Lessons in international business - negotiations

Observations on how to create trust, effective meetings and excellent negotiations with overseas customers, suppliers and partners.

• Whenever you are involved in international negotiations or global meetings keep in mind that you might be working with the same person for the next 10 - 20 years.

• Negotiations should be open and straightforward. Hidden agendas will eventually be discovered and make the next meeting very difficult.

• Negotiations should involve creating value for both parties.

• Meetings are important moments where trust is being built and confirmed. Be honest and clear about your desires.

• Never agree to something you cannot deliver or perform.

• Listen, understand and evaluate what your partner is requesting. What are they saying, and what does it mean.

• Be certain of what you are negotiating and agreeing to. If not 100% sure, stop and request clarification.

• Prepare for the meeting several weeks before it happens. Refresh and add information weekly. When you reach the meeting, you will be in control of the information and feel comfortable during the talks.

• At the end of the meeting, write down the most important points or agreements, with names and dates, and have it signed by those present. This little tip will save lots of time and trouble for everyone involved.

• Any agreement must have 100% follow-through. If for any reason problems arise in the follow-through, immediately contact and communicate the situation to your partner.

Related Links

How to negotiate with Mexican business people

Great international business trip results

Great International Business Trip Results

In any international relationship communication and understanding are critical for success.

Problems created by; language, stereotypes, misinformation, lack of information, and cultural misunderstandings combine with normal business problems to create a complicated scenario for anyone involved in international relationships and global business.

Prepare your international meetings and business presentations using the following questions as a guide to organize your ideas and focus on actions that will produce positive results for everyone involved.

6 Questions - Create Great International Business Trip Results

1. What does this organization know about me, my company and my country?
2. What do they think they know about me?
3. What can I tell them that they do not know?
4. What do I know about my international partner, culture and country?
5. What do I think I know about this business, culture and country?
6. What can they tell me that I do not know?

1. What does this organization know about me and my company. When you walk in the room an opinion has already been formed about you, your organization, and your ability to perform in the future. These ideas are based upon facts, information and past experience.

• What has been the history of our relationship in their country?
• Who has been involved in our mutual business, and why?
• What promises have been made and kept by both?
• What promises have been made and not delivered upon?
• What have the major problems and success been in the past?
• Press and media, our organizations promotional material.

2. What do they think they know about me. Clarifying the unknowns or presumed realities in a relationship is crucial to success. These ideas may be very damaging and limit your ability to trust one another. What stereotypical behaviour can you avoid or prevent? What can you clarify or refute through information or actions?

• Behaviour and reacts based upon past experience with your organization.
• Rumour and innuendo, press and media reports.
• Negotiation styles.
• Business objectives.
• Behaviour, goals and methods of doing business based upon country and cultural stereotypes.

3. What can I tell them that they do not know. Today’s business world requires trust, information and solutions. Reinforcing your need to work with your international partner, providing important information or solutions, and clarifying misunderstandings can only help the relationship.

• Clarify or destroy cultural stereotypes.
• Clarify business objectives and why they are important in order to reach these objectives.
• Provide solutions and alternatives to existing situations and challenges.
• Provide information of value for their business and strategy.
• Clearly identify current or potential business problems.
• Predict and have answers ready for their questions.

4. What do I know about my International partner, culture and country? What do I know is true and not innuendo or interpretation? The numbers, facts, information, agreements and past performance history of the business. Information about the country and the business culture.

5. What do I think I know about this business, culture and country? What preconceived ideas and stereotypes are you working with? What are you assuming and what has been proven?

6. What can they tell me that I do not know? What questions do you need to ask in order to verify information or create plans. What pieces of your information puzzle are missing? This is the time to get your questions answered, what are they?

Related Links

Cultural misunderstanding it can happen to you

Stereotypes and global business

Create great international business relationships

16 Essential questions - the international business traveller’s quiz

Lessons in international business

Changes - dialing long distance to a cellular phone in Mexico

New changes take effect for some cellular phone companies in Mexico on November 4, 2006.

The program is called “El Que Llama Paga Nacional”, which loosely translated means “Whoever Calls, Pays for the Call In Mexico”. Previously a long distance call to a cellular phone was shared between the caller and the receiver of the call.

