Doing Business Successfully on a Global Basis Requires In-Depth Relationships

Editor’s note: “International Business Corner” is a weekly column written by Joan Keston that provides information for people involved in or considering international operations. Keston is an international business consultant. Over the next several months she will be writing about important issues that international businesses face as they compete in the 21st century global business environment.

This article is the first in a series addressing business relationships in the global business environment. This article discusses the basic difference between the US business culture, a contract-based culture, and the business culture prevalent in the rest of the world, relationship-based cultures.

RALEIGH, N.C. - When doing business internationally having a relationship with the people with whom you do business is absolutely necessary for long term success. The network of long-standing relationships, friendships and family ties, and the importance of personal reputation are vital. Relationships are the leverage and the force that influence whether a transaction will be entered into, how the parties work through terms and conditions and address unforeseen occurrences, and determine how the contract is interpreted and, sometimes, whether it will be enforced.

Although Europe and the industrialized world in general have established legal systems that respect and enforce contracts, relationships are an important part of the process. In developing countries relationships are vital. In China for example, the legal profession is only about a decade old.

Relationships in the U.S.

In the U.S., “networking” is a big part of the way we make business contacts. It is relationship building of sorts, but on a very superficial level as compared to the concept in most developing countries. Most of the time, we barely know the individuals representing a company when we begin negotiating a contract; even a contract worth values that could proportionately make or destroy our businesses. In fact we often avoid doing business with friends and maintain third-party professional relationships with whom we do business.

The strength of the contract is the force that enables our business culture. The U.S. is a contract-based country when it comes to doing business. The written contract embodies the terms and conditions of the business transaction, and is relied on for the enforcement of that transaction. Our business culture relies almost exclusively on the written contract and not long-standing relationships for the vital aspects of the business transaction. The system works partly because both sides to the contract believe in the contract and basically trust the process, and because we have legislation and a judicial system that enforces that contract.

Doing business as we do in the U.S. is a very direct and straight forward process and seems much simpler when compared to the reliance on relationships as is the process in most developing countries. As developing countries enter the global market place and financial markets, some of these attributes are changing. Contract law and the legal tradition are developing. However, relationships are an important factor in developing and operating a successful business globally. Not only must you invest the time and resources to develop relationships, but you must employ the individuals on your international bridge who understand the importance of relationships and either have the relationships themselves or know how to build a network of relationships in the culture where you plan to do business.

About the author: Joan Keston is the managing principal of Keston & Associates, Ltd., an international business consulting firm located in Raleigh, NC, and a Partner at Paladin and Associates, Inc. She has 25 twenty-five years of experience with mature as well as entrepreneurial companies, domestically and internationally, coupled with an executive managerial and legal background. Her firm facilitates international business transactions, and assists companies establish, grow and integrate their international operations. She can be reached at (919) 881-7764 and jkeston@kestonassociates.com.