GLOBAL BUSINESS MANAGEMENT

AND SOCIAL RESPONSIBILITY

Session 05

Professor:
Ricardo Abelardo Mejía Peralta
April - 2018
 Language and cultural barriers
• Selling to customers or working with vendors who don't speak
native language of the market can be a significant obstacle for
any business owner. That's why the recommendation is to hire
bilingual staff members who can easily translate back and forth.
• "If you don't have the budget for full-time translators, outsource
tasks like overseas customer service and translation of
promotional materials to freelancers is mandatory”.
• Beyond language, differing cultural norms may also stand in the
way of a successful business expansion, if company doesn't
respect them. The entrepreneurs must to research cultural
practices in the countries they plan to expand into, especially as
these may relate to the company's product or service.
Go…
 Language and cultural barriers
…come
•Foreign customers' and business partners' needs may not be
the same as those of domestic stakeholders and this could
affect sales, marketing and overall business strategies.
•”We have to understand the different ways people
communicate”.
•For example, in northern Europe, there is far less 'chit-chat'
and might feel that the party is being blunt to the point of
rudeness, this is not the case.
•In southern Europe, there is a lot of personal conversation and
activity before business issues are addressed and cutting to
the chase is seen as being impatient.
 Tax & Compliance
Issues
• It's difficult to navigate the various tax codes and business
regulations from one country to another.
• Taxes worldwide incomes and there are also imposes special
reporting requirements on this income.
• Additionally, foreign banks may be hesitant to deal with a
foreign based account due to the administrative burden, so
you might need to set up a separate, foreign business entity
and bank account to make handling transactions worth while
for the banks.
• Other countries have different labeling and packaging
standards that may need to comply with, depending on what
product is selling.
Go…
 Tax & Compliance Issues
…come
•As reference, in US, the instructions include with products
will be in English (sometimes Spanish or French).
•But in Europe, instructions, even for the simplest product,
will be in multiple languages, sometimes up to 24 languages.
•If product is sold more regionally, you will have to consider
the increase in packaging cost associated with labeling.
•In addition, product will have to be certified as safe by those
countries' standards.
 Slower pace
• The business world moves pretty quickly. Executives and even
lower-level employees work day and night, making appointments
and closing deals long after they've left the office for the day.
• Entrepreneurs that business doesn't move at the same pace in other
countries; building relationships is a long-term commitment.
• Overseas, doing business is as much a personal event as it is
professional.
• It’s mandatory to be able to broker a deal just through formal
business meetings at home, but in China and the Far East, it is
necessary to spend extensive time getting to know your
counterparts outside the boardroom during tea sessions or dinner
banquets, for instance.
• Things will always take longer to be resolved overseas, but that isn't
necessarily a sign of a lack of momentum, we have to be patient and
prepared for multiple interactions to build trust.
 Local competition
• It's not always easy to convince a foreign customer to
purchase company's product when there's a comparable
product available that's made in the customer's home country.
• While some big-name chains have clout overseas, small and
midsize companies need to work a little harder to convince
the international market that their brands are trustworthy and
better than the competition.
• Why would customers buy from us over the local champion?
• Can we penetrate the market? If we do, can we be profitable
under the circumstances? Is the juice worth the squeeze?
Advice and best practices
 Find the right partner(s)
• When the business is expanding, it's critical to don't try to go it alone. Even
if "partner" is in the form of a mentor, we'll need the help of someone we
trust, who can vouch for us in the country or countries we're looking to break
into.
• We need someone who has a passion for the brand, understands ... the
local market, has experience in the industry, has capital needed to grow,
and ideally has additional businesses where he or she can leverage shared
resources.
• It’s important of setting expectations when seeking foreign business
partnerships, and really sticking to them.
• Know what we want in a business partner or acquisition and have a clear
understanding of expectations.
• Sticking with those expectations will help avoid aligning with the wrong
partner or investing in the wrong business.
• Oftentimes, businesses will give up too much to a partner just to get into a
new market or country. We don't want to be stuck with a bad partner.
 Hire a great team
• The need for help "on the ground" also extends into hiring
practices.
• The people to hire to deal with overseas business partners
and customers must be fully immersed in the local
environment, but also need to be sure they'll be looking out
for company interests.
• The foreign companies to may deal with probably have
more experience doing business in the company home
country than we have in their country.
• Without a core team on company side with the necessary
cultural, language and local business contacts, we'll be
competitively disadvantaged.
 Remain consistent in branding,
but adapt to the environment
• Varying cultural norms and customer needs in foreign countries
may require to adjust sales approach or even whole product.
• As example: While we must stay true to overall brand, it's
important to tweak product or menu, in the restaurant industry
slightly to account for local tastes.
• Allow for appropriate localization and flexibility to adhere to
local customs and customer needs.
• One of the key areas to adjust is with material sourcing.
• If we can maintain quality, local sourcing has the opportunity to
improve cost margins and supply-chain reliability.
 Due diligence
• Any major business decision requires taking the time to
think through all possible scenarios based on business'
strengths and weaknesses, but this is especially
important for international expansion.
• Research each aspect of business strategy is
mandatory, exploring alternatives and safeguards.
• Doing as much as we can to understand the markets we
are entering and take time to get it right.
 The impact of any new idea
• Introducing a new product or marketing campaign becomes a
whole new ballgame when operate internationally.
• Instead of only thinking about how own country's customers
might receive new ideas, we'll also need to think about and
accommodate for the impact these ideas will have on foreign
customers.
• As 'spitball' new ideas, someone definitely needs to think
about scalability to international territories, usually us.
• Time zones, language and cultural appropriateness all need
to be considered when branch out internationally.
• If we don't do this ahead of time, we run the risk of offending
international partners by appearing to be more concerned
about ourselves than them.
All international entrepreneur must to take the
time to measure market demand and
competition for his company's products and
services at the country objective.

