POLARIS IS BLAZING NEW TRAILS FOR EXPORTS

CEO Scott Wine leads the charge through employee swaps and global guerrilla marketing

[ By William Lobdell, GlobalTrade Magazine, January, 2013 ]

Uncharted territoryFocusing on an international approach to growth, Polaris is reaching sales unprecedented in its history.

Uncharted territory: Focusing on an international approach to growth, Polaris is reaching sales unprecedented in its history.

Nestled on the bluffs of the St. Croix River in Wisconsin, Osceola’s main attraction is a quaint downtown with historic brick buildings dating to the 1880s and a 25-foot waterfall. The town of 2,568 has one high school, no colleges and a mono-ethnic population (96 percent white). Bordering the Land of 10,000 Lakes, it markets itself as “The Bridge to Minnesota.”

Nowhere in Osceola’s DNA are indicators that the town provided the perfect setting to illustrate how one decidedly American company embraced the Gospel of Globalism and is now sending a sizable band of missionaries to the ends of the Earth to spread the Good News about its products—and posting record international sales in the process.

Osceola is home to a 200,000-square-foot Polaris Industries factory, where more than 500 workers manufactured parts for snowmobiles and all-terrain vehicles before the company announced in 2010 that it would be moving the plant’s operations to Mexico within a few years.

But when setting up the factory in Monterrey, Polaris officials encountered problems with a computer-aided, tube-bending machine. Operating the device, it turned out, was more of an art than science, and only a handful of Osceola-based employees had the artistry to teach their counterparts in Mexico.

So the American workers were recruited to be global trade envoys. For more than four months, they’d skip choir practices and children’s soccer games in Wisconsin to fly to Monterrey each Sunday and come back to Wisconsin late in the week.

“Some of these people had never stepped on a plane before,” says Suresh Krishna, vice president of Global Operations and Integration at Polaris. “But we needed them desperately.”

Though the workers were basically training their replacements in Mexico, they soon turned into international business converts.

“They just enjoyed the fact that they could teach people new things and in new settings,” says Krishna, adding that the company ended up retaining the U.S.-based employees and keeping the factory open because of booming business, including international sales. “Now they can’t wait until we open up a factory in Europe.”

Preached by Chief Executive Officer Scott Wine, this Gospel of Globalism has transformed Polaris—manufacturer of off-road vehicles and snowmobiles—from a U.S.-based company that happened to export to a global leader in the power-sports market.

Driving Global SalesCEO Scott Wine’s “Gospel of Globalism” helped Polaris tally a record $424.3 million in international sales in 2011.

Driving Global Sales
CEO Scott Wine’s “Gospel of Globalism” helped Polaris tally a record $424.3 million in international sales in 2011.

In 2011, it tallied a record $424.3 million in international sales, a 39 percent increase over the previous year, and for the first half of 2012, Polaris saw an eye-opening 45 percent sales jump in the Asia-Pacific market. The $2.7 billion company has projected its aggressive global initiatives—it has hired 1,200 new international employees over the past two years—will nearly double foreign sales (to 33 percent of Polaris’ total revenue) by 2018.

“Several years ago, we began a concentrated effort to grow international sales,” Wine says. “Our 2011 international performance reflects the success of that initiative: a record 39 percent sales increase with growth in every geographic region.”

In the beginning (1956), Polaris made snowmobiles. Over the years, the Medina, Minnesota-based company evolved to include the manufacturing of ATVs, off-road side-by-sides and on-road vehicles such as the iconic Victory motorcycle. While annual sales reached into the billions, Polaris didn’t put a significant amount of resources or energy into its international operations.

But in 2008, Wine arrived at Polaris like a prophet from the desert to preach the Gospel of Globalism and make converts of the company’s employees. A Naval Academy graduate who majored in economics and French—with an MBA in finance from the University of Maryland—Wine had worked at several top-tier international companies overseeing both domestic and foreign operations.

It didn’t take long for the 45-year-old to assess Polaris’ international operations: no manufacturing plants outside the U.S., few foreign partnerships, little or no presence in many major foreign markets, including China and India, and only 15 percent of the company’s sales coming internationally. He vowed to lead the company as quickly as possible to the Promised Land of export-generated profits.

“We want to be a global company—to think globally and act locally,” Wine says, in a phone interview from China. “It does take leadership, focus and resolve. There are numerous challenges, it doesn’t go as fast as you want and there are more problems than you anticipate. It all comes down to people.”

First, he had to get some fellow international evangelists to help him spread the word and change Polaris’ corporate culture, which was rooted deeply in an American mindset.

Wine began by recruiting some globally minded executives within the company, such as Michael Dougherty, who was vice president and general manager of the ATV Division and now is vice president of Asia Pacific and Latin America. Wine tapped Matthew Homan, then vice president of the Off-Road Vehicles Division, to be vice president in charge of Europe, Middle East and Africa operations.

Wine also brought in executives with international gravitas such as Krishna, whom he had worked with at UTC Fire & Security. There, Krishna was responsible for the company’s operations in the U.S., China, Mexico and Europe. Earlier, he had led strategic sourcing and supply-chain organizations for Mitsubishi, ABB and Diageo.

“When I arrived at Polaris, I saw a lot of raw material and brilliance,” Krishna says. “But the company needed a leader [with an international vision], and people who can actually execute the vision.”

Next, Polaris needed to start acting like an international company. Its products were big and bulky, making them expensive and time-consuming to ship overseas. So a manufacturing plant outside of the U.S. made financial and logistical sense, but Polaris had never taken the plunge.

