Countless executives complain that Chinese factories deliver the wrong products, defective materials, items not made to specifications and shipments delivered late.
There are horror stories of knockoffs and counterfeit pieces. “We hired a firm to make our nail clippers, and now the factory is selling nail clippers directly to our clients!”

Here are 11 strategies to employ to prevent this from happening to you.

• Ask yourself: Why did you think this would be easy?
This may sound psychological, but is a fair question to ask. If making lounge chairs is difficult in Cincinnati, why would someone think it’s easy, say, in Malaysia? The language, culture, currencies and laws are different. It’s also thousands of miles away. Managing factory workers is tough in any country and much more difficult in unknown countries.

• Protect your home base.
If you’re worried about your Malaysian factory selling your designed chairs to your U.S. retailers, then you’ve picked outsourcing as a solution without first solving some key branding, positioning and customer-service needs. Market power at home is your best protection against a less-expensive product.

• Live there for a while.
If you ‘re really considering making your lounge chairs in Malaysia, you should invest the time and live in country for a while. Get to know the rhythm, communication styles and your factory.

• Don’t use a one-country approach.
Tying political and currency risk to one supplier is a bad idea. There would be less hoopla about China’s currency valuation if firms had a better production mix with several other countries. The tsunami in Japan demonstrated that there was only one supplier for some of the parts used in the automobile industry. Hence, car companies couldn’t complete their orders.

• Train your production management.
If your production management knows how to make lounge chairs in the United States, train them properly about how to manage Malaysian (or wherever you’re doing business) factories, workers and processes. Be prepared to send a good production manager overseas for at least a year. This is a good way to validate manufacturing abroad. Are you spending enough to justify the costs of an expatriate worker?
• Don’t rush into a deal.
Many U.S. firms meet a factory or a representative and quickly turn their production over to them. Beyond checking references, doing background checks and finding out all you can about the manufacturer, allow for plenty of relationship-building time. Malaysians (as well as many other cultures) will know you are versed in how they do business if you speak in the long term.

• Get the right introductions.
Being introduced to the same outsourced partners you already know is a classic Asian way of doing business. Introductions are valuable because the Malaysians now know someone else is in the mix — watching, monitoring and, if necessary, keeping everyone honest. The higher the introducer’s status, the fewer problems you’ll encounter.

• Use legal enforcement on your brokers.
There’s very little you can do in Malaysia if a Malaysian factory decides to rip you off. Seeing your product knocked off or finding factory overruns selling in Malaysia is a part of doing business overseas. However, if these products head for the U.S. market, legal protection can help. Reps or middlemen can place funds into U.S. banks as guarantees, payments can be delayed, and trademark and copyright protection is available.
• Use a pilot project to test the relationship.
The Chinese say “a small boat turns back faster.” A few pilot projects work the bugs out of your processes and communications. And in doing so, if you learn that the Malaysian factory is incapable of producing, say, $10,000 worth of your product, then why would you give them more production?

• Keep some aspect of production to yourself.
An overseas firm could manufacture most of the lounge chair in one place — but you should have part of the process done elsewhere. Perhaps it’s the back of the chair, a coating on it, or branding, art and logos. Can the legs be made in one place, the back in another and the cushions in a third?

• Make it someone else’s problem.
These strategies are about controlling the manufacturing and, thus, spending a great deal of time and money.
Is it possible to hire a U.S. firm, give it your specifications and have it deal with these headaches? Can an importer pull up with a truckload of lounge chairs and be paid only after you’ve opened the box and inspected the contents?

Your cost per chair increases, but the real cost is in not understanding your production. If that doesn’t matter in your case, why bother?

A firm needs to commit to it or forget it when it comes to offshoring manufacturing. And be sure to analyze the costs of each.

Technorati Tags: Global strategy, foreign cultures market research, international research, planning, international business, off shoring, outsourcing, making products, Global business, marketing, business planning, marketing abroad strategic consulting

It’s unusual to write a global business column, which is published for a largely American audience, about how to sell into the United States. However, many businesses are advising foreign firms about what’s needed to successfully sell into the United States and how decisions are made here.
Also, showing the idiosyncrasies of the U.S. market makes U.S. firms more aware about how to sell abroad.

