Beruflich Dokumente
Kultur Dokumente
June 2010
Table of Contents
Introduction ............................................................................................................................................ 3 Demographics ......................................................................................................................................... 4 Results ..................................................................................................................................................... 6 Overall experience of doing business with customers, suppliers or partners in other countries (1 (very difficult to do business with) 5 (easy to do business with))....................................................... 6 For each country that a respondent identified as difficult, they were asked to indicate the areas of business that represent the biggest problems. The following slides show the percentage of respondents who had both identified a country as difficult and had experienced problems the stated area of business. ...................................................................................................................... 7 Appendix 1; Results by region............................................................................................................... 12 Appendix 2; Results by Industry............................................................................................................ 14 Appendix 3; SSONs interview with Tim Cummins, CEO, IACCM .......................................................... 16
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Introduction
The International Contracting Survey was conducted in June 2010 and drew input from 221 participants across a wide range of industries and regions, assessing the relative ease of doing business in almost 50 of the worlds major markets. The study asked members with direct experience of negotiating in overseas countries to rate their experiences on a scale of 1 to 5, where 1 was especially difficult and 5 was positive. IACCM then asked the participants to identify which of 9 categories of issue they had encountered. These categories were:
Ethics / business culture Contract or negotiation skills / understanding Problems with payment Demands for performance bonds or guarantees Dealing with licenses Local laws or regulations Maintaining rights to assets or property Language Enforcing contracts
The survey has three major purposes: 1. For the overseas negotiator: the findings will assist in anticipating some of the risks and issues they need to address or overcome. Of course, it may even mean they decide against a market entry at all. 2. For the domestic negotiator, the survey offers insight to external perceptions of their country and equips them to think about how they may adddress the fears that their counterpart may have in doing business with them. 3. For government agencies, the findings represent an agenda for improvement. IACCM plans to dig deeper into the initial results and to capture specific issues. For example, if a country scores badly on local laws and regulations, what are the precise concerns or experiences that have generated this rating? The study has already generated a high level of interest from professionals and the media. It is anticipated that it will become an annual study to ensure continued awareness for international negotiators, to provide advice on possible solutions and to monitor progress on improvements.
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Demographics
Legal, 5%
Manufacturing / Processing, 6%
Europe, 31%
Australasia, 5%
Asia, 13%
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Please indicate the context in which you are answering this survey
I mostly perform or support Sales Contracting / Commercial negotiation or contract management 43% I mostly perform or support Procurement / Sourcing negotiation or contract management I perform or support both BuySide and Sell-Side negotiations or contract management
24%
33%
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Results
Overall experience of doing business with customers, suppliers or partners in other countries (1 (very difficult to do business with) 5 (easy to do business with))
Canada Singapore Australia Netherlands United Kingdom United States Sweden Switzerland Denmark Finland Norway Germany Spain Malaysia Czech Republic Philippines South Korea Italy Japan Thailand South Africa United Arab Emirates Mexico Taiwan Poland France Argentina Brazil Mozambique Vietnam Egypt India Turkey Kenya Israel Indonesia Saudi Arabia China Venezuela Kazakhstan Russia Ukraine Congo Nigeria Angola 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50
Rating Average
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10% 0%
20%
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For each country that a respondent identified as difficult, they were asked to indicate the areas of business that represent the biggest problems. The following slides show the percentage of respondents who had both identified a country as difficult and had experienced problems the stated area of business.
Singapore United States United Kingdom Denmark Canada Australia Norway Thailand Saudi Arabia Japan Finland Sweden South Korea Switzerland Malaysia Germany Israel Netherlands France United Arab Emirates South Africa Taiwan Mexico Spain Kazakhstan Poland Turkey Czech Republic Italy China Vietnam Kenya Egypt Argentina Russia Indonesia Nigeria Brazil India Mozambique Ukraine Philippines Angola Venezuela Congo
Singapore United States United Kingdom Denmark Canada Australia Norway Thailand Saudi Arabia Japan Finland Sweden South Korea Switzerland Malaysia Germany Israel Netherlands France United Arab Emirates South Africa Taiwan Mexico Spain Kazakhstan Poland Turkey Czech Republic Italy China Vietnam Kenya Egypt Argentina Russia Indonesia Nigeria Brazil India Mozambique Ukraine Philippines Angola Venezuela Congo
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10% 0%
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5%
Singapore United States United Kingdom Denmark Canada Australia Norway Thailand Saudi Arabia Japan Finland Sweden South Korea Switzerland Malaysia Germany Israel Netherlands France United Arab Emirates South Africa Taiwan Mexico Spain Kazakhstan Poland Turkey Czech Republic Italy China Vietnam Kenya Egypt Argentina Russia Indonesia Nigeria Brazil India Mozambique Ukraine Philippines Angola Venezuela Congo
Singapore United States United Kingdom Denmark Canada Australia Norway Thailand Saudi Arabia Japan Finland Sweden South Korea Switzerland Malaysia Germany Israel Netherlands France United Arab Emirates South Africa Taiwan Mexico Spain Kazakhstan Poland Turkey Czech Republic Italy China Vietnam Kenya Egypt Argentina Russia Indonesia Nigeria Brazil India Mozambique Ukraine Philippines Angola Venezuela Congo
