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An American Businessperson in a Global World: Rethinking Your Cultural Business Etiquette

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Archives, Global Trade Daily, Special Reports

An American Businessperson in a Global World: Rethinking Your Cultural Business Etiquette

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In the American business world, there is a generally accepted, and often unspoken, etiquette that most businesspeople follow. Be on time, dress professionally, use a firm handshake, make eye contact, show initiative, be respectful of your superiors and so on. Take a look around the world, however, and you will find widely diverse protocols that can quickly lead to cultural barriers, misunderstandings, and possibly lost revenue.

From punctuality to attire to physical contact and personal space, the code of behavior varies wildly across different cultures. When doing business in a global, geo-political world, these differences can be tricky to navigate, especially in virtual meetings. But the broad representation of different cultures goes a long way toward making businesses more competitive. Culturally inclusive and diverse companies are shown to see higher profits. Diverse teams are more innovative, better at making decisions, and are more likely to capture new markets.

Cultural awareness can have a big impact on the growth of your business. More importantly, though, it is a matter of showing respect and earning the trust of your international partners and colleagues. It is about establishing common ground so that decisions, deals, and relationships start from the same foundation.  And to build that foundation, you may have to make some adjustments in how you do business.

Below we will look at 8 changes you can make to foster cross-cultural intelligence and improve the way you conduct international business.

Do Your Research & Be Prepared

Over 80% of CEOs recognize empathy as a key to success. Before meeting with any international business associates, invest time in learning how they act, speak, dress, and conduct business. Even if everyone speaks English, make the effort to learn how to say “hello” and “thank you” in their language. Be aware of what titles, if any, should be used. The simple awareness and empathy of what they do and why it helps you better adapt to their needs. Also, the planning you do before the meeting is often more important than what you do in the actual meeting. In many cultures, meetings are not where the decisions are made; they are an opportunity for asking questions and exploring possibilities. Therefore, distributing all necessary information prior to the meeting gives everyone involved time to review so that they can comment on it intelligently. In an ideal world, the materials should also be translated into their language to make things easier.

Hire your own Interpreter

Even when you have all materials translated, if you are not fluent in each other’s languages the potential for miscommunication is high. To prevent any misunderstandings, it is a good idea to have an interpreter on hand. This gives everyone an equal opportunity to comprehend everything that is discussed. Even if the other party has an interpreter in the meeting, always have your own interpreter on hand, as you never know what the other side may discuss!

Tone Down the Assertiveness

Americans are known for being direct, assertive, and loud. Some countries, like Germany, share this quality when sharing ideas and doing business. In other countries like Japan, however, people tend to speak softly and are not as forthcoming when making suggestions or sharing their ideas. Doing your research will help you know if being assertive is appropriate or if you are coming across as pushy and aggressive. When in doubt, use a neutral tone and be considerate of everyone’s input, even if they communicate in a way you are not accustomed to.

Beware of Nonverbals

A mere 7% of what we communicate is expressed with words. The remaining 93% is conveyed with body language. Nonverbal communication can be complicated in any setting, but with so much business taking place virtually these days, it is more important than ever to be aware of what you are saying with your body language. From intense eye contact to large hand gestures to loosening your tie in a meeting, there is a minefield of ways you could inadvertently insult an international colleague. Learning and practicing nonverbal cues that are common in your associate’s culture will be worth the effort to avoid coming across as rude and offensive.

Watch What You Say

Avoid using slang, local idioms, or “Americanisms”. For example, sports metaphors like “that came out of left field” or “can you pinch-hit this one for me” are not universally understood. Your associate may not understand what you’re talking about, and it is unlikely they will tell you, which can make them feel isolated and unaccepted. Be careful making jokes as well. While a good sense of humor is an asset in any potentially awkward cultural situation, jokes can lead to misunderstandings and possibly be offensive.

Don’t Try to Multi-Task

According to a survey from Intercall, the largest international conference call company, “65 percent of people do unrelated work during a meeting, 60 percent read or send e-mails, and 43 percent admit to checking social media.” While it may be easy to slyly multi-task in a virtual meeting, if it’s noticed, you’ll come across as rude. In addition, when meeting with an international client or colleague, whether virtually or in person, there’s a lot going on. From considering their cultural norms to understanding the interpreter in the background, to making important business decisions, you don’t want to get distracted from your main objectives. Save yourself a lot of trouble and keep your attention on the task at hand.

Consider How Other Cultures View Time

Many countries place a high level of importance on starting meetings on time and keeping to strict schedules. On the other hand, punctuality is treated casually in countries like France or Argentina. This fluctuation can affect how much relevant information you have time to share. Understanding your client’s culture can help you prepare and organize the meeting agenda accordingly.

Time is also a consideration in the decision-making process. For example, the UK has a slower process than the US. Germany also takes its time, being very thorough in early stages, but once they have made a decision, things move quickly. Understanding and managing your time expectations is critical.

Recognize Hierarchical Structures

Hierarchical structure can impact the way business meetings are handled. In many East Asian, Latin, and African cultures, decision-making authority varies according to age, gender, family background, etc., and team roles are allocated accordingly. Even the way the meeting is conducted in these countries is affected. For example, in China, you should always allow the host to leave the meeting first. Virtual meetings may minimize these issues since there are no seating arrangements, but because the rules and protocols can be complicated, it’s a good idea to explicitly outline the expected formalities ahead of time so everyone knows how to interact.

Cultural Awareness is Your Competitive Advantage 

Embracing cultural awareness and diversity is a crucial part of doing business in an ever-expanding world. Cross-cultural intelligence inspires creativity, encourages inventive thinking, and fosters better problem-solving. The local market insight you get makes your business more competitive and profitable. It allows you to better adapt your products and services to be more meaningful and valuable to all your customers.

A study done by McKinsey and Company showed that companies with more culturally and ethnically diverse executive teams were 33% more likely to see better-than-average profits. When you make a genuine and concerted effort to understand cultural dimensions, you can build a greater understanding between the different cultures in your organization. This ultimately leads to understanding, trust, respect—and competitive advantages— in a very complex world.

