Going Abroad 2014. Waldemar A. Pfoertsch
6 Preparation for the first meeting
People make a decision within about 30 seconds when meeting someone new. This first impression is made only once but is remembered for a long time. For this reason it is important to be particularly prepared for the first meeting.
Prepare as much as you can before the meeting and go in with self-confidence. In addition to generally educating yourself about the country and culture, have a very good knowledge of the business partner you are visiting. Browsing through the company website, speaking with colleagues and others who have similar experiences, are all good ways to educate yourself. Try to identify key values of the partner and note where you share values. Find out exactly who you will be meeting and what position he/she holds. You should also know about the needs of your business partners and what they are hoping to accomplish. Be prepared for possible questions and be able to discuss examples of previous similar solutions to certain problems. Having a prepared list of questions you wish to be answered will also make the meeting more effective.
Business cards are a good way to remember and be remembered. In fact, these cards are an essential part of business in many cultures, and not having one to present will make the meeting very awkward.
Tips on actual behavior in the meeting in regards to non-verbal language, dress code, cultural customs, etc. will be covered in detail in a later chapter.
7 Setting up a branch abroad
7.1 Representatives
Before you actively do business abroad, it would be wise to find a representative who is a native of the country. In some countries, it may even be required by law to have a representative. The representative will act as a cultural go-between, not only useful for translation but for helping to smooth the way through the maze of local rules and regulations, formal and non-formal. Representatives help you with introductions, market strategies, advertising and marketing activities, and other issues such as financing, permits, or import regulations.
Since the representative will often be working without supervision, he/she must be trustworthy. This may be a difficult position to fill, as qualified and trustworthy persons in any field are difficult to find. Checking local references is important but references from expats would be the most reliable. When writing the contract, make sure that both sides know where the responsibilities lie. When it comes down to finalizing contracts, it will help you to additionally hire a local accountant or a lawyer.
7.2 Establishing an office
After you have signed contracts and are ready to start working with your customers, it will be necessary to establish an office in that country. This will be work to be done with your representative or another specialized agent, if necessary, for your negotiations concerning space, offices, staffing, training, etc.
No matter where you go, it will not be easy to find good office space and business service. If you set up an office in industrialized countries, the infrastructure will be there to set up technical equipment, but this will be much more difficult in developing or under developed countries. If you do not want to wait years to get a phone installed, a possible shortcut would be to find offices that have just been left by another firm and take over all furniture and equipment.
In addition to equipment, business services like a secretary will be next in line. Initially, it might be sufficient to stay in a hotel offering these services, and temporary services provided by embassies and chambers of commerce will have to suffice before more permanent staff can be hired. In many countries, the labor market will be limited due to different systems of education, a lack of mobility, and a lack of educated and trained personnel. Be aware that it will be difficult and time-consuming to hire staff.
8 Finances
Money is involved as soon as you start getting in touch with a business counterpart abroad. When you sign contracts and start hiring, money starts to flow. At that point, it would be too late to start thinking about the financial risk, this should already have been calculated and provisions made for the risk that is involved in starting a foreign business. Advance knowledge of the financial situation of counterparts is absolutely necessary and this homework should have been done long before setting foot on foreign soil. To receive this kind of information, you can consult your international bank that can give you advice for unusual circumstances in difficult markets. Check the credit of your potential customers. In the United Stated, for instance, you can ask at a department of commerce for an International Company Profile (ICP), which provides information for credit checks. For a fee, you can request an ICP for foreign companies in many countries. It contains financial information on the company as well as facts concerning its size, capitalization, years in business, etc. Other sources of information are banks that provide credit reports or other companies, which have financial information on foreign firms.
8.1 Attitudes toward foreigners and money
Besides getting financial information about a company, you should keep in mind some general attitudes that many countries have concerning money of foreign companies. Foreign companies are not protected in another country. When problems arise, trust, good relationships, and commitment can disappear very quickly. The company may serve as a scapegoat, a target for the frustrations of poverty and political problems. If a foreign company should become very successful, this may also be reason for discontent and new demands for a bigger share of the success may be presented. The rules of contracts and agreements taken for granted in western countries do not necessary apply in other cultures.
8.2 Financing options to think about
Payments can be made in the buyer’s, seller’s or a third agreed-upon currency, which usually is the U.S. dollar, a widely accepted international trade currency. The uncertainty of future exchange rates always brings a risk for the foreign business. An exporter, for example, can either lose or win money when the currencies change between the time the deal is concluded and payment is received. In case a client asks to make payment in a foreign currency, you should consult an international bank about foreign exchange risks.
While importers usually prefer to delay payment until they have received the goods, getting paid as quickly as possible is desirable. However, it is often necessary to offer attractive payment terms to be able to compete in your (export) market.
The following factors are important to consider when choosing one of the many financing options:
Favorable payment terms can make you and your product more competitive. If someone offers a similar product with better terms, you can lose sales.
The cost of different payment methods (interest rates, fees etc.) varies.
The riskier a transaction, the harder and more costly it will be to finance. Political and economic stability also play a role.
In case of large orders, more working capital is often needed in advance.
To find the right option, you can consult your bank or some kind of business administration office. Abroad, you can approach a commercial bank with an international department and try to start a close work relationship with them. They can help you with banking services and advice for your terms of payment.
Some basic methods of payment include cash in advance, a documentary letter of credit, an open account, and other mechanisms like consignment sales. It would be ideal for you to receive cash in advance of the shipment. Commonly used are wire transfers and payment by check. You can also accept credit cards, especially when products are sold directly to the end user. But do not insist in advance payment if you do not want to lose customers, as it might create cash flow problems for them. An open account should only be offered when the customer is well established and has a long payment record.
References
1 Chandler, Frances G (1995): Fundamentals of Business Communication; McGraw – Hill, New York , NY
2 Chaney,