11.30.07
Posted in Economic Analysis, Exchange Rates, Strategies at 5:03 am by Administrator
The economic laws of supply, demand, expectations and speculation work in the long run – it’s just that its sometime difficult to predict when the long run will occur. The mistakes of US economic policy over the past ten years (tax policy that gives incentives to spending over investing, large federal deficits, an energy policy that encourages petroleum imports, lax regulation of the mortgage market to name a few) have caught up with the US. We’re now facing a probable recession that will take several years to work through. One by-product is that the dollar has weakened substantially and it is part of the self-correcting nature of the markets. (The increase in exports helps expand the economy and jump start consumption.)
If your products are denominated in dollars, now is the time for your business to look at international markets. There are some short term profits that can be made solely on the basis of price and you can find those opportunities relatively easily. The mistake that many international business managers make is not following up on the low price “teasers” made possible by the favorable exchange rate. Take advantage of the opening by strengthening your international market presence: you should identify your customers, work as appropriate with distributors or local representatives and find ways to differentiate your produce/service from the competition in that market.
A recent study by the San Francisco Federal Reserve found that the export boom ended when the Fed raised interest rates as the economy matured. Thus, in your market strategy, use the opening to gain new markets and keep a close watch on the Fed’s interest rate policy (particularly the differential with the Euro rates). When the rates change direction, that is the time to work aggressively to keep the international markets.
You’ll find that if you can establish your product through weak and strong dollars, you will have a corporate strategy that will get allow you to weather weak domestic markets by expanding exports.
What is your stategy to take advantage of the weak dollar?
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11.26.07
Posted in Clean Technology at 4:55 am by Administrator
Developing clean technologies is a personal interest of mine. I’m on the founding board of CleanTech Bay, which is a trade association of companies in the San Francisco Bay Area interested in promoting clean tech. I also have worked with a number of renewable energy technology companies in my “virtual incubator” at the Santa Rosa Chamber of Commerce. One company www.1-solar.com won first prize in the renewable energy category at the California Clean Tech Open last month (see also http://guntherportfolio.blogspot.com/2007/10/2007-california-clean-tech-open-final.html for a video on the electrical inverter technology).
For the planet to cope with the greenhouse gas effects on climate, we’re going to need innovative solutions for generating and storing energy and for conserving resources like water and open spaces. The solutions will likely be a mixture of ideas – some from academia, some from big business and many from small companies around the globe. Our environment is a global responsbility and we need to develop global businesses that will find and implement the solutions to the crisis that we are facing.
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11.21.07
Posted in Standards at 4:21 am by Administrator
The CE certification is analagous to the UL labels in the US, but is more encompassing. Any company wanting to do international business in Europe must comply with the regulations. A good guide can be found on www.export.gov (look on the left hand navigation bar for “Find CE Mark information”. Here, by the way is a short link to the various products covered, as iterpreted by the US Commerce Department: http://export.gov/cemark/CE_Mark_Guide.asp. I would also point out that the site contains a list of consultants to help you through the process — this is a must for all companies.
Please post your experience with getting a CE certification.
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11.16.07
Posted in Negotiating at 10:17 pm by Administrator
Concluding a negotiation is the difficult part of the process. The end can be dictated by either achieving consensus on all points in an agenda (say a contract, shipping, pricing, delivery, etc.) or coming up against a certain deadline (legal or end of fiscal year). Sometimes the end can be decided by the fact that there is agreement on some issues and no likelihood of finding common ground on the remaining issue.
In the cross-cultural context there are some unique challenges:
- Face – Can your counterpart take the agreement back to his/her bosses and still retain their respect. If you have negotiated such a tough deal that the negotiator is discredited, then you have won a short term victory and lost a long-term relationship. Good negotiators leave something on the table for the counterpart to take home.
- Language – if the contract is in two languages, you have to have professional translators conform the two documents. Don’t cut corners on this step – words have exact meanings and mistaken usage can cost you money. Even if the contract is in English, make sure you are using it in the same way. Again certain concepts don’t translate easily and terms have different legal connotations from country to country.