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Susanne Evens is the Founder and CEO of the St. Louis-based AAA Translation (founded in 1994), the President of St. Louis-Stuttgart Sister Cities (since 2006), and a board member of the World Trade Center St. Louis. Susanne is also a board member of the German-American Heritage Society (since 2007), a member of the St. Louis Mosaic Project Immigrant Entrepreneurship Advisory Board and a member of Explore St. Louis Multicultural Committee. Her advice regarding global business development and communications has been featured by national media outlets that include BusinessWeek, National Public Radio (NPR), BrandChannel.com, and more. Under her leadership, AAA Translation has grown to serve business clients the world over, working in more than 300 languages, to provide translation, interpretation, and cultural consulting services. For more, please visit aaatranslation.com.

Geopolitical
Archives, Commentary, Global Trade Daily

Axis of Innovation: A New School of Geopolitical Economics for the Digital Age

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What a difference a few decades make. Trade ministers from the United States and European Union recently felt compelled to sit down for special high-level ministerial forum in hopes of strengthening their relationship after years of transatlantic tensions on all manner of digital-age economic and trade matters—from digital service taxes to cross-border data flows—which together reflect fundamental differences of geopolitical strategy for the digital economy.

This never would have been necessary in the Cold War, when there was a clear, Manichean struggle between the democratic, market-based West and the authoritarian-communist East. It would have been inconceivable in those days to have such differences “across the pond.” There was strong bipartisan support in the United States—and parallel support in Europe—for a cohesive approach to the geopolitical economy that aimed to attract allies and isolate the Soviet Union and China by supporting Western business interests and spreading democracy around the world.

 


But now, as the Cold War fades into history and as the global economy is increasingly driven by digital and information technologies instead of heavy industry, that consensus view of the geopolitical economy has fractured. The old “free markets and free people” camp has maintained a foothold in the United States, and authoritarian statism is still deeply rooted in the parts of the East, but alongside them there are now other competing visions—including social democratic regulation in Europe and a rising form of digital protectionism in countries such as India, Indonesia, and Vietnam.

If the United States is to effectively advance its interests, which now hinge on spurring faster and deeper digital innovation and transformation, then U.S. policymakers need to recognize this new formation, while embracing a new framework for the geopolitical economy that is better suited to the times: national developmentalism. The overriding priority should be advancing domestic technology competitiveness instead of sacrificing U.S. economic interests on the altar of other foreign policy goals as America often did in the Cold War. Failure to execute this strategic pivot will produce a technologically weaker U.S. economy.

Until recently, America had only one big idea when it came to geopolitical economics, embodied in the neoliberal “Washington consensus.” Policymakers advocated at home and abroad for open markets, deeper trade, limited regulation, budget constraints, the rule of law, and a modest role for government. That approach worked in the Cold War, but there are two problems with it now: First, it ignores the fact that government plays a key role in helping develop and spread digital technologies, as we have seen in the history of the Internet, semiconductors, computing, and technologies like GPS—all of which the federal government spurred. Advancing growth in the era of digital innovation requires more than firms and markets acting on their own. Second, when U.S. policymakers point to the Washington consensus as the only alternative to China’s seemingly successful state-directed model, it gives nations looking to grow their own digital economies a limited choice: Do little and hope markets work things out for the best or be aggressive by copying Beijing’s statist model.

As in the Cold War, some nations today continue to embrace authoritarian statism, but with a digital edge and a more market-friendly veneer. China and Russia are the torchbearers for this formula, with China taking it to the greatest extreme. For China’s central planners, the approach is more than authoritarian; it is deeply mercantilist, seeking not just to build up domestic technology firms by any means necessary, but also to harm foreign competitors—as when Chinese firms coerce their Western counterparts into transferring intellectual property as the price of doing business in China while also enjoying lavish subsidies for “going out” to challenge Western firms for global market share.

This is a model that empowers U.S. adversaries and harms global innovation, because by employing tactics such as massive subsidies, IP theft, and coerced technology transfers, China is empowering its firms to take market share away from more innovative firms in other nations. Moreover, China scoffs at concepts such as freedom and democracy, and in global governance forums, its strategy is to ensure that its formula prevails over the U.S. model of freedom and human rights with private and civil-sector governance.

Meanwhile, where the United States and Europe once were closely aligned on economic and foreign policy, their goals and interests have now diverged. In the EU’s social democratic approach to the digital economy, the government’s main role is to regulate, rather than promote, technology and technology companies (especially U.S. companies) to achieve social policy goals. The EU is doing everything it can, including using carrots and sticks, to bring other nations into its orbit, offering its model as a third-way alternative to Chinese authoritarianism and what it considers to be America’s “cowboy capitalism.” The result is a spread of a digital regulatory system marked by higher taxes, onerous rules, and strict antitrust enforcement, which constrains global innovation and weakens U.S. competitiveness. And unfortunately, many U.S. policymakers, particularly on the left, see this as an appealing alternative to the Washington consensus they believe has been discredited.

But ultimately social-democratic regulation of the digital economy will prove to be a dead end. Even though EU social democrats and their U.S. allies profess to be pro-innovation, the reality is that onerous regulations on privacy, competition, “fairness,” and other areas result in less innovation, slower economic growth, and worse experiences for consumers.

On a separate track are unaligned nations that often charted their own path in the Cold War era. Today, many of them are defaulting toward digital protectionism as a preferred approach. For example, India, Indonesia, and Vietnam, among others, see limiting foreign IT and digital market access as the key to growing their domestic digital economies. To that end, they take measures such as limiting cross-border data flows, favoring domestic digital firms, and otherwise discriminating against foreign technology firms. This, too, will likely prove to be a dead end. Digital protectionism usually doesn’t work, in part because it doesn’t just harm the interests of U.S. firms and others, but often drives up the costs of digital technologies domestically, thereby limiting their use and forgoing the productivity benefits they offer.

Against this backdrop, the United States faces a host of new challenges, but it also has an opportunity to secure a new era of prosperity for itself and others by embracing a national developmentalist model in which government helps coach firms within its borders to compete globally, innovate, and boost productivity. This entails supporting innovation, markets, and business—including big business. But it also recognizes that the state should play a key role in supporting digital innovation in areas like broadband, health care, education, and governance while defending U.S. firms from unfair foreign competition. Among the nations moving toward the national developmentalism model are the Scandinavian bloc, the United Kingdom (as conservatives increasingly move beyond their Thatcherite traditions), Israel, Singapore, and Taiwan. Some U.S. policymakers on both sides of the aisle have begun moving in this direction, too, as evidenced by the Senate’s United States Innovation and Competition Act.