“Mentally, as a company, we could not make the leap that we can set up something outside of the U.S. and get the same quality product,” Krishna says.

The company began to look at manufacturing parts in Mexico for a variety of reasons: cost savings, Monterrey was in the same time zone as the company’s Minnesota headquarters, it took only a six-hour plane flight to get there, and the location could serve Polaris’ business in the southern part of the United States and its expansion in Central and South America.

(The company picked Monterrey because it was known as a safe city, about 80 miles southwest of the U.S. border. During construction of the plant, the Mexican drug cartels brought violence to Monterrey, causing Polaris to spend significant money to upgrade security for its facilities and employees.)

But many people at Polaris were not sold on the idea of a factory in Mexico.

“There was huge discomfort for most people in the organization,” Krishna said.

To create believers in the Monterrey plant, Wine flew down the executive team for a weeklong tour of Mexican factories run by U.S. businesses, including Caterpillar, John Deere and Bombardier.

“We showed them the quality standards and the complexity of the products being produced,” Krishna says. “It gave them the sense that this international push can happen.”

Back at the company headquarters, the team leading the Monterrey initiative met with small groups of employees to talk about similar case studies and recount the first-hand experiences of the global experts who Polaris had recently hired.

“We needed to make sure we had enough buy in, and eventually, those people became our advocates,” Krishna says.

ATV1

The opening of the 425,000-square-foot Monterrey plant was one of the turning points for the company’s aggressive exporting plan, proving that the company could produce the same high-quality products in a foreign land. And it also showed that Polaris was serious about its commitment to the international market.

“We started putting money where our mouth was for long-term international growth three to 10 years from now” as opposed to the next few quarters, says Dougherty, a longtime Polaris executive. “Our first factory outside of the U.S. was a huge step forward for Polaris.”

In its first year, the assembly plant produced 22,000 vehicles, 19,000 engines and the company projects more than $30 million in savings by the end of 2013.

Infusing a global viewpoint into the once-insular Polaris culture meant taking other bold steps, such as flying the entire executive team of nearly two dozen on a weeklong field trip to China to tour factories, meet with the Chinese media and get a sense of the potential market for off-road vehicles among the upscale Chinese.

Wine calls the decision for the mass corporate field trip “an easy decision to make,” and the result was a corporate team committed to an aggressive expansion in China. The company has since established headquarters for its China subsidiary in Shanghai, opened 16 dealerships and was profitable in its second year there.

The field trips have worked in reverse, too. From the company’s recently established European headquarters in Switzerland, Matthew Homan decided his team members weren’t connecting well enough with their counterparts in Minnesota. So he scheduled a three-day meeting with the operations folks in Minnesota.

“We talked about what needed to be done and where there was waste,” Dougherty says. “We came away with a collective vision for both teams, and we’ve made significant progress since. Little things like that made a big difference. We are now a tight-knit team.”

Some field trips can be longer than others. Polaris has started a worker exchange program, where a key employee from the Monterrey factory and his family moved to the Polaris plant in Roseau, Minnesota, for a year and an American worker from that factory and his family headed south of the border to Monterrey. These are not token positions. The employees work in the No. 2 spot in the factories. In the U.S., the Polaris manager from Monterrey oversees 400 employees.

Krishna says the result has been that both factories have been infused with another culture and, when the employees return to their home plants, they will bring their foreign experience with them. Another benefit? The town of Roseau (population 2,633) has its first ice-skating and snowmobiling Mexican national whose wife provides the local school its first native-speaking Spanish teacher.

“This has increased sensitivity to different cultures as we spend time with one other,” Krishna says. “We have our Polaris culture, and we need to respond and react differently to local cultures.”

Polaris’ new culture needed to produce true-believer missionaries because of how it has to drum up business in new markets. The company’s vehicles—from snowmobiles to ATVs—don’t lend themselves to mass-market advertising. During its initial foray into China, Polaris spent a considerable portion of its budget on a major trade show that didn’t get much bang from the buck.

Instead, Polaris has found success in guerrilla marketing that identifies and engages those who might be drawn to off-road pursuits.

“It’s not easy, but you need to find a team that is willing to be missionary, working weekends, going to races, holding road shows,” Dougherty says. “You can’t just do it from a corporate office. It’s a grassroots kind of marketing.”

In many cases, that means developing the power-sports market literally from the ground up. In India, for instance, the Polaris team has constructed off-road racetracks in each state as a way of attracting potential customers and dealers. In China, the company has set up demonstration rides with the media, celebrities and potential off-road enthusiasts. If a new market already has some off-road events, the company’s team members will crash those and give the enthusiasts an opportunity to check out Polaris vehicles.

And the company has used social media, especially Facebook, to scour the market for potential customers—for instance, those who love their Jeeps.

“Social networks are becoming a big part of our marketing,” Dougherty says. “In countries like Brazil and India, most of the marketing effort is through the social sites. People share their riding stories, share videos. It develops a community atmosphere.”

Polaris executives also have aggressively pursued joint ventures in foreign countries to expand their product line, including investments in the global on-road small electric/hybrid vehicle industry. In 2011, Polaris bought Global Electric Motorcars (GEM) from the Chrysler Group, giving the company a line of compact, low-speed electric cars that are popular overseas. The same year, it also made a

$26 million investment to become a partner of Brammo, manufacturer of electric motorcycles.

Later in 2011, Polaris acquired Goupil Industrie SA, a privately owned, France-based manufacturer of on-road, commercial electric vehicles.

