02.22.08

Cultural Boundaries and Successful International Business

Posted in Cross Cultural at 4:35 am by Administrator

My family and I have had the privilege of living in five countries and three continents. Being nomads of sorts, we frequently talk about our experiences. Tonight, my daughter Megan brought up the issue of differences in boundaries in personal relationships across cultures. She had been talking over the past few weeks with friends from several countries where we had lived.

In Latin America, families were all encompassing and everyone was free to involve themselves in another family member’s life. We were lucky because of our position in the embassies to get to know and be accepted by families in the area. Certainly a lot of that is due the outgoing personality of my wife Linda. Once we were accepted, we were able to be part of the families, lack of boundaries and all. Being part of the clan also brought obligations. Sometimes that put me in an uncomfortable position as an official American (visas were always a topic of discussion).

Megan noted by contrast that Germans have strong boundaries around their personal lives. One calls work colleagues as “Herr” and “Frau” I remember one time when I wanted to send an invitation to an Embassy reception to a colleague at the German Foreign Ministry. I knew him only as Herr Hoffman and so I called to ask about his first name for the invite. He had been working in the office for years and not one person knew his first name. Most Germans have only a handful of friends with whom they use the informal you “du” (In University, it is a symbol of collegiality to call many of the classmates “du” but that seems to vanish as students graduate and enter the workforce.)

This issue of formality and informality vary by culture. Americans tend to be at the informal end and Japanese at the other. Learning how to conduct business with other cultures requires an understanding of how to navigate the varying degrees of formality and boundaries.

Do you have a favorite anecdote

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02.14.08

GM and its upside down international strategy

Posted in Strategies, Clean Technology, Exchange Rates at 5:30 am by Administrator

GM posted this week a record loss of $722 million for last quarter. But digging into it further the loss was from the sagging North American operations where the company is rapdily losing market share to Toyota, Honda and other international manufacturers. For 2007, GM’s revenue was flat in North America compared to the 50% gain in Latin America and 20% growth in Asia Pacific. The company continues to lose automotive U.S. market share–falling from 23.6% in 2006 to 23.1% in 2007. GM barely held on to its title as the largest automaker in the world, beating Toyota by just 3,000 vehicles.

This result came at a time when the dollar was at record lows against the Euro and was relatively weak against the Yen. Yet international carmakers figured out how to cut prices of exports to the US. Most of the international auto makers also have operations in the US and they also managed to profit despite the rise in prices for imported components due the weaker dollar.

GM, like most US manufacturers, exports relatively few cars. It chose a strategy after the Second World War of having local assembly or manufacture. In fact, GM cars in Europe bear little resemblance to the ones produced in the US. There is some sourcing of parts from the US but most of the content is local.

Over the past two decades, GM and Ford international operations have been more efficient and profitable than the domestic counterparts. But it leaves the auto makers unable to take advantage of a weak dollar since they export little. On the other hand, when the dollar is strong, imports are more competitive.

The US automakers have vigorously fought the new high fuel efficiency standards. They now must retool to produce more efficient engines. The international manufacturers, particularly the Japanese, have already made the investments in clean technology.

GM has much to do with ”right-sizing” its domestic operations. It also faces challenges in “greening” its fleet. However, if the company loses such money in weak dollar environment, watch out if the dollar suddenly strenghens. 

 

 
 

 

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02.04.08

What should I look for in an international executive?

Posted in HR at 5:42 am by Administrator

My observation over time that the most frequent mistake that international companies make is sending the bright young sales or operations manager to head up an international operation. You’re taking someone who had succeeded in one business culture and assuming that s/he can similarly run an operation under very different cultural ways of doing business. The worst mistake is picking someone who has succeeded in only the domestic operation.

The downside risks of having the wrong executives in international positions are considerable. Some estimates are that it costs over $300k to post an executive overseas. Even if you are managing an international operation from the domestic offices, the wrong kind of executive may result in having a manager who misses the cultural cues, doesn’t understand the international legal structures, doesn’t understand the risks of international business and the dificulty of manging employees from another culture.  So what are some characteristics of successful international executives?

1. They are curious about other people and are accepting of differences. Having someone who expects others to adapt to his/her ways of doing business will inevitably lead to problems. This kind of inflexibility is mistaken for the positive trait of drive. A goal-driven executive will recognize when tactics need to be altered and that executive will get that information by reasearch and personal interaction.
2. They listen well to what is or is not being said. To interpret what is being said, the successful international executive has experience in the other culture or has asked experts about how to interpret what is going on.
3. The successful international executive can think strategically, several moves ahead, like a good chess player. S/he develops options and contigency plans that reflect the business culture and legal systems.
4. Speaking another foreign language is a plus. To speak another language fluently is to understand how language influences thought patterns. One senior executive of an accounting firm remarked to me that it took two to three years for an executive to reach fluency; to learn differing accounting and business practices took only months. Hence he hired only language qualified executives, even if he had to go beyond the firm.
5. The international executive has to be trusted that s/he is representing the company interests, not those of the international employees or customers. In the diplomatic world, the problem is called “localitis” — when a diplomat is representing the views of the country s/he is posted to and not the other way around. The same goes for international executives. One solution is to rotate the executives around a fairly constant basis.
6. If an executive is being sent overseasand has a family, the family has to have the same characteristics of curiosity and willingness to accept people of different cultures. Several times I saw talented executives cut their international postings short because the family couldn’t adapt to the strains of international living. In most cases, the executive goes to a structured office that resembles the ones back home — the family has to adapt to the daily challenges of the new culture.

I’ll be adding comments over the next few weeks on other topics associated with international recruiting.

Please join in with your comments… 

 

 

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