While the doctrine of national developmentalism presents a more realistic picture of the world, recognizing that nations seek competitive advantage in IT and digital industries, it also counsels a “race-to-the-top,” wherein nations support digital innovation with policies related to research and development, worker skills, and digital infrastructure, plus conducive regulatory and tax policies, and government leadership in using the technologies themselves.

The United States should fully embrace this burgeoning national developmentalism at home and work methodically to bring as many other countries as possible into the U.S. national developmentalist orbit—selling it as a compelling and effective alternative to social democratic regulation, protectionism, and authoritarian statism. We are no longer locked in a Manichean struggle; there are now several models on offer. But one is clearly the best.

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Robert D. Atkinson (@RobAtkinsonITIF) is president of the Information Technology and Innovation Foundation, the leading think tank for science and technology policy.

shortage
3pls, Archives, Global Logistics, Global Trade Daily

Here’s How to Turn the Trials of Commodity Shortages into Positives for your 3PL

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As I’m sure you’re aware, there’s a global shortage of a small, yet vital component in so many of the goods we use and buy today — so-called semiconductor chips. These tiny processors are used by manufacturers to produce everything from cars and Class 8 trucks to TVs, laptops, smartphones, medical devices, and even appliances like refrigerators and toasters.

These types of commodity shortages have become a defining factor of the post-COVID economic recovery and the 2021 economy as a whole.

Remember the gasoline shortage after the recent Colonial Pipeline shutdown? How about the lingering chicken wing shortage, as bars and restaurants re-open and try to stock up? Builders have been reporting lumber shortages for months, and prices on 2×4 studs and sheets of plywood have hit all-time highs. The list goes on: diapers, chlorine, furniture, toilet paper (in the early days of the pandemic). And, obviously, a “shortage” of hirees, which our industry is all too familiar with, in its persistent shortage of available truck drivers.


 

While most of our relationships with shippers remained hearty over the past year, our Michigan-based operation relied heavily on the automakers, both inbound loads of parts for new vehicles and, of course, trailers loaded with finished cars outbound for dealers.

But amidst the microprocessor shortage, new car production, at times, came to a complete standstill as the need for semiconductor chips blocked American automakers like GM, Dodge, and Ford from building new vehicles. With those production stops, our Michigan operation, likewise, came to a standstill; leaving our trucks parked and our staff searching for answers.

Unfortunately, the outlook for that business returning is cloudy, at best. One analyst might say chip capacity will return to normal by the end of the year. Others say this drags on until 2024.

Trying to plan around this uncertainty has been a challenge. But there are a couple key lessons that can be taken from all of this:

First, logistics providers need to diversify. If you rely on one steady stream of business either at large or for one branch of your operation, you’re a sitting duck. A shortage that popped up seemingly overnight derailed that segment of our business and left us suddenly searching for answers. We had been so busy managing our automotive business here in Michigan, we didn’t take the time and effort to find new customers and forge new relationships. In the end, that lapse caught up with us.

Secondly, remember to treat negative events as opportunities to learn and grow, and possibly emerge from them better and stronger than you were before.

When it became clear the auto production setbacks would be long-term, I encouraged our team not to simply sit around and wait for things to change. Instead, we gathered team members and taught them new skills — ones they could use in their own careers and ones that could benefit the company, too.

For example, we looped in members of our team who weren’t hired to do sales, such as those in dispatch and other back-office functions, and we taught them the basics of making sales calls and reaching out to potential new customers. They were all on board to do it.

We flipped around roles and tried to think outside the box. We had dispatchers finding industries and businesses that wouldn’t be impacted by the semiconductor shortage and then making cold calls to try to drum up new lines of business.

If it worked, fantastic — we made something out of nothing. If not, at least we tried, and our employees had opportunities to continue working and to learn new skills.

Ultimately, that could be the biggest takeaway: When things are turned upside down and the world suddenly changes, go back to the basics. Start at the beginning again and figure out how to find business.

These are lessons that can apply broadly across the third-party logistics landscape and ones I would encourage shippers, brokers, and carriers to make sure they heed, too. Do what you can to diversify your lines of business, because you never know when they might suddenly be toppled. And never underestimate your team’s ability to pivot and learn new skills, as that could be the key to pushing through when you find yourself in a rut.

What are the lessons you’ve learned over the past 15 months in your logistics operation? I’d love to hear about them, to learn from your experience, and to share your insights with our team, too: rkramar@circledelivers.com

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Ryan Kramar is a Vice President of Operations at Circle Logistics. Founded in Fort Wayne in 2011, Circle is one of the fastest-growing transportation companies in the nation, servicing over $250 million in freight spend. Circle combines the dedication of a privately owned asset-based 3PL with the coverage of a public large-scale provider to create a superior modern freight experience. Circle is committed to delivering on three core promises to our customers: No Fail Service, Personalized Communication, and Innovative Solutions, and provides coverage across all modes of transportation in the continental United States and Mexico, including Dry Van, Flatbed, Reefer, LTL, Expedite, Oversize and Air.

For more information, please visit www.circledelivers.com

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Archives, Global Logistics, Global Trade Daily, International Trade

3 Reasons Why it’s Going to Take Longer to Unravel the Current Global Logistics Mess

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If you’re involved in global shipping or even a consumer who recently purchased furniture or other bulky items, you’re well aware of the sorry state of global logistics. The pandemic and its knock-on effects have created global shipping chaos and driven astronomical shipping costs. While we are all enduring the consequences, the big question now is when will global logistics return to normal? Will it happen after peak season this year? I am less optimistic about a quick turnaround. Here are three data points that highlight why I believe the current situation will drag on longer than anticipated.

Inventories are way down and retailers want to hold more of it in the future.

The pandemic created a unique situation. Manufacturing and distribution capacity declined, but consumer demand didn’t. Retailers have seen their inventories cut as consumers continue buying, but they cannot replenish their stocks. According to the US Census Bureau, the inventory to sales ratio is down more than 25% since the beginning of the pandemic (see Figure 1).

The chart also shows a general decline over 2 decades in the inventory to sales ratio, which is a testament to retailers and their logistics partner continually improving their supply chain performance. That trend is about to change as many retailers are deciding to hold more inventory as a hedge against greater supply chain uncertainty. So, what does that mean? Retailers will be buying more than what they need in the short-term to build their stocks to larger acceptable levels. This will continue to put more pressure on supply chains and logistics operations—not reduce it—even after the peak season ends this year.

