both sides off the table, which is bad. Some cultures such as Russians and Ukrainians may use this technique as an opener and a bluff.

Appeals to Personal Relationship

It doesn?t take long in international markets to run into this technique. It is very common in the Middle East and Central Europe. You might hear ?If you value our relationship, you?ll give me xxxx?. It puts the?other side at a disadvantage because it equates rejecting the request rejection with rejecting the entire relationship. Interestingly, it is more common in situations where relationships are not well developed and by people who do not necessarily value the relationship. You?ll rarely find it used in China, Malaysia, or Indonesia.

Changing the Subject

This can be an effect negotiating technique in order to take the other side off a systemic strategy with a set agenda. It is a way to avoid giving away something you are not comfortable giving. It is face saving when?negotiations are tense and going in the wrong direction. In polychronic cultures (where time is not taken chronologically), frequent subject changes are normal and expected. This includes the Middle East, France and most of Latin America. But don?t use this in monochromic cultures such as the United States, Canada, Scandinavia or the Germanic countries.

Walking Out

Anyone who has ever spent time in a Mexican market knows the power of walking out. The price on whatever you were last examining drops dramatically. Walking out can be physically walking out of the room, but it can also be an emotional walk out with anger, shouts and gestures. It is normally preceded?by threats of walking out. If you are ever going to try this, you have to be willing to walk away from negotiations altogether. It is normally last resort. Sometimes just one member of the negotiating team will walk out at a critical time.? This tactic is used more frequently by Czechs, Dutch, Germans and Israelis. But if you use it on North Americans or Western Europeans, your negotiations are probably over.

Silence

This one is my favorite because it is most often used against my fellow Americans.? Prolonged silence (up to 3 minutes) can make North Americans, South Americans and any other communication-intense cultures very uncomfortable. Especially East Asians know this. What normally happens is that the silence is broken by the communication-intense side. They start blabbering and giving away concessions or other information they shouldn?t. The trick is to sit quietly with no facial expression until the other side breaks the silence. If you ask a question and receive no response in 3 minutes, head for the door. If they are serious about the negotiation, the other side will stop you from leaving.

I hope these negotiation technique descriptions are helpful!

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The International Entrepreneur: Hardest Place to Negotiate? The Middle East

The International Entrepreneur: Hardest Place to Negotiate? The Middle East

Courtesy of Cognizant & Flickr

Courtesy of Cognizant & Flickr

I was recently asked in which culture I thought was the most difficult to negotiate a business deal. The most difficult I could think of would be to negotiate with the Roma (gypsies) of Europe. But that really doesn’t come up much in international business. The Russians would be a strong candidate for most difficult, but a sharp wit and enough vodka can often help bridge the gap. No, my vote would go to Middle Eastern cultures as the hardest to navigate in negotiations.

Before I explain why, I think it is important to point out that in my experience Middle Easterners are normally warm and welcoming people. Business partnerships can often be measured in decades, with Middle Easterners showing a strong sense of commitment and loyalty to those who reciprocate. Middle Easterners I have known have a wonderful sense of humor and are dedicated to their family and friends.

Now here is why the Middle Eastern cultures get my vote. Long-term business relationships depend on each side benefiting from the relationship. But when Middle Easterners (& Russians) negotiate, culturally they want to win at the other side’s expense. There also can be a lot of drama (emotional displays) in the negotiation that negotiators from other cultures are not accustomed to seeing. But the final reason is that it is easy to offend a Middle Easterner and very difficult to regain the trust. This happened to me last fall. I was building rapport with a young professional Middle Eastern person. Over a period of three months, this person repeatedly offended a group of people. Instead of understanding or admitting her role in the group, this person blamed everyone but herself. In the process of complaining to me, I indirectly inferred joint responsibility for the situation. The result – an emotional volcano erupted and ties severed.