And last summer, Polaris announced a 50-50 joint venture with Eicher Motors Limited, a leading manufacturer of commercial vehicles and motorcycles in India. The joint venture will develop and market new products in India and other emerging markets. The overall investment is expected to be approximately $50 million, shared equally between the partners over a three-year period.

Eicher has a dealer network with more than 400 locations in India. In contrast, Polaris—which operated an Indian subsidiary in 2011—has about a dozen dealers.

“This agreement instantly expands and enhances Polaris’ presence in India and supplies access to additional emerging markets around the globe and leverages Polaris’ strength in product innovation and vehicle development,” Wine said when making the announcement. “Eicher’s financial strength and rich history as a leader in the Indian market makes them the perfect partner for Polaris in India. This joint venture represents an incredible opportunity to develop new vehicles and realize global growth.”

With so many global balls in the air, Wine continues to travel internationally as often as possible. It’s what missionaries do, and his globetrotting sets the example for his fellow Polaris evangelists, who may find it difficult to break away from the daily demands of office life to travel internationally.

As Mike Dougherty notes, “If he has the time to do it, why don’t I do it, too?”

And so the company employees continue to get a heavy dose of global trade religion.

“I tell them they are evangelists, and seriously, they are,” Krishna says. “They have to spread the word. They are people going on a mission to countries they have never been before” to spread the word about Polaris products.

Amen.

Go International, Young Startup

 

by Michael Fertik , Harvard Business Review (HBR Blog)|  January 25, 2013

Conventional wisdom says that startups need to embed themselves with American customers, sometimes for a stretch of years, before branching out to Europe and then Asia.

Like most conventional wisdom, it’s nonsense (or bollocks, absurdité, 廢話 — take your pick).

It’s seductive to listen to, especially if you’re at all concerned about becoming profitable (a major preoccupation for nearly every entrepreneur, unsurprisingly). Traditionally, you’d start with the U.S. market and stay there, often for several years, because it’s worth twice as much as the European market and three times that of going to Asia.

That was true once, but it’s not anymore. The whole world is fast becoming one market — and money is a universal language uniting all, whether you’re selling in China, marketing to the French or closing a deal in New York City. It may be a happy accident, but it’s just as easy to generate revenue internationally as it is to do with your home base clientele.

That’s why I think it’s critical for companies — including and especially young businesses — to go international earlier, rather than waiting five, seven or 10 years. That was a decision we made for our company, Reputation.com, and it was the right move. It opened some good revenue streams for us and, almost more importantly, helped surface rich cultural intel about our products and what offerings would appeal the most in which markets. As a result, we were able to intelligently redirect resources to capitalize on the countries with the most initial promise for us.

A recent conversation with Dave Goldberg, CEO of SurveyMonkey, reinforced the benefits of international expansion.

“If you have a product business and you aren’t focused on international, you are missing out on two-thirds of your potential customers,” Goldberg told me.

SurveyMonkey was international from its inception, Goldberg said, in that customers overseas could purchase its services. But these customers could only see an English-language website and buy in U.S. dollars and most didn’t really want to do business that way. “We were not optimized for international customers,” he said.

All of that changed two years ago, when SurveyMonkey localized its site. Goldberg said the transition was fascinating to watch: “Our customer support was only in English, but the next day, those same customers were contacting us in their native language.” Today, customers can select from 15 different languages and 29 individual currencies.

There are several lessons here, especially for startups, which would benefit hugely from rapid advances in market share, profit and capability:

Get international. When you focus only on customers in your backyard, you’re effectively slamming the door in the faces of international consumers who might be very interested in what you’re offering. There are few legitimate arguments for keeping your customer base to one-third its potential size. How can you really say no to expanding by 67 percent? After SurveyMonkey really committed to its international strategy, Goldberg says organic growth accelerated dramatically.

Speak their language. Sales and profits generally increase when companies pursue smart localization. Why? It’s the same reason the late Tim Russert secured an incredibly hard-to-get interview with Pope John Paul II. He followed advice from his beloved father, known as Big Russ, to literally speak the pope’s language. Russert’s earnest letter, written in the pope’s native Polish, made the critical difference. The point? Using the right language conveys respect for others — you’re meeting them on their terms. It’s also proof of a thoughtful commitment to convenience, making it easy for consumers to engage with you.

Don’t be unreasonably constrained by cost concerns. Goldberg says the costs to launch a new language for SurveyMonkey are very reasonable, with the tab for annual maintenance even less. They work with a small company that handles the change management associated with multiple languages, and just one full-time employee is responsible for the workflow of these language sites and associated teams. The lesson is clear: Don’t just assume international growth will be too expensive. Really do the research and think creatively to see if and how it can be done.

Consider an acquisition. Inorganic growth still very much “counts” as growth and purchasing another company is often an excellent part of a global expansion strategy. Even a small acquisition can open the door to rich opportunities in a new market, expansion of native capabilities, use of patented technologies, etc. Over time, these can contribute mightily to the bottom line.

As I helped ring the “remote” NYSE Opening Bell here in Davos this week, and throughout the meetings here, the markets have clearly been a key topic. For entrepreneurs, the U.S. markets are always fodder for discussion and enthusiasm — but what’s interesting is the clear emergence of international markets as attractive contenders for startups. And at Davos, the vibrant discussions and global ideas are a great reminder that shedding inward myopia expands the potential for real and significant success.

Perhaps companies should put a fresh spin on the famous exhortation: “Go West, young man, and grow up with the country.” While lacking that historic ring, “Go international, young startup, and grow the company,” is absolutely the right advice for young businesses.

Put another way: get aggressive, get purposeful and get global.