Figure 1: Retail Inventory to Sales Ratio

Inflation is up, but still viewed as manageable and history says it can go higher before stunting demand.

The Federal Open Market Committee (the Fed) just released its revised forecast for inflation. The forecast did rise by 1% to 3.4% for the year; however, that is more than manageable and unlikely to suppress consumer demand as longer-term inflation is being forecasted at 2%. In addition, if inflation were to go higher, that wouldn’t necessarily mean that US import volumes would decline and take pressure off the current situation. The last time inflation breached 5%, as it did in May, was in August 2008 when it reached 5.8%. As you can see from the US maritime import chart (see Figure 2), import volumes continued to increase.

Figure 2: US Maritime Import Volume

Source: Descartes Datamyne

The economy continues to reopen and the Fed expects robust job creation through the fall. This is a good news/bad news story. As states continue to relax or eliminate COVID-19 related restrictions, parts of the economy such as restaurants, tourism and other service industries will return to more normal capacity, increasing demand for goods many of them import. The Fed is also predicting robust job growth into the fall. The continued opening up of business will drive job growth and consumer spending as those hit hardest by the pandemic have more cash to spend. Again, more pressure on global supply chains.

The protracted situation means that short-term plans that increase costs but get goods to market may make more sense than waiting for the global shipping situation to get better on its own. However, retailers and other importers should evaluate their supply chains now for the alternate sources and paths their goods take to get to market. This evaluation should take into account the impact that highly concentrated and congested trade lanes have on the risk to fulfilling customer demand. For example, the concentration of manufacturing in countries such as China and the use of ports like LA/Long Beach. We can see today the delays that are happening and it won’t take much to see additional delays at some level with disruptions in the future. Now is the time for importers to engineer the risk out of the supply chain.

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Archives, Banking, Global Trade Daily, Special Reports

Why Investors Need to be Wary of the Investment Herd Mentality

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The past year has been one of exceptional volatility – volatility for personal lives while dealing with COVID restrictions, volatility in job markets due to government-mandated shutdowns, and volatility in markets as economies collapsed and began to rebound. After a drop of over 10,000 points from February to March 2020 at the onset of the COVID crisis, the Dow Jones Industrial Index entered a strong recovery. Investors flooded back into the market, driving prices to new heights in early 2021.

Much of this new investment came as investors responded to positive news about the launch of COVID vaccines and the prospect of world economies reopening. Markets began to show the effects of herd mentality investing as investors pursued profit opportunities. While herd investing may lead to profitable spikes, it is also capable of causing sudden drops with accompanying losses for the herd. 

Understanding the herd

Humans are naturally prone to herding. While perhaps originally a protective measure against predators, herding spread through every facet of human life. Throughout their lives, people join any number of herd groups – social groups, religious groups, political groups, sports groups and others. They rely on the mutual support found in these settings and the information sharing that occurs in the group.

Herd investing behavior has many underlying causes. Some seek to achieve the same wealth and status as the successful investors they see in the news. Many people who know little to nothing about investing but who also want to take advantage of investing in markets rely on the herd to provide them with information about investment opportunities. Many investors just have FOMO – the fear of missing out on a good thing. 

Frequently, it is uninformed investors, and those with the most to lose, who form the bulk of the investing herd. Trying to get rich quickly by following the example of successful traders, they wind up losing everything. 

But even with post-COVID volatility roiling markets, there are good opportunities in the markets for informed investors who pursue sensible investing strategies.

The dangers of following the herd

Unfortunately, herd mentality all too frequently results in the herd running off a cliff together. The history of markets is replete with examples of investors driving markets drastically upwards, only for herd panic to crash those markets. 

The dangers of herd investing first appeared in the 17th-century tulip buying craze in the Netherlands. Tulipmania, as it is now known, was the first market bubble. Just before the bubble burst, the most sought-after tulips were selling for upwards of 5000 florins. 

To put this in context, at the time, you could buy four oxen (and not just any oxen, fat ones) for 480 florins. A thousand pounds of cheese was 120 florins, and the equivalent of 65 kegs of beer was 32 florins. The cost of tulips grew to exceed annual salaries, and the most expensive tulips cost more than a house. 

Using margin contracts, buying on credit, leveraging assets, investors did whatever was needed to get their hands on tulip bulbs. But prices began to fall, and the market quickly and completely collapsed, leaving many investors bankrupt.

History has repeated itself several times since the beginning of the 20th century. The Great Depression of the 1920s, the dotcom bubble in the late 1990s and early 2000s, and the subprime mortgage crisis culminating in the housing crash of 2008 are all examples of herd-driven bubbles. 

Herd activity drives market volatility

Herd investing appears to be increasingly driving market volatility. The past year alone has seen several glaring examples of herd-created bubbles.

The herd creates crypto bubbles

A more recent example of herd investing is the explosion of interest in the cryptocurrency markets. From October 2020 to April 2021, the price of Bitcoin increased sixfold, from $10,000 to over $60,000. Since that time, it has lost a third of its value. And this is the second crypto bubble in less than five years. In early 2018, Bitcoin lost 65% of its value in a single month. By the end of 2018, cryptocurrency markets had seen a larger percentage decline than the stock market did during the dotcom bubble.

Cryptocurrency is an attractive investment. But it is notoriously volatile, and the crypto investing herd quickly responds to even minute suggestions about price direction. Tesla founder Elon Musk’s support for dogecoin helped its price skyrocket in early 2021. But when he made a joke on Saturday Night Live about dogecoin being a “hustle,” the price quickly plummeted.

Robinhood and GameStop

The GameStop price rollercoaster in early 2021 is a particularly alarming example of herd investing because it involved an intentional manipulation of the herd. A group of investors decided to punish investment firms that were relying on shorting stocks by driving up the prices of those stocks. They then promoted the stocks on an investment board on Reddit. GameStop became the poster child for their efforts, but other frequently shorted stocks also began to rise.

GameStop’s price skyrocketed as social media-based investors followed the Reddit group. Trading volume increased as well, with GameStop becoming the most traded stock on the S&P 500 at one point. Once again, Elon Musk got involved, sending out a tweet about GameStop that exacerbated the frenzy, causing the price to nearly double shortly after the tweet. 

GameStop quickly fell again after the Robinhood trading platform and others suspended trading. The fallout from this event is ongoing.

