When you conduct business in the United States, domestic laws cover all transactions. However, questions of the appropriate law and courts of jurisdiction may arise in cases involving different countries. When a commercial dispute arises between individuals from two different countries, each person would prefer to have the matter adjudicated in his own courts and under his own laws. Insert a clause in any agreement stating that each party agrees that the laws of a particular country govern – preferably, the United States.
Considering culture
If you’re reading this book, you have at least some interest in doing business in a country other than your own. But importing/exporting isn’t just about business – you also need to study the cultures of the countries you want to work with.
Culture affects all business functions, including marketing, human resource management, production, and finance. Culture is the total of the beliefs, values, rules, techniques, and institutions that characterize populations. In other words, culture is the thing that makes individual groups different. In this section, I cover the aspects of culture that are especially important to international businesspeople.
Aesthetics
Aesthetics is a society’s sense of beauty and good taste. In particular, you want to pay attention to color and the messages that different colors may convey. Color can mean different things in different cultures. For example, black is the color of mourning in the United States and Mexico, white is the color of mourning in Asia, and purple is the color of mourning in Brazil. Green is the color of good luck in the Islamic world, so any item featuring green is looked upon favorably there.
Attitudes and beliefs
Attitudes and beliefs include predispositions – either favorable or unfavorable – toward someone, someplace, or something. Attitudes and beliefs influence most aspects of human behavior because they bring order to a society and its individuals. The better you understand differing attitudes and beliefs, the better you’ll be able to work with people from other countries.
Here’s an example: Although Americans tend to think that time equals money, people from the Middle East, Asia, and Latin America may feel just the opposite – they’d rather get to know you before discussing business. Arabs typically dislike deadlines, and when faced with one, an Arab may feel as though he’s being backed into a corner.
Religion
Religion is one of the most important elements of culture. An awareness of some of the basic beliefs of the major religions of the world can help you understand why attitudes vary from country to country. As an importer/exporter, keep in mind that religion influences all aspects of business. If you don’t understand and adapt to a culture’s religious beliefs, you’ll fail – that’s the bottom line.
For example, a company called American White Cross manufactured a variety of first-aid products and sold them throughout the United States and around the world. Because its corporate logo and packaging included a cross, it was unable to market its product line in the Islamic world because the cross is a symbol representing Christianity.
Material culture
Material culture consists of technology (how people make things) and economics (who makes what and why). The aspects of technology and economics apply not just to production but also to marketing, finance, and management. If you want to do business with other countries and you’re using new production methods and products, that may require changes in people’s beliefs and lifestyle – and change is never easy.
Language
Language is probably the most obvious cultural distinction that newcomers to international business face. Even though many businesspeople throughout the world speak English, your ability to communicate in the local language gives you an advantage and conveys a sense of respect to your potential associates.
Nonverbal communication is often as important as written or spoken language. Gestures can have different meanings from one country to the next. For example, Americans and most Europeans understand the thumbs-up gesture to mean that everything is all right; however, in southern Italy and Greece, it conveys the message for which Americans reserve the middle finger. Making a circle with the thumb and forefinger is the okay sign in the United States, but it’s a vulgar sexual invitation in Greece and Turkey.
Noting currencies and exchange rates: Financial conditions
Values of currencies do not remain fixed – they change, sometimes rapidly, as currencies are traded in the world’s financial centers. Fluctuating currency values can result in major losses if a currency trader’s timing is wrong, so you need to have a keen awareness of exchange rates and use them as a factor in deciding when and where to do business.
Make sure you’re able to read and understand foreign exchange quotations and to recognize and understand currency exchange risks. Many newspapers list the foreign exchange table in their finance sections. You may see a quote like the one in Table 1-1.
Table 1-1 An Example Currency Quotation
The table shows that at close of business on Monday, the British pound cost in U.S. dollars was 1.8412, and at the same time on Friday, the pound cost in U.S. dollars was 1.8498. The table also shows that at close of business on Monday, the U.S. dollar was valued at 0.5431 British pounds, and at the same time Friday, the U.S. dollar was valued at 0.5406 British pounds.
Suppose that 1 U.S. dollar equals 100 Japanese yen. If you sell an item to a client in Japan for US$10,000, the item would cost the client in Japan ¥1,000,000. If the rate of exchange fluctuates to ¥125 to the dollar, the same item would now cost your client ¥1,250,000.
In this example, the dollar is getting stronger. It’s making your product more expensive and, hence, more difficult for you to export. On the other hand, a strong dollar enables you to import more goods, because the dollar has a stronger buying power.