Executive Master Class in International Business

Cross Cultural Negotiating Tips

Tue, 22 Jun 2021 10:20:07 -0700

We've been writing about cross-cultural negotiating for some time. Here is a interview that Chris recently participated in with Golden Gate University. (He has been an adjunct International Business professor at Golden Gate since 2005.) It sums up the key elements of negotiating with someone of another culture. Be sure to download our cross-cultural negotiating tips as well.

The IBA provides corporate training workshops on cross-cultural negotiating. The workshops cover not only cross-cultural negotiating but also practical skills, like working with interpreters and supervising global teams. Contact us for details.

The Convergence of AI, Robotics and Blockchain

Mon, 04 Jun 2018 09:33:47 -0700

I was fortunate this past week to attend the SelectLA Summit which focused on FDI attraction to Los Angeles. Stephen Cheung (@wtclaStephen) of the World Trade Center LA and his team did a great job of bringing together great speakers and content.

One panel discussion that stood out to me was on Industry 4.0. (Industry 3.0 was the addition of computing power to manufacturing processes. Industry 4.0 brings in artificial intelligence, robotics, sensors, the internet of things and advanced data analytics.) This discussion works well in the Los Angeles area as it has the largest concentration of advanced manufacturing in the US, led by the Elon Musk’s companies (TESLA, SpaceX, Hyperloop and the Boring Company). LA was once the headquarters for much of the aircraft industry. Although it has since moved to other regions, many advanced manufacturing companies grew out of the manufacturing experience of the aerospace industry. Silicon Beach continues to spin out companies in gaming, FinTech and social media. Not to be overlooked, LA also has unique marketing expertise, particularly for consumer products, drawing on the strength of the entertainment industry. All in all, LA is well situated to support and foster the growth of these next generation companies.

The discussion started out in a predictable way talking about robotics (Amazon) and the big data revolution behind Industry 4.0. The panel had a two-time entrepreneur in artificial intelligence, Michael Greenberg of Retina A.I., and an expert on blockchain technology, Heidi Pease of #LABlockchainLabs. With their input, the discussion then turned to how AI, robotics and blockchain intertwine. Many of the AI and blockchain applications have been discussed in the press – logistics, financial transactions and warehouse management. But as the applications expand, new problems can be addressed. For example, using the two technologies in food chain management would have enabled...Read More

China's Long-Run Economic Roadblock

Mon, 07 May 2018 17:16:13 -0700

China again dominates the news cycles with concerns about the trade deficit, thefts of intellectual property, subsidies and threats of a trade war. A popular theme from both right and left is that China’s massive growth and population will overwhelm the US economy, particularly manufacturing.

The news coverage reminds me of the headlines in the late 1980’s about Japan’s economy. Japan was going to buy up strategic industries in the US and dominate world trade. But Japan hit a constraint that was foreseeable, but not expected. Starting in the 1977, the population growth rate dropped as families had fewer children. At the same time, longevity increased. Economic growth peaked in the late 1980’s but then entered a period of long-run stagnation. At the present, Japan’s median-age is the highest in the world and its population is declining by 0.2% per year.

China faces a similar trajectory. In the early 1960’s, China has one of the highest population growth rates in the world and the Communist leaders feared continuing famines if the trend was not reduced. The one-child policy was the Mao-government response. The immediate result was dramatic:

(By Phoenix7777 [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], from Wikimedia Commons)

The long-term effects, however, are just beginning to show up:

An Aging Population: China’s median-age has crept up to almost 37 years. Most demographers expect China to surpass the US median-age within five years and that gap will widen. At the same time, Chinese are living longer (average 76.3 years, similar to most developed economies). As a result, the old-age dependency ratio (number of working adults compared to those over 65) will rise from 11 per 100 in 2010 to 39 in 2050. (By comparison, the US was at 19 in...Read More

Thoughts on the US Trade Deficit

Thu, 26 Apr 2018 20:46:55 -0700

The US trade deficit has been in our headlines, but most of the analysis of it has not identified the underlying causes. Without understanding the origin of the deficits, many of the proposed “fixes” could have significant negative impacts on the economy. For example, tariffs on Chinese products could result in retaliation against US agricultural and aerospace exports, in addition to higher prices for US consumers. Each of the policy options has pluses and minuses, so let’s first break down the major factors behind the continuing US trade deficit.

I.Exchange rates (floating). This is probably the largest component of the problem, and one that literally overnight can change the competitiveness of US products. Most of our largest trading partners have floating exchange rates, which reflect market supply and demand. However, as I have pointed out in previous blog posts, the key factor influencing floating rates is interest rate differentials (90%), not trade flows (10%). The Fed has announced a series of interest rate hikes for the rest of 2018 and, given the low rates in Europe and Japan, the dollar will likely strengthen throughout the year, widening trade deficits. Note to politicians: a strong dollar does not mean the US economy is strong. It means that our exports will be more expensive and imports cheaper.

II.Exchange Rates (Safe-haven effect). The US dollar remains the safe-haven currency when economic conditions go south. Thus, there will be a demand for the currency above what market conditions would warrant, resulting in a strong dollar. As a result, exports will be less competitive and imports more attractive, laying conditions for a continuing trade deficit.

III.Exchange rates (managed or fixed). Most of the non-OECD...Read More

Negotiating with Someone from Another Country or Culture? Three Important Things You Should Know Before You Start

Thu, 19 Apr 2018 19:54:33 -0700

I spent many hours of my diplomatic career in negotiations. My first experiences were with the Japanese back when the US wanted to get aluminum baseball bats into Japan. One day, my big boss came in elated, saying that he had achieved a breakthrough on aluminum bats that would open markets for all US companies wanting to sell to Japan.

