A government white paper released in October 2012 outlines a road map to ensure Australia becomes an even more prosperous and resilient nation. It covers a set of national objectives to guide the country to 2025, including five key policy areas.

For details please see the following link:
http://asiancentury.dpmc.gov.au/white-paper

Could there be some lessons for Canada here?

Prepared by Nerella Campigotto in conjunction with our India Partner

Indo Canadian bilateral trade stands at CAD 5 billion at present and is expected to increase to CAD 15 billion in the next 5 years. India’s exports to Canada in 2011 were up 25% and imports from Canada registered an increase of 31.7% over 2010.  Total bilateral trade during 2011 registered 28.35% increase over the previous year.

While it is clear that investment and trade relations between the two nations are growing, there is tremendous scope for increasing business. For example, Canadian investments in India are only 0.38% of the total investments received by India! Canadian companies need to look at new emerging markets like India to expand their business.

The simplest route for a company from Canada wanting to sell its products or services in India is through the appointment of an Indian distributor or agent. These arrangements do not generally need any entity to be established in India and generally no government approvals are needed to be taken by the Canadian company.

Companies from Canada wanting to do research on the India market and assess the business potential by getting a firsthand feel on the ground can open a Liaison (or Representative) Office in India, post approval from the Reserve Bank of India.

For companies that are sure about their India plans or those that are willing to take a longer term perspective on their business plans, opening a Wholly Owned Subsidiary (WOS) or a Joint Venture (JV) with an Indian partner are options that can be considered. With progressive economic liberalization, most sectors in India are open to foreign investment. Certain sectors like broadcasting, defence, insurance, telecommunications, retail etc. have a maximum permissible ceiling up to which foreign investments are allowed. Any proposed investments over the permissible ceilings will need to be cleared by the Foreign Investment Promotion Board (FIPB) which meets every week to clear proposals.

What are the potential challenges of operating in India?

The challenges of operating in India can be best illustrated by the World Bank’s annual Doing Business Study which compares measures regulations impacting 10 stages of a business’ life. The 2012 study which compared 183 countries saw India being ranked at 132, down 7 places from 139 from the Doing Business 20011 Report. Canada ranked 13 in the Study and Singapore ranked number 1. This gives a comparative perspective of the challenges that companies from Canada need to be prepared for when doing business with India.

‘Trading across Borders’ at 109 (Canada: 42), ‘Starting a Business’ 166 (Canada: 3), ‘Dealing with Licenses’ 181 (Canada: 25), Closing a Business 128 (Canada: 3), and ‘Enforcing Contracts’ 182 (Canada: 59) are some of the areas where Indian rankings trail those of Canada by a wide margin. While the rankings showcase India’s progress in modernizing its financial sector and in dismantling trade barriers, it also highlights continuing problems with relatively complex tax administration and endemic delays in the legal system.

The latter two factors are key concern areas for companies from Canada to watch for while doing business in India

What is our advice to companies from Canada wanting to do business in India?

• Research the market before you invest. Understand the size, potential and price dynamics and how and where you want to enter it. Do not go by the overall size of the Indian market, segmentation is important. Take time to study the market, the demand/ supply situation, pricing trends and competition. Do not go by overall Indian market size, segmenting the market for your business is critical.
• Make sure that you have top management commitment and adequate resources to manage a business relationship in India.
• Visit the market and take time to build personal relationships. Be prepared to make follow up visits. Choose your partner with care – conduct thorough due diligence and take independent advice.
• Allow plenty of time for meetings and travelling around the market. Be patient – it always takes longer than you think!

 Canada can take advantage of India’s growing economy for promoting solutions in mining, clean energy, high end technology, biosciences, pharmaceuticals and Telecom/IT. With growing awareness about mutual opportunities for cooperation and growth, trade and investment ties between India and Canada are poised to show excellent growth in the next decade.

• India is an emerging power in the 21st century, and is forecast to become the 3rd largest economy in the world.
• India is a source of talent and innovation; about half of India’s 1.2 billion people are under the age of 25.
• India supports a vibrant, pluralistic democracy and insists on an open and free press, providing a reassuring environment for businesses, particularly if compared to some other emerging markets.
• The falling Indian Rupee has improved the attractiveness of overseas companies investing in India, and all types of investment are forecast to rise as restrictions relax.

We live and work in a world that is an integrated entity, increasingly influenced by external cultural factors. For those in leadership positions it is now not only necessary to have a high IQ and EQ (emotional intelligence), but strong Cultural Intelligence (CQ) is also increasingly regarded as a necessary skill to succeed in today’s global business community.