Some U.S. business characteristics:
• Time is money — The idea of spending time, wasting time, borrowing time, buying and selling time is uniquely American. Foreign firms often get frustrated when they experience U.S. firms in a great rush and when inadequate (by their standards) time is budgeted for appointments.

• Information is a corporate asset — A Japanese business executive may get very confused when told to enter his personal customer information into a CRM program controlled by some chief technical officer he’s never met. Asians may not want to share all of their sales proposals and cost figures on a blog or a Google document.

U.S. firms feel that information belongs to the company. U.S. firms selling abroad often try to write “audit” privileges into (e.g.) a European distributor contract.

• Business is business — In most countries, “business is personal.” The “let’s get down to business” attitude of many U.S. firms can put off Asians and Europeans.

Americans spend little time on rela­tion­ship building, even though an Amer­ican executive may feel she’s asked the requisite questions, such as, “Are you married, do you have any children, where do you live?”

• American marketing savvy — The United States sees itself as the world’s greatest marketer. No country has the global brands of the United States. Starbucks, Coca Cola, McDonalds, YouTube, iTunes and Facebook are all American phenomena. We may not brag about the highest-quality products, but we do brag about how well we market them. Foreign firms that aren’t sensitive to this will be seen as inferior.

• Cross-marketing pioneers — The United States also enjoys the idea that marketing runs through several disciplines. For example, Disney characters have appeared in movies, television shows, blogs, proprietary websites, online games, YouTube videos and McDonald’s meal packages. You can buy Disney toys, Disney T-shirts, Disney games, enter Disney contests, read Disney newsletters, listen to Disney radio or see a full-length Disney movie. You can even vacation at Disneyland.

• Technologically superior — The United States believes it’s ahead of most countries technologically — which isn’t necessarily true. Foreign firms that don’t have basic necessities such as cellphones, websites, mobile email and social-media platforms will be seen as in the Dark Ages. Orders must be able to be processed electronically, and client data should be able to be reviewed and disseminated electronically.

• A reason for a discount — In negotiations, prices and terms often are amended as a way to close a business deal.
When a U.S.-based firm is offered a price that then is lowered, there’s often a need to rationalize that decision. “If you order now, you can get a discount” or “my firm really wants to get your business, and we are willing to work at a discount for this first order.”
Without rationale, U.S. negotiators often see discounts as evidence of a dishonest first price.

• Assumption that visitors aren’t guests — When foreign business people and students visit the United States, they’re often shocked to feel a void in hospitality. It’s quite often that an Indian business person may come here, only to find out full agendas haven’t been arranged for them; they’re abandoned for dinner and never invited into an American home.
A Dutch couple once told me that they have been in the United States for seven years and never had dinner at an American’s house.

• Litigious mindset — A Canadian/U.S. joint venture in Colorado received a legal bill for $250,000. The Americans said, “That’s cheap.” The Canadians said, “Wow, that’s expensive.”
The U.S. legal system is a cost of doing business here, and it often surprises foreign guests how quickly we’ll consult with an attorney and how involved attorneys can be in all levels of production, HR, negotiation, sales and technology.

• The hardest market in the world to do business — This is always the biggest surprise. The U.S. market needs a great deal of money and methodology. To compete in the United States, companies must have adept managers; undertake excellent sales efforts; have the strong, fresh marketing support; and offer superior delivery with money-back guarantees.
Contrast this to the Asian and European way of being connected and therefore being able to “get into the market.”

These tips can help a U.S. firm advise its overseas business partners, and hopefully see some of the limitations and constraints in our own culture.

Turmoil may open business opportunities overseas

We’re all watching historic developments in Middle East North Africa (MENA) countries.
Citizens have been protesting in the streets in defiance of their governments; Egypt’s Hosni Mubarak was forced out of office. Other changes may be coming. All of it is on camera, computer screens and cell phones. The whole world is watching.