About six months later, we were still trying to agree on final language and no aluminum baseball bats were being shipped to Japan. A friend then gave me a book by a Japanese author, Masaaki Imai, that gave me a radical new insight into cross cultural negotiations. The book was titled “Never Take Yes for an Answer.” The US thought it had an agreement. The Japanese had been saying ‘Hai’ throughout the talks, which can be translated as ‘yes’ or as “I hear what you are saying.’ In the end, we didn’t resolve the issue because we thought they were saying ‘yes’ and they were simply being polite.

There are many elements to successfully negotiating with someone from another culture. It requires the negotiator to step into the mindset of the other culture and look for ways to craft the win-win outcomes that characterize all successful negotiations. Here are three things that I recommend you consider as part of your preparation process:

What is the timing of the talks? The pace of the negotiations is a critical first factor. Does your counterpart normally expect a fast or slow pace? Some cultures require many meetings or social events before the start of negotiations in order to build trust. Others are more ‘businesslike’ in the American sense, willing to get down to immediate discussions. Another question is, will there be continuous discussions or will there be breaks for more socializing or for the other party to confer with headquarters? I often see US businessmen becoming frustrated with a slower pace. That frustration can place the US negotiator in a weaker...Read More

Laser Focus

Tue, 27 Mar 2018 09:02:43 -0700

“What’s the top priority for international online marketing?”

Fellow Executive Master Class faculty member, Hema Dey, and I were asked that question at a class on online marketing. We were delivering a primer on global online marketing to a group of Riverside, CA business owners. That class covered many topics such as SEO strategy, blog posting, social media integration, etc. etc.

It was understandable that the owners wanted prioritization. The answer to the question became clear over the course of the morning as a result of our interaction with the business owners.

In the US market, companies need to zero in on the exact market they are looking for. For example, if you are a lawyer specializing in injury cases, you find that you are more successful advocating for clients with head injuries rather than slips and falls. In your strategy (SEO, blogs or social media), you should focus on head injuries. Hema calls this “laser focus.”

I offered an analogy on how to expand this to global markets. Domestic online marketing follows certain rules (legal and business culture). It’s like a game of chess – everyone knows the moves and strategy. When the effort crosses-borders, another level of laws and business culture kicks in. That’s 3D chess. That requires a lot of strategy and effort (time and money). Each layer drives up the effort, at times in an exponential way.

So, what should be the top priority for international online marketing? The answer is the same as for the domestic market – laser focus.

What does laser focus mean?

Identifying your customer in as much detail as possible:
- B2B – location, size of company, their products, their buying habits, etc.
- B2C – location, income, their buying habits, etc.
Understanding how to get in front of those customers: social media, advertising, PPC, marketing, websites,
Measuring the...Read More

Welcome to the executive master class in international business!

Mon, 19 Mar 2018 12:17:57 -0700

Welcome to the Executive Master Class in Global Business! I created this platform for executives with the goal of keeping their global business knowhow at the cutting edge. New technologies are driving the evolution of business at a faster and faster pace. Companies that are doing selling globally the way they did five or ten years ago are falling behind.

Consider the following:

Blockchain technology is not just for Bitcoin. With its distributed ledger approach, it is being applied to logistics operations, increasing the ability to track shipments and cut costs. And once the shipment is complete, it can make the payments virtually instantaneous. If a supplier asked you to incorporate blockchain into your operations, would you know what to do?
90% of all the data that has been created has been so in just the LAST TWO YEARS! We are being inundated as IOT takes off. Do you know the implications of privacy laws in other countries? Facebook is now on the hot seat because it has not kept the kinds of strict controls that required in the UK and the European Union. Is your company doing enough in this area?
Mobile commerce is becoming the norm, even for B2B transactions. Internet access in Europe is fast approaching 100% when smart phones are factored in. By 2020, China expects that virtually all transactions will be digital. India, according to a recent survey, has the greatest percentage of people (87%) in the world who say they internet access is essential in their daily life. The country already has 200 million social media users. Is your company ready to do cross-border M-commerce?

The Executive Master Class fills a void in providing training and education for executives. The topics we cover are not taught in B-school and there is no other service that provides customized global business know-how on your schedule.

Look at the tabs on our course offerings and let’s schedule the time for the...Read More

reducing risk on foreign exchange transactions

Wed, 14 Feb 2018 17:25:10 -0800

Exporters face risks with fixed or floating exchange rates. In fact, even if you denominate all trade in dollars, the exchange rate can still play a major role in determining demand for your product or service. So, the bottom line is that you can mitigate, not eliminate, exchange rate risk. Here are some strategies to consider:

You should do a sensitivity analysis for all of your major markets when you are doing your business forecasts. First, look at the range of the exchange rate fluctuations over the previous years, and then decide a reasonable plus or minus range around the current exchange rate. Recalculate your bottom line for each market using the high and low calculation. This will give you an indication of your company’s exposure to exchange rate changes in a given market. If there is a major impact on your bottom line, you may want to consider one of the following hedging strategies. For major currencies, the organized currency markets can provide a variety of responses.
You can purchase currency on the futures market to align with your expected collection date. With this you can be assured of the price, but at a cost.
You can also purchase an option to buy at a certain price if the exchange rate exceeds a certain level. This is similar to a “put” in the stock market and is less expensive than a forward contract. It does, however, expose you to market fluctuations until you reach the strike price.
For currencies that are not freely traded, you can request the payment in dollars (or at the local currency equivalent on the spot market on the day the contract closes). This may minimize your risk but it also shifts the risk to your buyer. This could cost you sales if your competitors do have a similar requirement. A dollar denominated sales strategy does lessen risk, but it also limits your opportunities to expand markets.
If there is a significant market risk, you may also want to keep the pipeline short to...Read More