Fears about post-COVID inflation

At present, the herd is spooked about the prospect for significant inflation as world economies rebound from the COVID crisis. Consumer prices have been rising, even more so than expected at this point in the recovery. And, despite reassurances from the Fed that the inflationary spike is temporary, the fears of the herd have made themselves known in the markets. 

The fastest increase in the consumer price index in nearly fifteen years caused selloffs in the markets. At the same time, yields on treasury bonds have been rising. Home prices are also experiencing rapid upswings, leading to fears of another housing bubble.

The herd may be edging towards its next cliff.

Don’t get trampled by the herd 

Knowledgeable and prudent investors can still take advantage of hot market opportunities while avoiding suffering substantial losses by simply following the herd. Portfolio diversification is one important tool savvy should employ to counteract the effects of market volatility. Balancing risky herd-friendly investments with more stable options like bonds, mutual funds, or even gold helps portfolios avoid wild swings from market volatility.

There are also positive herd-style options, such as investment funds, that take advantage of the knowledge of investment experts. According to London-based financial advisor Alex Williams of Hosting Data, investment funds are a collection of capital that is owned by a conglomeration of investors. 

“These investors collect shares together, while each member remains in full ownership and control of their own individual shares,” says Williams. “The benefit to investment funds is that you have a wider selection of investment options and opportunities. You can also get access to better management expertise and there’s less commission than you’d be able to get on your own.”

And for those investors who do want to rely on social media, like the Reddit GameStop investors, without risking the downsides of herd investing, there are more well-founded options. Social investing platforms (distinct from socially responsible investment platforms) allow inexperienced investors to benefit from the knowledge and insights of experienced traders through copy trading and mirror trading.

Conclusion

With a bit of effort and prudent selection of a range of investments, even the most novice investors can take advantage of a booming stock market while protecting themselves from the whims of the herd.

payments
Archives, Banking, Global Trade Daily

HOW TO BETTER PREPARE PAYMENTS FOR FUTURE DISRUPTIONS

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A particularly virulent and nasty airborne virus, it has so far accounted for 2.5 million deaths worldwide with more than 110 million cases recorded at the time of writing. Given these numbers only represent reported incidences, the real tolls could well be substantially higher.

The pandemic has especially caught western societies on the backfoot. Unlike regions more used to infectious disease outbreaks such as Asia and Africa, the likes of Europe and North America have not had to deal with a public health threat of this kind since the Spanish flu disaster of 1918, a four-wave pandemic which is thought to have killed 675,000 people in the USA and 50 million worldwide.

Vaccinations are key to emerging from the worst of the crisis during 2021, both in terms of public health and the economy.

Regarding the latter, COVID-19 has been nothing short of a disaster. America has disproportionately suffered from the coronavirus: Not only does it have the highest registered death toll, but it is also forecast to lose trillions of dollars in revenue.

Predicting the size of the economic fallout is far from straightforward, and estimates vary tremendously.

According to a study by the University of Southern California, anywhere between $3 trillion and $5 trillion could be lost over the next two years, while economists at Harvard believe the pandemic will cost the U.S. $16 trillion, assuming it is over by this fall.

While uncertainty remains as to the exact extent of the financial damage, what cannot be denied is that the financial losses are and will continue to be enormous for years to come.

The second quarter of 2020 saw real gross domestic product in the U.S. decrease at an annual rate of 31.7 percent, the largest quarterly plunge in activity on record.

And one of the most worrying patterns emerging from 2020 is companies struggling to manage cashflows and stay afloat. Payments simply are not flowing through supply chains as they ordinarily would, an observation which is borne out by several reports and surveys.

For example, trade credit insurer Atradius reports in its annual Payment Practices Barometer that businesses across the USA, Canada and Mexico are facing widespread cash and liquidity pressures. Meanwhile, business credit information firm Cortera reported that in May 2020, large companies with more than 500 employees paid their suppliers 15.6 days late on average, up from around 10 days a year earlier.

Responding to economic disruption

So, how can companies safeguard themselves against this sort of financial disruption both now and in the future?

Paying particular attention to cash flow during times of crisis is essential if businesses are to emerge from this black swan event intact–even those that appear to be in strong financial shape, given the longevity of the demand and supply chain disruption being witnessed.

At the start of the pandemic, around March 2020, Deloitte released a series of advice papers on how supply chains can cope with the then anticipated fallout, one of these being “COVID-19: Managing cash flow during a period of crisis.”

“Given the importance of cash flow in times like this, companies should immediately develop a treasury plan for cash management as part of their overall business risk and continuity plans,” the report states. “In doing so, it is essential to take a full ecosystem and end-to-end supply chain perspective, as the approaches you take to manage cash will have implications for not only your business but also for your customers.”

Deloitte draws on lessons learned from the 2003 SARS epidemic, the 2008 global financial crash, and the 2011 Japanese earthquake, offering 15 specific practices and strategies for companies to better manage their cash flow.

15 ways to better manage your cashflow

1. Ensure you have a robust framework for managing supply chain risk.

2. Ensure your own financing remains viable.

3. Focus on the cash-to-cash conversion cycle.

4. Think like a CFO, across the organization.

5. Revisit your variable costs.

6. Revisit capital investment plans.

7. Focus on inventory management.

8. Extend payables, intelligently.

9. Manage and expedite receivables.

10. Consider alternate supply chain financing options.

11. Audit payables and receivables transactions.

12. Understand your business interruption insurance.

13. Consider alternate or non-traditional revenue streams.

14. Convert fixed to variable costs, where possible.

15. Think beyond your four walls.

*Source – Deloitte, “COVID-19: Managing cash flow during a period of crisis”

Among them is advice to extend payables–in other words, take longer to pay suppliers. However, Deloitte warns against delaying payments without prior agreement with customers, urging dialogue between both parties to ensure the supply chain is as minimally disrupted as possible.

Indeed, companies may wish to bring forward payments to suppliers if it prevents them from going out of business, the consequences of which being far costlier than using up some of your own cash reserves early.

As a supplier, offering dynamic discounting solutions for those able to pay more quickly could be a way to improve your cash flows; by using this technique, you are essentially paying customers to provide you with short-term financing. Going down this route could be expensive in the long term, but it could be the only viable option if other financing methods are not available.

Perhaps the most important, albeit least tangible piece of advice is to think outside of the confines of your own business. Rather than simply focus on your own operations, companies should think about how their actions will impact the wider supply chain ecosystem.