Words of Wisdom from 2012’s Top Female Entrepreneurs in Emerging Markets

 

23 January 2013 by Rania Anderson

The NextWomen Business Magazine

 Africa Theme.

Further dispelling myths and misconceptions about the achievements and participation of women in economies of emerging markets,this free, 22 page, visual eBook,Success Speakspublished by The Way Women Work compiles career and business advice from women entrepreneurs and upcoming professionals from developing and emerging economies across the globe, including Africa..

Some of the profiled women have already achieved great success and are named among the Top 10 Power Women in Russian, the Arab 100 Most Powerful Women, Top 25 Indian Women Achieves, and among Fortune’s 100 Most Powerful Women. Others are early and upcoming in their careers. They range in age and industry and position.

What they have in common with you is that they are all striving for increased success and impact. We know you will be inspired by their words of wisdom no matter where you are in your professional or entrepreneurial journey!

For your free copy register on our website

Here’s a sample of the remarkable women that you will find in the ebook. 

From Africa 

Njeri Rionge is entrepreneur, a seasoned corporate director, and Executive Director at Africa Ignite Consulting and Investing Ltd. In Kenya. Nijeri launched a business incubator to nurture and encourage entrepreneurship in Kenya known as the Business Lounge and the ‘Chief Techpreneur’ at Insite Limited, a company that helps businesses harness the power of online technology. Previously she founded East Africa’s first mass market oriented ISP, Wananchi Online (a Swahili word meaning citizen) which made Internet connectivity affordable for the average household for the first time. Njeri grew the business from a typical start-up to become the largest ISP in East Africa.

Harriet Ng’ok is an Entrepreneur Consultant with Sinapis Group – a Private Equity in Nairobi, Kenya with a focus on African Start-ups. Harriet is involved in a variety of economic and financial consulting with small/medium sized firms and government.

From Central America

Celeste North, from Mexico, founded NuFlick, a site for on-demand alternative and indie films focused on the Latin American market. For the past three years she has produced a podcast on entrepreneurship and innovation at Emprende.la, a site she created with two friends to be a resource for tech. She is also a regular contributor at Opinno, a global network of innovation centers. She writes on topics such as startups in Latin American, women entrepreneurs, challenges and trends in entrepreneurship, and more.

Estefany Marte , General Manager of A.M. Frutas y Vegetales SRL in the Dominican Republic.  Estefany is helping to change Santo Domingo’s fresh fruit landscape by the way she runs her company. She was selected to participate in the U.S. Department of State’s Women’s Entrepreneurship in the Americas (WEAmericas) Initiative and was specifically mentioned by name by Secretary of State Hillary Clinton during a speech about the impact of women entrepreneurs.

From India

Lynn de Souza is Chairman and CEO of Lintas Media Group in India, one of India’s largest media agencies. Lynn was named in India Today’s list of top 25 women achievers and is a marketing and advertising dynamo with decades of experience and leadership.

Yeshasvini Ramaswamy, a certified psychometric analyst, is the Founder and Managing Director of e2e People Practices, an Indian leadership audit firm that helps companies achieve business-people alignment. Among the many other awards and recognition she has received, the United States of America State Department, nominated Ms. Yeshasvini to represent India in the prestigious 2012 Fortune Most Powerful Women Program.

From the Middle East

Dr. Manar Al Moneef is Managing Director Imagination Breakthrough at Middle East at GE in Saudi Arabia. Dr. Moneef is at heart, an artist who has a Ph.D., in Molecular Oncology and Genetics. Prior to joining GE, Dr. Moneef attended Harvard Business School and was the Director General of Health Care & Life Sciences at Saudi Arabian General Investment Authority (SAGIA).

Tamara Abdel-Jaber is the founder and CEO of her company, Palma, a fast growing business and technology consulting firm. Palma has  22 full-time employees and 150 contractors across the Middle East. In 2011, Arabian Business Magazine named her one of the 100 Most Powerful Arab Women, and her company, Palma, was recognized as one of the 30 fastest-growing companies in Jordan. 

From Russia

Lyubov Simonova is a Principal at Almaz Capital Partners, a major international technology venture capital firm in Russia with a wide range of investments including in women-led businesses. She was recently named one of the Top Ten Power Women in Russia by The NextWomen magazine. Her professional background includes a role as head of business and strategy development at a private equity firm and at an Internet company.

Taisiya Kudashkina is CEO and C0-Founder of tulp.ru in Russia, the leading Russian reviews site. Tulp is the Russian yelp: a way to share the information about the best local businesses. Tulp has over a 170K reviews and is continuing to grow.

Rania Habiby Anderson is the President and Founder of The Way Women Work, an entrepreneur, executive business coach and an angel investor. Throughout her professional life, Rania has been observing, researching, connecting with and guiding the way women work.  As a leading authority on business women in developing and emerging markets Rania works with business women globally and established The Way Women Work as career and business advice site for women in developing and emerging markets. Rania is also the co-founder of the Women’s Capital Connection, the 8th women’s angel network in the United States and an equity investor in women-owned businesses.

 

The New Tao of Trade: Don’t Just Import from China. Sell There.

Vision Quest Lighting's chief executive, Larry Lieberman, started to break into the Chinese market by selling through an established local company.
Chester Higgins Jr./The New York Times
Vision Quest Lighting’s chief executive, Larry Lieberman, started to break into the Chinese market by selling through an established local company.
By JOHN GROSSMANN, THE NEW YORK TIMES
Published: January 24, 2013

Like many American businesses fighting to keep their prices competitive, Vision Quest Lighting turned to China about six years ago. It now imports about a sixth of the two dozen to three dozen parts required to make its lighting fixtures from there. Recently, however, the Long Island company began to see China in a different light: as a sales target. The growing economy of the world’s most populous nation made it ripe for Vision Quest’s architectural lighting fixtures, many custom-made for hotel and restaurant chains like Hilton and KFC.