Does that mean that the rest of the world should not do business with Middle Easterners? Absolutely not. There are ways to compensate for any challenging aspects of Middle East negotiations. First, always come prepared with what you can give to the other side and what you can’t. Most importantly, inflate your price to allow for deeper discounts and a perceived win-lose that is actually a win-win. Second, instead of dreading an emotional display in the attempt for deeper concessions, enjoy the show! It’s for your benefit. Your role is to stay calm and focus on the long-term relationship. And finally, never directly or indirectly accuse your counterparts of any wrongdoing. Instead, focus on the negotiating issues at hand. Remember, well negotiated business relationships with Middle Easterners can be some of the strongest and most enduring to be found anywhere.

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The International Entrepreneur: Practical Advice for Cross Cultural Teams

teamwork-383939_1280A good friend of mine was recently hired into a sustainability marketing position at a U.S. company. “Sally” is an intrapreneur (someone who brings entrepreneurial innovation and passion into a larger organization). She recently invited me out to lunch to talk about the cross-cultural team questions that have come up on the job.

As with many cross-cultural teams, Sally won’t likely meet her team in person. They communicate over phone and through email. However, so far Sally feels like much of her team does not give her projects the attention and interest that Sally thinks they deserve. Her team is located in South Korea, Japan, 13 different EU countries, Canada and Mexico. Here was my advice:

1. Make sure that Sally’s initiatives are prioritized from the top. If the company views sustainability as a priority, then do the performance metrics for overseas offices reflecting that? Some countries value sustainability while others see it as a low priority. It may be time to do some internal campaigning.

2. Develop rapport and understanding individually. I know, I know, who has time to figure out what makes each team member tick? This effort pays off as a multiplier effect with international teams. In most of the countries, trust must be built before any serious business can be conducted. And if you’re the only one from corporate doing this, guess whose projects will get a boost in priority?

3. Keep groups on conference calls small. Sally currently talks with 13 European managers on one weekly call. Participation is low. Why not break up the call into smaller group calls? Sure it takes longer, but the results including buy-in and understanding increases significantly.

4. Find the right level of formality to make team members comfortable. Americans normally have a casual business style. In many Asian and Latin American cultures there are more rules, for example- about how people address each other (Mr./Ms. Or by job title in some places). If you’re trying to help team members to appreciate you, adjust to their style or some middle ground. My favorite reference book for business cultural rules is Negotiating International Business by Lothar Katz.

5. Make and laminate a “greetings cheat sheet”. People will appreciate you more if you can greet them in their own language. Sally’s list of 10 sets of language greetings should include “hello”,”goodbye”, “thank you”, and “please”.

6. Watch Mexican telenovelas. Sally has trouble connecting with her Mexican counterparts. They are all businesswomen who treat her with detachment. Besides Tip #4 (use more formality), you can start watching a popular Mexican telenovela. Mexican soap operas are wildly popular throughout Latin America. Since you’ll be new to watching, you can ask basic questions like: “Can anyone help me understand why Arturo was so cruel to Pamela when it seems like he is attracted to her?” It can really break the ice!

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The International Entrepreneur: Management Commitment – Vital to International Expansion Success

international business meetingThe last in-house career job I held was sixteen years ago. I was an eager young marketing professional at a growing healthcare software company based in the San Francisco Bay area. The head of our department was a charismatic and experienced Sales and Marketing Vice President we’ll call “Joe”.

Top leadership at the company changed and Joe couldn’t go along with less-than-ethical orders. When he stood up for what he felt was right, he was “reassigned” to the role of International Sales.

Now Joe was actually excited about the prospect of building an international sales operation for the company. There was great potential for the company’s products in international markets. He quickly began building a sale pipeline with hospitals and health systems around the world. But before the sales potential could be realized, the company leadership gave Joe his termination notice. The newly formed International Sales Department quickly died away, along with that untapped potential.