A further question revolves around the ways in which payments are being made.

COVID-19 has accelerated the adoption of digital and automated payment methods. For instance, according to research by digital transformation platform MX, there has been a rise in mobile banking engagement of 50 percent since the end of 2019.

The U.S. has been behind the curve on supply chain financing for quite some time. Widescale adoption of electronic, data-driven invoicing will create fluidity and working capital for both suppliers and buyers.

Responding to social disruption

Another dynamic to consider is how to mitigate social disruption.

There is already evidence that the COVID-19 pandemic has rekindled divisions within society–black and ethnic minorities are disproportionately affected by the virus, while the poorest have been hit hardest by the financial costs of lockdown policies.

While not being ostensibly linked to coronavirus, the traction gained by the Black Lives Matter movement in the U.S. has undoubtedly been heightened in the pandemic’s context.

It has also prompted major shifts in consumer and business circles: Citizens and enterprises are putting time and capital towards prioritizing diversity and inclusion.

“Supplier diversity initiatives are no exception,” states supply chain software provider GEP in its 2021 Outlook. “In 2021, procurement and supply chain leaders will need to do more–by developing new approaches to include minority-owned businesses to achieve real targets for supplier diversity.”

Indeed, hardwiring diversity and inclusion into the procure-to-pay process will help organizations respond to the social unrest of 2020. This will involve tracking and benchmarking metrics at a transactional level, and companies can start by focusing on direct spending with small and diverse suppliers.

Going back to Deloitte’s advice on thinking beyond your four walls, businesses should also monitor the revenue growth of their suppliers in order to fully assess the impact of their supplier diversity and inclusion strategies.

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Archives, Global Trade Daily, International Trade

Uncovering the Biggest Myths for Business in Latin America

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Conducting international business is not what it used to be. In the post-pandemic era, resilient regions throughout the world are at an advantage now more than ever. Unfortunately, business climates are at the mercy of a media-painted reputation impacting future economic growth. Latin America is no stranger to this. Businesses and workers in Latin America have been misrepresented in the media, particularly when it comes to corporate corruption and compliance. In this exclusive Q&A, Global Trade Magazine learns about the biggest misconceptions of doing business in Latin America by Pedro Freyre, chair of Akerman International Practice.

What are some common misconceptions for conducting business in Latin America and how does this impact the region’s economic reputation?

Pedro: One of the biggest misconceptions is that Latin American businesses are not up to speed on the use of technology. These misconceptions – or what some could call biases, are that businesses in Latin America are unsophisticated and they lack understanding complex issues. This is absolutely incorrect.

Latin America is a resilient, tough business environment with a lot of ups and downs, but also very global in that it deals with various jurisdictions in its trade relationships. I have found Latin American clients to be sophisticated and understanding of issues and nuances. There are always legal cultural differences and part of our job is that we are the interpreters that bridge this gap.

Latin American business and businessmen have lived for many years in difficult and volatile environments, making them very adaptable. They are fast on their feet and work with different cultures, buyers, and sellers, and various interlocutors very well because that is what they had to do to survive and succeed. This is one of the competitive advantages found here because that’s what businesses had to do to survive in the past. Latin Americans are incredibly open to dealing with different nationalities, markets, and opportunities.

How does your firm support Latin American clients in combatting issues with noncompliance and corporate corruption?

Again, our job is to bridge that gap – the legal cultural gap of raising awareness. Now more than ever there is a new and evolving set of stricter global standards in compliance, anti-corruption, and anti-money laundering. The web of those types of regulations is extending and becoming highly integrated. So, you have the FCPA in the U.S and the other anti-money laundering provisions, the UK anti-bribery act, the Brazilian anti-bribery act, and the Mexican anti-bribery act. All of these work to add layers of regulatory compliance..

Another factor coming into play is that we help clients deal with non-governmental regulators that look for compliance. For example, financial institutions ramping up their compliance department to act as guard dogs for the government. So, when a Latin American client comes over to the U.S and wants to open a bank account, we help them understand that there is going to be due diligence on the part of the bank and that they’re going to have to provide a lot of information. That is where the added value comes into play by emphasizing that compliance in today’s world is far more pervasive and necessary for any business.

What role does technology play in combating this corruption?

Technology is just as integrated in the effort. I will give you an example. We recently had a wire come in from one of our clients in Latin America and OFAC flagged it and started doing more background checks to identify the source of the funds because the name of the remitter was similar to a company that was on the Specially Designated Nationals list. The software picked up the name, tasking us to explain the situation.

What are some of the benefits of collaborating with Latin American-based businesses?

Latin America has vast natural resources. For example, Brazil is a leading provider of all kinds of natural resources. Back in the forties, Argentina was a main provider of grains and beef to Europe. The region was a tremendously powerful provider of these things. Currently, the Chinese are making inroads over Latin America in their search for raw materials and agricultural products. It’s part of the natural wealth of Latin America. Latin American businesses are now becoming much more integrated, enabling cross-border business.

How has the pandemic exacerbated the negative reputation for Latin American companies? What can companies do to overcome this?

This is a challenge because part of what happens is what companies predict in terms of government action. If a business climate has a government with a clumsy response to the pandemic, then the assumption is everybody in that country is at risk. It is not working, and things are in disarray, creating the need for uprooting and taking business elsewhere. And again, we go back to the point of resiliency and adaptability. Latin American businesses have been there before, they come from an exceedingly difficult environment, stability has always been a challenge. So, even in the pandemic, these businesses have been able to adapt and move forward. Adding to the misconceptions list is if the government did not react well to the pandemic, then the businesses are not able to function. That is simply untrue.
It is important to remember that this is a business climate fraught with peril and difficulties but is also full of opportunity. As the saying goes, out of great problems come great opportunities.

I anticipate a reshuffling of assets and business orientation and interests soon. We are seeing more flow out of Latin America and more flow to Latin America. This year is going to be a year of takeoff, although I do think Latin America may lag behind the U.S. I’m also keeping my eye on Brazil, which is going through great difficulties. Brazil is a major powerhouse, however, and I am betting on it overcoming these difficult times.