So it’s wise to ask what all this means regarding business challenges and opportunities in that part of the world. Does it mean new markets for our products? As Baron Rothschild (of the famous Rothschild family) said in the 18th century, “The time is to buy when there is blood in the streets.” While this may be timeless wisdom, and many companies will invest in the MENA region now, most of us will be hesitant for the following reasons:
• We don’t know if the laws will change — This is primarily because we aren’t sure who will be in charge. There’s a possibility that foreign-owned properties could be nationalized, or that current insurers of property and assets in any given country could suspend or eliminate coverage. We still haven’t seen the peaceful transitions we’re hoping for, so investments could be very risky.
• We don’t know if the business community will change — Since there’s a connection between business and government in most MENA countries, top business people who Westerners currently deal with could be replaced. Industrialists who are well-connected with current officials could go out of business.
• We aren’t really sure what will happen to the economies — The optimists feel that in many cases, growth is inevitable. However, there could be a pulling back of business transactions, and potentially a nationalism or xenophobia in certain markets. This is in addition to the looming possibilities of military skirmishes or all-out wars, both civil and against other countries.
Are there business opportunities Western firms can start to embrace, despite the uncertainty? These ideas come to mind:
• The region is notoriously low in its ability to export — According to the CIA World Factbook, there are only two MENA countries among the top 30 exporters (Saudi Arabia and United Arab Emirates). Most of those exports are petroleum products. Many of these countries lack a diversified economy. Firms that offer services to facilitate direct exports (consulting, shipping, export finance, importing and distributing) could position themselves well once the MENA region calms down.
• The region has embraced technology — We hear of social-networking sites such as Facebook and Twitter making much of the uprising possible. Whether or not you accept that, it’s clear that the new social-networking media has had a significant role, and the popularity of these sites (and the Internet as a whole) presents opportunities.
Beyond the obvious new apps that can developed, there are opportunities for digital storage, offsite data centers, cloud computing, higher-speed connectivity, content development and management, and new social-networking and funding websites.
• The basics in lifestyle — Citizens of MENA countries are going to demand clean air and potable water. Imagine the new markets available to firms that can provide low-cost electricity, inexpensive medicine or fresh produce.
Companies that can start to tackle the needs of hundreds of millions of people will benefit greatly. They should build their business plans and prove their technology now, so that when it’s time to make the business connections, they’ll be ready to sell their products and services.
• Market-entry assistance for foreign firms — We’re about to see a deluge of consultants, trading companies, distributors, market-entry specialists and importers on the scene, willing to help foreign companies get a foothold into one or more of these markets.
Banks may start to realize financing opportunities never before available. And Western funds that were restricted from investing in firms in the region may get more courageous.
• Arab brands — Hopefully, we’ll soon start to see new brands from the MENA region that previously were unavailable to us. If new governments give the economies a green light, entrepreneurs and companies in the MENA area may be able to sell their own wares to a greater degree. Firms that help manufacture, ship, market and distribute those new brands may find business opportunities they never dreamed of.

While this list isn’t all-encompassing, it does mention some potential prospects for new business. We know this won’t happen quickly; that change takes time. However, the MENA region has many relationship-based cultures where one has to really know their business partners.
New market entrants will need time to wait for stability and to get to know their business counterparts.

So the only question left is: Who do we deal with?

If we’re going to do international commerce, a bank or banks will be involved. Choosing the right bank and managing it correctly can make the difference between getting paid or not.
For example, a Denver solar film producer is selling product to an importer in India. The Colorado firm needs to involve a bank to facilitate payments on the transaction.

What are the common mistakes this solar film producer could face?

(1) Using non-international bankers to handle international deals.
International payments and collections is its own specialty and has its own language. There’s a plethora of details and paperwork involved in international transactions, and your banker may have no experience in international arenas. You don’t want them to learn on your deal.

(2) Assuming a “bank is a bank.”
Banks become true partners in foreign sales. Beyond the financial transactions, banks may be able to help you in a more consultative way. A good bank should be with you early on and educate you constantly.

(3) Poor use of bank resources.
Banks are pillars in a community. Your banker should know people who can add expertise to your deal. A good international banker in Denver should be able to connect you to people who have done deals in India, understand the culture and advise you about customers.

(4) Not understanding a capability issue.
Banks can help finance work in process, as well as inventory. If the Indian firm was ordering $10 million worth of product, the bank potentially could finance the solar film manufacturing.
In other words, a large contract doesn’t have to fully overwhelm our solar firm’s resources. This work-in-process financing is in addition to funding existing inventory to be shipped to India.