The takeaway from Joe’s tale: without management commitment, you might as well skip the internationalization effort all together. International markets require dedication and a long-term strategy of revenue growth and expansion. If management cannot see that growth potential, it will be undermined at the first convenient time to fire a vice president who is out of favor or to cut costs before leadership performance is measured.

How do you know if you have management commitment?

1. International operations are integrated into the whole company

There are many tales of an enterprising young professional who asks for permission to pursue an international sales opportunity and uncovers a huge overseas market. What usually happens next is that the company’s leaders say “yes” to the sales opportunity and even to future international sales. It’s a short-term gain, so why not?

Now it’s a few years later and that enterprising young professional has grown this market segment into 20 or 30% of the company’s overall business. What a great international business success story, right?

Here’s where the problem bubbles up: As the business segment grows, the young marketer asks for additional internal resources to keep pace with the growing opportunity. But management still sees the international efforts as a side project to their core market. They don’t incorporate the internationalization into their overall strategy and operations. Eventually the talented young marketer leaves the company in frustration and takes a better job somewhere else. The international business quickly fades away, along with the long-term potential for revenue and profits.

2. Top Company Leaders Are Engaged in International Responsibilities

When new markets are being opened around the world, the President/CEO should be traveling to the new markets and meeting key partners, government officials and potential clients. This is especially true in markets where a position’s title is everything. By not going, the head of the company is telling the market that their commitment is questionable, which actually is very likely. If your company president cannot travel to India, China or Canada because of preconceived notions of what he will find, he will be unlikely to support you later when more complex business issues arise.

3. Planning for a Long-Term Return on Investment

International markets are a long-term growth accelerator. But it takes a great deal of time to make the right connections, learn about the market and the new potential customers, and control costs. Rarely are international markets profitable in their first year. Now by Year Five, these markets could very well be the driver of your business. But a company leader who consistently brings up ROI as a point of failure when the expansion has just started? This is a manager whose commitment is waning. Beware.

I hope you found this article useful. For more information about doing business internationally, please read more of The International Entrepreneur Articles.

Best of success to you in all of your business ventures,

Becky DeStigter

The International Entrepreneur

The International Entrepreneur: International Business Readiness Checklist

This checklist was updated on November 17, 2014

Many companies start their international expansion as a reaction to unexpected market demand from overseas. A Japanese customer wants your product and is willing to pay a premium for shipping to Japan. Or one of your clients expands internationally and needs you to send your delivery to their Colombian offices.

As reactive foreign sales begin to expand your company?s scope, it is time to investigate what a proactive international expansion would mean for your company. Here are important considerations to be ready for expanding into your company?s first overseas market:

1.?Long-Term Management Commitment. If you don?t have this, then stop right now. For top management to buy into international expansion, it needs to fit well into the company?s overall strategy including any plans for current owners? exit (M&A, IPO, etc.).

2.?Market Research. What is the market?s potential? You?ll never be able to reach an exact number, but it should be a well-researched estimate. I find it helpful to use both secondary data from industry and government sources, as well as primary sources such as interviews/round tables with potential in-country partners and customers.

How much would customers pay for your product? Oftentimes companies are surprised by different cost expectations. Your current cost structure might price your product out of a market or make it highly competitive. Consider potential offering size changes too. For example, a downloadable software product might be better received as a Software-as-a-Service model.

Also, how much localization of your product will be needed for it to be competitive in the market? This includes any local regulations, certifications, market expectations of the product, localizing any marketing promotional materials and approach to sales, etc.

3.?Financial Capital to Fund the Expansion. Does your company have enough capital to fund not only the production of products for the new market but also all the start-up costs and extra funds should things not go according to plan? Is the expected payback period?

4. Market Entry and Related Legal Structures. There are many ways to enter new markets ? from indirect exporting through distributors to wholly-owned subsidiaries. Each have unique advantages and drawbacks. Know your choices before making assumptions. Many companies new to international markets assume that contracting with local representatives is the best way. That?s not true for all situations, especially when there is valuable intellectual property to protect. It is also vital to research any legal requirements for your chosen entry mode, as well as any industry-related restrictions.