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Pedro Freyre is the chair of Akerman’s International Practice, a full-service team advising multinational and global corporations on a wide range of cross-border M&A, joint ventures, capital markets transactions, syndicated and secured lending, project finance, debt restructuring, trade, compliance, as well as complex construction and other international disputes. He is an internationally recognized authority on the U.S. Embargo on Cuba and the evolving regulations enacted since the restoration of diplomatic relations between the United States and Cuba.  In addition, Pedro represents clients engaged in inbound foreign investment in the U.S. and outbound U.S. investment in Latin America.

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Archives, Global Trade Daily, State Spotlight

Cities Most Dependent on Small Businesses

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Small business is often held up as a key driver of the U.S. economy, and for good reason.

According to the U.S. Small Business Administration, small businesses account for 64 percent of net private-sector jobs created since 2005. Collectively, small enterprises employ around 60 million Americans, which represents nearly half of the private workforce in the U.S. Compared to larger firms, small businesses tend to be more nimble, which promotes competition and innovation in the economy. Additionally, small businesses help strengthen communities, and entrepreneurship is a common route through which immigrants assimilate into the social and economic life of the U.S.

But with fewer financial resources than larger firms, small businesses are especially vulnerable during economic downturns. Where large firms can more easily turn to banks or capital markets for an infusion of funding in tough times, small enterprises are more likely to respond by scaling back operations, letting go of employees, or closing altogether.

While the recession of 2008 and the slow recovery that followed were hard on all sectors of the economy, small businesses struggled even more than large firms. Thousands of small businesses failed in the wake of the recession. Many would-be small business owners decided not to take on the financial risk of starting a business during the weak economic recovery, and lenders proved more risk-averse in financing new businesses as well. As a result, industry concentration in large firms has increased over the last decade, and employment growth at large businesses has far outpaced that of small businesses over the same period.

Today, COVID-19 is creating more difficulties for small businesses. Some of the industry sectors that tend to be most densely populated with small firms have also been the sectors most affected by shifts in consumer behavior and government restrictions meant to slow the spread of the virus. Notably, accommodation, food services, and retail businesses together employ nearly a quarter of all small business employees. But with more people staying at home, these firms—many of which have already been forced to close—face dire circumstances.

The continued success of small business matters more for some locations than others. Rural states in the Upper Plains, like Wyoming and Montana, and in New England, like Vermont, have a much higher share of small business employees in the workforce than other states. Because these areas tend to have few large employers, failures in the small business sector could create job shortages and prolonged economic hardship in these areas.

At the metro level, some of the areas most dependent on small businesses are in the aforementioned rural states, but other factors are at play as well. Some are Rust Belt communities where employment was formerly dominated by now-offshored manufacturing operations, leaving smaller businesses to generate most of the economic activity. Others have strong startup ecosystems that encourage entrepreneurs to create new firms.

To identify the locations most dependent on small businesses, researchers at Construction Coverage used U.S. Census data to find the percentage of employees in each metro employed at small businesses, defined as those firms having fewer than 500 employees.

Here are the large U.S. metropolitan areas most dependent on small businesses.

Metro Rank   Percentage of employees at small businesses  Total number of small business employees  Total number of small businesses   Percentage of total payroll paid by small businesses   Total small business payroll per employee  

Total large-firm payroll per employee
New Orleans-Metairie, LA     1      53.65% 265,378 23,960 49.26% $43,602 $51,989
Miami-Fort Lauderdale-West Palm Beach, FL     2      53.50% 1,184,791 167,326 48.27% $43,392 $53,498
Oklahoma City, OK     3      53.32% 269,939 28,210 48.62% $40,574 $48,974
Providence-Warwick, RI-MA     4      52.36% 333,667 33,162 47.72% $43,098 $51,898
New York-Newark-Jersey City, NY-NJ-PA     5      51.98% 4,356,853 499,998 41.10% $56,279 $87,294
Los Angeles-Long Beach-Anaheim, CA     6      51.93% 2,764,749 313,657 46.12% $52,115 $65,764
Portland-Vancouver-Hillsboro, OR-WA     7      51.41% 538,511 55,667 41.79% $45,280 $66,725
Buffalo-Cheektowaga-Niagara Falls, NY     8      50.93% 245,969 21,132 46.54% $40,162 $47,880
Grand Rapids-Wyoming, MI     9      50.36% 253,133 19,092 48.50% $43,895 $47,283
San Francisco-Oakland-Hayward, CA     10      50.31% 1,090,428 104,849 37.81% $67,798 $112,911
San Diego-Carlsbad, CA     11      50.06% 634,069 69,216 42.59% $49,023 $66,233
Washington-Arlington-Alexandria, DC-VA-MD-WV     12      49.64% 1,327,443 116,882 45.11% $60,027 $71,999
Sacramento–Roseville–Arden-Arcade, CA     13      49.45% 367,438 38,300 41.78% $45,280 $61,702
Austin-Round Rock, TX     14      49.39% 413,394 40,661 42.47% $48,145 $63,651
Baltimore-Columbia-Towson, MD     15      48.53% 573,447 52,387 42.56% $48,700 $61,994
United States     –      47.09% 60,556,081 5,976,761 40.32% $44,777 $58,996

 

For more information, a detailed methodology, and complete results, you can find the original report on Construction Coverage’s website: https://constructioncoverage.com/research/cities-most-dependent-on-small-businesses

business partners
Archives, Global Trade Daily, Special Reports

Here’s What’s Happening to Strained Business Partners During the Pandemic

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A business partnership isn’t all business. When two people start a company together, they often were friends already, and they see that bond strengthened by the hard work they put into building it up.

So when things go south, it can be traumatizing.

In fact, the emotional stages of the breakup of a business — what people in my line of work sometimes call a business divorce — are strikingly similar to that of a marital divorce.

Just as Covid-19 has put a financial and emotional strain on marriages, it has also strained business partners struggling to work through the pandemic. In some cases, the pandemic is also making pre-existing issues harder to avoid.

Many business owners say that they knew they had issues in their business partnership arrangement before Covid-19 and their problems only worsened in the current climate.

A business divorce is by far the most traumatic event that a business owner will experience. The foundation of a business partnership is usually a familial relationship or a very good friendship. Just as employers tend to hire people they’d like themselves, people tend to go into business with people they have strong relationships and connections with.

Business divorces typically evoke the same feelings of stress, resentment, doubt, blame, betrayal, guilt, fear, and other emotionally fueled reactions seen in a typical divorce.

In fact, they go through somewhat predictable stages of grief.

