Deadly Sins of International Business Blog

Of course, what is commonly referred to as the Chinese phoenix, the fenghuang, only distantly resembles the phoenix of the West. So, erudite reader, please forgive the amateurish use of the phoenix as a metaphor for what’s going on in China’s automotive sector. Mercedes, BMW, or Audi are all reporting very positive developments from the Chinese market. This confirms what insiders to the automotive industry and experts in cross-cultural marketing have long pointed out silently. It’s not necessarily (only) available income that drives purchasing decisions, but national culture plays a big role, too. Income levels in China would suggest that smaller models are sought after, but the opposite is true. Status, power and prestige are very important elements of Chinese culture. Several years ago now, Volkswagen had planned to rapidly increase market share in China by offering a small car – assuming that with rising levels of affluence, everyone would buy a small, entry-level car. Guess what, they didn’t. The polo was simply too small for the Chinese market. Today, larger Volkswagen models such as the Passat or the Tiguan are doing a lot better. Owning a luxury car is the ultimate sign of social status, and so demand in the premium automotive segment is on a constant rise. In July, Audi sold about 50 percent more cars in China than last year, BMW about 80 % more and Mercedes-Benz even tripled its sales. And all of this despite the rather high luxury taxes in China which raise the prices of the flagship models – the S-Class, the 7-series, or the A8 – to about double from what they are in Europe. These developments certainly come at the right time for luxury carmakers whose sales have been less than favorable in their core markets in the West in past years. The Chinese fenghuang is a symbol of virtue and grace – very similar to what the Mercedes brand stands for. Maybe my use of the metaphor isn’t that off after all.

Here’s an interesting list of “100 Essential Cheat Sheets for Doing Business Abroad”, ranging from ‘food faux pas’ to ‘dress codes’ to ‘negotiations across cultures’. Not all of it offers the deepest insight available, but it’s definitely a good place to start.

Tomorrow, the trial against four executives of the UK-Australian mining giant Rio Tinto will open in Shanghai. The executives have been charged with stealing commercial secrets and receiving bribes and are facing up to 20 years in prison. Both the protection of intellectual property and anti-corruption laws are important domains of the legal environment in any market, so what’s wrong with enforcing these laws? Well, two things. The first is that the facts of the case are not quite clear. Not much has been disclosed about the case, but it seems that what the Chinese courts see as infringements on trade secrets may be what business insiders consider rather normal gathering of industry information. Secondly, the trial may turn out to be highly political and less factual. It is commonly accepted in China that judges weigh both legal and political aspects of cases and sometimes give precedence to the political aspects and interests, including the protection of local markets and companies. That the court hearings will take place behind closed doors certainly contributes to concerns that this may happen in this high profile case, too. Could all of this have prevented? Yes, maybe! Multinational companies such as Rio Tinto simply must be aware of the land mines that are buried all over China’s business environment and proceed with appropriate caution. In a way – to stick with the theme of this blog – it is a case of pride that often shows itself as ignorance concerning differences and threats in the external environment.

eBay has been in several ruffles with french luxury goods maker LVHM. Recently, LVHM, that holds the rights to such well-known brands as Hennessy, Kenzo, Givenchy, Dior Perfumes, or Tag Heuer, has sued eBay over misuse of its Louis Vuitton brand. As its customers frequently misspell Vuitton, eBay has purchased keywords from search engines such as ‘Viton’, ‘Vitton’ or ‘Wuiton’ in order to channel web traffic to listings of the prestigious maker of leather goods products on its own website. Compared to earlier judicial awards LVHM won against eBay, the current one of US$ 316,500 is negligable. In 2008, it was fined 39.9 million Euros for the sale of counterfeit LVHM goods on its platform and in late 2009 it received another hefty 1.7 million Euro  slap on the wrist for continuing to allow the resale of authentic LVHM perfumes on its website. With net revenues in excess of US$ 2 billion in 2009, eBay will probably be able to take the most recent blow as well. As the fight between French brands and the California-based auctioneer has long outgrown its pure business and legal nature, but has become one between two cultures, it has not hard to predict that it will continue into the future.

Cultural awareness is key in any international business activity. Cultural divides should be accounted for in marketing, negotiations, product design, and other important decisions. One must analytically consider the best way to promote a product given the target audience. It is argued that differences among cultures can be explained according to four dimensions of culture:
1. Individualism – “I” consciousness vs. “we” consciousness
2. Power Distance – levels of equality in society
3. Uncertainty Avoidance – need for formal rules and regulations
4. Masculinity – attitude toward achievement, roles of men and women

This figure shows the cultural dimension scores of 12 countries.   Japan, for instance, shows the highest Uncertainty Avoidance score and thus might be receptive to such risk-reducing marketing programs as return privileges and extended warranties.  Since individualism is highly regarded in the US, promotional appeals the promise empowerment might be enticing. In Arab countries where Power Distance scores are high, consumers may respond well to promotions that imply social status.
Doing business in other countries requires cognizance of the cultural divide.  An international manager must think analytically to eliminate any self-reference criterion, which is the unconscious reference to one’s own cultural values.  This is the root of most international business problems.
Understanding culture requires constant monitoring of changes caused by outside events and by the business entity itself.  Resisting ethnocentrism – thinking one’s own cultural is superior – is also important.  One must be careful not to measure other cultures with one’s own cultural barometer.
Some times a Long-Term vs. Short Term Outlook dimension also has been considered.  Asian countries score highly on this dimension, while most Western countries do not.  This may help explain why the Japanese tend to evaluate marketing decisions based on long-term market share rather than on short-term profit motivations.

Re-post by permission of Prof. Michael R. Czinkota. Originally posted at: http://michaelczinkota.blogspot.com/

Something may have gotten past me, but does Chrysler really have a lot of wiggle room for experiments on their customers? It’s recent commercial for the Chrysler 300 features former Soviet leader Mikhail Gorbachev, former Polish leader Lech Walensa and is a call for freedom for Burma’s Aung San Suu Kyi. The commercial is an adaption of what Fiat’s ad agency Armando Testa has done in Europe for its Lancia brand. While the commercial is edgy even for the European market, it may fly there. As noble as the cause is, there is serious reason to believe that it is a total waste of advertising dollars in the US market. Many Americans either won’t know who Aung San Suu Kyi is or they couldn’t care less. Some may not even recognize Walensa or Gorbachev. It may even hurt Chrysler in some Asian markets that take a more authoritarian stance at opposition leaders. What was Chrysler thinking? Or was it Fiat that was doing the thinking? Watch it here: http://www.youtube.com/watch?v=ftJ9nTBDx2E