P ROGRAMAS Y M EDIDAS

The export manager with responsibility for a country or series of countries will need to have a wide awareness and good knowledge, though not necessarily expertise, of a plethora of subjects specific to the daily reality of exporting. Exotic new terms such as drawback, incoterms, demurrage, groupage, letters of hypo- thecation, general average and del credere risk will enter the exporter’s lexicon. The ability to contend with these, in addition to skills in negotiation, distributor motivation, marketing planning and sales forecasting will be crucial to a success- ful performance. It is not the intention in this section to give a comprehensive exposition of all aspects of export practice so much as to highlight the more important areas and to indicate how consultants can help.

..

.. 86 Part 1 / Management consulting in context and how it adds value

The exporter needs to decide on what basis a price quotation will be given to the importer. First, there is the price itself, that upon which the exporting company will realise its profit. Will it be based on the published wholesale price in the home country, will it be expressed in a standard export price list, will it relate to an increase (or not) over the price previously used, will it be established from an in-market price to the customer worked backwards down the price structure, will it have to take account of price controls in the overseas country, or will it be negotiated or offered as a tender bid? Having determined this price, it will be necessary to agree what element of freight, insurance, duty or other factors to include in the quotation. In the majority of cases, price will be quoted as either FOB (Free On Board), i.e. once loaded on to the carrying vessel, C&F (Cost and Freight) or CIF (Cost, Insurance and Freight) at a named port of destination, or in order to prevent loading of the C&F price, FOB plus Freight to a named port of destination. Alternatively, the importer may prefer an ex-works price (i.e. at the factory gates), or delivery franco domicile, i.e. to their warehouse inclusive of duty, clearance charges and onward transportation. Each has its particular merits, and it is very much a matter for both parties to agree upon. Consultants can provide valuable assistance – for example in identifying the most competitive insurance and freight rates.

The means whereby the exporting company will be paid have an obvious importance. Though desirable, cash in advance or cash with order are somewhat unlikely in view of the credit implications for the importer. Some companies with an established system of trading may have an open account arrangement, but it is generally the case that each order will have to be paid via an individual transaction. One that affords greatest protection to the exporting company is the Confirmed and Irrevocable Letter of Credit. In essence, this is a pledge via the importer’s corres- pondent bank to pay the exporter at the time of shipment provided all the terms of the order have been complied with, and the correct documentation is provided. This may not be especially attractive to either party, as the process is complex and the scope for errors to be made is considerable. Moreover, for the importer it implies parting with their funds before taking possession of the goods.

An alternative method involves use of a Bill of Exchange. Under this circum- stance, the exporter draws a bill on the importing customer which may be payable upon presentation (D/P), or against acceptance (D/A) with a stated term of credit. In order to take possession of the goods, the importer will have to accept and honour the Bill of Exchange, thus guaranteeing payment to the exporter. While this is more straightforward, it may not always be acceptable to certain countries wishing to regulate the flow of remittances abroad. Most commercial banks will provide guidance on method of payment issues, but a consultant may also have specialist knowledge.

Another area where expertise will be needed concerns shipping – identifying the most appropriate carrier, deciding the preferred routing, negotiating the particular freight rates, booking the order for shipment, assembling the necessary paperwork, and appreciating the particular issues of hazardous or inflammable goods, those requiring special stowage etc.

In this particular area, a shipping and forwarding agent can be of considerable assistance, especially to a small or medium enterprise or those new to exporting. Such agents are experts in their field, and will have an up-to-date and thorough know- ledge of transport methods and the relevant carriage rates. They will be aware of port conditions and specific customs requirements, and they may be able to consolidate

Chapter 4 / Consulting across borders and cultures 87

small shipments from different exporting companies into a single ‘groupage’ con- signment, thereby enjoying more favourable freight rates (Walker, 1970).

Additionally, the exporter should have a good awareness of aspects of mer- cantile law. This will include the law of contract, laws governing agency, the sale of goods, negotiable instruments, marine insurance and the carriage of goods by land, sea and air. Access to expert legal knowledge will, however, be indispensable in cases of dispute. Further, the importing country may have additional laws of their own regarding the legal status of agents, the payment of commission, corporate liability, trademark protection, trade with countries with whom they disagree politically and other commercial practices.

Products may need to be modified or given special packaging not for any par- ticular consumer benefit but rather due to specific local laws or by virtue of the rigours of the physical distribution process. Consider the food industry: innocuous products such as prepared mustard bound for Sweden have in the past needed to have the tartrazine colouring agent removed. The same country had more stringent rules on the level of permitted impurities in peanut butter than did the UK.

Consumer products intended for sale in Israel quite understandably require label- ling in Hebrew. Foodstuffs destined for the same country need a kosher certificate, which might require the visit of a rabbi to the manufacturing plant. Labelling laws, expiry dates, distributors’ addresses, safety warnings etc. all need to be accom- modated. Clear honey shipped at times of severe cold can set, and soft drinks stored in containers at high temperatures on vessels plying the Arab Gulf can boil and flocculate. Cereals may be prone to infestation from weevils and therefore require additional protection. All of these are the facts of life of exporting, and all will add cost and complexity to the manufacturing operation. Yet again, without specialist knowledge of such requirements, the exporter will be at a considerable risk.