In consequence…
Unleash Innovation in Foreign
Subsidiaries

No one has a monopoly on great ideas

 Why?

• Growth-triggering innovation often emerges in foreign subsidiaries

from employees closest to customers and least attached to the
procedures and politics of the home office.

• But as every multinational manager knows, promote it in foreign

subsidiaries is tricky.

• Too often, heavy handed responses from headquarters, squelch

local enthusiasm and drive out good ideas and good people.

• When headquarters tries to do the right thing by democratizing the

innovation process and ceding more power to subsidiaries, the
results are not always stellar.
 Innovation at the edges

When companies start to think of foreign subsidiaries as

peninsulas rather than islands, as extensions of the company's
strategic domain as isolated outposts…
… Innovative ideas flow more freely from the periphery to the
corporate center.

But even more than a change in mind set, corporate executives

require a new set of practices, with two aims:

- To improve the formal and informal channels of communication

between headquarters and subsidiaries.
- To give foreign subsidiaries more authority to see their ideas
through.
Defining and giving the right importance to culture’s role at each
subsidiary plus fluid communication channels are mandatory.

Only then companies can ensure that bright ideas

and the smart people who dream them up, don't
end up marooned on desert islands.
Promoting innovation
• In the past, multinationals recognized the need
to tap into a few select subsidiaries.

• Today successful corporate executives recognize that

good ideas can come from any foreign subsidiary.

• The challenge is to find ways to liberalize, not tighten, internal

systems and to delegate more authority to local subsidiaries.

• It isn't enough to ask subsidiary managers to be innovative; corporate

managers need to give them incentives and support systems to
facilitate their efforts.
 Right approaches
Four practices to set in motion innovation

• Give seed money to subsidiaries.

• Use formal requests for proposals.

• Encourage subsidiaries to be incubators.

• Build international networks.

 Give seed money to
subsidiaries
• Corporate executives must strike a balance between
demanding that subsidiaries meet short-term results and
granting them sufficient freedom to promote new ideas.

• Put too much emphasis only in ideas will causes a

proliferation of so called strategic projects, whose
returns will fall below target levels.

• One way to achieve the necessary balance is to give subsidiaries

discretionary budgets to test ideas within limits imposed by corporate
headquarters. But it's also a matter of who holds the purse.

• In consequence, seed money can be handled on a more

decentralized basis by the subsidiaries given authority.
 Use formal requests for
proposals
• It helps to think of subsidiaries as freelance contractors that
are granted licenses to manufacture or develop certain
products.

• The best approach is to limit the list of competing

proposals to three or four as long as the narrowing process
is designed to increase, rather than suppress variance.

• It’s best to avoid formal reviews in which two mediocre options

could be with the preferred candidate for appearance only.
 Encourage subsidiaries to be
incubators

• Distance can become an advantage. It allows foreign subsidiaries

to experiment with unconventional or unpopular projects that would
be closed down if they were more visible to headquarters.

• It allows them to become incubators that can provide

shelter and resources for businesses that are not yet
strong enough to stand on their own.

• The subsidiary as incubator model is promising, but as with

all corporate venturing, there is a risk that a new business
idea won't find a home within the corporate portfolio.

• The critical success factor is typically how well the project

champion is connected with other parts of the corporation.
 Build international networks

• Some companies have tried to build international networks

by creating employee rotation programs (problem).

• If employees don't do real work during their

overseas assignments, they never become part of
local teams or become integrated into networks.

• All global companies must to increase the number and variety of

professional networks from which the next ideas are likely to emerge.

• Multinationals also need to create roles for what we

have come to think of as idea brokers.