Going Abroad 2014

Going abroad

Going abroad

How to understand foreign markets and do business around the globe

Waldemar Pförtsch (Ed.)

With 10 Figures and 4 Tables

Editor

Waldemar Pfoertsch

Professor International Business

Pforzheim University

Tiefenbronnerstrasse 65

75175 Pforzheim Germany

Waldemar.pfoertsch@hs-pforzheim.de

Copy Editors

Carla Melo

Karin Herrlin

Michaela Mendes

Chief Editor

Yvonne Krepper

Marion Park

Graphic design and layout

Juliane Rafaela Zierbus

ISBN 978-3-7375-2877-1

Catalog-in-Publication Data

This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other media. Duplications of the publication or parts thereof is permitted only under the provision of the German copyright law from September 1063, in its current version, and permission for use must always be obtained from the editor. Violations are liable for prosecution under the German Copyright Law.

© Waldemar Pfoertsch www.pfoertsch.com

The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use.

Cover design: Anna Pfoertsch, Wellesley, MA, USA.

Preface

Understanding foreign culture is essential for all business people around globe. With this publication, managers and students who potentially want or need to do business in foreign countries are provided with a “how to do manual”. This book actually encourages new managers to prepare for this step and make them more sensible about potential pitfalls and lost opportunities.

The reader will learn about:

How to understand your own culture and how to behave when dealing with others

How to make things happen abroad

How to sell to foreigners

How to win a bargain

How to understand each other in international teams

How to get along with the bosses at home

How to get the best performance out of your employees

How to teach in a foreign Country

What it takes to be a winner

Here the reader can get guidelines for Business and Social Etiquette. He can learn a lot about international ways of doing business, and understand Business and Social Etiquette in various countries.

This publication gives also valuable advice, how deal with the company headquarters, when you are abroad and how to balance your social life in the foreign environment. It is written from a global perspective and answers questions, which many have learned the hard way. After reading this small booklet the reader will have a much easier way to participate on the rapid growth of international business.

Waldemar Pförtsch Stuttgart/Shanghai 2014

Table of Contents

Preface

Introduction

International Ways of Doing Business

How to understand your own culture and how to behave when dealing with others

Getting Started

How to make things happen abroad?

Marketing

How to sell to foreigners?

Negotiation

How to win a bargain?

Communication across cultural and language barriers

How to understand each other? Melanie Reithmeier, Nina Schaffarczyk, Susanne Brückner

Managing People Abroad

How do I get the best performance out of my employees?

Going International, Transferring Skills and Training

How to teach in a foreign country?

Business and Social Etiquette

Guidelines to business and social etiquette

Getting things done

Making the machinery work

Dealing with the Headquarters

How to get along with the bosses at home

Managing your personal and family life

Guidelines to work life balance

The Road to Success

What does it take to be a winner?

About authors and the editor

The editor

Introduction

Waldemar Pförtsch

One of the most significant trends in the economic world in the past decades has been the rapid growth of international business. Markets have become the battle ground for companies from all over the world, and we talk today about the globally interconnected world. Markets have become truly global for consumer and business-to-business goods, many services and financial instruments of all types. This has not only created opportunities, but also expanded the risk and vulnerability of local markets. The importance of understanding the international business environment and the difference that might exist in the business environment in the domestic and international contexts becomes an important asset for small and large companies in all places of the world.

As everybody knows, we live in economic difficult times and may enter into an entirely new era, an age of increasingly frequent and intense periods of turbulence in the global economy. The complete set-up of international relationships is changing on a country and company level. The economic development of the 80s, which led to the establishment of the “Triade”, consisting of the developed nations of the USA, Europe, and Japan have metamorphosed to a kind of “constellation”, including BRIC countries (Brazil, Russia, India, China) and the Next Eleven (N-11) a group of developing countries with great prospects for the future. They consist of Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam.

This “constellation of markets” became the target markets for product and service offerings for companies from around the world. The companies which understand the various market conditions and players will be the ones which will prosper.

Economic globalization began 30 years ago, but it was not widely recognized until recently in the past 15 years. The Organization of Economic Cooperation and Development (OECD) defined economic globalization as an ongoing process. In this process, economic activities, markets, technology and forms of communication are with increasing global characteristics, while the national ones are in decrease.

It is an unstoppable trend for the development of the world economy. However, for each country, it is also a double-edged sword, both an opportunity and a challenge at the same time. In past years, overseas investments and enterprise mergers and acquisitions, which benefit companies in trading, cash flow, technology transfer or simply cost reduction, have become the important strategies for enterprises’ developments.

“Going abroad” is a trend, a need and a privilege, no matter whether the company is focusing on steady growth or on an ambitious expansion. However ‘going abroad’ is not as simple as stepping out of the house and greeting the neighbors. There is much more to be considered and to prepare before and after the decision is taken.

