Category Archives: Global Trade

Overcoming Cultural Differences in International Trade with Korea

Today’s post, which is partially based on materials from Dick Locke’s seminars on International Purchasing, is edited by Dick Locke, Sourcing Innovation contributor and President of Global Procurement Group and Global Supply Training.

This post is going to examine some of the cultural differences that you may encounter (as an American or Canadian Sourcing / Procurement Professional) if you are doing business with Korea. We start by discussing each of the eight key cultural considerations outlined in our introductory post and then highlight a few other points that you should be aware of.

As per our initial post, this discussion is high-level and general in nature and, as Dick Locke points out in his classic text on Global Supply Management, while it is too easy to stereotype a country, individuals in each country will vary from the stereotype. You need to take time to get to know the people you will be dealing with because their behavior may be nothing like the usual behavior of the country in which they reside and there is always a chance that you might run into people who are trained to act like you … while in your presence.

While Korea, and more specifically South or the Republic of, has a lot of similarities with the Asian countries that surround it, it also has a lot of differences. Having built the third largest Asian economy in less than half a century, starting with low-cost high-quality export production and then a move into high-tech high-value-add in the 90s, they tend to move at a rapid pace. Also, as (recent) history has taught them that compromise leads to defeat and second place spells disaster, they are extremely competitive. They are always looking for an advantage, quick profits, and a quick sale … which is generally more important to them than the development of solid, long-term, business relationships (which the Chinese and Japanese prefer to focus on). As a result, you should be careful of exclusivity and focus on shorter-term awards based on past-performance.

  • Power DistancePower distance is moderately high in Korea. They have a vertical society that strictly observes protocol. You must show a Korean the respect he deserves based on status, age, and rank … or risk being outcast. However, unlike many other Asian cultures, this does not prohibit you from being tough in negotiations … they expect it.
  • Uncertainty AvoidanceHofstede’s classic work indicates that they are high on uncertainty avoidance, but this is not really the case. Of all the Asian countries, they are among the most willing to experiment and take risks, as long as the reward is there. They are also very creative and inventive.
  • IndividualismDue to the structure of their society; their core beliefs of kibun, hahn, and Confucianism; and their obsession with the survival of their society, they are not very individualistic when compared with the Western world. However, their tenacity and outgoing nature makes them more individualistic than many other Asian countries.
  • Polychronic vs. Monochronic TimeKorea is very monochronic. Punctuality is very important and they abhor wasting time. They are always striving to beat the Japanese and this requires getting the most out of every minute.
  • Personal / ImpersonalIn Korea, personal and family relationships are very important. As a result, good, personal, relationships are important for business. However, while Korean businessmen will shake hands, it is critical to remember that touching is generally an affront in their society, so no “pats on the back” unless they do it first, you’re at a social event and inebriated, and you’re willing to apologize for it immediately and the next day.
  • Buyer / Seller RankYour rank as a buyer is quite low in Korea compared to other Asian countries. They are strongly focussed on profit and have an innate distrust as foreigners.
  • Importance of HarmonyWhile Korea is still strongly influenced by the teachings of Confucius, and the correctness of social relationships that bring harmony, they are also strongly influenced by hahn, which describes the build-up of pent-up energies, unrequited yearnings, and general frustrations that developed under conditions of extreme hardship and oppression. As a result, they are more prone to violence than other Asian countries, very nationalist, and very, very competitive. So while harmony is important, especially since it also relates to kibun, it is not nearly as important as it is in Japan, or even China.
  • Importance of FaceKibun, which roughly translates as face or reputation, is a very sensitive issue for them, on part with Japan. They see it as correct behavior necessary for social balance and it is part of their strong sense of honor.

Finally, it is very important to socialize with Koreans if you want to build a business relationship. Accept every offer for evening entertainment (and read up on their dining customs first), even if you need two teams to keep up with them.

Finally, as I strongly recommended in my first post, if you plan to start doing business with any new international country, including Korea, you should do a thorough job on your homework. You can start with:

  • Dick Locke’s course on the Basics of Smart International Procurement (which is offered through Next Level Purchasing and counts towards the SPSM2 certification or ISM Continuing Education Hours), or
  • a customized seminar from Dick Locke’s Global Procurement Group. Dick Locke and his associates each have decades of experience doing business with over two dozen countries, including the fifteen biggest importers and exporters to and from the United States, and Korea. A single day with an expert like Dick Locke could save you months of headaches.