When one such client, a clothing retailer, ordered 1,500 lights for five stores, Vision Quest’s chief executive, Larry Lieberman, decided it made sense to start manufacturing lights in China. Other American clients, he reasoned, would no doubt begin placing similar orders as their chains sought to capitalize on the world’s fastest-growing consumer market. And with high-quality products from the West coveted in China, Mr. Lieberman also imagined his products on display in Chinese showrooms.

And yet, selling goods in China is not easy. Mr. Lieberman made the 1,500 lights only to see them gather dust in a warehouse in Guangzhou for more than four weeks because he had not yet established a local enterprise approved to process sales.

“The customer couldn’t pick up the goods because we were still trying to set up something so they could buy them correctly and pay the right tax,” he said.

With help from an experienced consultant, Mr. Lieberman finessed the impasse by selling through an established local company, and he remains bullish on cracking the Chinese market – as do many other small-business owners. After all, China, according to a 2012 McKinsey & Company report, From Mass to Mainstream, will be the world’s largest growth market for many years.

This small-business guide offers tips for getting started based on the experiences of entrepreneurs and small businesses that have already tried.

BILINGUAL IS NOT BICULTURAL Lou Hoffman is founder and chief executive of the Hoffman Agency in San Jose, Calif., a communications consulting company that generates more than 50 percent of its revenue in Asia. Mr. Hoffman planted his flag in China in 1999. “I thought I was in not just another country but another universe,” he said. “It starts with the language, but goes much deeper. We couldn’t do business on the phone or by fax. Placing our first classified ad took 14 hours. We had to do everything in person, and considering the traffic in Beijing, you could kill three hours so someone could see your face.”

Instead of dispatching a trusted lieutenant from his California headquarters to open a satellite office in Beijing, Mr. Hoffman delayed that expansion for nearly a year. Instead, he hired a Chinese national and embedded her in his San Jose office for 10 months so she could learn his agency’s culture, then carry it home with her. “We wanted someone able to interview people in their native tongue and able to bridge the cultures, which she was able to do,” Mr. Hoffman said.

SET UP SHOP AS A WFOE Although it is possible to scout opportunities with a so-called rep office and to do business in China by selling through distributors or by licensing products to a Chinese company, most American businesses that are serious about selling in China invest the time and money to establish themselves as a wholly foreign-owned enterprise, or what is known as a WFOE (pronounced WOOF-ee). “We do probably 100 WFOEs for every rep office,” said Dan Harris,  a lawyer with the Seattle firm Harris & Moure who writes a blog about Chinese law and business. “Legal fees for company formation, trademark and employee contracts and manuals typically run around $30,000 to $45,000.” But the upfront investment does not stop there. Depending on the location and the type of business, the Chinese government has minimum capital requirements – money deposited in a Chinese bank account – that can range “from $15,000 to millions of dollars,” he said

And think months, not weeks, to get all of the paperwork approved. “In China, you can’t do anything last minute,” said Savio S. Chan, president and chief executive of U.S. China Partners, which is based in Great Neck, N.Y, and which helped Vision Quest move its light fixtures out of regulatory limbo. “It can easily take up to six months to set up a WFOE.”

LET OTHERS NUDGE THE DOOR OPEN Cabot Hosiery Mills, which makes high-end recreational socks in Northfield, Vt., has edged into the Chinese market. Sought out by a Chinese distributor at an American trade show, the company has traded a bit of profit potential to test the demand for its made-in-America goods without wrangling a WFOE or staffing a sales operation. “Right now, it’s very straightforward and still small, less than 1 percent of our volume,” said Ric Cabot, chief executive of the company, which owns the Darn Tough Vermont brand. “But if it gets to the point where we see we’re leaving too much money on the table, we might consider doing something different.”

DON’T GET KNOCKED OFF Product infringement and knockoffs are risks in China. As a result, Earl Kluft, owner of E.S. Kluft & Company in Rancho Cucamonga, Calif., a maker of luxury mattresses priced from $3,500 to $70,000, watched his first attempt to tap into the Chinese hunger for premium Western brands fall apart. “A huge manufacturer of recliners and small mattresses came to us, and we started a program under their name,” Mr. Kluft said, explaining that the arrangement started with six mattress products named for American cities. But on successive trips to China, he started to see fewer of his products on display – and more of other brands that looked very much like his. “Even after we stopped selling to them, they still had my picture up,” he said. Networking through a friend, Mr. Kluft has since signed a deal with a Chinese division of an Indonesian company that cautiously re-established a sales channel with minimal upfront investment. “The idea is to get this up and running,” he said. “We charge them a royalty, so much a year for use of our name in their stores, and they buy the product at a special discount.”

Mr. Harris, the lawyer, advises getting started by finding reliable partners on the ground. “Find them through people you know, and then pay for whatever due diligence is necessary to make sure that you have made the right choice,” he said. “And do all of this before you start doing business with them.” LOOK LOCALLY BEFORE YOU LEAP For some entrepreneurs, help may be surprisingly close at hand. Many states – including Georgia, Pennsylvania, Mississippi and Tennessee – have international trade programs that offer counsel.