The book is a treasure book which comprehensively covers every stage and every detail required for going abroad, while it is also a simple handbook, which can be referred to easily once there is a need.

The reader will learn from many examples and descriptions about international business activities. Many companies and places are mentioned. You will even understand why Enzo Ferrari did not sell this company to Ford, and what the intercultural mishaps were when US centric business men wanted to be successful in Europe and vice versa.

In twelve chapters the “how to do business abroad” is described in a very illustrative way. The reader will experience difficult and funny situations and can learn for his own business developments abroad. There are hints and rules to be learned. It is your choice to follow them, but many managers who did are in a much comfortable position today than before.

This book is based on the research of many scholars put together for practical use in the international battleground. It is based on Lennie Copeland’s and Lewis Grigg’s book “Going International”, which was published by Plume Printing in the year 1985 when many US companies were expanding internationally. Now it is the task of many more companies from many more countries, and the practical and theoretical experience of other researchers and practitioners were put together by international business students of Pforzheim University to develop the basis for business around the globe.

Of course not all subjects could be covered, but this overview will lay the ground work for further understanding of doing business abroad.

International Ways of Doing Business
How to understand your own culture and how to behave when dealing with others

Mirja Wagner, Géraldine Quelle, Aline Reichert

Abstract Culture has many meanings. Culture can be a way of life for someone, it can be a person’s background, or it can simply be many different nationalities coming together as one community. For companies on their way to success in international markets, it is important to have a solid understanding of the general rules of a culture in order to become a trusted commercial partner. Managers who wish to be an effective player in the international arena must learn how to behave abroad as well as in the company’s home country. To start off, the reader will be given some explanations on the phenomenon of interactions between people in general and especially on doing business between different cultures.

1 What does culture mean?
1.1 Definition of culture

The word “culture” is a concept, which we deal with unconsciously every single day, and it can be described or interpreted in many different ways. The media is filled with articles and books including the word “culture”, but what does it mean exactly and how can it be defined? The authors Robert Grosse and Duane Kujawa give the following definition in their book “International Business”. “Culture can signify various patterns of behavior, values or beliefs, which are the characteristics of a specific community. A community can be a town, a city, a region, a country or even a company.”

In comparison, Terpstra and David propose this definition: “Culture is a learned, shared, compelling and interrelated set of symbols, whose meaning provides a set of orientations for members of a society. These orientations taken together provide solutions to problems that all societies must solve if they are to remain viable.”

There are several elements that are especially important in order to understand the relationship of cultural matters and global management.

Culture is learned: It is not innate—people are born into cultures and during childhood, adapt and learn the rules and values of their culture. This also means that it is possible to adapt to a new and different culture.

Culture is shared: Members of a particular group share various similarities, which are typical for their culture.

Culture is compelling: The individuals belonging to a certain group are often not aware of their specific behavior resulting from the influence of their culture.

Culture is interrelated: This means that it is important to study a culture as a whole entity. Specific elements should not be isolated, because they have to be understood in the complete context.

Culture provides orientation: A particular group often acts in a similar way to an upcoming problem or situation. Examining a culture can help predict the manner in which group members might react.

1.2 Understanding culture

“The first step to understanding another culture is, understanding your own”. This is a very important statement made by Lennie Copeland and Lewis Griggs in their book “Going International”, which was published by Plume Printing in the year 1985 when many US companies were expanding internationally.

Many aspects, explanations and examples given in this chapter originate from Copeland and Grigg’s publication, but they can also be identified in many other publications. Culture does not only exist in a region or a country, it can also be a significant part of a company. A company can have its own “corporate culture”. Two international corporations, Proctor & Gamble and IBM, are cited by Copeland and Griggs as companies whose cultures are defined by “the American way of doing business”.

If we take the “American way” as an example, we can identify strong and particular attitudes and behaviors that are common at work. Certain things are silently expected, others are declined, forming a special kind of “American glasses” through which the world is viewed, interpreted and evaluated. Copeland and Griggs see a fundamental problem in wearing “cultural glasses”. As travelers and visitors to other nations, people are often not aware of the frame of reference they are carrying along, whether it is American or some other nationality. When confronted by people who eat, dress, communicate and generally act in unfamiliar ways, travelers have difficulties understanding differences and are not aware of influences from their own values and behaviors.

According to Copeland and Griggs, “cultures are not right or wrong, better or worse, just different”. Cultures are shaped by their own logic, which makes it hard for foreigners to understand and make sense of it. Anthropologists explain this phenomenon to have developed from the different climates, terrains or resources that peoples had to adapt to in the past. Just like animals, “mankind evolved diverse solutions to life’s problems”.

1.3 Development of culture

Two important factors that influence the way a culture develops are geography and history. The following examples demonstrate what impact history had on the United States of America and on Germany.

