geopolitical business Archives

With so much having already been written on supply chain disruption over the past eighteen months – beginning with the initial shut-down of production in China, to fascinating tales of toilet paper hoarding, and now to the current inability to get backlogged demand through our ports of entry — I was initially reluctant to add yet another article to the stack. So what changed my mind? There are actually two reasons, which I’ll explain.

First, the problems and lessons learned from the COVID-19 pandemic are now forcing companies to become more agile, reassessing every element of their existing supply chains in preparation for the “new/next normal”. It’s now blank sheet of paper time as previous playbooks regarding sourcing, inventory levels, placement and risk mitigation plans (if they even had one) – together with any supporting infrastructure of people, processes and enabling technology – are being tossed out the window.

And while COVID-19 can be credited as the catalyst for forcing companies to perform these assessments, it doesn’t take a pandemic to bring a supply chain to its knees. In addition to the exposure contributed by single-sourcing key goods or from maintaining lean inventory levels (i.e., “Just-in-Time” versus “Just-in-Case”), designing a more resilient, risk-averse global supply-chain will require the inclusion of a broader list of potential risks to consider particularly when selecting foreign suppliers. These should include geopolitical conflicts, socio-economic factors including labor, crime and corruption, limited port capacity/infrastructure, weather-related disruptions, and even natural disasters (recall the 2011 earthquake and tsunami in Japan).

Take geopolitical risk, for example. The US’s over-dependency on China for products ranging from personal protective equipment (PPU) to rare-earth minerals has made it a growing concern from both a business and a national security perspective. A sobering report by the Hinrich Foundation (“Strategic US-China Decoupling in the Tech Sector”), states that “the China-US geopolitical competition has reached a competitive tipping point and morphed into a new ‘cold war’”, citing an increase in China’s bold hegemonic policies. The report further highlights China’s years of intellectual property theft, growing labor costs, and the more recent special tariffs levied by the Trump administration, as key reasons for an increase in US supply-chains decoupling from China and either moving into more risk-averse areas in Southeast China, near-shoring to Mexico, or even re-shoring to the US.

In an actual side-by-side near-shoring exercise which compared China with Mexico, the advantages quickly fell to Mexico citing a shorter supply chain with fewer physical touchpoints (damage/theft/service fees), lower freight costs, and eligibility for duty-free entry under the USMCA Free Trade Agreement, as well as side benefits that included ease of communication with vendors and the convenience of traveling to vendor sites.

Risk Management Meets Industry 4.0

The second reason for my writing is that there’s another movement afoot that aligns with supply-chain risk initiatives from the position of enabling technology capable of producing even greater resiliency. Labeled as “Industry 4.0”, this next industrial revolution is the result of the substantial transformation that is occurring through the digitization of manufacturing. For context, the first industrial revolution was through the introduction of water and steam power. Steam would give way to electrical power as the second industrial revolution, with the third being born out of the introduction of computers and their ability to automate previously manual tasks. Fast forward to today where the fourth revolution is now further optimizing that automation by connecting computers with smart machines and “disruptive technologies” such as Artificial Intelligence (AI), Machine Learning, Advanced Business Intelligence, Predictive Analytics and Data Lakes, capable of removing humans from decision-making processes, including applications capable of identifying and even predicting risk.

Where Industry 4.0 supports supply-chain risk initiatives is that the 4.0 movement includes the digitization of global supply-chains. This will translate into unprecedented transparency and connectivity across the entire end-to-end order and shipment process where supporting business functions such as Product Engineering, Procurement, Sales & Marketing, Transportation, Trade & Customs and Accounts Payable traditionally operate in respective silos.

For example, take Trade & Customs operations. Its typical placement near the end of the supply chain process, together with a lack of early visibility to international order, has served for years as a recipe for reactive firefighting as shipments become “stuck in customs” upon arrival until data/documentation issues are resolved. Under a digitized model, silos are replaced with connected supply-chain visibility that would allow Trade & Customs’ participation to move upstream to the earliest stages of new product build/buy decisions. As a result, they’re now in a position to proactively contribute critical advice on regulatory issues, import admissibility requirements, duty/tax minimization strategies such as Tariff Engineering, Foreign Trade Zones, Free Trade Agreements or changes in source countries (e.g., avoiding a 25 percent special tariff on Chinese goods by switching the sourcing to Mexico) – all key factors capable of removing cost, risk and time from their supply-chain.

If you’re currently building a business case to launch your own risk initiative, an interesting report from McKinsey & Company (“Resetting Supply Chains for the Next Normal”), might give you some additional support. For instance, in their survey of 60 senior supply-chain executives across industries and geographies, 85 percent responded that they struggled with insufficient digital technologies, 93 percent plan to increase resilience across the supply chain, and 90 percent plan to increase digital supply-chain talent in-house needed to support that new technology. In short, you’re not alone.

Whether your current project is to address the exposure from disruptions to your supply chain or to digitize the entire enterprise as a result of the increasing disruption caused by technology-driven innovation, what’s becoming clear is that companies will be forced to become agile and adaptive — able to change business models at unprecedented rates of speed in order to survive and thrive in the “new/next normal.”

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Jerry Peck is the Vice President of Product Strategy at QAD Precision, with over 30 years of experience in Global Trade Management. His career has uniquely encompassed nearly every facet of GTM, including third-party logistics, trade operations within Fortune 300 multinationals, and professional services consulting firms.

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.

Planning for Survival in the New Normal

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