Global Business and Governments

In countries and cultures in which the social framework is “loosely knit” like the United States and the United Kingdom, where individual goals are more important than collective goals, you are more likely to find market-based economic systems. In contrast, in countries and cultures in which the social framework is “tight” like those in Asia—Japan, Korea, China, etc.—where collective goals are given preeminence, the state may have taken control over many enterprises; markets in such countries are likely to be restricted rather than free and even “free” markets are subject to considerable legislation. Trade and its regulations are a source of tax income for governments, which also recognize that physical security is tied very closely to economic security. Not only does a strong economy generate funds for military expenditures, but it also, via international trade, creates a bond of codependency that strengthens every nation through alliance. So global businesspeople must understand both the role of government in trade and its motivation for that role.

Sovereignty, Prestige, and Security – The maintenance of national borders is the single-most important element that separates international trade from domestic trade. Geography aside, no country applies the same level of restriction within its borders as it does when dealing with its neighbors. Each nation’s approach to its domestic and foreign markets is dictated by its requirement for border sovereignty, the belief in its own prestige, and a need to secure its physical and economic well-being. Marketers must respect each government’s individual responsibility to its people, both from a legalistic (their country, their rules) and a commercial angle (their demand, my supply).

Host Government Trade Barriers – The host government of your target market can throw up a vast number of roadblocks to your success—some of them quite arbitrary in appearance. Here are some government-formulated obstructions to look out for when researching a new foreign market: Tariffs, Inspections, Import licensing, Distribution, Environmental controls, Technology transfers, Customs delays, Local partnerships, Local content requirements, Contract language, Quarantine, Quotas, and Anti-dumping laws.

Home Government Intervention – It’s rare for a country to attempt to stop its local companies from exporting. Even though they permit a steady outflow, governments maintain oversight and taxing rights. Marketers may have just as difficult a time handling their own government as they will the overseas variety. As is true of import laws, not all export requirements are written down in all countries and are, therefore, subject to “negotiation” and arbitrary enforcement. Research and good governmental relations are keys to keeping your product in the export pipeline. The following are the very formal and straightforward means by which governments control the marketing of their domestic producers, as well as that of foreign companies: Embargo, National security issues, Export tariffs, Export licensing, Anti-rerouting measures, Job protection sentiments.

Beyond these codified restrictions, there is a host of constraints—neither codified nor necessarily government enforced—that can affect the marketing of your product in foreign lands. The following informal barriers are more difficult to detect and, in many cases, harder to overcome than their more official counterparts: Public relations, Nationalistic, Religious, Ethnic, Societal, Scientific, Ethical, Environmental, and Educational barriers.

Trading Blocs: – The Invisible Handcuff – In the last few decades, nations have bound themselves together in non-military regional alliances that are designed to promote trade. Trading blocs, arising from free/foreign trade agreements among countries in a geographic region, essentially reduce, and ultimately remove, tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other, such as the free movement of people through the European Union. They also restrain foreign traders from assailing the weaker members by protecting them with numerical strength. So, if you deal with one trade bloc member, you deal with them all. Trading blocs work as regional handcuffs to control and sometimes eliminate trade in certain products.

Global businesspeople need to be aware of the membership and goals of such trading blocs so their plans can be tailored, not just to a single country, but perhaps to an entire region. Listed below are some of the major trading blocs your firm should research and formulate strategies for.

• APEC (Asia–Pacific Economic Cooperation).

• ASEAN (Association of Southeast Asian Nations).ⁱⁱ

• NAFTA (North American Free Trade Agreement) – Canada, Mexico, and the United States.

• MERCOSUR – Argentina, Brazil, Paraguay, Uruguay, Chile, Bolivia.

• ANDEAN COMMUNITY – Bolivia, Chile, Ecuador, Colombia, and Peru.

• FTAA (Free Trade Area of the Americas).

• OPEC (Organization of Petroleum Exporting Countries).

• EU (European Union).

• SAARC (South Asian Association for Regional Cooperation).

• SAPTA (South Asian Pacific Trade Association).

• CIS (Congress of Independent States).

• AFTA (ASEAN Free Trade Association).

After-Sales Service

After-sales service, which includes professional product consultation, maintenance, field service, and training, important factors in the initial export sale and ongoing success of products in foreign markets, should be an integral part of your firm’s business strategy and export initiative. If capable, knowledgeable, and efficient, it can prompt export sales to either grow with long-term commitments or fail. Service is on-time product delivery, courteous sales personnel, a user or service manual modified to your customer’s needs, and ready access to a service facility and dealer support. Service also varies by product type, quality, and price of the product and your distribution channel. Some export products require no service. The issues that do arise, if any, are resolved once you have determined quality criteria and return policies.