- Country of governing law – Ideally, you want to have any legal issues resolved in your local courts or in a country with a developed legal system. Many companies in the technology space specify California law, even when neither has a home in the State.
- Compliance – You have the ability to set up mediation or arbitration for dispute settlement as a way to avoid taking it to the courts. Many companies choose to use the International Chamber of Commerce arbitration system. It is pricey but is considered more fair.
- Enforceability – You have an agreement now – will the other side live up to it? In some cultures, agreements will only be honored if pressure is applied to enforce it. Cheating a foreigner is not considered “wrong” but allowable. You also have the further problem that agreement does not imply willingness to implement the agreement. Case in point: When I was with the US Trade Representative in the 1970’s, the then-Ambassador came back from Tokyo and announced that with an agreement to allow in US aluminum baseball bats, the Japanese market would now be open to Americans. The actual import of the aluminum bats took place almost a decade later. The Japanese negotiators were saying “Hai” to the point presented. It was translated as “yes” but the context was that “I hear you” not that “I agree with you.” There was a book on negotiating with the Japanese written in 1975 by Masaaki Imai entitled “Never Take Yes for an Answer.” The US negotiators should have read that book.
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11.14.07
Posted in Negotiating at 5:19 am by Administrator
Negotiations have their own pace — and part of it reflects cultural aspects. The successful negotiator understands how the counterpart sees the negotiation and adjusts strategy to achieve the win-win situation. Here are some questions to think about:
- What is the expected distance between the various offers? In the markets of the Middle East, it is expected that the seller will ask a price many times the perceived value and the buyer will similarly give a very low counteroffer. In Germany, opening offers and responses are expected to be fairly close. If you begin a negotiation expecting a “reasonable” offer and receive a high one, that can be taken as a sign of bad faith. Similarly, if one is negotiating in the market place and come in at the “reasonable” level, the buyer will think you weak and will push for even greater concessions.
- When are the concessions made? The Soviets were particularly effective in negotiating with the US during the Cold War. The Soviet style was to have prolonged discussions and save any concessions (all of which had to be approved by the Kremlin) until the end. The US negotiators, expecting a series of mutual concessions throughout the negotiations, frequently arrived in the final sprint with only major concessions left to give, while the Soviets had many.
- How much authority does the counterpart negotiator have? In very hierarchical societies (and sometimes companies), the negotiator frequently has little room to deal at the table and most decisions have to be referred back to the home office. I ended up being in that position once — the US proposed an “open skies” civil aviation treaty for Central America and my instructions were no negotiating, i.e. take it as is or leave it. My Salvadoran colleague really wanted to deal but I couldn’t do anything. That wasn’t the most pleasant setting that I was in.
Leave a comment with your stories!
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11.12.07
Posted in Uncategorized at 2:39 am by Administrator
Last Sunday. the San Francisco Chronicle had an interesting article about owning that “dream” home abroad. Here’s part two focusing on Latin America:
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/11/11/BU12T8UPN.DTL&type=business
Retiring abroad is a viable option for the seasoned international business person. Having been in US Embassies overseas, I’ve dealt with the problems of those who didn’t understand the day-to-day challenges of living in another culture.
What is your experience?
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11.09.07
Posted in Negotiating at 12:27 am by Administrator
As part of my teaching and consulting work, I have given a workshop on cross-cultural negotiating many times. The most fun part is talking about the many things that can go wrong when negotiating with a person from another culture. Here’s part of a checklist that I give out. We’ll talk more about the details in a later blog:
–body language–
hands (where do you keep them – on the table? ; do you use them for gestures? what should you avoid –the OK sign for Americans is an obscene gesture in Brazil).
feet (putting your feet on the table in most of Asia is an insult)
eyes (do you look the other person in the face?)
physical distance (“invisible bubble” how close or distant do you stand? can you touch them. George Bush giving Angela Merkel a shoulder rub is very un-German!)
hierarchy – (many cultures get offended if you forget them. The Austrians love Herr Doctor Doctor (2 PhD’s)
formality (can you use first names; some languages have informal “you‘s — can you address someone in the informal voice?)