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Singapore United States United Kingdom Denmark Canada Australia Norway Thailand Saudi Arabia Japan Finland Sweden South Korea Switzerland Malaysia Germany Israel Netherlands France United Arab Emirates South Africa Taiwan Mexico Spain Kazakhstan Poland Turkey Czech Republic Italy China Vietnam Kenya Egypt Argentina Russia Indonesia Nigeria Brazil India Mozambique Ukraine Philippines Angola Venezuela Congo
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10% 0%
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Language
Singapore United States United Kingdom Denmark Canada Australia Norway Thailand Saudi Arabia Japan Finland Sweden South Korea Switzerland Malaysia Germany Israel Netherlands France United Arab Emirates South Africa Taiwan Mexico Spain Kazakhstan Poland Turkey Czech Republic Italy China Vietnam Kenya Egypt Argentina Russia Indonesia Nigeria Brazil India Mozambique Ukraine Philippines Angola Venezuela Congo
Singapore United States United Kingdom Denmark Canada Australia Norway Thailand Saudi Arabia Japan Finland Sweden South Korea Switzerland Malaysia Germany Israel Netherlands France United Arab Emirates South Africa Taiwan Mexico Spain Kazakhstan Poland Turkey Czech Republic Italy China Vietnam Kenya Egypt Argentina Russia Indonesia Nigeria Brazil India Mozambique Ukraine Philippines Angola Venezuela Congo
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10%
20%
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Enforcing contracts
Singapore United States United Kingdom Denmark Canada Australia Norway Thailand Saudi Arabia Japan Finland Sweden South Korea Switzerland Malaysia Germany Israel Netherlands France United Arab Emirates South Africa Taiwan Mexico Spain Kazakhstan Poland Turkey Czech Republic Italy China Vietnam Kenya Egypt Argentina Russia Indonesia Nigeria Brazil India Mozambique Ukraine Philippines Angola Venezuela Congo
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Overall experience of doing business with customers, suppliers or partners in other countries (1 (very difficult to do business with) 5 (easy to do business with)) Regional Results
5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00
Europe
Middle East Africa Asia North America
Overall experience of doing business with customers, suppliers or partners in other countries (1 (very difficult to do business with) 5 (easy to do business with)) Regional Results
5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Europe Middle East Africa Asia North America
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Overall experience of doing business with customers, suppliers or partners in other countries (1 (very difficult to do business with) 5 (easy to do business with)) Industry Results
5.00 4.50 4.00 3.50 3.00 2.50 2.00
Engineering / Construction / Real Estate Oil / Gas / Minerals / Utilities Services / Outsourcing / Consulting Technology / Software Telecommunications
1.50
1.00 0.50 0.00
Overall experience of doing business with customers, suppliers or partners in other countries (1 (very difficult to do business with) 5 (easy to do business with)) Industry Results
5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00
Engineering / Construction / Real Estate Oil / Gas / Minerals / Utilities Services / Outsourcing / Consulting Technology / Software
Telecommunications
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Stories about Russia did not relate to bribery; they are more based on negotiators experiences that may have resulted from the history of the country. For example, they perceive a fundamental lack of trust, which can lead to quite erratic behaviors within negotiations - where you feel you have established a good relationship and then suddenly it just plummets for no evident reason. A lack of basic understanding of the principles behind contracting is another real challenge. Another interesting story came from one of our members in the insurance industry. He explained that regulation requires an insurance company to issue policies on watermarked paper, which you can only get from a government supplier and is often in short supply! In addition to that, the physical policy must be hand delivered to the policy owner and payment must be made in cash. These types of local regulations represent quite significant barriers to getting business done. Cash payments also lead to all sorts of problems when money needs to get to the bank. SSON: Tim, who came last and were you surprised by the overall result -considering a lot of organizations are currently moving East when it comes to reducing costs and adding value back into business? Tim: The list was made up of 50 countries. At the bottom of the list were three African countries, with significant issues like bribery and corruption, ethics and a complex business culture. Contract enforcement was another major issue in each of these. Many countries in that region impose requirements on incoming Western companies, in order to ensure a high level of local content. These Western companies are then forced to contract with local companies, who may not have any particular competence and in extreme cases - may just be a front which funds money to government officials. These are the real barriers and obstacles that a number of countries are wrestling to overcome. To answer your question about surprise: no, nothing in particular shocked me in these results. But we did find some interesting facts. For example, the US is struggling in some respects with peoples perceptions in terms of local law and regulation. The litigious nature of US society, the no-win, nofee culture of the legal community, the highly publicized mega settlements these make outsiders very nervous and they question whether they want to be subjected to such a system. I read an interesting article about how the UK has become the location of choice for governing law. Apparently American companies are now increasingly using the English courts and their trading partners are pushing them to do so, due to the unpredictability of jury judgments in the US. The general perception is that the US is a higher risk place in which to reach a resolution on legal cases. But lets not exaggerate the problem they still came in 6th place overall. The study certainly should cause many who are moving east to pause and question whether the superficial costs are the real costs. Some countries in Asia are excellent choices Singapore came second in the survey. But others clearly do have hidden minefields for the unwary. This study helps to expose some of those minefields and may help companies avoid them. One of the challenges for the SSON community generally is that the typical driver for outsourcing tends to be headline cost reductions. What this illustrates is: yes, you might have a dramatic drop in the cost of transaction, but what is the cost of the relationship and the cost of the added IACCM 2010. All rights reserved Page 17