Leadership entails communicating a vision and influencing others towards a goal; achieving this across cultures is no easy feat. Defining the characteristics that make a good leader can be daunting. Much of the research and information we are exposed to about this topic is US, or at least Western focused, where leadership skills tend to be measured by organizational performance such as productivity and morale. Nevertheless, universally there are basically two types of leadership – task oriented and relationship oriented. People from different cultures react differently to these styles. In addition, leadership quality, as with charisma, is often about perception; a person perceived as a leader will gain respect, power and authority. Indeed, we may say that it is the followers who determine a leader’s greatness. Successful global leaders understand how leadership is viewed in other cultures, and how the expectations of culturally diverse followers influence leadership behavior.

Let’s look at three ways leaders can demonstrate cultural intelligence.

1. Building awareness
   Culturally intelligent leaders are open to knowledge and develop new skills to help them succeed. This means understanding the cultural attributes of the followers and what their expectations are. These attributes can be in a number of areas such as the relationship between the leaders and their followers, what role seniority plays, how problems are handled, and attitudes towards efficiency, punctuality, deadlines etc. Often tradition will prevail over logic, so it is important for the global leader to learn about the history and values of the followers’ culture. This may be achieved by developing alliances with other leaders from different cultural backgrounds who can provide different perspectives for comparison.
2. Adapting
   Culturally intelligent leaders are comfortable in adapting their behavior to suit different circumstances without changing their inherent leadership style. With stronger awareness they can determine whether, for example, their followers are from an individualistic versus a collectivist culture, whether they work better in an autocratic versus a bureaucratic environment, whether they are motivated by incentives versus punishment, whether they respond to an informal versus formal approach, etc. Successful global leaders spend time with their followers to understand their comfort level, and listen to what is said and not said.
   
   
3. Communicating
   Culturally intelligent leaders understand that the way they communicate is critical to their success. Once they are aware of the cultural attributes of their followers and have adapted to their environment, it will be easier to tweak their communication style accordingly. Apart from the obvious need to use clear language, this may also mean determining how much information needs to be imparted in order to achieve the required goal, and what the consequences and/or rewards are for the followers. It also means adjusting communication styles to take into account whether the follower’s culture is one that exhibits an implicit rather than explicit manner, as well as non-verbal communication traits.

To summarize, whether a leader’s style is task oriented or relationship oriented, he or she can work towards increasing their cultural intelligence by applying the three steps above. By being aware of the cultural attributes of their followers, adapting to the cultural environment and communicating accordingly, leaders are more likely to achieve success. There is no doubt that a healthy dose of CQ is an indispensable asset for today’s global leader.

Communication skills are considered fundamental in the workplace; but let’s take this a step further and consider the implications of applying these skills in a cross-cultural setting, and doing so ethically.

Effective communication involves expressing oneself clearly, being a good listener, using appropriate body language, and how a message is delivered and received. It is inherently a two way process. Communication operates through a system of customs and principles that are essentially determined by people’s culture. When the communicators don’t share these principles, a communication breakdown, or miscommunication, will typically occur. Of course there are various types of communication in the workplace: face-to-face, email, phone, etc. and for each of these the style of communicating will vary according to culture.

Webster’s Dictionary defines ethical as “conforming to an accepted standard of good behavior” and the Oxford Dictionary defines ethics as “a set of moral principles or code”.  Consequently, when we speak of ethical communication in the global workplace we see that cultural customs and principles affect both the communication style and the definition of what is considered ethical.

Let’s look at three areas where communication styles differ across cultures and how we can overcome some of the challenges presented and still ensure we maintain an ethical approach.

1. Explicit Vs Implicit
   Most Western cultures, especially Anglo, Germanic and Scandinavian groups, will communicate explicitly, that is, almost all important information is communicated in a direct and unambiguous manner. This style also reflects our ethics, which is to communicate clearly and truthfully without being vague or misleading.  Such cultures as Asian, Middle Eastern and Latin American tend to communicate implicitly; they rely on the context to communicate the most important information, and may take relationships and setting into account, resulting in an indirect and ambiguous style. Ethics in these groups require that politeness and avoiding embarrassment take precedence over truth; in fact, for many of these cultures there is no absolute truth. The avoidance of saying ‘no’ in some Asian cultures is an example how these two styles can threaten communication. 

   So how can we ensure we are not offending by being too direct, and conversely, determine what is being conveyed in a vague response? Simply being aware of the situation certainly helps. Making others feel comfortable and relaxed can override what you say, and I would encourage the listener to ask open-ended questions to clarify vague answers. Being aware of your own values and principles, and not judging the other party by your standards can alleviate a lot of frustration.

