Building in Asia offers challenges to U.S. companies

By NATHAN ROTHMAN
Trade Interface Corp.

Our firm has been building manufacturing facilities around the world since 1984, usually buying technology and equipment from industrialized countries and selling it in lesser developed countries. We provide technology, equipment, training and financing.

During this time we have learned that business is business no matter where it is conducted. Considerations in terms of money, performance and contractual issues should be the same wherever you operate.

Many companies seeking to globalize operations take deals in Asia that they would not accept in the U.S. I think this is a big mistake.

The process of putting a deal together in a foreign country will take longer, but I believe that if you are open with your partners and explain to them why certain points are critical in the agreement and/or operating plan, you will end up with an agreement that is mutually beneficial and profitable for both sides.

There are many structures for doing business overseas, i.e., contractual, joint ventures, acquisition or start-up of a wholly foreign-owned enterprise. Whatever form the business takes, remember that you are an American doing business overseas. Abide by the principles you would follow when doing business in America, rather than trying to conform to the Asian ways of business.

Americans are generally respected and liked throughout the world and have the reputation for being forthright and up front. While you must be attuned to the business practices in Asia, be yourself and remember the merits of any deal should stand on their own, not on your desire to return home having landed a deal.

Defining roles

Another important element is to define in detail, the responsibilities for each side -- what each side will do and how they should perform. It is extremely important to make sure the lines are clearly drawn as to the responsibilities for the project or operation. Too many cooks ruin the broth, and they can also ruin an operation overseas.

It is common in some parts of Asia for construction workers to live on site. Trade Interface has set up day care centers so children are not present on worksites such as this leather tannery in Thailand. Photos by Nathan Rothman

There should be ultimately one person responsible for the operation. There can be a hierarchical structure that reports to him or her, but one person must be ultimately responsible for the final decision. Sometimes this is contrary to the Asian culture, where decisions are made by a committee. That one person can seek approval or acceptance from the committee, but I would stress the importance of defining responsibilities and establishing the management structure.

Timelines

Project schedules and timelines are also critical elements. Time has a different dimension in every country, and this is certainly true throughout Asia. Project schedules with key dates and deadlines are critical.

Our firm is involved in developing manufacturing projects. At the start of a project, we set up a timeline and management structure and define the responsibilities of both sides. We review all elements of the project including sub-contractors, outside service providers and equipment to insure delivery can be made on time and that they are capable vendors and suppliers.

It is important to check a vendor's reputation within the industry and to check credit ratings to insure the vendor can carry out its obligations. If a vendor is bringing people in to perform services, be sure to get a listing of employees and their skill levels. We have found in many instances that titles do not match skill levels.

Engineering

We have learned through experience to have all engineering work done in the U.S., with a local engineering firm reviewing the work for local standards and requirements.

We have at times worked with local engineers who lacked sophistication and the knowledge required to perform adequately. Our recommendation is to have all engineering done in North America and then have it reviewed locally.

Safety

Safety standards for employers and workers vary throughout Asia. We always strive to maintain U.S. safety standards. A classic example is the common practice for local workers to walk on a construction site with sandals, when a proper work boot is required for the worker's protection.

Time has a different dimension in every country so it is important to establish key dates and deadlines as well as review subs to be sure they will make deliveries on time.

In the past, we have had to educate workers on why safety equipment and standards are not only mandatory, but necessary for their protection. In this regard, a little extra goes a long way.

It is common in parts of Asia for construction workers to live on-site. In a number of operations we have been involved with, we have provided nurseries and day care so that children and infants are not present on a work site. A safer workplace means workers are happier, motivated and supportive of the project.

On-site supervision

We have found that until we are comfortable with local partners, we have had a minimum of one person and preferably a team of expatriates supervising the work. This insures the work will be performed to our standards and enables us to monitor the entire project.

We have tried many times to use locals in the beginning, but have not met with great success in most instances. My advice would be to have a team on-site that is willing to not only supervise the work, but teach the how and why of quality standards.

Quality of finish

What might be acceptable in Asia might not be acceptable in the U.S.

Levels of finish may be more subjective as opposed to a purely objective, measurable standard so we often have used pictures or videos showing acceptable standards. Examples might be how a piece of molding is made, or what a smooth finish should looks like when completed.

Local culture

It is also important to be aware of the local culture. There are many books published on what is acceptable and unacceptable behavior in Asia. Anyone going to Asia who is unfamiliar with the culture and local customs should read such books.

You never know when a seemingly harmless comment or action can have a negative effect on your business operation. As an example, we were involved in a project in Southeast Asia. During a dinner party with our Asian partners, one of the Americans joked to another American that if he was lucky, maybe he could marry the princess of that country and enjoy a good life.

The Americans laughed, but our Asian friends sat quietly. After dinner, the president of the Asian company told me that he and his group were highly offended by such a reference to the royal family. An apology was made on the spot and we went back to ground zero in building that relationship.

Establishing a relationship is very important for a successful business. There are two parts of the relationship -- the relationship of trust and friendship as well as the business relationship.

The social relationship is built only by spending time, both leisure and business, with the prospective partner. It is important to spend this leisure time with your partners, be it at dinner or over a golf game. This time is used to discuss family, hobbies and interests as well as business.

Asia is a great place to do business. The people are hard working, bright, energetic and, in general, have a positive can-do attitude.

Copyright © 1998 Seattle Daily Journal of Commerce.