management time? How much did the problem and resolution cost as a result of those outsourcing decisions? These costs are often ongoing hidden costs. This can cause the relationship to lead to disappointment and sometimes to fracture and even fail. If we look at the behaviors of companies there is a tendency to move first and learn later. Hopefully our findings will help to change that. SSON: How did you select the countries which were in the study? I noticed that some of the most obvious Eastern European countries for trade didnt feature on the list. Tim: We started off with a list of 202 countries. Some of the countries are so remote the chances are that nobody has really had much experience of doing business with them. So we chose the countries which we knew had a significant volume of international trade. To take an example, Hungary is one of the countries that didnt make the list, because the volume and diversity of its role in world trade is too small. Obviously Hungary has become a significant place in terms of outsourcing, but isnt that significant in terms of other international business. We were looking for countries that feature heavily in terms of their import and export activity. Of course, if anyone has specific interest in a country that was not on our list, the chances are we can establish a similar set of data for it. SSON: Tim, did you see a big variation on the overall performance of individual states in the US? Tim: A more detailed research study would probably reveal that to be true, but it was not something we asked in this survey. Im sure many people will have very strong preferences and they are probably right to do so. New York is typically the state people tend to choose for international contracting because it has more experience with international trade. There was a very interesting study three or four years ago by a US university, which concluded that a foreign litigant is 30 percent less likely to have the court rule in its favor than a domestic litigant. SSON: Tim, does this result really matter? Will people take this study seriously and think right Ill go to Canada now instead of Singapore? Tim: The results matter because they generate an additional awareness and additional management questions. Taking the nine criteria as part of your risk assessment when youre looking to do business will help you considerably. For the negotiator the study is an excellent checklist that they should consider if they look at the commercial risk, opportunity and options of doing business in different countries. If I was sitting in China and I wanted to do business with countries outside China, I would certainly be interested in that list, as it reflects the perceptions and experiences that the counter party may have already experienced. The question is to what extent can each negotiator or each country address and overcome those issues? There is real potential in the negotiation space. If you understand and anticipate the issue, you can generally find a solution. But this survey will be of interest to quite a number of government agencies as well as corporate management; yes, you can try and address this within a negotiations context, or try to look at this as a more embedded list for capability change. The list will probably gain some reasonable levels of attention in those countries which are serious about raising their level of competitiveness.
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SSON: If government agencies within the countries which did not make it into the top 10 are serious about improving their status, what can they do ? Tim: Well, theyll have to understand the issue in a bit more depth. This isnt an in-depth study in its current form. The next stage for any government interested in increasing their international business trade status is to determine what specific issues and local regulations outsiders are encountering which make them feel doing business with that particular country might be difficult or risky. We are very happy to provide an in-depth study for any government should they be interested. Governments generally understand that they are increasingly in competition with each other, particularly at this time of economic uncertainty. Governments all over are recognizing that they have got to be better at attracting internal investment and increased trade if they want to be successful. This information was noted by the Foreign and Commonwealth Office in the UK. They are now looking at re-emphasizing the role of the ambassador to drive British business. They also want to recruit people from the business world into ambassadorial roles, in order to promote British trade. The UK came number five; the governments interest in loosening bureaucracy could push it higher in the table. Countries are seeking to address a lot of these points. We are trying to give people data and information, that can take them beyond just talking and provide them with specific factual insights on the specific issues that people find make trade difficult. India has been trying to tackle this and the South African government is taking all the data seriously. The Central Reserve Bank in Brazil is trying to improve their competitiveness. Not only will we see an interest, but continued action because countries have to raise their competitiveness. SSON: Finally Tim, which countries do you predict will increase their status over the next five years? Tim: Everyone will improve. But the differentiating factor will be; which countries are extremely serious about increasing their status? I suspect there will be a lot of well established outsourcing countries trying to up their game even more. But Im sure a number of other countries will also be eager and anxious to move forward. Next week Im going to the Czech Business Institute in Prague, because they were very interested in improving the Czech international business trading status. They are currently number 15 on the list, but want to raise that level even further. Its going to be very interesting to see how different organizations and countries react to this comprehensive table. There are other sources like Transparency International who look at league tables from a corruption and bribery point of view, or the WTO that explores legal integrity, but I know of no other that offers such a holistic and integrated view of the commercial factors that impact business results. What differentiates this study is that it does take a much wider range (nine commercial factors) into account and builds them all into one specialist study as opposed to one specialist study focusing on one subject. SSON: Great, thanks Tim.
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