Who's Who: A Guide to Conducting Business throughout the Global Supply Chain

Conducting business on a global basis requires a good understanding of different cultures. What works in your country might not work well in another and might even be interpreted as an insult. One of the many roles of an effective supply chain professional is to raise the awareness of cultural issues within your team and your organization to ensure success.

We are living in a period where trade is becoming more global by the day. The ability of fast communication between people and places has boosted many companies to expand in other countries. Yet, cultural differentiations are the most sustainable features companies need to take under consideration in a strategic planning of setting up abroad. A firm needs to become progressively more aware of the foreign cultures when aiming for a successful future in an international business environment. Attitudes towards work and material possessions, entrepreneurship, willingness to accept risk, politics, religion, customs, and the role of women vary in different regions. How we react to and work with these differences are our challenges.

Cultural Understanding = Success

Over the past two decades, I have witnessed many cultural blunders that caused organizations to suffer financially. Here’s an example of one such blunder.

I was assisting a start-up international corporation with their operations in Asia (not China). Their Asian division was buying kits from China and performing final assembly in their country. During my engagement with this client, I noticed many instances of miscommunication due to lack of cultural aptitude. They handled their Chinese counterparts as if they were part of their own culture and made no attempt to learn and apply Chinese culture. I needed to spend most of my time on the ground in China, constantly resolving conflicts between my client and the main Chinese supplier. The relationship suffered. Most of these issues could have been avoided with the application of some cultural savvy.

When the world recession hit in 2008, material prices dropped significantly. The main supplier was asked to lower its prices because material was the major cost component. This supplier refused to lower their prices. The owner told me “unofficially” that she was not willing to lower her prices because of the difficulty in doing business with my client. The root cause of this “difficulty” was mostly cultural.

There were many instances where direction was given to either my clients’ personnel in China or a Chinese supplier, and actions did not occur as expected due to some misunderstanding. They responded by using the term, “I told you very clearly.” Just because some verbiage is clear to the sender does not mean that it is clear to the receiver (especially one who is not using their native language). There was a failure to realize that the Chinese did not possess the same level of English proficiency as these other Asians and that one must confirm understanding and resultant actions by a follow-up phone call.

My client ultimately paid a higher price and now has an unmotivated supplier due to their lack of cultural sensitivity and application.

Understanding and applying culture results in the following benefits:

Aids communication. Culture, rather than language, defines communication style.
Establishes immediate rapport/Builds positive relationships. Relationships are more important in low-cost regions than in the West.
Enhances team motivation/Buy-in.
Enables cooperation.
Positions the organization for success.

After a trip to Asia, I was telling a family member about something I experienced there. She responded with a negative remark (I cannot remember just what it was). My response was, “It is not right or wrong, good or bad; it is just different.” The point here is that one will encounter different behaviors and communication methods while traveling abroad. It is wise to not judge these differences, just accept them. Also, what we do and accept as normal will very often seem strange to foreigners.

Overview of Major World Cultures

The following are some very basic highlights of cultures and tips based upon my experience. (Note: This is a very limited discussion as each country and region could easily be the subject of an entire publication.)

North America

In the United States, we think in terms of whatever it takes to close the deal fast. We tend to push, push and push. When you are involved globally, you have to get to know everyday cultures from sitting down to dinner to learning taboos. Things move slower overseas.

For instance, my daughter is currently teaching at an international school in Switzerland, typical western culture: fast, streamlined and efficient. In a few months she will be teaching at another international school in a Third World country. Getting the proper visa three years ago in Switzerland was uneventful; however, she is experiencing a rude awakening dealing with the bureaucracy, inflexibility and slow process in getting her new work visa. Hopefully the visa will be issued before she needs to be in this country for work.

North Americans communicate directly, while this is not the norm in other parts of the world. Learn to read between the lines or find someone who can.

Another rather unique characteristic is our reliance on contracts and the legal system. There are more lawyers in the United States, per capita, than anywhere else in the world. Just because it is in the contract does not mean that it will be accomplished. (A contract is still needed and is recommended.) In most low-cost regions, personal relationships are more valued, so work hard on this one.

North Americans tend to be individualistic, straightforward and direct. They have no problem in challenging authority. “Time is money” is something that most North Americans believe. These values are not the same in other parts of the world.

China

Personal dignity (Manzi, which means saving face) is important to the Chinese. Be careful not to say or do anything that will result in one’s losing face.

Unlike westerners, the Chinese respect and will not challenge authority. A “yes” answer can mean nothing more than they acknowledge that you are speaking. It may not necessarily infer understanding, agreement, or that an action will take place. You may not hear them say “no.”

The Chinese may seem unfriendly when being introduced. They are taught not to show excessive emotion.

Use both hands when presenting business cards and be sure the writing faces the person to whom you are presenting your card. Cards should also be received with both hands. Do not write on it or immediately put the card in a pocket or bag—this is considered rude.

Do not be surprised when asked personal questions regarding age, marital status, children, family, income, job, etc. This is done to seek common ground. On the other hand, the Chinese will be uncomfortable with American familiarity, particularly early in a relationship.

The Chinese do not like to be touched, particularly by strangers. The arm around the shoulder or pat on the back with “Just call me Bob” approach should be avoided.

Humility is the norm, so avoid bragging or boasting.

Remember relationships (Guanzhi) are what make the business world go around.

Western gestures that are taboo in China include:

Pointing with the index finger; use the open hand instead.
Using the index finger to call someone; use the hand with fingers motioning downward as in waving.
Finger snapping.
Showing the soles of shoes.
Whistling; it is considered rude.