New long distance dialing codes (after November 4, 2006) from “regular” landline phone to a cellular phone:

If calling from Mexico, long distance to a Mexican cell phone:
045-Area Code - Telephone number (the old code was 01-Area Code-Telephone number)

If calling from other countries to a Mexican cell phone: 52-1-Area Code- Telephone number (old code was 52-Area Code- Telephone number)

This 045 prefix applies to calls to cellular phones using Telmex, Telefonos del Noroeste, Telcel, Iusacell, Iusatel, Telefonica, Baja Celular, Telefonia Celular del Norte, Portatel del Sureste, Telecomunicaciones del Golfo and Unefon service. This represents 90% of the cellular phone users in Mexico.

The person on the cellular phone receiving the call will not be charged, however the person making the call from the landline phone will be charged approximately $ 3.00 Mexican pesos per minute (an increase of 300% from the current rate). The rates are still being negotiated between the companies and final results should be available from Cofetel in the next week.

The following companies have not signed the agreement: Axtel, Avantel, Alestra and Maxcom. Dialing to cellular phones using these suppliers will remain the same (01-Area Code- Telephone number) and the costs are shared between the person dialing and the person receiving the call.

Related Links

Cofetel

El Que Llama Paga Nacional (pdf)

How to call Mexico from the USA

Global competitiveness 2006 - Mexico and China

The Global Competitiveness Report 2006 - 2007 (Link), released by the World Economic Forum on September 26, 2006 has some statistics and rankings of interest if your organization is expanding into new international markets.

Based upon a mix of economic factors, information and the opinions of international business leaders, the report lists how competitive nations are in relation to one another, and compares this to last years ranking.

Mexico has clicked up a notch from 59 in 2005 to 58 in 2006.

• “Mexico’s ranking has remained broadly stable, moving up one place to 58. The country’s somewhat uneven performance over the various pillars of the GCI is shown by relatively high scores for health and primary education, goods’ market efficiency and selected components of technological readiness, e.g., FDI and technology transfer, no doubt reflecting the close links of the Mexican market to the US in the context of NAFTA. However, this is offset by the same institutional weaknesses as are prevalent in the rest of Latin America.”

China is the big surprise, dropping 6 points this year (48 in 2005, 54 in 2006).

• “On the positive side, China’s buoyant growth rates coupled with low inflation, one of the highest savings rates in the world and manageable levels of public debt have boosted China’s ranking on the macroeconomy pillar of the GCI to 6th place – an excellent result. However, a number of structural weaknesses need to be addressed, including in the largely state-controlled banking sector. Levels of financial intermediation are low and the state has had to intervene from time to time to mitigate the adverse effects of a large, non-performing loan portfolio. China has low penetration rates for the latest technologies (mobile telephones, Internet, personal computers), and secondary and tertiary school enrollment rates are still low by international standards. By far the most worrisome development is a marked drop in the quality of the institutional environment, as witnessed by the steep fall in rankings from 60 to 80 in 2006, with poor results across all 15 institutional indicators, and spanning both public and private institutions.”

Related Links

World Economic Forum

Institute for Strategy and Competitiveness

U.S. tops world competitiveness index 2006

Lessons in international business

The most difficult part of doing business overseas will occur when you have to explain your country’s politics and culture, and provide answers on why you do things the way you do.

Related Links

Cultural misunderstanding it can happen to you

Stereotypes and global business

International business traveller, ambassador, explorer, map-maker

20 ideas - how to avoid major problems with your export business

Exporting is an extremely difficult process as compared to selling in the local or national market.

Exporting is not easy, and it’s not inexpensive. It takes planning and requires people that are open, flexible, problem-solvers, and quick at adapting to new situations.

A smart organization that desires to export their products will invest time and money building the proper administrative and sales structure before they begin operations.

20 ideas - how to avoid major problems with your export business

1. Say no to customers. When you can’t do it, say no upfront, before you make an agreement.

2. Create an export strategy before you begin to export. Don’t get sucked into exporting by “accident”.

3. Samples should be equal in quality to the actual production that will be shipped.

4. Make everything perfectly clear with customers. Don’t assume anything, don’t work with suppositions.

5. Learn and understand the business culture of your export market and customers before you begin.

6. Provide detailed price lists and price quotations to the customer. Understand your Incoterms (if you don’t know what these are, stop know and click here)

7. Contemplate what problems might possibly arise (internal and external) that could affect shipment or delivery. Prepare alternatives or take preventive action.

