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Exploring the cultural and business challenges U.S. companies face when outsourcing in the BRIC (Brazil, Russia, India, and China). Find out what being a Pacific Power means to U.S. business.
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Bridging Cultural Divides and Building Successful Multinational Business Relationships
Exploring the cultural and business challenges U.S. companies face when outsourcing in the BRIC.
®
Copyright © 2010-11 Hyrax International LLC, all rights reserved.
Bridging Cultural Divides and Building Successful Multinational Business Relationships
Exploring the cultural and business challenges U.S. companies face when outsourcing in the BRIC (Brazil, Russia, India, and China). Find out what being a Pacific Power means to U.S. business.
Apple is one of the biggest U.S. success stories, yet they have fewer than 50,000 U.S. employees. Over 700,000 employees are estimated to contribute to Apple products, worldwide. How is the manufacturing and technology ecosystem here and abroad changing the face of business?
Today’s global businesses need to effectively manage multinational, multicultural teams spread across the globe. Differences in work ethics, communication, culture, and language present barriers that few companies successfully master — and in today’s economy, the pressure to perform keeps businesses moving quickly. Find out where the challenges lie with international business and the cultural intricacies of international teams. This seminar touches on the future, covers recent changes in China's economic landscape, and opens up discussion on how the U.S. needs to change to preserve it's Pacific power status.
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Synopsis
Copyright © 2010-11 Hyrax International LLC, all rights reserved.
‣Experts in Globalization ‣ International team development. ‣Global program management. ‣Cross-cultural leadership.
‣Serving Global 2000 companies andselected emerging companies.
‣Our customers effectively manage differences in business cultural preferences, work ethics, communication, culture, and language.
‣Guiding companies to profit in Brazil, Russia, India, China (“the BRIC”), the Americas, and the Middle East.
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About Hyrax International LLC
globalPMguy
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The “BRIC”
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Brazil
Russia
India
China...and more recently,
South Africa“BRICS?”
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Donald Chan/Reuters
People flooded Foxconn Technology with résumés at a 2010 job fair in Henan Province, China.
I want a glass
screen.
Source: The New York Times.
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“The speed and flexibility is breathtaking, there’s no American plant that can match that.”— Apple Executive, post iPhone redesign
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The center of global economic power is shifting east. In 10 years, three of the world's five largest
economies will be in Asia: China, Japan and India. — Fareed Zakaria, Time Magazine (Jan 30, 2012)
“The United States is a Pacific power, and we are here to stay.”
— President Barack Obama
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Changing economies: Top 10 (1990 vs. 2011)
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6 GE Global Investor Day
March 7, 2012
Changing economies – top 10
0
2
4
6
USA Japan Germany France Italy UK Canada Spain Brazil China
0
5
10
15
USA China Japan Germany France Brazil UK Italy Russia India
Markets constantly evolving … growth markets ~50% of GDP by 2025
New entrants
2011
1990
U.S.
U.S.
($ trillion, GDP in current U.S.$)
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Why you should care about the “BRIC”
‣Since 2008, the BRIC has met yearly to discuss cooperation.
‣Europe has 35 cities with a population over 1 million. ‣By 2030: ‣ India will have 68 cities with over 1 million residents ‣China will have over 1 billion people living in cities.
‣Brazil's 8.9% growth topped the BRIC in the 1st half of 2010. (But, has markedly slowed, to 2.7% in 2011).
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Indian IT-BPO exhibits spectacular rebound
‣ India IT-BPO growth 18.7% FY2011.
‣ India’s Global outsourcing share: 55% (up from 51%, 2009).
‣China, India have over 500 million Internet users, projecting 800 million by 2016.
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Source: National Association of Software & Services Companies (Nasscom), Economy Watch.
0
15
30
45
60
FY 2010 FY 2011
$33.5
$27.3
$14.1$12.5
$11.3$10.0
IT ServicesBPOSoftware & Engineering
IT-BPO Export Revenue (USD billion)
18.7%
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The evolving face of outsourcing
“The era of cheap labor in China is over.” — Harley Seyedin, President, American
Chamber of Commerce in Southern China
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The Chinese economy and outsourcing
‣ Real wages for manufacturing: Growing 12% per year.
‣ Two decades of double-digit growth.
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Average Wage Rate Compared to U.S.*(adjusted for productivity)
Source: Boston Consulting Group.
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India: Big and confusing
‣$1.4 trillion economy in 2010. ‣Fourth largest Global economy in PPP terms.
‣ Indian to U.S. exports grew 30% in FY 2010. ‣Economy growing at about 9%. ‣Government receipts growing at ~16%!
‣Democracy, legal system based on UK law, respect for IP, predominant use of English in business. ‣Closer to U.S. in thinking than Brazil, Russia, China. ‣ (But, not necessarily culturally...)
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Source: Amritt Inc., Gunjan Bagla.
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Market’s attracting foreign investment in India
‣ The Americas and Europe are the largest customers for the Indian outsourcing industry.
‣ India will be 5th largest consumer market by 2025, worth over $1,500 billion.
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Source: Sourcing Line, McKinsey Institute.