Again, a big thank you to Dick Locke for serving as editor for this special series of posts and providing some up-to-date materials and information for the purpose of this series.

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Overcoming Cultural Differences in International Trade with Japan

Today’s post, which is partially based on materials from Dick Locke’s seminars on International Purchasing, is edited by Dick Locke, Sourcing Innovation contributor and President of Global Procurement Group and Global Supply Training.

This post is going to examine some of the cultural differences that you may encounter (as an American or Canadian Sourcing / Procurement Professional) if you are doing business with Japan. We start by discussing each of the eight key cultural considerations outlined in our introductory post and then highlight a few other points that you should be aware of.

As per our initial post, this discussion is high-level and general in nature and, as Dick Locke points out in his classic text on Global Supply Management, while it is too easy to stereotype a country, individuals in each country will vary from the stereotype. You need to take time to get to know the people you will be dealing with because their behavior may be nothing like the usual behavior of the country in which they reside and there is always a chance that you might run into people who are trained to act like you … while in your presence.

The first thing you need to know is that culturally, the Japanese are very different from anyone else. They were historically isolated, crowded by geography, and their language is pretty much its own language group, despite the fact that they have three alphabets (kanji, hiragana, and katakana). Furthermore, the beginning of Tokogawa rule in 1603 marked the beginning of 250 years of almost complete isolation, until 1853 when Commodore Matthew Perry arrived.

  • Power Distance
    In a word, moderate. There is a defined hierarchy, and no decision can be made with approval from the top, but those approvals generally aren’t made until a consensus decision has been reached at the lower levels of the organization and pushed up to the top for approval. You see, in Japan, your Japanese counterparts represent their company, which is part of their group, which represents Japan, which is represented by their companies … and it is all part of a very complicated social structure that, to be frank, the Japanese do not expect anyone who isn’t from Japan (from birth) to understand. However, their hierarchical structure insists on exaggerated respect for the senior negotiator, and they expect you to give your senior negotiator the same level of deference.
  • Uncertainty Avoidance
    In a nutshell, very high. The Japanese don’t like uncertainty.
  • Individualism
    Despite the apparently strong need for the younger generation in the big cities like Tokyo and Osaka to display their individuality through dress, electronic gadgets, and a very distinct (night) life (style), individualism in Japan is low compared to most countries in the world. The Japanese social structure is to encourage you to be (mutually) dependent on those around you from birth, and that carries over into the younger generation who, despite their apparent pursuit of individuality, always belong to a group of like-minded individuals as well as their family.
  • Polychronic vs. Monochronic Time
    From a business perspective, both apply. The Japanese are punctual to a tee, and you can set your watch by their trains, and even though they will always keep to a meeting schedule, they will hardly ever commit to a “we need a decision by …” request. They have a strong belief that you should always take whatever time is needed to get it right, and that solidarity in agreement is a must. Negotiations will be finished when they are finished, not before.
  • Personal / Impersonal
    Generally speaking, the Japanese are a very shy and private people who are uneasy around foreigners. They are often thought to be a very serious people as well because smiles can be few and far between, but you have to remember that, to the Japanese, Happiness hides behind a straight face. However, in business, the rules change, and they can be very aggressive. Also, possibly due to their generally lower tolerance for alcohol, and the fact that alcohol serves as a release valve for pressure in their society, they can be very loud and boisterous in business-related social functions, at least amongst other Japanese or those who have been accepted into uchi where the workplace group is concerned. (This will not happen quickly, or easily, if it even happens at all. You will need to appropriate their culture, language and social hierarchy as well as they believe any non-Japanese person can to even have a chance.)
  • Buyer / Seller Rank
    In Japan, the buyer always outranks the seller. That being said, they will only do business with you if you respect their strict rules on social and business conduct. (If you do not, they will politely end the negotiations, and you will never hear from them again.) Also, the Japanese do have a propensity for entering into business relationships that require mutual obligations. It’s not like guanxi in China, where you will get a generous “gift” in exchange for a future favor, but you will be expected to fully hold up your end of the bargain if you ever want to do business with them, or any company in their group, again.
  • Importance of Harmony
    Harmony is a fundamental foundation of their web society which is based on a great interdependence among all members of a group and an abundance of moral and social obligations, both vertically and horizontally. The only other country where harmony is as important is China. In Japan, meetings are not about decisions, information gathering, or even understanding … they are about creating harmony between two groups.
  • Importance of Face
    The importance of face is also extremely high and a part of their social fabric. It is so vital that everyone’s face must be protected at all costs that they have developed a very ambiguous language based largely on impersonal verbs that allow for multiple interpretations of a sentence and make it very difficult to understand who is being referred to. Their natural speech patterns enhance politeness while increasing vagueness … and allow anyone to be absolved of possible blame, which allows everyone to save face. Thus, you must never assign blame (especially to them) or hurt their feelings if you want the negotiations to go well.