(5) Not knowing if they need a bank with a relationship, or a bank with a branch.
So many bankers talk about “relationships” they have overseas with other banks. But does our solar film company need a bank with an office and dedicated people in India?
That question can be answered only if we know the size and urgency of the transaction, what additional services are required and how complex the transaction is. Does the film company get paid when the solar panels are placed on a truck in Denver? Do they get paid when the goods are delivered to New Delhi? Are they paid only on successful installation?
The simpler the transaction, the less representation you need.

(6) Not understanding the details of the contracts in place.
According to Catherine Cronin, export finance officer at Premier Bank in Denver, “You need to know who is responsible for each part of the contract, and you need to know what in the contract triggers payment.”
She also agrees with the benefit of using a bank’s consulting services, and working with a lender with the ability to round up people who are experienced in transactions such as these, to help you correctly structure your transaction.

(7) Assuming the bank takes any risk.
They may risk an unhappy client, they may risk a delay in time or unnecessary labor in finishing up your deal — but if your buyer doesn’t pay you, it isn’t implied that the bank will cut you a check for $10 million.

Moving too quickly.
In many countries, there are requirements to register transactions, obtain import credits and have many rounds of government involvement, including security, customs and licensing. If these types of requirements aren’t checked out in advance, it can delay your transaction — even if the buyer and the seller both want the deal done.

9) Not being honest with the bank.
If our solar film company is really shipping solar film, tell the banker this. But if a shipment includes anything other than solar film — software, chemicals of any kind, chicken parts, grapefruit juice, video recordings, for example — that should be disclosed as well. Paperwork and affidavits will be signed. And there’s a strong possibility the box will be opened and checked, either in the U.S. or India.

10) Not checking the reputation of the bank.
With today’s access to technology, it’s easy to find business information. Default rates, lawsuits, pending litigation, shady deals, known acquaintances, stock-manipulation accusations and more all can be found with a few clicks of a mouse.

It would be bad business judgment for our solar company to pick a bank with a soiled reputation, even if the transaction ultimately gets completed.
The theme remains the same: Do your homework. Check out your business bank, and make sure you get to know it. Then you can spend less time worrying about your transaction and more time keeping your client happy.

Top 10 accounting mistakes firms make overseas

Date: Thursday, October 21, 2010, 11:02am MDT

Many firms head into overseas markets with great products, excellent business processes and a defendable strategy — only to learn that accounting misunderstandings and tax consequences can destroy that opportunity. They can avoid making the top 10 accounting mistakes easily with some planning and expertise. Here they are:
• Going overseas for the wrong tax reason — Why pay millions of dollars in taxes when there are countries that don’t require taxes? Many firms feel that offshore operations can be a tax-free haven. Firms might assume they would save money on taxes overseas, only to realize there are many other costs they didn’t think of.
One problem that arises is that the IRS learns about overseas revenues and taxes the company anyway. Also, when money is repatriated to the United States, it’s subject to taxes.
• Going overseas first and worrying about taxes later — Gaining tax and accounting advice should be proactive. Entering a new market should require new assumptions, as there are new rules to worry about, such as licensing and reporting requirements. Those costs need to be added to any market-entry plan.
• Planning only for income taxes — Many countries require goods-and-service taxes, value-added taxes, withholding taxes and social taxes (especially true if there are employees). Foreign-exchange risk often is ignored. Learn about the cost of doing business overseas from experts in human resources, finance, legal and marketing.
• Not understanding and planning for tax treaties — Tax treaties are sets of agreements between countries to determine the rules they’ll use to avoid double taxation of companies. If a U.S.-based firm has an operation in London, for example, than there’s a tax treaty in place to mandate which government gets what taxes, and how and when those taxes are paid.
• Using the wrong international accounting and tax experts — Ken Berkeley, a partner in the international tax services division of EKS&H in Denver, advises that firms spend some time “evaluating international tax professionals, as the field is highly complex and very specialized.” He says it’s important for tax professionals from the United States and abroad to work together and get to know one another, instead of just sending paperwork to each other.
• A poor transfer-pricing strategy and lack of transfer-pricing documentation — The price a U.S. firm might pay for a product manufactured overseas needs to be market-based. Yet firms that make their own products overseas and sell them in the United States can manipulate the prices they pay for those products to show more or less profit in whichever country they choose. (A firm can “raise” its cost of materials from China to show higher costs and thus less profit in the United States.)
“The No. 1 IRS audit concern is the use of transfer pricing to influence revenue and profits,” Berkeley says.
• Assuming our law is THE law — Not every country uses Generally Accepted Accounting Principles. GAAP is defined as “a widely accepted set of rules, conventions, standards and procedures for reporting financial information, as established by the Financial Accounting Standards Board.” Notice that the word “widely” is used, not “universally.” There are countries where debt isn’t listed on a balance sheet. There are countries that allow different types of deductions — even for bribing.
• Improper due diligence — When investing in an overseas operation, ask what they’re doing that’s so different from GAAP? An example might be the expense category “meals and entertainment.” In the United States, firms can deduct 50 percent of those expenses. In other countries, those expenses are 100 percent deductible. This can greatly skew the tax picture and thus the financial accuracy of a company.
• Parking money —The U.S. corporate tax rate of 35 percent is much higher than the 28 percent rate in The Netherlands. A U.S. firm with an office in Amsterdam may choose to keep its money in The Netherlands, and take advantage of the lower rate. However, the Dutch will have their own requirements for legitimate business activity with economic substance. Maintaining and demonstrating what that business activity is may cost more than the money saved.
• Thinking they do it our way — Firms with people overseas that perform accounting functions often are surprised to learn that there’s incompatible software, incompatible work schedules, an enormous need for training and difficult communications.
When my firm set up an operation in Russia, we supplied new software and expected the Russians to learn how to use it. When we visited our offices months later, we found the box of software hadn’t been opened, as the Russians were waiting to be taught how to use the product.