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Fast-growing sectors
‣Rising middle class demanding consumer products: ‣Ford India sales up 300% on made-for-India “Figo.” ‣Amway expects to double its $395 million sales. ‣Whirlpool India, sales up 32 percent.
‣ Infrastructure: ‣$1 trillion infrastructure upgrade. ‣Highways, toll roads, mass transit, rail.
‣Entertainment: ‣Reliance invests $325mm for 50% of Dreamworks.
‣Defense & aerospace: Shopping list exceeds $100 billion.16
Source: Amritt Inc., Gunjan Bagla.
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Retail sector growth opportunities in India
‣ Organized retail estimated at $28B+.
‣Will become a $260B segment over the next decade.
‣ Huge opportunity for supply chain investment, IT infrastructure, expertise from International retailers.
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2007 2008 2009 2010 2011 2012 2017
Organized RetailTotal Retail
$1,011
$590$527$471$421$376$336 $282
$97$74$51$29$17$12$12 $17 $29 $51 $74 $97
$282
Source: IBEF, Boston Consulting Group.
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Why you should care about the “BRIC”
‣Every BRIC country represents:
‣Resource opportunity
‣Market opportunity
‣BRIC countries are rapidly coming on-par with the U.S.
‣ If we don’t become a Pacific Power, we (as a country, and as companies) will be left behind.
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70% of all projects suck
Sucks
Doesn’t suck
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Why?
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Unfamiliarity with scope & complexity
Lack of communication
Inadequate project management
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Reproduction of Singapore Airlines ad campaign.
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Three things for them
What three things do people in your country need to understand to work with the U.S.?
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Three things for us
What three things do Americans need to understand to work with other countries in the BRIC?
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Q&A
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‣At work, we do business with whoever has the best product, regardless of our relationship with them.
!
‣To avoid a conflict of interest, I avoid doing business with someone solely because of a personal connection.
Agree Disagree1 2 3 4 5
Agree Disagree1 2 3 4 5
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Relationships and ventures
‣Westerners are “venture driven:”
‣ It’s about the deal, the best price for performance return.
‣The BRIC (and especially Asians) are “relationship driven:”
‣ It’s about building trust and entering into long-term, healthy partnerships.
‣Americans seem impatient, disrespectful, opportunistic.25
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Blind to communication
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‣Western culture is low context, focusing chiefly on words.
‣ BRIC cultures are intensely high context, relying on many forms of communication!
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Failure in management
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Flat organizationsTall triangleTall OrganizationHierarchical Thinking
Flat OrganizationEmpowered Thinking
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International business implications
‣Power distance and high-context communication leaves Americans “blind” to the message.
‣Lack of relationships and social structure leave a vacuum... no way to subtly and respectfully inform the superior.
‣Problems are ignored until too late. Subordinates irrationally blamed, even if it’s beyond their responsibilities.
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Management
Western management theories (created mostly in America and France), like Management By Objective,
don’t work in Asia.
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A different time
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‣Westerners are “chronically” Monochronic, thinking of time as a finite resource that is “spent.”
‣Most of the rest of the world is Polychronic, thinking of time as an infinite resource.
‣Do several things at once, shifting from one to another.
‣Time is important, but other things (relationships) vie for attention.
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Learning to adapt to “BRIC” preferences
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‣Robust processes avoid lack of understanding.
‣Slow down your meetings, especially with India and China.
‣Long pauses in response times let your partner: ‣Gather thoughts. ‣Translate them. ‣Send them back.
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Group orientation (individualist / collectivist)
‣American thinking (individualist):
‣Promoting one self. Looking out for one self. Being the “best.” Achievement by accomplishment.
‣The rest of the world (collectivist):
‣Looking out for the group. Building long-lasting relationships. Ensuring well-being for all. Achievement through longevity and ascription.
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Cultural business preferences
Doing business with the BRIC requires mastering different cultural business preferences:
1. Relationship driven versus venture driven 2. Communication style 3. Power distance and organizational structure 4. Polychronic versus monochronic time orientation 5. Individuality versus group orientation
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Economy rankings: Ease of doing business
‣ Economy rankings on the ease of doing business (World Bank Group).
‣Multinational businesses must master foreign regulations, customs, business cultural preferences, and laws.
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30
72
8796
117
137 134127123
79
65
35
5
183
RussiaBrazilIndia
China
Turkey
Mexico
United States
OECD high income
Eastern Europe & Central Asia
East Asia & PacificLatin America & CaribbeanMiddle East & North Africa
South Asia
Sub-Saharan Africa
167 AfghanistanSource: World Bank
Ease of Doing Business Index
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Doing business in the “BRIC”
‣Outsourcing vastly increases the complexity of your business.
‣But, the payoff is there.
‣Engage with experienced partners that have proven track records.
‣Make sure your team has relevant International experience on board.
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Media contact: Laurel Mintz, [email protected], +1 805-409-9550 x 703. Copyright © 2014, Hyrax International LLC, all rights reserved. Cross Cultural Management™ is a trademark of Hyrax International LLC.
Media contact: Laurel Mintz, [email protected], +1 805-409-9550 x 703. Copyright © 2014, Hyrax International LLC, all rights reserved. Cross Cultural Management™ is a trademark of Hyrax International LLC.
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