The Japanese find face-to-face negotiations with foreigners difficult. They generally negotiate in teams where each member has a different speciality and reason for being there. They are primarily there to gather information to bring back to head office and to build harmony between two potential business partners. You need to observe protocol, be patient, and avoid bluntness in this process, or they may suddenly, albeit very politely, break off negotiations. Also, many of the decisions and agreements, especially on points, will occur during social interaction between meetings. When invited, you will need to take part in these interactions if you want to build harmony and move the process forward.

Finally, as I strongly recommended in my first post, if you plan to start doing business with any new international country, including Japan, you should do a thorough job on your homework. You can start with:

  • Dick Locke’s course on the Basics of Smart International Procurement (which is offered through Next Level Purchasing and counts towards the SPSM2 certification or ISM Continuing Education Hours), or
  • a customized seminar from Dick Locke’s Global Procurement Group. Dick Locke and his associates each have decades of experience doing business with over two dozen countries, including the fifteen biggest importers and exporters to and from the United States, and Japan. A single day with an expert like Dick Locke could save you months of headaches.

Again, a big thank you to Dick Locke for serving as editor for this special series of posts and providing some up-to-date materials and information for the purpose of this series.

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Overcoming Cultural Differences in International Trade with India

Today’s post, which is partially based on materials from Dick Locke’s seminars on International Purchasing, is edited by Dick Locke, Sourcing Innovation contributor and President of Global Procurement Group and Global Supply Training.

This post is going to examine some of the cultural differences that you may encounter (as an American or Canadian Sourcing / Procurement Professional) if you are doing business with India. We start by discussing each of the eight key cultural considerations outlined in our introductory post and highlight a few other points that you should be aware of.

As per our initial post, this discussion is high-level and general in nature and, as Dick Locke points out in his classic text on Global Supply Management, while it is too easy to stereotype a country, individuals in each country will vary from the stereotype. You need to take time to get to know the people you will be dealing with because their behavior may be nothing like the usual behavior of the country in which they reside and there is always a chance that you might run into people who are trained to act like you … while in your presence.

India is the 7th largest nation by area and the 2nd largest by population, with over 1.1 Billion residents. Furthermore, its population is growing rapidly and it is expected to be the most populous nation by 2030. It’s middle class is constantly growing, and, at over 300 Million, roughly matches the entire population of the United States.

It also has a long cultural history, like China, with roots that go all the way back to the Indus Valley civilizations in 3,000 BC. However, unlike China, where Mandarin (standard Chinese) is spoken by over half the population, India, with its dozens of languages, and hundreds of dialects, has five languages in the top 20 (Hindu, Bengali, Telugu, Marathi, and Tamil) compared to China’s three (Mandarin, Wu, and Yue [Cantonese]). It makes for a bit of a fractured society. However, thanks to its colonial history (the British Raj), a large percentage of the upper class, and a growing percentage of the middle class, speak English. Over 10% of its population speaks English as a first, second, or third language … so there is a very good chance you will be able to conduct your business entirely in English.