Then again, you may have a product, a consumer durable, or consumable that requires after-market service. For products like these, your consumer, especially buyers of industrial goods, seek after-market service, a key factor in a customer’s product choice. No doubt you realize foreign markets, like those at home, are sophisticated, each with their own unique seller expectations. These markets require manufacturer/distributors to ensure their service performance equals, or preferably exceeds the market competition, given the other factors of product quality, price, promotion, and delivery. Likewise, should you pursue a strategy and market entry decision that eliminates after-sale service, regardless of the number of markets you choose to enter, you run the risk of fewer repeat sales.

But, let’s examine the remaining service delivery options available to you. A high-cost option is returning the product to you for service or repair. This option inconveniences the customer by requiring the high cost of return shipment and loss of product use over an extended period of time while you, the manufacturer, incur the cost of exporting your product a second time returning it to the field. This approach is neither practical, nor cost effective.

Should your distribution channel be the creation of a joint venture or some other contracting arrangement, the overseas partner may have established a service/repair center? In this instance, you will want to negotiate the cost of providing for repairs, maintenance, and warranty service into the joint venture agreement.

If you are selling in a large or small retail environment, the firm may prefer identifying and using local service facilities. Acting on this warranty and service alternative requires incurring the up-front expense of identifying and training local service centers, specifically administrative, training, and supervisory overhead costs. But, it is one that develops the customer perception that the firm is a local competitor, which can be an important competitive factor when a firm enters foreign markets.

Lastly, if you are exporting into a commercial or industrial market, selecting a representative to serve a region, nation, or market should be based not only on the representatives’ sales capability, but also on cost and its ability and willingness to service the product, the firm’s vital stake in the global marketplace.

Business Travel Abroad

Realize your culture and many of its customs differ from those of your global customers so it is a must, that if you are doing business globally, you need to prepare yourself to work with your customer, know and appreciate his different customs, and the different practices and rules by which he goes about doing business. Any misunderstanding of your customer’s culture and business practices will be evident, and potentially offensive, thus damaging to your business interests and advancement to a position with global reach. Recognize that rules and customs vary by the country—and it’s important to know those specifics before you go.

Before your next business trip abroad there are many questions to ask yourself such as these:

• Is my passport up-to-date? If it is within 6 months of expiration, renew it as some countries won’t accept it.

• Do I need a visa?

• Do my travel plans reflect the company’s goals and priorities?

• Am I bringing a product for demonstration or sample purposes? An ATA carnet (pronounced “kar-nay”), an international customs export-import document to obtain duty-free temporary admission of certain goods may be helpful.

• What, if any, vaccinations are required?

• What is the currency exchange rate?

• What is the time difference?

• What is the dress code?

• What are some of the business customs and laws of the country?

• Are handshakes or bows, the proper use of names and titles acceptable when greeting someone?

• How are business meetings and dinners conducted?

• Will security be required and do I have emergency contacts and travel insurance?

• Are e-mail and communications secure?

• Are there export control laws to comply with?

There are also thousands of websites and books with useful information about business travel abroad. Use them to research all of the above before you go. Here are just a few great resources you’ll want to check out:

For travel books with information about travel documents, weather, tipping guidelines, and local customs obtain Frommer’s,ⁱⁱⁱ Fodor’s,^iv or Lonely Planet^v books.

To learn more about safety and security, visit the Federal Bureau of Investigation’s Safety and Security for the Business Professional Traveling Abroad^vi page.

For guidance by country, visit the United Kingdom Foreign and Commonwealth Office’s Travel Advice by Country^vii page, or the website of the U.S. Department of State website for U.S. passports and international travel^viii website.

For news about hotels, transportation, food, and anything else, visit the Business Traveller website.^ix

Read about international etiquette, manners, and culture by visiting Cyborlink.com.^x

Download the Culture Guides^xi mobile app for information about local customs by country.

To learn about the food in other countries, visit FoodByCountry.com.^xii

For guidelines on tipping in foreign countries, check out The World Traveler’s Guide to Tipping Internationally.^xiii

For information on the required travel documents, visit the individual country’s government travel site (i.e., Travel.State.gov^xiv).

For information on business dinner etiquette see Tripcase.^xv

For an ATA carnet,^xvi a temporary import/export document used to clear customs without paying duties and import taxes on merchandise that will be re-exported within 12 months, contact the U.S. Council for International Business^xvii allowing 6 to 8 weeks to acquire all the necessary documents.

After concluding your business, take the time to take in the local atmosphere, if possible. It is all about knowing your customer; what his government requires of him and you; his interest in your product; its after-sales support; his culture; and his customs, needs, and business practices. Knowing more will enable you and your firm to be of greater service.