2. Non-Verbal
   We use several non-verbal signals when we communicate such as touching, facial expressions, gestures, body positioning, eye contact, speech volume and tone, physical distance etc. These can have different meanings across cultures.  Another major difference is the use of silence. Most Western cultures tend to want to fill long silences, and this can be perceived as arrogant by cultures where silence is interpreted as a sign of respect. We may interpret avoidance of eye contact as an indication of dishonesty or lack of sincerity, whereas in many African cultures it is considered respectful.

   In the global workplace it is best to observe, and then modify our non-verbal communication signals to reflect those of the other party where possible.  I am not suggesting to completely mirror these signals, but things such as avoiding touching when it creates discomfort is an easy adjustment to make. Also, don’t make assumptions based on your own non-verbal communication style and rely more on verbal clarification. A smile is sometimes used to hide anger so you may want to make sure you have understood correctly by verifying the meaning verbally. 

3. Language
   One of the reasons English has become the lingua franca of the business world is because of its richness, directness and precision. The Thesaurus exists only in English, and there are about 200,000 commonly used words in English (whereas French, for example has 100,000). Some speakers of English as a second language, especially those from cultures that don’t want to lose face, pretend they understand when they really do not. On the other hand, pretending not to understand when in fact they do is a negotiation technique used by some others. Unfortunately we now have the phenomenon where two communicators are often both non-native speakers of English, adding another dimension to the challenge of global communication.

   Language is fraught with difficulties such as idioms, slang, jargon and euphemisms; these should be avoided when communicating ethically with a non-native speaker. Keep it simple, clear and use standard language. Clarify what you are saying and offer the other party the opportunity to do the same.

In concluding we can see that this is an extremely complex issue, but to begin the process of communicating ethically in the global workplace we should build awareness so we can anticipate the differences, and then observe and adapt, while still maintaining our own values and ethics. In fact, one could say that taking into consideration both your own and the other party’s cultural factors when communicating, in itself constitutes ethical behavior.

For small and medium sized enterprises in the business or professional services industry, expanding to a foreign market can be a daunting proposition. Many such companies limit their growth by not taking the chance, while others proceed with insufficient preparation and then wonder why they didn’t succeed. The following is a brief outline of the key steps that should be undertaken prior to launching into an international venture, and some of the issues to consider.

Step 1: Market Overview

Determine which country or countries have a viable market of sufficient size for your services. If more than one location is being considered, determine which location to target first. A wise service exporter will move on to other markets only after success has been achieved in the first location. Even if only one country is being considered as a potential market, it may be necessary to target a particular region to narrow down the focus of the market research. Instead of simply following the easiest and/or most popular export route, consideration should be given to less likely regions, as untapped opportunities may exist there.

Avoid becoming an exporter by default. Many international expansion decisions are based on a contract “landing in your lap”. Just because one client from a particular country approached your company and has a need for your services, it does not mean that the entire market should necessarily be targeted without having undertaken any additional research and analysis. The client in question may not be representative of the target market, therefore due diligence is still warranted.

Step 2: Market Analysis

Ensure all aspects of the market are covered. These should include: the market’s response to your service, competitive intelligence, the impact of foreign currency exchange rates on fees charged and costs incurred, and consultation with local professionals on local laws and regulations.

Be prepared to adapt your services for the needs of the targeted market, as well as meet the increased demand that the new market will create. Prepare for cultural differences, both from the perspective of customer service and also employee and/or partner relations. Do not assume there are no cultural differences simply because English is spoken. Also keep in mind there may be regional sensitivities within the target market.

It is important to visit the potential market and build relationships through face-to-face meetings, as well as to talk to other companies that have succeeded at exporting their business services to the area. Most importantly, be prepared for the financial and time commitment of the venture to be greater than anticipated.

Step 3: Market Entry

There are various options available when entering a new market as a business services provider, these include: opening a full branch office, opening a sales or representative office only, operating through an agent, entering a partnering agreement with a complementary business, forming a joint venture, or acquiring a competitor.

The advantages and disadvantages of each path should be analyzed. This would entail considering the need for positioning the business name or brand versus the cost efficiency of entry into the market through a partner or agent, market share versus profit goals, and the viability of entering the market in stages by working through an agent or sales office to test the market prior to opening a full branch office.

Step 4: Marketing/Business Plans

Form a market entry strategy based on the information obtained in the previous steps. A Business Plan or Strategic Intent should be prepared at the beginning of the new venture even if there is no necessity for financing. Prepare a detailed monthly marketing plan, especially if there is no local partner involved whose marketing strategy can encompass both parties. As a business services provider, which usually entails marketing intangibles, this will be vital to the success of the operation, and should focus on image building, and establishing credibility and relationships.

Consider diversifying your services or service delivery to better meet the needs of the target market. Also take into account any cross-cultural issues, and translate and localize all marketing material including websites. To avoid making mistakes in this area, engage the services of a local PR firm, advertising agency or other required expertise.