“face” (Can you point out a shortcoming? How about an assertion that you know to be untrue?)
food how to eat (can use your hands? The left hand in many cultures is considered unclean. And then there is the dilemma of the local delicacy that you may consider inedible — what if you are offered the camel’s eye? My diplomatic trainers told me to gulp it down and say how wonderful it was.)
drink (how, when and to whom do you make the toasts. The Japanese are very proud of their tea ceremonies.)
taboos (what can’t you talk about)
roles for men and women (How does the western woman do business in a traditional male dominated society?)
I’m sure you have your own examples, so use the comment box!
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11.07.07
Posted in Negotiating at 4:52 am by Administrator
Negotiating is a strategic game like chess and international negotiating is three dimensional chess. As with all negotiations, the best results are win-win outcomes. Your job as the negotiator is to figure out what motivates your counterpart and craft a strategy that helps him/her to achieve his/her goals. The challenge is what is a successful outcome in one culture may not be considered so in another.
Let’s first of all talk about culture. There are two levels to consider. First of all, there is what you think of as the traditonal ethnic culture — Japanese, German, Mexican etc. Note that I talk about specific countries — if you approach it as an area – Asian, European or Latin American – you’re going to miss important differences and make some major mistakes. You may even have to be more specific – I would approach a Catalan differently than a Madrileño.
There are also corporate cultures. I was talking to a German manager who worked in Germany in integrating HP and Compaq. I asked him about the German and US business styles and he told me that was an easy issue to deal with. The real challenge for him was melding the corporate cultures. HP was used to integrative teams and open work spaces. Compaq worked in individual spaces and interacted less with co-workers.
Step one in the negotiating process is to understand the motivations as understood in the cultural contect of your counterpart. That means understand both ethnic and corporate cultures. I’ll talk next about some questions to ask to help you understand the cultures
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11.04.07
Posted in Uncategorized at 11:40 pm by Administrator
We all have these fantasies about the dream house in another land — Italy, Mexico, Thailand, the Philippines. Mine still remains to have one house in Tuscany in the northern Hemisphere summer and another in Chile in the Maipo Valley outside of Santiago in the southern hemisphere summer. That way I’d live in eternal summer in wine country.
As with all dreams, you have to have a reality check. I came across a great article in today’s San Francisco Chronicle about the do’s and don’ts of owning a house abroad.
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/11/04/BUAESUM8B.DTL&type=business
Happy Dreams!
Add a post on your dreams
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Posted in Economic Analysis at 11:26 pm by Administrator
Yes and no. It does reflect the incredible dynamism of the world’s fastest economies. Exports are growing and foreign investment is increasing daily. However it did and does come at a cost. Essentially the Chinese kept the Yuan RMB fixed for many years (only recently allowing it slightly appreciate). The exchange rate was maintained to help the export expansion. As surpluses accumulated, the Chinese authorities were faced with a dilemma – to buy up the surplus dollars or let exporters convert them into Yuan, creating a massive increase in the money supply which would lead to inflation. They chose to keep the surplus dollars and as a result are now the largest US creditors. This came at a convenient time for the US as the Bush administration began massive deficit spending to finance the Iraq and Afghanistan wars. Much of the inflationary pressures for the US were “exported” to China who were willing to hold US I-O-U’s. (Greenspan and Bernancke were lucky to have this effect — one point that is consistently ignored in the skill vs luck debate about the Fed.)
We’re now at a turning point. With the housing crunch in the US, the run-up in oil prices and the interest rate cuts, the US dollar has been falling. This will lead to a slowdown in the US economy and an increase in US inflationary pressures. As is already mentioned, China has allowed a small appreciation in the currency and this could accelerate. So China is faced with the same dilemma that Japan faced in the late 1980’s.With the economy built on exports, can it thrive in a period of slower export growth?
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