Pharmaceutical products attract further regulatory issues. Most countries will require registration even though the item in question is freely on sale in its country of origin. A certified Free Sale Certificate may be sufficient, but it may be necessary also to provide raw material specifications, the method of manufacture, the product ingredients and a certified statement of the consumer price in the country of origin. The documentation will need to be processed, and it may take two years or more before approval is given. Access to informed regulatory affairs knowledge will be crucial.

4.6

Culture

One of the biggest issues facing a consultant with a multinational assignment is the different cultures involved. Good consultants recognise these early on in the consulting process and ensure they adapt their way of working without com- promising the project. Cultural differences may be national cultural differences in a largely homogeneous society, or there may be important subcultures – such as Latinos in the USA, Turkish immigrants in Germany, or the differing ethnic communities in South Africa. These differences will manifest themselves both in consumer and business behaviour. Managers and consultants should develop a keen awareness of these cultural differences, and respect them, for they will be the rules by which they will need to play if they intend to compete successfully.

..

.. 88 Part 1 / Management consulting in context and how it adds value

One example of cultural diversity is the strong influence of Islam on daily life in the Arab world, the emphasis on observing prayer times, modesty of dress, and the avoidance of alcohol and pigmeat. A Westerner who is not a Muslim will still need to observe the Ramadan fast if he is in an Arab country at the time. But he will also enjoy a greater degree of hospitality and personal attention than may be the norm in his home country. In Chinese culture, 5,000 years of Confucianism, which seeks harmony and equilibrium, place great importance on connections (guanxi), interpersonal relationships (renqing), courteous and refined behaviour (keqi) and the need to preserve face (mianxi). In Latin societies, attitudes to time (the hora latina) are often more casual than in ‘low context’ cultures such as Germany or Switzerland. Haggling and bargaining are part of the way of life in Turkey, India and the Middle East. German companies are especially formal in conduct, and colleagues within the same organisation are likely to be known by their titles and surnames: people may spend ten years working together without knowing one another’s first name. Israelis pride themselves on straight, blunt talk- ing almost to the point of rudeness, and expect the same in return: they will have little patience with subtlety and understatement. In Holland and Scandinavia, the concept of companionship is more greatly refined than in the UK or USA: the Dutch concept of gezellig implies sharing one’s personal feelings in a very personal way while being together in a small group (Arnould, Price & Zinkhan, 2004). National spirit is implied in untranslatable words such as sisu (Finland), hwyl (Wales), or lagom (Sweden). Finally, there is the facilitating role of bakhsheesh in Turkey and the Levant, dash in West Africa, or coffee money in Malaysia and Singapore: what Western attitudes might consider to be bribery.

Much has been written on the determinants, characteristics and elements of culture. In 1983 Geert Hofstede identified four dimensions determining national culture, adding a fifth in a further piece of research with Bond in 1988 (in Hollensen, 2004). The five elements are power distance – the degree of inequality between people in physical and educational terms; uncertainty avoidance – the degree to which people prefer formal rules and fixed patterns of life; individualism – the degree to which people in a country learn to act as individuals rather than members of groups; masculinity – the degree to which ‘masculine’ values such as achievement, performance, competition and success outweigh ‘feminine’ values such as quality of life, warmth of relationships, care and concern, and the environment; and time perspective – whether the tendency is for pragmatic long-term thinking as opposed to a conventional, short-term time horizon. Hampden-Turner and Trompenaars’ 1994 model identifies eight ‘value dilemmas’ driving national cultural features (in Morden, 2007). These are (at either end of the spectrum) strict adherence to rules as opposed to flexibility and exceptions; analysis of concepts or events versus their integration into wholes (deconstructionism and constructionism); communal as opposed to individual focus; internal focus on the society in contrast to an external orientation of people to their environment; the perspective of time as a linear rather than a cyclical concept; status based on age, education, class or race as opposed to status on the basis of achievement or merit; emphasis on hierarchy versus equality within the community; and affective, expressive and emotional behaviour rather than neutral, subdued and controlled emotion.

Finally, and of particular value to the international manager, Mead (1990, in Brassington and Pettitt, 2006) groups eight behavioural factors influencing busi- ness conduct. These are: time – attitudes to punctuality, the sanctity of deadlines,

Chapter 4 / Consulting across borders and cultures 89

discussion time and acquaintance time; business cards – when to offer them, whether to have them translated, who gives first, and how much attention to give them when received; gifts – whether they should be given, their size and value, and whether they should be opened in front of the donor; dress – dress codes and levels of formality; entertainment – the type and formality of social occasions, table manners and etiquette, cuisine, cultural and religious taboos, and venues (e.g. restaurant or private house); space – the meaning of office size and location, and the selection, quality and arrangement of furniture; body language – greeting conventions, facial and hand gestures, physical proximity, touching and posture; and material possessions – whether or not it is polite to comment on them or admire them. Managers intending to spend time in different business cultures would do well to seek expert advice on such issues.