5.?The Right Transportation. If you have product to transport, you?ll need an excellent freight forwarder or else another practical way to get your products and/or materials into the new market. An FF knows how to avoid costly mistakes and coordinate delivery of your products to market.

6. Local taxation, profit repatriation and corruption. As part of your research, learn about the local tax requirements and repatriation restrictions. Also, depending on the degree of corruption you may need to plan an anti-corruption policy for your company employees. Those caught bribing in another country may face fines and prison back home.

7.?International Staff Experience. You will need managers and other staff who are ready to meet the needs of overseas operations. If your company doesn?t have internal international experience, this can be supplemented with outside assistance from government assistance centers and consultants.

This is only the high-level list. Basically go through every function of your company to ask how international expansion will affect the function. Once you know your initial approach for each function, you?re ready. Just be prepared for surprises when another country?s business environment brings up issues that you didn?t know existed!

For all of its complexities, international expansion can unlock much larger potential than staying in one?s home market. It exposes the company to new ideas for product improvement. And can mitigate the risks associated with doing business in a single market (recessions, etc.).

This checklist was updated on November 17, 2014

For assistance researching your international markets, please contact Becky at [email protected].

The International Entrepreneur: Blending Company Cultures in Foreign Subsidiaries

Biz wordsLast week a business executive from a green technology firm lamented to me that his company had been purchased by a Swiss firm six months ago. ?The problem he felt was one of clashing business cultures. ?One of the main points of disagreement was in risk taking.? The American subsidiary was used to taking a higher level of risk in this fast-paced competitive industry. The Swiss parent company had a much more thorough decision-making process. The Americans were very frustrated as they saw opportunities slipping past them because of the longer decision-making time.

This is a common issue especially in mergers and acquisitions. The key is to first look for the commonly shared values and expectations between the two companies/divisions. For instance, one Denver-based company found that their low employee turnover rate served as a great recruiting tool in China where employees normally want to stay with a single company long term.? For the Swiss and American divisions, a common shared value was product performance. Next, look for ways to exploit the arbitrage. Since American business culture is very pro-risk taking, higher risk projects could be handed off to the American division. In Switzerland, a professional failure can ruin a career. In the U.S., you?re not considered experienced in many fields (especially entrepreneurship) until you?ve failed at least a few times.

I?d be interested to hear from readers about their experiences in blending different cross-border company cultures together.

The International Entrepreneur: CFO?s Role in International Business

I once heard a group of CFOs describing their firms? international operations. All but one CFO touted how they had contained the ?risk? of international business by convincing their firms to only use local distributors and insist on cash in advance payments in home country currency. These firms weren?t new to international markets, but were so concerned with containing the risks in international business operations, that they missed any form of strategic alignment between domestic and international operations. There was no balance between risk and reward.

The role of the CFO is to balance estimated revenue in international markets with the costs of doing business in those countries. This balance point must also consider the firm?s overall strategy and international strategy. For instance, if the company?s product requires a large capital investment to bring to market and does not require high levels of localization to sell abroad, then the firm can gain from economies of scale. Gains from these economies must be included in balancing cost with revenues. Another example: if your customers typically buy either replacement products or add-on products, then cultivating long-term customer relationships is key to keeping marketing costs low. Over time, foreign customers with a good credit history with your firm should be offered better payment terms that reflect this trust. This also creates a barrier to switching to a competitor?s product and increases loyalty. Distributors, like cash-advance payment terms, are most appropriate for firms that are just starting international expansion. Risk is low but profits are low too. Additional investment can fit strategy better and increase profitability of overseas operations.

As CFO, you should be visiting your foreign operations. Your role is to ask questions, meet customers, and better understand both the risks and rewards. In every financial decision you make related to a foreign operation, you need to be asking yourself: which option fits best with our firm?s strategy? And then which option gives us a projected net gain of reward over risk?

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