3 Rules for Doing Business Overseas

Vanessa Merit Nornberg, INC Magazine

Every country has its own place-specific challenges, as last week’s tragedy at a Bangladesh factory showed. Here’s how to protect your company.

Flickr image via Rich_Lem
 Last week’s factory collapse in Bangladesh was a terrible reminder of what can go wrong in life and in business. If your company needs to produce or purchase goods from a country other than your own, it is important to find out all you can about the culture, context, and craft in the country where you’ve decided to do business. Here’s how.

Culture is king. As an American, if someone tells me something is “difficult,” I take that to mean it may require a lot of elbow grease and time, but it can be done. However, “difficult” can mean something altogether to non-Americans. For them, “difficult” might mean “impossible” and they won’t attempt to do it.

I learned this the hard way when I naively waited for the “difficult” thing to be worked on, only to find out the project had never been started and I’d wasted valuable time. This kind of cultural understanding goes beyond reading the sections at the front of tourist guidebooks. It is acquired, unfortunately, by trial and error, and with meaningful advance research.

To understand the culture you’re working with, ask other entrepreneurs doing business in the region to tell you about their experience. Ask them to share three things they think are important to doing business successfully in their home country. But don’t stop there. Read everything–novels, non-fiction, magazine articles, whitepapers from chambers of commerce, even warnings on government websites–about the places you want to work with. Share this local intelligence with your entire team, so they know how to navigate the cultural divides.

Context is everything. We produce most of our products in South Korea because quality is our number one priority and the Korean factories we work with share a commitment to making great products. However, they have a frightening neighbor to the North, who likes to remind the international community from time to time he is a threat. This is not just a problem for the factories I work with, but a possible problem for my company, whose supply chain could get caught in the crossfire.

For this reason, I pay careful attention to the region’s political context and have sought out back-up suppliers in other areas, should the need to call on them arise. This is an extreme example, but even small things like the weather can be important. Monsoon season may seem like an exotic weather woe, but if you are doing business in the Asian basin, it can significantly impact production. In Thailand, for instance, it inundated and delayed production for a good two months in one factory we work with–they lost machines and workspace to  high waters. Thankfully our vendor had a well-run facility and its workers were able to remain safe during and after the floods.

Craft is crucial. Just as the definition of “factory” differs from country to country, so too does the craftsmanship of their products. Whereas in Korea a factory implies machines and automated processes as we know them in the West, in China, a factory implies a human workforce, using tools to perform the necessary tasks. The output of each type of production is different–the former is precise and exact, while the other is approximate but rapid. There are uses for both in the world of manufacturing, but you have to know which to use when.

If you have a sample of something you’ve already prototyped, China may be the right place to do your production run. If, on the other hand, you have a sketch or a digital illustration of a potential product, Korea should be your country of choice. Why? Because my past experiences taught me Chinese factories are generally good at executing, but not so gifted at imagining. They can break something down and work backwards, but can’t create accurately from an idea or photo. These are the kinds of nuances in construction you have to consider when you are choosing who to entrust with your production.

Asking the right questions and understanding the way things are done locally is the key to determining whether a particular country or a potential vendor is the right choice for your company’s needs–or a problem you should steer clear of.

About the Author: In 2004, Vanessa opened Metal Mafia, a wholesale body and costume jewelry company that sells to more than 5,000 specialty shops and retail chains in 23 countries. Metal Mafia was an Inc. 500 company in 2009.

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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