This last assumption applies to all areas of international business. Assuming they do it our way isn’t wrong just overseas, but in the United States as well.

Think of it in our terms: A young man disagrees with his father. He can’t seem to get his point across, or out of respect (or fear), won’t express a view contrary to his father’s.
What is he to do?

In many situations, he can consult with his uncle and ask him for advice, or to act as an intermediary. His uncle has more expertise and maturity, and a different kind of relationship with the father. Therefore, he may be more effective.

As a child in this country, I often was introduced to my parents’ friends who held the honorary title of uncle. “Uncle Morty” wasn’t my father’s brother, but the title conveyed respect to him.

This dynamic is true in many Asian countries. The terms “uncle” and “aunt” or “auntie” to describe an older person deserving of respect are used throughout Chinese-speaking countries, India, The Philippines, Malaysia, Indonesia and much of the Middle East. It’s a compliment.

What types of things can you discuss with your “uncle”? Basically, the relationship has no limits. And the more willing the parties are to be close, the more subjects that are covered.

In international business negotiations, an uncle can be a great benefit. Having received the compliment (as well as having given it many times), I have lived through the advantages of having one and the handicap of being without one.

My international “uncles” help with everything from business introductions, to avoiding cultural pitfalls, to arranging logistics within their countries during my visits.

The greatest task that the uncle seems to perform is as a trusted go-between, so that both parties can communicate and offer ideas.

Why not speak directly at all times with Asian counterparts? Because often, an idea can be rejected. Because the concept of losing face is so dear to many Asians, it helps to use third parties as a way of being indirect.

The message receiver retains face; if the idea is ignored, dismissed or augmented, it happens by way of this trusted advisor.

For the message sender, there is no loss of face either. They don’t have to experience a potentially difficult rejection of their thoughts. When the audience for the idea is unhappy, the idea’s creator or champion isn’t there to see it. When the idea is a poor one, it easily can be rejected by the other party without embarrassment — if there’s an uncle.

Negotiations can be tricky in Asia and many parts of Central and Eastern Europe. There are usually many hidden agendas and a lot of role playing in meetings. Add to this that Asians often enjoy the negotiating process. They enjoy hammering out the details and like to feel powerful.

One way power can be achieved is by setting (and delaying) the timetable of dialogues. Westerners often complain that their negotiations went on far longer than necessary. They complain of exhaustion, lack of ethics and big social commitments during the negotiating process.

Your uncle can relieve some of this burden. And as a third party, the uncle can take a step back and not take anything personally when negotiations heat up. Your uncle often can explain the ethics to you and relieve some of your social pressures.