  • Power Distance
    India is based on the caste system (which you should never discuss) and its values are still strongly held. They accept a hierarchy of responsibility and duty and, as such, they have a large power distance.
  • Uncertainty Avoidance
    Many Indians are risk-takers and experimenters. Overall, they have a moderate tolerance for uncertainty.
  • Individualism
    Despite the caste system, and the fact that tasks are a collective exercise in India, I’ve always found them to be very individualistic, once you get to know them. But there is a duality at work between the harmonious culture prescribed by the caste system and the major religions of Hinduism, Buddhism, Jainism, and Sikhism and what I see as a fundamental need to be themselves, especially after the colonization by Britain in 1858.
  • Polychronic vs. Monochronic Time
    While there is a strong tendency towards monocrhonic time in their business dealings with the west, they are historically a polychronic culture that does not work by the clock.
  • Personal / Impersonal
    They tend to be personal and open, probably because privacy is rarely indulged in or sought. That being said, within India at least, personal relationships may be dictated by the caste they belong to.
  • Buyer / Seller Rank
    Equality, more or less. In India, relationships are more important than they appear and the deal, if any, will ultimately depend on whether or not you build a relationship. (But remember that in negotiations, price comes last. When you agree on a price, the negotiation is done. All terms and conditions that you require must be agreed on first.)
  • Importance of Harmony
    Harmony underlies many of their major religions, and is important. Tasks, and decisions, will normally be group efforts. In addition, you may find them reluctant to criticize as they believe that business failure can be attributed to bad karma.
  • Importance of Face
    Always give them face. Although they may make little attempt to conceal their true feelings, face is very important to them.

Finally, as I strongly recommended in my first post, if you plan to start doing business with any new international country, including India, you should do a thorough job on your homework. You can start with:

  • Dick Locke’s course on the Basics of Smart International Procurement (which is offered through Next Level Purchasing and counts towards the SPSM2 certification or ISM Continuing Education Hours), or
  • a customized seminar from Dick Locke’s Global Procurement Group. Dick Locke and his associates each have decades of experience doing business with over two dozen countries, including the fifteen biggest importers and exporters to and from the United States, and India. A single day with an expert like Dick Locke could save you months of headaches.

Again, a big thank you to Dick Locke for serving as editor for this special series of posts and providing some up-to-date materials and information for the purpose of this series.

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Don’t Forget: NAFTA is an FTA

Why am I reminding you? Because this article on how “compliance is not just about avoiding risk, it is also about ROI” noted how a recent survey from Management Dynamics found that companies realize substantial savings from FTAs. Specifically, 40% of survey respondents said they are saving $500,000 or more per trade agreement.

NAFTA allows you to source from two countries. (Specifically, Canada and Mexico if you are in the U.S.) Furthermore, when you add these FTA savings on to what you can save from near-sourcing (significantly reduced transportation costs, reduced warehousing costs due to reduced inventory requirements due to reduced lead times, reduced currency risks, etc.), your savings potential becomes very significant.

Not to mention, if you adopt C-TPAT, import and export can become relatively quick, easy, and inexpensive compared to import and export from other countries. C-TPAT certified importers have fewer inspections and fewer delays. This not only results in in better visibility and lead-time predictions, but in shorter transit times which reduces overall supply chain costs.

So don’t forget, NAFTA is an FTA … and it can save you a lot of money if you near-source.

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Overcoming Cultural Differences in International Trade with Germany

Today’s post, which is partially based on materials from Dick Locke’s seminars on International Purchasing, is edited by Dick Locke, Sourcing Innovation contributor and President of Global Procurement Group and Global Supply Training.

This post is going to examine some of the cultural differences that you may encounter (as an American or Canadian Sourcing / Procurement Professional) if you are doing business with Germany. We start by discussing each of the eight key cultural considerations outlined in our introductory post and then highlight a few other points that you should be aware of.

As per our initial post, this discussion is high-level and general in nature and, as Dick Locke points out in his classic text on Global Supply Management, while it is too easy to stereotype a country, individuals in each country will vary from the stereotype. You need to take time to get to know the people you will be dealing with because their behavior may be nothing like the usual behavior of the country in which they reside and there is always a chance that you might run into people who are trained to act like you … while in your presence.

Germany, one of the most influential nations in the EU, has a very distinct culture that is simultaneously easy and hard to sum up, but if I had to try, I’d start with one of the sayings they like to hear most. Alles lief wie am Schnürchen. (Everything went like clockwork.)

