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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 – 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 – 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 – 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 – 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 – 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.

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