Other ways your uncle can help you:
• The mere mention of an uncle will ingratiate you to your Asian counterparts. When you say “on the advice of my uncle,” you are showing Asians you know more about their culture than the average visitor.
• Uncles can help follow up business meetings with a local presence.
• Uncles can haggle with hotels, shopkeepers and taxi drivers for you.
• Uncles can train you in cross cultural understanding.
• Uncles can prepare you for your meetings.
• Uncles have friends. Thus you can get an uncle network.
• Uncles can act as occasional interpreters.
• Uncles can collect debts you’re owed.
• Uncles can tell you when you’re wrong.

This last point is crucial. Many executives trudge forward in their businesses and never hear honesty. Highly successful Western businesspeople usually make a lot of money. Thus, how can they be wrong when they earn so much?

In the words of one of my clients, “I made $16 million last year. How much did you make?”

Asians are too indirect and sensitive about losing face. Central Europeans seem to have an overall skepticism that permeates all discussions. Thus the untrained Westerner may never know what the reality is, as he is never told directly — and an executive’s employees may be too scared to tell him that he’s messing up the negotiations.

Seniority and hierarchy are respected in Asia. Your uncle should be older than you, and thus possess more life experiences.

And beyond the age, know-how and wisdom, make sure your uncle is able to be brutally honest with you.

Think of it in our terms: A young man disagrees with his father. He can’t seem to get his point across, or out of respect (or fear), won’t express a view contrary to his father’s.

What is he to do?

In many situations, he can consult with his uncle and ask him for advice, or to act as an intermediary. His uncle has more expertise and maturity, and a different kind of relationship with the father. Therefore, he may be more effective.

As a child in this country, I often was introduced to my parents’ friends who held the honorary title of uncle. “Uncle Morty” wasn’t my father’s brother, but the title conveyed respect to him.
This dynamic is true in many Asian countries. The terms “uncle” and “aunt” or “auntie” to describe an older person deserving of respect are used throughout Chinese-speaking countries, India, The Philippines, Malaysia, Indonesia and much of the Middle East. It’s a compliment.

What types of things can you discuss with your “uncle”? Basically, the relationship has no limits. And the more willing the parties are to be close, the more subjects that are covered.

In international business negotiations, an uncle can be a great benefit. Having received the compliment (as well as having given it many times), I have lived through the advantages of having one and the handicap of being without one.

My international “uncles” help with everything from business introductions, to avoiding cultural pitfalls, to arranging logistics within their countries during my visits.
The greatest task that the uncle seems to perform is as a trusted go-between, so that both parties can communicate and offer ideas.

Why not speak directly at all times with Asian counterparts? Because often, an idea can be rejected. Because the concept of losing face is so dear to many Asians, it helps to use third parties as a way of being indirect.

The message receiver retains face; if the idea is ignored, dismissed or augmented, it happens by way of this trusted adviser.

For the message sender, there is no loss of face either. They don’t have to experience a potentially difficult rejection of their thoughts. When the audience for the idea is unhappy, the idea’s creator or champion isn’t there to see it. When the idea is a poor one, it easily can be rejected by the other party without embarrassment — if there’s an uncle.

Negotiations can be tricky in Asia and many parts of Central and Eastern Europe. There are usually many hidden agendas and a lot of role playing in meetings. Add to this that Asians often enjoy the negotiating process. They enjoy hammering out the details and like to feel powerful.
One way power can be achieved is by setting (and delaying) the timetable of dialogues. Westerners often complain that their negotiations went on far longer than necessary. They complain of exhaustion, lack of ethics and big social commitments during the negotiating process.

Your uncle can relieve some of this burden. And as a third party, the uncle can take a step back and not take anything personally when negotiations heat up. Your uncle often can explain the ethics to you and relieve some of your social pressures.

Other ways your uncle can help you:
• The mere mention of an uncle will ingratiate you to your Asian counterparts. When you say “on the advice of my uncle,” you are showing Asians you know more about their culture than the average visitor.
• Uncles can help follow up business meetings with a local presence.
• Uncles can haggle with hotels, shopkeepers and taxi drivers for you.
• Uncles can train you in cross cultural understanding.
Uncles can prepare you for your meetings.
• Uncles have friends. Thus you can get an uncle network.
• Uncles can act as occasional interpreters.
• Uncles can collect debts you’re owed.
• Uncles can tell you when you’re wrong.

This last point is crucial. Many executives trudge forward in their businesses and never hear honesty. Highly successful Western businesspeople usually make a lot of money. Thus, how can they be wrong when they earn so much?