“We think it’s hard for a small company who’s never been to China to figure this out all by themselves,” said Samir Ali, assistant commissioner of international affairs in Tennessee. “We’ll help them see if there’s a need for their product in China and to think it through: Do they need to set up a WFOE? Do they need to have a presence or not? Should they go the e-commerce route? And tell them how much they should budget going forward.” The assistance includes the use of Tennessee’s China offices for meetings with potential partners and help with business-to-business matchmaking through companies the international trade program has vetted in the 10 largest Chinese cities.

Though bullish on the opportunities, Ms. Ali finds herself repeating mantras like: “Don’t go in too fast. Don’t go in blind. And don’t leave your common sense at home.”

For more information on how to successfully expand your business abroad, visit  http://tiny.cc/oimha

 

Squeezing the sleazy -The politics of corruption

Dec  2012 | PRAGUE | The Economist 

Global anti-corruption efforts are growing in scope and clout. This year is set to be the best yet

IMPUNITY and euphemism used to be daunting obstacles for graft-busters. Not any more. International efforts are bearing fruit. New laws have raised the cost of wrongdoing. Financial markets are punishing corrupt companies. Most encouraging, activists have growing clout not only in high-profile cases but at grassroots level, where the internet helps to highlight instances of “quiet” (low-level) corruption.

The big international bodies dealing with corruption are making progress. A working group set up in 2010 by the G20 (the world’s largest economies) has done more than many observers expected, particularly in drawing up rules on seizure of corrupt assets and denial of visas to corrupt officials. Unlike the United Nations Convention Against Corruption, the G20 is not so far split between keen sleazebusters and countries like Russia and China. Another body, the Paris-based Financial Action Task Force, will start a fourth round of monitoring member states next year, chiefly for effectiveness in implementing anti-money-laundering laws.

Such efforts are “steady, slow boring stuff”, but still important, says Robert Palmer of Global Witness, a campaigning group. He notes that international discussions no longer tiptoe round the word “corruption”. A culture of denial has given way to at least lip-service to the cause.

The anti-graft laws of national governments are making progress too. America’s Foreign Corrupt Practices Act and Britain’s Bribery Act impose potentially savage penalties on firms that do business by sleazy means. That includes having weak in-house anti-corruption policies. The results are mixed. At a conference earlier this month in Prague organised by the Brookings Institution, an American think-tank, Thomas Firestone of the Moscow office of Baker & McKenzie, a law firm, said foreign managers trying to penalise bribery with dismissal face tough Russian laws that hamper such firings. Perversely, the most corrupt employees can thus gain hefty severance payments. Such clashes between local and international laws abound.

Market pressure is growing too. The International Corporate Governance Network brings together institutional investors with $18 trillion under management. It scrutinises companies for compliance with anti-corruption principles. So far 70 firms have signed up to the Extractive Industries Transparency Initiative, which aims to make natural-resource companies publish what they pay to governments. America’s Securities and Exchange Commission has backed similar rules. Campaigners say murk around such payments costs poor countries billions of dollars.

Businesses say they like the way clean government creates a level playing-field. In a corrupt country, “you are only as good as your last bribe”, said one executive at the Prague conference. For years, data were scanty: campaigners relied heavily on the corruption-perceptions index published by Transparency International, an anti-sleaze group. But the 58 countries that support the American-backed Open Government Partnership are committed to providing data about the way public money is spent. That helps to highlight wasteful (and corrupt) government procurement.

Specific campaigns have worked too. Congress has just passed a law blocking the visas and freezing the assets of 60 Russian officials implicated in the death in prison of Sergei Magnitsky, a whistle-blowing lawyer who had uncovered a $230m fraud. His client, Bill Browder, a financier who is campaigning to avenge him, wants Europe to follow America’s lead.

Lower-profile efforts are spreading too. Not In My Country, a web-based campaign in Uganda, encourages students to report instances of corruption—such as teachers demanding sex for higher grades. Next year it will launch a mobile app for people wanting to upload audio recordings of extortion attempts. Janaagraha, a Bangalore-based group, runs ipaidabribe.com, which has recorded thousands of bribes paid or sought; “heat maps” plot instances of corruption. Similar websites operate in Pakistan, Kenya, Liberia and Indonesia. They help even the humble to fight back.

Tricks of the trade

Given the scale of the problem, nobody is claiming victory. Laws are one thing, enforcement quite another. Public pressure may not create political will among decision-makers. Anti-corruption laws can be politicised and used for partisan purposes. Some countries think that the whole cause is a disguise for Western meddling and hypocrisy. But on December 9th campaigners celebrated International Anti-Corruption Day with a spring in their step.

from the Economist print edition | International

 

Unreasonable at Sea to set sail on 100-day accelerator cruise with 11 startups and Desmond Tutu

 

 The Queen Victoria & Queen Elizabeth II Rendezvous In Sydney Harbour
5 January 2013

A first of its kind type of accelerator is preparing to hoist anchor and set off on a unbelievable journey. Unreasonable at Sea, the startup accelerator taking place entirely on a boat, has announced it would be setting sail around the world starting on January 9. On board are 11 entrepreneurial teams, selected through the Unreasonable Institute and the non-profit Institute for Shipboard Education, that have a desire to advance their companies internationally.

Entrepreneurs and mentors stuck together on a ship

During the startup group’s 100-day journey around the world, they will be joined by 20 mentors who have exceptional experience in the ways of the world and can offer insights into helping a team’s product succeed. Among the notables are Nobel Peace Prize Laureate Archbishop Desmond Tutu, Google’s VP of New Business Development Megan Smith, Stanford’s d.school’s co-founder George Kembel, co-founder and Executive Producer of the hit TV show ER and co-founder of Law & Order: SVU Neal Baer, and IBM’s VP of Global Business Development Cathy Rodgers.

