How not to drown in confusion while doing business in the BRIC
18 February 2015 -
Head into the growth markets without being abreast of the business culture and you’ll sink without a trace. A willingness to adapt your management style is key
Sometimes it pays to misbehave. In Japan there is the “gaijin smash”, whereby foreigners deliberately break the rules to get what they want.
A long queue at a shop? No matter, the gaijin just barges to the front, knowing that the Japanese are too polite to do anything more than tut at the foreigner’s terrible manners.
But gaijin-smashing your way to the top of management is unlikely to be your best course of action in the up-and-coming economies of Brazil, Russia, India and China (Bric). Here, your quaint British ways won’t be seen as cute and quirky. You’ll just be seen as crass.
If you want to build a business in these territories and get the best from your team you need to understand the cultural values, how people respond to challenges, and which types of management styles will get the best performance out of your staff and suppliers. You also need to understand that products and services that prove instant moneyspinners in the West will almost always need tweaking for a Bric audience.
These tweaks can be quite drastic, says Mikkel Rasmussen, partner at strategy and innovation consultancy ReD Associates. “A fast-food manufacturer discovered that Chinese food menus were based on a completely different logic to Western food and that its menu needed to be reinvented to Chinese taste,” he recalls. “A sports brand discovered that consumers in Brazil couldn’t afford to buy its products at once and instead had to o.er to sell shoes on a monthly payment model. And a mobile technology company discovered that Indian consumers are used to sharing technologies – that meant it needed to design phones that could be shared by five people.
“Cultural factors in the so-called ‘emerging markets’ lead to sharp turns in strategy nearly every time.”
To help you acclimatise to the various quirks of doing business in the Brics, we spoke to entrepreneurs and senior managers operating in these nations to hear what they’d learned – usually the hard way. Here’s what we discovered.
Doctor not dictator
“Let me through, I’m a doctor!” Okay, so you might not have a medical degree or PhD, but in Brazil senior managers are routinely called doctor, or “doutor” in Portuguese. It’s a reminder of the key concept in Brazilian management: hierarchy.
Berta Papp, managing director of Tempest Security Intelligence, has launched three businesses in Brazil. She warns that while there is a clear tier structure in most firms, the nuances of hierarchy are hard to pin down. Indeed, many Westerners may find the working culture excessively – and frustratingly – consultative. “Working in a team for Brazilians means working together from beginning to end,” says Papp. “Everyone is involved in the entire process. No one makes any decisions without checking with the group.”
Work to live
Papp adds that a sense of fun is key to motivating these teams. “Brazilians work hard, but family and life outside of work comes first,” she says. “They appreciate and take all their vacation time each year. Brazilians work to pay their bills and enjoy life. If it gets to a point that they feel there is no enjoyment, they will find something else.”
Dress for success
Raymond Girard is setting up a São Paolo presence for WPP-owned branded-content agency Spafax. He makes sure he looks the part. Clothes are taken very seriously in business here. “I’ve seen American businessmen being made fun of for wearing character-free pleated khakis and navy blazers,” he says. “This attire is entirely acceptable in Orange County, but makes you stand out like a country bumpkin in São Paolo.”
Small talk is big business
What you may see as trivial chitchat is a crucial prospecting tool for many Brazilians, says Girard, who warns Westerners to treat small talk seriously. “Brazilians are not being obfuscatory if they ask you about your family or spouse – and they’re not wandering away from business,” he says. “They are placing you in context and investigating what sort of person you are. Then they will decide whether they want to do business with you!”
Local knowledge impresses
“You’ll get points for being on top of the ever-changing, dynamic, São Paolo restaurant scene and suggesting dinner at the top spots,” says Girard. “Some of the most spectacular restaurants in the world can be found there – by some of Brazil’s very own homegrown ‘starchitects’ like Isay Weinfeld and Márcio Kogan. Knowing those names alone will ensure your colleagues’ admiration.”
It’s tough out there
Let’s not pretend otherwise – the commercial environment in Russia is horrific, often akin to an African kleptocracy. There is corruption, alcoholism, a weary adherence to the rules by workers, and arbitrary application of those rules by the authorities. Transparency International ranks Russia 133rd out of 176 nations for corruption (where 1st is the least corrupt). This is below Kosovo – where the prime minister is embroiled in an organ-traffi cking scandal. More than 400 journalists have been murdered since communism fell, including the editor of Forbes Russia, and businessmen are often arrested and held without trial (witness the terrible case of murdered lawyer Sergei Magnitsky).
Power is at the top
Neil Abbott, business development director at fine wine investment specialist Vin-X, says the febrile business environment means teams operate a little differently. “Decision-making is usually pushed up the hierarchy,” he says. “So do not expect lower-ranking staff to have the autonomy to make decisions.”
Meetings test you
Respect for process is strong in Russia. Meetings can be very formal – and often take place outside what Westerners would consider to be business hours. “Prepare thoroughly for meetings,” warns Abbott. “Ensure you provide an outline for discussion before the meeting.”