Step 5: Start-up of Operation

If the Business Plan includes opening a branch office, ensure that all local laws and regulations are understood prior to setting up systems or hiring employees. Accountants and lawyers familiar with the local requirements should have been consulted during the market study stage, and should now be engaged to assist with start-up.

Adapt any systems already in place to work cross-culturally. The challenge lies in succeeding with this adaptation without losing sight of your company’s core values and culture.

Analyze the advantages and disadvantages of transferring staff versus hiring local people for key positions. This can be crucial to the success of the venture and should be closely monitored.

Ensure there is smooth communication between offices and with partners. To avoid the risk of miscommunication, translate all pertinent information into the local language even if English is understood by all parties.

It is essential to make a long-term commitment to the new market. Always keep in mind that this new venture may require more perseverance than originally anticipated. But ultimately, the most important point to remember may be the old adage:

“If you fail to plan, plan to fail.”

by Nerella Campigotto

 

If international expansion is on your agenda, this is a great time for seriously considering Australia as a potential business destination. Australia is the only developed economy in the world to avoid the recession and record positive growth in 2009, and according to the IMF, is anticipated to show lower net debt than any other advanced economy through 2014.

 

In October 2009 Australia was the first in the Group of 20 to raise interest rates (and did so again in November and December taking it to 3.75%) prompted by a decrease in unemployment, and increases in the stock markets, house prices, business investments and retail sales. GDP is expected to grow above 3% in 2010.

 

At time of writing unemployment sits at 5.7% and is expected to decrease further next year. Close to 100,000 jobs were added in the three months to November 30. The two-year government bond yields 4.48% and the Australian dollar trades at around US$0.91.

 

A diversified export market has also contributed to the economy’s health. Australia’s five top trading partners – Japan, China, South Korea, India and the US – represent 57% of the country’s total export market. Continued strong demand for its resources, such as iron ore and liquefied natural gas, will sustain Australia’s economic stability. Services exports have had an average growth rate of 7.8% per annum over the past five years.

 

Some additional 2009 rankings that indicate a strong economy:

·         The World Economic Forum rates Australia as the second-best financial centre in the world after the UK.

·         D&B’s Global Risk Indicator places Australia as one of the world’s four safest countries in which to invest.

·         The World Bank ranks Australia 7^th among OECD countries for ease of doing business.

·         The IBM Global Locations Trend Report places Australia 6^th in the world for R&D jobs. It is also considered to have the most competitive IT industry in the Asia-Pacific region.

·         According to the Mercer Global Pension Index Australia has the second-best retirement system in the world, behind the Netherlands.

·         The Global Competitive Index ranks Australia 15^th overall out of 130 countries, and 4^th for its banking system.

·         In 2009 the UN has placed Australia second in the world for quality of life, behind Norway.

 

Australia’s growth rate is anticipated to continue for a few more years, underpinned by booming resources investment, rising household income and the strength of its major Asian trading partners. All in all, this is a great time to make this vibrant economy part of your international market entry strategy.

 

by Nerella Campigotto

Current events and their effect on our economy may prevent many businesses from considering or proceeding with expansion plans. Conventional thinking may keep your competitors close to home in a defensive posture. Consider the points outlined below and decide if this could be the best time for your business to diversify into international markets:

• Pursuing foreign markets requires a great deal of preparation and research. This time-consuming activity could be used to take advantage of a slow down in your core business. Do you and your staff now have the time available to start a new venture?

 

• Currency fluctuations provide challenges in doing business globally, even in the best of times. However, a lower currency in your home country means that your service or product could be much more price-competitive in the world market.

 

• The cost of running an office in some foreign countries can be considerably lower than in your home market. This is also sometimes true of developed markets as well. For example, if we were to look at US or Canadian businesses wanting to enter Asia, we would find that there are financial, as well as various other advantages for them to consider Australia as a stepping stone from which to locate their next Asian branch office.

 

• The availability, as well as the relatively low cost, of hiring trained and skilled staff in foreign countries may be a particularly attractive reason for considering expansion at this time.

 

• Potential partners, strategic alliances and joint ventures, all strategies to be considered when expanding into a foreign market, are much more likely to be receptive and viable in times of difficulty.

 

• Last, but not least, expansion may now be your only chance for survival. It’s simply a matter of thinking in broader terms and finding larger or more diversified markets, rather than concentrating on your local, diminishing market. Following the heard often leads to the slaughterhouse.

 

Of course, we know that times of economic uncertainties come and go. The challenge is to ride out the cycles and take advantage of the opportunities that the economy may provide, so that we can emerge in an even stronger position once the cycle is complete.