SAS UAS Website Banners Route v3 Unreasonable at Sea to set sail on 100 day accelerator cruise with 11 startups and Desmond Tutu

As we reported last year, Unreasonable at Sea is the brainchild of Luke Jones, the Chief of Staff of Semester at Sea, and Daniel Epstein, the founder of the Boulder, Colorado-based accelerator Unreasonable Institute. The participants will set sail on a journey that will have them sailing 25,000 nautical miles and porting in 10 countries such as Japan, China, Vietnam, Singapore, Burma, India, Ghana, Morocco, Spain, and others.

Meet the companies that want to change the world

So just who are the lucky participants taking part in this grand adventure? More than 400 applications were received from over 80 countries, but 11 teams were selected with 25 total members going on board. The ages range between 22 to 48. A few of the companies have already been established and profitable, but are seeking ways to scale globally:

  • Aquaphytex: Goal is to provide clean water to 300,000 people without chemicals or energy, but through plants
  • Damascus Fortune: Focus is to develop nanotechnology that transforms carbon emissions into material for spaceships
  • Innoz: A highly-popular mobile application in India that is designed to leapfrog the Internet — it currently has over 120 million users
  • Prakti Design: It aims to help feed 250,000 people daily with “ultra-affordable and fuel efficient stoves”
  • Solar Ear: It claims to be the world’s first digitally programmable and rechargeable hearing aid
The Unreasonable Institute says that the remaining companies have a globally-relevant technology and are eager to launch on the international stage:
  • Artificial Vision for the Blind: This company focuses on leveraging artificial intelligence to be a non-invasive cure for blindness
  • Evolving Technologies: It plans to help make medical devices for maternal care “radically affordable” in emerging markets
  • Protei: Wind-powered, shape-shifting, open source sailing drones that clean oceans is this company’s product
  • Sasa: An SMS-based e-commerce service that connects offline artisans to consumers directly
  • The IOU Project: A company looking to shift the dynamics of supply chains in apparel
  • Vita Beans Neural Solutions: Looks to educate and empower teachers through what it calls a “gamified platform”

An unusual accelerator

When most people think about technology accelerators, they often cite Y CombinatorTechStars500 Startups, or similar programs. In this case, the Unreasonable at Sea program is one where teams are still getting mentorship and advice on how to build out their business, but at the same time, are on a rather lengthy field trip going about trying to really change the world. You’ll notice that none of these participating companies are involved in social media — you don’t really see anyone trying to build the next Facebook, competing against Zynga, or even creating a mobile photo-sharing app.

Companies on board will have a whole new situation in front of them. The group won’t be on the ship by themselves. It is operating in conjunction with the Semester at Sea college program, where students from around the world apply to continue their education. Les McCabe, President of the global shipboard study abroad program, says that it believes entrepreneurship will solve the world’s grand challenges and “we pride ourselves on offering students eye-opening learning experiences that will help them function as global citizens and become tomorrow’s entrepreneurs.”

Students onboard will have the ability to interact with the entrepreneurs while also learning more about starting their own business. Hopefully they’ll be able to witness the challenges faced by early-stage startups and how that plays out globally.

Each company will have a unique experience at port cities

Semester at Sea’s Chief of Staff Luke Jones tells us that at each port call, the entrepreneurs will have between three to six days to meet the community and learn about the culture. The hope is that the experience will be translated into helping shape the startup so that it can succeed internationally. Each port is for different companies and the Unreasonable Institute has done its research into bringing together experts, influencers, and leaders to help answer questions that an entrepreneur might have.

In one way, you might think about this accelerator almost like the “Geeks on a Plane” program run by 500 Startups’ Dave McClure, except you’re on a ship and the journey is much longer.

Next week will be the accelerator’s first cruise — nothing like this has ever been done before. Although, it’s not that difficult to believe this is happening. We asked Jones whether any of the alumni in the Semester at Sea’s 50-year history has gone on to help change the world and he said yes: Jessica Flannery, the co-founder of the non-profit micro-lending service Kiva.org.

Photo credit: Cameron Spencer/Getty Images

 

Brics Fade as Engine of Growth

By BOB DAVIS, The Wall Street Journal

BEIJING—Not too long ago, the Brics nations looked like they might be able to provide a powerful engine of growth for the global economy. Don’t count on it for 2013.

Brics refers to some of the stars of the emerging markets—Brazil, Russia, India, China and South Africa—which together represent 40% of the world’s population. But only one of the nations, China, has the economic heft to make a major difference internationally on its own, and it is just now starting to come out of a slowdown. The other four nations face a variety of economic challenges, ranging from inflation to inadequate foreign investment to labor unrest.

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Since 2009, the leaders of the group have held four leaders summits. South Africa, which joined the group at the end of 2010, is hosting the fifth summit in Durban, South Africa, in March 2013. But tThe hope that the Brics countries would help one another through increased trade, investment and political support hasn’t panned out. Officials and analysts from Brics nations say they act as much as rivals as allies, and their lack of cohesion adds to their economic problems.

China complains that other Brics countries increasingly target it in anti-dumping suits. Brazil objects to Moscow’s restrictions on Brazilian agricultural imports. Russia is trying to turn itself into a major farm exporter, which is bound to heighten competition with Brazil. Slower growth in China and India pushes down commodity prices, which hurts South Africa and Russia.