  • Power DistanceWhen discussing power distance in Germany, we need to discuss context. There is a very strong push for social equality in Germany, which makes the power distance very low. However, hierarchy is mandatory in a German company, and this often results in exaggerated deference to one’s superior or CEO.
  • Uncertainty AvoidanceA core value of Germans is ordnung which roughly translates to order or system. They despise uncertainty, and, even moreso than the Japanese, will like to dive into the details again and again and again. This is a culture that will read boring, factual, serious advertisements no matter how long they are … the more facts, the better! (In comparison to Japan where the average advertisement length is a mere 15 seconds.)
  • IndividualismGermans are highly individualistic. While they may never disagree with the group in a formal meeting, this is a result of their hierarchical corporate structure which is encumbered by manuals, systems, and extremely well defined hierarchical paths. Outside the office, you’ll likely have difficulty getting any of them into a queue. (While the Brits like their lines, Germans generally don’t. Remember the story about pedestrians waiting for a green light to cross a road that’s closed to traffic …)
  • Polychronic vs. Monochronic TimeGermans are the most punctual of all peoples. It is a great offensive to even be two minutes late. You can just as easily set your watch by meetings as you can trains.
  • Personal / ImpersonalGermans are a very private people who do not wish to become immediately familiar with strangers. They don’t like small talk, like to get close before greeting (so never, ever shout across a room), and reserve smiles for true friends. In a company, the boss is a very private individual who generally sits alone behind a closed door. However, they do tend to form very deep friendships, and are very personable if you reach that point.
  • Buyer / Seller RankWhile the buyer is generally treated with respect, this does not necessarily imply that the buyer will receive a higher rank, as implied by a number of sources, including Hofstede and Lewis. First of all, to keep the respect, the buyer will have to follow the rules of German business. (One of those rules is always be prepared, even though they will always be more prepared than you with counter-counter-counter arguments.) Secondly, and perhaps more importantly, this is not a society where customer service gets high marks. Retail store hours are dismal compared to the rest of the world (if you fly in Friday night and forget your toothbrush, better buy it at the airport … or do without until Monday morning). Last time Mr. Locke had an outdoor business lunch, he was charged a deposit on plates and silverware!
  • Importance of HarmonyWhile Germans are among the most frank, direct, and blunt people in the world, they also are a stickler for consensus before a decision is made. So, in a way, harmony is very important, but only in the decision itself … during the process, they may flat out disagree with each other and argue every option until every point has been considered and debated, repeatedly.
  • Importance of FaceIn Germany, face is important from a cultural perspective. While they may openly disagree with you, they will likely save any arguments they have between each other for private meetings. And while they will be quick to criticize you, as that’s just their way of being helpful (as they don’t want you to make mistakes or follow a sub-optimal process), they can be quite sensitive to criticism themselves (as that means they overlooked something and did a less than acceptable job; in Germany, it is expected you will always do your best). Thus, you should go to great lengths to avoid criticizing a proposal from them unless you can prove you are right, and present your argument in the logical, flowing manner that they are comfortable with. In other words, if you disagree, Beweise her oder Maul halten! (Put up or shut up!)

The most important thing to remember when attempting to do business in Germany is that, to them, business is serious. It’s not a joke (and jokes will not go over well). They have a strong belief in honest, straight-forward negotiations and expect you to have the same. This doesn’t mean that you can’t be aggressive, as long as you are open about it and can logically argue why your proposal is fair.

Finally, as I strongly recommended in my first post, if you plan to start doing business with any new international country, including Germany, you should do a thorough job on your homework. You can start with:

  • Dick Locke’s course on the Basics of Smart International Procurement (which is offered through Next Level Purchasing and counts towards the SPSM2 certification or ISM Continuing Education Hours), or
  • a customized seminar from Dick Locke’s Global Procurement Group. Dick Locke and his associates each have decades of experience doing business with over two dozen countries, including the fifteen biggest importers and exporters to and from the United States, and Germany. A single day with an expert like Dick Locke could save you months of headaches.

Again, a big thank you to Dick Locke for serving as editor for this special series of posts and providing some up-to-date materials and information for the purpose of this series.

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