In America, the pioneer spirit permeates its culture. The philosophy of starting out with nothing and then being able to achieve anything in life, if one just works hard enough, is very typically American. Children grow up with a strong sense of pride for their country, being taught that America is a unique and special place, and that they are lucky to be growing up in such a great nation. Up until recently, each school day started out with a recitation of the “pledge of allegiance” and the national anthem is played at the beginning of every sports event. In the attitudes and ways of doing business, Americans are guided by this strong sense of patriotism.

On the other hand, Germans of the current generation never learned to be proud of their country. Although National Socialism and World War II are history, consequences can still be felt. Very few Germans exhibit national pride, and hanging a national flag out of their window, something very common in America, is rarely done. In contrast to American pride, Germans are very careful about what they say or do concerning nationalism. It is no surprise that in business and in private life, the average German does not tend to take big risks in general, preferring security and predictability.

1.4 Problems in culture
1.4.1 Cross-cultural misperception

Every national group sees the world in a different way. Perception is a process by which each individual selects, organizes, and evaluates stimuli from the external environment to provide meaningful experiences for him or herself. Perceptual patterns are neither innate nor absolute. They are selective, learned, culturally determined, consistent, and inaccurate. Perception is selective because there are too many stimuli in the environment for you to observe at one time. Therefore you screen out the overload and allow only selected information through your perceptual screen to your conscious mind. Perceptual patterns are learned; we are not born with a certain way to see the world, but our experience teaches us how to perceive the world.

Perception is also culturally determined because one’s cultural background influences the way of seeing the world in a certain way; and perception tends to remain constant. Once you see something in a particular way, you continue to see it that way. Your interests, values, and culture act as filters and lead you to distort, block and even create what you choose to see and hear. You perceive what you expect to perceive according to what you have been trained to see, according to your cultural map. For example, read the following sentence:

“Finished files are the result of years of scientific study combined with the experience of years.”

If asked to count the number of F’s in the sentence, most non-native speakers see all six F’s whereas many native speakers only see three of them. They do not see the F’s in the word of because it is not an important word in understanding the sentence. Usually we selectively see those words that are important according to our cultural conditioning (in this case, our linguistic conditioning).

1.4.2 Cross-cultural misinterpretation

Interpretation happens when an individual gives meaning to observations and their relationships; it is the process of making sense out of perceptions. Interpretation organizes your experience to guide your behavior. Your experience helps you to make assumptions about the things you see so you will not have to rediscover meanings each time you encounter similar situations. For example, you make assumptions about how doors work, based on your experience of entering and leaving rooms; that is why you do not have to relearn each time how and that you have to open a door. Consistent patterns of interpretation like the one mentioned help you to act appropriately and quickly every single day.

Since there are more stimuli coming down on you than you can keep distinct, you only perceive those images that may be meaningful. As said before, you group perceived images into familiar categories that help you to simplify your environment and become the basis for your interpretations. For example, when a driver approaches an intersection, he or she might not see what is happening on the sidewalk, but will definitely notice whether the traffic light is red or green (selective perception). If the light is red, he or she automatically places it in the category of all red traffic signs (categorization) and will stop like prior times (behavior based on interpretation).

Categorization helps you to distinguish what is important in your environment and to behave accordingly; it becomes ineffective when we place people and things in the wrong group. Cross-cultural miss-categorization happens when someone uses his home country categories to make sense of foreign situations. For example, a Korean businessman entered a client’s office in Stockholm and encountered a woman behind the desk. Assuming that she was a secretary, he announced that he wanted to see Mr. Silferbrand. The woman responded by saying that the secretary would be happy to help him. The Korean became confused. In assuming that most women are secretaries rather than managers, he had misinterpreted the situation and acted inappropriately. His category makes sense because most women in Korean offices are secretaries but it proved counterproductive since this particular Swedish woman was not a secretary.

Stereotyping involves a form of categorization that organizes your experience and guides your behavior toward ethnic and national groups. Stereotypes never describe individual behavior; rather they describe the behavioral norm for members of a particular group. For example the stereotype of German businessmen is to be very punctual, busy and ambitious. Stereotypes, like other forms of categories, can be helpful or harmful depending on how one uses them. Effective stereotyping allows people to understand and act appropriately in new situations. But you should always keep in mind that stereotypes describe a group norm and not the characteristics of a specific individual, that they only describe a group and do not evaluate it and that you can and should modify them, based on further observation and experience with the present people and situations.

The problem with stereotyping is that it often leads to prejudice, a pre-judging of people you actually do not even know. In contrast to stereotypes, prejudices are based on emotions and easily translate into feelings of uneasiness and fear.

Even more dangerous than stereotyping and prejudice, certain groups of people feel that they are superior to others. In this state, others are seen as having positions below one’s own and that gives rise to making judgments about what is right and wrong according to one’s own values. This is called ethnocentrism. This attitude inevitably leads to conflicts with people from other countries, as they will probably think the same about their own culture.