“The Brics is not about the economy,” said Fyodor Lukyanov, an analyst who chairs an influential Kremlin foreign-policy advisory board. “The bloc sees itself as an alternative to the West, but not a confrontational one, like Iran.” On the economic front, Brics nations “have different, sometimes conflicting interests,” he said.

The Brics view themselves as an alternative to the Group of Seven industrial nations—U.S., Canada, France, Britain, Germany, Italy and Japan—politically and economically. But the economies of the Brics and the G-7 remain interlocked. When the U.S. financial crisis spread to Europe, it didn’t stop there. The Brics nations weakened because they lost big export markets and sources of financing and investment.

In 2009, China’s vast stimulus plan helped shore up commodity prices, which helped its Brics partners—for Russia on oil and gas, for Brazil or iron ore and agricultural goods; and for India and South Africa on minerals. But China itself slowed in 2012, as did the other four Brics nations, which all are expected to register slower growth for 2012 than they did the previous year, according to JP Morgan JPM +1.02% . The bank predicts all but Russia, whose growth rate is expected to slow further, will see modest improvements in 2013.

“These countries face so many domestic problems,” said Arvind Subramanian, a former IMF senior economist who is now at the Peterson Institute for International Economics in Washington. “The common dynamism they had is coming under question.”

For China, 2013 looks as if it will yield somewhat faster growth than 2012, when its economy is expected to show a 7.6% increase, according to JP Morgan, the slowest pace in more than a decade. China slowed because European and U.S. export markets shriveled, but also because the country’s leaders, wrestling with the legacy of the stimulus spending, imposed restrictions on real estate to deflate a housing bubble.

Now, feeling more confident that it has housing and banking problems under control, officials have been easing restrictions and approving more infrastructure projects. A number of analysts project China’s growth in 2013 should top 8%.

“China should be able to generate a positive impulse for growth,” said RBS analyst Louis Kuijs, as imports of commodities and other goods needed to build Chinese projects pick up.

Modest gains by other Brics nations aren’t likely to matter nearly as much internationally. India, with nearly the same population as China, has an economy just one-third the size of China’s. With inflation in India above 7% and large current-account and budget deficits, growth isn’t the country’s main concern.

“The government has now little choice but to press for fiscal consolidation,” said an RBS analysis, to reduce deficits and reassure investors the country isn’t a candidate for default. New Delhi is focusing on pushing through politically difficult reforms that would boost foreign investment, open up closed sectors and spur infrastructure spending.

Brazil, with its history of hyperinflation, is also on guard for a resurgence in inflation, which may limit its potential for growth in the coming year. A number of Brazil analysts say that the country’s mix of high tax rates, poor infrastructure and heavy government intervention in industries gives it a natural speed limit of around 3.5% a year. Attempts to push the economy to go faster through stimulus spending would also speed up inflation.

“There are too many economic bottle necks right now,” says David Beker, a senior economist at Bank of America BAC +3.10% based in São Paulo.

The country’s leaders have tried to rely on their ties with other Brics nations to help out economically. President Dilma Rousseff was in Russia to meet with PresidentVladimir Putin in December 2012 and invited Prime Minister Dmitry Medvedev to come to Brazil for the annual Carnival celebration in February.

But Brazil’s efforts haven’t yielded much more than photo ops so far. The biggest disappointment for Brazil has been China’s refusal to buy more Brazilian goods. China has declined to allow giant Brazilian ships designed specifically to bring iron ore to Chinese ports to dock, citing safety concerns, though critics say China wants to retain much of the shipping business for Chinese carriers.

Russia has its own problem, including the woes of the European Union, Russia’s main trading partner and the largest buyer of Russian oil and gas.

As for South Africa, the country’s violence remains a barrier to growth. Since police shot and killed 34 platinum miners near Johannesburg in August, labor turmoil has crippled the mining industry and hobbled manufacturers. Standard & Poor’s Ratings Services and Moody’s Investors Service downgraded South Africa’s debt in the past three months, saying they feared the government wouldn’t be able to quell the unrest and wider social tensions.

Looking to give the group more cohesion and economic purpose, the BRIC nations have proposed to create a Brics development bank, but even that effort has come to highlight the group’s divisions.

Liu Youfa, vice president of the China Institute of International Studies, a Chinese government think tank, attended a September session of Brics academics in Chongqing, China, whose aim was to fill in details of the bank proposal. The bank’s financing would be reserved for member nations, including funding for big infrastructure projects and engineering contracts, he said. Construction would benefit China, whose firms build roads, dams and airports around the globe.

But other countries have different plans for the bank. South Africa wants the funding to be available for other developing nations. India, which proposed the development bank, likes the idea of infrastructure financing but fears that China wants to run the bank mainly to make yuan loans and further the international use of China’s currency, “One country wants to dominate due to its financial standing, which would not be acceptable to the others,” said Brahma Chellaney, an analyst with the Centre for Policy Research, a New Delhi think tank.

Where to locate the development bank has become another battle. Mr. Liu says India wants the bank headquartered there, while China would “very much appreciate it” if the bank is located in Beijing, Shanghai or Chongqing. China is expected to chip in the largest share of the financing and “money talks,” he said. Mr. Liu said he believes the disputes will be ironed out eventually and the Brics bank will be established in the next several years, though not in 2013.

—Patrick McGroarty in Johannesburg, John Lyons in São Paulo, Alexander Kolyandr in Moscow and Romit Guha in New Delhi contributed to this article.

A version of this article appeared January 2, 2013, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: Hopes Dim Around Brics as Engine of Growth. 

 

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