In the words of one of my clients, “I made $16 million last year. How much did you make?”
Asians are too indirect and sensitive about losing face. Central Europeans seem to have an overall skepticism that permeates all discussions. Thus the untrained Westerner may never know what the reality is, as he is never told directly — and an executive’s employees may be too scared to tell him that he’s messing up the negotiations.

Seniority and hierarchy are respected in Asia. Your uncle should be older than you, and thus possess more life experiences.

And beyond the age, know-how and wisdom, make sure your uncle is able to be brutally honest with you.

I can’t count the times individuals and companies have approached me with import-export deals that are almost impossible to fulfill. People often have “great products” that they want to sell in China or a new emerging market, and ask for introductions to buyers. They want to pay entirely on a success fee and feel that with a simple introduction, everyone can make a lot of money.

If one is in the commodities business (oil, wheat, gluten or bandwidth), the products all are bought and sold the same way. The buyer doesn’t care where the product comes from. But for most other industries, we need to use better tools to analyze the opportunity. In our example, let’s use selling a sports beverage to China.

Here are the top 10 most common mistakes firms and entrepreneurs should avoid:
• The “everybody gets a commission” business model — In other words, no one is getting paid until the deal is fully transacted. We should call it the “ everybody only gets a commission” model.
The problems often are in defining when the transaction has been fulfilled. Is this when the products are shipped, or when they’re paid for? If no one is getting paid until the deal has concluded, the sellers will be in a huge rush … but the buyers may not be.
• No feeling for the time horizon — This is related to the previous point. Most firms underestimate how long it will take to enter a foreign market, even on a straight commission basis.
How long will it really take to get our sports drink shipped, licensed and accepted in China? Will it take weeks, months or years?
• There are too many people in the transaction — This can mean no one knows both the seller and the buyer. A broker network can raise the price artificially, not represent the product correctly and just complicate matters. Our sports drink firm is better off with a maximum of two intermediaries (though only one would be even better).
• No relationship with the manufacturer — This speaks to the “too many people” argument. The manufacturer must buy into the process, and be ready to invest time, product modifications, samples and marketing support. If our sports drink firm tells us it doesn’t want to do anything but sell us product, it’s time to look for an alternative supplier.
• Underestimation of the paperwork involved — In any exporting transaction, there are reams of paperwork to complete. People who do this regularly get paid regardless of the success of the transaction. There are shipping bills, government clearances (on both sides), international payment mechanisms, insurance documents, etc.
• No investment in the market or relationship — Even if our sports drink bottler won’t invest, someone else will have to. Someone will have to fly to China regularly, get to know the corporate buyers and the consumers, and understand what unique challenges China will pose to the firm.
• A complete lack of international payments knowledge — Too many deals have been completed and yet not remunerated. The wrong international payments documents can keep everyone from being compensated. Even typos can stop payments. Do you want to extend credit terms? Do you want to do this transaction entirely through a letter of credit from a bank? There are experts who specialize in this field, and they are worth their price.
• No understanding of the culture — This is often the biggest stumbling block. Without a clear understanding of who your clients are, and how they make buying decisions, the deal is doomed. If your intermediaries really understand this, they should be able to communicate the nuances to you. How would Chinese distributors and consumers decide to buy our sports drink? Why will they buy from us? Do Chinese prefer to pay in advance or require other terms?
• No supporting documents — This is beyond the transaction documents mentioned earlier. Is local testing required? Do the Chinese consider your sports drink to fall into the health care area, as they already have done for similar drinks? Do we need to approve our labeling and our claims about the product? Do we have all of our marketing communications materials localized (website, flyers, signage and email campaigns, to name a few)? Are we attempting to do this deal entirely in English? Is it fair to say the Chinese buyer may require different proof than the American buyer?
• No ongoing support in the market — Whoever is responsible for stimulating demand will own the client. Who will be in charge of that? Are we relinquishing everything to our Chinese contacts? How will the customer be supported? Are we helping establish or train call centers, sales staff and retailers?
While this all may seem unique to international trade, it really isn’t. If our sports drink bottler wanted to sell product in the United States, it would face all of these variables as well.

Bill Decker, managing director of Partners International, which consults with firms on global business and creates partnerships in foreign countries, can be reached at Bill@partnersinternational.com.

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