1. Disillusionment and Denial

Denial is when a business partner knows there is a problem but has trouble acknowledging the gravity of the situation and the possibility that there may not be an amicable resolution. When this is present a business partner may have stored resentments, feelings of a breach of trust, and overall discontentment towards the other person.

This usually manifests itself as a feeling that the other partner is not pulling their weight and doing their part to help the business thrive.

There are a number of decisions that will need to be made about how the business will continue to operate, if at all, after a partnership separation and denial allows a business partner to distance themselves from the likely reality that the business structure and the partner’s responsibility will undergo significant change if the business is separated.

2. Letting Go

In this stage, a business partner realizes that there is nothing that can be done to salvage the business relationship and that separation is inevitable. This is usually followed by a strong desire to review as much information as possible to understand the current state of the business and the options available to value and separate the partnership interests.

3. Deciding to Divorce

In this phase, the partners discuss their discontentment and float ideas about how to separate their interests. If one partner strongly feels that they were blindsided or betrayed, this will set the tone for how the business separation will proceed and the process of exchanging information and completing the steps to finalize the separation will no doubt be contentious.

4. Acting on the Decision

In this phase, the partners learn how much the business is worth and decide what they want in the separation. Do they want to stay in and operate the business, do they want to sell their interest and go work for another company or change fields completely, or do all partners want to sell to a third-party?

All of the foregoing options will be largely dependent on a valuation of the business and may require a partner to start the process of obtaining a loan or financing to buy out the other partner and continue to operate.

Filling out loan applications and hiring accountants and/or lawyers, to value the business and draw up a separation agreement, coupled with publicly announcing the separation, all make the emotional and physical act of separating a business very real and can cause emotional flareups.

5. Acceptance and New Beginnings

Adjusting to a new normal, whether that is continuing to run a business without the partner who was there from the beginning, or starting anew with a job at another company, requires acceptance.

The changes force partners to create a new identity and make new plans for the future, inevitably forcing them to regain a sense of power and control in addition to reconciling feelings of animosity, blame, anger, and forgiveness.

Although the old saying has it that some things are “just business,” it’s never that simple. A business divorce can evoke the same — if not more — emotional turmoil on everyone involved.

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D. Margeaux Thomas, founder of the Thomas Law Office, has been assisting small business owners with resolving contract and partnership disputes for nearly 15 years. The Thomas Law Office based in Fairfax, Virginia assists clients throughout the greater Washington, D.C. area with breach of contract claims, non-compete issues, and business torts. Attorneys at the Thomas Law Office also help companies through all aspects of business partnership divorce, including records inspection requests, valuation, buyouts, and dissolution. To learn more, visit: https://thomaslawplc.com

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Archives, Executive Education, Global Trade Daily

Change Is Just Beginning: How Leaders Can Focus On Meeting 2021’s Challenges

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Business leaders dealt with massive and rapid change in 2020 due to the COVID-19 pandemic, but many small businesses and chain stores didn’t survive.

As a new year begins amid much economic uncertainty, companies that successfully navigated 2020’s turbulence can’t rest, and they need engaged, forward-thinking leaders who can keep adjusting and focusing on the right factors in a volatile business environment, says Doug Meyer-Cuno, ForbesBooks author of The Recipe For Empowered Leadership: 25 Ingredients For Creating Value & Empowering Others.

“We live in a VUCA world,” says Meyer-Cuno, referring to the acronym standing for volatility, uncertainty, complexity, and ambiguity. “We need to adjust to how fast things are changing. It means companies adjusting to AI technology, electric cars, and hub-to-hub freight liners that are driver-free. Every company needs to think out of the box.

“Leaders, therefore, need to be fast at making decisions to compete in tomorrow’s world. They’ll have to challenge themselves to look into the future and find ways for their company to not only keep pace but stay ahead of the curve.”

Meyer-Cuno offers the following ways for company leaders to meet the frequent challenges of change in 2021 and beyond:

Align change decisions with the company vision. Meyer-Cuno says many entrepreneurs and CEOs forget the importance of setting a vision for their organization, and that makes decisions in the midst of massive change more difficult or less thought out. “Reaffirming the vision must be a priority every day until it becomes part of the DNA of the company culture,” Meyer-Cuno says. “Everyone in the company must ask themselves why the organization exists. They must ask themselves this question so often that the answer is ingrained in every decision they make. Once they do, it’s possible to navigate the uncertainties of change as a unified group.”

Be more intentional with your vision, mission and core values. “Some financially successful companies lose their compass,” Meyer-Cuno says, “which shows why it’s vital for your company to be always intentional with its vision, mission and core values. They are the standard-bearers for the organization’s reputation as well as performance. The companies that will make it in the future are the ones who can push data, processes, products, and services through the pipeline the quickest. Alignment around your vision, mission, and core values are crucial in developing a company capable of great speed and agility.”

Empower your employees. Though it’s important for leaders to often come up with the ideas and planning to chart direction, Meyer-Cuno says the most effective leaders tap into the talented and smart people around them, pick their brains in their areas of expertise, and implement their ideas. “You must empower employees not to be yes men,” he says. “Ideally, you want a group that thinks, not groupthink. Encourage debate and participation from everyone. The really talented people out there want great leaders capable of empowering them.”

Don’t put up with attitude problems. High performers who set their own rules and don’t adhere to core values aren’t worth keeping around, Meyer-Cuno says, due to the damage they can inflict on the culture. “When you’re in a leadership position,” he says, “it’s vital to the success of your team that you live what you preach. If you don’t, nobody else will either. Demonstrate boundaries and what it means to do the right thing by showing you won’t accept non-compliance from your mavericks or high performers. Taking that action will serve to further empower your teams.”

“At this critical crossroads time for many businesses,” Meyer-Cuno says, “leaders need to reevaluate how strong or fragile their company foundation is and whether it is well- equipped to handle the battering winds of change.”

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Doug Meyer-Cuno is an entrepreneur, mentor, and ForbesBooks author of The Recipe For Empowered Leadership: 25 Ingredients For Creating Value & Empowering Others. He founded a food ingredients distribution company, Carolina Ingredients, and expanded it into a nationally recognized and award-winning industrial seasoning manufacturer before it was acquired by Mitsubishi in 2019. Since then he has founded Empowered Leadership, which helps entrepreneurs, business owners and CEOs scale their companies by empowering their teams. Meyer-Cuno earned his BA in International Commerce from Furman University and is a graduate of Harvard Business School’s Owner/President Management program.