Chinese customs that annoy westerners:

Belching or spitting on the street.
Lack of consideration when smoking and failure to ask permission to smoke.
Slurping food.
Talking while eating.

India

Indian society is influenced by the caste system and individuals usually accept their relative position. The upper caste expects to be catered to.

It is expected that individuals arrive on time; however, sometimes a double standard applies as your associates may arrive late.

There is a strong family orientation, so inquiring about family is important.

Relationships (sometimes more than facts) and developing trust are important. Do not rely on the contract alone.

Head shaking from side to side indicates agreement and it is not a negative gesture.

Decisions are made slowly, so be patient (not easy for North Americans!).

The mindset is that “the boss knows best”; thus, hierarchy can get in the way sometimes.

Indirect communication is the norm; learn to read between the lines.

Always accept refreshments to avoid offending your host.

The Philippines

Filipinos (Pinoys) are eager to learn, flexible, positive and handle a crisis well. Their alignment with North Americans is as close as any. American English, by law, is used as the teaching medium in the public school system. Thus, there are no communication issues.

Maintaining “face” and upholding an individual’s reputation is a vital component of Philippine culture. In the Philippines, expressing anger, negativity, or experiencing public embarrassment results in a “loss of face” and as such has negative consequences.

Closely related to the concept of “face,” the Philippine style of communication is indirect and takes into consideration the perception of the recipient. In order to save face and remain courteous, Filipinos rarely give a direct answer of “no” and will avoid disagreement, rejection and confrontational behavior, especially when a superior is involved. The word “yes” is often used to disguise more negative responses and avoid causing embarrassment or offense.

The pace of doing business in the Philippines is slow and the decision-making process tends to be detailed and protracted.

They tend to be non aggressive, laid back and show up late for appointments.

Pinoys like to joke and laugh a lot.

Polite and respectful, they are eager to please those in authority. They tend to avoid challenging authority.

Latin America

There are 20 different countries with distinct cultures in Latin America. Avoid lumping them all in one category.

Most speak Spanish, except in Brazil where the national language is Portuguese. There are some country-to-country differences in the Spanish language in Latin America. Some words that are offensive in one country are acceptable in others.

Ensure that your translations are properly done. When planning product specifications, remember the story of Chevrolet's attempt to promote a new car called the Chevy Nova. No one anticipated that, in Latin America, it would be seen as “No va” (which translates roughly into “won’t go”). The car was quickly renamed the Caribe.

In all Latin countries, the attitude toward time is less rigid than among North Americans. Delays should not be a surprise. Do not arrive on time for a social event; arrive at least 30 minutes late.

Latinos will usually stand closer together during conversations, so be prepared for that plus casual touching and, of course, the abrazo, or embrace, among good friends.

Latinos enjoy social conversation before getting down to business. This is a calculated process aimed at getting to know you personally and becoming friends. Latinos tend to be more interested in you, the person, than you as a representative of some faceless corporation.

Avoid using a business associate’s first name until you’re invited to do so. Such an invitation usually won’t take long. In the meantime, use the more formal “Mr.” or even better “Señor.” If your associate has a title, use it.

Wait until your host takes his seat before sitting down at the table. Always stand when a lady joins or leaves the table, and don’t eat until everyone is served. Here’s a surprisingly different thing to remember: Keep your hands on the table, not in your lap, when dining with Latin Americans.

Negotiations may appear difficult, and it’s wise to get everything in writing. Ensure you are meeting with the decision-makers, otherwise your contract or bid approval may take much longer than anticipated as it will have to make its way up the corporate hierarchy.

In all Latin American countries, it is expected that any business discussion will be preceded by social conversation. You must take the time to build a friendly relationship first if you hope for any success in negotiating a business deal. Avoid a hard-sell approach. You don’t want to risk failure by creating resentment. It’s also important to make and retain eye contact if you want to be seen as trustworthy.

It’s always considered good form in Latin America to ask about your associate’s family and remember such details as the names and ages of children.

Northern Europe

In general this culture is similar to North America—legalistic, non-tactile and eager to get down to business fast. Management style tends to be more autocratic and titles are important. Leisure time has a high value.

They are scientific and thorough in their approach, data-driven, and they meet their commitments. It is difficult to pressure them to speed things up because if you do you will get a good lecture why they need to be accurate and thorough.

Dress expectations are conservative, and it is a good idea to know and lead with some basic phrases in the local language, even though English is widely spoken.

Southern Europe

This culture is more laid back with tasteful dress being the norm. In some parts of Italy, brown shoes are considered casual dress and should be avoided for business meetings.

One should move to business only after some casual conversation.

Applying Cultural Savvy

When encountering other cultures one should show respect, remain open minded and avoid stereotyping. Advance research relative to the culture, its history and some language basics will pay dividends. When dealing with individuals, demonstrate genuine interest in the new culture and its history. Take to time to stop, look, listen and enjoy the enriching experience. Understand and apply this new way of communication and dealing with your counterparts in other lands.

The best option is to invest in cross-cultural training for all the stakeholders involved in dealing with foreign cultures. This will pay dividends over and over.

Remember: “It is not right or wrong, good or bad—it is just different.”

Mark Hehl is a senior consultant with Solutions 4 Business. His efforts have helped companies set up and improve operations in various countries, including India, Hong Kong, Malaysia, Thailand, China, Taiwan, Korea, the Philippines, France, Germany, Brazil, Mexico, the Dominican Republic, the United States, and Ecuador. These supplier projects have resulted in significant reductions in operating costs along with improved schedule performance, service levels and quality.