Speech beats ink
The spoken word is more readily believed in Russia than written documents, warns Nick Rines, chief executive of the Institute of Diplomacy and Business. “This adds up to the need to meet people in person,” he says. “Email communication will not suffice.”
You might want to brush up on the Bribery Act 2010. Offences committed by Brits in Russia are now prosecutable under UK law. Worth knowing.
You know very little
“The biggest mistake?” asks Adrian Mutton, founder of Sannam S4, which helps foreign firms enter the Indian marketplace. “Brits come to India and think that because everyone speaks English, and that they have Indian friends and go to Indian restaurants, they understand this country. I have been here 20 years and am still learning.”
Don’t beat about the bush
Mutton’s key piece of advice to the British is to stop it. Stop being British, that is. “The British consultative approach can be baffling in one of the world’s most hierarchical cultures,” he stresses. “In India, people expect to be given precise instructions. Employees do what they are told to do by their managers – and they do it exceptionally well – but they also tend not to do things they have not been specifically asked to do.”
This major cultural difference can result in frustration on both sides unless Western managers quickly get to grips with it. “Brits see the Indian approach as lacking initiative,” says Mutton. “And Indians find the vague, imprecise instructions of the British confusing at best.”
No is the hardest word
Western managers may not like it when their staff say no. Yet they may soon miss it, says Nick Rines, chief executive of the Institute of Diplomacy and Business. “Another alien practice is that Indians do not say, ‘no’,” he says. Instead, Western managers need to infer a no from its inevitable absence. “It is not part of Indian culture to disappoint with a straight rejection,” says Rines. “Those questioned can sometimes be seen to struggle and hesitate to come to a conclusion in answering a question, which are signs that ‘no’ is the answer that will not be spoken. Therefore questions have to be oblique. Asking what the outcome may be in a given situation is far more effective than a head-on approach.”
The work ethic is real
The Chinese economy has been growing with the tenacious ferocity of young bamboo for 30 years. While deal volumes have fi nally started to fall – not even the great People’s Republic is immune to the global downturn – think tanks posit that, this year, gross domestic product will grow by 8%.
Compare that to the puny 1.4% forecast for the UK, and it’s not surprising that China’s allure for opportunist foreign firms is unlikely to diminish any time soon.
But it’s not just the country’s growth rates that are bringing in the business. The legendary work ethic of Chinese employees is both true and a source of national pride. Remember the astonishing Beijing Olympic opening ceremony? “I often joke and say that our human performance is number two in the world,” says its director, Zhang Yimou. “Number one is North Korea.”
Zhang, an admirer of the “uniformity that brings beauty” of Eastern one-party Communist states, draws unfavourable comparisons with the rest-ethic of the West. “I have conducted operas in the West. It was so troublesome. They only work fourand- a-half days each week. Every day there are two coffee breaks. There cannot be any discomfort, because of human rights. We do not have that. We can work very hard, and withstand lots of bitterness. We can achieve in one week what they can achieve in one month.”
Face time is crucial
The energy of Eastern workers can prove troublesome for expats used to a Western working day. But there are other challenges to be aware of. For entrepreneurs looking to take advantage of the cheap manufacturing resources on offer, heed the warnings of the vanguard: it’s not just the likes of fashion superbrands such as Burberry and Chanel who are finding their margins eroded by cheap knock-offs.
New ideas are hard to protect and Chinese copycats even harder to prosecute. “It’s imperative to find a trusted partner,” says Obi Nwosu, founder of watchmaker CLICLOC. “Don’t use middlemen or online intermediaries. If you want to do business in China, you have to get on a plane and meet your suppliers.”
The importance of face-to-face meetings is a recurring theme among the Brics. But in China it seems to be even more important. Business relationships are fostered slowly, spanning many meetings, which are often conducted through a translator. Since it is this person who is doing the talking, it is essential to look for translators with impeccable references.
Get in and stay in
For firms looking to enter China and cater to the domestic market – a fast-growing middle class means that opportunity knocks – there are many barriers to entry. Paul Vescovi, managing director of Experian’s UK&I Credit Services business, warns profiteers against a “make-a- quick-buck” strategy. “Stay for the medium- to long-term,” he says. “The China Securities Regulatory Commission favours those firms with a long-term interest in China.”
Don’t be anti-social
All newcomers to China should pay special attention to the rise of social media sites. Facebook and Twitter are not present in China, but QQ, RenRen, Kaixin001 and the Twitter-clone Weibo are just as pervasive. Web technology is changing the culture. “You now see families organising vacations using the internet,” says Jerry Clode, Shanghai-based head of cultural insight for WPP-owned marketing agency Added Value. “They might find families in other cities with the same interests and agree to meet up, or share a car journey with them. This isn’t normal behaviour for the Chinese, who are traditionally reticent to socialise so freely with people outside their circle.” Even the core idea of guanxi, the “exchange of favours” model, is being challenged by the online world. If you want to understand your Chinese co-workers, these social networks must be number one on your homework list.
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