8. Understand that there is a learning curve that affects the organizations ability and performance when exporting to new markets. Calculate the time this will require, and it’s cost.

9. Write down and sign all agreements with the customer (dates, specifications, changes, time, everything). Verify everything with an email or fax if unable to physically sign the agreements and changes.

10. Use caution about exclusivity agreements. Everyone wants exclusivity, will that exclusivity support your entire export production? Will it limit your ability to grow?

11. Develop a quality control system throughout the company.

12. Never send poor quality products, especially in order to meet a shipping deadline.

13. Research the transportation, temperature and climatic conditions that the product will be subject to prior to arrival at the export destination.

14. Create an export price strategy. Know where you are going, and how you want to get there, your costs and required profit margins before you begin to quote prices.

15. Clearly define the costs of production and separate them from the costs of the sales required for exports. Give the sales department a base price to build upon, and make sure they clearly identify the costs related to sales and promotion in the export markets.

16. Always have at least 2 customers in the export market. This will provide protection and stability for your production and for the customers in the export market.

17. Customers who provide the research, development and design for the product may bring samples to you. Assist in the development and manufacture of the samples. Your production know-how (turning ideas into product) is fundamental and important for all involved.

18. Research and investigate fashion, trends and tendencies. In order to survive, you have to create, not pirate and copy.

19. Quality complaints and suggestions must be addressed and implemented immediately. This has to be part of the understanding of every worker, from production to sales to executive suite.

20. Discipline, planning and order. Production planning, raw material purchasing decisions, financing, infrastructure investment, human resources, sales and marketing all must be planned and coordinated, at all times.

Added Oct. 1, 2006 - Bonus legal reminder: Know the law of the country to which you are exporting concerning: retention of documents for litigation, product quality and manufacturing and product safety before you begin sales and shipping. Understand your responsibility and liability for recalls, retrofitting, refunds or destruction of the product. Learn about your legal responsibility and relationship with brokers, agents and distributors and your products.

Related Links

7 tips for doing business internationally

Maquila and Maquiladoras in Mexico

Why you should pay attention to free trade treaties

Mexico and international free trade treaties

Maquiladoras in Mexico

An Internet search for the definition of the terms maquila and maquiladora will turn up quite a variety of ideas and interpretations.

The maquiladoras have created quite an emotional and political reaction on both sides of the US and Mexico border. They have been accused of stealing jobs from the US, promoting sub-standard working conditions, lowering wages, exploiting workers, and not contributing to the Mexican economy.

Despite the controversy, the maquiladoras are growing and thriving in Mexico. They offer attractive benefits to organizations that are seeking competitive production and assembly costs, skilled labor and Mexico’s proximity to the US market. Recently many transnational organizations that moved manufacturing operations to China in the 1990’s have moved back to Mexico due to cost and logistic advantages.

Maquila and Maquiladoras - definitions and activities

• The term maquila comes from the Spanish term that refers to the portion paid (in grain, flour or oil) to a miller for milling a farmer’s grain.

• Maquiladoras are legal entities under Mexican law, with special tax privileges, they provide service, assembly or manufacturing operations.

• Maquiladoras are able to import raw materials or semi-processed materials from foreign countries, in order to service, process or assemble them in Mexico, and then export the finished product back to that country. These activities take place without the collection or payment of import, export or V.A.T. (value added tax) taxes.

• The maquiladora program was created by Mexico in order for foreign organizations to take advantage of low labor costs in Mexico (primarily the USA), and to provide employment to Mexican workers in Mexico. Initially the maquila operations were located close to the US border. Currently maquila operations can be found throughout Mexico.

• Maquiladoras can be 100% foreign owned, 100% Mexican owned, or a joint venture between Mexican nationals and foreign investors.

• Maquiladoras are also known as twin plants, in-bond industries, export assembly plants and offshoring.

• The maquiladoras in Mexico suffered from a crisis of plant closings in the 1990’s and early 2000’s as many companies moved operations to China. Since 2004, Mexico has seen a resurgence of the maquiladoras.

• Check with your attorneys and accountants in Mexico about the specific benefits of the maquila program. As of September 2006, there were important legal changes (simplification and consolidation of government compliance and monitoring programs) that will affect current and future maquiladoras.

Related Links

Why you should pay attention to free trade treaties

Industrial and business parks in Mexico

Official government websites of the 32 Mexican states

Maquila and Maquiladoras in Mexico