Daniel R. Joseph is a managing director at ESS China, a a firm that specializes in helping American companies adjust to the challenges and seize the opportunities of globalization with a particular emphasis on China. ESS's activities include sourcing (helping U.S. companies stay competitive by keeping costs down), manufacturing and operations capability services (helping U.S. companies establish a presence in China), and investing in business opportunities in China (i.e., contract manufacturing, partnering with U.S. firms, getting involved in China, acquiring companies that are dealing with global challenges, etc.). Joseph is also the author of <em>Wen and the Art of Doing Business in China</em>, a humorous and instructive book about his experience managing businesses in China. He can be reached at djoseph@theessco.com.
Considering the size of the U.S. trade deficit, you would think that working with foreign suppliers would be old hat to most U.S. firms. Yet the fact is that foreign sourcing, particularly what is referred to as "low cost country" (LCC) sourcing, remains new and challenging to many companies, even as experience in this regard is becoming increasingly important.
A common mistake companies make when entering foreign markets is proceeding based on inaccurate estimates of the size and characteristics of the market.
When doing business in a foreign country and a foreign culture—particularly a non-Western culture—assume nothing. Because cultures really are different, and those differences can have a major impact on the business environment and management challenges you will face in another country.
We need to give more consideration to the role culture plays in shaping our world. If we did that, we would realize that businesses, economies and political systems tend to reflect the same cultural values.
It is often said that guanxi is the key to success in China and in many other developing markets, particularly in Asia, but my advice to you would be this—don’t bet on it.